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Sunday August 31, 2008

Singapore : Bread price inflation continues

This article belongs to the Singapore inflation watch story arc.

I went to buy the usual loaf of Gardenia high-fibre bread yesterday and found that the price had gone up by 10 cents, from $2.15 to $2.25. That's the one in the blue packaging. A quick check showed that the cheaper one in the red packaging, the enriched white bread variety, had also gone up 10 cents, from $1.75 to $1.85. After a few months of relatively stable bread prices in the midst of general commodity price volatility, it looks like bread price inflation has started to kick in again.

I have taken to collecting these plastic price tags of bread loaves in recent months, especially during the periods of price changes - and it has always been in the upward direction so far. Nothing quite like having hard evidence of price inflation in your hands. Here they are - the first 3 on the left are from 2007 :

At first glance, the timing of this increase seems a little peculiar, given how commodities have been volatile and generally declining in recent weeks, and how wheat itself had breached the $12 record back in Feb 2008 on the MGE exchange and yet there were no price increases in the local bread price so far. I rather suspect that we have hit the point where they have held down the inflationary pressures from the past half year or so as far as they could, and margins have declined to a point where they have no choice but to pass along the increased costs to consumers.

So. Despite some economists declaring the commodity boom over, and that inflation would ease in H2 2008, or 2009, I say, fat chance. I maintain that the ripple effects of $100+ oil are still continuing to ripple through the economy, and if you think we've had it bad so far, we haven't seen anything yet! $150 oil beckons, and then $180, $200, and beyond, and with it, the rest of the commodity complex. In terms of price inflation, the sky isn't really the limit this time round - we're heading to the next galaxy.

(2008-08-31 11:05:42 SGT) [Biz] Permalink

Thursday August 28, 2008

Zimbabwe chops 10 zeroes from currency notes as hyperinflation rolls on

This article belongs to the Zimbabwe inflation watch story arc.

sabcnews.com, africa.reuters.com :

Zimbabwe rolled out a new set of banknotes and coins on Friday [1 Aug 2008] to ease the impact of a ravaging economic crisis, but for many people the move was merely confirmation that authorities have lost the battle against inflation. Official inflation stood at 2.2 million percent, the world's highest. Zimbabwe central bank governor Gideon Gono announced that the currency would be re-denominated by removing 10 zeros from the Zimbabwe dollar. The highest note was 100 billion. The new set of notes range from Z$1 to Z$500. Critics accuse Robert Mugabe of destroying one of Africa's most promising economies with controversial policies, and see no hope for the country without a change in government. John Robertson, a leading Zimbabwean economic consultant, said the new banknotes would have no impact on an economy which has shrunk by almost two thirds over the past decade.

- If nothing is changed, the new notes will be worthless in a matter of weeks or even less, given the hyperinflationary environment where prices increase in exponential fashion. Changing the currency bankotes by itself accomplishes nothing if the financial and economic systems continue to be broken, and if the underlying problems are not fixed they will have to start adding zeroes again.

(2008-08-28 10:30:15 SGT) [Biz] Permalink

Sunday August 24, 2008

US PPI wholesale inflation rate hits 9.8%, a 27-year record high

channelnewsasia.com :

US economic reports released on Tuesday [19 Aug 2008] showed wholesale prices spiked dramatically in the past year while new home construction slumped heavily last month, dragging down US financial markets as investors worried about already fragile economic growth. The Producer Price Index (PPI), a key wholesale inflation gauge, rose by 9.8% in July from a year ago, the biggest surge in 27 years since a 10.4% gain recorded in June 1981. Economists said producers may be trying to pass on increased costs as rising commodity prices sweep through the economy. This could further stretch consumers already being stressed by a continuing credit crunch and a long-running housing market slump. The central bank could in theory hike interest rates to cool inflationary pressures, but its hands are tied by the housing and credit crisis.

- The CPI inflation rate figures are likely to have a political bias, what with stuff like core inflation rate and hedonic adjustments being thrown in. That's what is published in the mainstream media and that's what the citizens tend to focus on. On the other hand, it's mostly businessmen, traders and the investment community in general who also look at the wholesale inflation figures, so these are likely to have less of a political bias.

Hence, the American wholesale inflation rate going at a 27-year high of 9.8% is really telling, and is indicative of a highly inflationary future to come. Even the politically-charged American CPI inflation rate figures are going at 5% or so. Many hopeful economists are saying that this is due to the record oil prices in recent months and also that with the recent correction in NYMEX crude oil prices, inflation might be easing off a bit. But I say, compared to what is coming, this is really nothing. Commodity prices are already in recovery mode. The hyperinflationary starship has just left the space dock and the hyperdrive is not yet warmed up. We haven't seen anything yet!

(2008-08-24 10:34:17 SGT) [Biz] Permalink

Thursday August 21, 2008

OPEC warns oil prices could rocket to $500 per barrel

peakoil.com -> belfasttelegraph.co.uk :

The nightmare scenario of oil reaching $500 a barrel within a few years was raised by a member of OPEC's governing council. Such a rise would also pose a serious threat to economic growth in oil importing countries. "If the dollar's value continues to decrease and if the political crisis becomes worse, the oil price would reach up to $500," Iran's OPEC governor Mohammad Ali Khatibi said in an interview. "If there is another war in the region, it will not only be Iran's oil not reaching the market, but rather the oil of the whole region would be cut from the market," Khatibi said. "In that case, we will not have a price rise. We will have a price explosion."

$5000 gold, $500 oil. If the 10:1 ratio holds up till then. Could turn out to be conservative. If global hyperinflation kicks in, the sky isn't the limit and we're not just going to the moon - the new limit would be somewhere in the next galaxy. For a preview of a possible global future, refer to Zimbabwe and their $100 billion banknotes. We're probably long past soft landing scenarios now. Hope for the best, prepare for the worst.

