Talking about Tension grows between Calif. Muslims, FBI after informant infiltrates mosque

Brent Nears $100 on Cold Snap; WTI Falls After U.S. Jobless Data –  Brent crude headed toward $100 a barrel, widening the spread with New York oil futures as crude stockpiles remained above their seasonal average and jobless claims increased in the U.S., the world’s largest consumer. Brent traded above $98 a barrel for a second day as wintry weather in Europe and the U.S. boosted demand for heating oil. West Texas Intermediate in New York declined after Labor Department figures showed initial jobless claims increased more than economists estimated last week and an Energy Department report yesterday showed increasing inventories of oil products. “Product prices are at their highest in two years, mainly because of the cold weather, which is making the whole oil market bullish,” “While storage capacity in the U.S. is fully loaded these days, damping demand for WTI, good growth numbers in consuming nations suggest demand will increase, and we could see Brent hitting $100 by mid-next week.” Brent crude for February settlement rose as much as 54 cents, or 0.6 percent, to $98.66 a barrel. Yesterday, the contract climbed to $98.85, the highest price since Oct. 1, 2008, when Brent futures last traded above $100."

CNBC: Dennis Gartman: Food Supply Has Just Been Materially Reduced – You probably know about the latest USDA report; it showed America’s grain stockpiles were at their lowest levels in years.  The news sent corn and soybeans to limit up on Wednesday. But do you about what’s happening overseas and how it’s driving prices, too? Australia’s unprecedented floods continue to devastate the country leaving an area larger than France and Germany combined under water. And that includes key farmland. As a result, ”The winter wheat crop in Australia has been absolutely destroyed,” explains strategic investor Dennis Gartman and author of The Gartman Letter.  He goes on to say there’s no way to replant in time for this harvest. “There’s now demonstrably less wheat available to the world – because of what’s happened.” That upsets the balance of supply and demand which means prices are likely going higher. “The world needs food and food supply has now been materially reduced,” he says.

Farm Belt Gets Some Help From Food Prices –  The continued rise in food prices along with weather problems among global competitors have helped one sector of the U.S. economy that is often overlooked: the Farm Belt. The benefits, however, are not equally distributed, and higher grocery bills threaten to curb U.S. consumer spending on all other items, a headwind for overall U.S. growth. Global food-commodity prices soared in recent months, and more increases are expected to come. The Department of Agriculture recently lowered its estimate of some U.S. crop totals, but for producers, the rise in prices more than makes up for the loss in volume. Exports are another reason for better times. After adjusting for prices, real U.S. agriculture exports increased 8.5% in the first 11 months of 2010, compared with the same 2009 period, according to the Commerce Department’s trade report released Thursday. As a result, the agricultural sector is reaping a bumper crop of income. Farm income has almost doubled over the year ended in November to its highest level since early 2008, according to the Bureau of Economic Analysis.

SIGTARP on Citi Rescue: Ignoring a Bomb That Has Yet to Be Defused  – Yves Smith – On the one hand, I must confess to a “I love the smell of napalm in the morning” response to reading the SIGTARP report on the extraordinary assistance extended to Citigroup, starting in November 2009. The well-documented, blow by blow account, taken from the perspective of regulators, dovetails neatly with the reports here and on other blogs during those fear-filled, gripping times. But on the other hand, the SIGTARP report is annoying, in that it fails to connect some critical dots, diminishes the importance of its key finding, and is far too complimentary to the officialdom. It’s odd that the reports of the Congressional Oversight Panel are consistently more hard-hitting than those of SIGTARP. While most commentators were pleased with its report on AIG (it correctly criticized Geithner for failing to renegotiate the credit default swaps payouts to AIG counterparties, we found the report pulled its punches and incorrectly backed the Fed on its retrading of the AIG financing.

Canada Flips China the Loon Preparing for an Oil Sands Showdown – I recently reminded my readers of China’s never-ending quest for energy… The International Energy Agency reported China’s energy demand will jump 75% by 2035. Can you blame them for buying stakes in nearly every major oil project on earth? There’s one area in particular they’ve set their sights on: the Canadian oil sands. Their oil sands buying spree is still going strong. The country has funneled more than $8 billion into oil sands investments during the last 15 months. PetroChina snagged a 60% stake in two oil sands projects, costing nearly $2 billion. Hopefully OPEC won’t feel too left out… The problem, however, is that China might not get what they’re after. Alberta is welcoming oil sands investors with open arms, but Premier Ed Stelmach has made it clear that they won’t take over — no matter how much money is thrown at the province.

