Stock Market Crash Expected In 2008 To Be Worse Than 1929

[Soldier4Christ]

and make it so worthless it gets replaced with international money.

[nChrist]

and make it so worthless it gets replaced with international money.

YES - this does appear to be the direction of travel for many things. I give thanks that this world is NOT our HOME and we're just passing through.

[Soldier4Christ]

Famine fears as energy costs
spill over into food crunch
Oil guru: 'We've never been at a point
in commodities where we are today'

 Why the price of 'peak oil' is famine

Vulnerable regions of the world face the risk of famine over the next three years as rising energy costs spill over into a food crunch, according to US investment bank Goldman Sachs.

"We've never been at a point in commodities where we are today," said Jeff Currie, the bank's commodity chief and closely watched oil guru.

Global oil output has been stagnant for four years, failing to keep up with rampant demand from Asia and the Mid-East. China's imports rose 14pc last year. Biofuels from grain, oil seed and sugar are plugging the gap, but drawing away food supplies at a time when the world is adding more than 70m mouths to feed a year.

"Markets are as tight as a drum and now the US has hit the stimulus button," said Mr Currie in his 2008 outlook. "We have never seen this before when commodity prices were already at record highs. Over the next 18 to 36 months we are probably going into crisis mode across the commodity complex.

"The key is going to be agriculture. China is terrified of the current situation. It has real physical shortages," he said, referencing China still having memories of starvation in the 1960s seared in its collective mind.

While the US housing crash poses some threat to the price of metals and energy, the effect has largely occurred already. The slide in crude prices over the past month may have been caused by funds liquidating derivatives contracts to cover other demands rather than by recession fears. Goldman Sachs forecasts that oil will be priced at $105 a barrel by the end of 2008.

The current "supercycle" is a break with history because energy and food have "converged" in price and can increasingly be switched from one use to another.

Corn can be used for ethanol in cars and power plants, for plastics, as well as in baking tortillas. Natural gas can be made into fertiliser for food output. "Peak Oil" is morphing into "Peak Food".

Land use for biofuels has shot up from 12m to more than 80m hectares worldwide over six years. Biofuel provides 3pc of global energy needs, which will rise to an estimated 10.6pc by 2030.

In a pure market, sugar cane would be the only viable biofuel with a cost of $35 a barrel (oil equivalent). The others are sugar beet ($103), corn ($81), wheat ($145), rapeseed ($209), soybean ($232), cellulose ($305).

Subsidies drive the business. The US offers tax relief of $1 a gallon for biodiesel. The EU has a 10pc biofuel target by 2010.

The crop switch comes just as China and India make the leap to an animal-based diet, replicating the pattern seen in Japan and Korea, where people raised their protein intake nine-fold as they became rich. It takes 8.3 grams of soya or corn feed to produce a 1g weight gain in cattle - compared with 3.1g for pigs, 2g for chicken and 1.5g for fish.

Mr Currie said investment cycles in energy typically last about 10 to 12 years as producers struggle to catch up with demand. However, this cycle has been short-circuited by politicians after barely six years.

"The political environment is extremely hostile. The world is looking like the 17th century under mercantilism when countries saw economics as a zero-sum game. They exported as much as they could to get gold, and erected enormous barriers. China looks like that, so does Russia, the Mid-East and most of Africa and Latin America," he said.

While the West has much of the skill for developing energy projects, it is blocked by nationalist petro-states from investing directly.

[Soldier4Christ]

Personally I blame the environmentalists for this, especially so those in political positions as there is actually plenty of oil available. If allowed access to it this would not be a problem but these environmentalist have done a lot to prevent just that.

[Soldier4Christ]

Buffett bets against the buck
'In the future, I would predict that the U.S. dollar will decline'

U.S. investors worried about a possible recession also need to fret over the weakening dollar, which, if its value continues to slide, would further erode the value of American assets. They should heed Warren Buffett's warning that the greenback has further to fall.

"In the future, I would predict that the U.S. dollar will decline," Buffett, the world's second-richest man, said Wednesday at a Canadian business conference in comments transcribed in the National Post. "I don't know what it will look like in the short term, but force-feeding the rest of the world $2 billion a day is inconsistent with a stable dollar."

It doesn't take a financial genius to see the stiff head winds facing the currency. Like many experts, Buffett points to the U.S.'s gargantuan trading deficit as the heart of the problem. The U.S. has run a deficit every year since 1976, but the gap started ballooning in the mid-1990s as Americans' demand for foreign goods rapidly outpaced foreigners' demand for American goods. The deficit hit a record $758.5 billion in 2006.

