Thursday, August 07, 2008
Sudden Loss of Wealth
BHP, the world's largest mining company, dropped 27 percent to A$36 in Sydney since the index peaked. Rio Tinto Group, the world's second-largest iron ore producer, declined 28 percent to A$111.50. Alcoa, the world's third-largest aluminum producer, lost 30 percent to $31.04. It is probable that the oil market has reached the tipping point and is sliding into surplus. That means prices collapsing to 60 $/barrel once more. All the green and renewable energy projects will collapse, just as Luz (an Israeli solar energy enterprise) collapsed a few years ago. Luz II may not survive the current cycle. Everybody knew it was coming and everybody was caught with the pants down. We will have to stop buying expensive designer breads like Lehem Kafri and come back to lehem ahid - the subsidized uneatable bread in plastic sacks. And pitot. And margarine.