Blatant Reality

I just love Obama’s latest “Fight the Smear” article titled “Barack Obama does not take advice from Fannie Mae executives” in which they try to dismiss claims of Obama’s ties to several Fannie Mae executives. The funny thing is not what is written in the article, but what the reader is supposed to take away from reading it. First, look at this screen shot:

Notice anything funny about it? Well something that should jump off the page is the fact that the picture next to the story has both Fannie Mae and Freddie Mac’s logos in it. Hmmm…and I thought the story was only about Fannie Mae. See what kind of the subliminal messages that image can convey? Instead of just refuting his ties to Fannie, that images gives him the added bonus of rejecting his ties to Freddie as well.

But enough with the subliminal, lets move on to more pressing issues at hand, like the fact that even though Obama may have never taken advice from Fannie executives, he sure has received a lot of money from from both Fannie and Freddie. Take a look, the contributions he has received from PACs and individuals connected with these companies is only second to Senator Chris Dodd.

So while this Fight the Smear tries to hit two birds with one stone, remember that even though he might not have taken any advice, he sure has taken a lot of cash and I really can’t blame him. Who would want to take advice from executives of failing companies anyways? Money is so much better.

A days ago, I conducted an interview with South Carolina State Representative Nathan Ballentine about the current finantial situation. Now the situation has obviously gotten worse from Wednesday but this interview still has some good information so check it out.
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Click here for the interview

This is a hilarious article that just might make you smile. Well, maybe, depending on how immune you are to the woes of Wall Street.

Going off my previous post from Friday, the Dow has now fallen a total of 825 points since the passage of the bailout.

Just to make sure you are reading this correctly, I said the Dow is down a total of 825 points from Friday around 1:20 (when the bailout passed). Today it only dropped another 370 points which is better than the 800 points that it reached around 2:45 today.

I’m not even going to pretend that I understand the stock market but it does seem a little counter intuitive that the stock market saw a massive drop after the bailout was passed.

Now take a look at this and pay attention to what time it was at the highpoint before stocks started to fall (upper left-hand corner):

It was around 1:20 when the stock started to fall. Guess what time the bailout passed? Yep, you guessed it, right around 1:20. This means that from around 1:20 to close at 4:00, the Dow dropped over 450 points.

This leaves some questions for me:

1. What made the Dow go up almost 300 points before the bailout passed? It seems to not be the bailout since its passage seemed to have sent it into a downward spiral.
2. Was the downward spiral just the marketplace correcting itself? Were people betting on it not passing and had to change plans after it passed
3. Will this downward spiral continue on Monday? If that happens, why in the world did we even bother with this bailout?
4. Will bailout supporters use this drop as evidence to support the passage of the bailout? By this I mean will they say that the drop would have been much worse if it hadn’t passed.

Once again, I’m not an economist by any means, I’m just looking at what the numbers say and trying to make sense of it all. if you can answer any of these questions, please do so in the comments.

Rumor has it that the House will vote on this bill around 12:30. You can view the House debate here and the Dow Jones Industrial Average here. Watch them in unison.

Well, these numbers sum it up pretty well:

Here is an article that lists several energy stocks that you may want to buy if McCain wins in November. As you could have guessed, they consist of Oil, Coal, and Nuclear Companies.

On a McCain win, oil service stocks like Cameron (CAM), Transocean (RIG), Diamond Offshore Drilling (DO) and Halliburton (HAL) will be huge, huge beneficiaries of more liberal domestic drilling rules. Nuclear stocks such as Cameco (CCJ) and nuclear ETF Market Vectors Nuclear Energy (NLR) could experience massive upside moves.

 

At some point, the stigma attached to the nuclear industry will fall away under the unrelenting pressure of high oil prices. A quick look at oil prices clearly shows that the commodity is undergoing a consolidation phase. These periods can last quite a long time, even a year or more.

 

We would be engaging in the worst form of wishful thinking however if we were to believe that the oil run was over. Moderating oil prices will continue to buoy stock prices, but that will only last until oil gets ready to run again. When it does, we could finally have the necessary impetus to get serious about nuclear energy as a viable solution to our domestic energy needs.

