Tuesday, June 22, 2010

Rail Cargo

My favorite prognostication tool - Cargo moving by rail - fell off the proverbial cliff over the past 50 days or so. Down like a rock in a pond.

Housing is dead. Retail already rolled over. I took most of my equity positions off the table over the past few days... even the energy equities. I am just too afraid of really, really bad news coming from B.P. and the G.O.M. It comes down to 2 relief wells being able to intersect the well BELOW the damage point. Though perhaps more likely than not, this is by no means a certainty.
Say, 60/40 in favor. What if its the 40%? What if the well cannot be intercepted?

Deflation appears to be gaining the upper hand for the medium term (it has been winning overwhelmingly in the short term).

This is not a market call. Markets can do weird stuff in the short term... but it pays to watch shipping.

9 comments:

Anonymous said...

I wonder how many attempts at the relief well we get should the first fail? Amazing that this leak is at best case according to the Gov, 7 to 14 times Valdez,as of now.


peace

Anonymous said...

Separate note; I do not know if the local daily train run counts for rail cargo,but I use to here the local train twice daily,know its more like two to three times weekly. Just saying.

peace

Stephen B. said...

"OK, there’s no other way to put it: The Patrick administration has lost its mind. It has now embarked on a policy so fiscally irresponsible that it defies belief.

"Over the next five years the state [of Massachusetts] will borrow nearly $1 billion to pay for the salaries of transportation workers. That’s right, not for roads, not for bridges or buildings which have a decades-long lifespan. No, the administration will sell bonds (at whatever the going interest rate will be) to pay for salaries."

http://www.bostonherald.com/news/opinion/editorials/view/20100623fiscal_insanity_rules/

I guess states like MA think that at some point, everything will turn rosy again and we'll just pay off all the borrowing..........wow.

By the way, MA governor, Deval Patrick, is a good friend of B. Obama, or couldn't you tell?

Donal Lang said...

I think your 60/40 is optimistic. I think the leak is beyond catching; too deep, too much pressure, too many cracks and leaks, too much sand in the oil, too much methane, .... No one will admit it, even when its obvious. BP is toast.

To paraphrase Big J; He who lives by the Oil shall die by the Oil!

bureaucrat said...

Something I was just reminded of this week: credit default swaps (CDSs) and BP. Since BP must be intertwined with all these CDSs, what happens if BP just can't pay off everyone and does go bankrupt? What does that do to all the CDSs that are connected to BP's performance or lack of existence? We're back to 2008 again.

Anonymous said...

Good Point Bur. It seems that CDSs increase risk in three ways. First, they appear to be insurance, an so encourage risky investment. Second, there is insufficient reserve to back them up, so that a big failure causes them to fail too. Third, because you need no insurable interest to buy either side, there can be many times the exposure in the CDS market to the actual exposure of the primary investment. Worse than casino gambling, if you ask me. They should be banned.

Regards,

Coal Guy.

A Quaker in a Strange Land said...

Donal:

Worth reading:

http://noir.bloomberg.com/apps/news?pid=20601039&sid=axz59xiCgHuw

even though it sells less newspapers...

I have no idea WHAT the probabilities truly are, I used 60/40 arbitrarily.

Donal Lang said...

Greg; its another opinion based on limited information, and opposed by other comments on The Oil Drum. But I can't see much upside in this, erosion has to continue, wormholes will erode giving more leaks, and other cracks and failures will occur. The tophat system is amelioration, not a cure.

I hope BP can solve this, but already the quantities in the sea are incredible, the damage mindblowing. Given a year and a few hurricanes and storms, ocean currents, oil will be everywhere in the world.

Like I said at the start of all this, I think the claims will continue against BP forever until its broke. Legal costs alone will kill it as it protects itself against everyone taking a punt on a spurious claim.

I'd guess there's a 40% chance the entire reservoir will escape. I'd like to be wrong.

Donal Lang said...

PS Look on the bright side; you went half way around the world to invade another country and tens of thousands died so you could get your hands on their oil, and now all this free oil has landed right on your doorstep! :-)