• “Goldman Sachs is once again warning the world of a coming spike in oil prices that will remind everyone of 2008.”
• “The spike from 2008 will return because there’s been ‘decades’ of poor investment decisions by oil producers.“
• “Says Goldman via Alphaville, ‘As the commodity markets rebound with the broader global economy we expect a redux of 2008 when severe supply constraints forced the rationing of demand through sharply higher prices to keep the markets balanced.’”

Banks: News Max (money news.newsmax.com) posted this Julie Crenshaw piece on 8/17/09: “Warren: Banks Are Sitting on Bad Assets”. Here are some highlights:

• “Elizabeth Warren, head of the Congressional Oversight Committee, says most of the toxic assets former treasury Secretary Henry Paulsen convinced Congress to give him $700 billion to buy are still on the books.”
• “That’s because selling those assets at actual values would mean banks would have to recognize their losses, which would put some banks out of business.”
• “The final piece of bad bank news: Warren says default rates on the commercial mortgages that are coming due 2010-2012 may be as high as 60 percent.”

The Economists: “Taleb: Bernanke, Summers and Geithner Are Idiots; Economists Have Been No Better in Their Predictions than Cab Drivers” is the title from Washington’s Blog (georgewashington2.blogspot.com) on 8/17/09. The post is from an open letter to British Conservative leader David Cameron by the noted economic writer, author, analyst and commentator Nassim Nicholas Taleb. Here’s some of that letter:

• “I despair of the Obama administration’s ability to fix this financial crisis and prevent future ones. I am appalled by the dangers it has been creating and it’s takeover by the same economic  establishment responsible for this crisis.”
• “Be careful, too,  of the so-called science of economics. Economists have been no better in their predictions than cab drivers. We have an ‘expert’ problem, in which the expert provides you with misplaced confidence, but no information. Because we think, correctly, that the dermatologist, the baker, the chemist are true experts (they know about their respective subjects than the rest of us), we swallow the canard that the economists at the World Bank, the Bank of England, and the US Federal Reserve are also experts, without checking their record. This reliance on faux experts is, for the most part, what got us here.”
• “We replaced the heuristics  of our elders with arrogant (and incompetent) beliefs, breaking, in the name of science, the chain of knowledge. Old, conservative bankers and traders have been replaced by keen young mathematical analysts, yet anyone who listened to a grandmother who survived the depression would have been warned against debt and been better prepared than Ben Bernanke and Alan Greenspan, respectively chairman of America’s Federal Reserve.”

We plan on continuing our discussion of “What to Garden In Hard Times” at next time.

Until then: keep your eyes on the horizon as the weathers changing fast.

‘Food Prices’: “Jim Rogers: Food Prices Will Skyrocket” is May 15 headline on the Dan Weil post at Street Talk (moneynews.newsmax.com/streettalk/).

• Jim Rogers, a renowned investor (world class) and business savant, has serious concerns about future investment venues with special emphasis on commodities in general and food In particular: “ … where does Rogers see investment opportunities? Commodities…”
• “The only place I know where fundamentals are getting better is raw materials …”
• KEY “We’re going to have serious food shortages, … Pieces are going to go through the roof.”
  “Commodities are still the best place to be because supply is declining, and governments are printing huge amounts of money.”

Nassim Nicholas Taleb, famous for his prescient financial forecasts, agrees with Rogers.

‘Credit Card Defaults’: “Credit Card Defaults At Record Highs But Worst Is Yet To Come” says Mike “Mish” Shedlock over at Mish’s Global Economic Trend Analysis (globaleconomicanalysis.blogspot.com) today. Here are some highlights:

• “U.S. credit card defaults rose in April to record highs with Citigroup and Wells Fargo posting double digit loss rates as the recession slashed more than 2 million jobs since the beginning of the year.”
• “American Express Card Defaults Exceed 10%”
• “Last month Credit Card Defaults Hit (a) 20 Year High and … this month is worse. Next month will be worse and so to will the month after that. As long as we are shedding 500,000 a month … .”
• “Remember that credit cards are unsecured loans. Card chargeoffs are a direct hit to the bottom line. That bottom line is looking bleak regardless of what nonsense Geithner and Bernanke are spewing about banks being well capitalized.“

‘Consumers and Banks’: First an apology to Michael Panzner: we spelled his last name incorrectly in our May 6, 2009 post. “Panzner” is the correct spelling. It’s to Mr. Panzner we turn to again today, and his excellent blog site Financial Armageddon (financialarmegeddon.com), for insight on the consumers and banks.

