Há 4 dias
sábado, 21 de fevereiro de 2009
quinta-feira, 19 de fevereiro de 2009
Reforma ou contrarreforma?
ENTRA SEMANA , sai semana e a pressão aqui no FMI continua sem trégua e sem remorso. Na última coluna, contei que tínhamos até gente hospitalizada.
Desde então, mais um economista do escritório, representante de um dos nove países da nossa cadeira no Fundo, teve que baixar hospital.
Dessa vez, o episódio foi tragicômico. O país em questão enviou uma delegação ministerial a Washington e tivemos reuniões longas, às vezes tensas, com o FMI. No dia seguinte, o economista dos nosso escritório acompanhou um dos ministros em exercícios à beira do rio Potomac.
Eis que de repente toca o celular do economista: era ninguém menos do que o presidente da República, querendo falar urgentemente com o ministro. O economista, aflito, precipitou-se e correu para passar o telefone. Acabou tropeçando e batendo com o rosto contra uma árvore. O celular voou e foi cair no rio Potomac, com o presidente dentro. O economista, coitado, ficou todo machucado; teve que tomar vários pontos no rosto.
Eis aí, leitor, um episódio (tipo Pantera Cor-de-Rosa) que pode ser uma pequena metáfora da nossa situação em Washington. A vida não está fácil por aqui. Mas não me queixo, de modo nenhum. Tenho a forte impressão de que, se o Brasil e outros países em desenvolvimento souberem se posicionar, poderemos fazer grande progresso em termos de gerenciamento da economia e de reforma da arquitetura mundial. A gravíssima crise atual, que teve origem nos EUA e na Europa, abre espaço para mudanças que antes poderiam ser consideradas utópicas.
O processo está em andamento. A gradual consolidação do G20 como fórum de chefes de Estado é uma das mudanças importantes. As velhas potências, as principais responsáveis pela crise, estão na defensiva e, por enquanto, parecem aceitar a maior participação de países como China, Índia e Brasil. Americanos e europeus reconhecem, aos poucos, que o G7, grupo composto apenas de países desenvolvidos, deve ceder espaço ao G20 (ou outros agrupamentos que incluam nações em desenvolvimento) na discussão e na solução dos grandes problemas internacionais.
Dos países do G7, o Japão parece ser o mais inclinado a reconhecer a nova realidade. Os europeus talvez sejam os mais resistentes, apesar da retórica grandiloquente de alguns de seus chefes de Estado. O governo Obama, afogado com a administração da sua crise nacional, ainda não conseguiu se posicionar claramente sobre temas econômico-financeiros de âmbito internacional.
No que diz respeito ao FMI, os sinais de que a reforma pode avançar rapidamente parecem cada vez mais claros. Nos últimos dez meses, um dos nossos principais temas, por orientação do ministro da Fazenda do Brasil, aceito pelos outros oito governadores da nossa cadeira, tem sido a reforma do Fundo como emprestador, em especial a criação de instrumentos flexíveis e rápidos para prover liquidez a países com políticas sólidas, sem as condicionalidades e as ingerências tradicionais.
Estamos dando passos largos nessa direção, em linha com as diretrizes estabelecidas pelos chefes de Estado do G20 na reunião de novembro em Washington. Evidentemente, não se pode cantar vitória ainda. Longe disso. São muito poderosas as forças da inércia e até da contrarreforma. Se o Brasil e outros países em desenvolvimento fraquejarem ou se deixarem envolver por manobras e artifícios, a reforma pode facilmente se converter em contrarreforma.
Os ingleses, por exemplo, que são os anfitriões da próxima reunião de líderes do G20, em abril, vêm dando sintomas de que estão nostálgicos do Império...
A hora e a vez do novo Estado
Marcio Pochman
A crise mundial torna mais evidente o conjunto de equívocos que resulta da recente experiência neoliberal. Os países que mais longe avançaram o princípio da autorregulação das forças de mercado e da desregulamentação do Estado encontram-se entre os mais frágeis e vulneráveis no contexto atual de turbulências e incertezas globais.
Fácil imaginar como a economia brasileira estaria débil e à deriva se a trajetória privatista e de inserção externa subordinada aos interesses dos países ricos dos anos 90 não tivesse sido interrompida. Sem bancos públicos (BB, CEF, BNB e BNDES) e empresas estatais, como Petrobras e Eletrobrás, por exemplo, o Brasil não teria a mínima condição de responder imediata e positivamente à crise do crédito e do investimento privado. Países que se desfizeram de bancos e empresas públicas, como o caso argentino, convivem hoje com maiores dificuldades para enfrentar afirmativamente a crise. No Brasil, a fase da privatização implicou reduzir a participação dos bancos públicos de mais de 50% para quase um terço da disponibilidade total do crédito doméstico, enquanto a transferência para o setor privado de empresas estatais respondeu por 15% do PIB e pela destruição de mais de 500 mil postos de trabalho. Em valor, o processo de privatização brasileiro somente conseguiu ser inferior à experiência soviética, com parte significativa do setor produtivo estatal sendo capturado pelo capital estrangeiro.
Da mesma forma, a opção política pela diversificação comercial permite ao Brasil o reposicionamento no mundo com soberania, bem diferente das economias com exportações concentradas em poucos países, como parece indicar o México, com mais de 80% do comércio externo só com os EUA. A recessão nos países ricos contamina mais facilmente aquelas nações dependentes de suas trocas externas.
Para o Brasil, o peso dos países ricos no comércio externo encontra-se pouco acima de 40%, quando nos anos 90 era de mais de 67% do total. Estas constatações sobre o país em relação a outras nações descrevem resumidamente uma situação melhor, porém ainda insuficiente para indicar a necessária construção de novo caminho a ser percorrido. Isso porque se tem presente que o neoliberalismo cometeu o seu haraquiri, não tendo sido superado - até o momento - pelo estabelecimento de projeto econômico e social alternativo. As respostas à crise do capital globalizado podem até ser transformadas numa etapa de desenvolvimento do novo padrão civilizatório, mas ainda estão distante disso.
De maneira geral, percebe-se que o Estado reaparece como elemento central do enfrentamento à turbulência mundial, embora ainda desfalcado da perspectiva transformadora de oportunidades e desafios do Século XXI. A reprodução dos tradicionais traços do padrão de Estado dos últimos 100 anos indica tão-somente o aprofundamento da organização por funções setoriais (caixinhas), cada vez mais ineficientes, quando não concorrentes entre si e à margem do potencial das forças do mercado. Adiciona-se a isso o acúmulo das variadas ondas de "choques de gestão" internalizadas pela administração do Estado, que produziram tanto a regressão da capacidade e sistematicidade de grande parte das políticas como o esvaziamento da própria função pública. Por um lado, o corte do funcionalismo e de sua remuneração procedido pela internalização de métodos privados acirrou a competição na função pública e fortaleceu a autonomização setorializada e não convergente das políticas adotadas pelo conjunto do governo. Como na lógica privada, o todo deu lugar a partes, trazendo consigo a prevalência da visão e ação de curto-prazismo no interior da função pública. O planejamento e o compromisso de longo prazo foram substituídos por uma sucessão irracional de programas e projetos pilotos que, alterados constantemente pelas autoridades de plantão, fizeram com que o Estado fosse abandonando o sentido estruturador do padrão civilizatório fora da emergência do curtíssimo prazo. Por outro lado, a estabilidade da esfera pública foi sendo contaminada pela lógica da eventualidade, amplamente acolhida pelo curso da terceirização das funções e da contratação de mão-de-obra. Assim, o Estado foi-se comprometendo com repasses crescentes de recursos a instituições - algumas nem sempre decentes (fundações, ONG's e cooperativas) - portadoras de flexibilidade para o exercício dos desvios da função pública. Assim, orçamentos e licitações tornaram-se, muitas vezes, o espaço privilegiado para manifestação da força dos interesses privados, negociatas e maior corrupção. Em síntese, a emergência da corrosão do caráter da função pública, posto que o tradicional funcionário de Estado, demarcado pelo profissionalismo e meritocracia, passou a dar lugar - em algumas vezes - ao comissionado e ao corpo estranho dos terceirizados.
O novo Estado precisa ser construído. Ele deve ser o meio necessário para o desenvolvimento do padrão civilizatório contemporâneo em conformidade com as favoráveis possibilidades do Século XXI. A sociedade pós-industrial, com ganhos espetaculares de produtividade imaterial e expectativa da vida ao redor dos 100 anos de idade, abre inédita e superior perspectiva civilizatória: educação para a vida toda, ingresso no mercado de trabalho depois de 25 anos, trabalho menos dependente da sobrevivência e mais associado à utilidade e criatividade sócio-coletiva. Para além das exigências do Século XX, que conformaram tanto o Novo Estado Industrial (J. Kenneth Galbraith) como o Bem-Estar Social (K. Gunnar Myrdal), encontra-se em curso novos e complexos desafios que exigem profunda reforma estatal.
