Insider

Sunday, May 24, 2009

Executive Summary

• Global grain stocks at lowest levels in over four decades
• Shockingly low fertilizer sales suggest possibility of a disappointing yield
• Food supply and demand are tightly balanced
• Food distribution networks are cost-efficient but not terribly robust
• Ways you can increase your food security

Introduction

Food is something that many of us take for granted, but it is important to recognize that this luxury is a recent development in human history. It is time to give more thought to this critical staple in our lives.

In March of 2008, food commodity prices hit an all-time high. This coincided with a world-wide food crisis, food riots, and even a few instances of national rice hoarding. Many believe that this was triggered by economic conditions (e.g. a flood of cheap money), not a fundamental or structural shortfall in food production. But I hold the view that both were at fault.

Food demand has grown steadily over the years, as has food supply. However, in recent years the excess margin of supply over demand has tightened and even gone negative several times. Reserve stocks are incredibly tight, resting at levels not seen since the early 1970’s. 

It is easily conceivable that food deliveries could be disrupted within any country, leading to rapid onset of local food shortages. This report will apprise you of several of the challenges that currently exist regarding world food supplies and the possibility that these challenges could lead to a structural shortfall in global food supplies in 2009 or 2010. It also contains specific actions that could greatly enhance your own food security.

Sunday, May 17, 2009

Executive Summary

• Stop waiting for "it" to happen; it already has.
• Keep the big picture in mind.
• This is a crisis of too much debt, not too little spending.
• This is a global crisis.
• The energy situation is getting worse, not better.
• It’s not possible for an insolvent nation to borrow money from an insolvent financial system to bail out insolvent financial, real estate, and insurance companies.
• Change is necessary, and we must embrace it.

If you have been waiting for further confirmation about the direction of the economy, or waiting for a sign that it’s now time to get serious about preparing for a future filled with less, this report is written for you.

My job is to provide you with a big-picture view of where we are and where we are headed, with an emphasis on clarifying the ways in which the dominant spin-cycle news machinery attempts to lure us back into the false comfort of borrowing and spending more.

At PeakProsperity.com, people often wonder about what they’ll do "when things fall apart."  A frequently-used acronym-containing alternative to this phrase is "when TSHTF," where the "F" refers to a fan and the other letters to something else hitting the fan that I will be coy about, so as not to offend anybody’s sensibilities or trigger any spam filters.

I have news for everybody:  It has hit the fan.

Sunday, May 3, 2009

Executive Summary

• The bank stress tests are a sham.
• Reality is already worse than the worst case stress test scenario.
• The stress test results will be used as a “positive indicator” anyway.
• Don’t fall for it.

The bank stress tests, the results of which are to be announced later this week, have already failed. Why? Because the stress test is supposed to assess how a bank’s loan portfolio would fare under a variety of scenarios, but reality is already far worse than the worst-case scenario. The FDIC, Treasury, and Federal Reserve went ahead with their weak input assumptions to conduct the stress test, even though they knew that reality was outpacing their most dire scenario.

In other words, the stress test is a sham.

Thursday, April 30, 2009

Executive Summary 

• GDP report for 1Q2009 is a mess of Fuzzy Numbers.
• The surprising 2.2% increase in PCE, or Personal Consumption Expenditures, is discussed.
• Ostensible signs suggest that the bottom is in, but the numbers do not line up at all with hard, factual data.
• Sales tax receipts declined in first quarter.
• The GDP report for the first quarter of 2009 is in serious conflict with actual state sales tax data.
• Vehicle sales are down nearly twice as much as the 19% claimed by the BEA.
• The extent to which investors are fooled by these government reports is the extent to which they risk losing a lot of money in the stock market.
• Trust yourself.

As attendees of my seminars and regular readers know, I am deeply critical of the cheerleading spin cycle that exists between the government and the media, because it often inappropriately mixes facts, opinions, and beliefs. The aim, it would appear, is to foster optimism or confidence in the average investor.

Of course, as chronicled here many times, Wall Street lives off of the fees and products that it sells to retail investors, while the political machine favors a pacified, if not buoyant, electorate. Both of these aims are served by constantly spinning things to the upside.

While it is possible that "investors" are indeed optimistic, focusing on the "slightly more upbeat" report from the Fed and "signs that consumer spending rebounded," these claims deserve a bit of exploration.

