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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (7142)	5/26/2004 9:25:09 PM
From: Knighty Tin	Read Replies (5) \| Respond to of 116555

T, Are you talking all in costs, or just the refining? Because it seems they'd be selling one heck of a lot more if that was the all in cost.

To: Tommaso who wrote (7142)	5/26/2004 9:50:57 PM
From: mishedlo	Respond to of 116555

Bad debt dominoes a post from Roger on my board on the FOOL ======================== My uncle owned and ran a profitable moving business for about 30 years and lived very comfortably. When the economy turned down a few years ago, things got tight, but he was still turning a profit. Unfortunately, another large moving business that was connected to his went bankrupt and defaulted on a very large portion of his accounts payable. That default was enough to force his own business into insolvency. With no money flowing in, he had to put his $1,000,000 home on the market because he couldn't make the mortgage payments. The housing market had started down, but he found a buyer for somewhere around $920K. Unfortunately, just a few days before the sale was finalized, the stock market took another big dip down and the buyer had to opt out of the deal. Eventually, the bank took over both the business and the house and sold the house for about $750K and liquidated the business. This type of story is probably a common event in all recessions, and it points out something we investors should all be aware of if the economy heads into a steep slide: Profitable companies can quickly be sent into bankruptcy if their clients default on their payments. Some bad deb dominoes currently lined up on the table: Accounts Payable - Companies typically make allowances for doubtful accounts, but AP could be grossly overstated if things get ugly. Bad Loans - Banks with aggressive lending practices could see much of their equity wiped out if consumers and companies lose their ability to make payments on their debt. Tight Credit - As banks lose equity, they also lose their ability and desire to extend further credit. Sound companies fail if they can't get credit to cover their costs in difficult times. Derivative Instruments - Some types of derivatives are supposed to provide security for companies that want to protect themselves, but if the counter-parties were hedge funds that go belly up, that sense of security might turn out to be an illusion. Mortgage Backed Securities - If loan defaults get really bad and the GSEs go under, then a whole lot of pension funds will find that they no longer have the necessary assets to cover their obligations. Can the Fed stop a chain reaction by injecting liquidity before things get too bad? Probably, but at what point would they consider it necessary to intervene, and how much inflation would be caused by another liquidity surge? They want to protect banks from loan defaults, but inflation is also bad for banks because it means that the money they collect in payment is worth less than the money they originally leant out. To the extent that banks have passed risk off to the GSEs, the fed may be more inclined to protect against inflation rather than bad debt.

To: Tommaso who wrote (7142)	5/26/2004 10:20:07 PM
From: mishedlo	Respond to of 116555

Bad Combo for New Housing – Demand Down and Supply Up As demand for new homes is beginning to wane, the supply of them is starting to grow relatively rapidly. In the 12 months ended April, new homes for sale are up 13.86% -- the fastest growth since May 1995 (see Chart 2). As demand slackens more in the second half of the year, so, too, will home building. New jobs in the construction sector have accounted for 18% of the total 1.148 million additional payroll employees in the past 12 months. Currently, contractors won’t even return your call inquiring about a room addition. Come next fall, they will be making cold calls to you. Read the rest here Interesting stuff on China and the PPI as well northerntrust.com

To: Tommaso who wrote (7142)	5/27/2004 12:10:53 AM
From: mishedlo	Respond to of 116555

Just a few notes on the economy [Thanks to and compiled by RussWinter - mish] Message 20170032

To: Tommaso who wrote (7142)	5/27/2004 12:37:31 AM
From: mishedlo	Respond to of 116555

2006 Cuts In Domestic Spending On Table By Jonathan Weisman Washington Post Staff Writer The White House put government agencies on notice this month that if President Bush is reelected, his budget for 2006 may include spending cuts for virtually all agencies in charge of domestic programs, including education, homeland security and others that the president backed in this campaign year. read the rest here washingtonpost.com

To: Tommaso who wrote (7142)	5/27/2004 10:16:31 AM
From: Perspective	Read Replies (3) \| Respond to of 116555

As tippet just said, Message 20168702 everything (as far as I can tell) comes down to this ratio: energy recovered / energy input If that ratio is less than 1.0, it takes more energy to extract a Joule of energy than the energy you get out. This ratio has been falling for our energy sources for a while now, but I believe it is still in the high single digits. The more difficult the starting material, the lower grade the energy, and the lower this ratio falls. Also, I'm skeptical of your $12-15/bbl number; they'd be jammin' that stuff out of the ground like fiends right now if that were true, and they would have been in business and profitable for most every energy price scenario of recent history. Their absence tells me something. BC