Três grandes eixos estruturadores do novo Estado precisam ser perseguidos com clareza e efetividade. O primeiro diz respeito à constituição de novas institucionalidades na relação do Estado com o mercado. Alavancada pela experiência neoliberal, o mercado enfraqueceu as bases de promoção da competição, cada vez mais sufocadas pelo predomínio da monopolização expresso pelos vícios privados das grandes corporações transnacionais.
O esvaziamento da competição precisa ser rapidamente combatido com novas instituições portadoras de futuro, capazes de garantir a continuidade da inovação por meio da concorrência combinada com a cooperação entre empreendedores e da maior regulação das grandes corporações empresariais. O segundo grande eixo estruturador do novo Estado deve resultar da revolução na propriedade que impulsione uma relação mais transparente, democrática e justa com toda a sociedade. Neste caso, a ampliação do fundo público se faz necessária para sustentar o padrão civilizatório do Século XXI, a partir da tributação sobre o excedente adicional gerado por novas fontes de riqueza, que por serem intangíveis escapam crescentemente das anacrônicas bases arrecadatórias vigentes há mais de 200 anos. Por fim, o terceiro eixo reside na profunda transformação do padrão de gestão pública. Políticas cada vez mais matriciais e intersetoriais pressupõem a organização do Estado em torno do enfrentamento de problemas estruturais e conjunturais. Noutras palavras, a meritocracia e o profissionalismo para conduzir ações públicas articuladas para lidar com problemas estruturais e políticas governamentais descentralizadas e compartilhadas com a sociedade e mercado para enfrentar diversos e específicos problemas conjunturais. Urge fazer do Estado do futuro o experimentalismo do presente. Muito mais do que anunciar as dificuldades da crise global, cabe ressaltar as oportunidades que dela derivam como a realização de uma profunda reforma do Estado que viabilize o alcance das condições pós-crise para sustentação do novo desenvolvimento ambiental, econômico e social.
Mobius diz que hora é boa para investir em bolsa de valores
Por Angelo Pavini, de São Paulo
Mark Mobius, diretor geral da Templeton Asset Management, está otimista. Responsável por uma das maiores carteiras de ações de mercados emergentes do mundo, ele detecta uma retomada das aplicações neste ano, depois da onda de saques no ano passado. As carteiras da Templeton perderam 15% do patrimônio em emergentes - ou US$ 2,5 bilhões de um total de US$ 20 bilhões - de outubro a dezembro, auge da turbulência dos mercados. Agora, diz ele, a situação mudou. As taxas de juros, observa, estão caindo no mundo todo, inclusive no Brasil e os governos estão injetando trilhões de dólares na economia. "Onde os investidores vão colocar todo esse dinheiro?" questiona ele, para em seguida responder: em ações. Parte pode ir para ouro, outra forma de se proteger da desvalorização das moedas e da inflação, admite. Mas ouro não paga dividendo, não tem ganho de capital, então a resposta é ações, diz. "Eu mesmo estou investindo mais em ações do meu próprio bolso", afirma o executivo.
Mobius chegou ao Brasil na semana passada, já passeou de bicicleta em Copacabana (ele sempre carrega uma dobrável em suas viagens, que duram o ano todo) e conversou com o Valor sobre os mercados e os investimentos.
Valor: Como o senhor vê os mercados de ações, em meio à crise internacional?
Mark Mobius: Eu estou otimista. A melhor forma de escapar da inflação e do impacto da desvalorização das moedas que deve ocorrer no médio prazo é comprando ações. Com a quantidade de dinheiro que o governo americano está injetando na economia, vamos ver muita desvalorização do dólar pela frente. O ouro pode ser alternativa, o problema é que não paga juros nem dividendos. É interessente ter algum investimento em ouro físico, uma parcela pequena, em moedas ou barras, para emergências. Mas o melhor é ter ações.
Valor: A inflação deve disparar?
Mobius: Sim, teremos uma alta da inflação no mundo todo, a começar pelos Estados Unidos. E depois, os demais países vão desvalorizar suas moedas para se manter competitivos, e isso pressiona os preços locais. Claro, que a questão neste momento é injetar dinheiro na economia para suprir a necessidade de recursos do mercado, mas a dúvida será como cortar isso quando a inflação aumentar. Isso não deve ocorrer tão cedo. Por enquanto, a crise ainda está presente e a inflação está baixa. Por isso os BCs se sentem seguros para cortar tanto os juros e injetar tanto dinheiro na economia.
Valor: Qual o risco de uma depressão nos EUA?
Mobius: É pequeno. Se olharmos os anos 30, não dá para comparar, a situação é totalmente diferente. Não havia garantia de depósitos bancários, seguridade social, nem programas de ajuda a desempregados. É uma situação muito diferente. Não digo que a situação não seja séria, é muito séria, especialmente para os bancos. Mas outros setores não estão tão complicados. O que há é um problema bancário, que o governo está tentando resolver injetando recursos nos bancos.
Valor: Seria o caso de estatizar?
Mobius Na prática, o governo já quase fez isso. Ao receber ações em troca dos empréstimos às instituições, as autoridades estão tomando o controle, limitando a remuneração dos executivos e tudo mais. Mas eu acho que eles deveriam agir mais depressa e tomar de uma vez o controle total dos bancos. E, rapidamente, separar os ativos bons dos ruins, e eventualmente vender o banco bom de volta para o setor privado. Mas, do jeito que eles estão agindo hoje, eles estão tentando é salvar os acionistas desses bancos. E a razão é que parte dos executivos do governo vieram desses bancos. O ex-secretário do Tesouro, por exemplo, era um dos principais executivos da Goldman Sachs. Então eles têm de salvar esses acionistas. O desapontamento é óbvio pois as coisas não estão sendo feitas o rápido o bastante para resolver o problema.
Valor: Com esse cenário de inflação em alta e economia se desaquecendo, quais são as oportunidades do mercado?
Mobius: Todas essas medidas de estímulo devem ter impacto no mercado de ações. Investidores e gestores não vão querer deixar o dinheiro no banco com juros abaixo de 1%, enquanto a inflação está em 3%, talvez 4% ao ano. Eles vão querer tentar colocar o dinheiro em ações ou "private equity", ou ainda iniciar ou ampliar em seus próprios negócios. Eu penso que estamos começando a ver isso.
Valor: Mas até quando inflação e commodities devem ficar em baixa?
Mobius: Provavelmente em 2010, 2011, veremos uma mudança. Os mercados já recuperaram uma parte das perdas, os mercados emergentes já recuperaram cerca de 20% desde seu piso de em outubro. Mesmo nos EUA, há boas empresas sobreviventes, com marcas boas, boa geração de caixa. Há setores com tecnologia de ponta, empresas com marcas fortes, como Coca-Cola, Pepsi, cadeias de restaurantes, empresas de alta tecnologia, que estão tendo um mau momento, mas devem se recuperar.
Valor: Bancos são o pior setor?
Mobius: Mesmo nos Estados Unidos há bancos saudáveis, com negócios bem estruturados, que ficaram de fora da crise imobiliária. E no mercado internacional, há oportunidades como o HSBC, com uma rede global importante, presença forte na Ásia, na China, na Índia.
Valor: Entre os emergentes, quais as melhores oportunidades?
Mobius: Estamos olhando principalmente as empresas na China e no Brasil - que está em muito boa forma. Em seguida, temos Índia, África do Sul, Turquia e Rússia. Esses são os países que estamos olhando para investir. Entre os setores, gostamos do de consumo, AmBev, por exemplo, e de commodities, pois acreditamos que os preços caíram muito rápido e devem voltar a subir. Estamos olhando também empresas de energia e petróleo. Petrobras, no Brasil, Lukoil na Rússia, PetroChina, na China. São empresas muito sólidas. Gostamos também de Vale. Mesmo que o preço do minério de ferro caia 50%, ela continuá ganhando muito dinheiro. E há as empresas de cobre, que também devem ir bem no longo prazo.
Valor: Quais setores vocês não gostam?
Mobius: Não digo que não gostamos de um determinado setor. Não gostamos de empresas com alto endividamento ou com margens estreitas. Hoje, o caixa é o rei. Por isso, olhamos empresas com alta geração de caixa, que têm maior potencial para sobreviver. Vemos oportunidades em empresas de telefonia, por exemplo, que têm um componente forte de consumo, e são fortes geradoras de caixa.
Valor: E os bancos?