The deficit means foreigners are sitting on constantly growing piles of American currency. When they shift their holdings out of dollar-denominated assets, the value of the dollar falls.

The sputtering U.S. economy and the Federal Reserve's rate-cutting campaign are also punishing the buck. They push investors to seek better safety and returns in non-dollar-denominated assets.

Investors should listen to Buffett's thoughts on the currency: He's made part of his sizable fortune by correctly predicting its course before. His Omaha, Neb.-based holding company, Berkshire Hathaway (nyse: BRKA - news - people ), reaped billions earlier this decade after making a huge bet the dollar would fall.

Other currencies are looking more attractive to the Oracle of Omaha. He told the Financial Post Wednesday he made several hundred million dollars betting on the Canadian dollar. Although he already exited the positions, he said he wished he had kept them.

The only current currency position for Berkshire Hathaway is the Brazilian real. It's been another lucrative move for Buffett's holding company. Since May 2004, the value of the Brazilian currency in dollars has increased by over two-thirds.

Investors looking to take a page out of Buffett's book can play foreign currencies with currency trusts that trade on American stock exchanges, like the CurrencyShares Canadian Dollar Trust (nyse: FXC - news - people ). They could also buy American Depositary Receipts for foreign companies, like that of Brazilian miner Companhia Vale (nyse: RIO - news - people ).

[Soldier4Christ]

Bad sign: Shoppers use gift cards for groceries
Nation's retailers including Wal-Mart post weak January numbers

Here's a sign of how shaky the economy has become: Wal-Mart says its shoppers are redeeming their holiday gift cards for basic items — pasta sauce, diapers, laundry detergent — instead of iPods or DVDs.

Merchants had hoped shoppers armed with gift cards would provide a lift after a dismal holiday shopping season — partly because shoppers tend to spend even more than the value of the card. But that didn't seem to happen last month, and retailers are feeling the pain.

On Thursday, the nation's retailers turned in their worst January in almost four decades as high gas and food prices, a slumping housing market, tighter credit and a tougher job market pushed consumers to the edge.
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Sales at 43 retailers surveyed by the UBS-International Council of Shopping Centers rose just 0.5 percent in January, well below the original 1.5 percent forecast.

The results — based on sales at stores open at least a year — followed an anemic 0.7 percent pace in December and were below the 2.1 percent gain for all of last year.

Jill Panell, a 26-year-old homemaker from Sterling Heights, Mich., was using a $20 Wal-Mart gift card on Thursday to stock up on groceries and pet supplies. She wasn't in the market for a present for herself.

"Twenty dollars at Wal-Mart is easy to spend," she said.

Analysts think it's happening in other stores, too.

"Gift cards are being used as a secondary way to save," said Burt P. Flickinger III, managing director of the New York-based retail consulting firm Strategic Resource Group.

Even at department stores, he said, consumers are using gift cards to buy basic apparel such as socks and lingerie.

The assessment by Wal-Mart Stores Inc., the world's largest retailer, that gift card redemptions were below expectations and people were buying only necessities shook up industry observers. Retailers record gift-card revenue only as cards are redeemed.

"It shows you the level of worry. Even with free money in your hand, (consumers) aren't willing to spend on anything more than necessities," said Michael P. Niemira, chief economist at International Council of Shopping Centers.

Niemira said January's retail sales performance was the weakest for that month since at least 1970, when comparable records started.

Shoppers appear to be looking at gift cards not as "free money" but rather as their "own personal cash," said C. Britt Beemer, chairman of America's Research Group, citing his recent surveys with consumers.

They're also holding on to the gift cards longer this year than last year, he said — 15 percent of the 1,000 consumers his group interviewed said they redeemed their gift cards in December, compared with 33 percent who did so last year.

The retail sales results extended a streak of news that showed more signs of consumer strain. Consumer spending accounts for two-thirds of the nation's economic activity, and it appears to have stalled from an already slowing pace seen over the past year.
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Shoppers have had to contend with rising gas and food prices and a slumping housing market, and there are signs that the job market is becoming a concern as well.

The Labor Department reported Friday that U.S. employers sliced payrolls by 17,000 in January, the first decline in more than four years. The department said Thursday that jobless claims fell last week by 22,000, but that was a decline was smaller than expected.

And if the job market continues to deteriorate, "all bets are off," said Ken Perkins, president of RetailMetrics LLC, a research company in Swampsott, Mass.

While investors are hoping the Federal Reserve can avert a recession with a series of rate cuts, some economists say the moves may be too little, too late.

