Oil inventories and chinese oil imports (2000-2009, source: BCA)

The rate of road traffic in the United States, measured by miles by all vehicles, has declined by 4%. U.S. Oil crude inventories  are at maximum levels, with more than 360 billion barrels.

These two facts should be pressing strongly for a lower price of Brent crude, but especially the West Texas, but instead, the oil price has risen from $35 to $70 a barrel.

What’s hapenning?

You will see in the chart, a sharp increase in oil imports from China, coincided with the recent upward movement of the barrel. In Fact, China is the second World largest oil consumer.

China is again decisive in formation of global prices commodities.

Historical Us dollar chart in terms of Purchasing power parity (PPP), (source: BCA)

Wiki text:

The purchasing power parity (PPP) theory uses the long-term equilibrium exchange rate of two currencies to equalize their purchasing power. Developed by Gustav Cassel in 1920, it is based on the law of one price: the theory states that, in ideally efficient markets, identical goods should have only one price.

 This purchasing power SEM rate equalizes the purchasing power of different currencies in their home countries for a given basket of goods. Using a PPP basis is arguably more useful when comparing differences in living standards on the whole between nations because PPP takes into account the relative cost of living and the inflation rates of different countries, rather than just a nominal gross domestic product (GDP) comparison. The best-known and most-used purchasing power parity exchange rate is the Geary-Khamis dollar (the “international dollar”).

Compare this interesting historical chart. Above you can see the evolution of the U.S. dollar related to a basket of world currencies. Below, you can see the real US dollar spread with the theoretical PPP.

During long periods, the dollar is moving away from its theoretical value according to the PPP, but we also see that at some point there is a reversion to the mean. So the convulsive years of the early 80’s, the second oil shock caused a sharp rise in the dollar because of high interest rates.

Also in the late 90’s and early 2000, the clear overvaluation of the dollar has been gradually adjusting last years, and now dollar is near his parity level in terms of PPP.

This cyclical decline has further to run for next months or years in terms of PPP indicador.

World PPP currencies map related to US level 100 (source: wikipedia)

Europe’s most popular football clubs (source: sport+ markt)

According to a MasterCard survey on the economic impact of the Roma 2009 Champions final, this event will generate 310 million Euros. According to this study, the winner would be generated a 110 million Euros wealth. Even Manchester United, the loser, would have a positive impact of approximately 65 million Euros.

Even Rome stands to earn more than €45 million from hosting the 2009 Final. The €45 million windfall for Rome compares to €44.5 million for 2008 hosts, Moscow, and the €26 million Athens was believed to have generated from staging the 2007 Final, according to previous MasterCard research.

According to marketing specialist at ESADE University in Barcelona, Carles Torrecilla, Barcelona city also will benefit from a possible 10% increase of tourists because of Football Club Barcelona champions title.

2009 champions league celebrations in Barcelona.

The German company Sport + Markt has carried out a study, perhaps the only, whose aim has been to calculate the number of supporters of each club football in Europe. Futbol Club Barcelona is the European club with more fans, with an estimated 44.2 million, Real Madrid is second with about 41 million, followed by Manchester United with about 37.6 million. The surprise is how the EU is the fifth club Zenit St Petersburg.

However if we measure the clubs for their revenues, Real Madrid is the top european Club. Thanks to former president Florentino Perez, ACS chairman. Perez’s policy resulted in increased financial success based on the exploitation of the club’s high marketing potential around the world, especially in Asia, it came under increasing criticism for being focused too much on marketing the Real Madrid brand and not enough on the football.

Top 20 football clubs in Europe by revenues 2007/2008 (source: Deloitte)

Florentino was an excellent manager but also, a real estate suspicios deal, with the sale of the 4 famous towers in Madrid for an extraordinary earnings of 501 milions Euros (source: El pais journal).

Read this newspaper article from “The independent”:

“The property deal that helped Real Madrid pay for players such as Zinedine Zidane, Ronaldo and David Beckham is being looked into by the EU, who may order the club to repay some of the money.

The property deal that helped Real Madrid pay for players such as Zinedine Zidane, Ronaldo and David Beckham is being looked into by the EU, who may order the club to repay some of the money.

Real’s president, Florentino Perez, sold their 15-hectare training ground in the heart of fashionable Madrid to city and regional authorities for a staggering £290m in 2001. The sale helped clear the club’s £177m debt, and left enough to pay unprecedented sums for Zidane, Ronaldo, Luis Figo and Beckham. But the European Commission suspects the price was over-inflated and included a hidden public subsidy for what has been seen since the Franco era as Spain’s official state-sponsored club.

“We believe Madrid’s regional authorities may have overpaid,” Tilman Luder, the EU’s competition spokesman, said yesterday in Brussels. He warned that the club may have to pay back some money if the price exceeded the market value.

“We have sent a questionnaire to the Spanish government: to find out why they bought this land, at what price, and if they can prove it was at the market price. We suspect that the purchase price was influenced by the fact that this property had been reclassified, which increased its value,” Luder said. If doubts remain, the EU may launch a formal investigation.”

Barcelona second goal celebration in Rome.

Manchester United is number two and Footbal Club Barcelona is number three. Barcelona is the only one who didn’t accept a commercial sponsor. In fact, he pays to UNICEF.

Finally, the University of Navarre made a study of media impact on football clubs all over the world, which you can read from the excellent Blog eurosybalones from Luis Carlos Sanchez Martinez.

Us personal consumption as % of GDP (1960-2008, source: contraryinvestor.com).