Mobius: Estamos olhando seletivamente. A maioria dos bancos nos mercados emergentes não teve problemas com o mercado "subprime". Temos Bradesco, Itaú e alguns bancos na Tailândia em muito boa situação. E eles têm um componente importante de consumo também, por isso temos investimentos neles.
Valor: A volta do protecionismo preocupa?
Mobius: Essa é a maior preocupação hoje. Há o receio de o governo Barack Obama tender a adotar um maior protecionismo, o que seria um desastre. Mas eu não acredito que ele vá seguir esse caminho, pois olhando o passado, esse tipo de política prejudica a todos. Mas é preciso ficar de olho.
Valor: Como estão seus investimentos no Brasil?
Mobius: Temos cerca de US$ 3 bilhões investidos em ações no Brasil. A Franklin Templeton em geral tem US$ 10 bilhões, incluindo papéis de renda fixa. Na carteira de ações da Templeton, o Brasil representa cerca de 15% dos US$ 20 bilhões totais. A maior parcela está na China, com US$ 5 bilhões. A fatia do Brasil se mantém. O único país que ganhou participação recentemente foi China, que ficou muito atrativa.
Valor: O que torna o Brasil atrativo?
Mobius: As companhias estão muito baratas em relação aos lucros e aos valor de seus ativos, a qualidade da gestão é muito boa, a economia do país está indo bem e deve crescer, 2%, 3%. A governança está melhorando e os recursos naturais são incríveis. Vemos oportunidades aqui em commodities, bancos e telecomunicação. E empresas de consumo.
Valor: O que o caso Madoff pode mudar no setor de fundos?
Mobius: A fraude deve ter impacto sobre o mercado. As pessoas devem ficar mais cautelosas em relação a onde aplicam, olhar a reputação das empresas que recebem o dinheiro, observar mais a separação das atividades de gestão, custódia e controles. A lição é que pessoas inteligentes também podem ser enganadas. A SEC (Securities and Exchange Commission, a CVM dos EUA) deve mudar os controles.
Use a crise como incentivo para mudar as suas finanças!
Rodrigo Menon
Nos últimos meses, o assunto mais comentado em todos os locais é a crise econômica e financeira que o mundo vive. Nesses tempos, a grande tendência do ser humano é se acomodar e lamentar sua situação pessoal, da empresa, do país, do mundo. Porém, na verdade, a crise traz oportunidades e nos leva a buscar saídas e soluções para superar os desafios. Talvez seja este o momento ideal de programar sua vida financeira e se estruturar para encarar as próximas crises de uma forma mais amena e tranquila. Como fazer isso?
A palavra principal é planejamento. Sempre é tempo e nunca é tarde. Na verdade, quanto antes for feito, melhor! O bê-a-bá da educação financeira nos mostra que o primeiro passo a ser dado é o levantamento de todas as suas receitas e as suas despesas mensais. E a lição básica e principal é que a despesa nunca deve superar a receita. Passado esse primeiro aspecto, você deve avaliar qual o valor a ser poupado e investido para se ter a aposentadoria com que sempre sonhou.
Nesse planejamento, sempre somos questionados sobre qual a forma mais eficaz e eficiente de aplicar os recursos poupados. O melhor é fazer uma poupança independente ou então partir diretamente para os planos de Previdência Complementar (PGBL e VGBL)? A resposta é a mais comum quando se fala em investimentos: depende! Depende do perfil do investidor, dos objetivos, da educação financeira e do comportamento do indivíduo. Não há a melhor opção e sim aquela que se encaixa melhor a cada investidor.
Para auxiliar, vale a pena observar as principais vantagens e desvantagens de fazer uma poupança independente, sem optar pelos planos de previdência existentes. Quanto às principais vantagens, podemos destacar:
1) A carteira de investimentos de uma poupança independente geralmente apresenta um custo menor em relação aos planos, pois não há taxa de carregamento e taxa de saída como na maioria dos fundos PGBL e VGBL. Além disso, há a possibilidade de conseguir uma taxa de administração menor do que nos PGBLs. Fundos de renda fixa ou DI têm taxas de administração mais baixas para maiores volumes aplicados.
2) A poupança independente nos permite maior flexibilidade, pois temos a possibilidade de alocar as parcelas mensais no momento ideal dos mercados. Por exemplo, como o investimento é de longo prazo, aplicar em bolsa nos momentos de irracionalidade e forte queda ou alocar em prefixado em momentos de estresse da curva de juros. E, com isso, será possível fazer um produto híbrido, com uma performance mais atrativa em virtude do momento de entrada nos diversos tipos de investimentos.
3) Tributação: imposto de renda (IR) menor no caso de PGBL que cobra IR sobre o valor total no momento do resgate, enquanto nos fundos, CDBs, títulos públicos e nas ações, o IR incide apenas sobre o rendimento do período.
4) Diversificação. Há a possibilidade de compor o portfólio da aposentadoria com diversos produtos. Por exemplo: CRIs (Certificado de Recebível Imobiliário, que geralmente paga uma taxa de juros real e líquida para pessoa física), CDBs de grandes bancos, títulos públicos (LTN, LFT, NTN), debêntures, ações, fundos de renda fixa, DI, multimercados etc.
Já entre as principais desvantagens em se fazer uma poupança independente, podemos citar:
1) Fiscal: O PGBL tem o benefício fiscal de 12% sobre a renda bruta anual - redução de 12% da base de cálculo do IR ao aplicar esse percentual no PGBL.
2) A principal desvantagem da poupança independente é a falta de disciplina e de programação. Se o seu perfil é esse, seu caminho é, sem dúvida, um plano de previdência (de preferência com opção de boleta de aporte mensal, uma forma de obrigar o investidor a poupar o recurso determinado para aquele mês). Qualquer desvio no momento de acumulação das reservas pode ser fatal para atingir o objetivo determinado na aposentadoria.
3) Sucessão: outra desvantagem da poupança independente é o fato de o PGBL e VGBL não entrarem no inventário no momento da sucessão. Dessa forma, nos planos de previdência, há a possibilidade de fazer o planejamento sucessório de forma mais ágil e rápida, evitando transtornos aos beneficiários.
4) Para fundos de renda fixa e multimercados, a outra desvantagem é a existência do come-cotas (IR sobre o rendimento que ocorre nos meses de maio e de novembro). No caso dos PGBLs e VGBLs, não há a existência do come-cotas.
Resumidamente, a escolha da melhor forma de poupança deve ser feita em função do perfil do investidor e do seu comportamento como poupador. Independente da maneira escolhida, o importante é poupar e se planejar. Não importa de qual forma (independente ou via plano complementar) isso será feito! O essencial é se programar e se organizar para atingir o objetivo de uma aposentadoria tranquila e sem preocupações financeiras. E a crise? Aproveite-a como um incentivo para uma mudança no seu comportamento financeiro e organize-se! Sempre é tempo!
Rodrigo Menon é sócio da Beta Advisors e possui a certificação Certified Financial Planner (CFP)
E-mail: rodrigo.menon@beta advisors.com.br
Obama's Energy Plan: Trying to Kill 3 Birds With 1 Stone
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Summary
U.S. President Barack Obama's energy plan would be a $150 billion effort over 10 years to stimulate the economy, cut greenhouse gases and increase energy security, all in one fell swoop. It is an ambitious plan that, unlike the Depression-era recovery effort, could not only create jobs but also firmly establish a new "green building" industry and reinvent the American automotive sector. At this point, however, some of the numbers seem staggering while others appear insufficient, and much debate and lobbying remain — even on the international level.
Analysis
As part of the overall $789 billion U.S. economic stimulus bill agreed upon by House and Senate leaders Feb. 11 (and to be signed by President Barack Obama Feb. 17), approximately $50 billion will be set aside for programs focusing on promoting efficient and renewable energy. This follows Obama's announcement on Jan. 26 that his energy plan would invest a total of $150 billion over the next 10 years on a variety of projects, including vehicle efficiency, electrical efficiency, clean-coal power plants, biofuels and domestic oil and gas production.
Related Links:
- Global Market Brief: Bush's Oil Supply Plan
- The Biofuel Backlash
- The U.S. Energy Debate: Whether to Bet on Future Technology
- Global Market Brief: Biofuels Pushing Energy Firms 'Beyond Petroleum'
Obama's intention, essentially, is to kill three birds with one stone, addressing what his administration perceives as the country's need for economic stimulus, greenhouse-gas reductions and greater energy security. His 10-year plan makes it clear that his administration will work to reduce greenhouse gas emissions 80 percent from 1990 levels by 2050, and he will start on that path by reviewing a Bush administration decision to deny California its own climate change-focused law. Obama also announced that he would ask the Environmental Protection Agency (EPA) to review California's stringent emission standards, which were struck down by then-EPA chief Stephen Johnson in December 2007.