Analysts also say that while the government's proposed economic stimulus package, which would send rebate checks to more than 100 million Americans, could help re-ignite spending, the lift would be only temporary.

Nonetheless, shares of several retailers rose Thursday as many either confirmed their earnings forecasts or raised them, signaling they were able to control their inventories.

Hot Topic Inc. and Wal-Mart stuck with their outlooks, while Pacific Sunwear, Wet Seal and Gap Inc. raised their profit guidance despite lower sales.

Retailers are expected to offer a better picture of the impact of slower sales and may shed light on gift card redemptions when they report fourth-quarter earnings over the next few weeks.

Department stores and mall-based apparel retailers posted some of the steepest sales declines Thursday. J.C. Penney Co. saw same-store sales at its department stores drop 1.9 percent, though that was better than the 6.3 percent decline expected by analysts polled by Thomson Financial.

Upscale department store Nordstrom suffered a 6.6 percent decline in same-store sales, much worse than the 0.7 percent decrease expected.

Macy's Inc. had already reported a 7.1 percent decrease in same-store sales on Wednesday, worse than expected. Spokesman Jim Sluzewski acknowledged that gift card sales and redemptions were weaker than last year, reflecting the overall slower sales trend. He noted that Macy's doesn't track how shoppers use their gift cards.

Saks Inc. fared better, saying same-store sales rose 4.1 percent, better than the 2.2 percent estimate. But the luxury retailer said shoppers are still shifting more of their spending to sale merchandise.

Discount retailers have held up better as higher-income shoppers shift their spending to less expensive stores. But their traditional customers are cutting back as well. Target Corp. reported a 1.1 percent decline in same-store sales in January, worse than the 0.6 percent decline analysts expected.

Wal-Mart reported a 0.5 percent gain in same-store sales, far below the 2.0 percent increase expected. The company said it continues to do well with basics like groceries but home furnishings remain weak.

At a Wal-Mart in Cheektowaga, N.Y., near Buffalo, shopper LaShari Jackson, 37, said she was "just getting the basics, household stuff." She said she had no plans to look at electronics, CDs or other splurges: "Can't afford it."

[Rhys]

Personally I blame the environmentalists for this, especially so those in political positions as there is actually plenty of oil available. If allowed access to it this would not be a problem but these environmentalist have done a lot to prevent just that.

Most of the new oil available is outside the US and is not being blocked by environmentalists.
Venezuela is spending all its oil revenues on social programs rather than drilling. The oil companies are understandably reluctant to drill in countries where what they find may be nationalized. The areas where oil is most plentiful are politically unstable and risky to operate in.
The US does have some areas where we could drill - Alaska, offshore, but the estimated reserves there are so limited they would make no practical difference in supply or price.

[Soldier4Christ]

Believed to be the largest onshore oil reservoir with petroleum potential in the US, Area 1002 in the coastal plain area of Alaska. It is thought that this area has an oil reservoir that could contain enough oil to make it the largest in the world. This reservoir is being held up by the environmentalist so that it cannot be properly determined just how much oil is actually there. If the geologists that estimate the amount there are correct it would be one of the biggest reservoir's in the world and could supply all that the U.S. needs for many, many years to come.

[Barbara]

These developments seem to be snowballing daily. Since we may have the biggest oil reserves in the world, it doesn't sound like our politicians have our best interest at heart in this country. it sounds to me that the 'New World Order' takes precedence - and it seems to be moving right along.

[nChrist]

Hello Barbara,

It see things the same way. There are many things happening now on a regular basis that might as well be pages out of Bible Prophecy. Sister, we already have the end of the story.

As for me, I'll simply say "JESUS come quickly please." I know there are hosts of Christians who will love HIS appearance, and that time might be soon.

Love In Christ,
Tom

Thanks be unto God for His unspeakable GIFT, Jesus Christ, our Lord and Saviour Forever!

[HisDaughter]

Bad sign: Shoppers use gift cards for groceries

What did they expect?  I heard on Fox today that they are hoping we will spend our "rebates" frivilously to help the economy instead of paying off our debts  Fat chance.  With the cost of living the way it is, it's hard to get from one payday to the next let alone looking at "electronics".
Here's an idea.....
deport the illegals

I know, I know....but that whole matter just "sticks in my craw" as it were.

Sorry if I come off as just a grouchy, old bitty sometimes......
but then again,
MAYBE I AM! 

[nChrist]

        

I loved the picture, and you can consider it to be snagged.

