Catching up on the news…
The financial nabobs are talking about the recession, more as the ‘r-word’ rather than saying ‘recession’ out loud, as if that will keep the boogeyman at bay. There isn’t quite a recession as best I can see, but more a beat-down on the gullible and the greedy. Yes, foreclosures are through the roof compared to a couple of years ago and the real estate market is tanking.
The reason is simple: Loan companies sprang up to sell insanely inflated mortgages to No Income No Job Applicants, the NINJA loan, which was renamed the much more politic Asset-Backed Commercial Paper loan.. Everyone involved did a wink and a nod knowing the bank would end up owning the house, when the owner tossed the keys into the bank’s mail slot and walked away.
The lenders were betting that the ever-increasing real estate boom would allow them to flip the house to cover the default and still make a ton of money re-mortgaging the property for the new value, about five times the original price. Which might have worked if the number of defaulted and foreclosed properties was small and the market kept going up.
Funny how everyone involved collected all their fees and commission up front. From a documentation fee, to a loan fee, to the commissions from selling the loans as a package to lenders, to the stock market betting on the viability of the loans, everyone made their money up front. We have overlooked a small fact; that for a loan to be real, someone has to pay down the loan every 30 days.
Rice is being hoarded and corn for tortillas is under price control in Mexico. Two of the most common and plentiful foodstuffs on our planet are being priced out of reach. Why? Corn is the easy one to answer: Greed. Oil companies love to make ethanol from corn, as corn has lots of sugar in it. Lots of sugar means lots of alcohol, as corn ethanol is nothing more than backwoods moonshine making, but on an industrial scale.
The oil companies pay top dollar for corn and I can’t blame a farmer for looking at that equation and deciding to sell to Chevron or Shell, instead of the local mill or distributor. However, there are signs that people are figuring this out. The EU is looking at passing legislation forcing the producers of ethanol for fuel to use things that are not food, to produce ethanol.
In a posting last year I wrote about it. This is one where the government should step in and legislate a change. Force the oil companies to make ethanol from cellulose sources, like wheat stalks, switchgrass, or other non-food sources. The price difference is negligible at best and the technology for cellulostic ethanol works fine.
If there are oil company or government slushheads out there who don’t understand what I’m saying, email me and I’ll send you the link to iogen.ca which will tell you all about it. (Disclosure: I don’t own any stock in Iogen, or any related companies either.)
Making fuel for someone’s SUV from food is wrong on so many levels it makes your eyes hurt just thinking about it.
As for the rice ‘shortage’, there is no shortage. There is a lot of speculation on prices driven, as best I can see, by people who stand to make a lot of money off rapidly rising prices. India is a net exporter of rice. So are China and the US. The farmers aren’t making a bucket of money and the final buyer is being priced out of the market, so someone between the farm gate at the dinner plate is getting rich. Come on down commodities brokers world wide!
It would seem that drought in Australia’s rice-growing region (which has been going on for six years, so it’s not like it was a big surprise) has affected production levels. With a few carefully whispered hints, stories appear that the world is going to end as rice prices are going up and the streets will be four-deep in cadavers by next Tuesday. Yes, bad news is better news than good news, so food riots in Haiti becomes the rising price scare that has taken over the media.
Here’s the reality: Rice takes more water to grow than wheat or millet. Australia is in the midst of a long drought and farmers there are abandoning rice production at $240 an acre pretax profit, for wine grapes that need less water and produce a pretax profit of $2,000 an acre. Which would you prefer to grow, as a farmer?
The real issue is the drought in Australia. Is it a climatic blip or a permanent condition? Odds are it is a permanent condition due to global climate change. This means other countries can increase their production of rice, profitably and things will settle down again. This doesn’t make for exciting headlines ("Rice production pooched this year, Looks good for next year") Give it a week or two for the media to forget about it and things will be fine.
Foolishness is so endemic that hardly a day goes by without some celeb, pol, or sports figure getting caught doing the dishonourable, faithless, trashy, disgusting, stupid or merely unsanitary. AC Milan striker Ronaldo involved in an altercation with transvestite prostitutes in Rio de Janeiro hotel. The Olympic Torch – Tibetan Monk Beating World Tour. Vladimir Putin shanking some 20 year old. Barak Obama’s preacher going off his meds. Microsoft offering to buy Yahoo, then getting pissy when Yahoo wants more than $47.5 billion for the joint. The US Military lowering standards further to get anyone into the Iraq war who has a trigger finger.
Now the US Border Patrol is advertising for recruits. Their motto? "If you’re so fcuked up the Army won’t take you, we will. We’re the Border Patrol!"
To quote Bella the housecat: Wheeeeeeeee!!
RoadDave 