Mr. Panzner’s antidote in his article, “The Perfect Antidote”, is Howard Davidowitz, chairman of Davidowitz & Associates and a retail industry consultant. In a Yahoo Finance Tech Ticker piece entitled “ ‘The Worst Is Yet To Come’: If You’re Not Petrified, You’re Not Paying Attention” Mr. Davidowitz explains his outlook and here’s some of that explanation:

• “ith the unemployment rate rising into double digits – and that’s not counting the millions of “underemployed” Americans – consumers are hitting the brakes, which will have a huge impact, given consumer spending accounts for 70% of economic activity.”
• “Rising unemployment and the $8 trillion negative wealth effect of housing mean more Americans will default on ;;;mortgages,…student loans and credit card debt.”
• “More consumer loan defaults will hit banks …along with a “depression” in commercial real estate, …”
• Regarding bank “stress tests”: they were a sham and with the bailout money “…going to the most inefficient parts of the economy, “The bailout money is in the sewer and gone.”

Until next week then; keep your eyes on the horizon as the weathers changing fast.

I got down to the end to “Jim’s Quote of the Day” and read it. I then quietly pushed aside the economic material (I generally read 15-20 sources/day) I had thought was important and decided instead to go with this: “Jim’s Quote of the Day”, from the early 3/3/09 post of survivalblog at survivalblog.com.

“For what, after all, is the stimulus package attempting to stimulate? A restrained life of living within our means? No. It’s stimulating CONSUMPTION (caps ours). All the big talk of get the markets moving again, banks healthy again, balance sheets strong again, comes down to this: we need little Susie [homemaker] to get a loan for a really cool new car she can live without, drive to a shopping mall to buy cr*p she doesn’t need with a credit card she shouldn’t have, and return to a home mortgaged at a price higher than she can afford. That way, when she can’t keep up with all of it, she’ll have to fall back on other credit cards, and the bank balance sheets will be strong again. Great!” — Jason Kelly

PrudentHome Comment: The foregoing is a sad, pathetic and true snapshot of our current economic situation resulting from the economic policies of our greatest economic and big business minds who: come from the same great schools, with the same great professors, offering the same great view-points, to the “brightest and best” minds, who move up the ladder of success in the interchangeable worlds of business and government. And we stand all amazed at what’s been wrought!

Where’s some of the common sense that must be applied by a by a stay-at home- mother-of-four whose husband brings home a good, basic pay check? She works her budget magic on the back of an envelope, with the help of a hand calculator and a pencil with a big eraser, knowing that she must stay within budget to meet current and future needs as well as plan for possible future upsets.

Our economic future seems to be in the hands of men who can’t find the very essence of themselves with both hands in their back pockets. Who would have thought that William ButlerYeats was a rank optimist?

Food–It’s the Bees Stupid!: “Honeybees under attack on all fronts” writes Deborah MacKenzie, New Scientist (courtesy of Energy Bulletin at energy bulletin.net for 3/1/09).

Ms. MacKenzie writes that the worlds huge honeybee die-offs appear to be the result of a combination of causes (such as pesticides, lack of food and infections) working synergistically, to shove bee survival to “a lethal tipping point”.

She goes on to point out that one-third of human food is dependent on bee pollination and that the huge die-offs in the U.S. and Europe are now spreading to Asia.

Note: It’s always the simple things that seem to trip you up. We’re going to have to watch this topic more closely in the future as food security is already becoming a world-class problem.

Until a little later in the week then, keep your eyes on the horizon as the weathers changing fast.

From a common man’s point of view, we’re in the same place we were last week: nobody really knows what to do but at least theye’ve done “something”. The something is a “bailout” that may not work and, if it should work, may not be big enough.

There seem to be some “unintended consequences” from last weeks bailout too. It appears that a number of states in the U.S. are lining up, along with major corporations, for some “bailout”. It’s not difficult to envision the “bailout” line getting longer and more diverse as time goes on.

Here’s a nagging question that keeps popping up relative to the banks in the U.S. having money to lend to each other but not being willing to lend it due to their mutual distrust of each others financial statements: if the banks don’t trust each other, why should we trust the banks?

Where we are now is kind of summed up by James Howard Kunstler in a 10/6 post on his website (I won’t repeat the name of this site but you’ll know it right off when you look under his name on the web) entitled “All Fall Down”:

“We’ve entered the realm of phase change where everything is slipping and nothing has settled.”

JUST A NOTE: newsmax.com is currently offering an article entitled “Britain to Spy on Every Call, E-mail and Text” that notes that the British Government’s “Goal is to “live-tap” every electronic communication in Britain.” Interesting.

NOW-DO IT NOW!: There’s no more time to begin. If you’ve been putting off beginning a food (& water) storage program or if you’ve let you’re preparation efforts slack-off for whatever reason: STOP. Get focused on having a stock of essentials: food, water and medicines (along with the means to use and keep them) for at least 30 days for your entire family. Don’t forget to include enough for a guest and your pets. Consider now how you would “keep” them in any period of civil unrest.

