gis

Billionaire oilman T. Boone Pickens has launched a new campaign to substitute at least a portion of the U.S. imported oil with domestic natural gas.

Pickens would like renewable energy sources, wind power chief among them, to run electric power generation plants currently run by natural gas/coal, and use that natural gas to fuel natural gas vehicles.

Economist Glen Langan told BloggingStocks Thursday the PickensPlan is commendable for a number of reasons (it would lower the trade deficit, create domestic jobs, and decrease greenhouse gas emissions), but investors and readers should not view it as a panacea for the nation's transportation energy bill. "It could be a part of the solution, but it won't address the entire imported oil problem," Langan said.

Another oil saver: better engines

What's another key to reducing both imported oil and U.S.-produced oil consumption? Something that the U.S. auto sector has under-emphasized for more than a decade: technology-driven increases in car/vehicle efficiency, Langan said.

Langan said vehicle weight reduction, transmission/drive train improvements, enhanced aerodynamics, and the biggest factor -- increased engine efficiency -- "have the potential to reduce oil imports by almost as much as the Pickens Plan, and the changes won't take 10 years to see the results."

Further, many of the mpg-enchancing technologies already exist, Langan notes; he suggested an additional federal tax credit for automakers to help them incorporate the changes sooner.

"The fleet [all vehicles driven in the U.S.] should average 25-27 miles per gallon right now. Currently we're at about 20 miles per gallon. With appropriate federal tax credits we could be at 30-32 miles per gallon in five or seven years," Langan said.

Sales of existing homes in June fell 2.6%, to a seasonally-adjusted annualized rate of 4.99 million - - the lowest level in 10 years - - the National Association of Realtors announced Thursday.

Economists surveyed by Bloomberg News had expected June existing home sales to total a 4.94 million annualized rate. The annualized rate totaled 4.99 million units in May; a year ago, in June 2007, it was 5.75 million units.

Meanwhile, the national, median, existing home price for all housing types was $215,100 in June, down 6.1% from a year ago when the median was $229,000.

Existing home sales varied by region. Sales rose 1% in West, but fell 6.6% in the Northeast, 3.4% in Midwest, and 3.1% in the South.

'Bad time to be a home seller'

Economist Peter Dawson said the June existing home sales statistic shows that the housing market remains a buyer's market.

"No question, it's a bad time to be a home seller. Existing home prices continue to slide in most markets, and there's little in the data to suggest a turnaround, given the U.S. economy's doldrums," Dawson said. "My advise for those who are in the market to buy and don't have to buy a house right now - - wait it out, quarter by quarter. Prices in your market could drop considerably."

The dollar rose to a one-month high Thursday morning, as dollar bulls cheered a report that U.S. Congressional legislation designed to shore-up Fannie Mae and Freddie Mac had passed the House and that the Senate will begin evaluating the measure.

The House voted 272-152 in favor of the measure, and the Senate is expected to pass the bill within days, The Washington Post reported Thursday. President Bush, reversing earlier opposition to a component of the bill that would help communities hit hard by foreclosures, said he will sign the legislation in its current form.

Initial U.S. jobless claims jumped 34,000 to 406,000 for the week ended July 19, the U.S. Labor Department announced Thursday. Claims for the previous week were revised to 372,000. Further, this week's 406,000 statistic was the highest weekly jobless claims tally since March.

Economists surveyed by Bloomberg News had expected this week's initial jobless claims to total 375,000.

Also, the 4-week moving average increased 4,500 to 382,500. Economists view the 4-week average as a better indicator of unemployment conditions, as it smooths-out anomalies for strikes, holidays, or other idiosyncratic events.

Economist Peter Dawson said "job loss statistics continue to reveal an economy that's barely growing, with no job growth, save a few sectors."

The largest increases in initial claims for the week ending July 12 were in: New York, +13,909, California, +9,416, North Carolina, +9,344, Tennessee, +8,522, and Georgia, +7,000. The largest decreases were in: Michigan, -4,571, New Jersey, -1,835, Kentucky, -1,724, Rhode Island, -1,266, and Massachusetts, -919.

Meanwhile, the number of continuing claims decreased 9,000 to 3.107 million from a revised 3.116 million for the week ended July 12, the latest period for which figures were available.

Economic Analysis: A worse-than-expected weekly jobless claims report. While the 4-week moving average dropped to 382,500, it is still an elevated rate, indicative of soft labor market conditions.

OPEC again lowered its forecast for 2008 global oil demand growth, adding that the economic slowdown affecting the United States and other industrialized nations is likely to lower demand growth in 2009 as well, the group announced (pdf).

OPEC lowered its 2008 forecast to 1.20% global oil demand growth, down from 1.28%. It was OPEC's fourth downward revision for oil demand this year. The new price structure and slower global economy "have helped dampen oil demand growth in many regions," the cartel said in its July report.

OPEC, which accounts for about 40% of the global oil supply, now expects 2008 demand to rise by 1.03 million barrels per day, or 70,000 barrels per day less than the group's previous forecast.

