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23 comments on An unsteady start to the year

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Gets IT on January 16, 2006 - 2:41pm Permalink | Subthread | Comments top
I really can't believe that some people actually think the price of oil is rising because of the small shortfalls that occur between supply and demand from time to time. Some butterfly stirs up the air and ... bang... price rise. Since when do price-supply-demand charts have such steep slopes and tightly defined equilibrium points? Bush tells you the price of oil is rising, because you don't like to hear that the US Dollar is really a "US Peso". The price of oil is rising because the value of the US Dollar has fallen 40-50% over the last 5 years and looks like it will continue to do so. 50 billion/month, 55 billion/month, 65 billion/month, 58 billion/month outgoing every month in trade deficits? 850 billion a year? Hell, if it goes down from 65 to 59 billion, the idiot FX traders think its "Good News". But did you notice last time that reality caught up with them the next day and the Euro and Yen was back up again? How do you keep the value of the USD up with trillions in government overspending and US consumer foreign purchases? Look at the price of oil when converted to Euros/Barrel or Gold/BBL and you will see that it is more or less (or was until the last 3 months) pretty much the same as its been since the Euro was initiated. Americans... a nation of clams and ostriches! Well now I see how, "A one-eyed man gets to be king in the Land Of The Blind."
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Nate Hagens on January 16, 2006 - 3:25pm Permalink | Subthread | Parent | Comments top
Are you sure you Gets it? While I agree that the US deficit is scary and unhealthy, a quick look at statistics shows that crude oil has increased from 11$ to 64$ since the creation of the Euro in 1999, an increase of about 500%. In the same period, $/Euro exchange rate has ranged from .85 to 1.35 but is basically right where it was 7 years ago
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Stuart Staniford on January 16, 2006 - 4:06pm Permalink | Subthread | Parent | Comments top
From sasquatch's link:

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Nate Hagens on January 16, 2006 - 5:33pm Permalink | Subthread | Parent | Comments top
Thanks Stuart. Ill figure out the graph posting eventually..;)

So, of note, is that in the past 12 months since the Euro peaked on 12/28/2004 (oil closed at $41.7 on that day and $64.3 Friday), oil has increased 54.20% in dollars but increased 73.03% in Euros. (1.54*1.3633/1.215)

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Gets IT on January 16, 2006 - 6:34pm Permalink | Subthread | Parent | Comments top
Straight lines don't work in making maximum financial returns. You gotta' follow the curves and buy when its low and sell when its high and make the appropriate correlations along the way. I'll bet you're bank balance is probably "pretty much the same as it was 7 years ago" too, isn't it? Now ratio by the price of gold then and now. See where linear thinking got you?
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Nate Hagens on January 16, 2006 - 7:59pm Permalink | Subthread | Parent | Comments top
Gets.

I have long since abandoned the strategy of buying low and selling high - I learned years ago to buy high and sell higher, and in fact when I ran my hedge fund that was precisely the core strategy. The market undervalues 3-5 standard deviation events so going with the trend, long or short, and pyramiding makes one alot of money ($ or your precious Euros).

Gold has gone up from $300 to $565 (up$8 tonight) in the past 7 years -roughly up 80%. <img=http://www.kitco.com/LFgif/au00-04.gif>

Oil over the same period is up 500%. Energy is what makes the world work. Without energy we have nothing. As long as the economic system is intact, which I expect for sometime, oil will continue to go up more than gold. Only when currencies are worthless will gold have any actual true value, as a barter mechanism. Until that time, I will hold a small % of my assets in Krugerands and Maple Leafs as insurance against that type of world but mostly be invested in oil, gas, alternative energy, etc.

Lest this become a 'whose currency is longest thread' that will annoy TOD readers, I will defer to your trading wisdom and desist.

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Agric on January 16, 2006 - 8:48pm Permalink | Subthread | Parent | Comments top
Ummm... the US$ rose 15% in 2005, though that was after a 30% decline in the prior 5 years. I do expect the $ to resume declining this year though. However, I completely agree with you on the US trade and Federal deficits - they are unsustainable in the long term and I would venture that we are nearing the end of that long term within the next year or two, whereupon the $ will drop significantly.

The $ price of oil has been remarkably insensitive to $ forex fluctuations these last 3 years or so, increasing at a bit over 30% in $ terms each year. Might get frightening if that association breaks in response to a $ crisis.

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