The first stated goal of Obama's energy plan is to fuel job growth through the "green" sector to the tune of at least 460,000 new jobs over the next three years. The stimulus package, which includes a short-term $50 billion (roughly) in energy projects, currently provides about $14 billion in loans for renewable energy projects, $4.5 billion for "smart grid" electricity updates, $6.4 billion for cleaning up nuclear weapon production sites, $6.3 billion in state-level energy efficiency grants, $5 billion for home weatherization projects and $4.5 billion for making federal buildings more energy efficient. The stimulus also allows for $18.9 billion in "green transportation," essentially improving public transit and building high-speed rail. These expenses represent only the first step in the $150 billion investment over 10 years to secure energy efficiency and energy independence.
The idea behind these projects is to try and push America's construction industry away from traditional home-building and remodeling (in 2008, residential construction fell a record 27.2 percent from the year before) toward a more green approach, which would include installing solar panels and efficient insulation in homes, schools and government buildings. This effort is similar to that undertaken in the 1930s during the Great Depression, when the government employed out-of-work tradesmen, artists and other workers to build public parks, paint murals in post offices and engage in other public works that were intended mainly to keep people busy. The Obama plan is intended to have the added benefit of creating a fundamentally new business sector — a green building industry — while decreasing the country's energy bill and putting people back to work. The government would be providing a stimulus for private business by creating incentives and a consumer demand for energy-efficient features that otherwise would not exist.
The second stated goal of Obama's long-term energy plan is to eliminate the U.S. dependency on Middle Eastern and Venezuelan oil imports by 2019.The United States imported roughly 10 million barrels per day (bpd) of oil in 2007; of this, imports from Saudi Arabia, Libya, Iraq, Kuwait and Venezuela combined to a total of 3.3 million bpd. Removing the need for Middle East and Venezuelan oil would give the United States much greater room for maneuver in both regions.
The 10-year energy plan also contains a climate-change portion. Obama's target (an 80 percent reduction in greenhouse gas emissions from 1990 levels by 2050) is softer than Europe's (80 percent from 1990 levels by 2020), but his 25 percent renewable energy goal surpasses Europe's 20-20-20 plan. The European plan seeks to increase the EU's use of renewable fuels to 20 percent of total energy demand and reduce total EU energy demand by 20 percent, all by 2020. It is by decreasing reliance on non-renewable energy that Obama hopes to wean the United States off of Middle Eastern and Venezuelan oil.
Cap and Trade Program
One of the most ambitious proposals of the Obama energy plan is a national cap and trade program. Under such a program, the government would set emissions standard for various industries, allowing companies that emit less carbon dioxide than their allotment to trade their excess "credits" to those who are emitting above the cap. The initial allotments of carbon credits will incite one of the more contentious domestic debates in the coming years, as will the steepness of the emissions reduction curve. In addition to a national goal of 80 percent by 2050, there are questions about what the goal will be in 2020 or 2035.
Lobbying efforts are already under way regarding cap and trade. American businesses do not want to see states in charge of setting greenhouse gas emissions standards since that would increase the accounting and legal fees companies would have to incur to deal with the system on a state-by-state basis. Instead, they want to see a single national standard.
Establishing a national standard for a cap and trade system would allow utility companies to factor in future costs of emitting greenhouse gases, which currently is an unknown. Utility companies do not know whether it makes sense to build regular coal plants, clean coal plants, solar or wind installations or natural gas production facilities because the rules of the game are not set. Until that happens, energy expansion in the United States will be at a standstill.
However, the U.S. domestic climate-change policy must be negotiated at the global level, particularly with China. Obama, or any subsequent U.S. president, will be hard-pressed to adopt carbon emission rules without first getting some sort of a deal with China that would guarantee that Beijing would also address its own greenhouse emissions. Otherwise, U.S. greenhouse gas-emitting industries (chemicals, petrochemical, paper and pulp, steel, cement, etc.) could bolt for China and the developing world. Therefore, a conversation with Beijing about climate change is high on Obama's list of priorities; his energy envoy, Todd Stern, is accompanying Secretary of State Hillary Clinton on her current trip to East Asia, primarily to discuss some of Obama's energy ideas with the Chinese.
Improving Automobile Mileage
To reduce consumption of imported oil by approximately a third, Obama plans to force implementation of a congressional decision in 2007 to raise federal fuel economy requirements to 35 miles per gallon for cars by 2020, from their current level of 27.5 miles per gallon. (Today, about 60 percent of U.S. oil demand is used to power the American vehicle fleet.) The 2007 congressional decision was never put on a path for implementation by the Bush administration, which Obama will try to reverse by asking the Department of Transportation to come up with a plan by March to implement the mileage standard.
The problem with increasing the mileage of the current fleet (which has essentially averaged, on a fleet-wide basis, slightly above 20 miles per gallon since the early 1980s) is that it would necessitate replacing a substantial number of America's current fleet of over 250 million cars, small trucks and SUVs. In the Energy Independence and Security Act of 2007, Congress allocated $25 billion to "reequipping, expanding, or establishing manufacturing facilities in the United States to produce qualifying advanced technology vehicles or qualifying components." However, all of the $25 billion was subsequently relocated to provide bridge loans to the auto industry as part of their bailout announced on Nov. 20, 2008.
Therefore, it will be up to consumers to replace their old automobiles with hybrid vehicles, and Obama hopes to encourage them to do so by offering $7,000 in tax credits per vehicle for the purchase of an "advanced vehicle" (presumably these would include various types of hybrids) and putting 1 million plug-in hybrid cars on the road by 2015. This tax-credit program would have the U.S. government essentially spending a huge amount of money to buy new cars for people. Currently (figures are from December 2008), U.S. purchases of hybrids average 17,600 per month (down from about 30,000 during the first half of 2008), or approximately 3 percent of total purchases. At that rate, if Obama's $7,000-per-car system were adopted, the U.S. government would have to spend approximately $123 million in tax credits per month, or nearly $1.5 billion a year, just to sustain the current level of hybrid purchases.
Encouraging 'Plug-in' Hybrid Technology
The "plug-in" component of Obama's hybrid-vehicle plan is a direct plug for the domestic manufacturer General Motors Corporation (GM), which has essentially put all of its eggs in one basket with its flagship to-be Chevrolet Volt electric plug-in car. The Volt, which can go 40 miles purely on stored electricity before switching to its onboard gasoline engine, will have a price tag of more than $40,000, which means that even with the $7,000 tax credit for advanced vehicles (which presumably would also go for the cheaper Japanese hybrids), the Volt would cost essentially twice as much as its foreign competition. GM flatly stated in recent congressional hearings that the Volt would not be profitable in its first production run, that total costs of production would be around $750 million and that return on the investment could be expected only after 2016 — a risky strategy for a troubled manufacturer, to say the least.
At the moment, however, there is very little certainty that U.S. consumers would choose a U.S. made plug-in hybrid like the Volt over the (mostly Japanese) competition. Complicating calculations relating to the energy efficiency of the plug-in electric hybrid is the fact that the economics and ecological benefits of these vehicles depend on local electricity costs and the relative "greenness" of the consumer's power source. A traditional gasoline-electric hybrid contributes to less net greenhouse gas emissions than a plug-in hybrid in states that rely on coal for electricity generation. This calculation would change, of course, with changes in the electrical grid (see below).
Investing in Coal
Obama's plan is to "develop and deploy clean coal technology" as part of relying more on domestic energy resources. If there is one non-renewable source of energy that the United States has plenty of it is coal. In 2006, U.S. proven reserves totaled 27.1 percent of total global coal reserves, the highest number in the world. Coal already accounts for roughly 51 percent of U.S. electricity generation (in 2007) and for 22.8 percent of total energy use in the United States.
At the center of the debate over coal in the United States is the question of "clean coal" technology, especially carbon capture and sequestration. As the term implies, this combination of techniques allows for a coal-fired power plant to produce power without spewing carbon dioxide emissions into the atmosphere. Instead, the carbon is captured and sent to deep underground repositories where it is sequestered. The technology could prove to be a panacea (should it ever become cost-effective): The United States has over a quarter of the world's coal; it wants to increase its domestic energy sources; and it needs to reduce carbon-dioxide emissions. The only problem is, while the technology exists, no one has figured out a way to employ it economically.
To retrofit an existing coal plant would cost approximately $1 billion to $2 billion (a 300 megawatt coal plant by itself costs about $1 billion and a 630 megawatt costs around $2.4 billion) and would require a doubling of the actual acreage on which the plant was built. An additional problem is that capture and sequestration would consume 30 percent of the plant output, substantially limiting the total energy output of the plant.