When I look at the macroeconomic data so similar between the United States and England, I wonder how really gives the impression that the Anglo-Saxon economic model, very good in many ways, has created some big imbalances in macroeconomic for many years. Both in England and America match exactly the same imbalances, savings rates close to 0 or negative, huge debts both public and private, excessive current account deficit, growth based on a very high private consumption financed by debt.

Germany exported and save more, and consume less, (source: FT).

Instead, the German economy has some very sound fundamentals. Of course they are suffering a lot because it is the world’s leading exporter, but it is an economy that saves, which is very productive, which was not too much debt, and has had no housing bubble. The only negative point is that its bankers have sunk to all inexplicably leverages, and they have destroyed his banks.

When everything calms down, I think that the German economy will recover soon and may grow at higher rates than US and UK economies.

JPY/USD  (white line) versus S&P 500 (red line) chart. Yen carry trades still continues in may-2009, (source: Bloomberg, click to enlarge).

The carry trade, investors borrowing low-yielding currencies and investing in high-yielding currencies or in stock markets, continues.

As you can see in the graph, the Yen carry trade began in 2003 and still continues. As you can see the correlation is perfect.

Bud Fox and Gordon Gekko in 1987 Wall Street film.

Michael Douglas will return as corporate raider Gordon Gekko.

The film’s plot will revolve around Gekko’s life after he gets out of jail, and also are involving Hedge Funds.

When in 2007 it was rumored a possible shooting on the second part of the famous movie, what many of us saw as a further sign that the bear stock market is arriving. Why was filmed in early 1987, just before the crash? Because the stock market euphoria of the moment, attract to many people. When the stock market rises for many years, the whole world is interested, when it falls, nobody is interested in the stock exchange market. However in 2007 after a long bull market of  5 years, Edward R. Pressman considered very attractive to produce a sequel of 1987 Wall Street film.

Look at some of the best parts of the film of 1987. It is so impressive even today, 20 years later. It was a masterpiece.

Ladies and gentlements, the film has arrived, Wall Street, money never sleeps.

Bankruptcy risk measured by 5 years CDS 5 of the 4 major banks and UK government, (Source IMF).

¿What happens when the state has to save the major banks in a country?. Well very simple, the risk of bankruptcy of private banks is transferred to the entire country. Exactly as happened with Ireland, when Ireland government guaranteed all deposits from banks customers.

It’s a bottom up movement. In Spain, we are seeing the same effect more slowly.

Excellent table with multiple economic indicators comparison between current and past recessions (source: IMF)

Current US recession is severe using all type of economic indicators. Shap falls in wealth, in private consumption, in residencial investments, in equity prices or high increase in unemployement and in government consumption. Compared with another historical crisis, present US recessions is worst than median of previous recessions, it’s clear. 

Crude Oil and natural gas relative chart 1994-april-2009 (thanks to Jose Villarubia using visualchart).

It is a pleasure to have readers like José Villarubias. Thanks to the chart that he sent me, and also some reports that I read this weekend I think it’s an oportunity to buy ntural gas after falling from more than $60 to present $15. Especially if you sell short crude Oil and buy natural gas.

The natural gas price is at historically low levels in relation to oil prices in international markets. An Over-production in the U.S. in the last year, coinciding with US industries crisis, which consumes nearly 30% of Gas in the United States has led to a very discount price. You can do this easily through the United States Natural Gas ETF Fund (UNG).

Chinese GDP growth (year on year % change), 1992-2008 (source: FT).

While the major Western countries are struggling to save its financial system, their businesses and ultimately their hegemony, on the other side of the planet, China is using an instrument that the West countries can’t use because they spent all their ammunition. Unlike most industrialisated countries, Chinese government has achieved that bank lending reach to households and businesses. Its GDP is also decreasing its rate of growth because of the brutal slowdown in its exports to the rest of the world, and their inflation rates are already practically 0. But the increase in bank lending to the economy that will help a lot the chinese economy at least in the short term.

Chinese increase in bank lending (2007-march-2009, source: FT).

Daniel John Hannan is a controversial british politician, member of the European parliament for the conservative party.

Listen to one of the best speeches in Europe in recent years.

On 24 March 2009, after Gordon Brown had given a short speech to the European Parliament in Strasbourg in advance of the G20 London summit, Hannan followed up by delivering a 3-minute speech criticising in very strong terms the response by Gordon Brown to the global financial crisis.[8] He finished the speech

“….. you cannot spend your way out of a recession or borrow your way out of debt. And when you repeat, in that wooden and perfunctory way, that our situation is better than others, that we are well placed to weather the storm, I have to tell you, you sound like a Brezhnev era apparatchik giving the party line. You know and we know and you know that we know that it’s nonsense. Everyone knows that Britain is worse off than any other country as we go into these hard times. The IMF has said so. The European Commission has said so. The markets say so, which is why the pound has lost a third of its value. In a few months, the voters will have their chance to say so, too. They can see what the markets have seen: that you are the devalued Prime Minister of a devalued Government.”

Country default risk in the world (source: Bespoke)

This are the sovereign debt default risk as measured by credit default swap prices (CDS) for 5 year horizon. This indicador reflects the risk or probability of bankruptcy, according to the market in each country.

In December 2008, Argentina and Venezuela are two countries in the world with the greatest risk to invest.

This time the table is according to the country that this perception of risk has increased more in 2009 until March 5. Countries that have worsened are, Japan, Kazakhstan, Ireland (for their enormous crisis) and Austria (by its enormous debt to the Eastern Europe countries).

But the most significant are the countries whit the highest CDS level. Argentina are still the worst in the world, Venezuela the second worst, and Kazakhstan and Iceland also in the top 4. The Venezuelan and Argentine politicians can continue can continue to blame the rest of the world, but I’m sure this attitude will not improve his economy.