Bumper Crop for Seed Companies

This from the Seattle Times.

Seed sales are up 30%. People are buying seeds and garden equipments to grow food themselves. Many of them are apparently first-time gardeners.

With uncertainty hanging over the economy, people seem to be striving toward self-sufficiency and self-reliance. Quietly but steadily, as this article from MSNBC states:

"The National Gardening Association, a nonprofit research group based in South Burlington, Vt., projects that 43 million of the nation’s 111 million households will grow at least some of their own fruits, vegetables, berries and herbs this year — a rise of more than 19 percent over last year. More than half — 54 percent — said they were looking to save on their food bills, the association said in its annual report on home and community gardening in the United States."

(And I've been watching this stock forever now...in my other blog.)

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Peter Schiff on Our Economic Future

Podcast on The Lew Rockwell Show. It's about 10 minutes long. Following is my quick summary.

About the current stock market rally:
It's not a new bull market. We've been in an on-going bear market since 2000. During the bear market we do have sharp rallies creating opportunities to make money [going long]. But corporate earnings will continue to go down, as interest rate will eventually go up which will bring the present value down. It is like the 70's, only worse.

Effect of increase in money supply:
Prices would have fallen much further, but the government prevented the downward adjustment. It is more likely a wishful thinking on Bernanke's part that he can absorb liquidity later, even though he is a smart guy.

World market:
US is more dependent on consumer spending, borrowing, and asset price than any other large, developed economy in the world. EU and Japan are still creditor nations [with the exception of Great Britain], so they have more fear of inflation and they want to be responsible.

Gold:
Gold will go up. How high depends on US$ devaluation. US$ is the same as Zimbabwe $; neither has any intrinsic value.

Austrian economics:
Macro-economics Schiff was made to learn at Berkeley is Keynesian nonsense, a brainwash that teach people how free market does not work and how government can fix things.

If the government invites Schiff to Washington D.C., what would he tell them?:
There is no easy, quick fix. What can government do? - Answer, "Nothing". We got into this mess by borrowing and spending. And we can't get out by borrowing and spending more. We have to spend less, save more, produce more, export more, and allow the market to work. The problem is the government wants to do "something" because elections are coming all the time..

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Goldman Sachs upgrades auto makers

Goldman Sachs upgraded US and Japanese auto makers on Wednesday (4/22):

Ford Motor Company (F) : from Neutral to Buy
Honda Motor (HMC, 7267.T) : from Neutral to Buy
Nissan Motor (NSANY, 7201.T) : from Sell to Neutral
Toyota Motor (TM, 7203.T) : from Neutral to Buy

F went to $1.01 on November 21. (Currently trading at $4.38)
HMC went to $17.35 on December 5. (Currently trading at $28.13)
NSANY went to $5.59 on February 23. (Currently trading at $10.60)

TM went to $55.41 on December 5. (Currently trading at $79.47)

Are easy trades on these stocks over? I wonder...with chatter about GM and Chrysler Chapter 11 bankruptcy getting louder by the day.

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Necessary process for recovery

from Morgan Stanley Global Economic Forum: "Capex [capital expenditure] Bust and Capital Exit"

"The silver lining in this capital spending bust is that it will help to purge investment excesses; indeed, it is essential to do so. Most of the excesses in this cycle have been concentrated in housing, where foreclosures continue to fuel vacancy rates and supply-demand imbalances. But as noted above, easy credit did fuel exuberance in commercial construction, and the downturn has unmasked acres of obsolete plant and equipment. The cure for excessive investment is the exit of capital from what my former colleague Steve Galbraith calls the ‘capital pigs’ – overcapitalized industries – and the redeployment of that capital into new products and new industries that can use it productively." [emphasis original]

The article is basically saying the easy money resulted in misallocation of capital and that these malinvestments need to be purged before the new growth can begin.

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Credit Default Swaps market update

US Credit Default Swaps Little Changed, CDX Trading Shows (Bloomberg.com)

Watch out for this for the market direction in general, and financial stocks in particular (C, BAC).

That's where the heavy betting by big traders seems to be: CDS market.

