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The Dreaded Secret
Richard Russell
Dow Theory Letters
October 10, 2005
http://www.321gold.com/editorials/russell/russell101005.html
Extracted from the October 7, 2005 edition of Richard's Remarks
Is all paper money basically junk? Of course it is, and in due time, as the old saying goes, it will be reduced to its intrinsic value. This is the dreaded secret that the central banks of the world don't want you to think or recognize. But slowly, ever so slowly, the "dreaded secret" will emerge, and it will be recognized and acted on by the masses.
We are now in the early part of the second phase of the great gold bull market. This is the phase where gold starts to make the news. And when an item makes the news, the great unwashed public notices and begins asking questions. They don't do anything about it in this early stage -- they simply ask questions. And the question that a few curious people ask is, "Hey, why is gold going up? I read somewhere that it's at a 17 year high." And so it starts. The next question they ask is -- "What's wrong with the dollar. It's taking more and more of them to buy gasoline and heating oil and college tuition and rent. Is there something wrong with the dollar?"
These questions may sound innocent, but they scare the hell out of the Fed. So every week or so some fool Fed governor comes out and announces that "Inflation looks to be a little high at two percent, so we better raise Fed Funds another quarter of a percent. You see, we're just as scared of inflation as you good people are."
Of course, the one thing the Fed will never do is compare the purchasing power of the dollar with it's purchasing power 25 years ago or 10 years ago or even five years ago. That's a no-no, because the comparisons are sickening. You see, they have to keep that lie going to the effect that the Fed, like your dog, Rover, is man's best friend.
Here's my idea for a Fed motto -- "Keep it slow, and they'll never know." The "it", of course, is the decaying purchasing power of the fiat dollar.
On every dollar bill we read the words, "In God We Trust." Of course, they'd never put the words, "In the Fed We Trust" on the dollar -- because there's a limit to how big a lie the Fed thinks it can get away with.
The US government is now on a spending binge that boggles the mind, but I'm not going to recite the statistics on all the debt and deficits and liabilities again. Let me just put it this way -- the facts are horrendous. The question is, "How are we going to pay for them?" There are only two possibilities -- The government will default on them or the government will simply inflate them away. And the winner (but you already knew this) is -- inflation.
The ironic fact is that today we have "faith-based" money. Yeah, faith in the Fed. Economically speaking, could anything be more frightening -- or bearish?
The US public may not believe it or even understand it -- yet, but real money understands it. And now I'm going to shows you a few charts that I call my "secret weapons." "Secret" in that most people have never seen them.
These are monthly charts along with 20-month and 40-month moving averages. The first chart, I think, is spectacular. Here we see gold declining through the 1990s, then recording "double bottoms" in 1999 and 2001 in the 255 area. In May 2002 something dramatic occurred. The 20-month (blue) moving average crossed above the 40-month (red) MA. With that dramatic confirmation, I was convinced that a new primary bull market was well underway.
Since that bullish crossing, gold has climbed irregularly higher, but always holding above its 20-month MA. Note, also, that the 20-month MA has held persistently above the 40-month MA. That's the sign of a powerful primary up-trend. Today, up 2.70 at the close, gold has climbed to highest level since 1988.
click to enlarge chart
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Richard Russell
Dow Theory Letters
© Copyright 2005 Dow Theory Letters, Inc.
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Rogue
Feds Prepare for Super-Flu Disaster By LAURAN NEERGAARD, AP Medical Writer
Sun Oct 9, 3:54 AM ET
WASHINGTON - A super-flu could kill up to 1.9 million Americans, according to a draft of the government's plan to fight a worldwide epidemic. Officials are rewriting that plan to designate not just who cares for the sick but who will keep the country running amid the chaos, said an influenza specialist who is advising the government on those decisions.
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"How do you provide food, water ... basic security for the population?" asked Michael Osterholm of the University of Minnesota, a government adviser who has a copy of the draft plan and described it for The Associated Press.
"This is a much more comprehensive view than has previously been detailed," he said in an interview Saturday.
The Bush administration has spent the last year updating its plan for how to fight the next flu pandemic. While it is impossible to say when one will strike, the fear is that the bird flu in Asia could trigger one if it mutates to start spreading easily among people.
A recent draft of the plan, first reported Saturday by The New York Times, models what might happen based on the last century's three pandemics.
In a best-case scenario, about 200,000 people might die.
But if the next pandemic resembles the birdlike 1918 Spanish flu, as many as 1.9 million could die, Osterholm said. Millions more would be ill, overwhelming hospitals.
"You plan for the worst-case scenario," he said. "If it's less than that, thank God."
The government has on hand enough of the anti-flu drug Tamiflu to treat 4.3 million people. Manufacturing of $100 million worth of a bird flu vaccine just began.
The draft makes clear that tens of millions more doses of each would be needed. That is far more than the world has the capacity to manufacture quickly.
To finish that draft plan, federal health officials for several weeks have been role-playing what would happen if a super-flu struck now — not next year, after more medicines and vaccines have been stockpiled.
The strategy, Osterholm said, is, "Don't emphasize what you can buy, emphasize what you can get your hands on. If it happens tonight, how do you deal with order?"
For example, health workers would need to wear special masks, known as N-95 masks, to prevent infection while treating patients. Two U.S. companies produce 90 percent of the world's supply and "we'll run out overnight," Osterholm said.
Also being considered is the possibility that Tamiflu will not be powerful enough to treat someone already sick, but could protect against illness if given beforehand. So who would get the 4.3 million doses?
Health and Human Services Secretary Mike Leavitt recently met with Cabinet secretaries to get other federal agencies to determine their role in stemming rioting at vaccine clinics; when to close schools; how to keep gasoline, electricity, food and water supplies running; and how to manage the economic fallout.
State health officers also are being asked for input, Osterholm said.
"The HHS plan is going to be the foundation of a larger government-wide plan," said Leavitt's spokeswoman, Christina Pearson. "Beyond health care, there are issues with banks and schools, and that states and other place have to have their own plans."
Democrats have criticized the administration for not having a plan. Sen. Tom Harkin (news, bio, voting record), an Iowa Democrat, said in a statement Saturday that time for action was short.
"Having a plan on paper does nothing to protect us," Harkin said while urging the administration to work with Congress on implementing protections against a pandemic. "Next month is too late. The United States is woefully unprepared for this, and we must get started immediately."
___
On the Net:
Background on bird flu: http://www.cdc.gov/flu/avian/
Rogue
Jose Padilla and the consequences for us all... Invesment experts wrong about the dollar... no shame in the White House... John Roberts loves reading Richard Haass... British journalist Robert Fisk banned from entering the US... the push to cutt US farm subsidies...
http://www.theinternationalforecaster.com/trainwreck.php?Id=94&PHPSESSID=9299ea38bc0036d0e4b6ace....
We are forced to speak again of the situation of Jose Padilla and the dire consequences it holds for all Americans. Padilla was taken into custody by federal agents on May 8, 2002, as part of the war on terrorism and held as a material witness. It is important to point out here that being held as a material witness is a ruse to incarcerate. We do not know if Mr. Padilla is innocent or guilty of anything and neither does the US government. If they had a case they’d indict and charge him. For most of his time in confinement he’s been held in a naval brig in South Carolina. He is being held indefinitely because our appeal court says our President can do this in a time of war. Mr. Padilla is an American citizen. Even though convicted of nothing he is considered an illegal combatant and so he does not have the rights and guarantees that the constitution requires the government to accord criminal defendants. That means the Pentagon can hold him forever.
Under the Magna Carta and via common law and our Bill of Rights, there are procedural rights and guarantees and these protections have been lost in the indefinite jailing of Padilla. That means our government, under the guise of terrorism, can pick up and jail anyone anywhere in the world for any reason at any time. No habeas corpus as to why someone should be detained. No legal counsel, no due process and charges. There is a right to trial by jury. There is the right to confront witnesses and there is a presumption of innocence, which entitles the accused to remain silent and requires the government to prove guilt beyond a reasonable doubt. These guarantees apply to Americans and foreigners who are accused of a federal crime.
The case of Padilla is an attempt by our government to destroy America’s federal criminal-justice system and replace it as was done in Germany under Nazism in the 1930s. Ninety-eight percent of Americans know nothing of the Padilla case and its threat to our rights and guarantees by any despot. Our government wants the authority to kidnap and punish without any federal court interference whatsoever. The concept is anyone government accuses of terrorism becomes a prisoner of war, not a criminal defendant, and this prisoner of war is not entitled to the protections of the Geneva Convention, which governs prisoners of war. These are illegal combatants because terrorism is not a lawful way to wage war and because these uncharged and un-convicted combatants are not wearing military uniforms. All this illegal activity by our government is sanctioned by and signed off by our President.
At the Supreme Court level if these powers are upheld then no one is safe from the tyranny of a corrupt, despotic government. We can guarantee you there will be thousands of cases of prosecutorial abuse in our future and they will include anyone who speaks out about our elitist government. No one will be safe and this is no exaggeration. History is replete with examples of governments that used the criminal justice system to round up, punish and execute innocent people. With today’s corporatist fascist government in America no less can be expected. If the Padilla case is not reversed by the Supreme Court anyone criticizing government will be classified as those supporting terrorists. The bang on the door will come at 3:00 a.m. Your home will be surrounded by heavily armed government employees; you’ll be picked up, tortured, abused, raped and thrown in jail indefinitely. You can do nothing to defend yourself. There is no check on the military to take anyone into custody at any time. If the Supreme Court agrees with the appeals court then that’s when they’ll start collecting people like us who speak out.
Our President is masterminding this entire program with the assistance of the neocons and our congress. This is an attempt to impose military rule over America and we believe you should contact your representatives and express your dismay at their lack of interest in this most important issue.
Suspects arrested of detained by federal authorities could be forced to provide samples of their DNA that would be recorded at a central database under a provision of a Senate bill to expand government collection of personal data. The measure was approved by the Senate Judiciary Committee last week and is supported by the White House, but has not gone to the floor for a vote. This goes beyond the current law, which allows federal authorities to collect and record samples of DNA from those convicted of crimes.
This is absolutely outrageous. This is like fingerprinting. How can government demand such information from innocent people? Next we’ll have profiling based on genetic characteristics. Get after your elected representatives now and stop this unconstitutional invasion of our privacy.
Most experts thought that investors and central banks would be dollar sellers in 2005. The figures now tell us central banks were big buyers, not sellers. There was some diversification but by and large the plan by the major central banks was to have a dollar rally and take pressure off the euro. If you remember last we reported the IMF figures and they said that during 2004 the Fed and foreign investors absorbed $409.7 billion or about 113% of total Treasury issuance of $362.5 billion. This may work for now but its long-term bearish on the dollar and it’s very pro-inflationary. Gold is the only neutral non-fiat currency and it’s now rising against all currencies and as long as foreign central banks continue to buy dollars of decreasing value versus gold they’ll all continue downward. Gold will go up indefinitely as long as they continue to do what they are doing.
There is no shame and there is no embarrassment neither in congress or the White House. There are but a few statesmen and lots of pragmatic, purchased, politicians. They almost all enrich themselves as we head toward financial oblivion. We have two natural disasters three weeks apart that will cost $300 to $500 billion and we have a president who won’t increase taxes and a congress that refuses to cut pork. The Republican leader Tom DeLay says there is no fat left to cut in the federal budget. Does he really believe we are that stupid? If we were not optimists we’d be very pessimistic and depressed. As optimists we know we’ll win. The only question is what will be the price we have to pay? We have colossal debt and it keeps getting bigger. We have another quagmire called a war costing us $6 billion a day. When Roosevelt was faced with such a dilemma he cut non-war spending 20% and Truman cut 28%. Vietnam and Johnson spent with abandon. In 1982 there were 10 pork projects approved by Congress. In our recently passed Transportation Equity Act there were 6,371 totaling almost $400 billion. There is no morality left in Washington. It has truly become a den of vipers. All our elected representatives worry about is reelection, by buying votes and campaign contributions, a process that is totally corrupt as is the use of lobbyists, which should be banned. This is beyond cynical. America needs a wake up call. God tried to give us that with Katrina and Rita, but we are not listening. Hedonists never listen.
We are told California’s house appreciation will only be 10% in 2006, probably versus 14% in 2005. That could be the case if the 10-year Treasury stays at 4.25% because foreign governments continue to buy them without incentive for profit. That means a 5.75% 30-year fixed rate mortgage. The exotic mortgages will continue and the day of reckoning will have been suspended for another year. In the process though gold will go to $850 an ounce as official inflation climbs to 6-7%. Thus, the $523,150 house will increase in value to $575,500 as projected unit sales fall 2% to 630,610.
At the same time the California Association of Realtors tells us this glowing story they also tell us the 30-year fixed mortgage rate will rise to 6.4% and one-year ARMS will hit 5.1%. A 10% gain in value would mean only 15% of Californians could afford the average home. We disagree with the esteemed association. A 1/2% higher lending rate will leave a flat market and downward pressure on housing prices. That would also mean those with interest only and adjustable rate mortgages may not be able to make payments and go into foreclosure. That would also put pressure on housing prices. We’ll see, but 2006 is not going to be as good a year as 2005.