The elephant in the room is the potential cost of a complete overhaul of many of the current coal-burning plants, which would likely be necessary to make them economically viable under a future cap-and-trade system. The price tag for such an overhaul would be monstrous and definitely higher than the $150 billion currently earmarked for the next 10 years for all energy projects. The United States has 1,470 coal-burning plants, and if the cost of retrofitting for subterranean sequestration is factored in, the numbers would be astronomical and could measure in the trillions.
The final problem facing the coal industry is that the authority to regulate the building of new power plants in the United States rests with state governments, not the federal government. Some state governments have come under pressure from environmental groups to delay or cancel the building of coal power plants to avoid exacerbating climate change. In other states, environmental organizations have used lawsuits to tie up proposed coal plants for years. These lawsuits have added to the uncertainty surrounding the economics of building new coal plants. The economic uncertainty, legal uncertainty and litigation have resulted in a situation in which of the 151 coal plants proposed for construction in 2007, 109 were essentially scrapped or tied up in court, with only 28 actually under construction in 2008.
Promoting Ethanol
Encouraging a greater use of ethanol was one of Obama's primary electoral campaign messages, particularly to the corn-producing region in the Midwest where he picked up Iowa — the undisputed corn producing king — by a wide margin (Iowa voted Republican in 2004 and Democratic only by a slim margin in 2000). Derived mainly from corn, ethanol could be produced and mixed with refined petroleum to create enough gasoline to fulfill America's transportation energy needs (which account for 30 percent of total energy usage and over half of oil use in the U.S.). To fulfill Obama's pledge to wean the United States from Middle Eastern and Venezuelan oil, U.S. refineries would probably have to use six times as much ethanol in gasoline than they currently do.
The key problem with such a surge in ethanol use is that it would appreciate food prices. According to calculations by the University of Illinois economics department, with oil prices at $50 per barrel it is profitable to convert corn into ethanol if corn prices are lower than $4 per bushel. Corn prices currently stand at approximately $3.67 per bushel. If oil were to climb above $50 per barrel, it would be more profitable for farmers to sell corn to ethanol refineries than to sell it for food. As oil prices climb, the threshold for corn prices rises as well, giving farmers more incentive to convert corn into fuel and thus raise food prices.
One way to avoid raising food prices would be to produce ethanol from cellulosic material (essentially any sort of non-edible plant material, from grass to corn stalks). The problem with cellulosic material is that it requires expensive enzymes to break down the plant material before it can be refined — a recent study found that this process is competitive only with oil prices above $90 a barrel. The process would also require gathering massive amounts of low-value raw materials — itself a very energy-intensive process because these materials have to be transported from the farm to the refinery. Currently, cellulosic materials like chaff are simply ploughed into the soil as fertilizer, burned or used for animal feed. In order to use it as a main source of ethanol production, the material would have to be shipped to refineries from the farm.
The current collection-transportation networks in the Midwest are calibrated for food distribution, not gasoline delivery. Therefore the first problem is how to get the cellulosic material to the refineries. Chaff and agricultural by-products are usually less dense than corn, so it would take more trips to the local refinery to make it worthwhile, increasing transportation costs. Farms would either have to ship their agricultural waste for refinement to a centralized collection point (most likely right next to the grain elevator) or run rudimentary refineries right on their farms.
Either way, once the refining process is complete, the ethanol would have to be shipped to consumers around the country (most of who are on the coasts, far from the Midwest). There is no pipeline network ready to take the fuel-ready ethanol from refineries to the coasts, and such a network (one akin to the natural gas pipeline network in Europe may have to be developed) would be an extremely expensive project. Therefore, a switch to ethanol could work for the Midwest, leading to a bifurcated system where the coasts still use petroleum for transportation while the agricultural producing regions rely on ethanol.
The Alaska Natural Gas Pipeline
To boost domestic production of energy, Obama's plan would "prioritize the construction of the Alaska Natural Gas Pipeline," which would tap natural gas deposits in Prudhoe Bay on the banks of the Arctic Ocean. To get the pipeline to reach the U.S. lower 48 it would have to cross more than 1,500 miles, including the imposing Alaskan Brooks Mountain Range. The project is not new. It was proposed in the late 1960s, when the deposits were discovered, and became a popular idea during the oil shocks of the early 1970s. Today there are three competing pipeline projects being considered: ExxonMobil's Mackenzie Valley ($16.3 billion), the TransCanada project ($26 billion) and BP-ConocoPhillips' Denali project (somewhere between $30 billion and $40 billion). All three projects are financially daunting, comparable to the Soviet-style infrastructural development that aims to connect Russian natural gas fields on the Yamal Peninsula with consumers in Europe. As a point of comparison, the Yamal-Europe pipeline that ships natural gas from Russia to Germany via Poland and Belarus traverses over 4,000 miles of flat terrain and cost roughly $45 billion. As such, it is actually cheaper per mile of pipeline than either the TransCanada project or BP-ConocoPhillips's Denali project.
'Use it or Lose it' Lease Strategy
A U.S. congressional report, supported by Democrats on the House Natural Resources Committee, has highlighted 68 million acres "of leased but currently inactive federal land and waters" that could produce "an additional 4.8 million bpd of oil." Intrinsically, this production would decrease U.S. imports by 75 percent and eliminate the need for Middle Eastern and Venezuelan imports. The Obama energy plan would seek to boost domestic oil production by tapping this supposed wealth of untapped domestic wells that energy firms hold leases on but choose not to produce from.
The problem with this plan is that U.S. energy firms hold leases on potential wells and deposits that often require a long period of time to survey. Some underwater deposits are unable to be exploited, at least until technology is improved (which generally takes years and sometimes decades). By forcing energy companies to "use it or lose it," the government will discourage careful surveying and most likely run off the energy firms from the deposits by attempting to force them to develop currently uneconomical fields. Unless the U.S. government develops a state-owned energy company willing to tap and produce from fields for a loss, there is no point in taking leases away from energy firms.
The 'Smart Grid'
Ultimately the most significant change to America's energy usage and efficiency may be the retooling of the entire electricity grid and transforming it into a so-called "smart grid." This is essentially an amalgamation of modern technologies in the distribution and supply of electricity. It uses digital technology (such as digital electricity readers, which would replace manual readers) to coordinate supply and demand of electricity across the nation. It combines more efficient distribution of electricity to consumers with advanced long-distance transmission lines that would be able to take alternative energy sources (such as wind power) to electricity markets far away.
As such, a smart grid would introduce two-way communication between energy suppliers and consumers, allowing utilities to direct power more efficiently away from low-energy users to high-energy users depending on the time of day or need. It would also give consumers more room to create their own usage preferences by actually programming how (and when) their appliances use energy. The smart grid would also regulate electricity use of homes and businesses by being able to turn off appliances that are not being used during peak times.
The concept is simple enough and would update America's electricity infrastructure (currently running on technology not much different from its nascent stages in the 19th century) to a modern digital consumer/provider system. However, such a national grid would necessitate replacing all of America's electricity meters, as well as all transmission lines and all transformer stations, a project with a likely price tag of somewhere near $200 billion. The current stimulus package, however, commits only $4.5 billion to a smart-grid upgrading of some 3,000 miles of transmission lines and equipping about 40 million homes with "smart meters." This funding will not be enough to begin a serious overhaul of America's electricity transmission network. It is more an attempt to kick-start industry and private businesses and move them toward an eventual retooling.
John F. Mauldin
johnmauldin@investorsinsight.
The ABCs Of A Downtrend
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The Great Depression of 2009
Fellow Investor,
Having just returned from a week in the United States, I have concluded that the Great Depression has arrived. But it's not the economic kind. I'm now convinced the media is making the United States mentally ill.
It wasn't always so. When I visited the real "Situation Room" in the White House a couple of years ago, it was the place that presidents and their closest advisors gathered to deal with exceptional events like Pearl Harbor and 9/11. Today, "The Situation Room" is a daily program on CNN, boasting almost Orwellian presence in every airport across the land. Living as I do in Europe, and not inured against the relentless onslaught of "breaking (bad) news," it's hard not to come to the conclusion the U.S. media is populated by a dedicated army of Chicken Littles on a relentless quest for the next sky about to fall.
When a friend of mine in London -- a card-carrying member of the European Left -- found out that I appeared on Fox Business regularly, she asked me if I was forced to "spin" my comments. She was genuinely shocked when I said they did no such thing. As long as it was "good television," you get invited back, no matter what you say.
That doesn't mean that the media can be anything but breathtakingly distorted. I was reminded of this when I heard Federal Reserve Chairman Ben Bernanke speak in London about a month ago. Bernanke gave a speech on the creative measures that the Fed may undertake to address the financial crisis. It showed him for what he is: the brainy college professor turned technocrat you had in college if you studied at MIT, Stanford or Princeton. But when I read the newswire stories about it, they seemed to be about a different speech. One story in particular Bernanke's one sentence reference to Barack Obama and his proposed fiscal stimulus package, put it in the headline, and somehow argued that it was evidence of the Fed's own impotence and incompetence. I was genuinely flabbergasted.
