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CPTC.....I put a sell on it a long time ago on a retracement attempt to it's yearly high in the $5 dollar area and said the high was in for quite some time.
I never quite saw the Benjamin Graham "margin for error" or cushion of value in the company. Good story but no "safety net" for me. I hope everyone bailed on it a long time ago.
Rogue
CPTC....to be perfectly honest, IMHO we probably won't see the yearly low in this company until later in the year and tax-loss selling kicks in big time. No doubt there will be excellent "trading opps" in CPTC. It's just that this is a very long term story stock and "greed and fear" rule.
I now see a Chapter 11 post for CPTC......Hmmmmm, felt the need to update this message after that if it's not a joke????
Not a joke......disregard post then.
Rogue
"Sarbanes-Oxley in 2006 is troubling"........value microcaps will probably be saddled with the potential "stigma" as a result of this. P/E ratios will probably stay quite a bit lower than the overall market for microcaps because of this fear.
Rogue
US to borrow an unprecedented $1TRILLION this year
May 5, 2005
NY Times
The Thrift Imperative
The stock market has been a scary place lately: new yearly lows followed by big daily gains, then more lows and so on. While no one fully understands these gyrations, we do know that markets become skittish when fundamentals are out of whack. There's arguably no more fundamental imbalance these days than the United States' low national savings - the amount Americans save minus the amount the government borrows. But don't expect to hear our nation's leaders talk about it.
From 2002 through 2004, the rate of national savings was lower than at any time since 1934. This year, savings are once again off to an anemic start. That's a problem for stocks because the market looks forward, and a lack of national savings means that both the private and government sectors must borrow to pay for all of the things we wish for ourselves, our progeny and our society, like modern industrial plants, secure retirements, good education and better health care. If current trends continue, the United States will borrow an unprecedented $1 trillion this year alone, mostly from abroad, a sum that is reflected in the nation's huge budget and trade deficits.
Any sane market analyst has to wonder how long that can last, and such underlying angst intensifies market swings.
How we got to this point is now sadly familiar. The biggest culprit is the Bush administration's profligacy, with tax cuts the most glaring driver of the swing from budget surplus to budget deficit over the past four years. Currently, the deficit offsets most of the economy's net private savings.
Individuals also do not save enough, as reflected in the widespread inadequacy of retirement savings. Some argue that the amount of personal savings is understated because it does not take into account the increase in housing values, which has many homeowners feeling flush. But elevated home values do not add to national savings.
Such wealth is not converted into cold hard cash until houses are sold, and at that point the money flowing into the sellers' pockets is simply money that is flowing out of the buyers' pockets. No new wealth is created unless a seller saves the windfall - which is generally not the case in today's consumer economy. Instead, sellers increase their purchasing power, while the saving rate declines and the country as a whole becomes poorer. The uncomfortable reality is that saving is possible only by deferring today's consumption, not by spending freely while one's house appreciates.
The most powerful way to increase national savings is to cut the budget deficit. To do that, President Bush and his allies in Congress must defer the gratification they would derive from showering more tax cuts on the affluent. Lawmakers should also refocus their efforts on increasing personal savings. For decades the emphasis has been on granting tax incentives to savers, and for decades the amount of personal savings has trended downward. Congress should instead encourage all employers to improve the structure of retirement savings plans in ways that have demonstrably increased participation, including automatic enrollment upon hiring and the automatic allocation of employee contributions.
The alternative is economic decline. The markets are right to be skittish.
Rogue
NXG.... Northgate Exploration has been beat to hell recently. Touched an even $1.00 share price yesterday......may be ready for a decent trading rally in the least. Could have possibly bottomed out......the chart shows a distinct 5 wave downtrend which may have been completed.
Next move may be up 30% to 40% from here in my opinion.
Rogue
General Motors(GM).......I'm still short, could be setting up for a good sell short entry point for new positions in my opinion..........
from Barry Ritholtz
Bet the Jockey or the Horse?
Wall Street is all a twitter over 87 year old billionaire Kirk Kerkorian's $31 tender bid for GM.
I'm not looking to only be known as a contrarian, but I find much of today's chatter on this to be a bad joke:
· Tracinda is a 3.9% GM holder; Unless they backed up the truck on Monday, that has not been a wining trade; I suspect Kerkorian is buried in the position (just my guess). Indeed, any purchaser since January 2004 is way under water; Hardly the so-called Smart Money its been described as;
· What did Kerkorian do in the 1980s? (Begins with a G) This smells suspiciously similar to me;
· Kerkorian is no spring chicken - is he planning to oversee a 5 year turnaround plan?
· Unlocking value? GM has an absurd debt to equity ratio (Over $200B in Long term debt) . How much value is there to be unlocked?
· If you really want to build a position, you quietly accumulate shares -- you do not scream out I'M A BUYER @ $31!
I can understand the appeal of betting on the jockey - but not when he is riding on a 3 legged horse.
http://bigpicture.typepad.com/comments/
Rogue
Boone Pickens energy holdings:
BP CAPITAL MANAGEMENT L P 260 PRESTON COMMOND WEST DALLAS, TX 75225 Position Statistics Report Date: 3/31/2005 Total Positions: 27 New Positions: 10 Increased Positions: 23 Decreased Positions: 4 Positions With Activity: 27 Sold Out Positions: 3 Total Market Value (in $ millions): 703
PEABODY ENERGY CORP COM $53,867 $15,396 40.02% 1,230,680
FORDING CDN COAL TR TR UNIT $53,815 $7,251 15.57% 605,757
EOG RES INC COM $53,330 $21,642 68.30% 1,121,560
QUICKSILVER RESOURCES I... COM $53,247 $20,087 60.58% 1,037,337
ENCANA CORP COM $48,545 $20,474 72.94% 760,176
CONSOL ENERGY INC COM $46,043 $15,185 49.21% 1,064,822
ARCH COAL INC COM $45,621 $16,054 54.30% 1,028,895
MASSEY ENERGY CORP COM $44,644 $14,424 47.73% 1,236,323
CONOCOPHILLIPS COM $37,539 $3,168 9.22% 358,023
SUNCOR ENERGY INC COM $35,435 $7,154 25.30% 961,343
EXXON MOBIL CORP COM $34,302 $2,895 9.22% 601,479
METHANEX CORP COM $27,751 $2,342 9.22% 1,666,747
BJ SVCS CO COM $26,325 $26,325 New 540,000
SHAW GROUP INC COM $22,098 $2,038 10.16% 1,222,897
TRANSOCEAN INC ORD $16,740 $16,740 New 361,000
BHP BILLITON PLC SPONSORED ADR $16,680 ($8,019) (32.47%) 679,436
BG PLC ADR FIN INST N $16,596 $16,596 New 425,000
KERR MCGEE CORP COM $15,520 $15,520 New 200,000
GLOBALSANTAFE CORP SHS $15,120 $15,120 New 450,000
PLAINS EXPL& PRODTN CO COM $9,654 $9,654 New 300,000
TODCO CL A $9,123 $9,123 New 410,000
CABOT OIL & GAS CORP COM $8,832 $8,832 New 300,000
SPINNAKER EXPL CO COM $7,540 $7,540 New 235,564
TESORO CORP COM $4,354 $4,354 New 114,770
BP PLC SPONSORED ADR $0 ($16,383) Sold Out 0
CHEVRONTEXACO CORP COM $0 ($25,963) Sold Out 0
SASOL LTD SPONSORED ADR $0 ($28,441) Sold Out 0
Rogue
kozuh....very nice attempt at a post with "substance".