On Tuesday, oil plunged $6.44 to $138.74 per barrel -- its biggest decline, in percentage terms, since March 2008 -- following Tuesday morning testimony by U.S. Federal Reserve Chairman Ben Bernanke, during which the Fed chair said credit market write-downs were likely to slow the already anemic U.S. economy even more, Bloomberg News reported Tuesday. Economist Glen Langan told BloggingStocks OPEC's revised forecast is likely to represent another data point the oil bears will like.

Oil price key: Emerging markets

Amid the reports and cacophony of (seemingly) one bad economic news story after another, it's important -- perhaps essential -- to take time out to notice the good economic news stories out there.

And there are good news stories about business models, products, and services out there, because despite this period of extraordinary economic problems, the United States remains the most resilient, adaptable, and technology-advanced economy in the world.

An intelligent parking space system/service

One such good news story: smart parking technology, currently being tested in San Francisco.

This fall, San Francisco will test 6,000 of its 24,000 metered parking spaces in the nation's first large trial of wireless sensor network that will communicate which spaces are free at any moment, The New York Times reported.

U.S. business inventories rose a lower-than-expected 0.3% in May, the U.S. Commerce Department announced Tuesday.

Economists surveyed by Bloomberg News had expected March 2008 inventories to rise 0.4%.

Further, inventories are now up 5.2% from May 2007, the Commerce Department said. The April business inventory statistic was revised higher to 0.5%.

Meanwhile, the inventory-to-sales ratio declined to 1.24. A year ago, the ratio was 1.26.

Economist David H. Wang told BloggingStocks Tuesday the May inventory data can be interpreted two ways, with with positive or negative dimensions, depending on how one views the current corporate stance toward the U.S. economy, and the prospects for economic growth in the quarters ahead.

On the one hand, businesses are keeping inventories at a bare minimum -- a fact that typically is bearish, short-term, for the U.S. economy, Wang said.

Oil plunged more than $8 to about $136 Tuesday at mid-day after Fed Chairman Ben Bernanke's indicated the risks to U.S. growth have increased as a result of credit market losses, Bloomberg News reported Tuesday.

Oil fell $9.26 to $135.92 per barrel before recovery slightly. Oil hit a record of $147.27 per barrel on July 11.

The other major energy commodities, likewise, plummeted on the news. Heating oil plunged almost 15 cents to $3.91 per gallon, unleaded gasoline sank almost 17 cents to $3.39 per gallon, and natural gas plunged 44 cents to $11.51 per million BTUs.

"Oil in free-fall"

Energy trader Jim Dietz said "a mini selling frenzy" hit the oil market after Bernanke indicated the U.S. economy was likely to slow further.

"We did have some support for an oil-long trade earlier as an investment when few other investments are working, but that sentiment was quickly wiped out by Bernanke's comments," Dietz said. "We had oil in free-fall for about an hour. The market put 'two and two together.' We had the Fannie Mae and Freddie Mac bailout news yesterday [Monday] and Bernanke's bearish comments today. That led a lot of people to conclude we're going to see a slowdown in oil demand growth, which means lower prices."

The dollar fell to a record low against the euro Tuesday morning as traders calculated that U.S. credit market losses will further hurt U.S. economic growth.

The dollar weakened about 1.25 cents to $1.6048 versus the euro before regaining some ground to $1.5995. The dollar also fell one cent versus the British pound to $2.0057 and 1.85 yen to 104.20 versus Japan's yen.

Currency trader Andrew Resnick told BloggingStocks Tuesday the equation is a basic one: with more dollars in supply, each dollar is worth less.

"The Fannie Mae and Freddie Mac assistance packages will require more federal spending or federal support though guarantees. That action, plus FDIC takeover of problem banks means more federal outlays, which weakens the value of the dollar," Resnick said. "We've been in a period of increasing federal outlays for the past five years, although I don't think anyone in 2003 anticipated that federal spending would increase to this degree."

So far, billionaire investor George Soros says he doesn't see a light at the end of the tunnel; at least not yet.

Soros told Reuters Monday the crisis over Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will not be the last, and that the wider credit crunch will continue to effect the already anemic-growth (or worse) U.S. economy.

On Monday, the U.S. Treasury announced a plan to shore-up Fannie Mae and Freddie Mac, including authorization to buy unlimited stakes in and lend to the companies, aimed at stemming a collapse in confidence, Bloomberg News reported Monday. Soros said the U.S. Treasury's plan, and if need be, the resources of the U.S. Federal Reserve, will keep Fannie and Freddie functioning, but that does not blot-out the main negative: the drag effect of home foreclosures on the U.S. economy, Reuters reported.

'Most serious financial crisis of our lifetime'

Calling the year-long global financial market turmoil "the most serious financial crisis of our lifetime," Soros said the negative impact of foreclosures and the credit crisis is likely to increase, creating a deeper U.S. recession.

Economist Peter Dawson told BloggingStocks that "while Soros provided a candid description of current events, no doubt derived from considerable research, he may have been a little too stark . . . seeing too much of one side of the asset / liability ledger."

