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Wolf at the Door
TALK ABOUT GREAT ENTRANCES! For investors, anyway, they don't make them any better than the memorable one staged by that precocious calendrical infant, 2008. That is, if you're an investor who happens to have a portfolio chock full of gold and overflowing with oil.
The precious metal never glistened more brightly than it did last week as it soared past the all-time peak of $850 an ounce set nearly four decades ago. Not be outdone, crude made hydrocarbonic history of its own by topping $100 a barrel, an all-time record high and, keep in mind, please, we're not talking any old all-time, we're talking the real thing: geologic all-time.
Now, we're not so cloistered or insensitive as to fail to recognize that an absolutely humongous number of investors to their sorrow -- including not a few of those extraordinarily bright chaps and chicks who subscribe to this august magazine -- own neither a speck of gold nor a thimble of oil.
In that melancholy event, obviously 2008 did not begin on an upbeat note. Quite the contrary. But, hey, don't lose heart -- the year still has 365 other days, at least two of which, even a timid soul like us would be brave enough to wager, will witness a rise in stock prices.
Actually, we can understand why folks, especially those of a chronically cheerful disposition, shy away from gold. It is, after all, the nearest thing we have to a Dow Jones Average of Global Misery. We are a nation of optimists, and a real optimist would just as soon drink a quart of sour milk as own something that keeps reminding him that everything isn't hunky-dory. Then, too, for a lot of people, the mere mention of gold stirs up painful pre-fluoride childhood memories of having cavities filled by drill-happy dentists.
Gold's perverse proclivity to feed on bad news was much in evidence as the gathering woes of the economy at large (think housing collapse and the gaping black hole in our accounts with the rest of the world) and the financial sector in particular (the mother of modern credit crunches) provided the spark for the precious metal's combustible performance that sent it soaring to unprecedented heights.
And it's not an accident that bullion has battened rich on the sickening downward spiral of the dollar, which, easy to forget, was until not all that long ago the most revered currency on the face of the planet. The remorseless shrinking of the greenback's value has given rise to a clutch of scary scenarios, from an inflationary chain reaction to a kind of global Olympics in which nations fiercely compete in a race to devalue their own coin that is destined to end with every participant (except Zimbabwe) a loser.
Oil eased off its peak toward week's end, as buyers took a breather and concerns arose that the awful jobs report for December represented a harbinger of recession that would curb demand for all that crucial stuff like gasoline and heating oil that's squeezed out of a barrel of crude. And no doubt it will.
But, as we've said before (like George Bernard Shaw, we quote ourselves to spice our conversation), should oil suffer a slide, it'll probably be only to $80 a barrel, $75 at worst, not the $30-$40 the petro bears fantasize. And looking out a piece, prospects get increasingly bleak, not least because OPEC seems to have gotten its evil act together and China's inexorably growing thirst for oil shows no sign of being slaked.
Matt Simmons, boss man at Houston-based Simmons & Co., which covers energy the way Willie Mays used to cover center field, put out one of his rare personal reports on oil, and it doesn't make for pleasant reading. Matt lays out the case quite persuasively that global production peaked in 2005 at 74,298,000 barrels a day and is now a couple of million below that, while daily consumption has continued to climb and is rapidly approaching 88 million barrels. To fill the gap, he reports, various sources are being tapped, all of which share one quality -- they're not sustainable.
That suggests to him, among many more horrific things, that we'd better get used to $100-a-barrel oil, which he reassuringly reflects "is the equivalent of only 15 cents a cup." Somehow, that doesn't make us feel any better, even if it isn't "social chaos and widespread geopolitical conflict or war," possibilities he also alludes to if we don't get off our butts and do something about finding new energy sources, seriously pushing conservation and weaning ourselves from "a chronic addiction" to fossil fuels.
IT CAN GET AWFUL COLD in a terrific hurry in Iowa. We know because we spent a fair slug of time in the state way back when and grew quite fond of it and its homespun folks. We have a feeling that Hillary Clinton and Mitt Romney also have concluded, but more than a little ruefully, that Iowa gets awful cold in a hurry. Both spread plenty of the long green around the state and both enjoyed early success wooing the voters. Only to get blindsided by a pair of political parvenus.
