There has been a lot of interesting news over the last few of days so let’s do a “quick hits” roundup.
Cornering the Cocoa Market
The Telegraph reports Mystery trader buys all Europe’s cocoa
Even Willy Wonka might struggle to use this much chocolate. Yesterday, somebody bought 241,000 tonnes of cocoa beans. The purchase was enough to move the entire global cocoa market, sending the price to the highest level since 1977, and triggering rumours and intrigue in the City.
It is unclear which person, or group of traders, was behind the deal, but it was the largest single cocoa trade for 14 years. The purchase was enough to move the entire global cocoa market, sending the price to the highest level since 1977, and triggering rumours and intrigue in the City.
Analysts said it was very unlikely that a chocolate company, such as Nestle or Kraft, or even their suppliers, would buy such a huge order in one go and that is was probable that one or a number of speculators, possibly hedge funds, had attempted to corner the market. By doing this, they would have control of the entire supply in Europe, forcing the price yet higher.
Eugen Weinberg, an analyst with Commerzbank, said: “For one buyer it would likely be a little bit too large. It would be a crazy number. That said, if you’re cornering the market …”
“If it looks like cornering, feels like cornering and the price difference between Europe and the US is so large, it probably is cornering.”
UK House Price Crash Expected
The Telegraph reports House prices ‘to crash 20pc by 2012’ as Budget bites, says Capital Economics
Capital Economics, the consultancy led by Roger Bootle, expects house prices to fall 5pc this year, and 10pc in each of 2011 and 2012. In total, the group predicts a collapse in house prices of 23pc from the start of 2010 – a deeper drop than the 19.3pc crash during the recession.
“Higher taxes, spending cuts and rising unemployment all point to fresh house price falls this year and next,” the forecasters said in a report. “The benefits of low interest rates will be undermined by a fresh tightening in mortgage lending criteria.”
It is the second report in less than a week to make grim reading for Britain’s homeowners. PwC warned “there is a 70pc chance that UK house prices will still be below peak 2007 levels in 2015 in real terms … and that real house prices [after inflation] may not regain their previous peak levels until around 2020”.
Texas Budget Mess Now as Bad as California’s
The Texas Observer reports Texas Budget Mess Now as Bad as California’s
It’s come to this: The Texas budget outlook has become so bleak that we’re comparing rather favorably to the one state where balanced budgeting goes to die.
People, our budget deficit is now as bad as California’s.
Texas: $18 billion shortfall (estimated) or about 20 percent of state spending.
California: $19.1 billion shortfall (official estimate) or about 20 percent of state spending.
The numbers match up pretty neatly.
A couple of caveats: Texas—as you probably know—budgets in two-year cycles. If the budget gap does turn out to be $18 billion (and we won’t have an official number until early next year), that would represent about 20 percent of the $87 billion in state funds that Texas allocated for 2010-2011.
California budgets one year at time. But the state spends about double what Texas does. So a $19.1 billion budget gap represents about 20 percent of the roughly $83 billion California will spend this year from its general fund.
Illinois is the new standard in futility.
IMF Halts Loans to Hungary
Yahoo!News reports Hungary risks markets’ goodwill with IMF/EU failure
Talks with the International Monetary Fund (IMF) and the EU ended prematurely on Saturday without a conclusion of the country’s programme review, which means Hungary will not have access to remaining funds in its 20 billion euro (16.9 billion pound) loan secured in 2008 until a deal is reached.
This is a risky path for a country which has a poor budget track record and which runs central Europe’s highest public debt at about 80 percent of gross domestic product, analysts said.
Although Hungary does not face an immediate pressure on state finances as its 2010 financing seems to be secure thanks to unused loans and cash reserves, it needs the lenders’ safety cushion as an external anchor of credibility.
For now, the market seems to be shrugging off this news.
UK’s Per Capita Debt Hits £78,000
ThisIsMoney reports UK debt is ‘twice as much as we thought’
The true scale of the national debt is £2 trillion – more than twice the official figure, an alarming study shows.
