If you missed 60 Minutes last night, you missed this report on how the price of oil hit $147 last summer, then finished the year worse than the Buffalo Bills.
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The most ridiculous thing I heard last year was the claim that speculation had nothing to do with the price. The number of contracts written on oil had multiplied many time, there were hedge funds set up to trade oil, and ETF's to make it easy to speculate. None of those buyers was going to refine the stuff into gas! And all that money moved into commodities has got to bid up the price.
What I am also guessing, and this report doesn't explore, is that the speculators were borrowing money to do this, and when the doody hit the financial fan, there was no more money to borrow, which hastened the oil drop during October and November.
Having been a day-trader during the end of the tech bubble, I could see the same behavior in the oil market last year. Analysts were making wild claims about future prices that moved the market by themselves. And all news was bullish news. When Iran or the Bushies made threatening statements, the price would jump $4 on expectation of attack.....but when the attack never came, the jump stayed in the price.
Let's not be too hard on these guys though, as some good has come from this. $4 gas made Americans see the folly of driving cars far bigger than they need, and hopefully the threat that we could see $4 again will keep us thinking that way. We suffered some short term pain for, hopefully, long term gain, as burning less oil is better for this country in so many ways.
Monday, January 12, 2009
Sunday, January 11, 2009
Andrew Zimbalist answers sports-eco questions
If you are interested in both sports and economics (and who isn't?) you might want to check out the Q and A with leading sports economist Andrew Zimbalist at Freakonomics.
Economic news from Auctioneers
I spent the last 2 days at the Colorado Auctioneers Association annual convention in Denver. If you are not aware, I attended Auctioneer School last Sept with intentions of becoming an auctioneer for Charities and Benefits.....if you need an auctioneer, please call!.
The largest market for auctions in the country is real estate, and while this is not a business I am likely to get into, everyone else there seemed to be licking their chops at the idea that there is all this foreclosed real estate sitting around needing to be auctioned off. However, there were a few attendees there who already established in the business, and they point out one key problem: yes, there is more to sell, but no qualified buyers, and no financing for them. Particularly, banks who own foreclosed properties are not willing to provide financing when they are sold at auction. So, that means qualified buyers at auction need cash.....not an easy buyer to find.
Another interesting story I heard was from a gentlemen who runs an auction house in rural Colorado. He said he had an auction in August, just as things were starting to hit the fan in the financial world, that included precious metals, primarily gold and silver. At the time, silver was trading at $9 an ounce, and gold in the $700's. However, the metals he had to sell (all in raw form like bars or coins....no jewelry or otherwise added value) were selling at auction for far more than the than the world market price. Apparently, fear of a coming financial collapse had already set in.
Meanwhile, the talk was also that crowds were up at auctions for things like furniture and antiques, as everyone was looking for bargains, but dollar volume was down, as the crowds were not willing to spend. It's likely some people who attend auctions intend to re-sell what they buy for more money. That buyer is gone.
As a student of economics, if was interesting to listen to the stories these guys (and auctioneers are almost all guys, likely white ones in cowboy hats) told about what they were seeing in their businesses. There is no better indication of supply and demand in action than an auction. If you want to learn something about current market conditions, talk to a guy with an established auction business.
The largest market for auctions in the country is real estate, and while this is not a business I am likely to get into, everyone else there seemed to be licking their chops at the idea that there is all this foreclosed real estate sitting around needing to be auctioned off. However, there were a few attendees there who already established in the business, and they point out one key problem: yes, there is more to sell, but no qualified buyers, and no financing for them. Particularly, banks who own foreclosed properties are not willing to provide financing when they are sold at auction. So, that means qualified buyers at auction need cash.....not an easy buyer to find.
Another interesting story I heard was from a gentlemen who runs an auction house in rural Colorado. He said he had an auction in August, just as things were starting to hit the fan in the financial world, that included precious metals, primarily gold and silver. At the time, silver was trading at $9 an ounce, and gold in the $700's. However, the metals he had to sell (all in raw form like bars or coins....no jewelry or otherwise added value) were selling at auction for far more than the than the world market price. Apparently, fear of a coming financial collapse had already set in.
Meanwhile, the talk was also that crowds were up at auctions for things like furniture and antiques, as everyone was looking for bargains, but dollar volume was down, as the crowds were not willing to spend. It's likely some people who attend auctions intend to re-sell what they buy for more money. That buyer is gone.
As a student of economics, if was interesting to listen to the stories these guys (and auctioneers are almost all guys, likely white ones in cowboy hats) told about what they were seeing in their businesses. There is no better indication of supply and demand in action than an auction. If you want to learn something about current market conditions, talk to a guy with an established auction business.
Sunday, January 4, 2009
The End of the Financial World
Great, and very long, 2 part op-ed piece in today's NY Times about the financial meltdown and what should be done about it. Written by Michael Lewis ("Liar's Poker" and "Panic") and David Einhorn. I won't take the time to summarize it, but you should take the time to read it.
Saturday, January 3, 2009
Slumdog Millionaire
January 2 is my birthday, and since it occurs at a time of year when everyone, including me, is tired of partying, I always celebrate by taking myself to the movies (and sneaking in a really good beer to enjoy during it!).
Yesterday I saw an exceptional film, "Slumdog Millionaire". This is an Indian film that is getting quite a bit of early Oscar buzz, and for good reason. On the surface it is about a contestant on the Indian version of "Who Wants to be A Millionaire", who is accused of cheating, in part because he is an uneducated product of Mumbai's slums. What impressed me was the interesting story-telling technique. The film uses his answering the questions on the show as a method of flashing back and telling the main character's life story. In fact, you have 4 things going on at once: the question of whether he will win the big money on the game, the question of whether the police will be convinced by his story and let him go, the story of his very hard life growing up, and a love story.