They are speculating on the company's ability to repay its debt (or the government's willingness to protect the debt holders). Some people believe this was what caused the crash in financial stocks last year, and that's what they are doing now again.

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Survivalists 2.0: Regular people get ready for the worst

This from Houston Chronicle.

"Jack Spirko owns a media company, is married to a nurse and has a son in college. He has two dogs and lives in a nice house with a pool in a diversified neighborhood in suburban Arlington, Texas. Spirko, 36, considers himself an average guy with a normal life. But for the past few years, Spirko has been stockpiling food, water, gas, guns and ammunition. He also has a load of red wine, Starbucks coffee and deodorant stashed away..."

"Theirs is a different breed of survivalist, far from the right-wing militants or religious extremists who hole up in bunkers, live off the land and wait for the apocalypse.
Preppers are regular people with regular jobs who decided after Sept. 11, after Hurricane Katrina or when their 401(k)s tanked that they can’t rely on someone else to help them if something goes awry."

Maybe this explains those upticks in retail sales in January and February... People were hoarding...

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OT: Georgian Waltz

relaxing music during the stressful market hours... They (Il Stravino Armonico) are talented musicians in Munich, Germany. (The leader of the band is my friend.)

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Harvard economics professor's solution

It May Be Time for the Fed to Go Negative (New York Times)

in order to encourage more spending. According to the professor, we may have to figure out a way to make holding money less attractive. His suggestions are:

• Pick a digit from 0 to 9, and announce that all currency with serial number ending with that digit will not be legal tender any more. Effective 10% negative return on holding the currency. (To be sure, it is his graduate student's idea, not his.)
  
• Produce significant enough inflation so that the real interest rate as measured by purchasing power becomes negative.

And here's hoping it's a delayed April Fools Day joke:

http://globaleconomicanalysis.blogspot.com/2009/04/time-for-mankiv-to-resign.html

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US to put conditions on TARP repayment

This from Financial Times:

"Strong banks will be allowed to repay bail-out funds they received from the US government but only if such a move passes a test to determine whether it is in the national economic interest, a senior administration official has told the Financial Times."

I wonder who is going to define "national economic interest".

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Obama To Take Aim at Credit Card Abuses

This from cnbc.com. The president now wants to crack down on "deceptive" credit card industry practices.

[quote]"We need to do things to stop the marketing of credit in ways that addict people to it," Summers said in an interview on the NBC television talk show "Meet the Press." [end quote]

So credit cards are like packs of cigarettes?

[quote] The meeting comes as lawmakers have vented anger that banks with big credit card operations charging high interest rates and fees are the same institutions getting government bailouts from U.S. taxpayers who use these credit cards. [end quote]

That's the mantra these days: how dare they, when they are getting bailout money from taxpayers!

I wonder if this is going to be popular, just as bashing executive bonuses at a government-bailed insurance company was popular for a while.

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Interesting tidbits in financials

He's often over the top even in the doom & gloom department, but he often has very curious information that I don't see anywhere else.

Banks Must Brace for New Losses by Jim Willie, CB. Editor, Hat Trick Letter April 16, 2009

Here are some points that caught my attention. I don't even know they are independently verifiable, but curious. (Do your own due diligence, always.)

• "A movement pervaded Lower Manhattan offices to formally call in all Citigroup shorted shares on loan. " - so that could be the reason why some investors/funds have been frantically covering (or trying to cover) their short positions in the past week or so...
• "Other ‘C’ share games were played that enabled preferred shares to serve as collateral on common share shorts, as the plebeian shares descended to $1/share value." - the hedge funds have been long preferred and short common on C and other commercial banks deemed vulnerable, that is somehow a known piece of information. But I didn't know that preferred shares were used as collateral. So then their common short was naked shorting?
• "The story behind the scenes that captured my attention centered on German demands to return all their gold bullion held in custodial accounts on US soil." ... [To cover the March physical delivery of gold] "Deutsche Bank saved the COMEX bacon with a last minute 850,000 ounce delivery, courtesy of the Euro Central Bank at the eleventh hour. " - no wonder Germans are nervous.

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Re-inflation Rally

Here's an article from iTulip.