Sunday, April 19, 2009

Executive Summary

• Beware the gap between survey data and actual economic data.
• The stock market appears to be responding to survey data, not actual data.
• Surveys contain many potential pitfalls.
• Examples of influential survey data are given.
• Tax data is a relatively reliable indicator of the true state of the economy.
• Beware the "spin."
• The bottom is not in yet.
• Remain skeptical and bide your time wisely.

The past few weeks have seen the stock market shrug off bad news and seize upon whatever glimmer of good news it could find.  I am of the opinion that the stock market rally of the past six weeks is long in the tooth and built upon some highly questionable, if not patently misleading, reports.  I understand the importance of consumer and investor psychology to our economy, and can even sympathize in some small way with those who spin data in an attempt to be helpful, but I still find the practice of self-deception to be distasteful.

It is my opinion that this is not the time to be lulled back into spending more, nor is it a good time to get back into the stock market, unless you are a highly skilled trader who is willing to track your positions on a minute-by-minute basis.  This is a great time to lighten up on any stock or 401k positions that you might have regretted holding onto about a month ago…

One key oddity for me these past two weeks was the startling gap that appeared between so-called survey data (discussed below), which mainly surprised to the upside, and actual economic data, which mainly surprised to the downside.

This report explores that gap.  My theory is that survey data is being ‘massaged’ to paint a brighter picture than actually exists.   If these "glimmers of life" that Obama recently referred to, or "green shoots" as Bernanke said, have you thinking of spending more money or wading back into the stock market, you especially need to read this report carefully.

Sunday, April 12, 2009

Executive Summary

• Explaining Oil Pricing – oil prices are "set at the margin"
• Oil Storage – When it’s pumped out of the ground it has to go somewhere
• Oil Price Behavior – slight supply and demand imbalances drive prices
• The Total Shortfall – too little oil to support a robust recovery
• Nothing Fails Like Success – the worst thing would be a rapid economic recovery
• Timing – when will Oil Shock III arrive?
• What should you do?
• Investments, food, selecting a community, and an abbreviated buy list

Sunday, April 5, 2009

Executive Summary

• The relationship between oil and global GDP is explored
• The “undulating plateau”: How Peak Oil and the economy interact
• The G20 plan: Why the stimulus plans cannot possibly return the world to growth
• Oil demand
• Oil supply (production)
• Why volatility in energy prices is virtually assured
• Shortages and a spectacular rise in the price of oil predicted

Saturday, March 21, 2009

Executive Summary

• US federal deficits reported to be $9.3 trillion over the next decade
• Fuzzy Accounting means these deficits are actually vastly under reported
• Actual deficits closer to $6 trillion per year, or $60 trillion over the next decade
• Deficits defined and explained
• Risk of a dollar collapse only increasing
• You need to step up your personal efforts at mitigating the potential impacts of a US currency crisis

The Congressional Budget Office just announced that the fiscal deficits of the federal government are going to be a lot larger than previously estimated. This news was taken in stride by the financial markets, especially the FOREX markets where the dollar is traded, but it will only be a matter of time before these massive deficits are recognized for what they are – signs of terminal illness for the financial prospects of the US, and, by extension, the dollar itself.

It is vital that you understand the true extent of the illness, and the ways in which we systematically sugar-coat and under report the true magnitude of the situation by the use of Fuzzy Numbers – in this case, more accurately described as Fuzzy Accounting.

In this report I will explain how to interpret the reported deficit, demonstrate the actual size of the true deficit, and then make the case that you should seriously consider stepping up your personal efforts at preparing for an uncertain future.

Sunday, March 15, 2009

Executive Summary

• Hang on, the bottom isn’t here yet…
• China voices concern over dollar holdings
• Slump in global trade most severe ever recorded
• When is a reduced trade deficit a bad thing?
• US government fiscal deficit explodes
• Tax receipts at an all time low
• Print, print, print (Switzerland and the UK)

Hang on, the bottom isn’t here yet… 

As I see it, my work in preparing and sending these reports is to provide a different view from the mainstream press outlets, which I frequently regard as being overly optimistic or pessimistic, often at the same time.  For now, there is a lot of talk that "the bottom is in," and I wish to illustrate why I am convinced that the risk for additional downside is much higher than the chance that we’ve bottomed and are now on the road to recovery.   In this report, I will the case that the bottom is not in on the economy, recent stock market action notwithstanding.

Sunday, March 1, 2009