Archive for January, 2016

Thursday, January 28, 2016 @ 08:01 AM
posted by Kent Lockridge

The Energy Information Administration reported crude inventories rose by +8.4 million barrels in the week through January 22, bringing the total in storage to 494.9 million barrels, the highest on record. The build was helped along by refineries only operating at 87.4% of capacity due to maintenance season. Refiners used approximately 551,000 barrels per day less oil than the previous week, with inputs averaging just over 15.6 million barrels per day. The reduced refinery capacity did lead to a reduction of gasoline and distillate production, but total gas inventories still increased, rising by 3.5 million barrels. Distillates (which includes diesel fuel and heating oil) on the other hand saw stockpiles fall by 4.1 million barrels. Much of that drawdown is being equated to colder weather however, so the demand increase may be very short lived.

 

Tuesday, January 26, 2016 @ 02:01 PM
posted by Kent Lockridge

Sub-Sahara AfricaWith little in the headlines regarding U.S. crop production, I thought it would be interesting to take a look a the explosive growth in Sub-Saharan Africa. Essentially the area we are talking about includes all of the African continent which lies south of the Sahara Desert. It does not include the five predominantly Arab states of northern Africa which consists of Morocco, Algeria, Tunisia, Libya, Egypt and the Sudan. Keep in mind Sub-Saharan Africa, especially East Africa, is regarded by some geneticists as being the birthplace of the human race (the genus Homo). Stone tools are first attested around 2.6 million years ago, when H. habilis in Eastern Africa used so-called pebble tools: choppers made out of round pebbles that had been split by simple strikes. This marks the beginning of the Paleolithic, or Old Stone Age; its also argued to be where the last ice age ended, around 10,000 years ago. In any regard, this area of the world has seen a rising appetite for imported agricultural goods, a direct result of the region’s robust growth in gross domestic product (GDP) and population. The USDA recently estimated Sub-Saharan Africa imported close to $50 billion in food and agricultural products, a value that has been growing rapidly for the last two decades. In comparison, India only imported around $20 billion in agricultural products and they have 300 million more people. While U.S. exports to Sub-Saharan Africa have slowed recently, several key U.S. exports continue to thrive, laying a roadmap for future success in the region. It’s worth noting that Sub-Saharan Africa’s GDP has grown by a whopping +60% and its middle class has expanded by +90% in just the past 10 years. In fact many sources now regard this as one of the fastest growing regions in the world, perhaps more robust than Southern Asia. Overall, consumer-oriented products have seen the highest growth. The brightest star has been U.S. poultry exports. In fact, Sub-Saharan Africa was recently the third-largest market for U.S. poultry and has experienced 30% year-on-year growth for the last five years. In addition, U.S. exports of prepared foods, condiments/sauces, and dairy products have all seen strong growth in the last five years. Another success story has been U.S. wheat exports. Sub-Saharan Africa has long been the top destination for U.S. wheat exports and will likely continue to be a significant market. While Nigeria has traditionally accounted for the majority of U.S. wheat exports to the region, other countries in West and East Africa have seen strong growth. Bottom-line, most all economist and forecasters believe U.S. producers will continue to enjoy large export growth opportunities for the next several years. (Read more at USDA/FAS)

 

 

 

 

Tuesday, January 26, 2016 @ 02:01 PM
posted by Kent Lockridge

Stock markets around the globe are stable this morning as WTI crude oil tries to perform a balancing act at around $30 per barrel. News that Iran made its first post-sanction oil sale to Europe and that Iraq’s oil production hit record levels last month was like pouring water on any type of bullish rally from last week. Also adding to the concern about the global oil glut was a comment made by the chairman of Saudi Arabian Oil Company, who said the company can withstand low oil prices for “a long, long time.” He also noted that the company had not cut investment in new production projects. With the world’s number one oil producer seeming to be content riding out “lower for longer” prices, there’s not much hope that the supply glut will diminish anytime soon. There are also more signs that the rout in oil prices is doing major damage to the economies of oil revenue dependent U.S. states, adding to overall uneasiness about the economy. North Dakota just announced they may be forced to raid their “rainy day fund” to make up million of dollars in budget shortfalls due to declining oil activity. Other states feeling the pinch include Alaska, Louisiana and Oklahoma, all of whom are projecting budget deficits as oil revenues fizzle. As for today, the U.S. Federal Reserve begins their two day FOMC policy meeting, the first since raising interest rates in December. No policy changes are expected when they announce their decision tomorrow (Wednesday, February 27), but investors will be taking a close look at their rhetoric regarding U.S. growth prospects and the lack of inflation. From what I understand, the trade is currently giving the Fed 0% chance of a rate hike this meeting and just over a 50% chance that it could happen by the the September meeting. Outside of a rate adjustment, the trade will also be looking for any changes in the Fed’s language surrounding global economic risks, particularly slowdowns in China and other emerging markets, as well as the possible implications of depressed global currencies versus a strong U.S. dollar. Economic data will pick up a bit today with the S&P Case-Shiller Home Price Index, Consumer Confidence and Richmond Fed Manufacturing numbers all scheduled for release. It will also be an extremely busy day for earnings. Apple, the largest company in the world by market capitalization reports after the close. Analysts are expecting revenue to be slightly below expectations, which would be the first time the company has disappointed in six quarters. Warnings from Apple suppliers indicate the company is cutting iPhone output by as much as -30%, so investors are anxious to see what Apple has to say. Also of great interest will be how the company is fairing in China, especially since the Asian giant has become somewhat of a major economic “unknown” the past several months. Keep in mind earnings are also due from AT&T, Corning, Dupont, Johnson & Johnson, Lockheed Martin, Procter & Gamble, Sprint and 3M, along with over 80 other major corporations. I continue to be extremely cautious as earnings might surprise a bit to the downside… 

