The chart on the left shows that rice prices are up. WAY WAY WAY UP. That’s more than 3X the price per tonne in the past few months.
Rice is the food staple of the world. More people eat rice than anything else. So when the price moves in such a material fashion, we should definitely be taking notice.
Rice, like oil, is used as an input for many goods (and we’re not just talking about Rice Krispies). With such a dramatic move, it won’t take long before prices for many products begin to move higher in tandem.
Crude oil prices are hovering close to $120/bbl, at record highs. With the low interest rates currently being pursued in North America, it is no longer a question of if we’ll see inflation, but how soon.
If we do begin to see inflation before the economy recovers, expect to hear a whole lot about Stagflation.
Here’s the good news: It looks like a bubble. Not a quick shock like in the 70s, but a bubble. A bubble just like Tech in the 90s. A bubble just like Real Estate from the past few years. Bubbles can last for years, but eventually will pop and bring relief to an inflated market. The only concern is how long will we have to suffer, and at what cost?
Apple released the following earnings summary:
“APPLE REPORTS RECORD SECOND QUARTER RESULTS
APPLE INTERNATIONAL CO LTD Q2 SHR $1.16
SEES Q3 2008 SHR ABOUT $1.00
Q2 REVENUE $7.51 BLN
SEES Q3 2008 REVENUE ABOUT $7.2 BLN
SAYS QUARTERLY IPHONE(TM) SALES WERE 1,703,000
SAYS APPLE SHIPPED 2,289,000 MACINTOSH COMPUTERS DURING THE QUARTER
SAYS SOLD 10,644,000 IPODS DURING THE QUARTER”
This info was pulled from the news release off the wire service, sorry for the weird format.
It should be noted that Apple’s shares slipped about 1% during after hours trading. Apparently, their projections for the upcoming third quarter were a bit lower than expected.
Canada has long been a fiscally conservative nation. The strong banking sector has steered consumers in a responsible direction under their watchful risk averting eyes. There is no sub prime mess in Canada because the banks would never lend funds out to such high risk consumers. However, this Globe article has me starting to think otherwise.
I recently purchased purchased some property. At the bank I gave my income and financial info to the banker and their computer system spat out my maximum purchase price, which could be increased if necessary. They can increase the number by increasing the term of the mortgage. 25 years, which a generation ago was considered the max mortgage is now the standard. 30, 35 and 40 year mortgages are becoming more popular. One bank is even running billboards advertising a 0 down mortgage. With 0 down and 40 years of payments, almost anyone can afford a little place with today’s interest rates. But what about tomorrow? What happens if Joe with 0 down and 40 years to pay loses his job in 2 years? He’ll quickly discover that he has not built any equity because almost 100% of his payments for those 2 years were interest.
Joe will default.
The same goes for interest rates. If rates spike up, Joe might not be able to afford his payments.
The end result? Not a meltdown like the US, but a serious dent in the real estate market.
Bloomberg has an article this morning detailing Microsoft’s reaction to Yahoo!’s earning results reported last night.
Essentially, Microsoft stated that it will not be raising its bid to aquire Yahoo, even though the company came through with decent earnings. Good. Great. Super. Now all we need are the Yahoo shareholders to reject this offer.
Yahoo’s board of directors is recommending that this hostile takeover is rejected. Normally, I think board of directors are full of it, but I do agree with this opinion.
Microsoft would ruin Yahoo. It’s not really because they would want to ruin them, I’m sure they have some great ideas that make complete business sense. The problem is that Microsoft has already become too big. The entire company can easily be compared to the disaster that is Vista. Vista, for those fortunate enough to not be aware of, is Microsoft’s newest operating system. It is slow, bloated, frustrating and seemingly has a split personality.
A merged Microsoft/Yahoo offering would be equally bloated, frustrating and definitely possessing a split personality. The thought of Microsoft’s marketing team frothing at the mouth over the cross marketing potential of the world’s #1 website makes my stomach turn. For Yahoo! shareholders, it should make yours too.
Vote No. Vote often.
Reuters has an article on President Bush’s recent comments at a summit with Canadian Prime Minister Stephen Harper and Mexican President Felipe Calderon.