Keep up the good work! LOL!
Rogue
Oil prices......Oildesk/sounds like you "get it".
PSSSST....I'd like to tell you a little secret....the US dollar is truly "depreciating garbage". I will bet on oil before the US dollar.
Nothing I can think of will save the US dollar that I can see......oil prices are heading higher "long term" IMHO.
Rogue
Crash of 1987....I was ready for the crash back then and was buying like crazy at Dow 1500 on the panic bottom. I remember getting a block of Gerber Baby Foods right near the low....had numerous "4-baggers" and more in a year or so on low risk blue chip stocks such as that one.
Hopefully I'll have a nice shopping list ready again if we ever have a crash.
Elaine Garzarelli couldn't hold Robert Prector's jockstrap back in those days. He's the one that called that crash. His words would move the market back in those days prior to the crash.
Rogue
EGY.....I sold a block yesterday of trading shares bought much lower. I think it's great long term but short term there are probably some "trading" shares being sold.
Short term weakness and then looking good in my opinion.
Rogue
CFCI....."Inside information" truly exists. Last October I was told by a friend to buy all of CFCI that I could afford. He said he knew a top insider well and that you would "make alot of money soon" if you bought the stock.
Never did buy any and it "rocketed" soon thereafter!! I believe the price was trading at $7 or so when I got the insider tip.
I guess I should have listened .....huh???
Rogue
Flipping real estate ... without getting burned
By Jane Hodges
Special to The Seattle Times
Investors fed up with stocks are scooping up property
In December, Paul Galasso quit his Costco management job to join his wife, Evelyn, as a full-time real-estate investor.
The leap from salaried manager at a $48 billion public company to residential real-estate entrepreneur wasn't impulsive, Galasso said. The couple made more than $100,000 from five Eastside deals they completed during 2004.
Galasso, 38, is among the growing ranks of weekend real-estate investors in the area who, encouraged by a housing market that continues to sizzle and buoyed by the success of initial deals, have decided to pursue the practice full time.
Galasso is a member of the Real Estate Association of Puget Sound, or REAPS, a nonprofit real-estate education group that has tripled its membership to 900 since 2003. He and his wife have spent more than $20,000 on investor "boot camps" and seminars to learn how to make deals — and he says every dollar has been worth it.
The National Association of Realtors in Washington, D.C., released survey results in March indicating that 23 percent of all residential real-estate transactions in the U.S. last year went to investors, rather than to buyers looking for a place to live.
Association spokesman Walt Molony said he believes this level of investor activity would apply to a market like Puget Sound's. Glenn Crellin, director of the Washington State Center for Real Estate Research in Pullman, agrees.
Investment tips
For those thinking about investing in residential real estate, experts offer these tips:
Do your homework: Stick to one particular part of town and get to know it like the back of your hand.
Start small: Find something you can live in while you fix it for resale. Avoid something needing massive renovation.
Buy low: Know the market to help avoid paying too much for a property, the mistake that most often leads to losing money. Some experts recommend that investors buy properties at 30 to 50 percent below their market value after they're fixed up. Often, this means looking for properties owned by motivated sellers — owners facing foreclosure or people who don't have the time or money to fix up their homes.
Choose a quick flip instead of a wealth builder: Before buying a property with the intention of reselling it quickly, look for at least a 20 percent profit margin after subtracting rehab expenses, taxes, commissions, financing and other costs. A 20 percent profit is something of a break-even point because most interest-only loans available to buy investment properties cover 80 percent of a home's expected market value.
Rely on experts: Seek out mentors and experts, including a good banker and an accountant, who can help you avoid costly mistakes. Consider Nashville-area investor Toby Hildabrande and his wife, who thought they were getting a great deal until their inspector discovered the property was once a gas station and probably had environmental issues.
Get an accountant: Taxes on investment properties can get complicated quickly. Anyone remodeling a home must have builder's risk insurance, and rental owners must have a fire-insurance policy with large liability limits.
Keith Russell, The Tennessean
Galasso said his bosses were shocked when he left. But among his peers, the move to real estate isn't unusual. Galasso said he knows people just like him in Georgia, Texas, California and beyond now investing in residential property.
"The hard part is knowing where to start," he said.
Many also say it's important to do research first because novices can lose a lot of money if they don't know what they're doing.
Why real estate?
The real-estate market has been booming locally and nationally for years. Around Puget Sound, the combination of low housing inventory and low mortgage-interest rates has created a seller's market. The average price of houses and condos combined has risen more than 24 percent in King, Snohomish, and Pierce counties between 2000 and 2004, according to data from the Northwest Multiple Listing Service.
But rising property prices aren't the only thing driving folks like Galasso into the business: The dot-com crash and stock-market declines of 2001 made many investors rethink their reliance on stocks and seek alternative investments. Since then, they've been doing their homework on how to invest in property.
"I lost a ton of my portfolio in 2001, and that's happened to a lot of people in America," Galasso said. "It spurred my interest in learning that there was a better way out there. I'm the last of 11 children — the oldest is 21 years older than me, so he's 59, and he's still working hard."
He believes the retirement of baby boomers will drain the market and that Social Security's uncertain future means diversifying now is crucial. He's serious about moving away from old-school stocks and mutual funds: Around the time he left Costco, Galasso and his wife fired their financial planner and shifted 75 percent of their retirement resources from regular equities and mutual funds held in a traditional IRA into a "self-directed" IRA that they can use to fund real-estate deals.
How the deals work
Mark Schmale, president of REAPS, says that most people who join his organization want to learn about nontraditional investment strategies that they can use to buy single-family homes.
About 90 percent of members use some form of "looking to buy" marketing to find sellers who want or need to sell quickly, Schmale said. Those who want long-term investments focus on lucrative Seattle neighborhoods such as Green Lake, Queen Anne and Capitol Hill. Short-term gains can be found almost anywhere throughout the Puget Sound region, he said.