 

Tuesday, January 19, 2016 @ 03:01 PM
posted by Administrator

Those of you who watched the State of the Union address last night know that President Obama spent some time, as usual, crowing about his economic record. To my surprise, he mentioned the “Great Recession” only once, but he spent plenty of time talking about how the economy has grown during his term is office. As you might expect, these words need to be taken with a grain of salt. A recent study from the National Association of Counties (NACO) provides more evidence to support our suspicions. According to their study, across all of the United States’ 3069 counties that have their own county government, only 214, or 7%, of them have recovered to pre-Recession levels on all four of their indicators, jobs, unemployment rate, GDP recovery, and home prices. That means 2882 of the counties NACO considered have yet to do so. From their report:
By 2015, 214 county economies recovered to their pre-recession levels on all four indicators analyzed, almost three times more than by 2014. Most of these county economies are in Texas, Nebraska and Kansas. For the first time, 17 of the 126 large county economies — in counties with more than 500,000 residents — are part of this group. The majority are in California and Texas.

Overall, the county economies recovered on all four indicators by 2015 still represent only 7 percent of all county economies. In contrast, almost 16 percent of county economies had not recovered on any indicator by 2015, mostly in the South and Midwest. States such as Florida, Georgia, Illinois and Mississippi have more than a third of their county economies still reeling from the latest downturn across all economic indicators.
The report has this section under the cheery sounding subheading “Economic Recovery is Spreading Out”, but it’s really hard to see this in too positive a light. For those interested, here is the relevant map:

214 County Economies Recovered on all Four Indicators by 2015

As you can see, the darkest blue indicates counties that have totally recovered on all four of their indicators. Most of the country’s counties, though, are still stuck on the lower end of the spectrum. As you can see, the colors for 0-2 recovered indicators far out number the fully and mostly recovered counties.
It does qualify as progress, I suppose, from last year when, as the Wall Street Journal noted, the organization’s study found only 65 of the nation’s counties had recovered on all four points. The Journal has done the hard work of crunching the numbers on NACO’s study. Here is what they have note:
Last year, 72 of the recovered counties were in Texas, the most of any state. Nebraska followed with 22. Minnesota, Kentucky, North Dakota, Montana and Kansas each had at least 10 fully recovered counties.
Meanwhile, in 27 states, not a single county had fully recovered.
Some of the nation’s largest counties finally recovered from the recession in 2015, including the counties containing

Denver, San Francisco, San Jose, Dallas and Columbus, Ohio. In 2014, no county with more than 500,000 residents had fully recovered. Last year, 17 of 126 had.
That’s progress from nothing, but it’s still pathetic that only just over 13% of our nation’s largest counties with county governments have fully recovered from the Great Recession. These are our nation’s population centers, and this study makes it plain that they are still suffering. The counties containing cities like Detroit, Miami, Cleveland, Jacksonville, Tucson, and Las Vegas, along with many other populous counties like Orange County, California, are still stuck on the orange end of the spectrum. This also applies to many other major cities that fall short of 500,000, like St. Louis and New Orleans. Other large cities, notably Chicago, Los Angeles, and San Diego, are in counties that have only halfway recovered from the recession, by the NACO’s four indicators.
It’s interesting to note here that most of the fully recovered counties are, as the Journal notes, in energy-rich areas of the country. Even with the recent downturn in oil prices, counties in the oil-rich states of North Dakota*, Texas, and Nebraska, among others, continue to dominate the map, but it’s also important to note that many of these counties in the Great Plains States are not very large in population either, so the large mass of blues in the center of the country is somewhat deceiving in that respect.

That so few counties have recovered from the recession is something that Barack Obama absolutely should have mentioned in his State of the Union addressed. Instead, he provided an overview of what he considers his “accomplishments”, and he neglected to seriously talk about our country’s still prevalent economic problems as well. It might be unrealistic to expect all of the nation’s counties to be fully recovered by this point, but under any President with a competent economic policy, we would be looking at much better numbers. We can also be sure that this map will not get much better if our country continues to elect Democrats to the Presidency, so if you need even more reasons to get out and vote Republican this November, the NACO has just given you 2882 of them.

SOURCE: Jake, RedState.com
http://www.redstate.com/2016/01/13/study-93-us-counties-still-havent-recovered-recession/

Wednesday, January 6, 2016 @ 07:01 AM
posted by Kent Lockridge

U.S. vehicle sales broke the all the all-time record in 2015, though they did not finish off the year with quite the strength expected. December’s results still were strong, totaling a seasonally adjusted annual rate of 17.2 million units, rather than the lofty 18 million that many analysts were anticipating. Non-seasonally adjusted, total sales came in at 17.5 million, a +6% increase from 2014 and compared to the 2000 record of 17.4 million. According to Kelley Blue Book, the average transaction price for December sales was $34,428, up about $297 from December 2014. They also note that luxury sales spiked in December, accounting for around 15% of the market, more than 2% higher than the rest of the year’s average. In addition, SUVs and trucks continue to make up a larger share of sales, which is also helping to boost average transaction prices. Some individual company highlights included an +8% year-on-year retail sales increase for GM, boosted by high demand for Silverado and GMC Sierra pickup trucks. Fiat Chrysler’s annual sales were up +7%, with the groups Jeep brand sales up +42% in December alone. Ford’s full year sales rose by +5.3%, led by increased demand for its Lincoln brand MKC and Navigator SUV models.

U.S. Light Vehicle Sales