Wednesday, September 17, 2008

Post-Ike Pondering

Most of you are still without power.
The Clanton Hacienda remains in al-fresco mode as well. As the temps start to creep upward, the hammock in the back yard is going to look more and more appealing.

The damage in the area is beyond comprehension. Repairs for Kemah alone will top $50-million.

The cost of hauling off the ruins and trash for the metropolitan area is estimated to hit $128-million.

How much trash is that?
The Army Corps of Engineers figure up to ten-million cubic yards of debris will have to be hauled and disposed of.

If you’re still waiting for the power to return…get ready to take it slow. It’s a good idea to disconnect the larger appliances from their power sources until the grid in your area is energized and stabilized. We recommend un plugging the refrigerators, freezers, washers, dryers…and especially the big-screen TV until everything else has been on for at least an hour---take it slow. The last item you should power-up is your A/C.

While we were riding out the storm this weekend, there were storm clouds over Wall Street…
How big is too big to fail?
Fannie Mae and Freddie Mac: Too big to fail.
Bear Stearns and Lehman Brothers: sorry.

Now there's American International Group: gonna have to that company on life support:
The Federales are stepping in with an $85 billion bailout of AIG to prevent the bankruptcy of the nation's biggest insurer and the worst financial collapse in history.

According to Bloomberg, the Federal Reserve will provide a two-year loan, take over 79.9% percent of the company's stock and replace its management because "a disorderly failure of AIG could add to already significant levels of financial market fragility.''

AIG unraveled as the housing crisis resulted in more than $18 billion of losses in the past year. What would an AIG meltdown have cost? Hard to tell, but a close guestimate is somewhere in the $180-billion range, because AIG provides insurance on more than $441 billion of fixed-income investments held by the world's biggest institutions. $57.8 billion of that is in securities tied to subprime mortgages.

Here’s something of a surprise: After Hurricane Ike knocked several drilling rigs and oil refineries offline this weekend, Oil prices continue to retreat. On Tuesday oil plunged $10 a barrel in a violent, two-day slide.

Here’s why: The messiness on Wall Street looks like HWY 146 through Kemah…and any hopes for a swift economic recovery are dimming. That typically means another drop in U.S. energy demand. Crude, which shot up near $150 a barrel only two months ago, is now down 8% for the year.

While gas prices are notching higher at the pump, topping $3.85 a gallon amid the aftermath of Hurricane Ike, with the continuing slide of crude prices, retail gas is expected to turn lower within a few weeks.

The House has done an about-face and approved a package of energy initiatives. Carefule, the devil is in the details. There are elements that would allow oil drilling as close as 50 miles off the Atlantic and Pacific coasts, and in a nod to renewable energy proponents, provision to finance the long-term development of alternative energy sources.

However, most Republicans rejected the Democratic-sponsored legislation because it would prohibit exploration of much of the known oil reserves closer to the coasts and in the Gulf of Mexico.

The legislation next heads to the Senate, where three competing alternative ideas await. What are the odds Congress will pass it before the November elections? If they do, what are the odds it's something you can live with?

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