CNN: Oil prices pushing near $100 a barrel — Oil has risen to within reach of $100 a barrel for the first time since the 2008 price spike amid mounting optimism that global economic growth will boost demand. But the sharp rise has also heightened concerns about the impact of soaring commodity prices on the global economy, particularly in emerging countries, as it comes on top of high costs for agricultural commodities and metals. The oil surge also comes on the back of supply disruptions such as this week’s outage in a pipeline in Alaska and strong investor inflows in commodities. Traders said there was a growing consensus that the Organisation of the Petroleum Exporting Countries was comfortable with prices near at $100 a barrel. In the past, Saudi Arabia, the cartel’s de facto leader, had said it would work to keep oil prices at $70-$80. Brent crude, the global benchmark, hit an intraday high of $98.8 a barrel on Wednesday, the highest since September 2008, when oil prices were in the midst of a collapse from their $147-a-barrel record

Commodities can still shock  – The global economy may have come a long way, but in large parts of the world, the past few weeks are a reminder that ordinary life still revolves around a handful of basic goods. And rising food prices can still all too easily bring a government to its knees. Just ask the Indian prime minister, who recently authorised emergency onion imports from Pakistan – after the domestic price of an onion trebled, in just one month. According to the FT, at least two Indian governments have been felled by the rising price of onions in the past. We also have the government of South Korea releasing emergency supplies of cabbage, pork and mackerel, among other things, to keep control of rising inflation. And the Indonesian president launching a national campaign to encourage people to grow their own chillies. As I discovered from taking part in a special segment on the GMT programme this afternoon, in Indonesia, chillies are a very, very big deal. And their price has quintupled in barely a year.
Secrecy By Complexity: Obfuscation in Energy Data, and The Primacy of Crude Oil – The dramatic fall of Mexican oil production, and its largest field Cantarell, is often cited as a signature example of the problems facing Non-OPEC supply. Since the production highs of 2004-2005, Mexican production has lost over 800 kbpd (thousand barrels per day) which is fairly dramatic for a country that was producing around 3.4 mbpd as recently as 5-6 years ago. But as accelerated as these declines have been in Mexico, there’s another oil producing region has seen even quicker declines. The North Sea, which comprises “United Kingdom Offshore, Norway, Denmark, Netherlands Offshore, and Germany Offshore” has just lost 20% of its production in 24 months. Daily production is down 600,000 barrels per day in that period.

Alaska Pipeline Problem Signals Future Oil Shortages – The four-day shutdown of the Trans Alaska Pipeline, which sent a jolt through world energy markets, pushing the price of oil up $4 a barrel in two trading days, could be a sign of things to come, according to officials.  That’s because the 33-year-old pipeline could outlive its usefulness, unless new sources of oil are developed in northern Alaska.  The flow of oil through the 800-mile pipeline was partially restored late Tuesday. Officials hope to have it fully restored in a matter of days, with another brief shutdown to install a bypass around a leak at a pumping station that led to the initial shutdown. The pipeline is now running at a rate of around 400,000 barrels per day.  But even at full strength, currently around 650,000 barrels per day, the flow is a fraction of what it once was. At its peak in the late 1980s, the pipeline carried more than 2 million barrels per day. It was designed to carry 1.5 million per day, according to Alyeska Pipeline Service Company, the consortium that owns and operates the line.

PlanetGreen: Confirmed: Mercury Cancels Out the Health Benefits of Fish Oil – Lately, a shadow has perched itself over the fish oil industry. While no one disputes the benefits of a diet rich in omega fatty acids, Rachel wrote about a number of studies pointing to myths associated with fish oil. Most recently, a new study was released that confirms that any benefits that come from fish oil are cancelled out but excessive mercury in the system.  According to Environmental Health News, methyl mercury is transferred to people who eat the fish, which is especially concerning for pregnant women whose children are exposed while developing in the womb.  The study, published in Environmental Research, said this: "Of the five nutritional components evaluated, only the beneficial effects of DHA – as measured by the children’s test scores – were negatively impacted by increased mercury exposure. The nutritional benefits of DHA were significantly reduced and then disappeared altogether at the higher exposures."

December Foreclosure Filings Slump By Biggest Annual Amount In History As Fraudclosure Clampdown Persists – RealtyTrac has reported its December foreclosure data: at a total of 257,747 default notices, foreclosure auctions and bank repossessions, total foreclosure activity dropped by 1.8% in December and 26.3% from a year earlier, "the biggest annual drop in foreclosure activity since RealtyTrac began publishing its foreclosure report in January 2005 and giving December the lowest monthly total since June 2008." Specifically, December Default notices (NOD, LIS) decreased 4 percent from the previous month and were down 35 percent from December 2009; Scheduled foreclosure auctions (NTS, NFS) decreased 3 percent from the previous month and were down 20 percent from December 2009; and bank repossessions (REO) increased nearly 4 percent from the previous month — thanks in part to substantial month-over-month increases in some states such as Nevada (71 percent increase), Arizona (52 percent increase) and California (47 percent increase) —  but were still down 24 percent from December 2009.

