The World According to Tempus

I.O.U.S.A.

Please take a look at this trailer. The movie I.O.U.S.A. is going to premiere on August 21st, 2008, and will take the drama of the U.S. national debt issue to the big screen, in what is promising to be a eye-opening event for the common folk. The issue is bigger than Godzilla!

Gas prices: too high?

Too high for most people's wallet, maybe... well I live 20 minutes walk from a train station that can take me downtown in 30 minutes, so I can't complain! But there sure are a lot of people complaining about getting gouged at the gas station, especially here in Montréal where unleaded prices are hovering around 1.50$/liter (6$/gallon).

The taxes and refining conditions are of course different in the US, but I saw this chart today that tells you an obvious answer:

Countrywide foreclosures

The carnage in residential real estate  continues in earnest... We haven't seen the bottom yet, as new foreclosures continue to add to the stockpiles of unsold homes. And we can expect another year of growing foreclosures as more ARMs get reset, which is expected to peak in spring 2009.

Here is an interesting blog that keeps track of events in the residential mortgage market.

http://countrywide-foreclosures.blogspot.com/

The U.S. Dollar - what next?

Since our last discussions, the U.S./Canadian exchanges rates finally reached parity after a long, long journey for the Canadian dollar being laughed at and called Monopoly money, and worse.

Two trends have helped the Canadian dollar in the last few years, and both of which are still very much alive.

I'm back!

Sorry to everyone who were hoping for more activity on my blog. Life has taken a major turn for me, and I wasn't able to even think about this blog for over a year. I am now back, I have reactivated my account and approved some comments from last year (!).

So much has happened since my last post regarding food prices, inflation, oil, commodities, the real estate/financial meltdown... I have to come back just to brag about having told you so...

Seriously, I still managed to keep up to date with happenings and will be posting some entries soon.

Take care all!

What is going on with food prices?

I have chatted about this many times over the last year with many people. The new corn based ethanol craze in the U.S. is one of the worst ideas we came up with. In the long run, it will solve the problem of reduced oil supplies by reducing the food supply and eventually slowing and reducing world population growth. There are better ways to make ethanol, such as sugar cane in Brazil. But even that is not without consequence. Every time we increase our sugar cane consumption, we need to cut down another section of rainforest to plant more crop.

Bottom line: we need to reduce demand.

Here is a recent article from Times Wire Services

U.S. consumers are paying 8% to 10% more for breakfast foods than a year earlier because of rising prices for corn, wheat, milk and other commodities, a U.S. Department of Agriculture economist said.

Commodity inflation "is starting to work its way through the system," USDA economist Ephraim Leibtag said. Food prices overall probably will increase 3.5% to 4% this year, about one percentage point more than usual, he said.

Increased use of corn for ethanol and falling supplies of orange juice and milk are partly responsible for the jump in breakfast-food prices, Leibtag said.

Corn futures have surged 64% in Chicago in the last year, boosting costs to feed livestock and poultry and driving up meat and egg prices.

Unintended consequences: Corn

All actions create a reaction, we all know that. But sometimes we do not fully realize all the consequences of an action.

A few months ago, the US congress passed a law to mandate an increase in the use of bio-fuels, mostly ethanol. The most efficient way to create ethanol would be from sugar, but there are duties on imported sugar, such as sugar cane from Brazil (a strong ethanol user). This is meant to give support to US corn farmers, which are currently suffering from record high corn prices.

Implosion of the US Subprime Mortgage Lenders

I wrote a little about this subject last year, more as a prediction than anything else. According to many measures, the US Real Estate market did hit its top around August last year. Now some of the market pundits have called for a bottom, after a MAJOR decline of about 9% nationally. Never mind the fact that this decline is less than any previous decline in real estate historically, never mind the fact that the bull market was many times stronger than any previous one, to a point being silly. In any case, one of the differences in this bull market was strong speculation by low income/low assets individuals, looking to make money in a safe, quick way by flipping houses.   

The beginning?

For a few years, I've been preaching about our impending doom.... so many resons why the system will fail:

- US Federal Deficit
- US Trade Deficit
- Money Supply inflation
- Pension Shortfalls
- Consumer over-indebtment
- Real Estate Bubble
- High Tech Bubble.. (nah, that's so 2001)
- and... out-of-control derivatives.

Well, as we know the tech bubble burst. The real eastate bubble is showing signs of being about to burst.... what was that about the last item?

Housing & Fed Update

A few interesting tidbits... the slowdown in housing is still going on, deepening.

I had called myself the peak last summer with empirical evidence. It now seems that the US association of realtors has been calling the peak for August 2005. My call was pretty close... and a year earlier than the experts...

Enough back slapping!