Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publication articles.
In case you didn’t know, world food prices hit a record in January.
The U.N. Food Price Index has risen for seven months in a row. It hasn’t been this high since it began in 1990.
According to the U.N. World Food Program’s executive director:
We are entering an era of food volatility and disruptions in supplies. This is a very serious business for the world.
Frost in Phoenix… One of the worst cyclones ever in Australia… Flooding in Malaysia… Drought in the Black Sea…
Wheat’s the highest it’s been in two and a half years. Palm oil prices are at three-year highs. Sugar’s the highest it’s been in 30 years.
Maybe someone will riot…
In case you didn’t know, Americans are once again dipping into their savings.
Gone are the lessons of the Great Recession. We pulled $311 billion from savings and investment accounts over the two years ending September 2010 — about 1.4% of disposable income.
That’s a drastic change from the past 57 years, when Americans “added an average of 12% of disposable income to their holdings of financial assets,” according to the Wall Street Journal.
We’re back to our old habits, while 2010 witnessed:
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an all-time record of foreclosures
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a record number of bankruptcies
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15% of the country on food stamps
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a solid year of home price slippage
You’re spending more because the Fed has kept interest rates near zero, which takes money out of your pocket and essentially gives it to the banks.
So while we’re dipping into hard-earned savings, the Wall Street Journal reports:
Pay on Wall Street is on pace to break a record high for a second consecutive year.
It’s not much — just $144 billion in compensation and benefits.
In case you didn’t know, Brent crude is getting comfortable over $100 a barrel.
It hit $103.37 on Thursday and remained above the three-digit benchmark again Friday, sustaining price levels that haven’t been seen since before the crash in 2008.
Fatih Birol, head of the International Energy Agency, says:
Oil prices are high enough to derail the global economic recovery.
Not to worry, oil companies are posting record profits as crude and pump prices creep higher.
But you don’t care that Shell (NYSE: RDS-A) doubled its annual profit to $18.6 billion, or that Exxon’s (NYSE: XOM) fourth quarter profit was up 53% to $9.25 billion pretty much on the backs of consumers like you, right?
Oh, and the outlook isn’t all that great…
OPEC said Friday it will spend $155 billion on projects between now and 2014. But analysts say most of that money would go toward just maintaining current output, rather than bringing new supply online.
A senior energy advisor at PFC Energy has said, “When you look at the Saudis, they’ve basically finished their incremental oil capacity increases. I don’t see much in the way of OPEC capacity increases in the next few years, aside from Iraq.”
Sounds like Peak Oil to me.
Maybe there’s a newsletter that’s been saying this would happen for years and can guide you to profits as it all plays out…
Call it like you see it,
Nick
Editor, Energy and Capital
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