Using foreign exchange data from FT.com, the chart above shows the one-year forward discount or premium of the USD vs. the euro from January 2006 to January 2008. (Mid-month rates were used for the months between January 2006 and December 2007, and yesterday’s quote was used for January 2008.) After trading at a one-year forward discount vs. the euro for at least 23 consecutive months, the dollar has been selling at a one-year forward premium vs. the euro for the last two months, and is now trading at a one-year forward premium of .40%. Over the last 6 weeks, the dollar has strengthened by about 1.5% vs. the euro in the spot market.
It’s a land where things are often not what they seem — at least to outsiders. They are, in fact, the opposite of what they seem. In his new book, “Homo Politicus: The Strange and Scary Tribes that Run Our Government,” Dana Milbank describes this place as Potomac Land, also known as Washington, D.C.
‘Potomac Land’ Speak Select phrases, followed by their English equivalents:
“You’re doing a heckuva job.”
You will be fired in ten days.
The following statement is false.
“You are either with us or against us.”
You are against us.
“The senator will deliver a major policy address.”
The senator is desperate to get on television.
And my favorite:
“I will continue to do the people’s business.”
I expect to be indicted.
From a story this morning on NPR.
From the September 2007 LA Times article “Can You Buy a Greener Conscience?“:
The race to save the planet from global warming has spawned a budding industry of middlemen selling environmental salvation at bargain prices. The companies take millions of dollars collected from their customers and funnel them into carbon-cutting projects, such as tree farms in Ecuador, windmills in Minnesota and no-till fields in Iowa.
In return, customers get to claim the reductions, known as voluntary carbon offsets, as their own. For less than $100 a year, even a Hummer can be pollution-free — at least on paper.
Driven by guilt, public relations or genuine concern over global warming, tens of thousands of people have purchased offsets to zero out their carbon impact on the planet. Beneath the feel-good simplicity of buying your way to carbon neutrality is a growing concern that the idea is more hype than solution.
In this related commentary “Carbon Offsets: Eco-Extortion, Green Guilt, and the Selling of Indulgences,” Frank Pastore writes:
The selling of “voluntary carbon offsets”—eco-indulgences—is a $55 million per year industry, involving over three dozen companies worldwide. Total sales are anticipated to double both this year and next, and entrepreneurs are clamoring all over themselves for a piece of the action.
And it’s all a scam.
Yes, the money is very real, but the alleged benefits to the environment are fake. Paying someone to plant a tree to “offset” the carbon footprint of your SUV is just plain silly. Yet there are thousands of people spending real money on these kind of indulgences every day.
Why? The answer is that it’s part green guilt, part eco-extortion, and part just plain novelty.
MP: Both articles point out this part of the scam: Native Energy and other companies selling eco-indulgences often contribute only 1% of the total cost of windmill projects and alternative energy plants, yet they claim and sell 100% of the carbon reductions.
Oil for delivery in December 2015 is trading on the NYMEX for $88.33 per barrel. Assuming a 3% average annual inflation rate over the next 8 years, that means that oil in 2015 is trading for only $69.72 per barrel in today’s dollars.
I say NO in this commentary that has appeared nationally in these papers (circulation in parentheses):
JANUARY 2 — AKRON BEACON JOURNAL (141,073) / Op-Ed “Our economy is strong”
JANUARY 2 — ROCHESTER (MN) POST-BULLETIN (42,391) / Op-Ed “Key indicators show few signs of financial trouble ahead”
JANUARY 1 — KANSAS CITY STAR (261,776) / Op-Ed “No, a recession isn’t looming in 2008”
JANUARY 1 — COLUMBUS DISPATCH (259,000) / Op-Ed “Global economy will keep U.S. economy vibrant”
JANUARY 1 — JANESVILLE (WI) GAZETTE (26,682) / Op-Ed “Expanding global economy will keep U.S. economy humming”
DECEMBER 31 — AUSTIN AMERICAN-STATESMAN (183,952) / Op-Ed “Despite pressure, America’s economy will remain strong in 2008”
DECEMBER 31 — CHARLOTTE OBSERVER (232,000) / Op-Ed “U.S. economy is resilient enough to handle changes”
DECEMBER 29 — YOUNGSTOWN (OH) VINDICATOR (64,763) / Op-Ed “We’re thriving in this economy”
Science columnist John Tierney’s prediction in today’s NY Times:
In 2008, your television will bring you image after frightening image of natural havoc linked to global warming. You will be told that such bizarre weather must be a sign of dangerous climate change — and that these images are a mere preview of what’s in store unless we act quickly to cool the planet.
