Yesterday I read a long post from Market Ticker detailing some of the recent, distressing economic and business news. Here are some things that stuck out for me.
First, durable goods orders decreased 5.3% on the month and inventories are rising. Market Ticker says this is always a sign a recession is on the way (or at least evidence that people are cutting back on spending), which makes sense to me. People used to be buying lots of crap, manufacturers ramped up production bit by bit to meet demand. Now that the demand is no longer there because people are limiting their spending, inventories will naturally rise and products will not get shipped.
Second, he berates the short-sighted politicians for setting America up for an energy crisis. The fools have prohibited any nuclear energy development for the past 30 years. We’ve turned our food into energy and we have refused to drill for oil off our coasts, oil which we know is there.
Also, and a most interesting and scary prediction that there will be a war between China and Russia in the future:
Let’s talk geopolitical risk – what’s really driving metals prices. Its not talked about, but it should be. China has north of 1.2 billion people. Russia, which shares a border with China, has 140 million, or about 1/10th of China.
Russia has a net surplus of both oil and natural gas, and in addition has a surplus of land per-capita. China has a dearth of all three. So long as China can pay for what they need, this is not a serious problem.
But as we flush, to believe that China can turn to internal consumption and pick up the slack, with a per-capita income of under $2,000, where ours is more than 10 times as high, is pure fantasy.
I wouldn’t take that bet at any odds.
What I expect to happen is that China will eventually run out of ability to subsidize, and will turn to what nations have always historically turned to when faced with severe internal pressures and a resource-rich nation sharing a border with them.
Quite distressing news overall, but good news if you happen to be a bear.