June 30, 2008

Today went about as one might expect with conditions short-term oversold at the opening bell. So we had our rally based more on these conditions and a dash of hope more than any positive news.

Really, we should rally a little here as end-of-month dividends get reinvested. They still have those right? Then there’s some typical upside action around July 4th possibly.

Volume was about average but breadth both sucked and blowed. [Note: Something weird happens to Yahoo/Finance just after 4:30--their ability to calculate columns is destroyed.]

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Article Source Arnold Kling poses a question for Paul Krugman. Here's how I would answer. Kling writes: Early in 2007, the price of oil was $60 a barrel. Recently, it has been above $130 a barrel. Which of the following does Paul Krugman believe: (a) market fundamentals justified $60 a barrel then, and they justify $130 a barrel now; or (b) market fundamentals justified a much higher price in 2007? ...We know that Krugman does not believe that today's oil price is out of line with fundamentals. Krugman's view, in effect, is that if speculators artificially boost the price of oil, then supply will exceed demand, and the excess has to go somewhere. Where are the inventories? This view ought to hold in reverse. If speculators artificially kept the price of oil too low early in 2007, then demand should have exceeded supply and inventories should have ...

by Menzie Chinn New aggregate indicators on the macroeconomy are out. How do they compare against a summary measure of the macro series the NBER BCDC focus on? A week ago, Macroeconomic Advisers released their estimate of April GDP, while e-Forecasting released their estimate of May GDP. These two series are depicted in Figure 1. Recall that the NBER BCDC examines four other variables to gauge economic activity: payroll employment, industrial production, real manufacturing and trade sales, and real personal income less transfers [1]. To see how GDP has moved differently from these other measures of economic activity, see this post. Rather than providing a welter of series, I’ve tried to summarize the movement in these four variables by generating an index that is the first principal component of the four underlying series (all logged). This is the blue line in Figure 1. Figure 1: First ...

by James Hamilton The recently announced Saudi oil production increases are more modest than had been suggested in some of the earlier rumors. The Oil Drum ([1],[2]) is your source for the meaning of the latest announcements.

Environmental Economics and The Energy Collective are among the many voices recently advising consumers they could save gasoline by driving more slowly. I was curious to take a look at the evidence behind such claims. Source: U.S. Dept. of Energy. Air resistance increases the faster you travel, which might lead you to think that higher speeds always require more fuel. However, your car's engine is designed for maximal efficiency in converting fuel into motion when you drive at higher speeds. As a result, the typical car gets much better gas mileage if you drive it at 45 mph instead of 15. However, at speeds above 60 mph, the wind resistance becomes a dominant factor, and miles per gallon for most cars starts to decline significantly if you drive faster than 60. The basis for the graph above and many of ...

I first met Martin about 14 years ago, at the Weiss School in Palm Beach Gardens, Florida, where I had enrolled my three young children. Martin was running his research and ratings company on the east side of the building, while his wife, Elisabeth, was running the school, on the west side of the building. I don't know how Martin found time to do it, but in between all his writing and speaking engagements, he taught Japanese to the children, and my daughter was one of his students. After class one day, she gave him a report I had written years before, predicting the boom and bust in the stock market, an eventual bull market in gold and commodities, and a whopping surge in inflation. All that despite the fact that it was the ...

by Menzie Chinn: As I type this post, the President is proposing once again drilling in ANWR, noting the "enormous" benefits. [1] [2] [3] I'd like to just note the analysis his Administration's DoE just published last month. From Analysis of Crude Oil Production in the Arctic National Wildlife Refuge, published May 2008: Summary The opening of the ANWR 1002 Area to oil and natural gas development is projected to increase domestic crude oil production starting in 2018. In the mean ANWR oil resource case, additional oil production resulting from the opening of ANWR reaches 780,000 barrels per day in 2027 and then declines to 710,000 barrels per day in 2030. In the low and high ANWR oil resource cases, additional oil production resulting from the opening of ANWR peaks in 2028 at 510,000 ...

Each year, the NCAA college basketball tournament winnows its starting field of 64 teams to the Final Four teams who play for a chance to become the national champion. Congratulations to the University of Kansas and the University of Tennessee, this year’s men’s and women’s basketball champions.

The structure of the NCAA tournament got me to thinking. …

Article Source: Nonresidential investment has been increasing until 2008Q1, at which time it essentially stalled (-0.2 ppts. annualized in log terms). On the basis of past historical correlations, what's in store? Figure 1: Four quarter growth rate in nonresidential investment (blue) and residential investment (red) lagged one year, calculated as four quarter log difference. Source: BEA GDP release of 29 May 2008, NBER, and author's calculations.Figure 1 depicts the time series for year-on-year nonresidential investment growth, and residential investment growth lagged four quarters. There's an obvious correlation, but clearly it's not a particularly strong one. There are periods where business fixed investment levitates above residential growth, such as the latter part of the 1980s (due to the dollar's depreciation), and during the 1990s, as well as the most recent few quarters. The relationship ...

By Jennifer Yousfi Managing Editor Odds of a future rate hike for the European Central Bank (ECB) increased yesterday (Monday) on news that Eurozone inflation hit a 16-year high in May. With inflation accelerating “it becomes increasingly difficult to argue against an ECB hike in July,” Carsten Brzeski, an economist at ING Groep NV (ADR: ING) in Brussels, told Bloomberg News. Soaring food and energy costs pushed inflation up 0.6% in May to an annualized rate of 3.7%, an increase from April’s 0.3% monthly rate and 3.3% annual rate. High commodity costs fueled the increase, as food costs shot up 6.4% in May, up from 6% in April. Energy prices soared 13.7% year-over-year on the back of record high oil, up from a 10.8% increase the prior month, the European Union’s Luxemburg-based statistics office said. Story continues below…...