Archive for April 1st, 2008
1shooter writes “Researchers in France are using a synchrotron as a giant X-ray machine to peer into the insides of opaque amber to reveal insects dating from the age of dinosaurs. ‘The European Synchrotron Radiation Facility in Grenoble, France, produces an intense, high-energy light that can pierce just about any material, revealing its inner structure… From more than 600 blocks, they have identified almost 360 fossil animals: wasps, flies, ants, spiders.’ The process reveals detailed 3D images that can be used to make near-perfect enlarged scale models of the bugs using a ‘plastic printer.’”
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friedo writes “The NYTimes has an interesting piece about Prof. Mark Schiefsky, a Harvard classicist with an interest in the history of science. Schiefsky pores over ancient texts in Greek, Latin, and Arabic to decipher the origin of knowledge that’s been taken for granted for millennia. For example, a Greek treatise published a generation before Archimedes’ proofs of the lever laws explains why, if you were a galley slave, you’d want to work the oars near the center of the ship instead of closer to the hull.”
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KentuckyFC writes “Single photons are surprisingly difficult to generate. But since they’re crucial for quantum communication, a number of research groups are working on photon guns that fire single photons on demand. The problem they’ve come up against is that making the photons identical is proving harder than expected. Now a group in Cambridge, UK, has cracked the problem using a quantum dot on a transistor to emit single photons that are essentially identical. In the process, the group has developed an entirely new technique to trigger photon emission (abstract on the physics arxiv).”
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Posted by: in Housing
Filed under: Commodities, Housing
Reuters reports that the market value of some homes is less than the street price of their copper pipes. The result is that thieves are ripping out the pipes and selling them. Copper prices have risen 400% in the last three years while home prices fell 11% in the year ending January 2008 and could drop as much as 50% from the peak. This creates the ultimate domestic value play.
Here’s the opening anecdote from Reuters: “Shards of broken glass outside the basement window of 31 Vine Street hint at the destruction inside the three-story home. Thieves smashed the window to break in and then gutted the property for its copper pipes — a crime that has spread across the United Says as the economy slows and foreclosed homes stand empty and vulnerable.”
Demand for copper in China and India has boosted prices dramatically. Scrap copper sells for about $3.50 a pound, against 70 cents just three years ago. Scrap traders estimate that more than 80% of recycled copper is exported to China and India. So if a foreclosed home has, say, $5,000 worth of copper and is on the market for $100, investors could make a profit buying up the house, stripping out the copper, and selling it as scrap.
According to the Reuters interview with Cleveland city councilor Tony Brancatelli, “We’re seeing houses sold for $100 that are distressed houses that should not be recycled.” Some boarded-up homes in his Slavic Village community have “No copper, only PVC” painted on the boards to cease would-be thieves
Sounds like the kind of value play that would make Benjamin Graham proud.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
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Posted by: in Housing
Filed under: Indices, Economic data, Housing, Recession
 Econobrowser suggests that housing prices could drop 50% from their peak. While it was initially skeptical about such a huge drop which was suggested by a commenter, its re-examination of this based on recent developments, and what the economists surveyed by the Wall Street Journal state led it to conclude that such a summit plummet was plausible.
Sunday, I posted on the possibility that it could take 10 years for housing prices to recover based on an interview with the Warren Group and comparing the current housing tumble to the one in the 1990s. Combining this with the Econobrowser’s pessimistic scenario recommends that we could be in the longest and deepest housing price decline in American history.
I do not comprehend the details of the analysis presented here but if my reading of the post is correct, it concludes that the Case-Shiller index of housing prices, one which seems to have more credibility than the one produced by the government’s OFHEO (Office of Federal Housing Enterprise Oversight) House Price Index (HPI), is that prices could fall 50%. Econobrower notes “that only a slightly more pessimistic than average forecast implies a 50% decline in house prices as measured by Case-Shiller, relative to peak.”
So if you purchased a house for $300,000 in 2006, it could be worth $150,000 when the housing market hits bottom and take until 2016 to recover to its original price. How about that for an ownership society?
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
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Posted by: in Housing
Filed under: Forecasts, Economic data, Housing, Recession
 As economists and stock reviewers will vouch, analysis can vary depending one’s prism, or perspective — i.e. how one views the economic world.
Look at the 2008 U.S. economy one way, and you see the onset of a conventional recession. Five or so years of GDP growth, earnings growth, investment, resource / commodity / raw material utilization, and consumption have basically run their course, and a pause is due. It’s a period of lower earnings, less investment, lower consumption, and we call these pauses recessions.
Look at the 2008 U.S. economy another way and you see a different picture. Five or so years of GDP growth, earnings growth, but also substantial asset price inflation - - primarily in residential real estate - - combined with only modest improvement in the U.S. trade deficit, federal budget deficit, national savings rate, and a substantial weakening of the U.S. dollar. Then, a period of slower growth ensues, a slowdown made all the more onerous by the appearance of a credit crunch that began when the real estate balloon began to deflate, if not burst.
Economist Glen Langan has pondered whether the United States’ condition in 2008 is mirrors Japan’s in 1986-1993. Langan argues the U.S.’s current condition differs considerably because, although each experienced asset price inflation prior to economic slowdowns, the U.S. economy is vastly more complex and flexible than Japan’s of two decades ago. Further, although both the U.S. and Japan face an expanding retiree population, the U.S.’s more massive population growth makes it superior equipped, from a workforce carrying capacity standpoint, to pay for those higher retirement benefit/medical costs, he stated.
