So far, no hurricanes this year

Sometimes it is what doesn't happen that can make news. While todays action in the oil market is due to rising fuel inventories [zerohedge] I'd like to point out what those on the Gulf of Mexico already know: so far there has not been a major hurricane strike the continental US.

As I have mentioned previously (Aug 13, 2009) a significant percentage of the pumping and refining capacity for America is in the Gulf of Mexico. Not having a hurricane stomping around will keep the oil and natural gas flowing.

Let's see if we can make it through the entire hurricane season without any damage. Look for solid bids on reinsurance stocks and debt if this happens.

Verleger on oil

Philip Verleger has some interesting things to say on why we had a spike in oil prices last year and when it could possibly happen again.

Philip Verleger, February 19,2009 at UCSD 59min 25sec

While it is an hour long presentation I strongly suggest watching it if you are interested in the energy markets.

The gist of his talk is how environmental regulation changes regarding low sulpher diesel excacerbated energy prices in 2008. The upcoming cleaner requirements for low sulpher shipping fuel may possibly create a simliar situation by 2020.

Consumer credit continuing to fall

Data published yesterday shows the continued retrenchment of the U.S. consumer.

I extended the graph's time period so you can see the last time consumer credit outstanding has consistantly been negative is before 1950.

Until the U.S. Consumer starts to borrow again any recovery will be very tepid.

Oil as a financial or physical asset?

The recent news of Deutche Bank shutting down their their Oil Fund elucidates the interplay between the financial and physical.

Here's an interesting article from Philip Verleger in late 2007 on the interplay of oil as both a physical asset used and consumed by the entire world as well as a financial asset. His prediction of $90 oil by 2010 was not extreme enough price or time wise!

Hugh Hendry and Eclectica fund August 2009 commentary

I ran across Hugh Hendry a several weeks ago and enjoy his irreverant style.








The Great Debate right now is inflation versus deflation and Mr. Hendry falls in the deflation camp.

Here's the August 2009 Eclectica commentary which he manages.

Hugh Hendry is also very bearish on China.





Mr. Hendry's positions are quite contrary. How many of his predictions come true will be interesting to observe.

Looking for that inventory bounce

I drive though the Port of Tacoma, which is a major import hub for several Asian car manufacturers, on my way to work every day.

From the freeway spur you can see acres and acres of cars, waiting for distribution to local and regional suppliers. During the panic you could see the inventory stacking up in all sorts of locations not usually used for storing cars. Parking lots for businesses, spare lots, etc. were full of row after row of brand new cars right off the boat.

Some of that excess inventory appears to have been worked off as the fields of cars are only located in their 'normal' staging areas.

Except this spot. This is a brand new warehouse just completed . Google maps' satellite photos don't even show the building yet. It does not contain a business but is completely full, and surrounded by new car inventory.

Driving around the building you can peer inside some of the garage doors and see the entire inside of the warehouse is full of cars as well. This is a 500,000 sq foot warehouse which is absolutely HUGE. Take the time to examine some of the photos below and look at the how many garage doors are along the long side of the building.

At least one real estate management firm is getting inventive on how to lease space.
(Photos were taken August 19th, 2009)












If you are looking for a brand new 500,00 sq foot warehouse right next to a rail hub in Tacoma, you might want to give them a ring.

Home foreclosures and delinquencies accelerating

In my previous postings I may have appeared a bit negative on future home prices and suspicious of the optimistic feelings exuded in the popular media regarding the housing market. Here's some reasons why.

Both graphs show functionally the same data but from different sources and slightly different methodologies. The coming flood of home foreclosures will further erode consumer wealth, bank balance sheets, home prices and consumer confidence. That's just some of the primary effects.

Graph #1 is from Paper Economy blog and shows loans on Fannie Mae's books that are seriously delinquent.

Graph #2 from Calculated Risk blog provides a slightly more granular look at similiar data from a different source, showing both mortgages delinquent and in foreclosure. I recommend you check both blog entries.

Look at the graphs and you will see the foreclosure crisis is getting worse, not better.