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150 comments on DrumBeat: October 11, 2008

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Black_Dog on October 11, 2008 - 10:59am Permalink | Subthread | Parent | Comments top

People who are experts in economics and finance usually don't understand energy. A prime example might be Alan Greenspan, who was a disciple of Ayn Rand and who spread her mantra of unbridled capitalism leading to today's extreme distress.

http://www.noblesoul.com/orc/bio/greenspan-time.html
http://www.nytimes.com/2008/10/09/business/economy/09greenspan.html

Since it was cheaper in economic terms to rely on imported oil instead of domestic supply in the 1980's, we imported ever larger volumes of the stuff. As a nation, the U.S. could have continued Nixon's "Project Independence" and Carter's follow on efforts, but we did not. Now, we are finding that to have been a very bad decision, as there may not be enough time to make a transition to sustainable energy sources as the fossil fuels are depleted.

Oil at $30 a barrel? Maybe for a short while, given the inelastic nature of oil production and consumption. But, the Peak will eventually be seen and the price will of necessity begin to soar again. Like the stock market on a given day, there will be "volatility", but the long term price trend is likely to be upward.

E. Swanson

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westexas on October 11, 2008 - 11:11am Permalink | Subthread | Parent | Comments top

The WSJ website had the following headline, linked on yesterday's Drumbeat:

The Official Demise of the Oil Bubble

Jim Rogers noted that there have been at least two large price pullbacks since the current secular bull market started in 1999. That gave me the idea for the following

A What-If: Basically the same story, but written at the end of 2001:

In November, 2000 the price of crude oil averaged about $34 a barrel. What seemed like a bewildering ascent in the price of crude at the time is now a relief to traders, who watched oil fall $14 a barrel to average about $20 a barrel in November, 2001 on the New York Mercantile Exchange.

Like a number of other commodities, oil’s move went from a steady ascent to a vertical bounce in the fall of 2000, before speculative excess started to drain from the market. And those who believed that the oil price was justified by fundamentals — being, as it is, an actual product, rather than an Internet company’s vague promise of revenue — are smarting.

“This is a market that is basically returning to the price level of July, 1999, which it arguably should never have left,” says Evans Tims , energy analyst at Citigroup. “We pumped up a big bubble, expanded it to an impressive dimension, and now it is popped and we have bubble gum in our hair.”

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wisco on October 11, 2008 - 11:51am Permalink | Subthread | Parent | Comments top

Oil prices remain 2-3x more expensive than they were back in 2003-2004 when the NASDAQ settled in the 7,000-8,000 range.

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clifman on October 11, 2008 - 6:25pm Permalink | Subthread | Parent | Comments top

Que? NASDAQ peaked in 2000 during dot.com bubble at about 4,600. In '03-'04 it was in the 1500-2000 range.

http://moneycentral.msn.com/investor/charts/chartdl.aspx?D5=0&CE=0&D4=1&...

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alan on October 11, 2008 - 12:14pm Permalink | Subthread | Parent | Comments top

Jim Rodgers on CNBC.com yesterday

The current rescue plans, which will force governments to issue more debt, print money and flood the markets with liquidity, will flare up inflation after the crisis is over and will create worse problems, Rogers warned.

"We're setting the stage for when we come out of this of a massive inflation holocaust," he said.

http://www.cnbc.com/id/27097823

If the bailouts lead to a spike in inflation, into the double digits like in 1980, recovery form the mortgage crisis will be followed by an new crisis as consumer's credit card payments climb rapidly. A wave of bankruptcies which could follow the 'recovery' would renew pressure on the banks holding these debts.

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chemE on October 11, 2008 - 12:56pm Permalink | Subthread | Parent | Comments top

That is not true,

(1) Should there be an increase in the money supply (so far it is shrinking) AND
(2) Should there be resultant asset-price inflation

(3) It will be great for Americans who are Asset Rich (Houses, real-estate, commercial property via REITS, other assets) but Cash poor.

Americans will easily be able to pay off their credit loans via selling of some assets or borrowing cheaply agains assets that are worth more now (e.g. home equity) instead of relying on usurius credit card rates.

Rogers is trying to buy the same assets on the cheap, while shedding crocodile tears for average Americans. (& he has always done that)

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chemE on October 11, 2008 - 1:16pm Permalink | Subthread | Parent | Comments top

Also Rogers has publicly stated on many occasions that the place where he puts his money is the PRC.

The only cash rich entities are KSA, PRC, some other gulf states, Russia, Norway

Rogers is also fond of coming on TV (he is frequently invited to Fox News) and boasting about how rich he is:

Questions:

(1) Is he really that wealthy?

(2) How much income tax does he pay? Since he talks about everything else why does he not boast on the amount of tax that he pays?

(3)Perhaps he has sheltered his wealth in a charitable foundation? No one seems to have heard of it, unlike for e.g. the Bill and Melinda Gates foundation

(4) What is the source of his wealth?
Corrolary: I will assert that traders cannot get that wealthy. Buffet had operating companies and is buy and hold. The other famous stock investor (who may be broke right now after his lousy bets on YHOO, MOT, others) is Carl Icahn. But all his bets are public knowledge. The United States Government REQUIRES that any individual or entity who has more than $100 million in investible assets file statements with the SEC disclosing their holdings. Where are Rogers' filings?

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jteehan on October 11, 2008 - 9:59pm Permalink | Subthread | Parent | Comments top

This is the same Jim Rogers who said China was a screaming buy even at 5000. It's at 2100 for those of you scoring at home.

Half the time he's right and half the time he's wrong. I have similiar success when I'm guessing as well. Maybe I'm just jealous of his bike ride around the world.

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chemE on October 12, 2008 - 2:13am Permalink | Subthread | Parent | Comments top

Strangely enough he was able to accomplish this motorbike-ride around the world without being kidnapped or otherwise harmed. Yet he is a self acknowledged Wealthy American, who went to all
sorts of places that do not have much law and order.

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150 comments on DrumBeat: October 11, 2008

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