Cato Institute
Professor of economics at the University of Georgia, George A. Selgin
speaks at the CATO monetary Conference on February 23, 2012.
Cato Institute
Professor of economics at the University of Georgia, George A. Selgin
speaks at the CATO monetary Conference on February 23, 2012.
InfoMetrics
Monthly Gasoline prices spike again. Now $3.57 per gallon (2/20).
The average pump price of regular gasoline in the U.S. has
now risen to $3.57 from a month ago at $3.385 p/gal., and
up from $3.171 p/gal., just a year ago. A hefty 12.6% rise.
Here is what the main stream media, the Street and the
department of energy are reporting:
Both Brent and WTI are trading well above $100 per Barrel.
The burning question is why.
Here are the corporate owned media ‘talking-points’:
In turn, this is what investment firms and traders use as
a so-called “inflection point” or “trigger” to artificially drive
prices up, of both crude oil and retail gasoline.
However, here are a number of facts uncovered by DataAnalytics.
Most of the previously lost Libyan production is back to
over 800K barrels per day.
Nigerian production of 2-/+ mb/per day has been relatively
stable for the 15 months.
The supposed Geo-political issues in the middle east have been
on-going for the past 40+ years. This is nothing new.
The prospect of supply being disrupted is slight.
U.S. Gasoline demand is at its lowest in 17 years.
Gasoline supply has increased 9.7% from January.
Refinery utilization has declined from 85.6% to 84%
per day or only 0.4% which equates to -218K per day.
(this is basically a negligible amount)
Other than geo-political rhetoric and wild, unregulated
speculation, the mostly normal and broadly acceptable model
of demand and supply, based on consumption, appears to have
no place in the current price ‘controls’ established by Wall Street,
OPEC and supposed government regulations.
The fact is that the current and wild speculation is unfounded
and is in the process of creating a gasoline bubble. Just last week,
traders bought 90 billion barrels of futures contracts for themselves.
A major consequence of course is increased consumer inflation
and the further erosion of discretionary income and spending.
The most perilous potential result could be a Double-Dip Recession.
The bottom line is that the average consumer will suffer the
most, while only a very select will benefit and benefit enormously.
When supply is up and demand is down, but prices keep rising,
it does not take a PhD to figure out the causation. Which is
neither one of a geo-political, mechanical or physical supply issue.
In short, it is simply the underlying ambition of what appears to be
unreasonable profit, by baseless speculation, at the great expense
of the consuming public.
By InfoMetrics
History has shown that the spread between cap rates and the Treasury yield should thin out, but as we’ve seen, that compression will most likely be the move of both rates. The two factors that affect cap rates in the real estate market are: Demand-Supply and Cost of Debt.
With both cap rates falling and interest rates rising, just how much lower can the spread between these two figures go before investors begin to push back?
Consumer confidence has bounced back and forth from low to moderate levels, there has been a lowering of demand for safe-haven U.S. Treasury bills and subsequently it has driving the yield in an inverse direction.
Commercial real estate seems to have bottomed out. Cap rates for net lease investments stabilized in early 2010 and rapidly compressed over the following 12 months. As the economic world has changed over the past few years, rates and their relationships have changed as fast as dollar-store concepts are expanding.