This is truly and outstanding and different film, so go see it before it leaves your local theater. And don't leave before the credits run, because, as it is an Indian film, there is a big dance production number at the end.
Yesterday I saw an exceptional film, "Slumdog Millionaire". This is an Indian film that is getting quite a bit of early Oscar buzz, and for good reason. On the surface it is about a contestant on the Indian version of "Who Wants to be A Millionaire", who is accused of cheating, in part because he is an uneducated product of Mumbai's slums. What impressed me was the interesting story-telling technique. The film uses his answering the questions on the show as a method of flashing back and telling the main character's life story. In fact, you have 4 things going on at once: the question of whether he will win the big money on the game, the question of whether the police will be convinced by his story and let him go, the story of his very hard life growing up, and a love story.
This is truly and outstanding and different film, so go see it before it leaves your local theater. And don't leave before the credits run, because, as it is an Indian film, there is a big dance production number at the end.
Thursday, January 1, 2009
Any idiot could see......
Under the "Any idiot could see..." department are 2 articles in the NY Times today.
First is a story about the fact that today is the 50th anniversary of Castro's takeover in Cuba. Several years later, the US started a trade embargo that was certain to bring Castro to his knees. And it has clearly worked, as he is certain to die of old age any day now, having ceded power to his brother.
Any idiot could see long ago that this embargo is unproductive, along with being expensive and immoral, having deprived Cuban citizens of the comforts we take for granted, and making the US an easy scapegoat in Cuba for all their problems. But, because old Cuban exiles wield so much power, and nobody wants to look "pro-commie", this stupid policy lives on.
Also, the Times has an editorial in support of Sen. Jim Webb's efforts to re-assess our criminal justice policies. It seems we have a higher percentage of our citizens in jail than any other country, yet we still have plenty of crime. Any idiot could see that keeping non-violent drug offenders in jail for extremely long sentences is unfair, immoral, expensive and unproductive. But no politician wants to risk looking "soft on crime". So these policies live on.
In both of these cases, any idiot could see how stupid our policies are. Which means that our spineless politicians who fail to change these ridiculous failed policies are more than just any idiots....they are a special class of idiots!
These would be 2 great places for change we can believe in to start.
First is a story about the fact that today is the 50th anniversary of Castro's takeover in Cuba. Several years later, the US started a trade embargo that was certain to bring Castro to his knees. And it has clearly worked, as he is certain to die of old age any day now, having ceded power to his brother.
Any idiot could see long ago that this embargo is unproductive, along with being expensive and immoral, having deprived Cuban citizens of the comforts we take for granted, and making the US an easy scapegoat in Cuba for all their problems. But, because old Cuban exiles wield so much power, and nobody wants to look "pro-commie", this stupid policy lives on.
Also, the Times has an editorial in support of Sen. Jim Webb's efforts to re-assess our criminal justice policies. It seems we have a higher percentage of our citizens in jail than any other country, yet we still have plenty of crime. Any idiot could see that keeping non-violent drug offenders in jail for extremely long sentences is unfair, immoral, expensive and unproductive. But no politician wants to risk looking "soft on crime". So these policies live on.
In both of these cases, any idiot could see how stupid our policies are. Which means that our spineless politicians who fail to change these ridiculous failed policies are more than just any idiots....they are a special class of idiots!
These would be 2 great places for change we can believe in to start.
My New Years Eve Gig
It's hard to imagine many things more unlikely than me being an evangelical preacher harping on the evils of alcohol. I haven't been to church since 1972, and I think that the invention of beer is probably mankind's greatest feat (oh, sure, the wheel is good too, but if you are not going out to get beer, you really don't need the wheel!). But that is exactly who I was for about 90 minutes last night.
The beautiful Boulderado Hotel celebrated it's 100th anniversary last night, and the director of marketing decided it would be fun to have some characters from the hotel's past there to tell some stories. So, they hired 4 of us from the murder mystery company I work for. I portrayed the Reverend Billy Sunday, a former major league baseball player who left baseball to become a preacher, and was quite famous for his fiery sermons demonizing drinking, dancing and card playing.
We introduced ourselves to the crowd during the band's first break, with each of us having a brief statement. I declared that I was dismayed to see that "Boulder is an even greater cesspool of iniquity than it was when I stayed here 100 years ago". That got me some laughs. When I followed with " and I intend to put a stop to it" it got me booed. Some actors might not like to get booed, but that was just the reaction I was looking for. Then, I spent the next hour damning the drinkers, while really wanting to join them.
The interesting question asked to me: If alcohol is so evil, how come Jesus turned water into wine? My answer: It wasn't safe to drink the water back then.
A rather unusual way to spend New Years Eve, but actual much better than getting drunk and watching a ball drop!
The beautiful Boulderado Hotel celebrated it's 100th anniversary last night, and the director of marketing decided it would be fun to have some characters from the hotel's past there to tell some stories. So, they hired 4 of us from the murder mystery company I work for. I portrayed the Reverend Billy Sunday, a former major league baseball player who left baseball to become a preacher, and was quite famous for his fiery sermons demonizing drinking, dancing and card playing.
We introduced ourselves to the crowd during the band's first break, with each of us having a brief statement. I declared that I was dismayed to see that "Boulder is an even greater cesspool of iniquity than it was when I stayed here 100 years ago". That got me some laughs. When I followed with " and I intend to put a stop to it" it got me booed. Some actors might not like to get booed, but that was just the reaction I was looking for. Then, I spent the next hour damning the drinkers, while really wanting to join them.
The interesting question asked to me: If alcohol is so evil, how come Jesus turned water into wine? My answer: It wasn't safe to drink the water back then.
A rather unusual way to spend New Years Eve, but actual much better than getting drunk and watching a ball drop!
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