Hiking Boots

SUMMER VACATION APPEARS to have set in on Wall Street, as the major indices backed off for a second week. By the numbers, for the week ended Friday, July 10, 2009, the Dow Jones Industrial Average closed at 8146, down 134 points, or 1.6%. The Standard & Poor’s 500 closed at 879, down 17 points, or 1.9%, and the NASDAQ Composite closed at 1756, down 40 points, or 2.2%.

U.S. market regulators are moving toward regulating the trading of oil and commodities, primarily to control price volatility. Stay tuned for more on this effort. Oil dropped below $60 per barrel this week. The price of a barrel of oil jumped from $3 to $12 during the 1973 Arab oil embargo, giving OPEC for the first time a taste of its control over oil prices. The price of a barrel of oil peaked at about $37 in 1981, dropping to about $12 in 1998, before starting its journey north again. In 2008, oil peaked at about $150 before settling back to its current $60 range. Our thanks to the WTRG Energy Economist Newsletter for this update.

The administration has reiterated its support of national health care, following comments by an administration staffer. The SEC has ruled that the paper sold recently by California is securities, and not obligations of the state of California. This gives the federales an out when California comes to Washington for a handout.

The Institute for Supply Management reported that its service index for June was 47. Any index below 50 represents a business contraction. GM is emerging from bankruptcy, with questions still surrounding the status of GM stock and bond holders. It will be interesting to see how Government Motors fares as an enterprise.

According to Bob LeClair, last week’s oil distillates report showed inventory levels at their highest in almost 25 years. US demand for gasoline, diesel, and heating oil is off 12% from the same period last year. Will the price of oil go to $30 or $300 in the next twelve months?

California leads the country for states in financial crisis, and is expecting a $53 billion budget deficit, representing more than 50% of its budget, for FY 2010, according to the Financial Times. To see how other states are faring, go to www.ft.com/usstatedeficit. According to this report, only Montana, Oregon, and North Dakota have no deficit.

US representatives Henry Waxman and Ed Markey have sponsored the American Clean Energy and Security Act of 2009, the cap-and-trade bill. This bill, already passed by the House, would cap carbon emissions, and set goals for percentage utilization of renewable energy.

According to Randall Pugh, president of Jackson EMC in Northeast Georgia, the provisions of this cap-and-trade bill will raise the cost of living of an average household by $1600. The renewable energy provision requires power companies to produce at least 6% of their power from renewable resources by 2012, and 20% by 2025. Power companies that fail this test will be taxed at the rate of $.025 per kWh above 4 billion kWh used annually. For Jackson EMC, this would have been a tax penalty of $25 million in 2008, all of which would be passed on to EMC members.

According to testimony by EPA administrator Lisa Jackson, given in congressional hearings, the cap-and-trade bill will have no material impact on CO2 concentrations unless all regions and countries of the world participate. A recent study by MIT came to the same conclusion. China and India have both made it clear that they will not participate in emission-reduction targets or schemes. In fact, China went so far as to suggest that they view carbon tariffs as a violation of WTO rules.

Peter Limmer has been making boots in an 18th Century barn in Intervale, NH, for many of his 53 years, a fourth generation bootmaker. 200 pairs a year, by hand, with one assistant in the shop. The waiting list for a pair of Limmer boots is two years, with a $50 reservation fee to join the list. Peter prefers that you come in for a fitting. You can find out more at http://www.limmercustomboot.com/.

US authorities are eyeing North Korea as the source of the cyber attack that overwhelmed government websites in the US and South Korea. San Francisco Mayor Gavin Newsom has banned spending city money on bottled water, has mandated composting citywide, and has proposed mandates on healthier food. The administration is spending $18 million to redesign the http://www.recovery.gov/ website.

Finally, you can also find this commentary posted on our blog, www.centurionag.blogspot.com.

Quote of the week:

“I cannot always control what goes on outside. But I can always control what goes on inside.”
Wayne Dyer