[Barbara]

Hello Barbara,

It see things the same way. There are many things happening now on a regular basis that might as well be pages out of Bible Prophecy. Sister, we already have the end of the story.

As for me, I'll simply say "JESUS come quickly please." I know there are hosts of Christians who will love HIS appearance, and that time might be soon.

Love In Christ,
Tom

Thanks be unto God for His unspeakable GIFT, Jesus Christ, our Lord and Saviour Forever!

I agree, blackeyedpeas!!

And what a day that will be!!!!!!!!!!!!!!!!!!!!!

[Soldier4Christ]

 US credit crisis escalates as defaults spread

Defaults in the US housing market are spreading from sub-prime to the much larger stock of top-grade housing debt, threatening to set off a wave of even bigger losses for banks and investment funds.

The Mortgage Bankers Association says default rates on all outstanding home loans in the US have reached 7.3pc, the highest level since modern records began in the 1970s.

Arrears on "prime" mortgages have reached a record 4pc, confounding expectations that middle-class Americans with good credit records would be able to weather the storm.

While sub-prime and close kin "Alt A" total $2,000bn (£1,019bn) of debt, the prime market in all its forms is roughly $8,000bn. If prime default rates rise on their current trajectory, they could ultimately cause huge financial damage.

The grim data comes amid further wild ructions this week on credit markets. The iTraxx Crossover index - a risk barometer that measures default insurance for Europe's low-grade bonds - rocketed to a fresh high of 575 yesterday. It is now above the extreme levels seen in August and November.

"We're now at, or close to, historic highs pretty much across the board on the credit indices," said Dr Suki Mann, an expert at Société Générale.

"There's a vicious spiral as banks are having to protect themselves against these market movements by hedging, and that drives the indices even higher. It's not a crunch as such because companies can still borrow if they need to, but nobody is willing to pay these premiums. The market has shut down," he said.

Willem Sels, a specialist at Dresdner Kleinwort, said investors had been rattled by losses of $4.9bn at AIG and by the refusal of Standard Chartered to bail out its failed fund Whistlejacket after a $7.15bn rescue collapsed.

The risk is an avalanche of forced asset sales in the mortgage securities market. "The banks no longer have the luxury to take a long-term view," said Mr Sels. "They themselves face tight liquidity conditions, so they can no longer rescue every single borrower.

"This crisis is not going to stop at mortgages. It is spreading to credit card debt, auto debt, and now student loans. On top of that we think corporate defaults will rise from 1.1pc to between 5pc and 9pc over the next 12 months."

US house prices have fallen by 7.7pc over the past year, according to the Case-Shiller index of the 20 biggest cities. The slide is likely to gather pace as 2.2m mortgages taken out at the height of the credit bubble adjust upwards by 250-300 basis points. Goldman Sachs says house prices may fall by as much as 25pc from peak to trough - creating the worst slump since the Great Depression.

Over 40pc of all mortgages issued from late 2005 to early 2007 are on adjustable rates - a break with the US tradition of fixed-rate borrowing.

Mr Sels said $40bn to $50bn would reset each month from now on, reaching peak pain late this year. "Borrowers never expected to pay the new rates. They assumed they could roll over their mortgages when the time came, but that is now impossible," he said.

"There are very similar problems emerging in Britain, Ireland and Spain. We know from the lending surveys by the Bank of England and the European Central Bank that conditions have tightened a great deal."

Emergency rate cuts by the US Federal Reserve will cushion the blow this year. The federal funds rate has come down from 5.25pc to 3pc since September, and is almost certain to drop further. However, the crisis is now moving with such speed that it may already be too late to avoid a domino effect as one distressed sector topples into the next.

The arrears rate on US auto loans has reached 7.1pc. Defaults on home equity loans have jumped to 5.7pc.

The latest concern is paralysis in the $250bn US market for auction-rate securities (ARS), which fund state governments. A series of deals has failed over the past two weeks. The risk is a slide in ARS prices along the lines of the mortgage debacle, leaving banks with yet another chunk of losses.

[Soldier4Christ]

Cap and Trade: Solution or Stealth Tax?

Congress is considering several pieces of legislation that would implement a “cap and trade” emissions trading scheme. In early December, the Senate Environment and Public Works Committee approved a bill introduced by Senators Joseph Lieberman (D-Connecticut) and John Warner (R-Virginia). Senator Barbara Boxer has endorsed the bill, America’s Climate Security Act of 2007, saying it’s an ideal framework for dealing with global warming as it “embodies all the key concepts,” and is “the perfect starting point for discussions.”