In addition, Langan stated as in the norm for the U.S. economy as it enters this stage of an economic cycle, the focus has turned to the U.S. consumer. The attention is warranted, he stated, given that the U.S. consumer accounts for 58%-67% of U.S. GDP, depending on the methodology used. But whether the consumer has the capacity to continue to serve as an engine of economic growth remains an unresolved question in economists’ circles, he added. Still, unresolved issue or not, differing analytical prisms or not, the U.S. consumer will have to make an appearance again, he stated, for U.S. economic growth to resume.
**
What’s your take on the U.S. economy? From your perspective, is the U.S. economy worse than it seems? Or is the U.S. economy just in a temporary, slow-motion phase? Let us know what you think.
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Posted by: in Housing
Filed under: Earnings reports, Bad news, Citigroup Inc. (C), Bank of America (BAC), Merrill Lynch (MER), Housing
 UBS (NYSE: UBS), the big Swiss bank, will write-off another $19 billion in the first quarter, mostly real estate and related assets. The company’s chairman will leave in the face of a large first quarter loss and the bank will try to raise $15 billion. According to The Wall Street Journal:”UBS’s latest move follows a capital injection and other measures worth more than 19 billion francs earlier this year, and is necessary because UBS is suffering the effects of still holding in risky assets on its books.”
The news sharply raises concerns for US banks that hold similar assets. Whether the problems are as pervasive at Citigroup (NYSE: C) or Bank of America (NYSE: BAC) remains to be seen. Brokerages such as Merrill Lynch (NYSE: MER) also has these type of financial instruments on its books.
Goldman Sachs recently estimated that the total fall-out from subprime and other distressed assets will be $460 billion. It claims that only $120 billion of that has been written off so far.
Write-offs of that magnitude could cause US banks to have to raise more capital. If a bank like Citi has to raise another $10 billion against its market cap of $112 billion, it could easily take the stock from its current level of $21 to a new low of $15 or $16.
It is going to happen. It is just a matter of when.
Douglas A. McIntyre is an editor at 247wallst.com.
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esocid writes “Astronomers have spied a faraway star system that’s so unusual, it was one of a kind — until its discovery helped them pinpoint a second one that was much closer to home. In a paper published in a current issue of the Astrophysical Journal Letters, Ohio Say University astronomers and their colleagues suggest that these star systems are the progenitors of a rare type of supernova. In research funded by the National Science Foundation, they found a star system that is unusual, because it’s what the astronomers have called a ‘yellow supergiant eclipsing binary’ — it contains two very bright, large yellow stars that are very closely orbiting each other. In fact, the stars are so close together that a massive amount of stellar material is shared between them, so that the shape of the system resembles a peanut.”
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Filed under: International markets, Products and services, Management, Insiders, Industry, Law, Consumer experience, Exxon Mobil (XOM), Scandals, Chevron Corp (CVX), ConocoPhillips (COP), BP p.l.c. ADS (BP), Politics, Oil
 U.S. lawmakers are going to get their chance this day to ask executives from five of the world’s largest oil companies what their take is on current gasoline prices.
Executives from the top three American oil companies — Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX) and ConocoPhillips (NYSE: COP) — will be present at today’s hearing, as well as executives from BP (NYSE: BP) and Royal Dutch Shell (NYSE: RDS.A). While the executives are predictably going to blame the current high gasoline prices on surging oil, it will still be interesting to see just how hard lawmakers hit the executives.
For the executives, it can’t be a good feeling to be walking into today’s hearing. The hearing is being called “Drilling for Answers: Oil Company Profits, Runaway Prices and the Pursuit of Alternatives.” The hearings will be chaired by Rep. Ed Markey of Massachusetts, who in the past has been a vocal critic of the oil industry.
While it is easy to point the finger at large oil when we get hit hard at the gasoline pumps, they do have some ground for defense this time with oil prices shooting up as high as they have over the past few years. Can you remember reading about $20 oil? I can, but just barely; then again, it was not all that long ago. We’ve become used to reading and hearing about $100 oil, but when you pause to remember, it was only in 2002 that oil prices were under the $20 mark. That’s a pretty rapid growth over just a small six-year period to rise to over $110 a barrel earlier this month.
Gasoline prices are not the only scheduled topic this day. The executives will discuss their positions on moving towards alternative fuel sources as well. Congress has been looking to reduce tax breaks on huge oil by $18 billion, which could then be used to explore alternative energy. But oil companies have naturally been very vocal in their opposition to such a move.
According to Markey, “These companies are defending billions in federal subsidies needed for renewable fuels and clean energy while reaping over a hundred billion dollars in profits in just the last year alone.” It is definitely going to be tough for large oil to dispute that claim. Consider that Exxon Mobil alone earned a record of $40.6 billion in 2007.
It should definitely prove to be an interesting day on Capitol Hill. I am not sure what exactly will come out of the hearings, but at least lawmakers will get their opportunity to grill the people that we all curse under our breath as we spend $50 or $60 to fill up our gas tanks.
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Posted by: admin in Today News
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