Tuesday, December 15, 2009


Fastest Food Inflation Since Riots Means Milk Up 39%

Falling production in commodities from rice to milk is bad news for just about everyone except investors.

Rice may surge 63 percent to $1,038 a metric ton from $638 on Philippine imports and a shortage in India, a Bloomberg survey of importers, exporters and analysts showed. The U.S. government says nonfat dry milk may jump 39 percent next year, and JPMorgan Chase & Co. forecasts a 25 percent gain for sugar. Global food costs jumped 7 percent in November, the most since February 2008, four months before reaching a record, according to the United Nations Food and Agriculture Organization.

Farm prices this year lagged behind copper futures that doubled and oil’s 57 percent increase. A recovery from the worst recession since World War II would spur food demand and boost costs for buyers of commodities including milk processor Dean Foods Co. while increasing the number of hungry people that the UN says now exceeds 1 billion. (more)

S&P 500 Rallying 9.8% Is Forecast of U.S. Strategists

The Wall Street strategists who correctly predicted U.S. stocks would rebound from the steepest plunge since the Great Depression now say the Standard & Poor’s 500 Index will rally 9.8 percent next year.

Thomas Lee, the chief U.S. equity strategist at JPMorgan Chase & Co., and Goldman Sachs Group Inc.’s David Kostin, this year’s most-accurate forecasters, say Federal Reserve interest rates near zero and profit growth of more than 26 percent will drive the S&P 500 to 1,300 and 1,250, respectively, in 2010. The combination of higher earnings and an increase in mergers and acquisitions will boost the index to 1,250, according to Thomas Doerflinger, a senior strategist at UBS AG in New York.

While analysts failed to foresee 2008’s crash, when credit markets froze and the S&P 500 fell the most since 1937, investors who followed their advice this year were rewarded with 23 percent gains. The index will end 2010 at 1,223, according to the average of 10 projections in a Bloomberg News survey. Their optimism clashes with Pacific Investment Management Co.’s Mohamed El-Erian and economist Nouriel Roubini, who predict smaller returns or losses. (more)

Bartlett: Second Stimulus Will Kill Economy

A second federal stimulus may wreck the U.S. economy, writes former U.S. Treasury economist Bruce Bartlett.

“An important debate is going on among liberal economists about whether the economy needs another substantial dose of fiscal stimulus lest the unemployment rate linger at unacceptably high levels for the foreseeable future,” writes Bartlett in his column in Forbes magazine.

“Although I supported the original $787 billion stimulus package in February as an emergency response to a crisis situation and am even sympathetic to the idea that it should have been larger, I believe that going forward additional stimulus carries more potential risks than rewards.” (more)

Killing the Currency

First under the Bush Administration and even more so under President Obama, the federal government has been seizing power and spending money as it hasn’t done since World War II. But as bold as the Executive Branch has been during this financial crisis, the innovations of Fed chairman Ben Bernanke have been literally unprecedented. Indeed, it is entirely plausible that before Obama leaves office, Americans will be using a new currency.

Bush and Obama have engaged in record peacetime deficit spending; so too did Herbert Hoover and then Franklin Roosevelt (even though in the 1932 election campaign, FDR promised Americans a balanced budget). Bush and Obama approved massive federal interventions into the financial sector, at the behest of their respective Treasury secretaries. Believe it or not, in 1932 the allegedly “do-nothing” Herbert Hoover signed off on the creation of the Reconstruction Finance Corporation (RFC), which was given billions of dollars to prop up unsound financial institutions and make loans to state and local governments. And as with so many other elements of the New Deal, FDR took over and expanded the RFC that had been started under Hoover. (more)

Baltic Dry Index

Social Security Will Go Bust in 2010

For the third time in my life, the Social Security System will go belly-up.

The first time was in 1977 – well, almost. To head off the bust, Jimmy Carter got Congress to pass a major FICA tax increase – sorry, "contribution" increase – in order to save Social Security. The rate would be hiked in phases from 2% to 6.15% (times two: employee and employer). He promised: "Now this legislation will guarantee that from 1980 to the year 2030, the Social Security funds will be sound." (http://tinyurl.com/ybksxs4)

Carter's projection was off by a Georgia country mile. In 1983, the SSA program technically went bankrupt. Reagan signed a law that speeded up Carter's rate increases, added Congressional employees to Social Security, and delayed the age of eligibility. (http://tinyurl.com/ybksxs4) (more)


Families hit by the credit crunch are turning to so-called payday loans because they cannot access extra money from high street banks.

National TV adverts for one loan firm hit screens last week just as Office of Fair Trading research revealed a worrying increase in expensive short-term borrowing. And last night there were calls for the Government to clamp down on the loan firms amid fears that thousands of families could be plunged into spiralling debt.

Liberal Democrat Treasury spokesman Vince Cable said: “At a time when official interest rates are close to zero and inflation is very low or negative it is unbelievable that people are being charged thousands or hundreds of per cent in interest.

“Much of this can be attributed to the withdrawal of credit from struggling households who can no longer use banks and are being driven into these extreme and extortionate forms of credit. (more)

Peter Schiff and Dr. Ron Paul on U.S. Economy.