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Monday, September 29, 2008

News and Charts for Monday

Oil falls to near $103 on concerns US bailout package won't halt global slowdown
Oil prices fell to near $103 a barrel in Asia Monday on concern that economic growth will slow across the globe despite a tentative agreement in Washington on a $700 billion bailout package to stabilize the U.S. financial system.
"The bailout should inject confidence in the markets in the short-term," Shum said. "Longer term, it increases money supply, inflation and likely weakens the dollar -- all of which supports oil prices."
XX Sean's note -- as the saying goes, in the long term, we're all dead.

Sour economy tied to psychology that fed gas panic
As anxiety on Wall Street led banks and other investors to hoard cash last week, a different kind of market fear gripped cities across the Southeast.
A hurricane-related disruption in gasoline supplies prompted jittery drivers from Atlanta to Nashville to top off their fuel tanks more than usual, causing sporadic shortages and temporary shutdowns of stations. These closures only magnified the problem, of course, leading to more shortages, which sent local prices skyrocketing.
XX Sean's note -- there are gasoline shortages, and yet gasoline prices went down an average 1 cent per gallon last week. While different regions are fed by different pipelines, and it's not economically feasible to truck gasoline from one region to another, it still makes you wonder.

Congressional leaders, Bush team pressing lawmakers to swallow distaste, support $700B bailout.
Without this rescue plan, the costs to the American economy could be disastrous," Bush said in a written statement Sunday.
Convincing their colleagues to back the plan despite thousands of angry phone calls, e-mails and letters pouring in from angry constituents proved a tall order for leaders in both parties.
The bill lets Congress block half the money and force the president to jump through some hoops before using it all. The government could get at $250 billion immediately, $100 billion more if the president certified it was necessary, and the last $350 billion with a separate certification -- and subject to a congressional resolution of disapproval.

World markets fall on investor skepticism US bank bailout plan will quickly resolve crisis
World stock markets tumbled Monday as investors reacted coolly to Washington's $700 billion bank bailout deal, recognizing that cleaning up the bad debt mess will take a long time and likely drag on global economic growth for the foreseeable future.
Asian marine transport names posted big declines after a key shipping index plunged 10 percent Friday amid slowing global trade and a recent drop-off in iron ore demand in China. The Baltic Dry Index, which measures drybulk shipping rates on 40 routes across the world, fell 417 points to close at 3,746 -- marking one of its biggest one-day declines.

In Financial Food Chains, Little Guy Can't Win
Almost no one (except Mr. Buffett) saw this coming, at least not on this scale. But let’s get back to the man of the hour. Why didn’t Mr. Paulson, the Treasury secretary, see it? He was once the head of Goldman Sachs, an immense player in the swaps world. Didn’t people at Treasury have a clue? If they didn’t, what was going on in their heads? If they did, why didn’t they do something about it a year ago, when saving the world would have been a lot cheaper?

If Mr. Paulson and Ben Bernanke, the chairman of the Federal Reserve, didn’t see this train coming, what else have they missed? What other freight train is barreling down the track at us?

Richard Heinberg: Bailout blues

Sounds like a great plan to me. Why would anyone balk? Just think of the futility of spending a few billion of that treasure on things like building bridges or railroads, projects that might actually hire real workers, when we can instead buy up mountains of toxic debt from a bunch of bankrupt hucksters. Now that’s a real investment in our future! Sorry for the sarcasm. It’s hard to resist. I’ll try to ratchet it down as I explain just what $700 billion means in terms of our nation’s energy infrastructure. America has about 130 million private homes, so that’s about $5,400 per home—not quite enough to put a one-kilowatt photovoltaic system on every roof. I use that as a standard, because that’s what my wife and I have on our own house, and it basically zeros out our electricity bill for the year.

Dollar Intervention Risk `Meaningful' on Volatility
We're getting closer to the right conditions for authorities to step in and prop up the dollar,'' said Maxime Tessier, who manages $151 billion as head of foreign exchange in Montreal at Caisse de Depot et Placement. "The nightmare scenario will be a wholesale loss of confidence in the dollar.''
Growth in the euro-zone will decelerate to 1.35 percent this year from 2.63 percent in 2007, according the median estimate of economists surveyed by Bloomberg. Japan's economy may expand 1 percent, compared with 2.08 percent, while the U.S. economy will likely grow 1.7 percent, the surveys showed.
The dollar will rally to $1.43 by year-end and to $1.40 by the end of the first quarter, according to the median estimate of more than 40 economists and strategists surveyed by Bloomberg.

Gold Fields Cuts The Minimum Size for New Mines to 200,000 Ounces a Year Gold Fields Ltd., Africa's second- largest producer of the metal, cut the minimum output it demands before investing in new mines by 60 percent as larger, safer deposits become more scarce.
The company will consider deposits as small as 2 million ounces that yield about 200,000 ounces a year, compared with 5 million-ounce deposits yielding 500,000 ounces, Johannesburg- based Gold Fields said in its annual report on its Web site today. There are ``very few'' large deposits, it said.

Gold May Reach Record on Increasing Investment Demand, GFMS's Walker Says Gold is expected to rise to a record in the next six months as turmoil in financial markets boosts investment demand, Paul Walker, chief executive officer of London-based research company GFMS Ltd., said.

Chavez Says Gazprom, Rosneft Will Form Energy `Colossus' With Venezuela Russia and Venezuela agreed to create a joint oil company that will invest ``tens of billions of dollars'' to develop fields in Latin America and beyond, Russian Energy Minister Sergei Shmatko said.

Canada's Harper Says U.S. to Face Crisis Alone, Pins Meltdown on Policies Canadian Prime Minister Stephen Harper, vying for re-election on Oct. 14, signaled his government can do little to help resolve the financial crisis that he and his Group of Seven colleagues say was caused by U.S. policies.

China's Weekly Iron Ore Import Prices Plunge 17% as Steelmakers Cut Output Benchmark cash prices of iron ore imported by China, the world's biggest buyer of the steelmaking material, fell the most since at least 2006 last week as mills cut production.
China's steel demand rose 6 percent last month, down from the 13 percent gain in the first seven months from a year ago, the association said earlier this month. Baosteel said Sept. 18 that orders are falling.

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