Among the techniques members and other investors use:
• Buying, holding and reselling fixers without repairing them;
• Buying and repairing fixers to sell at a profit;
• Wholesaling, or flipping — making an offer on a home and, before closing, finding a buyer who will pay more for it (this leaves the investor the profit);
• Signing lease-option deals in which investors rent out a property at above-market rent to a tenant who wants the right to buy the place at the end of the lease.
Doing the homework
Making money as a real-estate investor requires more than buying and selling properties using conventional mortgages and real-estate agents, Schmale said.
"A lot of people come into the market not knowing the true costs involved," he said. "Of course, [learning that] is the responsibility of each individual."
Real-estate investments
Many local investor groups are optimistic about the potential to make money in the current real-estate climate, but they all recommend doing homework — reading, attending seminars, networking with other investors before cutting deals.
Here are some of the techniques many investors use:
Flipping
Pros: You make an offer on a property and secure a new buyer before you close on the property, diverting the property to the new owner and pocketing the difference between your offer and theirs. In a hot market, this means you can make money fast.
Cons: You may end up closing on and holding the property if you don't find a buyer, which could tie up cash and lead to capital-gains taxes if you choose a short-term resale. If you have multiple wholesale deals in progress, you could get financially over-obligated.
Rehabbing a fixer
Pros: If you know how to do the work or have a network of inexpensive contractors, the likelihood of making a profit is high.
Cons: This can be capital-intensive, and if the home is in terrible condition, it can be difficult to secure a lender. Work — and the resale — can take a long time, tying up capital.
Lease-purchase options
Pros: You can charge higher-than-market-rate rent to tenants who intend to buy your home (and thus serve as quality renters), guarantee your sale price, avoid real-estate-agent commissions, and reduce capital gains by not executing the sale until a later date.
Cons: You will need a lawyer to learn how to structure an agreement correctly, and tenants attracted to this often have sub-par credit.
Foreclosure purchases
Pros: Properties are available at discount, and informed buyers can leverage some new loan products to bring more cash to auction and skirt some liens owed on the property.
Cons: Often you can't see a home's interior before buying it, meaning repair spending could skyrocket. You may also inherit liens on the property, adding to the expense.
Jeff Wolfson, a residential land-development specialist at Skyline Properties in Kent, is researching investment opportunities for himself and clients.
Wolfson, who has been in the industry for nearly 20 years, says many investors are overextending themselves on the assumption that the market will remain favorable. He believes low interest rates contribute to this, he said.
Interest rates on fixed 30-year mortgages haven't gone above 6.5 percent since late 2002, according to data from HSH Associates, a research firm in Pompton Plains, N.J. In Seattle, the typical 30-year fixed mortgage rate was 5.92 percent last week, HSH data show.
"I've been in the industry long enough to see how it operates in cycles — and it cycles on [mortgage] interest rates," Wolfson said. "I believe the market right now is in a bubble — people are putting 10 percent or 5 percent or zero down, or they're taking adjustable rate mortgages, but then one day their renters can't afford the rent, and the owners aren't prepared for that."
Wolfson's belief is reflected by Robert Shiller, the Yale University economist whose book "Irrational Exuberance" foretold the dot-com crash. Shiller's latest book ("Irrational Exuberance: Second Edition," Princeton University Press) was published in March and compares investors' current zest for real estate with their behavior during the dot-com bubble.
The book argues that investors have shifted their money from stocks to real estate and that, en masse, they are using the same mentality that created the hyperactive dot-com economy. Only now they're using a different asset: housing. Such a marketplace, the book argues, must eventually correct itself.
Mix-and-match portfolios
To counteract the potential risks, many investors use a mix of strategies. They want to balance the benefits of holding a home long-term with short-term deals that allow them to keep more cash on hand.
Roz Burton, 32, of Bothell is a club member who invests with her husband, Kerwin Burton, 33. She said they have closed six deals since July 2004, and they are working on more. She now works full time on real estate; her husband, part time.
The Burtons have experimented with several types of transactions. After they married two years ago, they began renting out the two condos they had lived in. They sold one condo to buy a house in Mill Creek that they will rent out.
They're selling their other condo in Kirkland through a lease-option deal. The two-bedroom unit in Kirkland would rent to a regular tenant for $1,000, but in a lease-option they're able to charge $1,500 ($1,200 for rent, and $300 a month toward the tenant's down payment).
After a year, the tenant can either buy the unit or the Burtons can start the process over again — making $2,400 more a year from rent than they would have without the lease-option deal. (The tenants get the down-payment money back if they don't buy.)
The Burtons also have flipped properties, such as the fixer they found in Burien for under $90,000 that they sold to an agent for $100,000.
The Burtons spend much of their time looking for sellers — cold-calling, knocking on doors or mass-mailing — or trying to cut deals without real-estate agents who charge commissions. They pay scouts a $500 reward if a lead becomes a deal.
For investors, the key to a good deal may be tracking down people like the Canadian who had neither the time nor the money to repair a Queen Anne fixer. He sold his house to the Burtons for a bargain; they made a profit selling it to a builder.
Foreclosures
The Puget Sound investment organization isn't the only group teaching investment techniques.
In 2003, three Windermere agents and a partner formed The Foreclosure Group, a resource for investors that offers property photos, financial history, comparable properties in the area, and status updates on the home's auction, said Christopher Hall, one of the partners.
Kerry Hemmingsen, another partner, told the 20 or so investors who came to an April 21 meeting that 1,400 foreclosures take place each month in King, Pierce and Snohomish counties combined, the majority because of divorces.
Hemmingsen and other partners lead investors in weekly information sessions to outline the different types of foreclosures and how his company's service and commission fees work. Investors who decide to bid on a particular property attend a huddle the evening before the property they want goes to auction. On Thursday nights, it's all about discussing strategies.
Michelle Dickerhoof, 35, attended the April 21 session to learn more about how the company operates. Dickerhoof quit her corporate-affairs job at Starbucks last fall to collaborate full time with her contractor husband to find fixers to invest in.
The couple already own an investment property in Edmonds and plan to use their primary home in Magnolia as a rental down the line. Having contracting know-how, she says, gives her and her husband confidence about dealing with the uncertainties of a foreclosure. (Unlike normal listings, buyers can't walk through or inspect most foreclosures before purchase, so it's hard to predict repair costs or the home's true condition.)
Right now, Dickerhoof is working on buying one of two Magnolia foreclosures set to be auctioned before May 6. She's just secured a home-equity line of credit on her primary home to pay for the new properties. She expects the two properties she's eyeing — a 1960s home with a starting bid of $238,000 and a 1950s cottage with a minimum bid of $224,000 — could be resold for around $400,000 after they're fixed up.
Different sort of investment
Schmale, the Puget Sound investment-group president, says investing in real estate is fundamentally different than investing in stocks and mutual funds: Real-estate investors are more actively involved in influencing their investment than those who put money into stocks.
The investors who flock to real estate, in the end, may like the participatory aspect of it the most — doing the research, overseeing renovations, cutting deals.