(2008-08-21 22:10:34 SGT) [Energy] Permalink

NYMEX crude oil gains a third day on US-Russia tensions, dollar weakness

bloomberg.com :

NYMEX crude oil prices rose on speculation that Russian crude may be disrupted because of rising tensions with the US, and the weaker dollar bolstered commodities. US plans for a missile shield in Poland will "spur an arms race" in Europe, Russia's Foreign Ministry said. About 1.1 million barrels of Caspian Sea crude remains shuttered following a pipeline fire in Turkey on Aug 5. Crude oil for October 2008 delivery rose $2.69 to $118.25 a barrel, recovering from a steep correction that took it down from $147.27 to $111. The September contract expired yesterday at $114.98. The US dollar slipped to a one-week low of $1.4832 against the euro. Gold gained to $817.61 an ounce.

- As I am writing this, NYMEX crude oil prices are up $8 to $119 from the recent low of $111, and gold is up $56 to $830 from the recent low of $774. Unless this is one heck of a bull trap, it looks like the summer lows could be behind us, proving my Beijing Olympics shutdown hypothesis. There will surely be lots of volatility on the way, volatility being a hallmark of commodity markets. We are back on track to $200 oil, and the next immediate resistance levels are in $10 intervals from $120, $130, $140 and the big one : $150. Support levels are $110, $100 and $90, but we wouldn't count on those now, would we?

(2008-08-21 21:16:41 SGT) [Energy] Permalink

Monday August 18, 2008

Peakoiler buys 2008 Honda Civic Hybrid FD3

It has been almost 3 months of waiting since Biow and I decided to take a trip down to Kah Motors at the end of May 2008 to make a booking for the car that we "should have bought in the first place" (my opinion). Today, we took delivery of our 2008 Honda Civic Hybrid, also known by its platform code FD3 (1.3L CVT). At the same time, we traded in our 1-year-old conventional 2007 Honda Civic FD4 (1.6L 5AT) of the same generation.

In the meantime between then and now, NYMEX crude oil prices have hit consecutive price records to a dizzying $147.27 per barrel, nearly tripling from the $51 level in Jan 2007, and then fell hard in a correction that has probably shaken even some oil bulls. As I write this, crude oil prices seem to be in the early stages of recovery - we will only know for sure as the days and weeks progress, if (when?) it breaks the subsequent resistance levels of $120, $130 and $140. I am on record saying how the 2008 Beijing Olympics shutdown figures in all this. Like I said earlier, Peak Oil has not been cancelled. It's just the oil markets acting schizophrenic, which is usually the case most of the time. The fundamentals have not changed, and giant corrections are nothing new in the realm of commodities investing. The last time round, oil prices dived 35% from $78.40 to hit a local minimum of $51. This time round, so far, oil prices are down "only" 24% from $147.27 to $111. We remain on track to reach $200 oil and beyond.

As for the car itself, I could go on and on to talk about its LDA-MF5 3-stage iVTEC engine, CVT transmission, IMA drivetrain, fuel consumption, mileage and how it achieves its efficiency, or you could read up any number of websites that can explain it in (sometimes) excruciating detail, including various hypermiling techniques to squeeze every last drop of energy out of the fuel. Actually, Honda seems to have taken this "squeezing every last drop" story to heart and they have launched a website, driveeverydrop.com, and marketing campaign to show how this has been their philosophy all along, starting from the CVCC engine in the very first Civic generation back in the 1970's. Today's 8th generation Civic Hybrid continues that tradition and represents the current state-of-the-art in a car that is fuel-efficient, has low greenhouse gas emissions, does not have to rely on billions of dollars of yet-to-be-built future infrastructure (as is the case for pure electric vehicles, hydrogen or even CNG cars), and yet remains relatively affordable for its class. In fact, regarding that last part, we just needed to fork out an additional 6K or so, reset the loan period, and voila, we get a brand new hybrid car, proving both the relative affordability of the Honda Civic Hybrid and the excellent resale value of the Civic platform overall.

Of course, as in all things technological, progress marches on. I have alluded to that in my earlier post. Lithium-ion battery technology has always been "just around the corner", but unless you are in the (rather long - two years was what I last heard) waiting list for a Tesla Roadster, or if you put up US$29K worth of batteries to convert a Toyota Prius from Ni-MH to Li-Ion, or sign up your interest for a Chevrolet Volt, there just isn't anything lithium-ion powered that you can walk into a dealer right now and order or drive off the lot. Alternatively, if you set aside the notion of lithium-ion batteries for the time being, you could wait for the 2009 Toyota Prius. Or the Honda Global Small Hybrid, or even the 2009 Honda Civic Hybrid (another 3-4 month wait, Nov-Dec delivery if you order one right now), but as with all technological purchasing decisions, there comes a point when you just decide to buy the technology currently available at a certain price at a certain point in time.

One thing is for sure, and for now I can only speak for myself and not for others, but I am of the opinion that the era of driving conventional vehicles is all but over. The future belongs to the new generation of "non-conventional" cars. In time, "non-conventional" cars will become conventional, and pure fossil-fuel-burning-only cars will be euphemistically renamed as "classic" or "antique" cars. What might once have been labelled "newfangled" would be the new mainstream, the same way that trains have switched from coal to diesel and then to electric. Hybrid vehicles are an important part of the ongoing transition to a new economy which will be based more on electricity and less on fossil fuels, and I am happy to be a part of this revolution.

(2008-08-18 23:54:54 SGT) [Energy] Permalink

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