The Lieberman-Warner bill would place mandatory caps and reductions on greenhouse gases (mainly CO2), as well as caps on industries in the U.S. responsible for emitting 75 percent of greenhouse gases. The system is designed to reduce emissions by 70 percent by 2050. Sounds like a great idea, right? Not so fast.

An April 2007 Massachusetts Institute of Technology report estimated the annual cost of implementing these schemes between $263 billion and $366 billion. The estimated annual cost for a family of four is $3,500 to $4,900, with a disproportionate share from low-income families. In November 2007, the Congressional Budget Office estimated that a modest 15 percent reduction in CO2 emissions would cost consumers $100 billion annually, and similarly found that low-income families would bear the brunt.

In reality, the cap and trade proposals are nothing more than a regressive tax that will cause a massive redistribution of wealth upward, with no real benefit. The proposals would mandate emission reductions (read energy usage), which can only be obtained by curtailing output. The result: economic recession.

_____________________


Cap and Trade: Solution or Stealth Tax?

Congress is considering several pieces of legislation that would implement a “cap and trade” emissions trading scheme. In early December, the Senate Environment and Public Works Committee approved a bill introduced by Senators Joseph Lieberman (D-Connecticut) and John Warner (R-Virginia). Senator Barbara Boxer has endorsed the bill, America’s Climate Security Act of 2007, saying it’s an ideal framework for dealing with global warming as it “embodies all the key concepts,” and is “the perfect starting point for discussions.”

The Lieberman-Warner bill would place mandatory caps and reductions on greenhouse gases (mainly CO2), as well as caps on industries in the U.S. responsible for emitting 75 percent of greenhouse gases. The system is designed to reduce emissions by 70 percent by 2050. Sounds like a great idea, right? Not so fast.

An April 2007 Massachusetts Institute of Technology report estimated the annual cost of implementing these schemes between $263 billion and $366 billion. The estimated annual cost for a family of four is $3,500 to $4,900, with a disproportionate share from low-income families. In November 2007, the Congressional Budget Office estimated that a modest 15 percent reduction in CO2 emissions would cost consumers $100 billion annually, and similarly found that low-income families would bear the brunt.

In reality, the cap and trade proposals are nothing more than a regressive tax that will cause a massive redistribution of wealth upward, with no real benefit. The proposals would mandate emission reductions (read energy usage), which can only be obtained by curtailing output. The result: economic recession.

The Emissions Trading Scheme: The European Experience

In 2004, the European Union adopted the Emissions Trading Scheme as the primary mechanism to ensure compliance of their Kyoto Protocol obligations. Trading of emissions credits began in 2005, with an initial trading period set for 2005-07 and a second one for 2008-12, coinciding with the Kyoto Protocol’s expiration.

The E.T.S was designed to include only large industrial carbon dioxide sources, including the following:
- Combustion installations over 20 megawatts
- Oil refining installations
- Cokes, iron, and steel production
- Lime and cement production
- Glass production
- Ceramics
- Paper and pulp production

Each member state was required to define an allocation plan for emissions credits consistent with its commitment under the Kyoto Protocol, and to comply with E.U. rules on competition and state subsidies.

Despite high hopes, the E.T.S. has not worked. The program will not meet the member states’ obligations under Kyoto, and the price of emissions credits for the first trading period have plunged from around $30 a ton in March 2006 to less than $1 per ton by February 2007. Thus, the cost to companies for exceeding their emissions allowance is essentially zero. Futures prices for emissions credits in the second trading period remain high, due to uncertainties over future allocations, caps, and changes to the program.

Several factors have led to the failure of the first phase. Among the problems: initial caps were set too high (they were estimated at 3 percent higher than actual emissions); the program was too complex; there was no transparency in how the credits were allocated; and there was major inequality among the member states. In some states, the covered industries represented as little as 30 percent of emissions, whereas in others, they accounted for 70 percent.

The E.T.S. has had a number of unintended economic consequences. In Germany, for example, electricity prices rose by almost 25 percent during the first trading period, while German electricity generators earned extra-normal profits of several billion euros. Electricity prices are set to rise 10 percent this winter in the U.K. Cement producers across southern Europe now face competition from Morocco and Algeria, as producers there are not subject to emissions purchase. The net result is increased global emissions and job loss within Europe.

A recent study has suggested that continuation of the E.T.S. through 2012 will result in a net reduction in gross domestic product across the E.U.-15, ranging from 1.3 percent for Great Britain to 3.3 percent for Italy. In other words: recession.