"In real estate I can do a lot to increase the price and value of my holdings, which isn't true of having stock in some large company," Galasso said. "By the end of this year, we'll be doing two to three homes a month."
And he doesn't regret leaving his management job. "This is so much better than being in a cubicle."
Jane Hodges is a Seattle freelance writer.
Rogue
Will oil strike $380 a barrel by 2015?
by Adam Porter
A report prepared by energy economists at the French investment bank Ixis-CIB has warned crude oil prices could touch $380 a barrel by 2015.
Analysts Patrick Artus and Moncef Kaabi said in the next 10 years demand for oil will outstrip supply by around 8 million barrels per day (mbpd).
"If one takes into account the level of previous oil shocks such as in the 1970's, we don't think a price level of $380 per barrel is out of the question," they said.
The analysts argued that the shortfall in energy needs would not be made up by alternatives as they were not developed as yet. "Thus the world will still need to rely upon traditional fossil fuels," their report said.
Growing demands
They also said existing new oilfield projects would not be enough to satisfy unprecedented growth in demand from developing economies, particularly China.
"We have taken into account every new oil discovery and potential source … as well as this we note the continuing situation of a fall in new field discoveries," the analysts said.
They pointed out China would contribute greatly to the world's rising energy needs.
"Rapid movements of people from the Chinese countryside into the cities would increase the demand for housing, cars and general transportation. All of this will fuel energy consumption," the report said.
Economic juggernaut
Industrial production in China is also growing rapidly with no major signs of decline.
"The types of energy-intensive production in China are growing fast and forecasts also point to continued growth."
"Chinese economic development is at a stage where the amount of energy used is not yet recycled back into the economy. This has definitely been the case in recent times and this explains the sharp increases in China and other similar nations recently," Artus and Kaabi said.
"One could thus envisage a scenario where there is a near seven-fold increase in crude oil prices, whereby, adding annual 2.5% inflation ... we arrive at a price of $380 per barrel by 2015."
Rogue
Global race is on to snag oil supplies
By Kevin G. Hall
WASHINGTON — Soaring demand for crude oil in China, India and other developing nations has set off a scramble to secure future energy supplies that could undermine the economic and national security of the United States.
The United States, Europe and Japan increasingly will be forced to compete with developing nations, especially China and India, the world's two fastest-growing major economies, which account for more than one-third of the world's population.
"The center of gravity in world oil is shifting," said Daniel Yergin, the chairman of Cambridge Energy Research Associates and an author of "The Prize: The Epic Quest for Oil, Money & Power," a Pulitzer Prize-winning history of oil.
"Last year, Asia consumed more oil than North America," Yergin said. He predicts an oil-supply shift, too, as Africa, Russia and former Soviet republics compete with the Middle East to fill the growing demand for oil.
The developing world's growing appetite for oil is one reason gasoline prices have shot up for Americans. Over time, these emerging economies also will shape not just global oil flows and prices but also world events, said Anne Korin, the co-director of the Institute for the Analysis of Global Security, an energy security think tank in Washington.
"A third of humanity doesn't want to ride bikes anymore," she said. "That has profound geopolitical implications."
China and India have moved aggressively to strengthen their relations with two oil-rich countries — Sudan and Iran — undermining U.S. sanctions against Sudan's regime and undercutting U.S. efforts to halt Iran's nuclear ambitions.
"We are in a situation right now where the energy consumption of the developing world is having an impact on the foreign-policy options of the United States," Korin said.
For now, the United States remains well-positioned, at least when it comes to energy supplies. The proven reserves in the Middle East make it the expected primary global supplier of crude oil. Iraq, where the United States has forcefully established a beachhead, has proven oil reserves of between 78 billion and 112 billion barrels.
But political instability, increased terrorism and the spread of fundamentalist Islam make it unlikely that today's oil-production map will look the same in 20 years.
What's clearly changing is demand. The International Energy Agency in Paris, a research arm of the world's most developed nations, projected last year that oil demand will grow by 45 million barrels a day to 120 million barrels a day by 2030. More than $3 trillion will be invested to find and produce that oil, and more than half of that investment will serve the needs of emerging economies.
The scramble to find and develop new oil fields and natural-gas wells will occur in places such as eastern Siberia and West Africa, as hungry nations hedge their bets should leading producers such as Saudi Arabia or Iraq falter.
"You need energy to develop an economy, so there's a great strategic value in securing energy assets," said Antoine Halff, an oil expert with the risk-management company Eurasia Group in New York.
One likely winner is Russia, along with some of the independent states that formerly made up the Soviet Union. They have proven reserves of 78 billion barrels, but the U.S. Geological Survey estimates there may be 171 billion barrels of estimated undiscovered oil in the region.
"Russia is virtually unexplored. Their potential is enormous," said Gary Swindell, an independent petroleum engineer in Dallas whose business is estimating reserves.
Africa is another winner. It has 87 billion barrels of proven reserves and estimated undiscovered reserves of 125 billion, mainly in West Africa. Central and South America have roughly the same, but, as in Russia, many in are prohibitively remote areas.
Elsewhere in the Western Hemisphere, Canada and Mexico are expected to remain the second- and third-largest U.S. oil suppliers. But smaller oil players are courting Washington's competitors.
In Venezuela, the fourth-largest U.S. oil supplier, President Hugo Chávez is trying to rewrite concessions to U.S. oil companies and has invited China and India to participate in oil exploration. Ecuador and Colombia are negotiating oil deals with China, too.
China, the world's fastest-growing economy, also is making heavy diplomatic and energy investments in Africa. It needs to: China is projected to consume within 20 years what the U.S. consumes today: 21 million barrels a day.
China's President Hu Jintao in mid-April cemented a partnership with Nigeria during a state visit to Beijing by President Olusegun Obasanjo. Nigeria is West Africa's biggest producer and a major U.S. supplier. China is trading loans for energy-development participation in Chad, Gabon and Angola.
In Sudan, China ignored evidence of genocide in the country's long-running civil war to entrench itself. It also effectively voided unilateral U.S. sanctions imposed because Sudan sheltered Osama bin Laden before he moved to Afghanistan.
Sudan's widely reported human-rights violations also sparked protests in Canada and Sweden that drove oil companies from those countries out of Sudan in 2002 and 2003. China, which obtains up to 10 percent of its imported oil from Sudan, has repeatedly blocked U.N. efforts to impose anti-genocide sanctions against its trading partner.
Data from the federal Energy Information Administration help explain China's moves. The agency predicts China will import about two-thirds of the oil it consumes by 2025, up from the current one-third.
India, which has almost none of its own oil, is equally hungry. The energy agency expects India to more than double its oil consumption to 5.3 million barrels a day by 2025.