Furthermore, it's no secret that bad news sells. Sex crimes, scandals and accidents sell papers and increase ratings. As the old saying goes; "If it bleeds, it leads." As a rule of thumb, the media broadcasts 13 negative stories for every positive one. And psychologists have shown that a negative story has three times the negative psychological impact on you as a positive story does on your well-being. Even more insidiously, bad news is addictive. It literally releases chemicals in your body -- a manifestation of the "fight or flight" response -- which gives you a perversely satisfying jolt. That's why some psychologists have called strong emotions "the most addictive chemicals in the world." And in terms of generating a daily dose of bad news, positioning the current economic slowdown as the "Second Great Depression" is a worthy successor to the Iraq War. The all-news channels also need to generate a lot of (addictive) content. After all, they have more than 8,700 hours to fill every year.
But once you stop and think about it, it's naïve to think the media's "job" is to report objective "facts." And it's not a matter of whether you look to Paul Krugman on MSNBC or Hannity on Fox News to validate your pre-existing opinions. You may be surprised to learn that financial television owes its origins to sports broadcasting. The similarities are apt. After all, financial markets are a non-stop "game" with their own "star players" and plenty of opportunity for "play by play" commentary and "post-game locker room" interviews. No wonder many of the producers of financial news programs got their start as sports show producers.
The Great Depression of 2009: Try a Mental Diet
Yes, there is some high-quality reporting which offers some novel perspectives. I just completed watching Alastair Cooke's series "America" from the early 1970s, which offers a terrific insight into American history from the Alexander De Toqueville of his day. But I now think of day-to-day media as a kind of mental junk food. It may taste good and may be even addictive. But if you eat too much junk food or watch too much TV news, don't be surprised if you wake up fat and depressed.
So what should you do? Go on a mental diet. Start by turning off the TV. Visitors to my home in London are often surprised to find I don't even own a television. It's a conscious decision. Life looks better when you don't have the talking heads telling you how bad everything is.
Sincerely,
Nicholas A. Vardy
Editor, The Global Guru
Holiday Blues: Weakness Unmatched In 35 Years
In January, 21% of the states in our survey met or exceeded their forecasted sales tax collections, up from 9% in December. Our index is based on states meeting their forecasts, not reporting strong or even positive over-the-year collections, so we need to point out that the entire improvement came from a large state doing slightly better than the stunning decline they had forecast. This decline was partially calendar related, but January 2008 was 7% below forecast, so they had a very low bar. In the words of our contact in that state: "Bad economy, good forecast." Had the revenue estimators in that state made a less dramatic forecast our survey would have slid to 6%, which we think is more in line with historical weakness reported for sales tax collections during the holiday season.
States reporting over-the-year growth fell to 3% from 15% in December. The average decline, weighted by state population fell from December's –6% to –10%. (More on this in a bit.) Forecasts were negative in all but two of the states that met their projected collections. The exceptions include a state that collects sales taxes on groceries and attributes their relative strength to the spike in food prices, and another that put through a rate increase, which accounts for all of the growth.
The energy-extraction states, which have held up the longest, are now weakening as well. To give you an idea of how powerful the surge in energy prices has been, our contact in one southern state told us that their Appalachian mine country is currently outperforming regions where manufacturing and research predominate.
Throughout the country, states are reporting historic weakness. One Midwestern state reported two months of double-digit declines, which just three months ago would have been "unthinkable." A small southern state reports that never before has an entire year fall below the prior year; they are currently down 5.7% for the year, and have to go back 35 years to find similar monthly weakness. Calling the holiday season one "large discretionary item," our contact in a large Midatlantic state reports that that item "imploded like never before" in his forty years of data. "Holiday receipts will make you say: OMG," he promised, even if you're too old to talk that way.
There is one piece of potentially encouraging news. A few contacts remarked that they do not expect the current rate of decline to continue into the spring as spending swings back toward day-to-day needs and away from the discretionary shopping of the holiday season. But, of course, there is no guarantee that consumer spirits will improve much with the job market in rapid decline, the markets in disarray, and our leaders struggling to come up with a viable plan to get the credit markets moving.
In addition to exceedingly weak sales receipts, our contacts are reporting record unemployment insurance payouts (in one state double what would formerly have been considered a "huge" month), plummeting corporate receipts, skyrocketing refunds, and evidence that withheld taxes may have been supported by employees opting out of retirement plan deductions, and even cashing out of 401K plans. (Hardship withdrawals trigger withheld taxes.)
Consumption: From Excess to Freefall
What's happened to consumption since the middle of 2008 is nothing short of stunning, both in speed and magnitude. Several examples will make this point.
Let's start with one of the mainstays of this report, sales taxes. Graphed below is the yearly change in state and local government (SLG) sales tax receipts adjusted for inflation from the national income accounts. (The price index is that for SLG purchases.)
The last entry on the graph is our projection, based on the results of our January survey -- a 10% nominal decline with a 2-point inflation adjustment, or a 12% estimated decline. (The estimate of 2% inflation is rough; it was about 3% in the fourth quarter, down from around 6% at midyear.) The actual result for the fourth quarter of 2008 was –6.3%, a little worse than the previous two quarters, which came in at –5.9%. That –6% neighborhood for late 2008 is the worst in the history of the series; its closest rival is the –5.1% hit during the sharp 1980 consumer recession, when Jimmy Carter got on TV and told people that it was their patriotic duty to stop using their credit cards -- which they actually did for a while, though not for long. This quarter should shape up to be a record-breaker.
OK, moving on to auto sales. Graphed below are monthly unit sales at a seasonally adjusted annual rate per 1,000 people. Adjusting for population really brings home the weakness. January's 9.5 million rate (for autos plus light trucks) is one of the lowest in history, but its earlier rivals were at times when the U.S. population was considerably lower than it is today.
January's rate translates into 31.1 units per 1,000 people, which is 3.5 standard deviations below the mean, and well below November 1970's 36.1, a dismal performance created not by economic weakness, but by a two-month strike at GM. It's also worse than the lowest levels of the 1973–75 and 1981–82 recessions (40.8 and 38.3 respectively). It comes after a 17-year period when there was basically no auto recession. But the contraction has hit suddenly and hard: sales were 50.3 per 1,000 in February 2008. The yearly drop-off is the worst since the numbers begin in 1968.
And now a macro measure: what Keynes called the marginal propensity to consume (MPC). The MPC is the share of after-tax income growth that is devoted to consumption. Between 1950 and 1990, the MPC was 89% (that is, the growth in consumption over those 40 years was equal to 89% of the growth in after-tax income). Americans started consuming more of their income growth in the 1990s, but really broke records in the 2000s.
Those points are illustrated by the graphs on below. The top graph shows the MPC computed over rolling one-year intervals. It's obviously very volatile, so we've added a trendline (as computed by a Hodrick–Prescott filter). In the 1980s, the HP trend broke above 100% for the first time, maxing out at 106% in 1986. It fell back to just below 100% as the decade turned, but began rising again in 1991. It stayed above 100% until mid-2006, and has now fallen very sharply to 75%. The actual MPC for the fourth quarter of 2008 was 2.4%, the lowest by far since 1950.
The graph on the bottom stretches the interval out to three years, to smooth out some of the volatility. That measure isn't at record lows, but its fall has been vertiginous: from 113% at the end of 2007 to 82% at the end of 2008. Measured in percentage terms, that's the sharpest fall over the last 58 years.
And the graph below shows the MPC by expansion, for the last 10 cycles. The MPC for the 2001–2007 expansion was 108%, a record by a comfortable margin. The #2 slot is occupied by the 1991–2001 expansion's 102%. Aside from the late 1950s expansion, nothing else came in above 100%.
What does this all mean? It suggests that the consumer retrenchment in this recession will be deep and long, and will probably continue into any recovery. The American consumer is no longer the world consumer of last resort, and that's an enormous change for both this country and the rest of the world to get used to.
Thursday's retail numbers
As we often point out, the retail sales series is extremely noisy, so noisy in fact that its month-to-month serial correlation is negative or non-existent. Stringing together the old and new series since 1967 gives you a serial correlation of –0.198 for the headline and –0.154 ex-auto; just looking at the new, post-1992 series, the coefficients are –0.151 and 0.032. This compares to the nonfarm payrolls correlation of +0.707.
This is by way of preface to saying that it's unusual to have several consecutive months of steep declines, as we have in recent months, but certainly not surprisingly in these unusual times (something to be thankful for in five or ten years, we hope).