Re-inflation Rally Part I: falsehoods, fantasies, fabrications, and fake-outs

"...Without a shred of proof to support the theory that economy-wide price fixing of capital and under-pricing of debt by governments through manipulation of interest rates cures the economic ills caused by previous price fixing and debt subsidy schemes, global Keynesian stimulus as an alternative to debt cancellation is a triumph of ideology over evidence that will end in inflationary tears. Shall we as investors go all-in with the bulls to play the intermediate results of the fiscal fantasy plan in execution -- the stock market rallies and the price distortions in bonds and commodities -- or a solid position for the end game with the doomers, wait it out with bars of gold, a sidearm, and a case of Scotch? Is there a rational position to take between these extremes?" [emphasis by me]

Good question. But alas, their answer is only for iTulip paid subscribers in Re-inflation Rally Part II.

But here's an interesting snippet from this article:

"The cornerstone of the economic recovery story is the fallacy that the stock market can see into the future, and that today’s rising stock market foretells economic recovery. A review in of past recessions reveals that stock markets are blind to the onset of recession, fall coincident with economic contraction, and recover coincident with economic growth, sustained or temporary. " [emphasis by me]

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Jim Rogers: Put all your eggs in one basket

He says ..

"Diversification is something that stock brokers came up with to protect themselves, so they wouldn't get sued [for making bad investment choices for clients]. Henry Ford never diversified, Bill Gates didn't diversify. The way to get rich is to put your eggs in one basket, but watch that basket very carefully. And make sure you have the right basket."

Jim Rogers: How He's Investing After the Crisis (Newsweek)

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Treasury International Capital data for February 2009

Treasury Department released the Treasury International Capital (TIC) data for February 2009.

"Monthly net TIC flows were negative $97.0 billion. Of this, net foreign private flows were negative $106.3 billion, and net foreign official flows were positive $9.3 billion."

December 2008 figure was net positive $86.9 billion, and January 2009 was net negative $146.8 billion.

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Japanese in the 90's

Dr. Doom Marc Faber's latest post led me to recall how it felt like in Japan during the so-called "lost decade".

I'd read recently somewhere that the price deflation during the lost decade in Japan was a myth. Maybe, but what I remember is indeed cheaper prices across the board - not just big ticket items like houses, condos, golf-course membership but everyday items. Food, drinks, clothes.

There was an unmistakable sense of relief in the society that they didn't need to keep running anymore, keep chasing the money, higher return, pricier condo, what have you. Sense of "Let's slow down here and take it easy." And that wasn't a bad feeling.

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Sea of Red

in American Bulls index page.

Other than some gold indices, there are interesting "buy-if"s.

• DJ distillers and brewers
• DJ tobacco
• DJ pipelines

No idea about pipelines (other than crude oil is still in contango), but the other two are true-blue recession plays, aren't they? Drink and smoke to forget the troubles of the world.

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Bloomberg Commentary

Fed’s Flood May Leave Democracy Needing Bailout: Kevin Hassett

"Many economists believe that helping financial institutions turn their less liquid assets into hard cash is a key step toward returning them to good footing. The best way to achieve that in a democracy would be for Congress to appropriate the funds to acquire the assets and for Treasury to borrow the money that it needs.

But Congress is unwilling to appropriate enough money, so Treasury and the Fed have cooked up a work-around: the Fed buys the assets instead. Since the Fed exists outside of the normal budget process, no permission from elected officials is required. "

The economic activities are not the only area affected by the monetary policies.

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Taxpayer subsidizing Paper?

Taxpayers Subsidizing Paper? (Econompic Data)

Paper mills, that is. Unintended consequence of supporting alternative energy, taxpayers ending up paying the paper mills for the process that they have used for long time without any government subsidy.

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Is China going to buy IMF gold?

'China ready to buy IMF gold with a telephone call' (Business Intelligence Middle East)

Officially Reported Gold Reserves (Wikipedia)

Check out the table in Wiki. Gold percentage of the total Chinese reserve is only 0.9%. Maybe Japanese (1.2%) or Russians (2.2%) want to convert their foreign currency reserve to gold..?

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Market Mover?

Treasury Directs GM to Prepare for Bankruptcy Filing
Will this be a market mover for Monday? Or a yawn? Futures down but not by much so far.

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