China and India are investing billions in Iran despite President Bush's attempt to isolate the Persian Gulf nation because of its nuclear ambitions. The money is a lifeline for the world's fourth-biggest oil producer, which also sits atop the world's second-largest natural-gas reserves. Both are off-limits to U.S. companies.
Iran — China's largest oil supplier — signed long-term oil and natural-gas contracts this year worth tens of billions of dollars with China and India. Iran gave India's state oil company a 20 percent stake in the development of a key Iranian oil field.
In economic terms, it doesn't hurt the United States when developing countries promote oil drilling, extraction and production. That increases world supply, slakes demand and drives down prices. But access to ample energy is a prerequisite to world power.
That's a lesson not lost on Russia, the world's second-largest exporter of crude oil and holder of the world's largest reserves of natural gas. The United States, Europe, India and China have each carved out stakes in Russia's energy future, while, for its part, Russia has sought to control strategic pipelines for oil and natural gas flowing from or through former Soviet republics.
Bush will travel to Russia this month and is expected to lobby President Vladimir Putin for a multibillion-dollar pipeline deal to take natural gas to the Russian seaport of Murmansk. There, it would be liquefied and transported for sale in the United States.
Rogue
Out to shock the world over Saudi reserves
George Bush’s energy adviser Matt Simmons claims the global economy has misjudged oil supply, writes Valerie Darroch
AS President George W Bush strolled around his Prairie Chapel ranch in Texas last week with Saudi ruler Crown Prince Abdullah, oil prices were high on the agenda during talks between the leaders of the world’s biggest energy consumer and largest oil exporter.
At the same time, Matt Simmons, one of Bush’s energy advisers, was at a conference in Edinburgh, spelling out harsh facts on Saudi oil production which, if proved true, would have severe repercussions for the global economy.
Simmons’s belief is that Saudi has been overstating its oil reserves for years, its biggest oil fields are in decline and it will struggle to live up to its promise to crank up daily output from around 10 million barrels a day to 12 million by 2009 and later 15 million to meet global demand.
He visited Saudi in 2003 as part of a US energy delegation. By the time he left, six days later, he was convinced that the rosy picture the Saudis had painted of their key strategic resource was deeply flawed but he could not yet prove it.
“On the plane back from Riyadh I said ‘Something doesn’t meet the smell test …’ I have made my career out of uncovering illusions and I thought, wouldn’t it be odd if the biggest energy country in the world proved to be an illusion,” he says.
Chairman of Simmons & Co, the independent energy investment bank he founded in 1974, Simmons is about to publish a book – Twilight In The Desert: The Coming Saudi Oil Shock And The World Economy – in which he outlines the fruits of his painstaking research into the true extent of Saudi oil reserves.
Simmons studied some 200 petroleum engineering reports on the biggest oil fields in Saudi, a nation which boasts 25% of world reserves.
“It was the most exhausting project of my life … like putting together a complex patchwork quilt,” he says. He found “a smoking gun” – no evidence of major new finds beyond a limited “golden triangle” and clear evidence of major fields entering decline.
Global data on oil reserves is a sensitive topic. The big oil-producing nations, members of the Organisation of Petroleum Exporting Countries (OPEC) production cartel, are particularly sensitive about revealing data as any downward revision in oil wealth would have ramifications on economic and political stability. Simmons claims that OPEC members frustrated attempts to get real data over the past two decades because the higher their reserves seemed, the bigger the quota they obtained.
In the 1980s, Middle East reserves jumped by some 43% in three years, despite there being no major new finds.
Oil nations and oil companies alike have a motive to exaggerate reserves. Shell admitted last year that it had overstated reserves by a whopping 20%, sending its shares crashing. “Sure, there are other bombshells out there still to come,” Simmons claims.
He is calling for the world to adapt a new standard of disclosure of oil reserves, which he refers to as “13 points of light”. The idea has support from the International Energy Agency, International Monetary Fund and G8 leaders of the world’s richest economies.
But facing up to the truth is not easy for those with vested interests. Simmons says: “My two worst critics in Saudi think I’m looney … but I think I’ll sell a lot of books there.”
His arch critics – two senior figures in Saudi oil firm Aramco – visited Washington recently to debunk his theories, arguing that with new technology and future discoveries, they could hold production steady in mature fields such as Ghawar, the world’s largest.
But Simmons says the seeds for today’s problems were sown in the 1970s when US oil majors urged the Saudis to use water injection to get high oil flow rates. Simmons argues that this has led to significantly lower recovery levels. “Big Oil bagged the Saudis … people knew in 1972 that if they produced at those levels it would destroy the reservoirs,” he says. Does he fear the Saudis might want to silence him now?
“Some people in Saudi will think I’m a hero because the oil price will go up … I’m no Salman Rushdie,” he grins.
And what does Bush think of Simmons now? “He tells me to keep speaking out loudly and honestly about our energy situation,” Simmons replies.
In the run-up to Bush winning the Presidency in 2000, he hired Simmons to help write and edit his energy plan. Simmons had previously warned Bill Clinton’s administration of impending oil shortages. He advised Melanie Kenderdine, who became director of US oil policy, and former energy secretary Bill Richardson, to concentrate on finding out how much oil OPEC had rather than on begging for more.
“Melanie came back and said ‘Oh Matt. There’s no oil out there … But if you talk to the super-majors there’s no crisis at all,” Simmons says.
He takes a pride in being a contrarian, making strategic moves against conventional wisdom in his career that later proved to be prescient.
Son of a wealthy commercial banker, he was a research associate at Harvard Business School when he did his first oil-related deal in 1969, raising $340,000 for a diving company fighting off a takeover.
“The guy who ran it pioneered the use of mixed gases to take men below 200ft. If that hadn’t worked we’d never have had the North Sea,” he says.
Five years later, investors in the company made 60 times their money – a blistering start to Simmons’s career. He set up an office in Boston doing deals in a number of sectors. “But I’d fallen passionately in love with companies selling services to the oil industry,” he says.
When the Yom Kippur war broke out in 1973, sending oil prices soaring, Simmons saw his future: “I foresaw a boom in oil services of which we’d not seen seen the like since the railroad days.”
He moved to Houston and secured funding from Edward Bates & Sons, a bank controlled by Ivory & Sime, and founded by Jimmy Gammell, father of Cairn Energy founder Bill, just one of his long-standing links with Scotland in the early days of the oil boom.
“The industry was full of gruff old boys and we were the young Harvard MBAs. Man alive, it was fun,” he says
Bates was declared insolvent during the secondary bank crisis and Simmons had to buy back its shares from the Bank of England. There followed seven strong years, interrupted by another oil shock in 1981. “I thought there would be an oil crisis like you wouldn’t believe and I’d best get into restructuring,” he says.
Simmons steered countless companies through painful financial restructuring at a time when other banks declined to get involved. “It was the best of years and the worst of years,” he recalls.