We are told that our Supreme Court Justice nominee expressed great enthusiasm for a new book by Richard Haass, a friend who runs the Council on foreign relations. The book, entitled “The Opportunity” presents the idea of how to integrate the world under a single political and economic order through a war of attrition. That would be accomplished by an end run around national sovereignty, eroding it piece by piece. “Our policies must recognize that globalization is a reality, not a choice,” says Haass in the tome that has so enchanted John Roberts. We told you in a previous issue that Roberts wouldn’t have been chosen if he wasn’t part of the elitists program. This of course proves it, so what else did you expect? Roberts agrees with Haass, “Sovereignty is conditional, even contractual, rather than absolute,” subject to revocation by the international community in the case of nations that defy its will. “The world 35 years from now will be semi-sovereign. It will reflect the need to adapt legal and political principles to the most serious challenges.” Roberts has been chosen by the Illuminati to adapt the legal system to the New World Order described in the manifesto written by his dear friend who is a top Illuminist at the Council on Foreign relations. Did you really think you were going to get someone who would look out for the interests of the American people?
Louisiana’s congressional delegation has requested $40 billion for Army Corps of Engineers projects in the wake of Hurricane Katrina, about 10 times the annual corps budget for the entire nation, or 16 times the amount the corps has said it would need to protect New Orleans from a Category 5 hurricane. As you know, the funds were diverted for the war in Iraq and used by Fatherland Security to pursue phantom terrorists. That is in addition to the $32 billion request by the Governor of Louisiana. In eying the requests they are found to be loaded with pork. These requests are in addition to the $62.3 billion already approved. That is about $134.3 billion. That cost of $200 billion when all is said and done is stretching toward $400 billion. The requests boggle the mind. Brazen doesn’t begin to describe it. The Louisiana delegation is using Katrina as an excuse to resurrect a laundry list of pork projects. All the work done on requests for the Congressional delegation was done by lobbyists who are also on a working group. We should expect these kinds of requests the way endemic corruption is today in Washington.
Robert Fisk, the great British journalist who has been covering war zones for decades, has been banned from entering the US. This is of course for reporting the truth and repeatedly exposing the US and British governments’ disinformation campaigns. Fisk has been told his papers were not in order. This, of course, comes under the venue of the Patriot Act and Fatherland Security. Fisk is probably suspected of aiding and abetting terrorism. We are surprised he wasn’t thrown in jail. Fed chairman, Sir Alan Greenspan, told France’s Finance Minister Thierry Breton that the US has, “lost control of its budget deficit.” Breton said, “The US has lost control of their budget at a time when racking up deficits has been authorized without any control from congress. The situation that is creating tension today on the currency market is clearly the American deficit. One has the feeling that interest rates will probably continue to rise slightly until his departure.” Greenspan is due to retire in January 2006.
As the Chinese yuan trading band widened from 1.5% to 3% as US Treasury paper came under pressure as traders surmised that the Bank of China would be buying less Treasury debt as part of its dollar intervention operations. There is no further need to buy dollars and Treasuries because the yuan is no longer based on the dollar. It is based on a basket of currencies. Program Trading accounts for 70.8% of NYSE volume. That is 1322.7 million shares daily. This has nothing to do with investment. The concept has turned the exchanges into gambling casinos. Its little wonder the average investor is out of the market. Brokerage firms executed an additional 839.4 million shares daily of program trading away from the NYSE, with 0.5% of the overall total on foreign markets.
The IMF says, “There is rising concern among the world’s economic leaders that financial market participants may be under-estimating economic risks and that implies that central banks will keep lifting interest rates for some time.” They should mention that to real estate investors.
The office of the Comptroller of the currency reports a net easing of retail underwriting standards and it warns that banks are overly concerned about fee generation and under concerned about loan quality. They just want to generate commissions without regard to profit and loss. Banks are concerned about renting money and not the repayment of principal. Alan Greenspan has fostered that mentality with his relentless credit creation and the perceived Greenspan put.
One of these days the denizens of the foreign exchange market are going to discover that the dollar and the American economy will not always be the logical repository of capital at the margin. The alternative, the euro, is facing a European recession, EU political problems, and political problems in Italy as well as Germany. That is all understandable, but the dollar’s problems are far greater.
August existing home sales rose 2%. Sales were up 7.8% from August 2004 and were the second highest on record. The median home sales price rose 15.8% to $220,000 year-on-year. Inventories of homes for sale rose 3.5% in August to a 4.7% month supply, the most plentiful month’s supply since November 2003.
On Monday, in spite of the Fed adding $10 billion in repurchase agreements and putting the repo pool at $94.830, the market struggled all day. Gold was hit in Europe and then in the US, but gold rebounded strongly for the day.
The World Bank’s policy-making committee has agreed to a global debt-relief proposal sought by the Group of 8. That will wipe out $55 billion in debt for 37 nations. Our experience having lived in a number of third world nations is that they‘ll run their debts up again. An unspoken part of the agreement is the privatization of utilities in all countries by US or European elitist companies.
The US is under growing pressure to cut farm subsidies as their latest meeting with three other trade powers ended in deadlock. There are only three months left to agree on a framework global trade treaty. There is a good chance the US will not bend. They think their tariffs of 12% are acceptable. In addition, there are other simmering issues between rich and poor countries. Brazil is seeking WTO sanctions against the US after the elitist US neocons failed to comply with a ruling ordering it to reform cotton subsidies. The EU has also angered Brazil, Thailand and Australia by announcing plans to dump its two million metric ton sugar surplus on world markets just before a ban on its sugar subsidies enters into force.
Shortages of building materials along the Gulf Coast will increase construction costs and support housing price gains if interest rates stay in their current mode. We believe they are headed higher. The experts expect the national median price for housing of all types to rise 10.8% this year. Over the past five years homes have risen in value by 53%.
Citizens for Responsibility and Ethics in Washington have listed the 13 most corrupt politicians in Washington. Leading the pack is Senate Majority Leader Bill Frist (R-TN) and House Majority whip Roy Blunt (R-MO). Then there are Representatives Richard Pombo (R-CA), Maxine Waters (D-CA) and Randy “Duke” Cunningham (R-CA). Then there are Senator Conrad Burns (R-MT) and Representatives Bob Ney (R-OH) and Tom Feeney (R-FL). William J. Jefferson and Cunningham are under federal investigation. The other three are Senator Rick Santorum (R-PA), Representatives Charles H. Taylor (R-NC) and Marilyn N. Musgrave (R-CO) and Rep. Rick Renzi (R-AZ). We are sure there are some subjective feelings being vented.
Do you want to read more by Bob Chapman? There are 87 previous issues for you to read.
Rogue
Jose Padilla and the consequences for us all... Invesment experts wrong about the dollar... no shame in the White House... John Roberts loves reading Richard Haass... British journalist Robert Fisk banned from entering the US... the push to cutt US farm subsidies...
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http://www.theinternationalforecaster.com/trainwreck.php?Id=94&PHPSESSID=9299ea38bc0036d0e4b6ace...
We are forced to speak again of the situation of Jose Padilla and the dire consequences it holds for all Americans. Padilla was taken into custody by federal agents on May 8, 2002, as part of the war on terrorism and held as a material witness. It is important to point out here that being held as a material witness is a ruse to incarcerate. We do not know if Mr. Padilla is innocent or guilty of anything and neither does the US government. If they had a case they’d indict and charge him. For most of his time in confinement he’s been held in a naval brig in South Carolina. He is being held indefinitely because our appeal court says our President can do this in a time of war. Mr. Padilla is an American citizen. Even though convicted of nothing he is considered an illegal combatant and so he does not have the rights and guarantees that the constitution requires the government to accord criminal defendants. That means the Pentagon can hold him forever.
Under the Magna Carta and via common law and our Bill of Rights, there are procedural rights and guarantees and these protections have been lost in the indefinite jailing of Padilla. That means our government, under the guise of terrorism, can pick up and jail anyone anywhere in the world for any reason at any time. No habeas corpus as to why someone should be detained. No legal counsel, no due process and charges. There is a right to trial by jury. There is the right to confront witnesses and there is a presumption of innocence, which entitles the accused to remain silent and requires the government to prove guilt beyond a reasonable doubt. These guarantees apply to Americans and foreigners who are accused of a federal crime.
The case of Padilla is an attempt by our government to destroy America’s federal criminal-justice system and replace it as was done in Germany under Nazism in the 1930s. Ninety-eight percent of Americans know nothing of the Padilla case and its threat to our rights and guarantees by any despot. Our government wants the authority to kidnap and punish without any federal court interference whatsoever. The concept is anyone government accuses of terrorism becomes a prisoner of war, not a criminal defendant, and this prisoner of war is not entitled to the protections of the Geneva Convention, which governs prisoners of war. These are illegal combatants because terrorism is not a lawful way to wage war and because these uncharged and un-convicted combatants are not wearing military uniforms. All this illegal activity by our government is sanctioned by and signed off by our President.
At the Supreme Court level if these powers are upheld then no one is safe from the tyranny of a corrupt, despotic government. We can guarantee you there will be thousands of cases of prosecutorial abuse in our future and they will include anyone who speaks out about our elitist government. No one will be safe and this is no exaggeration. History is replete with examples of governments that used the criminal justice system to round up, punish and execute innocent people. With today’s corporatist fascist government in America no less can be expected. If the Padilla case is not reversed by the Supreme Court anyone criticizing government will be classified as those supporting terrorists. The bang on the door will come at 3:00 a.m. Your home will be surrounded by heavily armed government employees; you’ll be picked up, tortured, abused, raped and thrown in jail indefinitely. You can do nothing to defend yourself. There is no check on the military to take anyone into custody at any time. If the Supreme Court agrees with the appeals court then that’s when they’ll start collecting people like us who speak out.
Our President is masterminding this entire program with the assistance of the neocons and our congress. This is an attempt to impose military rule over America and we believe you should contact your representatives and express your dismay at their lack of interest in this most important issue.
Suspects arrested of detained by federal authorities could be forced to provide samples of their DNA that would be recorded at a central database under a provision of a Senate bill to expand government collection of personal data. The measure was approved by the Senate Judiciary Committee last week and is supported by the White House, but has not gone to the floor for a vote. This goes beyond the current law, which allows federal authorities to collect and record samples of DNA from those convicted of crimes.
This is absolutely outrageous. This is like fingerprinting. How can government demand such information from innocent people? Next we’ll have profiling based on genetic characteristics. Get after your elected representatives now and stop this unconstitutional invasion of our privacy.
Most experts thought that investors and central banks would be dollar sellers in 2005. The figures now tell us central banks were big buyers, not sellers. There was some diversification but by and large the plan by the major central banks was to have a dollar rally and take pressure off the euro. If you remember last we reported the IMF figures and they said that during 2004 the Fed and foreign investors absorbed $409.7 billion or about 113% of total Treasury issuance of $362.5 billion. This may work for now but its long-term bearish on the dollar and it’s very pro-inflationary. Gold is the only neutral non-fiat currency and it’s now rising against all currencies and as long as foreign central banks continue to buy dollars of decreasing value versus gold they’ll all continue downward. Gold will go up indefinitely as long as they continue to do what they are doing.
There is no shame and there is no embarrassment neither in congress or the White House. There are but a few statesmen and lots of pragmatic, purchased, politicians. They almost all enrich themselves as we head toward financial oblivion. We have two natural disasters three weeks apart that will cost $300 to $500 billion and we have a president who won’t increase taxes and a congress that refuses to cut pork. The Republican leader Tom DeLay says there is no fat left to cut in the federal budget. Does he really believe we are that stupid? If we were not optimists we’d be very pessimistic and depressed. As optimists we know we’ll win. The only question is what will be the price we have to pay? We have colossal debt and it keeps getting bigger. We have another quagmire called a war costing us $6 billion a day. When Roosevelt was faced with such a dilemma he cut non-war spending 20% and Truman cut 28%. Vietnam and Johnson spent with abandon. In 1982 there were 10 pork projects approved by Congress. In our recently passed Transportation Equity Act there were 6,371 totaling almost $400 billion. There is no morality left in Washington. It has truly become a den of vipers. All our elected representatives worry about is reelection, by buying votes and campaign contributions, a process that is totally corrupt as is the use of lobbyists, which should be banned. This is beyond cynical. America needs a wake up call. God tried to give us that with Katrina and Rita, but we are not listening. Hedonists never listen.
We are told California’s house appreciation will only be 10% in 2006, probably versus 14% in 2005. That could be the case if the 10-year Treasury stays at 4.25% because foreign governments continue to buy them without incentive for profit. That means a 5.75% 30-year fixed rate mortgage. The exotic mortgages will continue and the day of reckoning will have been suspended for another year. In the process though gold will go to $850 an ounce as official inflation climbs to 6-7%. Thus, the $523,150 house will increase in value to $575,500 as projected unit sales fall 2% to 630,610.
At the same time the California Association of Realtors tells us this glowing story they also tell us the 30-year fixed mortgage rate will rise to 6.4% and one-year ARMS will hit 5.1%. A 10% gain in value would mean only 15% of Californians could afford the average home. We disagree with the esteemed association. A 1/2% higher lending rate will leave a flat market and downward pressure on housing prices. That would also mean those with interest only and adjustable rate mortgages may not be able to make payments and go into foreclosure. That would also put pressure on housing prices. We’ll see, but 2006 is not going to be as good a year as 2005.
We are told that our Supreme Court Justice nominee expressed great enthusiasm for a new book by Richard Haass, a friend who runs the Council on foreign relations. The book, entitled “The Opportunity” presents the idea of how to integrate the world under a single political and economic order through a war of attrition. That would be accomplished by an end run around national sovereignty, eroding it piece by piece. “Our policies must recognize that globalization is a reality, not a choice,” says Haass in the tome that has so enchanted John Roberts. We told you in a previous issue that Roberts wouldn’t have been chosen if he wasn’t part of the elitists program. This of course proves it, so what else did you expect? Roberts agrees with Haass, “Sovereignty is conditional, even contractual, rather than absolute,” subject to revocation by the international community in the case of nations that defy its will. “The world 35 years from now will be semi-sovereign. It will reflect the need to adapt legal and political principles to the most serious challenges.” Roberts has been chosen by the Illuminati to adapt the legal system to the New World Order described in the manifesto written by his dear friend who is a top Illuminist at the Council on Foreign relations. Did you really think you were going to get someone who would look out for the interests of the American people?
