Month: August 2008

Georgia Update

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It appears that the Russian pullout is in fact happening, though they are taking up stations in their buffer zones, and they blew up military installations on the way out.

The UN Security council is currently deadlocked, with the Russians demanding that force to reunify the provinces be specifically forbidden, and the US demanding that it not be, and that “Georgian territorial integrity” be specifically affirmed in the document.

I also heard (no link, radio report) rumors that both South Ossetia and Abkhazia will be declaring independence at some point in the near future.

OK, Maybe I was Wrong to Dismiss the Oil Speculation Theories

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I’ve been dismissive of accusations that speculation is responsible for most of the oil price run up.

I have always suggested that arbitrage might cause excessive volatility, but have been dubious on the idea that speculators are responsible for most, or even much, of the current oil price run up.

Unlike electric power, where one can shut down a plant to juice the market, you can’t hide all that oil, you have to pay to put it somewhere

Well, the CFTC just discovered that Vitol, a company that thought to primarily be in the business of hedging oil for large consumers, like Southwest Airlines, to save costs, has been aggressively holding huge amounts of futures contracts as a speculative investment too, at one point holding about 11% of all trades on the New York Mercantile Exchange (Nymex).

So the CFTC now pegs the percentage of speculative, i.e. non-consuming, trading at around 81% of volume.What’s more the CFTC found out about this by mistake.

I still believe that the primary cause of the run-up was supply and demand lines crossing, but with this level of speculation, and this level of leverage, it’s reported that Vitol could have purchased over $8 billion in oil futures for less than $1 billion, it’s possible that there were issues of excess volatility and over-shoot on the price of oil.

Anthrax Update

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First, we have an editorial in Nature, one of the most prestigious scientific publication in world, suggesting that the data provided this far by the FBI has been incomplete and not properly reviewed. They strongly suggest that the FBI is using selective information releases to make their case, and I agree.

Meanwhile, this breathless article detailing the efforts to identify the sample genetically seems to be exactly what the editors of Nature are objecting to.

I again would note that none of the information provided by the FBI has shown how the samples might have been weaponized, a capability that was not present at Bruce Ivin’s lab.

Georgia News

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It appears that by late last yearIsrael scaled back arms sales to Georgia last year, because they saw a war between Georgia and Russia brewing.

Based on what I’ve read at this point, it appears that, with the South Ossetians, there was no one within 1500 km who did not know that the Georgians were preparing for an invasion of the breakaway province.

Meanwhile, Georgia is suffering economically, both as a result of transportation disruptions and a flight of foreign capital.

Meanwhile, in response to NATO’s downgrade of relations, the Russians have frozen cooperation with NATO, which includes things like anti-drug operations and supply routes to Afghanistan.

On the military side, while the Russian counter-offensive was clearly successful, there are accusations that the Russian Air Force was unprepared, with little or no effort made in the initial stages of the war to take out surface to air missile and radar sites.

Mikhail Gorbachev has written a blistering editorial excoriating the west and the western media, that he feels was in the pocket of Georgia.

It looks like the promised Russian pullout is procedeeding, albeit slowly, though Georgian president Mikheil Saakashvili is claiming that the pullout is widening the occupation of Georgia.

I think that it’s clear at this point, despite Saakashvili’s fluent English and his Columbia University degree, which counts for way more than it should in US diplomacy, he’s just a bit…..well….nuts.

FTC Institutes New Regs Requiring Written Opt-In for Robo-Calls

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This, of course, will effectively kill the odoriferous putrescence that is robo-calls.

By December, all Robocalls must have a key or voice activated opt-out, and by the following September, robo-calls are prohibited, unless the marketer has “the prior express written agreement of the recipient to receive such calls.”

Prior business relationships have been eliminated as an exception, though medical calls related to HIPAA, and calls by non-profits to members have an exception, though the latter requires automated opt-out.

Note that political campaigns can still inundate you with robo-calls though.

Just When You Thought that Zimbabwe’s Path Could Not Get Any More Twisted

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Well, it appears that Robert Mugabe has stated his intent to reconvene the Zimbabwean parliament, because it seems that Arthur Mutambara splinter faction holds the margin for a majority, even though yjr MDC-Tsvangerai is very clear that this will jeopardise the power sharing talks.

As if this was not Mugabe’s goal in the first place.

For what it’s worth, I rather like this article, The bullying black Englishmen, and how it adds a new layer to the already complex interactions going on here.

Basically the authors thesis is that the bad actors in this drama, Mugabe, Mbeki, and Matambara, all of whom were educated in the West, see Tsvangerai, who was not, as unworthy of power by virtue of this:

With his humble origins and poor school record, Tsvangirai lacks not only the lofty Western educational qualifications that his three opponents display in their wordy speeches, witticisms and articles, but their sartorial style.