His principles remain the same as in 1974 – specialise in energy products and services; offer the highest quality advice; pride yourself on being small; and have fun.
“When we emerged at the end of the 1980s I thought – our sector got nuked and we didn’t just survive, we are actually now an important firm,” Simmons says.
In 1993, Simmons moved into the securities business, which now accounts for 40% of revenue, and expansion continued in 1998 when Simmons hired Colin Welsh to head up a new office in Aberdeen.
A restless mind with unflagging energy, Simmons spends increasing time at his home in Maine where, besides indulging his passion for painting, he buries himself in energy research. If his latest book is anything to go by, he may have a few more shocks in store for the future.
01 May 2005
Rogue
AOBO....it's a Chinese company and there are huge swings in "euphoria" and "despair". There could well be trading rallys but I don't think the "time to load the boat" is at hand.
I've got a little experience playing China companies. Traded in and out of NYSE listed CYD for years beteen $4 and $1. When it broke $1 I sold out of my position when it was trading at a P/E of 5. It proceeded to trade down to a share price of .26 cents and a P/E of 1 1/2. And that was a NYSE listed company! It did rally in the next year 2 years to $37 so it pays to be patient.
AOBO may someday do the same......I'm just not confident the bottom is in here yet at all for AOBO.
Rogue
Heartland Oil & Gas Corp (HOGC.OB).......new 52 week low today. Big selling recently. Coal bed methane. Anyone ever do any DD on this one?
Rogue
AOBO....yeah, that offering really stunk. I bailed and avoided AOBO since. It surely capped any upside movement in my opinion and opened up the posssibility for much lower prices (which we are now seeing).
I still think it will work it's way quite a bit lower and would avoid it for now.
Rogue
AOBO.....used to own it. Never liked it after the "sweetheart" private placement at less than half the current market price at the time.
I sold out and said it was going below a buck and I think it surely will before the bottom is in.
Rogue
My take on oil......Investing in oil is a great hedge against the monetary insanity going on with the US dollar.
I think there is more than a little correlation with the rising oil price and the extreme amounts of US$ dollars being sent all around the planet! No one has brought it up here recently in this oil "discussion".....but besides all the regular supply/demand issues bantered about, we have a commodity(OIL)priced around the world in US$ dollars.
This is the price we pay(..gouging LOL!) for the fiscal and monetary insanity.....
Blame Allan "Bubbles" Greenspan and others for the "gouging" going on in the "price" of Oil. Even if supply and demand were in pefect balance the price would still probably be steeply rising because of the huge supply of dollars being sent all over the world. It would even be much WORSE(higher priced for us) if oil was ever being traded with a currency other than the US dollar. I wish Milton Friedman could explain this better to us!
PSSSST..... By the way, a revaluation of the Chinese Remnibi relative to the US dollar should also result in higher oil/gas prices for us in the US.
Rogue
BADOG....YOU DA MAN!!!!!!
Rogue
April 29, 2005
Quarterly Oil Production from Majors Dropping
According to quarterly reports, average daily production of crude oil and natural gas liquids from eight major oil firms dropped by some 304,000 barrels per day (-2.8%) during the first quarter of 2005 as compared to the prior year.
Combined liquids production for these firms dropped to 10.475 million barrels per day (mbpd) in 1Q 2005 from 10.779 mbpd in 1Q 2004.
The firms include ExxonMobil, BP, Royal Dutch Shell, Chevron Texaco, ConocoPhillips, Amerada Hess, Unocal and Marathon. Results from the mega major international companies such as Total and Eni, or the state-owned firms such as PEMEX and PDV are yet released.
Oilprod1q05percentage Oilprod1q05actual
Royal Dutch Shell experienced the largest actual drop—184 thousand bpd. Separately, the company faces losing 10% of its oil and gas acreage in Oman, its biggest source of oil in the Middle East, as the government considers bringing in other companies to revive production. (Bloomberg).
To offset these declines, these firms are angling for more access to reserves held by national oil companies (NOCs)—to work together with the state owners to develop more completely the oil in place.
At an oil industry conference last week, Jeroen van der Veer, CEO of the Royal Dutch/Shell Group and President of Royal Dutch Petroleum Company, remarked:
We currently use 200 million barrels of oil equivalent [BOE= barrels of crude plus natural gas counted by the equivalent amount of energy contained in a barrel of oil] a day to meet the world’s energy needs and of these 80 per cent are hydrocarbons. By 2050 we are likely to use 400 million barrels of oil equivalent a day of which 60 per cent will be hydrocarbons—that means we are going to see a very substantial increase in the use of oil and gas over the next half century.
And contrary to what some commentators say there is plenty of oil and gas left. It might not be in traditional locations, it might take unconventional forms, and it might be mined rather than drilled but there is plenty left. The costs of recovering these fuels has more than halved in the last decade and in an era of high prices they are now looking even more economic.
The IEA predict unconventional resources such as oil sands and oil shale could make up 8 per cent of global oil supply by 2030 at 10.1 million barrels a day. And there is similar scope to develop unconventional gas reserves such as coal bed methane.
In this last quarter, Shell produced 78,000 barrels per day of oil from oil sands—down from 82,000 (-5%) from the first quarter in 2004. The company also has maintained its development work on extracting oil from oil shale.
Increasingly, the companies will need to look in all the hard places for their supplies. Not that it is hurting the bottom line—revenues and profits were up again this quarter. But with peak production of the “easy” crude (relative term—some of the drilling efforts are technically amazing) approaching, you can count on rising oil and gas prices as a constant.
April 29, 2005 in Oil / Permalink
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Rogue
What would an end to the real estate boom mean to the US economy?
I'm not a believer whatsoever in the "soundness" of our economy. I've seen way too many people living beyond their means and indulging in the "good life" because they somehow felt wealthy because of the great gift of home appreciation from Alan "Mr. Bubbles" Greenspan.
Can they keep it going forever?
I can't get believe a couple I know who bought a 3 bedroom slab in Florida 3 years ago for $200,000. People are now tripping over themselves to buy it for $450,000!!
It looks SOOOOO easy to make a fortune in real estate....doesn't it??
Sure is good for the economy though if it lasts forever. Those hurricanes sure stir up economic growth too!
Rogue
Len...I agree on the housing market comments. I have not shorted a single stock in the industry for years.....even though many were bearish for way too long and recommended shorting and have been killed.
The "ball game" is probably in the 9th inning and believe that we are close(relatively speaking in a huge multi-year bull run) to a good point to be selling short real estate sensitive companies.
I'm a very,very patient investor but I believe we may soon be seeing an end to the real estate boom.
The CHARTS will tell.
Any good names to look at shorting?????
How about FNM to start?
Rogue
STUOF....Good Oil/Gas play. Added another block today...looks as if the bottom my be in for a bit, at least technically. Made a new 52-week low with no follow-through. That was my signal to buy another block.
