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Demand destruction, continued weakness and broccoli-flavored tofu pops

Today's Financial News - Posted January 12, 2009

All part of the Hope and Change economy?

by J. Christoph Amberger

Baltimore—TFN: “Demand destruction” and “continued weakness” were the favorite terms of analysts today.

Although I was not quite sure if they meant the renewed downward trajectory in oil prices. Or the Detroit Auto Show.

Crude-oil futures fell by more than 7%, to below $38 a barrel yet again. Apparently, not even the record cold in Europe is sparking energy demand. And just in time for cheap gasoline, U.S. car makers now dazzle with the promise of battery-powered cars.

It’s like the Candy Manufacturers Association promising broccoli-flavored tofu pops: I cannot imagine a stronger deterrent to the joyful purchase of a new car than a line-up of “good-for-you” hybrid cars.

Then again, it may be all part of the Hope and Change economy: As the Washington Times reported today, Obama’s pick for “global warming czar”, Carol Browner, was listed as one of 14 leaders of a socialist group’s Commission for a Sustainable World Society. It calls for “global governance” and believes “rich countries must shrink their economies to address climate change”.

As most Socialist countries could attest to, there was no better way to shrink one’s economy than to offer products nobody wanted to buy.

*** Russia and Ukraine signed an agreement to deploy international pipeline monitors. Russia has pledged to restore the flow of natural gas by Tuesday.

To Gazprom’s European customers, who have been cursing the Russians and Ukrainians in 18 languages and 15 dialects, it looks like things are heading back to normal. Of course, the current agreement will not resolve the underlying dispute — Russia’s demand that Ukraine pay double the amount for gas for its own use.

So did my grand prediction of a Cold War II, with Russian troops pushing into Ukraine to “secure” the pipeline, end with a squawk?

Could be. But this is not a dispute between your local utility and a delinquent customer. The only viable alternative to the transit pipeline through Ukraine is the planned North Stream pipeline, which will run below the Baltic sea to pump gas from Russia to Germany. But the application process has been delayed in Sweden and Finland. And even if it all passed, it would take years to get the pipeline built.

After this conflict with Ukraine, there’s preciously little goodwill left on either side to come to an amicable agreement. For the Russians, the next best thing to physical control of the pipeline may just be regime change in Kiev.

The winter’s still young… and oil prices falling again.

*** Laura Cadden just posted a new, updated and expanded version of her special report “Four biotechs set to soar“: “These four biotech stocks have tremendous potential for future gains,” she says. “And best of all, each is currently trading for under $6!”


Next Article: Need a mortgage? Call a judge

Posted by J. Christoph Amberger · Filed Under International Investing 

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