Toro's Running of the Bulls Market Blog

Australia Angers God

From The Wall Street Journal.

Analysts said Russia even may cease or curtail shipments abroad. Meanwhile, other countries included in the group of the top-five wheat exporters also are facing problems. Canada's crop has struggled due to excessive rains, and Australia is battling a plague of locusts. [emphasis added]

What next, Australians turning into piles of salt?

Hey Saskatchewan - Don't Build a New Dome Stadium. Buy the Silverdome!

I am from the province of Saskatchewan.  Wonderful place, if you can handle weeks on end of -40C in the winter.  People are lovely.  Friendly too.

Unfortunately, they now have too much money.

Several years ago, I flagged the opportunities of Saskatchewan, as well as the nuttiness of the local economy.  When I grew up there in the 70s and 80s, it was flat broke.  Saskatchewan's biggest export was people.  Farmers were receiving hundreds of millions of dollars from Ottawa to bail them out because grain prices were so low that the farm economy was effectively bankrupt.  The government was utterly incompetent, spending hundreds of millions of dollars on subsidies for people to upgrade their homes, i.e. build whirlpools in their back yard.  The province's bonds were rated junk.  The pension fund of the capital city, Regina, was prohibited from buying the province's bonds because they weren't investment grade.  

But now, Saskatchewan is the quintessential asset-driven economy play.  It is blessed with commodities.  Saskatchewan is a major producer of grains such as wheat and canola.  It has vast deposits of potash.  And it may have extensive reserves of oil and gas, too.  The Bakken Formation extends into Saskatchewan, and some speculate that there are oil sands in the western part of the province.

In other words, Saskatchewan is loaded.

Too loaded, in fact.  It is a common phenomenon that people without money who get money sometimes blow it on unwise things.  And that is what the people of Saskatchewan may be on the verge of doing.

The City of Regina is examining the possibility of building a domed facility to replace Mosaic Stadium.

Regina Mayor Pat Fiacco said Tuesday the city is looking into what it would cost to build a domed stadium, if the move would be financially practical and how it would be funded.

“We’re doing our due diligence and we’ll go from there,’’ Fiacco said Tuesday. “It has to be affordable but we all know that it takes a bit of an investment. Someone had the vision to build Mosaic Stadium or Taylor Field at the time. For obvious reasons, we have to make sure that we take care of the next 50 years.’’

Fiacco said it was too early to speculate on the costs, size or site of the new facility. He said the city would like to build the facility close to where Mosaic Stadium is currently located.

Fiacco said that the domed stadium would be more than a home to the CFL’s Saskatchewan Roughriders, who are the primary tenants of Mosaic Stadium.

Now, I'm a huge Riders fan.  All of us from the province are.  But a domed stadium?  In Regina?

Regina

Regina has a population of 200,000.  Saskatchewan has a population of 1 million.  The province had a population of 1 million 50 years ago. 

The estimated cost of building a domed stadium in Regina is $386 million.  Given The Law of Stadium Costs - the actual cost of building a stadium will be on average double the initial estimate - such a stadium may wind up dinging the taxpayers of Saskatchewan a cool $750 million. 

This, to me, seems nuts.  The province almost went belly up in the 1990s due to incompetent government schemes and spending and a near depression in the farm economy.  A commodity-based cyclical economy without many people probably should be using its money prudently, not blowing it on extravagances such as a shiny new sporting arena.  It reminds me of those guys buying five condos on the beach they could not afford, financing it with subprime ARM loans, thinking the party will never end.

Given the fondness in my heart for my home province, I propose a better solution.  Instead of building a new domed stadium, buy the Pontiac Silverdome!  Last year, the former home of the NFL's most hapless franchise was sold for a mere $583,000.  Factoring in the The Law of Stadium Costs, that is 0.07% of the prospective cost of a domed stadium in Regina.  Think of the savings!

Of course, this presents a bit of a problem since Pontiac is in Michigan, 1351 miles from Regina (2163 km for my Canadian readers).  How do you get the Silverdome to Regina?