Looking for a nice move up from here....I guess we'll see.
Rogue
China creating office to safeguard `energy security'? (updated PM 02:00)
2005/4/28
SHANGHAI, China (AP)
China has created a powerful new agency to oversee the country's energy security amid booming demand for power and surging oil imports, an official at the country's main planning agency said Thursday.
The National Development and Reform Commission is in the midst of preparations for a State Energy Office, a commission official in Beijing said, confirming a report by The Asian Wall Street Journal.
The official refused to give his name or provide other details.
The State Energy Office will supervise China's state-owned oil companies and a newly created strategic petroleum reserve, the Journal said, citing an unnamed commission official. It will report directly to the Cabinet, giving it greater influence than other regulatory agencies, the newspaper said.
China's communist government is alarmed at the country's growing dependence on imported oil and gas to fuel its surging economy, whose annual growth has topped 8 percent in recent years. By 2020, the country will depend on imports for 60 percent of its oil supply and 30 percent of its natural gas, according to a recent report by the U.S.-based Rand Corp.
China has aggressively sought oil and gas supplies abroad, signing multibillion-dollar supply contracts and pursuing closer relations with Russia, Iran, Sudan and other countries. Widespread power shortages have prompted criticism of the State Energy Bureau, a tiny department with about 20 people, that's responsible for overseeing an energy industry with assets of more than 10 trillion yuan (US$1.2 trillion; ?934 billion).
China created an Energy Ministry in 1988, but abolished it in 1993 amid a bureaucratic overhaul. The Energy Bureau was set up in 2003 to oversee oil and gas, coal, electricity and alternative energy sources, but power over those sectors is divided between various ministries and state-run corporations.
State media reported in December that the government was considering setting up the Energy Office to handle strategic planning and oversight of the energy sector.
The Journal said the office would be led by Ma Kai, who also heads the NDRC. Ma's deputies at the new agency will include Ma Fucai, who resigned as general manager of China's biggest oil company, China National Petroleum Corp., after a gas field accident in 2003 killed 243 people, it said.
The office's mandate could extend to securing foreign gas and oil, managing domestic coal supplies, resolving chronic electricity shortages and forcing factories to raise efficiency and cut pollution, the report said.
Rogue
Richard Russell...wise old pro. I think we should be looking to get short housing and construction stocks soon/now.
Jusy my opinion.
I'm 80% cash. My longs......mostly deep value and oil/gas are hedged 30% with a GM short. I believe I may be looking to hedge more on the short side.
Rogue
"Outside Zebras and Rogue Dolphins!"......are very similar creatures! LOL!
And in dollar terms, Wanger did even better...
Thanks to the miracle of compounded interest, he made over seven times more money than the average fund manager on Wall Street for more than a quarter of a century. And he eloquently describes in his book, A Zebra in Lion Country, he did it by mimicking the behavior of the "Outside Zebra" in the wild.
Zebras that reside on the outside of the herd are calculated risk takers. They know there is always a chance a lion could pounce out of the bush, wrap his gigantic paws around their neck and fatally sink his fangs into their jugular.
But the allure of lush green grass, fresh water and the cool breeze is worth the risk of an attack. You see...
Zebras that stay in the middle of the herd, the inside zebras (read: 99% of all fund managers in the world), are scared creatures. They don't want be eaten by a lion. So they cower around hundreds of their closest friends. It's a good strategy to stay alive. Problem is...
The inside zebras tend to be thin - gaunt even. The grass they graze on has been trampled on by hundreds of other zebras. What little there is to eat is up for grabs by the entire pack.
For the zebra, every move it makes is a calculated risk. And the same is true for investors. The question you have to ask yourself is, can you handle the risk of being an outside zebra investor? Or are you satisfied with the gaunt returns of an inside investor?
Wanger decided early on in his career he was an outside investor through and through.
Rogue
Oil price....It's this sort of analysis that will allow me to re-load oil/gas companies with the smart money.
Short term wee may see a stiff correction. Long-term.....I just fail to ever see $25 or $30 dollar oil even with a depression in the U.S.
Our U.S. dollar is a complete joke....what would happen to Oil supply/demand if the US dollar loses 50% of its value relatuive to the Chinese currency(which I feel is highly likely in the next 2 years)??
I think we see $100 barrel oil sometime in the US even with a depression. Hell.....the "idiots" running the show(I will not take sides in the left/right "Hegelian" game.....no politics!!) will even "blame" $100 oil/$6 dollar gallon gas for the depression!!
Welcome to the "New World Order".....or is it the "New World Odor"!! LOL!
Rogue
BWLRF.....I haven't bought any yet. I have a pretty nice block of NXG, which has also been trading poorly and is a somewhat similar company/industry. I have not added yet to NXG to "average down". That may be coming soon but not just yet.
I'll "ring the bell" when I think it's safe to buy into BWLRF or NXG. I think we see more downside damage but we are probably getting close to a "bonafide" intermediate term bottom.
Rogue
Gouging......Too funny!
Tell Alan "Bubbles" Greenspan to stop printinng all those US dollars and sending them all over the planet. Maybe then the price of oil won't reach $100 per barrel and gasoline at $5 per gallon soon enough.
It's really more like Alan Greenspan "Gouging" the value of your money!!
Rogue
10 bagger..."Speculation in low Cap oil stocks will in my opinion cease..... "
Why do you believe that? What is your time frame on this thinking?
In my opinion they may "cool off" for a while but down the road(in the next 2 to 6 months)they will get hot again. I believe and happen to agree that the "oil spike" that has been talked about by the likes of Goldman Sachs and others will eventually happen sooner or later.
Anyway it makes sense to me to "invest" in value in the small cap Oil/Gas sector. As they get sold off value will be more apparent again(if they do sell off?.) If "speculation" returns down the road in the micro oils....... that'll be "gravy" and all the better!
Rogue
STUOF/San Telmo Energy..........small oil/gas company mentioned a few times by Bobwins.
Just picked up a block here. It's very oversold technicaly right now and trading right near it's 52 week low for the year.
Rogue
GFCI......Maybe you should post the number that actually get's answered in case anyone else interested may like to do a little DD.
Just a thought.
Rogue
FPPC.....breaking down again today. I'm out for now. It looks as if it's in a "C" wave of an ABC correction. It'll be interesting to see if the last "push low" of $1.80 holds.
Whomever first brought this one to the attention of the board congrats and thanks! I was a big accumalator(quietly) of shares originally at .63 to .67 back then and sold most near $3.00.
Rogue
Cuba, China, And Venezuela: A New Axis Arises. Oil: Refinery Concerns On The Rise. Stocks Stuck In The Mud.
by Dr. Joe Duarte,
Dallas, TX, April 25, 2005 , 08:00 EST
Stocks are stuck in the mud. The major indexes have still not resolved their issues with the 200 day moving average. Rising oil prices are back. And this week offers new economic data to move the markets. Wednesday could be a very interesting day, as oil supply data will be released.