 More banks walking away from homes, adding to housing crisis – A new type of property is adding to neighborhood blight: the bank walkaway. Research to be released Thursday, the first of its kind locally, identifies 1,896 "red flag" homes in Chicago — most of them are in distressed African-American neighborhoods — that appear to have been abandoned by mortgage servicers during the foreclosure process, the Woodstock Institute found. Abandoned foreclosures are increasing as mortgage investors determine that, at sale, they can’t recoup the costs of foreclosing, securing, maintaining and marketing a home, and they sometimes aren’t completing foreclosure actions. The property, by then usually vacant, becomes another eyesore in limbo along blocks where faded signs still announce block clubs. "The steward relationship between the servicer and the property is broken, particularly in these hard-hit communities,". "The role of the servicer is to be the person in charge of that property’s disposition. You’re seeing situations where servicers are not living up to that standard."

The risks of raising interest rates too quickly – Martin Wolf – To tighten or not to tighten, that is the question. It is one on which the current UK discussion risks becoming more than a bit hysterical. Yes, inflation is well above target. Yes, the Bank of England failed to forecast this. Yet these facts are neither a necessary nor a sufficient argument for tightening policy. Famously, monetary policy works with long and variable lags. No sane monetary policy – that is, no policy that seeks to avoid the certainty of futile slumps – could prevent an overshoot of the target over the next few months or even over the next year. These are just bygones. All anyone can do over bygones is weep. The question, however, is whether this overshooting might continue. The answer? Probably not. We can, in short, see no sign of an incipient wage-price spiral. Nor does one seem imminent. Expectations implicit in gaps between yields on conventional and index-linked government bonds are volatile. But they are currently at about 3 per cent. This is slightly below their average of the past six years.

Pawlenty Proposes Making Congressmen Do Their Own Taxes – Former Minnesota Governor Tim Pawlenty has an interesting plan for tax reform: "require every member of Congress to do their own taxes." In response to a question on ABC’s "Good Morning America" about reducing the deficit, Pawlenty commented on the complexity of the current tax code. He proposed a system where Congressmen do not get the "help of an accountant, a lawyer or a tax specialist." Everyday Americans must file their own taxes and Pawlenty would require congressmen to do the same:

Get a Model, Plug in Guesses, Cure Unemployment – Just when you thought you’d heard the last of “jobs created or saved,” the Obama administration’s quarterly report card on its $814 billion fiscal stimulus, along comes the Federal Reserve with its own model-derived guesstimates. The Fed’s full menu of securities purchases “will have raised private payroll employment by about 3 million jobs,” said Fed Vice Chairman Janet Yellen. Yellen’s projections are based on simulations performed by the Fed’s macroeconomic model, known as FRB/US, not real jobs. That would be the same model that failed to grasp that mortgage loans made during a period of exceptionally low interest rates by lenders with no skin in the game might not be repaid, putting major financial institutions on the brink of insolvency; the same model that failed to understand how new and exotic derivatives based on these mortgages would perform; the same model that failed to see the millions of jobs that would be lost if housing and credit bubbles were allowed to inflate until they burst; and the same model that predicted an unemployment rate of 8.8 percent in the fourth quarter of 2010 without the enactment of a fiscal stimulus.  

The US won’t default, even if the debt ceiling stays – Greg Ip makes a very important point today, which I haven’t seen made anywhere else: even if the US debt ceiling isn’t lifted, that doesn’t mean the government will default. In any given month, the government’s income dwarfs its debt-service obligations, which means that the government could simply pay all interest on Treasury bonds out of its cashflow. Greg hasn’t run the numbers on principal maturities, but I’m pretty sure that they too could be covered out of cash receipts—and when that happened, of course, the total debt outstanding would go down, and we wouldn’t be bumping up against the ceiling any more. The point here is that the government has enormous expenditures every month, and debt service constitutes an important yet small part of them. If the debt ceiling weren’t raised, it stands to reason that just about any other form of government spending would get cut before Tim Geithner dreamed of defaulting on risk-free bonds.
 Strong Demand at European Debt Auctions – Spain, Italy and Hungary all carried out successful bond auctions Thursday, as investors showed strong demand for the bonds following Portugal’s better-than-expected bond auction on Wednesday.But the results failed to dispel worries about debt levels in the euro zone’s fiscally frail countries, as investors focused on the higher yield Spain had to pay and the potential for weaker demand at the next round of bond sales.  Both Spain and Italy sold the maximum intended amounts they had planned, with Spain selling €3 billion ($3.94 billion) of a five-year bond and Italy selling €6 billion in five- and 11-year bonds. Spain’s Treasury sold the bonds at an average yield of 4.542%, up from 3.576% at the previous auction Nov. 4 … Italy sold its five-year bond at a yield of 3.67%, up from 3.24% on Nov. 12, while the yield on the longer bond rose to 5.06% from 4.81%.
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