Land of Black Gold

Not to put too fine a point on it..

2009-10-11T09:05:00.003-04:00

Re: my last point about there being enough natural gas to help mitigate the most serious impacts from oil peaking. There are issues with this (see bottom), but I'm confident we won't be suffering a "die off", to quote one of the more extreme peak oil sites.

BP sees possibility of 100 more years of natural gas.

Reserve estimates are rising sharply as technology unlocks unconventional resources,” Hayward said in a Buenos Aires speech posted on the London-based company's Web site. “Estimates vary, but the U.S. may now be sitting on between 50 and 100 years worth of recoverable natural gas.”

New Way to Tap Gas May Expand Global Supplies.

Because so little drilling has been done in shale fields outside of the United States and Canada, gas analysts have made a wide array of estimates for how much shale gas could be tapped globally. Even the most conservative estimates are enormous, projecting at least a 20 percent increase in the world’s known reserves of natural gas.

ANALYSIS-Natgas giants still reeling from U.S. shale shock.

And big gas exporters noted that shale gas comes with its own problems, including massive water use and other environmental complaints, as well as the need for constant investment that could limit its impact.

"There's a lot of myths about shale production," said Gazprom Deputy Chief Executive Alexander Medvedev.

"We should not forget what the shale gas production profile looks like. If you stop drilling, production will fall by up to 80 percent in the next year."

Dr Strangelove, or How I learned to stop worrying and love peak oil.

2009-08-02T19:58:00.002-04:00

Okay, I'm totally kidding. Peak oil is a serious problem, and one that I believe looms in front of us in the near future.

However, through a combination of conservation, lifestyle adjustments, and the increased use of alternatives, I think humanity will figure out a way to cope with this problem. Natural gas looks promising as something to help mitigate the problem. I worry there's a bit of overpromise here, but we'll see.

In the meanwhile, personally, I've put other items on my front burner.

So, as Douglas Adams once put it.. "So long.. and thanks for all the fish."

Penn Energy: Questar President: Natural Gas is Abundant

The Oil Drum: How Much Natural Gas Do We Have to Replace Gasoline?

Charles Nenner says long term cycle bottoms soon.

2009-02-04T08:22:00.003-05:00

CNBC: Nenner Cycle Signals Entry Point.

You must also watch the Bloomberg video at his site to understand his full picture though.

See top video link here:

http://www.charlesnenner.com

Charles Nenner on Deflation, Commodity Stocks, and THE Market Bottom.

2008-10-31T06:04:00.004-04:00

Bloomberg: Charles Nenner Sees Opportunity in Commodity Stocks: Video.

Note: To view the video, click on the link towards the right side, under the heading "Related Video and Graphics".

Fear and Loathing in Closed End Funds.

2008-10-26T08:22:00.005-04:00

Closed end funds are like ETFs (exchange traded funds) in that they are traded on an exchange like stocks, and are made up of a bundle of other securities. Closed ends funds are unlike ETFs in that ETF shares are created and de-created (for lack of a better term) each day dynamically as demand warrants. Closed end fund shares do not have this dynamic creation/de-creation aspect. The other big difference is that closed end funds often trade at discounts or premiums to their underlying asset value, depending on how the market feels. When everybody wants in, they tend to trade at premiums, and when there is less or no demand, they tend to trade at discounts, sometimes severe.

It's interesting to look at the premiums/discounts that closed end funds have traded at over time. Sometimes it can identify an extreme in market emotion that could signal a panic bottom.

Below I show a few closed end funds and their premium (+) or discount (-) from their net asset value. The data is from Barron's. Notice the extreme swings and readings on the week ending October 13, 2008. It's too early to call the exact bottom in the market, but based on these readings, and the way we traded on Friday (futures limit down, lots of talk of a crash, but a day turned out less feverish than anticipated) suggests the extreme panic point may be behind us.

Premium/Discount from Net Asset Value on Selected Closed End Funds.

Stock
BDV = Blackrock Dividend Achievers
BGR = Blackrock Global Energy
GUT = Gabelli Utility
APB = Asia Pacific Fund

Bond
WIA = Western Asset Inflation Linked
HIS = Blackrock High Income (High Yield)
BFK = Blackrock Muni Income

Date BDV BGR GUT APB WIA HIS BFK

04-02-07 -6.3 -10.2 +18.6 -11.7 -10.3 -4.0 +16.4

06-30-08 -12.2 -15.7 +31.1 -9.6 -9.0 -12.1 +3.5

09-22-08 -17.6 -16.1 +44.8 -4.3 -14.0 -25.0 -7.2

10-13-08 -17.7 -23.4 -0.4 -22.2 -23.2 -38.1 -28.3 <-- Fear Itself

10-20-08 -12.0 -11.9 +41.8 -3.3 -14.5 -19.3 -6.1

10-27-08 -9.2 -13.8 +37.6 -13.4 -10.9 -19.6 -4.5

Unfortunately, it's difficult to make those line up very well.