Today’s Analysis: Cuba, China, And Venezuela: A New Axis Arises.
U.S. citizens taking photographs of Venezuelan infrastructure were recently arrested, prompting Venezuelan President Hugo Chavez to claim that the United States is planning to attack his country.
According to CNN.com: “Venezuela's President Hugo Chavez said Sunday that a woman linked to the U.S. military had been arrested while photographing a military installation, and several U.S. citizens were also arrested for taking pictures of a refinery, signs, he added, that Washington may be plotting an invasion of his country.” According to Reuters, the arrest of the unnamed woman, reportedly a U.S. naval officer occurred several months ago. She was not identified by Reuters. And her whereabouts, at the time of the report, were not reported.
Chavez provided few details about the arrest, but warned, during his weekly radio show that ["If she or any other U.S. official does this kind of activity again, they will be imprisoned and face trial in Venezuela."] According to the CNN report “He also said that the other detained Americans were journalists caught while taking pictures of El Palito refinery, some 100 kilometers (62 miles) west of Caracas. They were released.”
The actions coincide with the sudden ending of military ties between Venezuela and the United States. Chavez, last week notified five U.S. officers in Venezuela, by phone, that they would be asked to leave the country. According to reports, he cited that U.S. officers were spreading negative ideas about him, to the Venezuelan military, fomenting anti-Chavez feelings in his military.
Cuban Directive Strengthened
The timing of Chavez’ announcements and moves to further separate Venezuela from the U.S. are not accidental. According to Reuters “Venezuelan President Hugo Chavez will visit Cuba this week to promote exports of everything from sardines to chocolate and forge a new bond in the alliance between his oil-rich nation and the Communist-run island.”
The deal is fairly simple. Chavez ships oil to Cuba, and Cuba offers services to Chavez. “Cuba pays for the oil with medical and educational services. More than 20,000 Cuban doctors, dentists, sports trainers and other technical experts now work in Venezuela. Cuba watchers say the shipments of crude and refined products have increased beyond the 53,000 barrels per day agreed to in 2000 and are closer to 78,000 bpd, with little evidence of cash payments for the $1 billion-plus oil bill.”
Chavez will be opening a trade fair in Havana this week in which he is launching a barter based trade zone with Cuba.
In fact, Cuba’s major export these days, aside from bizarre ideology is physicians, to places like Africa and Venezuela. There are some who believe that at least some of the doctors may be spies, and military advisors in disguise.
Rogue
SYTE.....For what it's worth I took a flyer today at .023. It seems to have some speculative/value appeal.
Rogue
Asia can grow without trade with US: Faber
Investment Guru Marc Faber says that Asia could easily grow by itself without any trade with the US or with Europe. Asia can have an economic block by itself and grow at significant growth rates because we start with markets that are not yet saturated.
Excerpts from CNBC-TV18’s exclusive interview with Investment Guru Marc Faber:
On the sell-offs in the global markets:
Well, not necessarily, but very clearly over the last twelve months or so, money supply growths and liquidity growths has been de-accelerating and usually this leads to a more unfavourable environment for asset markets and as you know we had very high asset inflation over the last couple of years, within them have been consumer price inflation. But all asset markets whether its real estate or equities or bonds etc, everything has risen in value, and these markets mostly in the US are very stretched and so when liquidity tightens, these markets obviously sell-off.
On the possibility of a sharp depression in the US economy:
Actually you don’t need any investment bank to tell you that there is a slowdown. All you have to do is to look at the performance of consumer stocks, such as Wall-Mart or General Motor or Harley-Davidson etc and their sharp decline, and also their declines and the under performance of financial stocks will tell you that something is not right, that something is wrong, especially in the imbalanced US economy. And of course, there will be a slowdown.
The question is of course, is there a slowdown and is it that deflationary where bonds will rally and interest rates will fall again or is it the worst of all in possible worlds, which I believe will happen if the economies slows down, inflation accelerates and you are moving to some kind of stagflationary environment, which is a total disaster for equities.
On global liquidity:
I wouldn’t bet that if the US markets continues to sell-off, the other Asian markets and other emerging markets would rally or perform well because we are talking about global liquidity and if its shrinking, usually the emerging markets suffer the most for a while. But I take the point that in Asia recession would mean, maybe growth slowing down from, say 6-9% in China to a growth rate of say 3-5% , whereas in the US, recession would mean an absolute decline in GDP.
On the US economy:
Basically the US economy is disaster in the waiting. It’s total catastrophe. It has been driven since 2001 by asset inflation. This is the most dangerous type of inflation because it provides people with the illusion of wealth, when actually no wealth is being created. But illusion of wealth arises from rising debt levels, that lead to rising asset prices, in real estates and on those on rising asset prices that people can make more money and then spend it on cars and other consumer goods, which they don’t really need. So this economy is not sustainable and the penalty would be very high. The penalty will come in two-ways, either the Fed has to continue to tighten and they have to push up Fed fund rate, which is now at 2.75%, but still below the rate of inflation.
Now to push up the Fed fund rate to say 4.5-5%, this would be bad for the asset markets, for real estates, for stocks, but it would probably be good for the dollar. The question is Mr Greenspan has done nothing else for the last 25-years then to print money and each time there was a problem, he has printed more money and so if asset markets begin to decline, I would expect Mr Greenspan actually to stop tightening and then what will happen is that consumer prices will start to rise and inflation will shift out of asset market into consumer prices and that will knock-off the bond market in the US and push up long-term interest rates, and in that scenario the asset markets will obviously also not perform well, infact they will perform worst, then if Greenspan has tightened monetary policy but they can then keep the illusion of wealth a little bit longer going. But the end result will be much worse.
On Asia's growth without trade with US or Europe:
I have the following view, the US is always threatening the Asian countries with protectionist measures, lately in the case of China with textile quotas again and import duties. I would say in principle, the Asian region with 3.6 billion people and countries as diverse in their economic development such as Japan, Bangladesh, India, China, Indonesia, Vietnam and so forth, Asia could easily grow by itself, in other words, without any trade with the US or with Europe.
Of course, the adjustment process would be painful and would take 3-4 years, but in principle, Asia could have an economic block by itself and grow at significant growth rates because we start, with markets that are not yet saturated, we start with very favourable demographic conditions and we start with very dynamic societies.
Rogue
TRAC.....value wins out. I got my average cost down to $2.15 buying the past week before the pop. I will look to re-enter again on a further pullback. That will be averaging up and those will most likely become my "trading" shares.
I thought it was an easy doulble at $2.20.....looking for $5 and something handle for TRAC seems reasonable in the future??
Rogue