Louisiana’s congressional delegation has requested $40 billion for Army Corps of Engineers projects in the wake of Hurricane Katrina, about 10 times the annual corps budget for the entire nation, or 16 times the amount the corps has said it would need to protect New Orleans from a Category 5 hurricane. As you know, the funds were diverted for the war in Iraq and used by Fatherland Security to pursue phantom terrorists. That is in addition to the $32 billion request by the Governor of Louisiana. In eying the requests they are found to be loaded with pork. These requests are in addition to the $62.3 billion already approved. That is about $134.3 billion. That cost of $200 billion when all is said and done is stretching toward $400 billion. The requests boggle the mind. Brazen doesn’t begin to describe it. The Louisiana delegation is using Katrina as an excuse to resurrect a laundry list of pork projects. All the work done on requests for the Congressional delegation was done by lobbyists who are also on a working group. We should expect these kinds of requests the way endemic corruption is today in Washington.
Robert Fisk, the great British journalist who has been covering war zones for decades, has been banned from entering the US. This is of course for reporting the truth and repeatedly exposing the US and British governments’ disinformation campaigns. Fisk has been told his papers were not in order. This, of course, comes under the venue of the Patriot Act and Fatherland Security. Fisk is probably suspected of aiding and abetting terrorism. We are surprised he wasn’t thrown in jail. Fed chairman, Sir Alan Greenspan, told France’s Finance Minister Thierry Breton that the US has, “lost control of its budget deficit.” Breton said, “The US has lost control of their budget at a time when racking up deficits has been authorized without any control from congress. The situation that is creating tension today on the currency market is clearly the American deficit. One has the feeling that interest rates will probably continue to rise slightly until his departure.” Greenspan is due to retire in January 2006.
As the Chinese yuan trading band widened from 1.5% to 3% as US Treasury paper came under pressure as traders surmised that the Bank of China would be buying less Treasury debt as part of its dollar intervention operations. There is no further need to buy dollars and Treasuries because the yuan is no longer based on the dollar. It is based on a basket of currencies. Program Trading accounts for 70.8% of NYSE volume. That is 1322.7 million shares daily. This has nothing to do with investment. The concept has turned the exchanges into gambling casinos. Its little wonder the average investor is out of the market. Brokerage firms executed an additional 839.4 million shares daily of program trading away from the NYSE, with 0.5% of the overall total on foreign markets.
The IMF says, “There is rising concern among the world’s economic leaders that financial market participants may be under-estimating economic risks and that implies that central banks will keep lifting interest rates for some time.” They should mention that to real estate investors.
The office of the Comptroller of the currency reports a net easing of retail underwriting standards and it warns that banks are overly concerned about fee generation and under concerned about loan quality. They just want to generate commissions without regard to profit and loss. Banks are concerned about renting money and not the repayment of principal. Alan Greenspan has fostered that mentality with his relentless credit creation and the perceived Greenspan put.
One of these days the denizens of the foreign exchange market are going to discover that the dollar and the American economy will not always be the logical repository of capital at the margin. The alternative, the euro, is facing a European recession, EU political problems, and political problems in Italy as well as Germany. That is all understandable, but the dollar’s problems are far greater.
August existing home sales rose 2%. Sales were up 7.8% from August 2004 and were the second highest on record. The median home sales price rose 15.8% to $220,000 year-on-year. Inventories of homes for sale rose 3.5% in August to a 4.7% month supply, the most plentiful month’s supply since November 2003.
On Monday, in spite of the Fed adding $10 billion in repurchase agreements and putting the repo pool at $94.830, the market struggled all day. Gold was hit in Europe and then in the US, but gold rebounded strongly for the day.
The World Bank’s policy-making committee has agreed to a global debt-relief proposal sought by the Group of 8. That will wipe out $55 billion in debt for 37 nations. Our experience having lived in a number of third world nations is that they‘ll run their debts up again. An unspoken part of the agreement is the privatization of utilities in all countries by US or European elitist companies.
The US is under growing pressure to cut farm subsidies as their latest meeting with three other trade powers ended in deadlock. There are only three months left to agree on a framework global trade treaty. There is a good chance the US will not bend. They think their tariffs of 12% are acceptable. In addition, there are other simmering issues between rich and poor countries. Brazil is seeking WTO sanctions against the US after the elitist US neocons failed to comply with a ruling ordering it to reform cotton subsidies. The EU has also angered Brazil, Thailand and Australia by announcing plans to dump its two million metric ton sugar surplus on world markets just before a ban on its sugar subsidies enters into force.
Shortages of building materials along the Gulf Coast will increase construction costs and support housing price gains if interest rates stay in their current mode. We believe they are headed higher. The experts expect the national median price for housing of all types to rise 10.8% this year. Over the past five years homes have risen in value by 53%.
Citizens for Responsibility and Ethics in Washington have listed the 13 most corrupt politicians in Washington. Leading the pack is Senate Majority Leader Bill Frist (R-TN) and House Majority whip Roy Blunt (R-MO). Then there are Representatives Richard Pombo (R-CA), Maxine Waters (D-CA) and Randy “Duke” Cunningham (R-CA). Then there are Senator Conrad Burns (R-MT) and Representatives Bob Ney (R-OH) and Tom Feeney (R-FL). William J. Jefferson and Cunningham are under federal investigation. The other three are Senator Rick Santorum (R-PA), Representatives Charles H. Taylor (R-NC) and Marilyn N. Musgrave (R-CO) and Rep. Rick Renzi (R-AZ). We are sure there are some subjective feelings being vented.
Do you want to read more by Bob Chapman? There are 87 previous issues for you to read.
Rogue
Oil prices, supply/demand and the US dollar....
I heard some good "provocative" analysis on the current strength of the US dollar of late and oil prices.
This is an excellent weekend "wrap-up" financial program.....I listen every week to the entire program if possible....
http://www.netcastdaily.com/fsnewshour.htm
Oil has basically almost tripled in price in the past two years. It has been said by some that since oil is priced in US dollars worldwide that this has put an "artificial bid" underneath the fundamentally unsound US dollar.
Since countries around the world that buy/import oil must buy US dollars to "pay" for oil.... This has "created" a somewhat artificial demand for US dollars. THE RISING PRICE OF OIL MAY HAVE BEEN BULLISH FOR THE US DOLLAR.
How this may "unwind" is interesting? Is there a "vested interst" to keep oil priced in US dollars and "high" in price to keep the unsound/unsustainable US dollar proppped up???
Just wondering?
Rogue
Bush will veto anti-torture law after Senate revolt
****Rogue comment....I'ts good to see there are still decent Americans that don't want torture used on us or anyone else and will stand up to this abhorable "policy". Can the "Agenda" be derailed by good, decent Americans??
http://www.infowars.com/
London Telegraph | October 7 2005
By Francis Harris
The Bush administration pledged yesterday to veto legislation banning the torture of prisoners by US troops after an overwhelming and almost unprecedented revolt by loyalist congressmen.
The mutiny was the latest setback for an administration facing an increasingly independent and bloody-minded legislature. But it also marked a key moment in Congress's campaign to curtail the huge powers it has granted the White House since 2001 in its war against terrorism.
The late-night Senate vote saw the measure forbidding torture passed by 90 to nine, with most Republicans backing the measure. Most senators said the Abu Ghraib abuse scandal and similar allegations at the Guantanamo Bay prison rendered the result a foregone conclusion.
The administration's extraordinary isolation was underlined when the Senate Republican majority leader, Bill Frist, supported the amendment.
The man behind the legislation, Republican Senator John McCain, who was tortured as a prisoner in Vietnam, said the move was backed by American soldiers. His amendment would prohibit the "cruel, inhumane or degrading" treatment of prisoners in the custody of America's defence department.
The vote was one of the largest and best supported congressional revolts during President George W Bush's five years in office and shocked the White House.
"We have put out a Statement of Administration Policy saying that his advisers would recommend that he vetoes it if it contains such language," White House spokesman Scott McClellan warned yesterday.
The administration said Congress was attempting to tie its hands in the war against terrorism.
The veto would be Mr Bush's first use of his most extreme legislative option. But senators pointed out that a presidential veto can be overturned by a two-thirds majority in both houses.
For now the amendment's fate depends on negotiations between the Senate and the lower chamber, the House of Representatives, which is more loyal to the administration.
But senators said they were confident that most of the language would survive and that the issue could pose an extremely awkward dilemma for the president.
The amendment was attached to the $440 billion (£247 billion) defence spending bill and if Mr Bush vetoes the amendment, he would have to veto the entire bill.
That would leave America's armed forces in Iraq and Afghanistan short of cash as early as the middle of next month
Rogue
THREES...I'm glad you noticed that something has gone VERY wrong in our country.
Remember the female reporter that used to sit in the front row of Presidential press conferences for decades? She was the "veteran" and tradition had her ask the President the first question after press conferences. Well she was "banished" to the back row by Bush. Google her name...Helen Thomas. What a tragedy the treatment she was given because she asked "hard" questions to the administration.
http://www.commondreams.org/views05/0430-20.htm
Yes.....something has gone seriously wrong in our country.
I think it all began in November of 1963 when President John F. Kennedy was assassinated by this group with "AN AGENDA". (See Oliver Stone's excellent movie "JFK" (DVD version!) for an awesome history lesson.)
It makes me sick to think that Pappy Bush(Our first Bush Dictator) was an aspiring 38 year old CIA "employee" on the streets of Dallas that day. America was never the same after that....and the "rest is history".
Rogue
Depletion
Published on Saturday, October 8, 2005 by Agora Publishing Co., Whiskey & Gunpowder
By Byron W. King
In a recent article in his daily missive The Rude Awakening, my Agora colleague Eric Fry wrote about rising energy prices and how they might tend to moderate demand. In his humorous manner, Eric wrote:
"Energy demand worldwide is falling. So says the International Energy Agency.
"If only The Wall Street Journal would produce a 'Weekly Reader' version, we might be reading sentences like these in upcoming editions. We might also be reading sentences like, 'See Oil Prices! ...See Prices Fall!'"
The essence of Eric's article was that, as prices for oil and oil products go up, the sticker-shock for oil and its byproducts will cause people to change their behavior and consume less. After all, at the end of the day, consumers have only so much money in their pockets. As the household expenditure increases for oil-related products, it requires more of that household cash. Eventually, the funds run out. Consumption has to end.
Another way of looking at it is through the lens of classical microeconomics. The solution to high prices will be, of all things, high prices. As prices rise, demand for oil-related products (which is some or all of just about everything in our economy, when you look at it closely) will fall. At the same time, and on the other side of the trade, the supply of oil or oil-related substances will increase as entrepreneurs look for ways to bring hitherto uneconomic resources to the marketplace. In its own way, life comes to some sort of economic equilibrium.
It reminds me of my days in Pensacola, when I was in flight training with the U.S. Navy. There was a watering hole located directly on the border between Florida and Alabama. Truly, it straddled the state line. It was called, appropriately, the "Flora-Bama." At a certain time of the evening, the proprietor of this saloon used to say, "You don't have to go home, but you can't stay here." Yes. Equilibrium.
So as the price of oil increases, people don't have to go home. But they will sure spend less time standing at the gas pump. And when you add up lots of microeconomic decisions, you get macroeconomic trends. All across the economy, millions of households will decide to drive less. Each household will purchase less gasoline. This will lead directly to falling aggregate demand for petroleum and its products. So prices, which are set at the margin, should fall.
Sounds good. So will prices fall? Maybe a little bit, and maybe for a short time. But the long-term trend is up, up, and up some more.
I believe that in addition to looking at the world using classical economic analyses, micro- and macro-, you have to factor in the concept of depletion. Quite simply, depletion is the tendency to empty out, to exhaust, to reduce the number or quantity of something, and in this case the supply of oil. Depletion is the heart and soul of the concept behind Peak Oil.
Peak Oil is the phrase that is associated with the work of geologist M. King Hubbert, who during his long life (1903-1988) conducted extensive research into the size of both U.S. and world oil reserves. I had the privilege of attending a talk that Dr. Hubbert gave at Harvard back in 1977. (At the time, he was teaching at MIT.)
Hubbert stood at the blackboard, drawing graphs on the slate and slapping his pointer against his poster boards, talking about oil production and decline curves. He discussed in detail the concept of "irreversible decline" of oil field production, and of the need to track it on a field-by-field basis. He then explained the process of aggregating the "micro" decline curves of individual oil fields, into a "macro" overview of total production. From these data, he discussed how he was forecasting the long-term trends in petroleum availability.
Hubbert went on to explain his concept of the "material-energy" system of the Earth, which is premised on a linear increase in the supply of goods from the crust of the Earth. At the same time, Hubbert ripped into the fiat-currency monetary system, which is premised on an exponential growth in an artificial money supply. The best way that I can summarize what Hubbert said is that there are natural, geologic controls on the material-energy system. There is no real control, however, over the monetary system. Eventually, something will have to give. Can you guess which one it will be?
Picking up on Hubbert's thesis, the root of wealth is the ability to store energy. For example, in ancient times, people stored wealth in the form of grain (the Bible is full of these tales, as is archaeology in general). Another example is that the seabed of the Mediterranean is littered with the wreckage of ships laden with olive oil, which was also used as a store of wealth in olden times. These forms of ancient wealth were, in truth, stores of solar energy, because they reflected the photosynthetic fruits of contemporary agriculture.
