This attitude is magnified by the impact that the potential disintegration of the 17-nation Eurozone could have on the financial direction of the U.S. stock and bond markets.
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| Morris Beschloss |
With instability roiling the bond offerings of half the Eurozone membership, the bailouts and other stratagems to keep the lowest third (Portugal, Italy, Ireland, Greece, Spain and possibly Belgium) from collapsing into bankruptcy will depend on the ability of Germany to keep the Eurozone afloat, at least long enough to determine whether that current alliance can survive.
France had been considered Germany's junior partner in resolving this predicament, if at all possible. But now it seems that the French are also becoming Eurozone victims instead of one of its two-nation saviors. Paris's major banks have found to be overloaded with commercial and government bonds, whose values have plummeted precipitously, putting the French financial markets in jeopardy.
Germany has turned to the International Monetary Fund and the United Kingdom to help stabilize the Eurozone's financial disintegration, but this will only bring short-term solutions.
There are several tiny bright spots breaking through the overall economic clouds as we transition into a mixed bag in 2012:
1) The overhang of delinquent mortgages has fallen to the lowest level since late 2008. In a further attempt to break out of the construction and sales depression affecting the housing industry, Congress has moved to approve the maximum size of mortgage loans that can be guaranteed by the Federal Housing Administration.
2) Rentals, both in new construction and conversion of condos and co-ops from ownership to leasing, have become a major accelerating factor in the overall residential market. It's expected that this heretofore unexpected strength of transition will play an even greater role in reviving the relatively dormant residential plumbing-heating-cooling industry in 2012. This is also good news for the industry's craftsmen, such as contractors, electricians, and others specializing in maintenance and repair, as well as building.
3) The pipe-valve-fitting sector is heading for potentially the best year in its history with the price of oil-per-barrel hitting the $100 per barrel mark. This is the result of greater demand pressure from China, India, Indonesia, as well as a number of other emerging economies. Even the U.S., which has seen consumer demand pick up of almost 10% over last year, has done so at the expense of a declining savings rate, which had reached 5%, the highest level since the early 1990's.
The revolutionary fracturing (fracking) procedure, breaking out in New York State, Pennsylvania, North Dakota, Montana and West Texas will have its best year by far in 2012, barring further appeasement by the Obama Administration of the Environmental Protection Agency extremists.
Although the EPA succeeded in pushing the trans-Canada XL oil pipeline final decision into 2013, Canadian Prime Minister Steve Harper has already indicated that the future expansion of the Alberta Province's tar sands production, which is already 1.5 million barrels per day of crude oil, will be shifted to China through expanded rail lines and increased Vancouver export port capabilities, financed by Beijing.
The Canada/U.S. oil pipeline extension would have employed 30,000 construction workers over a two-year period of work if the project had been approved.
A surge of crude oil shipped directly from Canada's production source to the refineries around Houston and Louisiana would have made an increased supply of oil derivatives (gasoline, jet fuel, heating oil, diesel) available, bringing the U.S. closer to independence from Venezuela and the Mideast OPEC nations.
An immediate post-White House rejection pipeline postponement move was the 50% acquisition by Enbridge, Inc. of the Seaway Pipeline, which gave it proprietary control. This will reverse the flow of the pipeline, which sent Gulf of Mexico deep-sea crude into the giant Cushing, Oklahoma inventory, which had been overstretched.
This reversal would shift the flow out of the Cushing inventory straight into such major refineries as Valero Energy, near Houston. Such a move would partially mitigate the 'bottleneck' in previous shipments to refineries, which the 'postponed' project would have totally eliminated. With Gulf of Mexico drilling practically dormant, the need for shipments from the Gulf Coast to swell the Cushing inventory even more, has practically been eliminated.
4) Although recent slight reductions in weekly jobless and continuing claims give cause for some hope, the entry of job seekers into the work force still outweigh the number of job openings available. Even with skilled workers in increasing demand, no training programs of consequence exist to close this widening gap.
Independent private sector businesses especially are spending their relatively plush cash positions to become more productive through the latest technology. With continued perceived hostility by the White House, practically all businesses, whether manufacturers, distributors, contractors or retailers, feel increasingly strangulated by the interference of government agencies, especially the EPA, plus burdensome Frank-Dodd financial regulations and the looming Obamacare.
Our January 2012 UPA letter will present our economic forecast for the year, with a distinct focus on the plumbing-heating-cooling-piping industry.
