Sunday, January 21, 2007

Kenneth Deffeyes channels Gordon Gekko.

The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.

Gordon Gekko, Wall Street.

Surely one of the most memorable movie quotes ever, who can forget Michael Douglas giving that immortal speech. The magic of Hollywood...

Ah, okay, back to business. So what's the connection between that quote and Kenneth Deffeyes? Well, nothing directly, but I got a little nervous when I read the latest update from Kenneth Deffeyes and he's plugging energy stocks like a cheap, two-bit, um... blogger.

Call me old fashioned, but I prefer my academics to stay in the mystical realm of theories, research, higher ed, learning and the occasional socialist utopian rant. When I see academics talking money and stocks and sounding all Wall Streetish, I get dizzy, start having visions of LTCM, and start worrying that we've all gone to one side of the boat again.

However, we already took a pummeling this month, and hey, it's not like they interviewed him in Playboy for Chrissakes. So I'm gonna go with letting this one pass.

Beyond Oil: Update, End of 2006.


I could, and did, arrange my own non-sucker bet by investing in several oil and natural gas stocks on a scale larger than $1000. It worked out quite well, thank you, although I have to grit my teeth during the downswings in price: Grit, grind, crunch.

As I was writing this, a statement from the Saudi Minister of Petroleum was reported by Forbes, the International Herald Tribune, and the Washington Post. He announced that Saudi Arabia will increase its oil production from 9 million barrels per day to 12.5 million barrels per day by the year 2009. I hope they succeed. Meanwhile, it keeps the other investors complacent while I buy some bargain oil stocks.

I enjoy talking with financial firms about the oil problem. It is gratifying that many in the financial community took an early interest in the consequences of a downturn in world oil production. One of the nicest compliments that I received was in Tokyo. A fellow told me that he read Hubbert's Peak five years ago, believed it, and told me that he "made a hell of a lot of money." I wasn't quick enough to ask how many zeros were in a "hell of a lot of money," but he heads the largest hedge fund in Asia.

I'm not in the business of recommending individual stocks. That requires far too much homework; I don't have the patience. Recognition is growing slowly that the world oil situation is approaching a crisis. But whenever the price of gasoline goes down, a lot of people think that the problem has disappeared.


He also points out that May 2005 is so far showing up as the peak in conventional oil production according to EIA statistics, which isn't far from his prediction of December 2005. I take that with a grain of salt since the data is murky, subject to revision, and nobody really knows the complete story about current production. If we peaked back then, then this fall to $50 is an overreaction on the downside and we should have a strong move upwards later this year (basically, Boone Pickens' position).

I'm leaning towards the peak still being in front of us somewhere, mostly because I think we will see some wild price moves in oil prices around the peak, and especially by a year or two out. Wackier even than what we've seen so far, I think.