Going beyond grain and olive oil, however, the mines of Europe, from Spain to Romania, and later the mines of Mexico and Peru, yielded the gold that supported the accounting of many generations of nations and empires. This was certainly the case up until 1914, when most of Europe left the gold standard in order to better fight the Great War without having to pay for it.
On a day-to-day level, we all need some unit of account. People have to work and, in one way or another, get paid. By getting paid in dollars or euros or yen or yuan, we are, in essence, "storing" our work until we can go to the market and buy the groceries.
But what happens when the whole world trades in fiat currency, the amount of which in circulation inflates over time? At root, monetarism is predicated on the ability of central bankers to "adjust" the amount of money in circulation (in the United States, we call it M-1, M-2, M-3, etc.). The idea is for the so-called "money supply" to reflect the so-called "natural" need of the economy for liquidity, and to facilitate financial transactions and accounting in support of an economy that ranges across a continent, if not the world. The original justification for the creation of the U.S. Federal Reserve in 1913 was a perceived need for a central bank that could manage an "elastic currency."
But can anyone really know the "natural" requirement of the economy for "money," or for some other unit of account? "Too much money" in circulation equals inflation. "Too little money" in circulation means deflation. The historic tendency of the central bank is to err on the side of long-term inflation, but at the cost of destroying the underlying value of the pre-existing capital base.
Compare this with a gold standard. When you base things on the amount of yellow metal held in reserve, at least you have a known amount of gold in circulation. It does not change, or does not change much. The amount of gold in circulation is defined as historical gold reserves, plus mine production, minus destructive industrial applications. It is very predictable, and not inherently subject to accounting gimmicks.
Hubbert's thesis of a "material-energy" system supports the conclusion that an inflating amount of fiat currency gives people the ability to "buy" things for which they have not really worked and saved. Long term, the current monetary system creates an imbalance in the accounts of man's work, versus what can be had from nature's bounty.
Thus, with a fiat currency, we have experienced a century of what appears, in retrospect, to have been accelerated economic growth. This nominal growth has looked good on paper (no pun intended) but has also facilitated mankind in devouring the Earth's resource base, certainly as is the case in the use of oil, and to plunder the future. On the other side of this particular trade, Mother Nature has a long time horizon. Sooner or later, it will all catch up with you. My concern is that the future is now.
Getting back to depletion and Peak Oil, these concepts reflect the fact that you cannot produce oil out of the ground if you have not discovered it. After you discover the oil, you can only produce it out of the ground one time, and then only over a period of time. And once you produce the oil, it is no longer there. You have depleted the pores of the rocks, emptying them of the oil and gas that were formerly contained within. There is no "inflation" when it comes to the supply of oil. There is only depletion.
And while we are on the subject, who is it that discovers and produces the oil? It is those devilish oil companies. Not to restate the obvious, but if there were no oil companies, there would be no oil. I only mention it because I have actually met people who think that oil companies "make" oil, as if they manufacture the stuff by performing some sort of engineering alchemy on sedimentary rocks. No, no, no. Oil companies are merely God's way of moving oil, which is truly ancient, from pores deep within the rocks of the Earth, into pipelines, thence to refineries, thence into tanker trucks, and finally into gasoline tanks.
As I mentioned, first you have to discover the oil. And where is it to be found, that dark and energetic elixir? The old saying is, "Oil is where you find it." But it helps to look in the right places, particularly in sedimentary basins. You have to look for rather discrete types and series of rocks that have a rather specific geologic history. It all depends on the deposition environment of an ancient sea or river, the burial history of the sedimentary basin, the thermal history of the rocks, and the later tectonic uplift. When you look at it over the long term, oil formation in the Earth's crust is a rare event.
Generally speaking, there are only so many places on the Earth to look for oil. In fact, the world's petroleum industry stopped finding significant numbers of large oil fields about 30 years ago. Certainly, there have been many oil discoveries since then, but not nearly enough to replace the oil that was otherwise produced in the past three decades. The petroleum-consuming world (and you know who you are) has been depleting the underlying resource and living on the discoveries of geologists long deceased.
Worldwide and every day, mankind produces and consumes four barrels of oil for every barrel of what might be classified as "new" discovery (as opposed to backdating reserves to the date of the original discovery well -- don't get me started on that). And when I use the ratio of 4-to-1, I am being very generous with the statistics, so as not to be accused of being alarmist. (But if you care to know my opinion, I think that petroleum depletion, and the eventual unavailability of the substance in significant quantity, is the single most serious matter that faces mankind.)
Peak Oil is a shorthand way of saying that mankind has reached the end of the era of cheap and available petroleum. It is premised on the scientific fact that there is an upper limit to the amount of energetic petroleum within the rocks of the Earth's crust. The best current estimate is something in the order of 2 trillion barrels.
Another way of saying it is that mankind since Col. Drake drilled the world's first commercial oil well at Titusville, Pa., in 1859, has consumed about half of all of the Earth's oil endowment. That is, mankind has produced and consumed about 1 trillion barrels of oil in the past 146 years.
These trillion barrels of oil consisted of the relatively cheap, more-or-less available, easily accessible liquid petroleum that you could get by drilling a hole in the ground. This oil flowed from the crust of the Earth into the borehole under its own natural reservoir energy, or with modest assistance by artificial lift methods. This was and is the liquid petroleum that comprised the depleting resource. And now it is depleted.
In the future, instead of more and more petroleum becoming available at some higher price, there will absolutely be less and less available at whatever price. Long term, I believe that petroleum is priceless. But mankind's generally accepted economic system cannot factor for that, so we just pay the utter pittance of $65 or so per barrel these days. Enjoy it while it lasts.
Depleting and consuming the second half of the Earth's petroleum inheritance will occur at a faster rate, on a vaster scale, and with much more human conflict involved. Current worldwide oil production is approximately 84 million barrels per day, from the rocks beneath six continents and from offshore sea floors. The worldwide depletion rate has been estimated at about 5% per year (although some people estimate a higher number). This means that, absent new discoveries and production, the Earth will yield about 4 million fewer barrels of oil per day next year, just due to depletion. And every barrel of oil that gets pumped out will still have a buyer who will pay for it.
The key question to ask about the effect of rising prices on demand for petroleum products is this: Will rising prices cause demand for petroleum to fall faster than depletion reduces the total available quantity of the substance?
Because if depletion reduces the amount of available oil, and there is still strong marginal demand for every barrel, the long-term price will rise. Any reduction in nominal price is a temporary market phenomenon. Call it a trading opportunity.
What could possibly reduce oil demand by a dramatic amount? Probably nothing short of a major worldwide economic collapse. By way of historical comparison, the housing industry in the United States fell in economic value by 95% in the two years after October 1929, when the U.S. stock market crashed and, ultimately, the Great Depression commenced.
Depression or not, I cannot conceive of oil demand dropping by 95%. But that is the closest comparison I can muster.
What about tar sands? What about shale oil? These topics are other discussions for another time, but let me address them very briefly. Tar sands will not begin to meet the equivalent of what is being lost to the supply side of the market place, year over year, through natural depletion of the traditional oil production base. Even the most optimistic estimates for tar sand production from Canada's Athabasca region forecast at most about 3 million barrels per day by 2015, 10 years from now. But this quantity of what is called "unconventional oil" is less than one year's worth of depletion of the present reserve base of conventional oil.
And shale oil? I regret to inform you that the pilot plants for shale that were constructed in the Western United States and fired up with such fanfare in the 1970s have long since been shuttered. There is no such industry as "shale oil" anywhere in North America, and only the smallest-scale efforts anywhere else on the face of this planet.
It will take the United States 30 or more years to get a domestic shale oil industry up and running, and this is only if we start tomorrow morning. To add insult to injury, this does not factor in the immense quantities of scarce fresh water and natural gas that such an industry will require, as well as the environmental destruction of vast stretches of Wyoming, Colorado, and Utah.
On that regrettably downbeat note, dear readers, I bid you all farewell. As the man said, "You don't have to go home, but you can't stay here."
Until we meet again...
Byron W. King
~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~
Byron W. King has worked as a geologist in the exploration and production division of a major international oil company. He has followed developments in the oil and gas industry for almost three decades. He is currently a practicing attorney in Pittsburgh, Pennsylvania.
For more of King's essays, see The Saga of Oil.
-BA
Article found at :
http://www.energybulletin.net/newswire.php?id=9184
Original article :
http://www.whiskeyandgunpowder.com/Archives/20050926
Rogue
OFF TOPIC...Has anyone else noticed "pop-ups" on Ihub and SI recently every time you click on a message???
I just noticed this a few days ago......VERY AGGRAVATING!!!
Is this normal or do I have a virus on my computer???
It's only on IHUB or SI that I notice these wierd pop-ups that don't really "pop-up" fully. What's going on? Anyone else notice this????
Rogue
Interesting comments on OIL/INFLATION from another poster....
"Higher oil prices are here to stay which elevates inflation. Inflation causes the Federal Reserve to raise interest rates in an attempt to control inflation. Higher rates reduce economic activity which will reduce energy demand (so called "demand destruction"). As energy demand comes into balance with energy supply, oil prices will come down.
The problem with this picture is that many believe we are near a peak in oil production, while nowhere near a peak in demand for energy products. Oil demand in the Asian Tiger economies (China, India, et. al.) is steadily increasing. A recession will slow Asian Tiger growth, but it will remain much higher than the developed countries of the West.
Here is the point: The Federal Reserve cannot change the longer term supply/demand imbalance of energy products, no matter how high they raise interest rates. Higher rates will choke the economies of the world, but it cannot control inflation that is induced by higher energy prices. The likely result is a period of stagflation, stagnant economies with relatively high rates of inflation. Not a pretty picture.
Inflation erodes the value of fiat currencies (i.e., paper money). Especially the elderly and those on fixed incomes will suffer, as their savings lose purchasing power. Social Security is already in dire straights as the baby boomer generation nears retirement, thus drawing down on the "trust fund" that doesn't exist except as an IOU of the US Government.
Sorry to be gloomy. I hope I'm wrong about this scenario."
Rogue
FPP....Who was the guy recommending FPPC on the old Raging Bull board when it was trading around .65 cents a year and a half or so ago????
Hat's off to that guy!!...he picked a 10-bagger plus! Although I haven't owned FPPC since the high 3's.
Rogue
Richard Russell regards the combined losses of the US markets this week as significant. Other sources he regards as significant draw the same conclusion.
"Yesterday was the first 90 percent down-day in this market cascade. A 90 percent down-day is a day when down-points comprise 90 percent of up + down-points and at the same time down-volume is 90 percent of up + down volume. What's notable about yesterday's action is this -- 90 percent down days don't usually come singly, they usually come in a series of two, three or four or more 90 percent down days.
Technically, the wheels seem to be on the verge of coming off the market vehicle. Yesterday, everything tradeable with few exceptions seemed to be heading down. Lowry's Buying Power Index plunged to a new low for the year while Lowry's Selling Pressure Index surged to a new high for the year."
[AE Note -- Desmond is one of the principals of Lowry's Research and either developed or refined the "90% down day" principle. Not as catchy as the Hindenberg Omen which, by the way, is also currently in effect, it is an investment signal ignore at one's peril.]
"Joe Granville called yesterday's action -- a collection of "the most bearish reversal patterns that I have ever seen in one day."
"Breadth was horrendous with more than 2000 declines over advances. New lows easily topped new highs. The sentiment background couldn't be worse with month after month of more bullish advisors than bear advisors -- while the VIX was still in the low range at just over 14.
"Volume picked up as the market tumbled. All in all, it was a nasty day in the face of what I consider incredible investor complacency. On top of everything else, the cash position of the mutual funds, adjusted for interest rates, is at an historic low, meaning that the funds are totally unprepared for a resumption of the primary bear market."
FWIW, it's quite likely that my personal "elves" list will flip bearish on Monday. The Chartist is bullish, James Stack is hedging but is bullish. On the other hand both Russell and Lowry's are bearish. I haven't tracked down the Ned Davis reading yet (anyone have it?) I expect that this week's action will result in Hussman turning bearish. If so, that is when I start to significantly add to short positions.
Rogue
Signals of the End of the Dollar Standard
October 5, 2005
Guest Commentary, by Rob Lee
Rob Lee is an economist who has been involved in investment markets for 30 years, the last few in nominal retirement.
I am an economist who worked for 25 years in large investment companies in South Africa. I “retired” to the UK a few years ago. For most of my career I lobbied for policies such as money supply targets and later inflation targets that were (implicitly) intended to substitute the role of gold as an independent anchor for the monetary system. I was never an advocate of any form of gold standard, unlike the current Fed Chairman, now ironically testing the fiat money system to destruction.
However, in recent years the scales have fallen from my eyes. As Voltaire said in 1729 “paper money eventually goes down to its intrinsic value – zero.” Every fiat paper currency before or since has confirmed to this prediction. A fiat paper currency that is also the global reserve currency becomes this problem writ large. A US Treasury official of old - Sam Cross - put it this way: “if you postulate a system that depends on one country always following the right policies, you will find that sooner or later no such country exists. The system is eventually going to break down”. In my view the Dollar Standard system is irretrievably breaking down, as signaled by four recent developments described below:
1. China has ended its currency peg to the dollar. The new exchange rate system for the Yuan is admittedly not yet a dramatic break from the dollar fixed peg . That is not the Chinese way. It is nevertheless hugely symbolic. It serves notice that China will be increasingly reluctant to accumulate dollars they know will depreciate in value over time. Chinese economic spokesmen have made no secret in public of their alarm at US profligacy - what is said behind closed doors?
