Mish's Global Economic Trend Analysis

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EU Emissions Trading in Tatters (As It Should Be) Posted: 16 May 2013 03:48 PM PDT The Wall Street Journal reports Emissions trading in Europe in Tatters. The European Union's flagship program to fight global warming—a regional carbon-emissions trading system—suffered a major blow Tuesday when legislators rejected a proposal aimed at saving the market from collapse. After the European Parliament's rejection, spooked investors drove the already depressed price of carbon emission permits down by nearly half. Benchmark electricity prices also fell. Europe's Emissions Trading System, launched in 2008, was intended to protect the environment by raising the cost of polluting and encouraging businesses to invest in cleaner technologies. Slack demand for electricity because of the recession and an abundance of permits helped push the price of emitting a ton of carbon below €5 ($6.60) earlier this year, from nearly €30 in 2008. On Tuesday, the price dropped to €2.55 before recovering partially to €3.20. Without some intervention to reduce supply, "the ETS will almost certainly collapse," said Kash Burchett, a London-based analyst at consulting company IHS Energy. "Prices will likely sink below €1 per ton as participants recognize that there is no political will at present to restore the market mechanism to functioning order," he said. Scheme Flawed From the Start "Today's vote is a historic failure," said Joris den Blanken, EU climate policy director at environmental advocacy group Greenpeace. Really? No not really. Today's vote is one of the few common sense things the EU has done in years. Giving existing polluters credits that they could sell, and credits that new polluters had to buy, is preposterous. Hopefully this will bury the idea forever, but don't count on it. Please note that I am not praising pollution. I am against this method of doing something about it. I also disagree with the entire concept of man-made "global warming" in the first place. Even if it exists, the odds that government will do something reasonable about it is close to zero. For further discussion of EU clean energy silliness, please see Paul Krugman "Was" Right. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Philly Fed Slips Into Contraction (Again); Current Conditions Recessionary, Future Expectations Far Too Optimistic Posted: 16 May 2013 10:25 AM PDT The Philly Fed Business Outlook Survey shows regional activity weakened with current indicators negative. The Six-Month Outlook brightened in what I believe is rampant over-optimism. "The current activity index has shown no pattern of sustained growth over the past seven months, generally alternating between positive and negative readings." Note the negative slope of current conditions and future expectations. Current conditions are in recession territory. Philly Fed at a Glance Business Outlook Survey May vs. April 6 Months From Now Series Data Apr Index Increase No Change Decrease May Index Apr Index Increase No Change Decrease May Index Business Conditions 1.3 23.8 41.8 29.0 -5.2 19.5 44.5 36.3 12.2 32.3 New Orders -1.0 27.4 35.5 35.3 -7.9 24.3 47.2 34.2 12.7 34.5 Shipments 9.1 23.9 39.3 32.4 -8.5 26.5 47.1 29.1 15.4 31.7 Unfilled Orders -8.7 12.6 60.5 21.9 -9.3 -2.1 24.4 61.7 7.5 16.9 Delivery Times -13.8 10.2 68.3 16.2 -6.0 -4.5 12.1 69.4 10.2 1.9 Inventories -22.2 25.3 52.2 21.1 4.1 -13.3 19.6 55.2 20.8 32.3 Prices Paid 3.1 18.1 69.2 11.2 6.9 26.6 36.8 51.9 6.0 30.7 Prices Received -7.5 7.0 81.3 10.3 -3.3 8.3 24.5 63.4 6.3 18.2 Number of Employees -6.8 13.7 63.9 22.4 -8.7 8.2 23.9 56.8 14.0 10.0 Average Workweek -2.1 14.7 54.7 27.2 -12.4 6.6 26.4 53.9 12.3 14.1 Capital Expenitures - - - - - 7.8 25.4 52.4 13.9 11.5 Key May Index Numbers Business Conditions: -5.2 New Orders: -7.9 Shipments: -8.5 Unfilled Orders: -9.3 Number of Employees: -8.7 Average Workweek: -12.4 Margin Squeeze Price Paid +6.9 Prices Received  -3.3 Looking ahead,  future expectations rose from 19.5 to 32.3, yet businesses are not backing that optimism up with a huge jump capital expenditure plans or hiring plans although both showed small increases.   Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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