Tuesday, December 29, 2009

Tanker Glut Signals 25% Drop on 26-Mile Line of Ships

A 26-mile-long line of idled oil tankers, enough to blockade the English Channel, may signal a 25 percent slump in freight rates next year.

The ships will unload 26 percent of the crude and oil products they are storing in six months, adding to vessel supply and pushing rates for supertankers down to an average of $30,000 a day next year, compared with $40,212 now, according to the median estimate in a Bloomberg News survey of 15 analysts, traders and shipbrokers. That’s below what Frontline Ltd., the biggest operator of the ships, says it needs to break even.

Traders booked a record number of ships for storage this year, seeking to profit from longer-dated energy futures trading at a premium to contracts for immediate delivery, according to SSY Consultancy & Research Ltd., a unit of the world’s second- largest shipbroker. Ships taken out of that trade would return to compete for cargoes just as deliveries from shipyards’ largest-ever order book swell the global fleet. (more)

Even as the US economy recovers, a decade of joblessness and flat wages could lie ahead

The decade ahead could be a brutal one for America's unemployed - and for people with jobs hoping for pay raises.

At best, it could take until the middle of the decade for the nation to generate enough jobs to drive down the unemployment rate to a normal 5 or 6 per cent and keep it there. At worst, that won't happen until much later - perhaps not until the next decade.

The deepest and most enduring recession since the 1930s has battered America's work force.

The unemployed number 15.4 million. The jobless rate is 10 per cent. More than 7 million jobs have vanished. People out of work at least six months number a record 5.9 million. And household income, adjusted for inflation, has shrunk in the past decade. (more)

Home equity lines have dried up across U.S.

Borrowing on the home for quick cash is a lot harder than it used to be in the United States, and it's causing headaches for homeowners, banks and the economy.

During the housing boom, millions of people borrowed against the value of their homes to remodel kitchens, finish basements, pay off credit cards, buy TVs or cars, and finance educations. Banks encouraged the borrowing, touting in ads how easy it is to unlock the cash in their homes to "live richly" and "seize your someday."

Now, the days of tapping your house for easy money have gone the way of soaring home prices. A quarter of all homeowners are ineligible for home equity loans because they owe more on their mortgage than what the house is worth. Those who have equity in their homes are finding banks far more stingy. Many with home-equity loans are seeing their credit limits reduced dramatically. (more)

Barclays: Central Banks Will End Dollar Rally

The dollar’s recent rebound will peter out by mid-2010, as foreign central banks diversify to other currencies and the Federal Reserve reverses stimulus slowly, according to Barclays bank.

The Fed will raise interest rates at a slower pace than the market expects, Barclays analysts say.

“We see the dollar strengthening in the first six to nine months of 2010 when the focus is on liquidity withdrawal and tightening of rates,” Steven Englander, chief U.S. currency strategist for Barclays, told Bloomberg.

“Once the market gets past this initial fear of tightening, the reality will be that the Fed isn’t going to be tightening very fast, and we’ll see dollar selling again.” (more)

Morgan: Treasury Yields, Mortgage Rates Will Soar

Morgan Stanley predicts 10-year Treasury bond yields will jump more than 40 percent next year, while 30-year fixed mortgages may surge more than 50 percent.

The exploding budget deficit will do the damage, David Greenlaw, Morgan Stanley’s chief fixed income economist, told Bloomberg.

“When you take these kinds of aggressive policy actions to prevent a depression, you have to clean up after yourself,” he said.

“Market signals will ultimately spur some policy action, but I’m not naive enough to think it will be a very pleasant environment.”

The firm predicts the 10-year Treasury yield will reach 5.5 percent next year from about 3.85 percent now. (more)

Oil Price Pattern

“If 2010 follows the pattern of the past 15 years,” notes Frank Holmes of U.S. Global Investors, “we are approaching the start of a seasonal climb in the price of crude oil that could present a good investment opportunity in energy-related stocks…

“As the 15-year chart above illustrates, much of the recent drop in the price of oil can be explained by commodity price weakness that typically occurs from October through December, and thus does not represent a cyclical downturn.

“These seasonal factors include a reduction in driving during the fall and more moderate temperatures between the summer cooling and winter heating seasons. During the 15-year period, January has typically been the month in which the seasonal oil price trend starts back up again as markets prepare for the summer driving season.

“It is interesting to note that, while crude oil prices are usually soft during this time of year, energy stocks begin to strengthen in December, offering nimble investors an opportunity to capitalize on favorable seasonal strength to come.”

NIB to stop handling cash

One of the country's larger banks has told to its customers that it is to stop handling cash in its branches.

National Irish Bank says it is moving to a Scandinavian model of "cashless banking" - with an increased reliance on ATMs and debit cards.

NIB has told customers that its branches will no longer handle cash withdrawals or lodgements, nightsafe lodgements or foreign exchange cash.

They are instead urging customers to use ATMs or get cash back on their laser cards if they need notes. Branches will continue to accept cheques and postal orders.

The bank says the idea of "cashless banking" will be rolled out over the next 18 months, and that the model is that used by its Danish parent company.

NIB says Irish dependence on cash is amongst the highest in Europe.

Gerald Celente top 10 Predictions for 2010!