China is clearly intent on exchanging its paper assets (predominantly dollars) for real assets, notably commodities in general and energy products in particular. On gold the strategy focuses on encouraging private citizens to own gold- deregulation of the gold market has been rapid by Chinese standards. [Ironically it may now be easier for citizens of China to invest directly in gold than it is in many western democracies].
China is likely to prefer to remove dollar support only gradually. Bear in mind though that most of the smaller economies in Asia tend to follow China - Malaysia announced a similar change to its exchange rate system very soon after the Chinese. Other countries from outside the region - notably Russia and Saudi Arabia - have indicated an intention to downgrade the dollar in their currency arrangements. Iran is attempting to create an oil trading exchange that does not transact in dollars. These are ominous straws in the wind for a currency so dependent on foreign capital.
2. Deflation in Japan is coming to an end. Japan is the biggest foreign holder of US dollars. For example, Japan held $680bn in US Treasury Securities at the end of June - nearly 34% of total foreign holdings. This compares with $291bn held by China (including Hong Kong). Japan will therefore play a critical part in any changes to the world’s currency system.
US-Japan relations are far closer than those between the US and China. Japan also has literally more to lose from the demise of the dollar than China. Nevertheless the same logic that impels China’s move away from US paper applies to Japan. As long as deflation remained the key economic concern in Japan supporting the dollar was the paramount objective of its exchange rate policy. However, there are clear signs of a self-sustaining recovery of domestic employment, investment, and consumption in Japan. The recent election victory of PM Koizumi should reinforce reform and recovery. These forces are simultaneously bringing an end to both the deflationary process and to dependence on exports for growth. The imperative to support the dollar will erode and interest rates in Japan will begin to normalize. Another straw in the wind - Japan did not increase its holdings of US Treasuries in the first half of 2005.
3. The US in effect now has to borrow abroad in order to service all its foreign debt. The remarkable down spiral in the US foreign financial position took another crucial but little noticed twist recently. In the second quarter of 2005 the US paid out more in income to foreigners on their US assets than it received in income on its foreign assets. Technically net foreign investment income went negative. No comfort should be taken from the fact the second quarter investment income deficit was a mere $0.5bn. The income deficit will deteriorate rapidly in coming years. The US has net foreign debt (foreign liabilities minus foreign assets) of more than $ 2.5 trillion, and this debt will grow rapidly as the US continues to rack up huge current account deficits (now roughly $800bn annually). The income deficit on this debt has only just gone negative because the US receives a rate of return on its foreign assets roughly double that of overseas investors in the US - about 7% versus 3.4% between 2002 and 2004.
This differential return reflects the fact that Americans have invested largely in riskier assets abroad while foreigners have opted more for Treasury securities. A world economic downturn (likely in my view) would reduce returns on US overseas assets, while rising US interest rates will raise the return to foreigners. The longer term dynamics of this process are alarming. Within a short period of years the US will be borrowing hundreds of billions merely to service existing debt. Economists call this the “debt trap” - and the US economy is heading inexorably into it Can the US dollar sustain its position as the world reserve currency in the face of these fundamentals? As the saying goes, you only have to ask the question to know the answer.
4. The gold price is breaking out in all key currencies. Not all the world’s investors (or central bankers!) are blind to the scary developments sketched above. Gold in dollars has definitively been in a bull market for some time, but in recent weeks gold has decisively broken out all key currencies including the Euro, Yen, Swiss Franc and Sterling. Markets are recognizing that the failure of the Dollar Standard is one not only of US economic management but one inherent in the fiat money system itself. In the long term they may demand gold’s return as an anchor to the global monetary system.
The flight from paper assets (and especially dollars) towards hard assets is now underway in earnest. There is still time - this is a multi-year trend - for investors to switch from devaluing dollars to rising gold. Those ahead of the herd are moving but the herd itself is yet to stir.
Rogue
Len/Oil prices and oil demand....I think that a falling value/depreciation of the US dollar will "mitigate" any serious fall in the price of oil long-term.
Oil is after all still widely priced in US dollars around the world. The dollar rally may end and that should put a bid under oil even if we have some "attrition" on the demand side for oil due to our economy weakining.
There's way too many US dollars floating around this planet for me to be bearish on oil long-term....no matter what our domestic supply/demand equation may be in our USA here.
I'm looking for bargains in the oil patch as usual. The "key" of course is timing.
Rogue
Oil/energy stocks....this sector comprises the bulk of my 20% invested positon. I still believe in the long-term story.
Wish I would have taken some off the table recently but am looking to buy into this weakness to add/build to positions. They are very oversold right here but it is a bit like catching a falling knife.
I'm watching the majors (XOM) Exxon-Mobil and (CVX) Chevron Texaco here as well as the Oil Index (XLE) as possible buys soon. (PCZ) Petro-Canada is a compelling large cap oil/energy value on further weakness.
I will probably be building a position in those majors and possibly hedging the whole portfolio of mine with short QQQQ or DIA or SPY if I can "finesse" that.
Gold/silver and or the gold equities/resource equities are intrigueing also.
Rogue
ARTX....I still think we will see a selling "climax" here soon. I'll be looking to buy the "climax" for a trade fronm the long side.
http://stockcharts.com/def/servlet/SC.web?c=artx,uu[w,a]daolyyay[pb50!b200!f][vc60][iut!Uc20!Li14,3]...
It's very oversold stochastically but the CMF indicator has been showing steady distribution all along.
Rogue
Petrobank Energy and Resources....PBEGF.PK/PBG.TO
I just bought a good size block today. This is Canadian oil sands asset play. It's very very oversold here and could be a good trade or at the very least a compelling long-term energy asset play.
http://stockcharts.com/def/servlet/SC.web?c=PBG.TO,uu[w,a]daolyyay[pb50!b200!f][vc60][iut!Uc20!Li14,....
It ran to near $12 Canadien a few weeks ago on buyout rumours. Trading considerably lower at $8.87 Canadian right now. It has been written up by some Canadian research firms as having a value of at least $17-$24 Canadian in a buyout. There are "bidders" out there looking as a bidding war broke out for Deer Creek(another oils sands asset play)....DCE.to.
Deer Creek (DCE.t) was bought out recently by Total Oil(French)for $32 Canadien. A knowledgable poster on another board convinced me to buy that one at $12 Canadian.
I believe Bobwins has mentioned this one (PBEGF.PK/PBG.TO) too before.
Rogue
ruff/AMEP.....I was lucky enough to sell my shares on the high-volume "blowoff" day at .12 cents. My cost basis was less than .02 cents.
Were shares sold by the company into the run-up that you know of? That wouldn't neccesarily have been a bad thing as it would have raised capital for them???
I think we will see "value prices" again. I have not "re-loaded" again but also look forward to better buying oppurtunities.
Rogue
CXPI.....Well that makes sense now(Reg SHO). Someone was determined to cap the price while they were short and looking for shares. Hence the very "controlled" stock price for weeks.
It reminds me of an awesome book I read years ago written by a NYSE "specialist" from the 1970's. It was one of the most interesting books I had ever read on the markets. It detailed a long "campaign" spanning years of a single stock he was a "specialist" in. How he "controlled" it and made afortune off of it in a few years span.
It detailed how he "helped" the stock bottom out..... how he quietly accumalated it at it's lows.....how he managed his "inventory" as it was "marketed" from $1 or so to $50 in a few years.
EXCELLENT book....if I remember the name I will let you know. It was a very obscure but EXCELLENT read!
Rogue
Got Energy?
http://www.pimco.com/LeftNav/Regional+Market+Commentary/Global+Credit+Perspectives/2005/Kiesel_Got_E....
U.S. Credit Perspectives
Mark Kiesel | October 2005
At some point over the next several years, recognition of the coming energy crisis will reach critical mass—a "tipping point"—and when it does, the key competitive question investors will be asking countries and companies alike will be: Got energy?
That’s because energy is unlike any other commodity. Most commodities can be replaced: trees can be planted, food can be grown, consumer goods can be manufactured, and money can be printed. Those that can’t be replaced are often reusable, such as diamonds and gold. But energy is finite and irreplaceable. Once you use it, it’s gone.
So, when the tipping point comes and people fully grasp the magnitude of the impending energy crisis, those who don’t have energy will have to pay those who do. And perhaps pay dearly because, remember, there is a finite supply. Hurricanes Katrina and Rita illustrate how little room for error there is in today’s energy markets. However, the energy crisis itself is being caused by five long-term factors: (a) rising global demand, (b) changing consumer and investor preferences, (c) growing oil dependency, (d) under-investment, and (e) shrinking spare capacity.
For several years already, PIMCO has been bullish on the long-run prospects for the energy sector. Our portfolios have favored energy companies and selective emerging market countries based on our secular view that the price of energy should be supported by the factors mentioned above. Let’s examine each in turn and then consider the investment implications.
Rising Global Demand
One of the most important secular developments in our lifetime is happening right before our eyes, as China, India, Eastern Europe, and several other highly populated economies in Asia emerge into the global marketplace. The industrialization of these developing economies will have enormous implications for global labor markets, the environment, financial markets, inflation and the demand for natural resources. Within the energy sector, we have only seen a glimpse of what may be on the horizon.
Global demand for energy has been robust and shows no signs of letting up on a long-term basis. China is a perfect example of the demand growth from rapidly expanding emerging markets that we can expect in the future. China’s oil imports have been growing at double-digit rates year-over-year1. This pace is not likely to slow given China’s significant infrastructure spending. Rural workers are migrating to jobs in manufacturing facilities near port cities. This boost in labor is supported by the economy’s export-led growth machine. China has a strong incentive to maintain this economic growth in order to ensure political stability.
China’s demand for oil has not yet caught up with its population growth. Today, China consumes roughly 7 million barrels/day of oil, or approximately 8% of the world’s consumption of 84 million barrels/day of oil 2 (chart 1). Yet, with 1.4 billion people, China represents over 20% of the world’s population.3 To put its oil consumption in perspective, China is consuming 30% of the world’s coal, 26% of the world’s steel, 21% of the world’s soybeans and 20% of the world’s copper.4 Given China’s population size and economic growth, rising consumer interest in automobiles and demand for other energy-intensive luxury goods, it is only a matter of time before the country’s demand for crude oil catches up with its demand for other commodities.
Demand for energy is also set to take off throughout most emerging market countries. This will materialize when consumer spending naturally picks up as young populations mature and already pent-up demand for consumer durables, such as automobiles and housing, continues to rise. For example, in China, auto sales are growing faster than 20% annually.5 By the end of the decade, the IMF projects China will be the second largest auto market in the world, with 8 million new car sales per year,6 compared to 17 million currently in the U.S.
As China and other emerging markets industrialize, the secular increase in demand for energy will only intensify due to these countries’ rising dependency on energy-intensive manufacturing as their main source of economic growth. With respect to growing demand for energy, the U.S. Department of Energy in March of 2005 said simply, "The world has never faced a problem like this."
Changing Consumer and Investor Preferences
As China industrializes and accumulates additional wealth, oil consumption will most likely swell. Increasingly, transportation will be by automobile and airplane which depend on oil for fuel. If Chinese energy preferences come to mirror those in the U.S., the consumption of both oil and natural gas will surely rise. Today, oil constitutes only 17% of China’s total energy consumption as compared to 40% in the U.S. (chart 2).7 Therefore, we expect oil prices to be supported by changing consumer tastes and growing long-run demand within the expanding emerging markets.
Consumer preferences in developed countries are also impacting the demand for energy. This is particularly apparent in the U.S. where sales of large SUVs and pickup trucks, as a percent of overall auto sales, have risen sharply for the past 15 years (chart 3). As more "gas guzzlers" have taken to America’s roads, U.S. fuel efficiency has shown only modest improvement despite technological progress. As a nation, we have sacrificed energy efficiency for consumerism. This trade off is likely to occur in developing nations and is a preview of what is to come. Consumerism is here to stay. The era of cheap oil is over.
Change in investors’ appetite is another trend leading to rising global demand for energy. Over the past several years, commodities have delivered strong investment returns. Reacting to this solid performance, global investors have moved money into the commodity sector, which has resulted in incremental demand for oil futures and over-the-counter swap contracts. Low real interest rates globally have also driven a "search for yield" into alternative products. The prices of energy products, including crude oil and natural gas, have increased due to this new demand.
Growing Oil Dependency?
The U.S. uses roughly 21 mm barrels/day of oil, approximately 25% of world consumption.8 More importantly, the U.S. is becoming increasingly reliant on imports to meet its growing demand. Today, over 60% of U.S. oil consumption is met through imports (chart 4), compared to less than 40% in the early 1980s.9 China is now in the same boat with over 40% of its 7 million barrels/day of demand imported. In fact, import dependency in China is rising faster than in the United States. It is no wonder China is scrambling around the globe in an effort to secure energy resources.
The physical location of the world’s proven oil reserves also has increasingly significant implications for the price of this commodity. It just so happens that 64% of the world’s proven oil reserves are located in the Persian Gulf region. Within this area, the largest countries with proven reserves include Saudi Arabia (20%), Iran (10%), Iraq (9%), United Arab Emirates (8%), and Kuwait (8%).10 As this region’s political instability attracts attention, the U.S. and other developed countries are becoming more dependent on imports to satisfy their energy needs. Terrorist threats are rising at some oil wells, ports, refineries and pipelines. Mounting geo-political uncertainty is leading to a higher risk premium in the energy market. As evidence, forward price contracts for crude oil are now trading at a premium to spot prices for crude oil (chart 5).
