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The U.S. news media has convinced many investors that oil consumption is falling because of the global recession. While that may be true, it’s a disservice to millions of investors because
production is declining at a pace that’s actually three times faster.
And that suggests higher oil and gasoline prices in coming months - perhaps as much as 50% - 70% higher, or more - particularly if a U.S. economic recovery is truly in the offing.
To really see what I’m talking about, let’s start with a close look at consumption. I’m asked about this frequently in my global wanderings, most recently at the Las Vegas Money Show last week.
For months we’ve been hearing about a drop in global demand. It’s a popular story and one that sounds credible: After all, it seems logical to assume that during economic chaos, consumers and businesses alike will rethink their budgets and ratchet back their spending.
The delicate state of the global economy could be rocked by an outbreak of swine flu, which has killed over 100 people in Mexico and infected many others in the United States, Canada, Spain and New Zealand.
Underscoring the serious nature of an outbreak is a study conducted by the World Bank in 2008, which estimated a major swine flu pandemic could cost $3 trillion and cause worldwide gross domestic product (GDP) to plummet almost 5%.
"A nasty chill will run through the market…as people think back to the SARS virus," Justin Urquhart Stewart, investment director at Seven Investment Management, told Reuters.
It looks like it is not only South Africa which is cutting interest rates of late. The European Central Bank (ECB) decided yesterday (Thursday) to slash interest rates again. European Central Bank President Jean-Claude Trichet, cut the banks benchmark interest rate by 25 basis points to 1.25% and it could still be lowered further next month as they try to find a way to help the struggling European economy. The ECB has now reduced interest rates by 3 percentage points since early October. At 1.25 percent, the main rate is the lowest since the ECB took charge of monetary policy in 1999.
Trichet said the key rate may be reduced further “in a very measured way.” The deposit rate, which the ECB cut to 0.25 percent, is at “an extremely low level” and has probably reached its floor, he said. The ECB is allowing the deposit rate — the rate it pays banks on overnight deposits — to steer short-term market borrowing costs. This from a report on Bloomberg.
The Coca-Cola Co. (KO) said Friday that it would invest $2 billion in China over the next three years.
That’s 25% more than the $1.6 billion Coke has invested in China during the past 30 years.
As Coke’s third largest market – trailing only the United States and Mexico – China is already a centerpiece of the company’s global growth strategy. When the company announced better-than-expected fourth-quarter results last month, it reported that China jumped 29% last year, while U.S. sales actually fell by 1%.
So it’s no surprise that China will overtake both Mexico and the United States to become the company’s largest market by 2018, Coke President and Chief Executive Officer Muhtar Kent told The Financial Times.
Day 4
The Mining Day officially ended today but the deal making and networking will not end today. I spent more time doing some networking of my own in the Exhibitors Hall and I was collecting business cards like the bonus round of Super Mario Land on Nintendo. Remember that? The atmosphere at the Exhibitors Hall was good, people were still talking business, I even saw some contracts being signed at the Canadian stand. However, some people seemed tired and I can understand that. It’s been a long week and somewhat taxing as the mood was sombre at best. I can safely report that the Mining Indaba was a success even in the current “Things are bad” space.
My highlight of the week has to be the China story. So I would like to dedicate what maybe my final piece on the Mining Indaba 2009 to China and what it means to the world and to Africa.
Read the rest of this entry »
The first 100 days of President Barack Obama’s administration officially begin today (Wednesday). But the reality is that President Obama already has a solid head start, as he and his advisor have been working for months to establish the groundwork for one of the most ambitious - and most important - economic-stimulus plans in U.S. history.
President Obama’s team was hard at work weeks before his Jan. 20 inauguration, crafting an ambitious $825 billion economic stimulus plan, parlaying with the U.S. Treasury Department and Congress to ensure its speedy implementation, and assembling the team the nation’s 44th chief executive felt he needed to get the job done.
The World Bank said today (Wednesday) that it plans to triple its lending to developing nations this year in an effort to prevent a “human crisis” that has been brought about by economic turmoil.
The amount the World Bank lends to developing countries such as China, India and Brazil could reach $35 billion for the 12 months ending June 30. That’s almost triple the $13.6 billion doled out to developing countries over the last fiscal year. The bank said it is prepared to commit up to $100 billion over the next three years, with the majority of the funds to be made available through its International Bank for Reconstruction and Development (IBRD).