We’ll talk more later. Looking forward to presenting a book review this coming Friday: 10/11/08.

Until then, keep your eyes on the horizon.

Banks will continue to be hurt also, she says, by continued home value declines. She predicts a nearly 40% reduction in home values from their peak.

GEO-POLITICS: Russia’s recent invasion of Georgia seems to have caught the U.S., NATO, and the EU flatfooted. Questions are now being raised, according to a piece (8/10/08) in WorldNet daily.com, concerning Russia’s willingness to use military force to achieve political influence over former Soviet Union states and the effects of this new aggressiveness on future oil prices and availability (note that the major Baku-Tbisli-Ceyhan oil pipeline serving the West runs through Georgia).

Israel vs. Iran : In a recent Jerusalem Post (8/11/08) article it was noted that the U.S. Secretary of State pointed out that Israel is a sovereign nation that will make it’s own decisions concerning war and peace. Also noted in the article were comments from Israel that any S-300’s sold to Iran (to upgrade it’s air-defense capability) would be neutralized.

Iran : A newsmax.com article of 8/10/08 indicated that the Iranian government is “ ready to confront sanctions” and that their nuclear policies will remain “ under any circumstances’.

OIL AND FOOD: In a worldnet daily.com article of 8/07/08, it was noted that while gas prices are falling, “ higher energy prices are pushing food prices through the roof, according to the Siena Research Institute.”. Joseph Farah elaborated … “ this is a petroleum-based economy and rising prices for every other commodity are directly tied to skyrocketing energy costs.”.

Food : Arnaud de Borchgrave in his recent piece “ World Food Crisis Underway”, presented by newsmax.com on 8/08/08, refers to a recent report by the Center for Strategic and International Studies (entitled “Global Food Crisis” ) which says in part …”The current crisis is unlike any food emergency the world has faced in the past. It is caused by a web of interconnected forces involving agriculture, energy, climate change and new market demands from emerging markets.

“All this carries grave implications for economic growth and development, international security and social progress in developing countries.”

FARMLAND: Bloomberg.com, on 8/05/08, in an article entitled “U.S. Farmland Values Reach Record on High Crop Prices (Update2) “ by Alan Bjerga, notes that while the rest of the country is in the midst of a housing crisis ” The value of all land and buildings on farms…increased 8.8% from a year earlier.” This appears to be the result of large increases in commodity prices such as wheat (77%) and soybeans (78%) over roughly the same period.

The above information coupled with the uncertainties it implies should be a strong impetus for individual family preparation. This is why we’ll be discussing expanding our three-day storage program to a full week of storage/preparation this coming Friday, 8/15/08.

In the meantime, keep your eyes on the horizon.

Like the weather, economic, political, and environmental events are beyond our individual capabilities to control but like the weather too, we’re somewhat able to predict their coming and prepare. So what does the weather look like as it begins to move toward us just at the horizon ? Our economy thrives on cheap, available credit and fossil fuels (oil). Now, if credit is cheap it is certainly less than readily available while oil is not cheap and probably becoming less available.

Three major European banks and a major U. S. investment house are predicting a financial situation , in the U. S. and the world , during the coming months characterized by words like “crisis” and “catastrophic” . This while our own central bank, “ The Fed”, is described as an institution “ without credibility “.

World food stocks, primarily grains, are at a half-century-plus low with major countries preventing grain exports altogether or heavily discouraging those exports thru taxes. While world production is currently at a marginally adequate level, it is fragile. Any significant economic, climate, or geo-political interruption could spell famine on a large scale.(Note: Both China and Saudi Arabia are currently buying farmland in places like Africa and South America)

World oil production levels are nearly maximized though they are currently pretty stable. This stability however, exists in the face of an increasing world demand with it’s attendant price increases.

World fresh water stocks seem to be in about the same shape as food and oil : marginally adequate at current levels barring interruption.

Climate change (warmer, more variable and uncertain weather) brought about by, or significantly influenced by, human activities appears to be a generally accepted scientific position. This change could effect world food production in both the short and long term.

Geo-politically, the world seems to be stumbling along about as usual however, current potential conflicts in major oil producing areas of the middle-east and Africa cause special concerns regarding world oil production interruptions with their attendant price increases.

Now we come to the shy, retiring, 800 pound gorilla in the room…population . While critical world resources, though stretched thin , might be adequate in the short-term we’re adding a population to the world equal to that of the U. S. every 48 months!

What does all this mean to the family and the prudent home? In a word, PREPARATION. This is the same response the family and prudent home gives to any severe weather challenge.

More specific discussion about the “weather” and family responses to it will be found here next week on Tuesday, July 8.

Meanwhile, keep your eyes on the horizon.