U.S. producer prices soared a seasonally-adjusted 1.8% in June, the U.S Labor Department announced Tuesday, as rising energy prices continued to increase wholesale costs at an alarming rate.

Economists surveyed by Bloomberg News had expected the June PPI index to rise 1.4%. Producer prices increased 1.4% in May and 0.2% in April.

The core rate, which excludes food and energy costs, increased 0.2%, the Labor Department said, below the Bloomberg News 0.3% consensus estimate.

Economist Peter Dawson told BloggingStocks Tuesday the June PPI is another unfortunate data point for the economy, but it's not as bad as it appears. "The report is bad, but not as bad as it could have been. Energy really drove the index higher. If you took out gasoline prices, PPI would be down a half percentage point," Dawson said. "That said, energy prices are still rising at an alarming rate and they're a cost concern for businesses and individuals alike."

Oil's four-year bull run to +$140 per barrel has increased the wealth of 'petrodollar' nations, and is about set to propel another shift, this time in the bond market.

Petroleum-exporting nations, such as Saudi Arabia and Russia are set to become the biggest creditor nations to the U.S. Government, Bloomberg News reported Monday.

Holdings of petrodollar nations increased 44% to $510 billion through April, Bloomberg News reported Monday -- an increase pace that's set to displace Japan, which holds the largest amount of U.S. Treasuries, at $592.2 billion.

Oil rose about 20 cents to $145.28 per barrel in late Monday afternoon trading.

Market absolutists' complaints notwithstanding, the U.S. Treasury's plan to shore-up Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will stabilize the bond and credit markets, but it's unlikely to sidetrack a mortgage system revision by the U.S. Congress, in one economist's interpretation.

"[U.S. Treasury Secretary Paulson has acted, now is the time for [U.S. Rep.] Barney Frank to react," economist David H. Wang told BloggingStocks Monday.

At issue: who pays for mortgage risk?

At issue is what constitutes acceptable mortgage risk by banks and mortgage lenders whose loans or asset-backed securities are insured by the U.S. Government or government service enterprises, Wang said.

"The way the system was configured, if banks and mortgage lenders made high-risk loans and won, they collected huge profits. If they made high-risk loans and lost, the government, or the taxpayer, bore the cost," Wang said. "This system is untenable."

What's one likely revision? Wang said he believes a "two-tier mortgage system will emerge." The first group will include loans/mortgages offered by banks "for specialized clients/situations." This batch of mortgages and assets tied to them would not be backed by the government or by GSE insurance, he said.

Traders on the long side of dollar trades cheered the U.S. Treasury's plan to shore-up Fannie Mae and Freddie Mac, as the dollar rose against the world's other major currencies.

The dollar strengthened about one-half cent to $1.5874 versus the euro and two-tenths of a yen to 106.46 versus Japan's yen in Monday morning trading. The dollar was virtually unchanged against the British pound at $1.9877.

On Sunday night, U.S. Treasury Secretary announced a sweeping rescue package and asked Congress for the authority to buy unlimited stakes in and lend to Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), aiming to head-off a collapse in confidence, Bloomberg News reported Monday. Separately, the U.S. Federal Reserve approved Fannie's and Freddie's ability to borrow directly from the central bank.

'Wait and see approach'

Currency Trader Andrew Resnick told BloggingStocks Monday even though the currency and stock markets have initially reacted favorably to the Treasury's / Fed's measures, many currency traders are taking a "wait and see approach" until they know what financial form the assistance to Fannie and Freddie is likely to take.

The dollar was on-pace to record another weekly decline Friday - - undoing the gains against the euro and pound earlier this summer- - as traders and analysts debated the likely next step for the U.S. Congress and/or the U.S. Federal Reserve on the heels of possible additional massive, mortgage-asset-related write-downs by Fannie Mae and Freddie Mac.

The dollar traded at about $1.5888 to the euro Friday at mid-day, down about 1 cent, and also within about 1 cent of an all-time low versus the euro. The dollar also traded at $1.9878 to the British pound, also down about 1 cent, and off about 1 yen to 106.09 versus Japan's yen.

Currency trader Andrew Resnick said that given the dollar's decade-long slide versus the world's other major currencies, it's difficult to fathom further dollar declines, but that's what the economic fundamentals suggest.

"From one perspective, you have to ask, at what point do central bankers say the dollar's slide poses serious risks of commodity prices rises and inflation, with negative consequences for global growth?" Resnick. "On the scale of competing demands, you can make a strong argument that the dollar can not be permitted to slide much further."

However, Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), which face additional losses, Bloomberg News reported Friday, could come under full control, also called conservatorship, of government regulators, or receive bridge loans from the U.S. Congress or the Fed, Resnick said, absent a private equity investment. In any event, if Fannie's and Freddie's additional losses hit key levels, "we're looking at another enormous government obligation, and that's not good news for the dollar," Resnick said. "It means more dollars in circulation, which combined with the weak U.S. economy, will drive the dollar lower."

Resnick added that he presently is short with the dollar in the euro / dollar, British pound / dollar, and yen / dollar currency pairings.