Bulging out of his cheap suits, Tsvangirai seems uncomfortable alongside the three Savile Row dandies, who are said by some close to the negotiations to despise the former trade unionist and principal Movement for Democratic Change (MDC) leader.

It appears that every society has its despised minority, and in southern Africa, it’s Africans.

Banks Object to Credit Card Regulation

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There’s a big surprise, they want to continue to treat their customers like garbage.

This bill is pretty mild:

  • Requires 45 days’ notice of interest rate increases
  • prohibits companies from changing the terms of the contract at any time for any reason, so called “Universal Default”.
  • Makes issuers mail billing statements 25 days before the due date, instead of the current 14-day minimum.
  • Require that payments be applied to all balances proportionally, as opposed to the lowest (often introductory) rate first.

But even this very weak tea is too much for the banks.

McCain Owns Too Many Houses to Keep Track Of

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He was asked how many houses he ownsin an interview and re replied that he would have a member of his staff get back to him.

He does not know how many homes he, well, really Cindy, owns, but as I’ve mentioned before, they also neglect to pay the property taxes in a timely manner.

The quip of the day, though goes to Virginia Governor Tim Kaine, who suggested that the reason that McCain could not answer the question was because, “He Couldn’t Count High Enough.”

Heh.

BTW, in the, “It didn’t take very long,” department, the McCain campaign is already going the noun, verb, and POW route

He [spokesman Brian Rogers] also added: “This is a guy who lived in one house for five and a half years — in prison,” referring to the prisoner of war camp that McCain was in during the Vietnam War.

It’s amazing how quickly they move to self parody….I just hope that the American public does not buy it.

John Sidney McCain is truly a pathetic old man.

Economics Update

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Ummm….This is not a day for pleasant economic news.

First, the Leading Economic Indicators indicate a bigger slowdown than anticipated, dropping 3x more than expectations, and then the Philly Fed index fell for the 9th straight month.

Employment isn’t good either. While new unemployment claims fell, the 4 week rolling average rose, and in any case at 432,000 claims (seasonally adjusted, which is the elephant in the room), it’s still too damn high.

If you are a monetarist, then we have more bad news, because the growth rate for M3 has dropped off a cliff (chart pr0n below):


Note that this is a graph or the rate of growth, not the money supply, so the effect on the overall money supply is less than it appears, but, “As a rule of thumb, the data gives a one-year advance signal on economic growth, and a two-year signal on future inflation.”

The chart is a rolling 3 month average of the annual rate, and the rate for May-July is 2.1%, indicating a contraction of the M3 money supply in real terms, which would suggest downward pressure in housing and financial markets.

We also have the Reuters/Jefferies CRB Index of commodities making the biggest weekly jump in over 30 years and oil up by 6 bucks, along with the dollar falling which seems to indicate that the past few weeks might just have been profit taking…a breather before an ascent to the summit, though
gasoline is down over a dollar today.

UK Court Rules that British Government Must Provide Gitmo Defendant With Evidence of His Own Torture

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This is good news from a legal perspective, but it bothers me, because the circumstances are so Kafkaesque:

A British court ruled on Thursday that the government must disclose evidence to a defendant being held at Guantanamo Bay, a decision that carried with it implicit criticism of U.S. government detention policies.

In its ruling, the High Court said Britain’s Foreign Office must provide Binyam Mohamed, a British resident detained in Pakistan in 2002 and now held at Guantanamo, with information relating to his time in detention.

His lawyers say the material supports his claim to have been “extraordinarily rendered”, tortured and forced into a confession on terrorism charges.

A Washington Pundit Uses the “L” Word

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And I don’t mean in a conversation about Rachael Maddow’s new job at MSNBC.*

I mean that Jonathan Alter just called John McCain a liar

His final graph:

But when he resorts to these kinds of falsehoods, and casts such aspersions on his opponent’s patriotism, John McCain is no longer putting his country first. If he were, he would recognize that the interests of the nation require a relatively truthful campaign. To fulfill his image of himself, McCain should stop lying about his opponent. For a man with his claims to honor and integrity, that’s not too much to ask.

This is a word that you never see in political writing. Ever.

I’m beginning to think that the sick old man is losing his base, the Beltway pundits…..Please make this so.

*No offense intended toward the talent Ms. Maddow. She has been out, and proud, for years.

Ratings Agencies Begin to Upgrade Government Bonds

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At least Moody’s is.

For years, corporate debt has been rated higher than equivalent government debt, and once the monoliner insurers started to implode, municipalities realized how much of a racket it was, with the ratings agencies using a stricter standard, so that the government debt had to use insurers where the rater’s brother-in-law worked.

Took long enough, and I’m sure that the fact that various Attorneys General were looking into this, and that there was a bill in congress, had nothing to do with the change.