Tuesday, September 23, 2014

The Next Big Shale Formation And The Germans

The Utica is starting to blow up.  The last I checked, the rig count was below 50 but with Aubrey McClendon's new company, American Energy Group, looks like they are going all in on the Utica.  Other companies appear to be planning for large operations in the area such as Eclipse and Hess.  The Utica, along with the Niobrara, could be the next wave in oil investment booms in the US.

Also, Siemens, the German rival/equivalent of General Electric, has agreed to purchase US pumping specialist Dresser-Rand.  The move should give the German company a foot in the door in the US onshore shale boom.  This is perhaps both a politically and technologically strategic move.  It gives Germany room to operate away from Russian gas in the future, may allow Germany to reduce its dependence on coal, and open the Germany economy to modern oil and gas technology.

Tuesday, September 16, 2014

American Diet: Chinese Edition

I've heard that American fast food is catching on like wildfire in China.  The Chinese may becoming more obese and diabitic as a result (just like their 'Murican counterparts).  From Adam Minter:

China is now home to a quarter of the world's diabetes sufferers. That amounts to more than 100 million people -- nearly 12 percent of the population. And according to The Lancet Diabetes & Endocrinology, the British medical journal which last week published a three-part series on Chinese diabetes, the patient pool is almost certain to expand dramatically. More than 600 million Chinese suffer from prediabetes, a condition in which individuals exhibit elevated blood sugar levels that can spark Type 2 diabetes if not treated. 
These are epidemic conditions, and China is going to have an even harder time getting its crisis under control than the U.S. (where 9.6 percent of the population suffers from diabetes) and other developed nations. Genetic and other biological factors make Chinese "particularly susceptible" to Type 2 diabetes, the Lancet study's authors write. And the country's healthcare system, already struggling to provide affordable access to hundreds of millions of uninsured rural residents, isn’t anywhere near ready to care for tens of millions of chronic disease sufferers. Diabetes treatment in China currently focuses on managing complications and end-of-life care. According to some estimates, the disease could consume more than half of China's health-care spending if all patients were to receive routine, state-funded care. 
Indeed, diabetes has the potential to cause the kinds of social and economic upheaval more commonly associated with infectious diseases. “In a country that has gone from economic strength to strength,” the Lancet writes in an editorial accompanying the series, "the diabetes epidemic can now be viewed as a measureable hurdle to achievement of further growth and stability.”

Friday, August 29, 2014

Blame it on Rio (and the World Cup)

From the FT:
“We believe that this contraction is largely a temporary effect caused by the reduction of business days during the World Cup,” Ita├║-Unibanco said in a research report.
I was under the assumption that building new sports stadiums boost an economy.

Thursday, August 21, 2014

If I Were A Central Banker, This Would Be My Number One Graph


I am still bullish on consumer spending.  Just too many cool gizmos out there, extended adolescence of millennials, and retirement of baby boomers.  Money is a state of mind.  As long as the right mindset exists - desire, motivation and commitment - there will be lots of money to spend.

Saturday, July 19, 2014

Money Supply: China:US

I played around with some of the Chinese and US money supply data.  I didn't occur to me that Chinese money supply is so large, but then again it is a large economy with very large upside potential.  Notice that the M1 ratio has gone flat but M2 and M3 ratios are still moving upward.

Graph #1: M1 China:US

Graph #2: M2 China:US

Graph #3: M3 China:US

Thursday, June 19, 2014

NY Fed back in the game

Repos are back, and in a big way.  The NY Fed is taking over the game, though I wonder if they didn't take over the game initially during the financial crisis.  From the FT:
The Federal Reserve Bank of New York has emerged as the single largest player in an important segment of the short-term lending market that was at the epicentre of the financial crisis. 
The Fed’s decision to quadruple its trading with government money market funds in the repurchase or “repo market” is a sign that the central bank is now engaging more directly with the shadow banking system at the expense of large Wall Street banks. 
Historically, the repo market was where big banks pawned out their securities such as Treasury bonds to lenders including money market funds, insurers and mutual funds, in exchange for short-term financing. Now the Fed is stepping in to trade as well as it prepares to end its current near-zero interest rate policy. 
Armed with a balance sheet of $4.3tn of bonds purchased during quantitative easing, the Fed is using what it calls its reverse repo programme, or RRP, to trade with money funds at a time when tough new regulatory standards have made such borrowing less attractive for the banks.
Like the article says, the Fed is now becoming a dealer of last resort.  I am not sure if I want to visit that casino much less be dealt any cards.

Dealer of last resort