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May 10, 2008 – Comments (5)

You can always count on Yves to report on the what the popular media simply doesn't report.  I suppose the google advertising model is giving us true freedom of the press. 

In this post Yves contrasts three reports,  WSJ, one of their blogs and then Brad Setser.

Popular media gives the impression that exports will save the day, or the year.

Setser shows that if you strip commodities out it is a disaster.  And the average price for oil import last for the full year last year was $64.27.  At $110 oil you end up an extra $200 billion needed.

Commodities such as agriculture are helping and that appears to be where considerable amounts of the gain is coming from.  The gain isn't coming from value added manufacturing.

5 Comments – Post Your Own

#1) On May 10, 2008 at 11:21 AM, misterpickles (< 20) wrote:

Yeah I was talking to a pilot buddy of mine that has friends that fly for FEDEX. He told me that certian european routes they currently fly the contracts for those routes will not be renewed. Also he expects layoffs at FEDEX soon. Thursday is when he told me that and what happens friday? They pre-announce revised earnings!! This is 3rd hand info so take it for what it's worth.

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#2) On May 10, 2008 at 11:50 AM, leohaas (31.85) wrote:

You are making good points, but I am not so sure I agree with your headline.

Of course the high oil prices are going to wreak havoc on our trade balance. Considering that much of that money goes to countries where they hate our guts (and actually use some of it to sponsor terrorism), it is our patriotic duty to conserve. Trade in your gas guzzler today for a more economical vehicle. Any car getting fewer than 30mpg highway is pure waste, unless your job requires you to haul stuff.

Having gotten that off my chest, stripping out commodities is essentially the same as calculating inflation while ignoring the effect of "volatile" items such as energy and food. Sure it gives you a picture of what is going on, but the picture is incomplete. And when it comes to inflation or trade balance, the only thing that matters is the complete picture.

When projecting the effect of the dropping dollar, we need to keep in mind that there will always be a lag. A typical business plan covers 5 years. And depending on the kind of business, the first year may not see any revenue. Thus, the lower dollar will only give us a seizable improvement of our trading deficit if it will stay low for years to come. According to some of the most active bloggers here, that should not be a problem unless Ron Paul is our next President!

In the mean time, us investor types can take advantage by selling our carmakers stocks and buying companies that get at least a significant portion of their revenue from outside the USA.

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#3) On May 10, 2008 at 12:17 PM, misterpickles (< 20) wrote:

Yeah I was talking to a pilot buddy of mine that has friends that fly for FEDEX. He told me that certian european routes they currently fly the contracts for those routes will not be renewed. Also he expects layoffs at FEDEX soon. Thursday is when he told me that and what happens friday? They pre-announce revised earnings!! This is 3rd hand info so take it for what it's worth.

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#4) On May 10, 2008 at 12:53 PM, misterpickles (< 20) wrote:

Yeah I was talking to a pilot buddy of mine that has friends that fly for FEDEX. He told me that certian european routes they currently fly the contracts for those routes will not be renewed. Also he expects layoffs at FEDEX soon. Thursday is when he told me that and what happens friday? They pre-announce revised earnings!! This is 3rd hand info so take it for what it's worth.

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#5) On May 10, 2008 at 12:54 PM, dwot (42.57) wrote:

leohass, yeah, that was a Dr Seuss headline, two word when trying to come up with a more descriptive one is elusive...

You bring up a good point that few of us consider the social reprecussions of what we buy.  I think that goes beyond energy.

misterpickles, fedex is the type of business that is an advance indicator for the economy as a whole.  Not good... 

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