The black hole in the public accounts equates to £78,000 for every household in the country.
The ‘real’ state of the national finances is exposed in a study published today by the Centre for Economics and Business Research, which warns of a series of mammoth debts that aren’t revealed by the official figures.
The national debt – forecast to reach £932m by next spring – does not include a number of expensive liabilities, such as the cost of civil service and town hall pensions and projects funded under the Public Finance Initiative.
Putting these liabilities into the official figure would add £1.13 trillion to Britain’s whopping overdraft, according to CEBR.
Under the worrying scenario, the debt would jump from 62% to 138% of Britain’s income.
Hugh Hendry Wants to Short Obama
The New York Times comments on An Outspoken Man in a Secretive Trade
With a sharp wit and a sharper tongue, Mr. Hendry, a plain-spoken Scot, has positioned himself as the public contrarian thinker of this city’s very private hedge fund community.
The euro? It’s finished, Mr. Hendry proclaims.
China? Headed for a fall.
President Obama? “If there was a way to short Obama, I would,” Mr. Hendry said.
Last May, on British television, he verbally sparred with Jeffrey D. Sachs, director of the Earth Institute at Columbia and perhaps the best-known economist writing on developmental issues.
Before that, he took on Joseph E. Stiglitz, the Nobel laureate, about the future of the euro. “Hello, can I tell you about the real world?” Mr. Hendry interjected at one point. Video of the encounter was a huge hit on YouTube.
Stiglitz vs. Hendry: Euro currency crumbling?
Killing the Spill Take #108
The Wall Street Journal reports BP Weighs New Way to Kill Gulf Well
Oil giant BP PLC was Monday considering yet another method to kill its ruptured Gulf of Mexico oil well amid concerns that the cap it installed last week could be allowing oil and gas to seep out the sides.
Meanwhile, a federal panel investigating the disaster heard that the Deepwater Horizon drilling rig suffered a series of power outages and seized-up computers in the months before it exploded.
BP’s new containment cap has stopped the flow of oil since Thursday, but with the well now sealed at the top, government officials are worried that oil and gas could now be escaping elsewhere.
The rig’s chief engineer, Stephen Bertone, testified during a panel hearing in Kenner, La., that the Deepwater Horizon suffered a series of maintenance problems in the months before the well exploded.
Investigators have identified more than 20 “anomalies” in the rig’s last two days that could have contributed to the disaster, according to a document written by the panel’s investigators and reviewed by The Wall Street Journal.
I have no idea how many things have been tried at this point. However, I do know they have all met with failure.
China Becomes World’s Biggest Energy Consumer
The Wall Street Journal reports China Passes U.S. as World’s Biggest Energy Consumer
China is now the world’s biggest energy consumer, knocking the U.S. off a perch it held for more than a century, according to new data from the International Energy Agency.
The Paris-based agency, whose forecasts are generally regarded as bellwether indicators for the energy industry, said China devoured 2,252 million tons of oil equivalent last year, or about 4% more than the U.S., which burned through 2,170 million tons of oil equivalent. The oil-equivalent metric represents all forms of energy consumed, including crude oil, nuclear, coal, natural gas and renewable sources such as hydropower.
The figures reflect, in part, how the global recession hit the U.S. more severely than China and hurt American industrial activity and energy use. Still, China’s total energy consumption has clocked annual double-digit growth rates for many years, driven by the country’s big industrial base. Highlighting how quickly its energy demand has increased, China’s total energy consumption was just half the size of the U.S. 10 years ago.
China’s voracious energy demand helps explain why the country—which gets most of its electricity from coal, the dirtiest of fossil-fuel resources—passed the U.S. in 2007 as the world’s largest emitter of carbon dioxide emissions and other greenhouse gases.
China’s rate of growth in energy consumption is not sustainable. Therefore, China’s desire to grown at 8% or more a year is not either.. Peak oil or perhaps even oil wars will put an end to it.
Mike “Mish” Shedlock
Click Here To Scroll Thru My Recent Post List