The geographically challenged Mr. Huckabee, whose strongest card seems to be his amiability, demonstrated to the apparent satisfaction of the state's Republicans that he was a regular guy by donning some hunting gear and shooting at flocks of quizzical birds. But, in fact, our Iowa sources tell us, he was really after bigger game: He was keen on picking off some Pakistani terrorists who, he implied, have been sneaking into Iowa by the thousands to do their mischief.
For Mr. Huckabee seems to have confused Pakistan with Mexico in terms of their respective locations and also seems to believe that Iowa borders on Mexico/Pakistan. We must admit we never did a thorough survey of the state in the considerable time we spent in such places as Red Oak and Iowa City. So it could be he's discovered a hitherto unknown sliver of the state snakes its way undetected to the nation's southern border. We're quite eager to see what comparable revelations Mr. Huckabee's journeys through New Hampshire yield.
The Democrats, for their part, spurned Hillary Clinton and her new-found smile, which we can authoritatively report, despite all appearance, was not surgically affixed to her face, in favor of Barack Obama. Rubbing it in a bit, the Iowa voters or whatever you call participants in a caucus (caucusees? caucusers?) relegated her to third place behind John Edwards and Mr. Obama. Whatever the effect on her political fortunes, she manifestly isn't invincible, which seemed to be her biggest claim for the nomination.
Mr. Obama is long on oratory and short on any concrete qualifications for the presidency. But as recent history has mordantly demonstrated, that might be just the ticket for election. His main pitch is that he's not an old Washington hand. Which raises two questions: If he thinks Washington is such an evil place why is he panting to get back there? Or, at the very least, why doesn't he propose that the nation's capital be relocated to a city at some remove from D.C., say Honolulu?
All the pundits agree that Iowa is not the end of the road to the nomination. We find that a most depressing thought.
WALL STREET, NOT SURPRISINGLY, didn't give a fig as to who won or lost in Iowa. But that failed to keep it from getting deeply depressed. And who can blame the investing masses? After duly celebrating the arrival of the new year, they woke up only to find the wolf at the door.
For many months now, there had been plenty of warning that recession was lurking out there in the tall grass. But it went pretty much unheeded, when not scorned. However, even the most ebullient bull began to breathe heavily as 2008 dawned, accompanied by a swell of evidence that the economy was tanking, led by manufacturing, which was supposed be enjoying a boomlet thanks to the debased dollar and demand from abroad, and retailing, which presumably could always count, in fair weather or foul, on consumers to consume. Alas, it ain't necessarily so.
Came Friday and with it the crusher in the form of an exceptionally ugly report from the Bureau of Labor Statistics on jobs -- or more precisely, the lack of them -- in December. As Philippa Dunne and Doug Henwood of the Liscio Report neatly summed it up, the payroll number was quite weak and its household counterpart even weaker.
All told, supposedly 18,000 jobs were added. We might note right off the bat that there were no fewer than 66,000 mythical jobs added, courtesy of the infamous birth/death adjustment; save for that curious confection, the total would have gone considerably negative. That handy adjustment, incidentally, was responsible for 89% of all the reported payroll additions in 2007.
Unemployment jumped to 5%, from 4.7%. And the big losers were widely dispersed, paced by construction, where 49,000 jobs vanished last month and manufacturing, which lost 31,000. Apart from health-care and restaurants and bars, there were virtually no conspicuous gainers. As Philippa and Doug quip: "Our new economic model: eat, drink and check into the hospital."
They anticipate "some significant negative employment numbers in the coming months" and point out that "the unemployment rate is already above what the Fed had projected for the next three years." We imagine the Fed will do what it always does when it gets agitated -- cut rates. And we suspect that'll have zilch lasting effect on the economy and the stock market.
http://online.barrons.com/article/SB119949084836468909-search.html?KEYWORDS=birth+death&COLLECTION=barrons/6month