Because so many countries, like the U.S. and China, rely so heavily on imported oil, geo-political uncertainty and strategic factors are also affecting energy demand. Rising geo-political risk is leading to stockpiling of oil inventories as global competition to secure long-term energy resources intensifies. (This was a major theme in the book Resource Wars by Michael Klare, a PIMCO Secular Forum speaker in May 2005). As evidence of this trend, the U.S. has built-up its strategic petroleum reserves to 700 million barrels and may add up to 300 million more barrels over the next several years.11 Similarly, China and India have been stockpiling oil. However, their strategic petroleum reserves are modest in comparison to both U.S. levels and their countries’ longer-term needs. Taken together, the cumulative effect of emerging market industrialization, changing consumer and investor preferences, and strategic stockpiling has steadily increased global oil demand.
While global oil production is still rising, we are getting closer to the point where the world’s production of oil cannot keep up with this incremental demand. At some point global oil production will peak and we will start down a production decline curve where available supply shrinks over time. Rising demand and the eventual decline in global production means the price of oil should trend up over time. In addition, the price of oil should be supported in the near-term by demand from countries such as the U.S., China and India, which are in competition to secure energy sources and are increasingly reliant on foreign imports to satisfy their demand. Given these developments, combined with the fact that oil is primarily located in areas of extreme political uncertainty, it is not surprising that spot and forward energy prices are rising.
Under-Investment
U.S. energy companies have under-invested for decades in infrastructure, exploration, pipelines and engineers. The U.S. has not built a new refinery since 1976.12 In fact, in 1981, there were 325 refineries in the U.S. with a capacity of 18.6 million barrels per day. Today there are 148, with a capacity of about 17 million barrels per day - though U.S. demand for gasoline has increased more than 20%.13 Rising costs to comply with environmental regulations have depressed new refining investment to the point that the U.S. refining industry is now currently operating at 95% of capacity. The U.S. has also under-invested in liquefied natural gas (LNG) terminals. This is important because the U.S. has limited import capacity to store natural gas and no strategic natural gas reserves. In addition, large U.S. multi-national energy firms have barely increased exploration and production (E&P) investment despite soaring demand, record energy prices and an increasing ability to invest, given rising cash balances. As evidence, while rig counts have increased recently, drilling and production is nowhere near where it was in the early 1980s14 (chart 6). Why? Energy companies are finding it more difficult and costly to locate oil. The low-hanging fruit has been picked.
To make matters worse, costs to access foreign oil are rising as foreign governments keep U.S. companies from picking the low hanging fruit. U.S. corporations are increasingly being denied drilling access to foreign oil reserves. Those countries that allow companies in are collecting a significant chunk of future profits on all oil discoveries. In most cases, U.S. firms pay all exploration, development and royalty costs on new drilling projects, in addition to handing over the majority of the resulting future income to the foreign government. For example, Venezuela’s government has attempted to renegotiate oil contracts with foreign oil companies to get a larger share of the revenue. The infrastructure costs of drilling are also rising because companies are having to drill deeper and in more hostile and volatile regions. Given these factors, it is not surprising that managers of U.S. energy corporations are increasingly redirecting cash toward share buybacks and dividend increases as opposed to exploration, production and new refining capacity.
Shrinking Spare Capacity
As a result of surging demand from developing countries and continued healthy demand from developed countries, the world has likely reached the point where global demand is surpassing the world’s ability to supply incremental oil. The International Energy Association (IEA) in April 2005 went so far as to say, "Oil consumption has caught up with the installed crude and refining capacity." In fact, spare capacity as a percent of total production is now approaching all time lows (chart 7).
It seems that the supply constraints the world is now facing are real and will only intensify over time. Saudi Arabia, the largest OPEC producer, has ramped up its daily production to approximately 10 million barrels/day. It hopes to be able to turn on the taps to 12.5 million barrels/day by the end of the decade. While OPEC’s current production has been rising, this increase will be limited due to OPEC’s failure to expand production capacity (chart 8). Production disruptions are increasing in both OPEC countries, like Iraq and Nigeria, and non-OPEC countries, like Ecuador. Hurricanes have also impacted, and may continue to impact, U.S. production in the Gulf of Mexico. This helps to explain why oil prices have remained elevated. Given rising geo-political uncertainty, the world has become increasingly dependent on Saudi Arabia’s ability to meet rising global oil demand. Simply put, Saudi Arabia, the swing supplier of oil to the world, must expand capacity to make up for the modest capacity growth prospects elsewhere in the world. As a result, the security of its oil fields and the flow of energy throughout the Middle East have been and will remain a top global security interest.
OPEC Production Capacity vs. Output
While Saudi Arabia and other OPEC countries have been keeping up with current demand, it is not clear that they will have the ability to do so in the future. Saudi Arabia may be approaching the limit of its natural geological ability to increase additional capacity. The country claims to have ample spare capacity to meet global demand. However, Saudi Arabia has not let outsiders in to verify its oil reserves. If Saudi Arabia has the ability to increase production, why haven’t we seen it? Saudi Arabia’s oil production over the past 4½ years has only increased by approximately 1 million barrels/day.15 The country’s peak oil production was 10.4 million barrels/day back in 1978.16 Why isn’t the country taking more dramatic steps to ramp up production given today’s high prices? This is unknown. What is known is that oil prices are rising and the lack of spare capacity is no longer an issue the energy markets can ignore.
PIMCO’s Investment Strategy in Energy
Because of the long-term trends discussed above, the energy sector has been performing strongly over the past few years. Nevertheless, we believe energy will continue to outperform on a secular basis for years to come because of the above mentioned themes which we feel will support energy prices.
Donna Riley, our energy analyst, and I have been immersed in energy research over the past several years. In meeting with CEOs, CFOs and senior management, we have attempted to gain insights into both top-down and bottom-up factors driving energy prices. While my focus has been primarily top-down, Donna has focused intensively on the bottom-up analysis of individual energy companies.
Bottom-up research focuses our energy investments on companies with four primary characteristics. These key traits are low cost production and reserve replacement, diversified asset base, long reserve life and strong management team.
Low cost production and reserve replacement are crucial to long-term success in the oil and gas industry. Low cost operations allow for greater margins in high oil price environments and large cushions during economic downturns. Companies also need to be able to replace reserves efficiently. We especially look for firms that achieve low cost, organic replacement. By this we mean companies that can restore over 100% of production annually through drilling and exploration rather than through acquisition. Possession of these qualities indicates operational expertise and suggests a trend that can be maintained into the future.
We like companies with large, diversified asset bases. A corporation with production in several different fields and/or regions provides greater protection for bondholders in the face of geological difficulties, weather-related events, and other unforeseen situations. In addition, we prefer firms with most of their assets in stable geographic regions because this minimizes geopolitical risk.
A long reserve life demonstrates a company's ability to sustain its current production for several years without replacement. Reserve life is calculated by dividing total reserve base by annual production. A long life means a company could potentially generate cash flow for several years without replacing reserves, if this became necessary.
Finally, we look for strong management teams with successful track records in the industry. We have built strong relationships with executives at many companies within the oil and gas sector. We leverage these connections to evaluate peer performance.
Not only do we invest for our clients in energy companies directly, we also passively invest in energy through the PIMCO commodity real return strategy, which derives a third of its commodity exposure from the energy sector.
Lastly, PIMCO’s investment strategy in emerging markets has also been influenced by our long-term bullish secular outlook for energy. Members of our Emerging Markets team have been responsible for directing our emerging market investment strategy towards countries with improving internal credit fundamentals and a significant external tailwind. Our strategy specifically targets countries whose export growth is positively influenced by, or linked to, China and other developing countries’ strong demand growth for commodities and energy.
Several of PIMCO’s favorite country picks, including Russia, Mexico and Brazil, have benefited from a rapid improvement in export growth which has caused trade deficits to turn into surpluses. More importantly, these countries have prudently managed their financial balances by using solid export growth to build up large exchange reserves (chart 9). This positive development has resulted in credit upgrades for all three of these countries. Given strong secular demand that will support energy prices over the longer-term horizon, we continue to remain positive on several selective emerging market credits based on our expectation of improving fundamentals.
Energy as a Secular Investment
Our long-term, bullish outlook for energy prices reflects positive secular demand and supply factors. In terms of demand, over the long run, energy prices will be supported by the industrialization of the emerging markets and changing consumer and investor preferences. In terms of supply, spare capacity will remain limited due to under-investment in energy resources and growing import dependency by the industrialized and large industrializing emerging market nations. However, we recognize that the global economy also has cyclical tendencies. A slowdown in economic growth will negatively impact the outlook for energy in the short-term.
PIMCO expects U.S. economic growth to slow over the course of the next year, as the factors that have stimulated consumer spending, including low interest rates, tax cuts and the surge in the housing market, fade and higher oil prices eat into corporate profits. PIMCO’s current corporate positioning in light of this view is detailed in my article entitled "Set-up and Swing," published in July of 2005. If the U.S. economy slows, energy prices could come under pressure. Despite our cautious, cyclical outlook for the economy, we believe the energy sector and related investments will outperform on a long run, secular basis.
Got Energy?
Cheap energy is a thing of the past. The world’s increasing demand for energy is now colliding with the simple reality that crude oil production is nearing capacity limits at the same time that under-investment in refining and natural gas infrastructure is leading to bottlenecks in energy supplies. This dilemma is intensified by the industrialization of China and other emerging markets, global competition to secure energy assets, rising import dependency, and geo-political uncertainty. Energy is a unique resource that causes a high degree of uncertainty worldwide, given rapidly evolving secular and economic factors. It poses to individuals, companies and countries the question, "Got Energy?"
Mark Kiesel
October 1, 2005
Rogue
I don't expect you Len or anyone else to understand the IMPORTANCE of "The Bill of Rights" in this matter. I don't think you or 80% of the US population is "smart enough" to see "the agenda" for what it is.
The "sheeple" (and Len I'm sad to tell you ....you are a blindly ignorant "sheeple" on this) will be scared to death and "give it all away" IN FEAR. And like clockwork....we will have the troops here for Bird-Flu to impose Martial Law.
And of course Len.....I'm a "terrorist" who believes in "Freedom and Liberty"and OOOHHH how that makes me SOOOO DANGEROUS compared to you "brainwashed propaganda drones" who are so afraid of even your own shadow...... and I'm going to go "nutzoid" on you sheeple. LOL!!!!
No Len....your "just reward" will come someday when you've passively and stupidly given away all your freedoms in fear.... and you're fighting for a loaf of bread in a FEMA food line with the "babushkas". Lenin would be proud of you!
And of course the reward for a "crazy nutzoid" like me who believes in "freedom and liberty"(oh how DANGEROUS that makes me! OOOHHH I 'm so scary I must be a "terrorist".... give me a break!) will be forced labor in a FEMA internment camp.
For the "betterment of Society" of course.
Rogue
Len... you stated,"You just want to deal with your own little isolated "rights".
No....at one time The "Bill of Rights" existed and we were all afforded due process and the protections to EACH OF US AS INDIVIDUALS. Nothing was "isolated" about individual rights and freedoms. Martial Law won't be the least concerned with any of that.
THE POLICE STATE IS COMING...you know it! I know it!
Only difference is I see it for the SCAM it is and don't like it! I think you are "brainwashed" by this "betterment of society" BS and will accept it like the bamboozled idiots in Bolshevik Russia circa 1917.
Now, I guess for "the betterment of Society" (your commie words)....I, as well as every individual in this country should just throw all of our individual rights afforded to us in The Bill of Rights down the drain and hand it all over to this "New World Order"(Big Brother).
I'm sure you believe this New World Order Police State has "the betterment of society" as it's primary duty. LOL!!
LOL!! Give me a break. Take away the rights of the "individual" and just hand them over to BIG BROTHER.
For the "betterment of society" of course!
I'm sorry...I'll take care of myself. I don't need no quarantine.....no forced vaccination, or any of that crap. You Len,can have Big Brother "make sure" you're safe and quarantined or whatever for the "betterment of society".
Freedom and Liberty????
HA...what a joke! Well of course Len I'll just "give it all away" for the "betterment of society" and all the grand "visionary plans" of this New World Order.
Who the hell need's the Bill of Rights and all those other "selfish thing's " to protect the "selfish" responsible individual American citizen. What's more in order would be a FEMA agent and US soldiers in a tank.....who need's an "archaic and selfish document" like the Bill of Rights to protect individuals. We're well beyond that sort of old fashioned stuff. Call in the troops....Martial Law for everyone!
Leninist "Betterment of Society" . All dissenters go to a FEMA work camp!
You really need to become familiar with Ayn Rand and her philosophy.......I'm sure your comments have got her rolling in her grave.
Rogue
BIRD FLU....This is a "nightmare scenario" having Bush talking about using "milatary force" to quarantine people in an area because of an alleged "bird-flu" outbreak.
If you thought New Orleans was bad?....oh my God this could be the end of America as we know it!! Those idiot Feds from FEMA "telling me I'm quarantined" while US soldiers have tanks pointing at my home?? I don't think this is going to go over very well. My God.....WE"RE GETTING CLOSE!!
Would you like to be quarantined??? I have nightmare visions that this is all going to be used Len to "further this agenda"(maybe the whole damn thing designed for that very purpose)..... I'm sure you have heard me talk before about this "agenda". Everyday get's more outrageous and outlandish to that end!
Freedom and Liberty????
Lock and Load!
Rogue
I hope this story is a joke. I don't think it is though. WOW... What a nightmare scenario if this bird-flu comes here.
Goodbye America.
http://news.yahoo.com/s/ap/20051004/ap_on_he_me/bush_avian_flu
Bush Considers Military Role in Flu Fight By JENNIFER LOVEN, Associated Press Writer
Tue Oct 4, 7:59 PM ET
WASHINGTON - President Bush, stirring debate on the worrisome possibility of a bird flu pandemic, suggested dispatching American troops to enforce quarantines in any areas with outbreaks of the killer virus.