Unfortunately, I can’t be more specific. I don’t know if disaster will come by flood or drought, hurricane or blizzard, fire or ice.
Tierney also writes about the “availability entrepreneurs: the activists, journalists and publicity-savvy scientists who selectively monitor the globe looking for newsworthy evidence of a new form of sinfulness, burning fossil fuels.”
When the Arctic sea ice last year hit the lowest level ever recorded by satellites, it was big news and heralded as a sign that the whole planet was warming. When the Antarctic sea ice last year reached the highest level ever recorded by satellites, it was pretty much ignored. A large part of Antarctica has been cooling recently, but most coverage of that continent has focused on one small part that has warmed.
When Hurricane Katrina flooded New Orleans in 2005, it was supposed to be a harbinger of the stormier world predicted by some climate modelers. When the next two hurricane seasons were fairly calm — by some measures, last season in the Northern Hemisphere was the calmest in three decades — the availability entrepreneurs changed the subject. Droughts in California and Australia became the new harbingers of climate change (never mind that a warmer planet is projected to have more, not less, precipitation over all).
Aren’t CEOs overpaid? Here’s part of George Mason economist Walter Williams’ column today:
What about complaints about CEOs earning so much more than the average worker? Before looking at CEOs, let’s look at another area of huge pay differences. According to Forbes’ Celebrity 100 list, Oprah Winfrey earned $260 million. Even if her makeup person or cameraman earned $100,000, she earns thousands of times what they earn. Among the celebrities earning hundreds or thousands of times more than the people who work with them are: Steven Spielberg ($110 million), Tiger Woods ($100 million), Jay Leno ($32 million) and Dr. Phil ($30 million). According to Forbes, the top 10 celebrities and athletes earned an average of $116 million in 2004 compared to an average of $59 million earned by the top 10 corporate CEOs.
When Jack Welch became General Electric’s CEO in 1981, the company was worth about $14 billion. Through hiring and firing, buying and selling decisions, Welch turned the company around and when he retired 20 years later, GE was worth nearly $500 billion. What’s a CEO worth for such an achievement? If Welch was paid a measly one-half of a percent of GE’s increase in value, his total compensation would have come to nearly $2.5 billion, instead of the few hundred million that he actually received.
Bottom Line: You could probably make a stronger case that Jack Welch was underpaid and exploited by his shareholders and GE’s Board of Directors than making a case that he was overpaid as a CEO.
Fact 1: The size of the global outsourcing market is estimated to be $310 billion in 2008, driven primarily by the endless pursuit of U.S. MNCs looking for low-cost labor any where in the world it is available and ultimately seeking greater corporate profits. Most offshore outsourcing efforts save 15-20% when all costs are considered, representing a form of “labor arbitrage” generated by the wage gap between industrialized and developing nations.
Fact 2: According to the National Organization for Women, full-time women workers in the U.S. are paid an average of 77 cents for every dollar men are paid. Women of color are short-changed even more, with African-American women paid only 71 cents and Latinas just 58 cents on men’s dollar. These wage gaps stubbornly remain despite the passage of the Equal Pay Act more than 40 years ago, and a variety of legislation prohibiting employment discrimination.
Questions: If the wage gap in the U.S. exists primarily because of discrimination and U.S. companies could immediately save 23-42% by exclusively hiring women, why would they overlook this “labor arbitrage” opportunity and profitable wage gap right in their own back yard? In other words, why would U.S. companies go to the other side of the planet to hire low-cost workers in Bangalore, to take advantage of a 15-20% wage gap and exploit labor arbitrage in India, when they could exploit labor arbitrage and a wage gap right here in the U.S.?
It’s a grim new year for newspapers. As yet another rough quarter draws to a close, we witness the closing of a venerable Midwestern journal, The Cincinnati Post, after 126 years of publication, as well as an alarming new trend: the outsourcing of advertising responsibilities to India.
Read more here.
According to world stock market capitalization data available from Global Financial Data and the World Federation of Exchanges, more than $9.5 trillion of stock market value was created from January-November 2007, an historical record for that period (see chart above).
Bottom Line: Despite $100 oil, a subprime crisis, a somewhat weak U.S. stock market, and constant worries about a U.S. recession, the $9.5 trillion increase in world stock market capitalization during the first 11 months of 2007 was almost as much stock market value as was added in the global bull market, Dot.com years of 1995, 1996, 1997 and 1998 COMBINED. The global economy and the global stock markets are alive and well.