LOL, Larry Summers reportedly behind relatively puny tax and spending deal between Joe Manchin and Chucky Schumer

Schumer, Manchin Quietly Resurrect Deal Washington Left for Dead...
 

The Washington Post, citing people familiar with the details, reported that the two men spoke this week. A spokeswoman for Summers declined to comment,  as did a spokeswoman for Manchin. This time, the haggling and lobbying bore fruit: a surprise agreement for a $369 billion tax, energy and climate plan that Manchin and Schumer announced on Wednesday.

You remember Larry Summers, right?

 

 

Color me skeptical: Firewood prices said to be soaring

$67-$83 a face-cord for seasoned mixed hardwoods doesn't sound that high to me, but $158 for hickory would. The former were common many years ago already.

I come up with $612 for the 1776 cord through 2020, a quibble.

 

At Firewood by Jerry in New River, Arizona, a cord of seasoned firewood — roughly 700 pieces or so — goes for US$200 today. That’s up 33 per cent from a year ago. At Zia Firewood in Albuquerque, the price is up 11 per cent since the summer to US$250. And at Standing Rock Farms in Stone Ridge, a bucolic, little town in the Hudson Valley that’s become popular with the Manhattan set, the best hardwoods now fetch US$475 a cord, up 19 per cent from last year. ...

Over the course of American history, there have been any number of booms in the firewood business. One of the earliest episodes came during the British siege of Boston at the outset of the Revolutionary War. That winter, the price of a cord — a centuries-old benchmark measuring 128 cubic feet — soared to US$20, the historian David McCullough documented in his book “1776.” That’s the equivalent of some $635 in today’s dollars ... just about every major spike in energy prices in the past half century has triggered a rush into wood-burning among some segments of the population. These fevers invariably fade as soon as the energy crisis does.

More.

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The main reason we are still in a secular bear market

Ed Easterling, Crestmont Holdings LLC, quoted here:

"P/E has not declined to levels that are required to drive a secular bull market.”

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Other forces have been hard at work manipulating prices, inhibiting discovery of actual value.

Rosie May Be Right: Cash May No Longer Be Safe

David Rosenberg points out that financial repression could go on as long as 2018, here:

[T]he Fed said in its December post-meeting press release that it will not budge from its 0% policy rate until the U.S. unemployment rate drops to 6.5%. It is currently around 8%.

We have done estimates based on various assumptions and found that achieving this Holy Grail likely takes us to the opening months of 2018 or another five years of what is otherwise known as financial repression.

People think their money is safe in cash, but it isn’t.

Following on that, just compare cash in the form of Vanguard's Prime Money Market Fund with stocks in the form of Vanguard's Total Stock Market Index Fund over the last five years and you will see that while cash was relatively safe compared to stocks for the four years up to May 2012 with stocks mostly underperforming cash, since then stocks have firmly broken out, as of about May 31, 2012 (the dot on the chart grabbed from Morningstar).

The only problem is that with a Shiller p/e today of 24.26 it's an awfully rich time to be investing in stocks which have reached new all-time highs.

And the alternatives don't look very attractive either.

At this hour the gold/oil ratio stands at 15 indicating that relative to each other their prices may have normalized but both at high levels relative to the long term.

Housing prices also are at the far upper end of the long term trend prior to the bubble.

And the bond market is within 2% of its highest valuations and also remains expensive to buy.

In my humble opinion the smartest thing to buy under these conditions is any long term debt one may be carrying at a rate of interest higher than about 3.5%. To retire it one would have to deploy capital, i.e. savings, but you can hardly lock in say 6.25% for twenty or twenty-five years anywhere else more easily than by retiring a 30yr-mortgage taken out at that rate in 2007. Bonds have returned less than 5% annually over the last ten years, and one year returns have fallen below 3.5%.

Still, there is no substitute for savings.

The surest way to get a 10% return is to save one dollar of every ten earned.

Coal Was King Recourse In Last Decade, Followed by Oil and Gas

"Almost half of the increase in primary energy use in the past decade has come from coal. Almost all the rest has come from oil and gas."

-- Peter Foster, here

Natural Gas Reserves in US Increase 35%, The Most in Forty Years

And supplies in other countries, also from shale fields, are on the increase and are making energy, economic and political independence more certain for many more nations than ever before:

Last year, the “Potential Gas Committee,” a group of specialists linked to the Colorado School of Mines, reported the biggest increase in US natural-gas reserves in its 44-year history, from 1,532 trillion cubic feet (TCF) in 2006 to 2,074 TCF in 2008.

Since the US used approximately 23 TCF in 2008 at a unit cost in excess of $9.00, the vast new reserves point to prices closer to $6.00 going forward and decades of supply. Americans should get serious about committing to compressed natural gas powered automobiles instead of gimmicks like electric and hybrid electric cars in order to bridge the gap to a cleaner energy future.

Read the fascinating details from Peter Foster for The Financial Post here.