Well, I don't know. Someone else can figure that out.  Maybe they can dig it out of the ground, plop it on a few trucks, and drive it to Regina.  You know, like those big trucks that move pre-manufactured homes place to place, with the smaller trucks decked out in orange and yellow trailing behind, going 20 mph below the speed limit.

Or maybe the province can just fly everyone to Michigan.  They could spend $700 million transporting all the spectators to the Silverdome.  They would still be better off than building a domed stadium.

That may not make much sense, but it seems to make a whole lot more sense than a province the size of Texas with the population of San Jose CA and one of the most cyclical economies on the planet that was just recently on the brink of bankruptcy building a domed stadium for hundreds of millions of dollars.

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HT Mark Thoma

Las Vegas Offended by Wall Street Comparisons

Who wouldn't be?  From the FT.

In a week in which Goldman Sachs executives were hauled over the coals for allegedly structuring a deal that they expected to fail, angry members of a US senate committee invoked a city that had little to do with the bank but everything to do with negative public attitudes towards Wall Street.

Goldman, which has argued throughout that it did nothing wrong, “had less oversight than a pit boss in Las Vegas”, said Claire McCaskill, a Democratic member of the committee. Mark Pryor, a fellow Democrat, was more damning. “You’re marketmakers but you’re also playing in that market,” he told the Goldman executives. “In-stead of Wall Street, it looks like Las Vegas.” America’s gambling mecca is known for many things: garish buildings, excessive behaviour, Elvis Presley and all-you-can-eat buffet breakfasts. But the people who live in the city and work in gambling resent the comparison to Wall Street’s latest fraud case.

“It’s very offensive,” said Shelley Berkley, a Democratic congresswoman whose district covers the city’s gaming strip and casinos ranging from the luxurious Bellagio to the rather down at heel Binion’s Gambling Hall & Hotel.

“Las Vegas casinos might not have clocks but we have rules, we have regulations, we have odds for sports betting,” she said. “Everyone knows what the rules are and no one is getting ripped off.” ...

“When you come to Las Vegas you know you’ll lose some money,” said Cheryl Westland, who was visiting from California and playing slots in the Tropicana. “What I’m not prepared to do is lose half the income on Wall Street that I’ve spent my life saving – but that’s what happened.”

Europe, a Parable

There are two neighbors who live in a subdivision.  One neighbor is Hans, the other is Nikos.  They both bought similar houses next to each other at about the same time for the same price.  Hans put 20% down to buy his house and borrowed 80%.  It has a fixed interest rate and his payment is well within his means. Nikos also has a mortgage, but he put 5% down and borrowed 95% with a variable interest rate.  Nikos stretches to meet his mortgage payment every month.

Hans is an automobile engineer.  Nikos is a clerk for the government.  Hans is more productive than Nikos and earns more money.  Hans works 50 hours a week while Nikos works 35 hours a week and gets every third Friday off.  Nikos could work longer, but the weather’s nice so he chooses not to.  Hans plans to retire at 67 and is saving for retirement.  Nikos plans to retire at 57, but he doesn’t have much savings and is running up his credit cards buying lots of stuff.

But Nikos is putting too much on his credit card. He can no longer maintain his lifestyle and pay his debts.  One day, Nikos skips a mortgage payment.  The bank decides to check his credit rating.  It has fallen dramatically.  The bank then checks Nikos’s income.  The bank discovers that Nikos lied about how much money he made on his mortgage application.  So the bank calls Nikos and tells him they have to either raise his interest rate or cancel the mortgage.  This is a problem for Nikos because he’s maxed out his credit card and can’t borrow from anywhere else.

So Nikos goes to his neighbor, Hans, and asks him for a loan.  Hans, who likes Nikos but disapproves of his free-spending ways, says OK, but on the following conditions

• Nikos has to get a higher paying job, which would require him to work longer and not take a long weekend every three weeks.
• Nikos can’t retire at 57.  He has to work to 67.
• Nikos has to start paying down all his other debt.
• Nikos has to start saving more.

Nikos says “No way.  I like my lifestyle.  I’m not giving it up.”  