Bush asserted aggressive action could be needed to prevent a potentially crippling U.S. outbreak of a bird flu strain that is sweeping through Asian poultry and causing experts to fear it could become the next deadly pandemic. Citing concern that state and local authorities might be unable to contain and deal with such an outbreak, Bush asked Congress to give him the authority to call in the military.
The president has already indicated he wants to give the armed forces the lead responsibility for conducting search-and-rescue operations and sending in supplies after massive natural disasters and terrorist attacks — a notion that could require a change in law and that even some in the Pentagon have reacted to skeptically. The idea raised the startling-to-some image of soldiers cordoning off communities hit by disease.
"The president ought to have all ... assets on the table to be able to deal with something this significant," Bush said during a 55 minute question-and-answer session with reporters in the sun-splashed Rose Garden.
Dr. Irwin Redlener, associate dean of Columbia University's Mailman School of Public Health and director of its National Center for Disaster Preparedness, called the president's suggestion an "extraordinarily draconian measure" that would be unnecessary if the nation had built the capability for rapid vaccine production, ensured a large supply of anti-virals like Tamiflu, and not allowed the degradation of the public health system.
"The translation of this is martial law in the United States," Redlener said.
It was the president's first full-fledged news conference in over four months, as the White House hopes to regain momentum lost amid sky-high gasoline prices, a rising death roll in Iraq, and a flawed response to Hurricane Katrina. Bush has seen a small rise in his approval ratings, but they remain near the lowest of his presidency.
Despite the polls and recent grumbling about his performance from some Republicans, Bush insisted he still had "plenty" of political capital that he would spend getting lawmakers to go along with his proposed budget cuts, Iraq strategy, proposals to add to U.S. oil refining capacity and desire for a reauthorization of the anti-terror Patriot Act.
He called for quick confirmation of his nomination of White House counsel Harriet Miers to replace Justice Sandra Day O'Connor on the Supreme Court.
On Katrina, Bush said the federal effort to help evacuees and local communities remains uneven.
He praised his administration's success at handing out $2,000 in immediate cash assistance to some storm victims and in resolving bureaucratic hurdles that had impeded the removal of the Gulf Coast's huge debris piles. But he said the government could "probably do a better job" arranging for temporary housing for displaced people and needed to be up to the task of retraining people to fill new jobs.
Responding to fiscal conservatives' sticker shock at the costs of rebuilding the Gulf Coast, Bush called for "even deeper reductions in the mandatory spending programs than are already planned" to pay for it.
On other topics:
_Bush said the White House has begun the search for a replacement for Federal Reserve Board Chairman Alan Greenspan, who retires in January, but he hasn't seen names yet.
_He acknowledged the public had a "diminished appetite" for overhauling Social Security, a top priority earlier this year that was in trouble before Katrina hit and has nearly completely fallen off Congress' radar since then.
_Bush said he was "disappointed, frankly, in the vote I got in the African-American community" in November after trying hard to bring it up from the 9 percent he got in 2000. Bush won 11 percent of the black vote in 2004, and the poor federal response to Katrina's mostly poor and black victims has led many to question Republicans' hopes of doing better next time.
_Citing the investigation into the leak of a CIA agent's identity that has two White House officials as its focus, Bush declined to say if he would fire anyone indicted in the probe, or whether he has discussed the case with the two officials.
Bush signed an executive order in April adding pandemic influenza to the government's list of communicable diseases for which a quarantine is authorized.
The key question he introduced into the debate Tuesday was who would control it: the states that by law now have the main responsibility for containing an outbreak within their borders, or the federal government, which typically has been in charge of keeping diseases from entering the country.
White House spokesman Trent Duffy said the president envisioned possible military control of the quarantine process only "in the most extreme circumstances" and when state and local resources are overwhelmed.
Pentagon spokesman Bryan Whitman said the military hasn't be asked to develop such a plan. But he noted the military's capabilities, with mobile medical units and hospital ships and the ability to create field hospitals quickly.
Avian flu has killed or led to the slaughter of millions of birds, mostly in Asia but in parts of Europe, too.
It has killed about 60 people, mostly poultry workers. So far it doesn't spread easily from person to person. If that changes — and flu viruses mutate regularly — there could be a worldwide outbreak.
Rogue
I hope this story is a joke. I don't think it is though. WOW... What a nightmare scenario if this bird-flu comes here.
Goodbye America.
http://news.yahoo.com/s/ap/20051004/ap_on_he_me/bush_avian_flu
Bush Considers Military Role in Flu Fight By JENNIFER LOVEN, Associated Press Writer
Tue Oct 4, 7:59 PM ET
WASHINGTON - President Bush, stirring debate on the worrisome possibility of a bird flu pandemic, suggested dispatching American troops to enforce quarantines in any areas with outbreaks of the killer virus.
Bush asserted aggressive action could be needed to prevent a potentially crippling U.S. outbreak of a bird flu strain that is sweeping through Asian poultry and causing experts to fear it could become the next deadly pandemic. Citing concern that state and local authorities might be unable to contain and deal with such an outbreak, Bush asked Congress to give him the authority to call in the military.
The president has already indicated he wants to give the armed forces the lead responsibility for conducting search-and-rescue operations and sending in supplies after massive natural disasters and terrorist attacks — a notion that could require a change in law and that even some in the Pentagon have reacted to skeptically. The idea raised the startling-to-some image of soldiers cordoning off communities hit by disease.
"The president ought to have all ... assets on the table to be able to deal with something this significant," Bush said during a 55 minute question-and-answer session with reporters in the sun-splashed Rose Garden.
Dr. Irwin Redlener, associate dean of Columbia University's Mailman School of Public Health and director of its National Center for Disaster Preparedness, called the president's suggestion an "extraordinarily draconian measure" that would be unnecessary if the nation had built the capability for rapid vaccine production, ensured a large supply of anti-virals like Tamiflu, and not allowed the degradation of the public health system.
"The translation of this is martial law in the United States," Redlener said.
It was the president's first full-fledged news conference in over four months, as the White House hopes to regain momentum lost amid sky-high gasoline prices, a rising death roll in Iraq, and a flawed response to Hurricane Katrina. Bush has seen a small rise in his approval ratings, but they remain near the lowest of his presidency.
Despite the polls and recent grumbling about his performance from some Republicans, Bush insisted he still had "plenty" of political capital that he would spend getting lawmakers to go along with his proposed budget cuts, Iraq strategy, proposals to add to U.S. oil refining capacity and desire for a reauthorization of the anti-terror Patriot Act.
He called for quick confirmation of his nomination of White House counsel Harriet Miers to replace Justice Sandra Day O'Connor on the Supreme Court.
On Katrina, Bush said the federal effort to help evacuees and local communities remains uneven.
He praised his administration's success at handing out $2,000 in immediate cash assistance to some storm victims and in resolving bureaucratic hurdles that had impeded the removal of the Gulf Coast's huge debris piles. But he said the government could "probably do a better job" arranging for temporary housing for displaced people and needed to be up to the task of retraining people to fill new jobs.
Responding to fiscal conservatives' sticker shock at the costs of rebuilding the Gulf Coast, Bush called for "even deeper reductions in the mandatory spending programs than are already planned" to pay for it.
On other topics:
_Bush said the White House has begun the search for a replacement for Federal Reserve Board Chairman Alan Greenspan, who retires in January, but he hasn't seen names yet.
_He acknowledged the public had a "diminished appetite" for overhauling Social Security, a top priority earlier this year that was in trouble before Katrina hit and has nearly completely fallen off Congress' radar since then.
_Bush said he was "disappointed, frankly, in the vote I got in the African-American community" in November after trying hard to bring it up from the 9 percent he got in 2000. Bush won 11 percent of the black vote in 2004, and the poor federal response to Katrina's mostly poor and black victims has led many to question Republicans' hopes of doing better next time.
_Citing the investigation into the leak of a CIA agent's identity that has two White House officials as its focus, Bush declined to say if he would fire anyone indicted in the probe, or whether he has discussed the case with the two officials.
Bush signed an executive order in April adding pandemic influenza to the government's list of communicable diseases for which a quarantine is authorized.
The key question he introduced into the debate Tuesday was who would control it: the states that by law now have the main responsibility for containing an outbreak within their borders, or the federal government, which typically has been in charge of keeping diseases from entering the country.
White House spokesman Trent Duffy said the president envisioned possible military control of the quarantine process only "in the most extreme circumstances" and when state and local resources are overwhelmed.
Pentagon spokesman Bryan Whitman said the military hasn't be asked to develop such a plan. But he noted the military's capabilities, with mobile medical units and hospital ships and the ability to create field hospitals quickly.
Avian flu has killed or led to the slaughter of millions of birds, mostly in Asia but in parts of Europe, too.
It has killed about 60 people, mostly poultry workers. So far it doesn't spread easily from person to person. If that changes — and flu viruses mutate regularly — there could be a worldwide outbreak.
Rogue
Lentinman....It is not my "theory" that CHAR's parent NLG(Nelson Resources) was taken "under" it's prevailing market price(about $3 before the buy-under) for $2.57 Canadian.
As the acquirer Lukoil(sometimes known as "Russian mob") came up with this number by taking NLG's "6 month average trading price" to arrive at the bid price. Never mind the stock was trading above $3 just recently when insiders dumped millions of shares onto the market at NLG's highs. What a scandal!!
It's not my "theory"...just fact at how they are stealing NLG. The price they bid and how they arrived at it is ludicrous. Insider selling is just as bad. No mention at all at arriving at a fair number for NLG's true value and assets which I have heard some say is closer to $5 canadian.
All the theorys out there about CHAR somehow realizing it's "fair value" after it's parent NLG is apparently being stolen seem ludicrous too. Unless of course NLG get's a better bid sometime soon.
Anyway....Why wouldn't Lukoil have the "audacity" to bid $3.10 for CHAR???? That's how they arrived at the "value" for NLG.... The "6 month average trading price".
Red line is "6 month average"
http://stockcharts.com/def/servlet/SC.web?c=CHAR,uu[h,a]daolyyay[pb50!b182][vc60][iUc20!Lh14,3]&....
And that's FACT not "theory"!
Rogue
Lentinman...Have you ever worried about the safety of your "cash hoard"????
What are you doing to protect yourself(your capital) if we ever get into a situation like Argentina had a few years ago in 2002?? Just wondering.
Check out this article...
How A US Currency Crisis Can Unfold
by Chris Laird
October 4, 2005
Imagine going to your bank (probably online) and wanting to take out say 50k, say half of your cash, so you can go buy say, Yen. The bank tells you, "you are only allowed to take out 5k per month, it's a new law." This would be same situation for a brokerage account.
Sound far fetched????
Argentina did that in about 2002. The Argentine peso collapsed, people wanted to take their pesos and sell for dollars. The Argentine government just told the banks, don't let them pull out their money. Freeze the bank accounts. The peso dropped like a stone and the people with money in the bank... just had to watch... and starve too. There was rioting in the streets of course, for months.
Sound far fetched for the US? In the early 30's the US declared a bank holiday amidst having bank runs and bank collapses, after the crash of 1929... and subsequent ensuing depression.....Oh and by the way, the US outlawed gold holdings then.... ordered people to turn it in, and gave them the US exchange rate below 30 bucks, then soon after raised the gold price in USD to 35 bucks.....
I get people asking me about holding cash, instead of gold. The above things happen to people like that.
Suppose the US entered a dollar crisis where, say the dollar is collapsing via foreign currencies.... Say just for example, against the YEN. Then millions of people would want to buy Yen, and the US govt would probably just say, "you cannot take out more than 5K per month out of your accounts. IE they freeze your bank accounts, so you cannot go and buy Yen.
People worry about hyperinflation. But currency crises also come and have come to the US even, and in Dec 2004 we were flirting with pre stage events that could have boiled into a dollar crisis, when the USD was dropping fast late 2004.
So whether its hyperinflation with a resultant mad rush to buy anything real, or a currency crisis where there is a mad rush to buy any currency other than the USD, people with large amounts of cash are asking for big trouble. All the government has to do is freeze or semi freeze your bank accounts, they have already done this in the past, and I guarantee that if the US were to enter into a real bonafide dollar crisis, they certainly will freeze most bank accounts as outlined above.
I suppose that people will think, well gold ETF's will do well. Perhaps. But don't you think the US government would be kinda ahead of that curve???? All they have to do is suspend trading, or use a bank freeze to prevent you from getting any money over into that ETF anyway, and later when things really get nasty, after the ETFs have scarfed up enough gold.....you get my drift? after that then say, "for national security" we are taking "custody" of the etf gold vaults.
They will say its for the protection of the gold, but all it really is is confiscation. All an ETF is to me is a vehicle where the public buys all the gold, then the govt seizes it later. Happened before. And it will probably happen again. The govt might say" here is x dollars, but we're taking the gold". A week later gold sells for three times as much on the black market, and the dollar buys exactly one third as much food, gas and so on.....you have the dollars but all of a sudden they just don't buy much.
"They would never do that" you say.
But didn't I just tell you that that is PRECISELY what happened in the 1930's???????? The US govt outlawed gold ownership for the public, took the gold coins out of circulation, and issued all fiat dollar notes............and took all bank deposit boxes of gold as well, and if you went into a bank to open your deposit box, you had to do that IN VIEW of a federal marshal..... If he saw any gold he forced the owner to had it over for a specified number of fiat bank notes.... If that happened to gold and gold currency in the 1930's why can't that happen today??? What would keep a gold ETF out of that picture?