Although our sales tax survey is abysmal, collections are lagged and we have seen some of that weakness in December's retail numbers. We suspect January sales fell -0.3% and –0.2% stripping out autos. The standard private surveys suggest that January wasn't as bad as December; the Goldman Sachs–ICSC weekly chain store numbers have stabilized (at low levels, suggesting necessities, not indulgences) in recent weeks. Our headline is far from consensus because we understand that weakness in unit auto sales was largely driven by fleet sales. The Census Bureau instructs retailers to include fleet sales in their responses, but since these sales usually bypass retail outfits they are probably more often missed than included.
--Philippa Dunne & Doug Henwood
John F. Mauldin
johnmauldin@investorsinsight.
Market Outlook 19/02/2009
- Three Urban Legends on Wall Street Today by Stockton Sage
- Wall Street Breakfast: Must-Know News by SA Editor Rachael Granby
- Preview from Europe: Stocks Fail to Gain Traction by The Mole
- Does the Dow Matter? by Sean Hannon
- 21 Reasons to Be Bullish by Toro
- Being Bullish in a Bearish Environment by Toro
- My Normalized Earnings Approximation of the Market by Toro
- Stocks Are Cheap by Toro
- Is There Anything Else Investors Can Do Right Now? by Kris Tuttle
- Gold Continues to Climb as Economic Catastrophe Looms by John Browne
- Why Forecasters Go to Extremes by Don Fishback
- Junk Bonds Today: Realistic Levels? by Avi Morris
- Bond Expert: Wednesday Wrap by John Jansen
- A Five Year Investment Plan by Jeffrey A. Miller
- A Caveat to 'Stocks for the Long Run' by Larry MacDonald
- Gold: The Only Remaining Bubble? by Alan Brochstein
- Odds on a Two-Year Recession and a Three-Year Bear by James Picerno
- Will the November 2008 Support Hold? by Babak
- Dow Almost Touches November 20 Low by Peter Cooper
- Options Trader Wednesday Outlook: Stop GM Before They Kill (the Economy) Again by Philip Davis
- S&P 500: Finally, Bottoming? by The Curious Investor
- Further Job Cuts Could Trigger New Stock Lows by J Clinton Hill
- In Today's Environment, Neither Technical Nor Fundamental Analysis Alone Will Workby J. S. Kim
quarta-feira, 18 de fevereiro de 2009
Doug Fabian's Making Money Alert
Fellow Investor,
What Obama Bounce?
Dow Jones Industrial Average closing value, November 4, 2008: 9,625
Dow Jones Industrial Average closing value, February 17, 2009: 7,553
On Tuesday, President Obama signed unprecedented bailout legislation into law. The $787 billion "rescue" package is intended to create jobs and jumpstart the ailing U.S. economy. Whether the plan has its intended effect, only time will tell; however, one effect we all can agree on is that since Election Day, the market hasn't been very bullish on Obama.
The Dow Jones Industrial Average is down 2,072 points since the nation voted in our 44th president. So much for the Obama bounce that many Wall Street pros, including myself, admittedly predicted would take place.
If you recall, we wrote to you in last week's Alert that we once again could be on our way to the 800 level in the S&P 500. Well, as President Obama was signing the biggest -- some may say most invasive -- economic legislation in U.S. history, the S&P 500 blew through the 800-support level.
The chart above of the S&P 500 tells us that the next stop on the downside is 750. If the market falls below that level, we need to batten down the hatches and prepare for what could be the most turbulent conditions I've witnessed in my three-plus decades of market watching.
Conversely, if stocks can find some positive catalyst -- be it a bank rescue proposal with some real teeth, a mortgage bailout or some kind of positive macro economic data -- we could look back on this decline as a great buying opportunity.
Fortunately for readers of my Successful Investing advisory service, we have sidestepped nearly all of this market pain by allocating to what I'm calling the best Obama investment right now.
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Has every ship run aground? Have all the oceans frozen over? You might think so if you've followed the dramatic tumble of the Baltic Dry Index. The index tracks the price to ship dry goods -- everything from corn to cement -- and unless the world suddenly stops eating and building, the odds are this index is ripe for a stunning rebound.
Today, we're featuring an article from our friends at StreetAuthority. StreetAuthority's Amy Calistri explains why these shipping stocks have a bright future ahead of them, all while providing some monstrous yields -- one shipper in particular is paying a 23.2% yield!
Shipping Stocks Are Starting to Rebound...
Don't Miss the Chance for Double-Digit Yields
By Amy Calistri, Investment Strategist, StreetAuthority.com
Legendary investor Warren Buffett has always said, "Be fearful when others are greedy, and be greedy when others are fearful." When we look back on 2008, we'll see it as one of the most fearful times of our generation.
A number of investors, certainly including Buffett, will remember this time happily, as an opportunity to make a fortune. Fear has caused everyone -- investors, consumers, businesses -- to put the brakes on spending. This has led to nothing short of panic.
Nowhere is this more obvious than with the Baltic Dry Index -- which had at one point fallen 94% from its peak just seven months ago.
The Baltic Dry Index isn't a regular stock index like the S&P 500 or the Nasdaq. It's actually a composite survey of daily shipping prices around the world. And although it doesn't track underlying stocks like most market indices, its movement does affect almost every shipping company's share price, as it is viewed as a proxy for the overall industry. As the index has plummeted, it has taken the share prices of most shipping companies with it. This provides new investors a chance to capture some of the most appealing yields that we have ever seen.
The BDI's Bubble Trouble
In May 2008, the Baltic Dry Index was riding high. Commodity prices were still on the upswing, and commodity buyers were insensitive to shipping costs. In preparations for the headaches of tighter port security surrounding the Olympics, Chinese companies had stockpiled raw materials, pushing shipping prices even higher. And the U.S. subprime crisis appeared to be contained at its borders -- meaning the rest of the world's trade went on unhampered. On May 20, shipping spot prices hit an all-time high.
No one, not even the shipping companies, considered the May highs sustainable. But few anticipated the perfect storm of downward pressure that shipping prices would face during the next few months. How bad has it been? Rates for capesize ships -- so named because initially their large size prevented them from using the Suez Canal, forcing them to sail around either Cape Horn or the Cape of Good Hope -- that were priced at $230,000 a day in late May have fallen to almost $20,000 a day. The Panamax-class shipping rates have seen a similar trend, tumbling from daily rate quotes of $90,000 a day to about $12,800.
The decline of the S&P 500 looks like a mere bunny slope when compared to the Baltic Dry Index's plummet. The BDI has fallen more than 90% since its high on May 20.
There are a number of valid reasons why the Baltic Dry Index should be off its highs. In addition to being grossly overheated just a few months ago, the U.S. subprime mortgage problem blossomed into a full blown financial crisis and undoubtedly has weighed on economies outside the United States. When world economies slow down, the demand for shipping also slows. And the speculative bubble in the commodities market also has burst, making commodities buyers more price-sensitive when it comes to shipping.
But instead of adjusting to a new shipping world order, the index failed to find a floor. Jacob Fentz, Classic Maritime Inc. president, noted that the BDI was "overshooting big time on the downside just like it did on the upside." But there is good news for investors: Ample evidence suggests the index's current inability to find the brakes stems from temporary problems with immediate solutions.
Short-Term Problems, Near-Term Solutions
Why do we see an eventual rebound in the future for the Baltic Dry Index? Many of the short-term pressures weighing on shipping prices are already showing signs of abating.
Easing Credit Worries: The worldwide credit crisis that has made it harder for small companies and consumers to borrow money, also has made it harder for dry bulk buyers to get their cargos loaded onto ships. Traditionally, all a buyer had to do was show a letter of credit from a bank. But as banks became undercapitalized, letters of credit -- the lifeblood of international shipping -- grew harder and harder still to come by. As a result, commodities began to pile up at the ports. "There's all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy."
The credit freeze has begun to thaw. Bank-to-bank lending has resumed. Governments around the globe have put up hundreds of billions of dollars to back the world's banking system, and letters of credit appear to be navigating their way through the system again.
Stabilizing Demand: In an effort to reduce pollution, China shut down hundreds of construction sites, coal-fired power plants, cement factories and chemical manufacturers a month before the Olympics and throughout the games. While this was only a temporary measure, the drop-off in shipping demand made an already nervous sector panic. But the temporary fits and starts from the Beijing Olympics are now long behind us. The Olympic cutbacks were not a real measure of demand any more than the pre-Olympic build up was, and these anomalies now are being seen for what they were.
Short-Term Feuds and Still-Strong Growth: A tiff between China's steel companies and Brazilian iron ore suppliers, which has resulted in limited shipments of ore between the two countries, had wreaked havoc on the index. This situation has cooled, with Brazilians backing down from the price hikes they were demanding.
