Look out for the Supremes


No, not the 1960’s R & B group. 12 U.S. states, several environmental organizations, and 2 science Nobel Laureates will have their case on Global Warming (GW) heard before the U.S. Supreme Court. The case is Massachusetts v. United States Environmental Protection Agency, 05-1120, and it has every opportunity to be “the shot heard round the world” (or not).

The evidence is ``so compelling that it has crystallized a remarkable consensus within the scientific community: Climate warming is happening, and human activities are very likely a significant causal factor,'' the scientists tell the justices. – Bloomberg News, 11.20.06

From some of my previous posts I received a number of emails from people who thought I had a political axe to grind. Sorry, no axe here - I am a realist capitalist. Legislation, regulation, and court decisions on GW are coming, and they must be factored into your expectations.

The risks to the economy of any meaningful action taken to reduce Greenhouse Gases (“GHG”) are quite real. The risks to the economy of no action taken are just as real. Irrespective of what the Supremes do, and I think they will side with the Environmentalists because of Justice Scalia and Thomas judicial history of being strict constructionists of the Law, the issue gains momentum daily and will overwhelm its resistors in the near future. What form the laws and regulations take I have no idea, but their impact on the economy and markets will not be positive under any circumstance.

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Housing, Energy and the 2007 economy


In case you had any doubt, Housing is still in free fall. The pitch from the various bank economists presenting themselves as “independent experts” was that there was no bubble in asset prices. Now the pitch is housing’s troubles will not spill into the rest of the economy because energy prices have come down. Thank heaven these guys don’t work as traders on any Oil desk with my money working. These guys have not made 1 correct call on energy prices that I can remember. They should come with a warning like the one on cigarette packs.

My crystal ball is broken and I have NO IDEA about energy prices in the short term so I will hedge my bets: Follow energy prices AND aggregate supplies; if prices trend up – look out – coupled with Housing's pain I cannot see how the economy can expand. If energy prices trend flat to down, but supplies REMAIN flat to down, we will have the same outcome, in my opinion. Only if energy supplies rise AND prices fall is their a possibility of an expanding economy.

The odds of energy availability increasing for the U.S. is Slim and None, and Slim left town.


Mentatt (at) yahoo (dot) com