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  • harehau harehau Apr 5, 2008 5:35 PM Flag

    Energy innovation

    Peter, thanks for the link. In Barron's today, Dry Ships is featured. Scott Black feels it is a good value at 3 PE. There also is an article, A Gasoline Conundrum. Refiners have restricted output to 82% of capacity in the face of plenty of crude supply and flattening demand. This summer could be a significant test. Also, on one of the charts on the site you linked, it showed that unemployment typically pops up 2%+ points in a recession and Epstein in his article confirmed that based on the last one, we could see 6.8% unemployment. We still have a ways to go with jobs but if the market is looking out 6 months, we may already be on the upswing.

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    • Park, Harehau et al,

      I took a look at the weather prognostication maps for Roma, Italia and discovered that Park would be experiencing similar weather if he stayed in the Rathole--high 60's much of this coming week. I am glad to hear that Park did not have sticker shock on the comestibles front. Perhaps he didn't hear the waiter mutter under his breath "Sfortunatamente, il povero" as he cut Park some slack because he recognized him to be an American.

      The housing problem is far from over world-wide:

      http://www.bloomberg.com/apps/news?pid=20601109&sid=ao4F2HvP_rWo&refer=home

      Note that Senior Sainz got his penthouse apartment for $500 per sq. ft. and that he is trying to bottom fish by himself. Observed here many times in the past is the idea that housing bubbles will take many years to work themselves off. People who might have moved don't until some job issue or family circumstance forces them to, etc.

      6.8% unemployment? It is possible. But, with the actions of the Fed, you'd think that what is likely to happen is simply that the economy won't grow at all as opposed to contracting sharply. In 2002-2003, the last sort-of-recession, unemployment popped up to 6% only. Ideas to watch about this? Governmental employment, definitely. Local, State and Federal Governments continue to hire. If the contraction causes significant tax reductions and if the relative inability to borrow causes additional spending declines then we could see this sector contribute to rather than ameliorate the problem.

      I get mixed signals from my real estate friends in Boston these days. Those who are in the parking business and are most attuned to traffic levels say that business is flat to off 10% depending on the neighborhood. They cite slowed discretionary spending as the issue. My friends in the building ownership business are, however, more optimistic. They believe that new leasing activity is pretty good and that declines in office populations are not going to be large and may not occur at all.

      My gut says that we may not see any disaster at all on either the unemployment front or on the recession front. The Fed has demonstrated that they are really willing to become very pro-active on the idea of backstopping the economy. But my gut also says that it will be very difficult for the US economy to grow for some protracted period of time. There are many structural reasons for this: (1) the additions of the US consumer to growth are over until housing price rises commence anew--a point that has to be far into the future, (2) de-levering is still relatively early in the process and will continue to some extent and (3) the cost of doing many things will impede growth--construction costs, manufacturing costs, rising personal living costs (home heating and cooling, food, medical care, etc.). So, the danger may not be contraction but rather no growth for a longish period of time.

      Regards,

      Peter

 
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