He said: “We’re not in recession, we’re in a slowdown”
This, ladies and gentlemen, is reason number #452 that Mr. Bush will go down in history as one of the worst US presidents.
Now, technically he’s right (ghastly, I know). The textbook definition of a recession is at least two quarters of negative growth in an economy. We’re not there yet, but all the signs on the road point are pointing to one, perhaps even a deep one.
The reason that this comment strikes me so hard, is the tone. He knows a recession is on the horizon. His advisers have shurley briefed him on that. He could have made a statement on things every day americans need to do in order to protect themselves during tough times. He could have made a statement calling for americans to rally and support the economy. Instead, he asked Congress not to raise taxes. That might be a good idea, but not an inspiring one.
Via Reuters:
” OTTAWA, April 22 (Reuters) – The Bank of Canada cut its benchmark interest rate on Tuesday by a half-percentage point to 3 percent, as expected, and signaled that further easing was required but suggested it might pause before cutting again.
In a statement which projected a steeper U.S. economic downturn that would dampen Canadian growth, the bank said “further monetary stimulus will likely be required,” but dropped a previous reference to the need for more cuts in the “near term.”
Every time the Bank of Canada (BOC) or US Federal Reserve is due to make a rate decision, the staff on the trading desk where I work place bets on how large the move will be and in which direction. Unfortunately, I run about 50/50 as a success rate.
It is very hard to get into the heads of those involved in these decisions. Sometimes the difficulty is determining whether or not they will act, others it’s how high/low they will go. Tomorrow, the debate will be the latter, not the former.
Nearly everyone on Bay Street is calling for a cut from the BOC’s key interest rate tomorrow. Nearly everyone is calling for that cut to be 50 basis points, bringing the overnight rate to 3.00%. The only problem is nobody seems to agree on if the Big 5 private banks will follow by cutting their Prime lending rates by the same amount.
The entire purpose of the BOC rate cut would be to stimulate the economy by making money cheaper. Loans would have lower costs (interest) and would encourage spending. If the banks refuse to lower their rates, it would signal that they believe that their interests are above those of the economy, that their profits are more important than the financial and economic well being of their customers. A greedy, disgraceful and obnoxious move.
I’m out of the office today, but I’ve written this special feature about choosing a stock broker instead.
For many people, navigating the world of investment products and services is a daunting task. A stock broker can be a great way of saving time and effort by having a professional do the research and look after your finances. The process of selecting this individual can become as stressful and daunting as choosing a house or planning that perfect trip. You’ve worked hard for your money and you want it treated right, so read on and enjoy the tips!
“Google Inc. blew past Wall Street expectations this quarter, posting revenue of $5.19-billion (U.S.), a 42 per cent jump over the same period in 2007 and 7 per cent higher than the previous quarter.
Net income – adjusted for generally accepted accounting practices – for the first quarter was $1.31-billion compared to $1.21 billion in the fourth quarter of 2007. Earnings per share amounted to $4.12 on 317 million diluted shares, compared to $3.79 for the fourth quarter of 2007.” Via [Globe & Mail]
I find this a bit curious. Very interesting.
Google’s bread and butter is advertising, it’s their only real source of revenue. They have made a killing doing the best job and using the brightest people. I think its great.
What’s curious and interesting is this unexpected increase. Usually in a economic downturn, marketing and advertising are the first costs to be cut. Firms would rather trim those budgets than fire workers. It’s much easier to later increase spending compared to training new staff.
So now in the midst of all this economic doom and gloom, here’s feisty Google posting up some big numbers. So is the doom and gloom over exaggerated? Or is Google just that good? Very interesting…..
Merrill Lynch has just announced 4,000 in job cuts (10% of the workforce). Let the Wall Street Bloodbath begin.
It’s not very unusual for Wall Street firms to hire on mass when profits are strong, only to then fire when times are tough. It won’t be long before there’s more cuts across the other banks, let alone the final numbers from the Bear Sterns bailout.
I’d hate to be working in derivatives or structured finance these days…I expect many more bankers and traders will be writing blogs soon…..
