Thursday, December 19, 2013

Mortgage Delinquency

A consistent decline in single-family residential mortgages.  Correlations against housing starts (first graph) and the 10-year treasury rate (second graph).

Sunday, December 15, 2013

Mexico: One Step Closer to Amending the Constitution

Mexico is just a few state assembly votes away from making a major overhaul to its constitution aimed at reforming its energy policy.  Mexican lawmakers have amended Mexico's constitution to permit foreign firms to engage in production sharing contracts.

From Adam Williams, Eric Martin and Nacha Cattan at Bloomberg:
Mexico will end 75 years of government control of its vast oil reserves after Congress approved the nation’s most significant economic reform since the North American Free Trade Agreement.
The bill secured the required two-thirds majority in a 353-134 vote in Mexico City’s lower house today after challenges to articles were rejected. Before becoming law, the proposal must be ratified by state assemblies, the majority of which are controlled by the party alliance backing the reform. 
Producers will be offered production-sharing contracts or licenses where they get to own the pumped oil and will be allowed to log crude reserves for accounting purposes. The reform could increase foreign investment by as much as $15 billion annually and boost potential economic growth by half a percentage point, JPMorgan Chase & Co. said in a Nov. 28 report.
I am 100% certain there is no end to government control but the legislation, once fully passed and approved, will be significant.  I think Mexico is in good position to benefit not just from deep-water technology but also from horizontal drilling and fracking technology which have increased US oil production to a 20-year high.  I also wonder how this might affect immigration as new high paying oil field jobs become available in Mexico.

Monday, December 9, 2013

Debt to Income: United States

In a couple weeks the third-quarter figure for TCMDO (total debt) will be released.  Third-quarter GDP shows a slight uptick in the nation's aggregate demand.  Here is how the ratio (TCMDO:GDP) looks as of now:
Total debt to GDP for the United States.

Saturday, December 7, 2013

Most Of It's Not Going To Be There In Ten Years

Interesting article from Gizmodo about a (new) unoccupied 13-story apartment building which recently collapsed in China.  The accident resulted in a single fatality.  Of interest are the similar apartment buildings in the background.

I cannot really make out the foundation - perhaps that is it in the first photo.  I cannot tell if the pylons, as seen from the fourth photo, are driven into the dirt or cemented into the foundation.  It is a sad story.  Though I am reminded of something Jim Chanos said in regards to the construction boom in China.

Tuesday, December 3, 2013

Lights Out On Venezuela?

Venezuela and Iran both produce a heavy oil that is popular among Gulf of Mexico refiners in the US and refiners in China.  As it stands with the current sanctions against Iran, Venezuela is probably getting a good deal out of the sanctions -- at least better than Iran.  However, now that the US and Iran are approaching an agreement that could dissolve the economic sanctions, Venezuela has much to worry about.  From Kejal Vyas at the Wall Street Journal:

CARACAS—Members of the Organization of the Petroleum Exporting Countries will have to accommodate any additional oil supply into the market in light of the recent easing of economic sanctions on Iran without changes to the cartel's overall production ceiling, Venezuela Oil Minister Rafael Ramirez said Thursday.
Mr. Ramirez said how Iranian crude is absorbed into the market will feature highly in discussions next week when OPEC members gather. Venezuela will push to maintain the group's 30-million-barrels-a-day quota, the minister said.
The U.S. and five other world powers reached an agreement on Sunday in Geneva to relieve some penalties on Iran in exchange for moves to cap the Islamic government's nuclear program.
"If this permits Iran to reach its maximum oil production, perfect. Then its production quota is guaranteed in OPEC, which must be respected, and we are going to back that [Iran's] normalization is respected," Mr. Ramirez said.
Venezuela's problems with inflation and toilet paper shortages aren't the end to its economic woes.  Consider this BBC article:
A massive power cut plunged the Venezuelan capital, Caracas, and other cities into darkness on Monday evening.
The Caracas metro ground to a halt and people had to be evacuated from shops and offices. 

President Nicolas Maduro tweeted that the cut had been triggered in the same place as an outage in September, and suggested "sabotage" was responsible. 

Power cuts are common in Venezuela, especially in the inland states, but rarely affect the capital. 
Although Venezuela has large oil reserves it is dependent on hydro-electricity for about 70% of its power. 
The blackout took place shortly after 20:00 on Monday (00:30 GMT Tuesday) as President Maduro was addressing the nation on television.
Blackouts in September were blamed on a vast right-wing conspiracy to sabotage the electrical system.  Oil refineries were not effected by either blackout; instead those effected were households and small businesses in the capital city - a rare event.  With his recently granted power to rule by decree for the next years, Nicolas Maduro may be grasping at straws.