Of course, if you have that gold stashed here and there, not in a bank.... maybe you'll be ok. There is nothing that equates to 100 pct security. But if you have lots of bank accounts, I wouldn't bet on them keeping you safely out of financial harm's way in such a scenario.
How a USD crisis might unfold this time:
There are many ways a currency crisis could unfold for the US. One main one would be selling of UST bonds. That effectively would be dollar flight, first out of T-Bonds into dollar cash, then out of dollar cash into say, Yen. Or Yuan, or Euros.... Now at the moment I don't see this happening but it definitely can.
In such a scenario, if other foreign central banks did not all join to support the USD, it would be very possible that the USD could collapse not in weeks, but possibly in a day or even if things got hot, in an hour. Electronic money is so fluid that markets could be flooded in only an hour. Then the US would have to halt trading here, but of course there are foreign markets. I doubt the US could get the international FOREX markets to close too... in which case, the collapse would continue.
One of the things that concerns me is that the world really has geared their finance on the US consumer, and the US housing boom. Of course they now have their own property booms, but a lot of that started here. Actually, if you want to really trace the present finance boom worldwide we can thank the Japanese, who started this latest mess in the 1990's following twin stock and property boom/collapses and countered that with zero interest rates, but not only for a year or two, but for a decade. Now the world is infected with the imbalances of that ill advised strategy, and the YEN carry trade was the conduit for massively low interest rates world wide. The fact that the US initiated its own virtually zero interest rate environment, post the tech crash and 911, was only a second phase of an already well under way world liquidity boom started by Japan.
At that point, when the US started its own version of ZERO interest rates (zero at least in real rates, if a 1 pct Fed target rate isn't low enough), the world got entrained in the Japanese low interest finance disease via the USD conduit. Now we are really in a mess. REALLY IN A MESS.
Now back to my main concern. The US housing boom is peaking. We still have statistics indicating that its going strong, but also clear indications that it is slowing. It is my view that should the US consumer slow decidedly, there will be little incentive for the Chinese, say, to keep supporting the USD. They may decide at some point to go ahead and try to focus on their Asian markets, as might Japan, figuring that the US is toast anyway for a decade. Should that happen, I am sure we will be looking at a very serious possibility of a real bonafide USD crisis. Basically they would be saying, the US consumer market is maxed out, and not worth saving.
Now back in Dec 2004, I wrote at Gold-Eagle that I believed the Chinese would not unpeg the Yuan until late 2005 because they would not mess with the US consumer since that was their biggest customer. It would only be when the housing boom was slowing that they would even consider meaningful Yuan revaluation. They have made their first move in July 2005, albeit a very small one. Probably more than anything else that move was due to pressure from the US with all the threats then of anti China bills in Congress. Now I believe we need to look at the view that, should the US housing boom slow and the US consumer pull back decidedly, the USD gravy train for Asia has no more gravy left.
2006 will be a very dangerous time. I believe that the US housing boom is peaking. Therefore I believe there is a risk now of a real USD crisis, or semi crisis. There is one major caveat though. The USD is still so strong vs the world reserve currency, that that might make all parties involved not even think of doing anything to harm the USD. But the possibility of major pullbacks of USD holders remains anyway. And, as I said, the scenario where they dump US treasuries is only ONE scenario.
There are many such scenarios.
Another would be the derivatives mess collapsing. That is so fraught with liabilities that it is, as I said before, the single greatest black box risk to the US and world economy..... and could result in a USD crisis as well, as the Fed might find itself having to infuse trillions (yes I said trillions) to stem the next major derivatives crisis. That would probably lead to a currency crisis. As a matter of fact, would you believe that China and Russia and other nations right now are making bold moves into all sorts of derivatives markets themselves?????? WHEW!
The world is speculation happy! Most definitely.
In any case, there are many scenarios that can lead to a USD crisis. I don't think those scenarios are all voluntary ones either. It is possible a USD crisis could ensue, not as a result of some definite decision of foreigners to pull out of the USD, but could ensue as an accident, possibly of derivatives.....
Now recently, I wrote the article "something is wrong, something is up, possibly a crisis" In that I stated that gold's recent rise was too fast for the recent behavior to be only due to some usual economic news, but rather looks to me like there is a hidden crisis.....I pegged derivatives as suspect number one. That argument has now showed itself in many financial publications. (not necessarily the derivatives component).
We still are not clear on what crisis is at hand, but I suspect there is one. The problem is that if it remains hidden then by the time you know about it, it will be too late for you to make any moves.....This is why I keep saying be in PROTECTIVE MODE. Stop chasing new yields, and new capital gains. Stay in protect mode.
My PrudentSquirrel newsletter has material such as this every week in more detail. Stop by and have a look at the testimonials.... and subscribe. For 44$ you get 26 weekly issues. That is a great value.
http://www.gold-eagle.com/editorials_05/laird100405.html
Rogue
valuemind/CHAR.....unless the bid for CHAR's majority owner NLG.to/Nelson Resources is materially increased from the $2.57 "takeunder" price by Lukioil....
I wouldn't expect the minority shareholders of CHAR to get anything better than the "6-month average trading price." Which is what they are taking NLG "under" for.
It just seems "illogical" to me to think that CHAR's majority owner will get "stolen" by the Russian mob.....and somehow the minority shareholders of NLG's CHAR will somehow get "fair value" from the Russian mob.
It just seems a little like wishful thinking unless NLG's bid is increased. If that bid IS increased....then I could see a bullish case for CHAR.
Has anyone figured out CHAR's "6 month average trading price". It could be a BUY again enough under that level to make a profit in a potential looming "takeunder".
Rogue
FNM....something really stinks with FNM. LOL!
As a matter of fact....to be bluntly honest, something stinks with this entire "house of cards" US economy!
Rogue
We had a "classic" blow-off top "key-reversal" yesterday with AMEP.
Huge volume and holders/buyers are now "trapped" between .10 and .14 cents. This is now "overhead resistence".
Doesn't anybody follow classical tecnical analysis anymore???
I was never much into the Candlesticks "thingy".
Rogue
NLG.to/CHAR....This is one reason why I added today to NLG.to/Nelson Resources.
I believe the "theft" by the Russian "mob" of Nelson at $2.57 has a 50/50 chance of not occuring and a higher bid may be imminent.
Kazakh Oil May Be Bigger Than Kuwait
http://www.terradaily.com/news/stans-05j.html
"When completed, this National Program will allow us to export 2 million barrels (of oil) a day in 2010 and 3 million barrels (a day) in 2015. The natural gas output will reach 100 billion cubic meters a year," Nazarbayev said.
by Martin Sieff
UPI Senior News Analyst
Washington (UPI) Oct 03, 2005
Kazakhstan's president says his country in a few years will be a bigger oil exporter than Kuwait and a major asset to U.S. global interests.
President Nursultan Nazarbayev's speech to the opening of the second session of the new Kazakh parliament in Astana last month was filled with strong signals courting U.S. goodwill. Nazabayev said Kazakhstan's gigantic Kurmangazy oil and gas field alone "may possess up to 980 million tons of extractable hydrocarbons."
He said oil production from Kazakhstan's share of the Caspian Sea could reach "oil production levels of 100-150 million tons (per year) by 2015."
"When completed, this National Program will allow us to export 2 million barrels (of oil) a day in 2010 and 3 million barrels (a day) in 2015. The natural gas output will reach 100 billion cubic meters a year," he said.
According to the Energy Information Administration of the U.S. government, in 2004 Kuwait and Nigeria both produced 2.51 million barrels per day and Iraq produced 2.03 million bpd. Only two nations in the world, Saudi Arabia and Russia, exported more than 3 million bpd each in 2004: Saudi Arabia exported 8.73 million bpd and Russia exported 6.67 million bpd.
But Kazakhstan faces the same kind of security problems Saudi Arabia and Kuwait did before it. It is relatively under-populated, with 17 million people, immensely rich and in a dangerous and unstable neighborhood.
Islamist extremism is rife in several of Kazakhstan's neighbors, including Uzbekistan, Kyrgyzstan and Tajikistan. And it is in the neighborhood of nations armed with nuclear weapons - Russia, China, India and Pakistan. Seeking good relations with neighboring nations and with the global hyper-power the United States is thus a difficult and urgent national security priority.
Nazarbayev, therefore, took care to signal his willingness to play a moderate role in maintaining international energy prices.
"Kazakhstan takes very seriously its new role in safeguarding international energy stability and security," he said.
Kazakhstan has sought good relations with the United States and strong U.S. investment, especially for its oil industry, while taking care not to offend Russia and China. Nazarbayev confirmed this explicitly in his September speech. "Out first priority is the development of cooperation with Russia, China, United States and European Union," he said.
"Kazakhstan has always been - and will remain - staunchly committed to a broad international cooperation in containing nuclear proliferation, fighting against international terrorism, religious extremism, drug trafficking and other current threats. This corresponds to our national interests, too."
On July 5, Nazabayev hosted a summit meeting of the six-nation Shanghai Cooperation Organization in Astana at which Russia and China, who dominate the organization, called for the United States to rapidly leave air bases in the area.
Meanwhile, Nazarbayev has also been under growing pressure from the Bush administration to work more rapidly to build structures of democracy and political transparency in Kazakhstan. He has responded by launching a National Program of Democratic Reforms to be implemented in two three stages over the next six years between 2006 and 2011.
As part of this program, over the past six months, he has responded by signing decrees establishing new formal processes and public transparency in local government and national executive power, and his Ministry of Justice has produced legislation to develop the practice of trials by jury. He has also announced the reform of the judiciary "as part of the broader democratic reforms," he said in his Sept. 2 speech. Nazarbayev is running for re-election as president in national elections this December.
However, the Kazakhs want to move more slowly than some pro-democracy activists in the Bush administration want them to. For the Kazakhs, like their neighbors, were alarmed by the violent over throw of President Askar Akayev's government in neighboring Kyrgyzstan and by the violent disturbances in the city of Andijan in Uzbekistan that left several hundred dead.
A furious and alarmed Uzbek President Islam Karimov reacted to that by seeking stronger Russian and Chinese support and giving the United States a six-month notice to evacuate its strategically vital Kharsi-Khanabad air base, triggering a conflict between the Pentagon,. which wanted to keep the base above all else, and the State Department, which wanted to send a strong message to Karimov on human rights.
Nazarbayev and other senior Kazakh policymakers argue Kazakhstan must expand its middle class and ensure a stable, broad-based foundation of property-owners who have a vested interest in maintaining stability to ensure a stable democracy.
"One cannot build an open, free and prosperous society with a high standard of living in a weak, backward and dependent economy that does not possess a predominant middle class," he said in his Sept. 2 speech.
"Our goal is to build the foundation of a modern and competitive economy in an open, democratic and prosperous society of free citizens," he said. "... On cannot build an open, free and prosperous society with a high standard of living in a weak, backward and dependent economy that doses not possess a predominant middle class."
Nazarbayev is also pushing hard to try and win the chairmanship of the Organization for Security and Cooperation in Europe for Kazakhstan and as part of his bid has offered to host an OSCE forum on tolerance, interfaith respect, social and interethnic accord along with a second Summit of the Leaders of World and Traditional Religions.
Rogue
'stock_peeker'....Nat Gas drawdown??? Sounds like a fairly logical strategy or thinking on your part. Typical "whipsaw" like action you are saying.
Todays selloff in Gas stocks likely is the bull "bucking off" sellers for the next move up. I might be inclined to agree.
Rogue
PTN....that's funny, maybe you bought my shares today! I sold and took profits today into the run-up.
I recommended PTN a week or two ago at much lower prices. It's overbought right here and will look to re-establish a position on a pullback.
It probably does have multi-bagger long-term potential though IMHO.
Rogue
NLG.to....Nelson Resources. Picked up a block of stock at the low today of $2.45 Canadian. I think worst case scenario is the "takeunder" price of $2.57.
Upside is a better bid to more reflect the "value" in NLG. It was trading above $3.00 Canadian before the bid.
Management may have to get more for the company or face the wrath of lawsuits for insider trading just before the "takeunder" bid.
Rogue
ARTX...Looking for .70 support to give or "break" and a possible selling climax coming here soon?? But, of course .70 may hold?
"Pick a number" for the ultimate low ....but I'll be looking to pick up a good size block on a washout "clearance sale".
Half of that block would be for "trading" and the other half ideally for long-term cap gains.
Rogue
Transports....that looks like a "dead cat" bounce to me. Could provide good short oppurtunities here.
Rogue
We now have what is called "overhead resistance" between .10 and .14 cents. All the high volume has the classical technical earmark of what is called a "blowoff top".....or "key reversal" in technical trading terms.....
at least for the "near term"(next few weeks or so).
http://stockcharts.com/def/servlet/SC.web?c=AMEP,uu[h,a]daoayyay[pb50!b200!f][vc60][iut!Ub14!Li14,3]...
AMEP may have trouble "slicing through" all this upside technical resistance until it's worked off in a significant correction from here.
That is at least how the "classical interpretation" of today's "key reversal" trading would "transpire".
Sold today and looking to reload in the weeks ahead.
JMHO.
Rogue
CXPI...very strange "controlled" like trading recently.
Which way will it break? Probably to the upside I would guess.
Rogue
AMEP...looks like a "key reversal" day could be forming technically today on the charts after a huge run the past week or so.
I've sold a chunk today and will "ask questions" later.
Rogue
CHAR....why should CHAR rise to over $10 when NLG was supposed to have assets "worth at least $5 Canadian" and they had those Russian creeps take them "under" for $2.57 Canadian??
I don't understand why CHAR wouldn't be taken "under" also?
What is CHAR's 6 month average price??? That's what they did to rob NLG shareholders.
Rogue