China, of course, is an important market for shippers, and many investors worry about a slowing Chinese economy. While there are some signs of this, it is a relative term. After all, China is on track to maintain an 8.5% rate of growth for the next four years. That's considered breakneck speed for any economy, and it will add 50% to China's GDP by the end of 2013. China will need iron ore and other materials to build out that growth. Brazil and other international suppliers will sell it, then ships will move it.
"Dry bulk levels may be close to their 'logical bottom'"
So read the recent headline from Lloyd's List, a respected maritime news outlet. As many of the temporary pressures on the Baltic Dry Index already are starting to ease, it's hard not to believe the BDI has overshot its floor and soon will find a more rational level -- certainly off of its unsustainable highs but also above its equally unrealistic lows.In fact, we're already seeing this. The BDI is more than 20% off its lows -- but still nowhere near a rational level. And as normalcy returns to the index, investors still have a chance to profit from shipping's worst fears. While you can't trade the index itself, almost every shipping stock was pummeled by the fall, and most will follow it up on the rebound.
In the meantime, with many shipping stocks trading near their 52-week lows, already generous yields are at unprecedented highs. Investors not only have the opportunity to lock in 10%-plus yields with stocks such as Navios Maritime (NYSE: NM), they have the added potential for share-price gains once sanity returns to this sector.
Shipping is Just One Bright Spot for 2009
I'm not the only one who thinks the shipping sector is poised for a comeback. Paul Tracy, editor of StreetAuthority's Market Advisor, recently cited the rebound in shipping rates as Prediction No. 3 in his "11 Surprising Investment Predictions for 2009."
"The bounce-back investment of the year," Paul writes, "will be shipping stocks. After plunging 94% in 2008, these stocks are ripe for a monster rebound." Paul has pinpointed his two favorite ways to cash in on the shipping rebound, including one stock yielding 23.2%.
Along with an expected historical rise in shipping, Paul makes several other bold investment predictions in this report, including:
A scarce metal needed for the defense industry will see its price soar after violence in Africa cuts off supply.
President Obama will pour billions into rebuilding the nation's highways, bridges and other ailing infrastructure. Three construction companies' revenues will skyrocket.
A new way to cash in on nanotechnology may make early investors rich. Some people are calling this the "opportunity of the century."
These are just four of the 12 investment angles that Paul's research team has identified as triggers for explosive profits in 2009. Visit this link to read Paul's predictions report in its entirety right now.
ETF Talk: Is Retail Out of Style?
Consumer spending always is a key factor in economic growth. Economists tell us that consumers account for nearly 70% of the U.S. gross domestic product (GDP). In light of the current economic situation, with a 7.6% unemployment rate that is more than double the norm, consumer spending and GDP seem destined to fall further.
As of this week, the retail outlook seems dim. The Labor Department recently reported that retailers slashed about 45,000 jobs last month to cut costs. Even major retailers such as Wal-Mart, Target and Macy's have announced job cuts in the last few weeks. Amid this maelstrom of dismal news, however, retail sales unexpectedly rose 1% in January -- the first time in the last six months that retail sales haven't fallen from the previous month.
Your first instinct from this brief analysis might be to short retail stocks -- possibly by using exchange-traded funds (ETFs). If you believe that the retail sector is going to be plagued unrelentingly by this ongoing recession, betting against retailers might be a profitable idea. As the retail industry enters a new year, consumers generally are curbing their spending, according to reports from the International Council of Shopping Centers and Goldman Sachs. Chain-store sales were flat for the week ended Feb. 7, compared to the previous week, but declined by 1.8% on a year-over-year basis.
Between job cuts and lagging sales, the shares of major retailers such as Wal-Mart, Target and Sears fell more than 6% last week. The S&P Retail Index, which tracks most retail stocks, last week fell 18 points, or 6.9%. As a result, ETFs that short this sector, such as UltraShort Consumer Goods ProShares (SZK) and UltraShort Consumer Services ProShares (SCC), have risen by more than 15% since January 2009.
| Two Ways To Play |
|---|
| Long |
| XLY Consumer Discretionary SPDR |
| XLP Consumer Staples Select Sector SPDR |
| PMR PowerShares Dynamic Retail |
| UCC ProShares Ultra Consumer Services |
| UGE ProShares Ultra Consumer Goods |
| Short |
| SCC ProShares UltraShort Consumer Services |
| SZK ProShares UltraShort Consumer Goods |
On the other hand, if you believe that consumer spending will recover in a few months, you may prefer to invest in a retail rebound. Since the market usually rises before the economy, early bird investors willing to bet on retail stand to profit the most. Since retail stocks have been beaten down, the industry may bottom out in the coming months. Major retailers such as Macy's and Sears have lost as much as 50% from their share prices in the last year. At some point, retail stocks inevitably will start to climb.
For those of you who believe that President Obama's stimulus package will work and that tax cuts and bailouts might encourage people to resume their now-curtailed spending habits, you may want to invest in retail's recovery. If that scenario plays out, expect to see the sector jump.
At this point, I am not recommending retail as an investment either way. We are at the proverbial fork in the road and it is not readily apparent which way to go. Although retail is starting off 2009 in rough shape, things could improve by year-end.
If you want specific recommendations about which ETFs to trade, check out my ETF Traderservice by clicking here. As always, I am happy to answer any questions that you have about ETFs. To send me your questions, simply click here. I will try to follow up in a future ETF Talk.
Last week, we ran the following story on how to rescue your 401(k) plan. I got a lot of positive response to this story, so I thought I would repeat it here in today's Alert. Enjoy!
It's no secret that most 401(k)-type retirement plans are in shambles as a result of the recent market meltdown. And while there is no simple, quick-fix solution for an ailing 401(k), 403(b) or 457 plan, if you have the ability to self-direct your retirement assets there is a way to put yourself on the road to recovery.
Here are the dos and don'ts of turning around that big drop in your retirement nest egg.
First of all, you have to fight "city hall." All 401(k) providers want you to buy their investments and hold them in perpetuity. I don't care where your 401(k) is, the mutual fund companies want you to choose a mix of funds and then just leave that mix alone. They have placed rules and restrictions on you, and in many cases they make it hard for you to do what you want with your own money. Your first assignment is to know the rules of your 401(k) plan's fund exchange policies. Hey, it's your money, so don't let anyone talk you out of doing what you want with it.
Second, you need to know your retirement plan fund choices. Usually, these choices fall into three categories: fixed income, stocks, or cash. Look closely at your safe choices in the cash category; this could be labeled "stable value" or "money market." As I have been saying for the last year, you need to use this account as your safe harbor in these uncertain times. I'd say you need at least a 50% safe harbor allocation right now.
In the fixed income category, there are some choices that I like. One popular fund is the PIMCO Total Return Fund, a balanced bond fund that posted a total return of 4.2% in 2008. I think you should stay away from those fixed income funds that went down in 2008.
Third, you need to get out of stock mutual funds. I realize that some of you may want to hold on to some of your exposure to stocks, but for me and subscribers to my Successful Investingnewsletter and me, we have zero exposure to equity mutual funds right now. Ideally, if the S&P 500 can recapture 900, we could make a run to 950. If this happens, then it will represent the best opportunity for those still in equity mutual funds to sell into strength.
Fourth, are you able to get some money out of your 401(k) plan? Here's what I mean by that. Traditionally, 401(k)s are very restrictive. Their very design means you have limited choices and more trading restrictions than you would otherwise have in a self-directed IRA. If you are able to, you should transfer assets out of your 401(k). You can do this if you are over age 59 ½, as you may be able to do what's called an in-service rollover. This is when you transfer all or part of your 401(k) to an IRA rollover account. And while this is perfectly legal, your plan must allow for it.
Also, if you have a 401(k) at a previous employer, you should roll that account into an IRA. This will give you the ability to buy and sell exchange-traded funds (ETFs), which come at lower cost than mutual funds -- along with virtually no trading restrictions and with the utmost transparency, so you always know what you own.
Finally, I know what I am outlining here runs counter to establishment thinking, but ask yourself this: are you happy with the results you had in your 401(k) last year? I dare say that that the answer for most people is no, and that means it could be time for some radical change.
Latin For "Hero"
Tu ne cede malis sed contra audentior ito
(Do not give in to evil, but proceed ever more boldly against it.)
-- Virgil, The Aeneid
The above Latin verse from Virgil's Aeneid was adopted as a motto by one of the greatest thinkers in history, Austrian School economist Ludwig von Mises. The author of the highly recommended book Human Action recalled these words during the dark hours of World War II, and it helped him survive intellectually as he was forced into political exile by Nazi sympathizers. I think we all can learn from the example set by Mises, as the only real power that evil has is the power we choose to give it. Thanks, Mises, for being a true intellectual and moral hero.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars or anything else. Click here to Ask Doug.
Sincerely,
Doug Fabian
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