Dollars and Jens
Friday, November 30, 2007
risk-free rate of interest
Overnight LIBOR has been over 6% the past couple nights, nearing 6.5% tonight. 3 month T-bills are at 3.15%; repo rates are in the 3.3%-3.8% range up and down the gamut of treasury securities. So, what's the risk-free rate of interest?
Tuesday, November 27, 2007
Help me follow this:
"High oil prices are not rationing demand," Addison Armstrong, director of market research at the brokerage Tradition Energy Futures, said, adding that speculative money might be tacking on just $5 or $10 to the price of a barrel. "The fundamentals are much tighter than they were a year ago."Follow that? Inventories have been declining; the amount of oil being produced has been less, with market prices where they've been, than the amount of oil being consumed. The net amount of oil bought off the market for reasons other than immediate use has been negative. The reason, as Gheit points out, is that people who own it have been — he doesn't use this word, for some reason — speculating that oil prices will drop.
EIA said other factors contributing to a doubling in oil prices over the last year include moderate growth in new supplies from non-OPEC countries, the inability to immediately produce much more oil in OPEC countries, a lack of refining capacity and ongoing geopolitical threats.
But longtime Oppenheimer oil analyst Fadel Gheit doesn't buy it.
Gheit said inventories are declining because high oil prices give people an incentive to sell crude now and wait until later to restock supplies, when hopefully oil is cheaper.
This guy, though, thinks speculators have been driving up prices, and fingers my employer:
When Goldman last month told its clients to sell oil when it approached the mid-90's, crude lost over $3 in one day.Actually, he didn't call attention to that bit; it kind of gets tucked away in the story.
Successful speculation causes spikes to come sooner and to be less severe. Unsuccessful speculation tends to exit the market. If speculators are, in fact, stockpiling oil, causing the price to rise, I'm willing to be glad they're taking precautionary measures in case it does.
Wednesday, November 21, 2007
The yield on the ten year treasury dipped below 4.00% a few times today, and the swap spread at 3 to 5 years closed above 100bp for the first time that I've noticed. Fed funds futures seem to expect another cut at the next FOMC meeting.
I think current fed policy is pretty nearly neutral. It's worth noting that monetary policy tends to act with a lag of maybe 9 to 12 months on the real economy and longer than that for inflation. Housing investment will likely be bottoming out in about 12 months, so while it might make sense to cut interest rates for the next couple meetings, the period where we want a stimulative rate is likely to abate by the end of next year. As for what should be done at the next meeting, there's another personal spending report out before then, not to mention an employment report; incoming data are, as always, of primary importance.
Thursday, November 08, 2007
Looking on the Bright Side
Robert Samuelson sees the silver lining of recessions. I'm still opposed.