Hans replies, “Well, I work hard for my money. If you aren’t willing to alter your lifestyle, I’m not lending you anything.  Why should I lend you my hard-earned savings if you aren’t willing to change your free-spending ways?”

“But I deserve to live this way!”  Nikos yells.

“Sorry,” says Hans.

Nikos goes across the street to Francois.  Francois and Nikos have always gotten along pretty well, so Nikos asks for Francois for a loan.  Francois is afraid that Nikos may have to sell his home and move.  Francois doesn’t want Nikos to move because he is having an affair with Nikos’s beautiful Greek wife, so he lends him the money.

And that is the eurozone.

 

Sunburning, Getting Blasted and Chasing Bikinis on the Algarve is a "Human Right" - EU

Byron Wein once called Europe an "open-air museum."  It is hard not to see why.

The European Union has declared travelling a human right, and is launching a scheme to subsidize vacations with taxpayers' dollars for those too poor to afford their own trips.

Antonio Tajani, the European Union commissioner for enterprise and industry, proposed a strategy that could cost European taxpayers hundreds of millions of euros a year, The Times of London reports.

"Travelling for tourism today is a right. The way we spend our holidays is a formidable indicator of our quality of life," Mr. Tajani told a group of ministers at The European Tourism Stakeholders Conference in Madrid on April 15. Mr. Tajani was appointed to his post by Italian Prime Minister Silvio Berlusconi.

The plan -- just who gets to enjoy the travel package has yet to be determined -- would see taxpayers footing some of the vacation bill for seniors, youths between the ages of 18 and 25, disabled people, and families facing "difficult social, financial or personal" circumstances. The disabled and elderly can also be accompanied by one other person. The EU and its taxpayers are slated to fund 30% of the cost of these tours, which could range from youth exploring abandoned factories and power plants in Manchester to retirees taking discount trips to Madrid, all in the name of cultural appreciation.

"The commission is literally considering paying people to go on holiday," Mats Persson, of pro-reform think-tank Open Europe, told Britain's News of the World. "In this economic climate, it's astonishing that the EU wants to bribe people with cheap holidays."

"A Huge Mistake"

From an academic

Former Federal Reserve Governor Frederic Mishkin, a professor at Columbia Business School, said it was "a huge mistake for the government to think it knows the best size of financial institutions." At the same time, he acknowledged that financial institutions are encouraged to get too big "because they are likely to be bailed out."

And I suppose allowing banks to get as big as they wanted such that they threatened the economic viability of the world is a "minor mistake?"

The Economics of the New Yankees Stadium

Kottke.org has an interesting cost comparison of the costs of attending a Yankees-Mariners game.  It is cheaper to fly from Seattle to New York and spend a weekend in the Big Apple than it is to buy the best seats in the house and watch the actual game.

Surely, this was a top in the insane money culture.

France Threatens to Walk

From Bloomberg

French President Nicolas Sarkozy will walk out of this week’s Group of 20 summit if his push for stricter international financial regulation flops, Finance Minister Christine Lagarde told the British Broadcasting Corp.

Sarkozy will refuse to sign any statement if he feels “the deliverables are not there,” Lagarde said in the interview. “I think he is very determined.”

My first thought was "So?  Who cares?"

But amazingly, someone (who isn't French) does.

"It’s a bombshell to be honest,” said Philip Whyte, senior research fellow at the London-based Center for European Reform. “If such a high-profile leader would walk out of the summit, it likely would be seen as very negative on the stock and bond markets. It would highlight the disunity among the leaders when the times require a show of unity, concrete actions and stabilization.”

I just can't see it.

Heck, I didn't even know France had a stock market...

Bottom in Financials Near!

Oh why oh why did I not see this when it was first announced!  A friend made this observation to me today.

Surely, Meredith Whitney quitting Oppenheimer to start her own firm rings the bell at the bottom for the bank stocks!

Bank analyst Meredith Whitney — one of the few names on Wall Street that actually gained favor during the financial crisis — is leaving Oppenheimer & Co. to start her own stock advisory firm.

DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!!