 

The idea of nuclear stocks and coal stocks being growth industries again will strike many investors as odd. But over the summer, we saw coal stocks acting like internet stocks of yesteryear, witnessing massive runs in once staid companies like James River Coal (JRCC) – up almost 150% over the last six months – and Alpha Natural Resources (ANR) – up almost the same amount.

I found these graphs in an article on the Wall Street Journal talking about how “Energy is Top Economic Issue for Voters“. The top two graphs aren’t all that surprising but the bottom two I did find interesting. Pay attention to the 1980 mark in both of them and compare it to the 2008 mark. In the bottom left graph, you can easily see that the price change in the late 70s had a much larger impact to the consumption than anything after it.Now look at the bottom right graph. Consumers were paying a larger percent of the income for gasoline in the late 70s and early 80s than they are currently.

What does this mean? Well it would suggest, at least to me, that over the past twenty-some years Americans as a whole have increased their wealth (as your wealth increases, gasoline payments will take an increasingly smaller portion of your income). This has happened even with inflation. This is good news because with increased wealth, people are better able to cope with changes and unforeseen circumstances might occur.

However, the trend is going up so obviously there will come a point when we are paying the same percentage of our income on gasoline as was being paid a little over 25 years ago. Another thing that must be kept in mind is that these graphs don’t take into account what rising fuel costs do to all other commodities (like food for instance). Even with this in mind, I do feel that it is promising to look and these graphs and see that the increase in the price of gasoline hasn’t affected our consumption all that much or dug into our wallets any more than previous times. This is a positive since the implications mean that as a whole, our society has become more well off.

Now what are some negative implications of these graphs? Well they will probably make the environmentalist and pro-AGW (Anthropological Global Warming) crowd fairly angry, especially the bottom left graph. You see, these high prices we are experiencing are supposed to, in part, curb our consumption of gasoline. They have to some extent but not nearly as much as seen at previous times. This will only fuel (no pun intended) the Green’s desire to see higher prices in order to influence our consumption habits.

New taxes and restrictions on drilling are two ways the Greens may try to influence our consumption to make a dip like that seen in 1979 happen today. Watch out.

Corn ethanol is once again being linked to as a contributor of rising food prices and it seems that things will only get worse. This year, because of flooding and other factors, the corn harvest expected to be drastically smaller than last year. When you add this to the fact that the government has mandated a 9 billion gallon corn-based Renewable Fuel Standard (RFS), the demand for corn is going to far outstrip the supply. This will end up contributing to the increase of prices of all corn-based products, including food.

“A lot depends on how badly this weather has devastated the corn crop,” said Thomas Elam, an agricultural economist at Indiana University who was commissioned by the Balanced Food and Fuel Coalition to release a study on the matter. “A smaller crop will be devastating to meat, dairy, and poultry producers if the Renewable Fuels Standard is maintained, and consumers will suffer as food and fuel costs rise.”

 

About 5% of the world’s corn supply goes to producing bio fuels – representing a whopping three years of growth in typical crop production, according to Elam.

 

“Corn will have to go to at least $8 a bushel to squeeze out enough food use to keep up with corn for ethanol,” he said. “Food prices will be significantly impacted by corn if RFS goes to 10.5 billion gallons for 2009.”

 

How significantly? Collins said food costs could rise 23% to 35% above the normal annual inflation rate of 2.5% over the next two to three years if the RFS mandates are not reduced. Elam said food price inflation rate could go as high as 7% without a mandate reduction.

“Collins” is the US Department of Agriculture chief economist just to let you know. How should we fix this? Well the article states that just a simple 50% reduction in the RFS would bring the bushel price of corn to $2. Sadly, this probably won’t happen.

I sure hope everyone is beginning to see that using a food crop for fuel is never a good idea, no matter how well intentioned or fool-proof it looks on paper.

For more of my thoughts on Corn Ethanol, check out this article I wrote on the subject a couple weeks back.