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Journalism and other myths.

Breaking the Oil Cycles

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News shown out over the highway in big glowing numbers – 3.289, a number lower than anyone had seen in a while.  That was the price per gallon of gasoline the last time the little purple car was filled up and piloted back down the highway.  A few months earlier it was 3.929 at the same station, about 20% higher or $7.68 over a tankful.  How can that possibly be?

Many things go into the price of gasoline, but the most important is the cost for crude oil.  Something around 60% of the cost at the pump is the raw material that fuels our lives, the rest being more or less fixed costs in refining, transportation, taxes, and profit.  It’s the price of oil that is notoriously volatile, driving the changes at the pump.  And something is about to be done about it, too.

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Singularity

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Imagine you are in a space ship hurtling toward a black hole.  You might try to turn the ship around and fire the engines full force.  The problem is that the blast from your engines only adds mass to the black hole, making its gravitational pull even harder.  What do you do?  Fire the engines harder to try to hit escape velocity?

That may sound like a silly analogy for our ecnonomy, and it is definitely far from complete.  But as the brilliant John Mauldin discusses in his “Thoughts From the Frontline”, the black hole of debt is posing some very unusual economic problems.  This “singularity” is, simply put, a place where the normal equations that describe the universe of economics no longer apply.  What can we do when everything we know no longer works?

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Housing Boom?

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Are you ready for a new housing boom?  It’s OK, I thought you might need a chuckle today.  But there are some analysts who seriously expect housing to lead the economy out of the slump of the last five years … much as it showed the way into this mess in the first place.  It’s probably overstating the upside dramatically, but there are signs of recovery or at least stability in the housing market overall.  It’s uneven and just starting, but this may be the latest sign that we are, in fact, more or less at the bottom right now and starting to turn up.

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A Guy Can Dream

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The Presidential election is tightening.  That’s only to be expected as we get closer, especially through the debate weeks.  It was predicted here that Romney simply showing up and looking like a human would give him a bounce after weeks of demonizing, and he did better than that.  Obama will have to find his A-Game to seal this thing.

But it is still Obama’s to lose.  The “toss-up” states are nearly all ones that Romney should be ahead in already, and he will have to win almost all of them to pull this thing out.  The big money is going to continue to flee his campaign and look to the more interesting races, particularly for the US House.

The race for the House is very close by the only measure we have, the Generic Congressional Ballot.  That could make for something very interesting this January no matter which party manages to pull it out.  In a big world of speculation this is worth thinking through.

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Party on the Jobs Report!

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The news was electrifying just one month before the election.  Unemployment rate down to 7.8%!  Decent gains in employment all around!  After an August report so dismal it spurred the Fed into action with an open-ended round of mortgage buying, QE3, how could September’s come in so strong?

The answer is obvious to longtime readers of Barataria, since it was called when the August report came out.  We’re seeing fluctuations caused by sketchy methods of calculating the state of jobs, a small number found by subtracting a big number from another big number.  Indeed, the best part of the gain came from adjusting July and August up by 89k jobs total.

Underneath the big story is a much bigger story that is going unreported through this gradual turnaround.  We are witnessing the printing of a strong bottom, a floor in the overall employment picture where we are roughly treading water.  What makes this possible, and hard to report, is the net gain of jobs in unexpected places that the traditional survey is having a lot of trouble finding.

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