February 21, 2008

1) The Architectural Design Services index fell sharply in January from 55 to 50. The boom, bust level is 50. Below 50 means that more business is being completed than there is new business coming in. This is the second consecutive quarterly decline. A drop in architectural services is followed by a decline in commercial construction activity nine months later. Overall, commercial real estate construction grew by 13.2% in 2007, but no growth at all is expected in 2008. There especially has been a fall off in spec properties as financing for these has dried up. Time to renegotiate the presidio winery construction contract?

2) Whenever oil hits a benchmark a bunch of interesting data spews out. The US has 5% of the world's population but is using 25% of the world's oil. Global oil production is 85 million barrels a day and is not expected to rise much from there. At $100 a barrel the US is paying $500 billion a year to foreigners to buy oil, most of whom hate us.

3) Boone Pickens said he is shorting oil over $100 with a Q2 target of $85. I have been following this guy since the early eighties when I met him while working at Morgan Stanley on an oil company merger. I have never known him to be wrong about oil. (Remember the Pacman mergers when it was cheaper to prospect for oil on the floor of the NY stock exchange than in the field?)

4) Oil has become the safe haven asset. Instead of a flight to the dollar in times of uncertainty, you are now getting a flight to oil. There is great reluctance by foreigners to go into dollar denominated assets now.

4) All time highs today in oil, gold, palladium, platinum, coal, iron ore, and bulk shipping. Stocks and bonds are dead.

5) The CEO of Hovnanian, a major home builder,  came out and said that the housing market will recover at the end of 2008. Wishful thinking.

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