The Panic of 2008 bottoms on Oct 14-15?

2008-10-06T12:48:00.000-04:00

I see that Barry Ritholtz has come up with the moniker of "The Great Financial Crisis of 2008", but I personally like "The Panic of 2008" a bit better.

While there are certainly legitimate roots for some of the selling, it is now extending well beyond that into a pure financial panic that is spreading into many corners of the market and around the globe.

I highlight here a recent video from Charles Nenner, who makes market predictions based on history and studying various cycles. Why highlight Charles Nenner? Well, he has a pretty good track record of making market calls, including a call that 2008 was going to be a bad year and one that it would be very difficult to make money in.

Mr. Nenner is now suggesting that we may hit a cycle low around October 14 or 15th, but it's also very important that we hold the lows we made recently. Unfortunately, October 14/15 (i.e. next week) seems a very long way off right now, and it doesn't appear that we will hold the market lows. His work also suggests that oil will go back to new highs sometime in mid-2009. And if next week seems a long way off...

Charles Nenner.com see Fox News video at the top for his latest views.

When good (lefty) papers go bad.

2008-10-03T08:19:00.006-04:00

When the New York Times starts bringing up the possibility of global cooling, you know it's about to get interesting. Note the oblique reference to global cooling, "would more than offset the warming effect".

New York Times: Sunspots Are Fewest Since 1954, but Significance Is Unclear.

Quotes:

Scientists are not sure why this minimum has been especially minimal, and the episode is even playing into the global warming debate. Some wonder if this could be the start of an extended period of solar indolence that would more than offset the warming effect of human-made carbon dioxide emissions. From the middle of the 17th century to the early 18th, a period known as the Maunder Minimum, sunspots were extremely rare, and the reduced activity coincided with lower temperatures in what is known as the Little Ice Age.

Compared to the Maunder Minimum, the current pace of sunspots “makes it look like we’re having a feast, not a famine,” Dr. Hathaway said.

Scientists expect that sunspot activity will pick up in the coming months, but exactly what will happen next is open to debate. Dr. Hathaway had predicted two years ago, based on the Sun’s behavior near the end of the last cycle, that the maximum this time would be ferocious.

“I’m getting worried about that prediction now,” he said. “Normally, big cycles start early, and by doing that, they cut short the previous cycle. This one hasn’t done that.”

But many of the other competing predictions — more than 50 over all — pointed to a quieter-than-average cycle. “They do kind of go all over the map,” said Douglas Biesecker, a physicist at the Space Weather Prediction Center who led an international panel that reviewed predictions.

Warren Buffett invests in Chinese electric car maker.

2008-09-28T07:41:00.007-04:00

$230 million is sort of chump change for Warren Buffett, but it's interesting nonetheless. He also recently bought Constellation Energy Group, a US electric provider that got itself in a bit of a financial crunch.

MarketWatch: Buffett powers into electric cars, buying 10% of BYD.

Quotes:

MidAmerican Energy Holdings Co. said in a statement that it would buy 225 million shares of Shenzen-based BYD for HK$1.8 billion.

BYD's Website says the company's 130,000 workers produce information-technology products including nickel-cadmium and lithium-ion rechargeable batteries, mobile-phone displays, keypads and housings; laptop-computer keypads, and more.

On the vehicle side, the company produces electric cars, ranging from economy to luxury models, as well as car molds and car parts.

CNBC: Warren Buffett Invests In Chinese Company Developing 'Green' Cars.

Quote:

BYD chairman Wang Chuanfu is quoted in the release as saying, "We are extremely pleased and grateful that Berkshire Hathaway and MidAmerican will be our long-term investor and partner, as we bring our electric vehicles and other environmental protection measures to the global space."

Links:

http://www.cnbc.com/id/26916857
http://www.baltimoresun.com/business/bal-te.bz.buffett19sep19,0,4547417.story
http://www.marketwatch.com/news/story/berkshire-powers-electric-cars-buy/story.aspx?guid=%7BA0737406%2D0BEC%2D4527%2D84CB%2D8EEA08BD1792%7D&tool=1&dist=bigcharts&

Warren Buffett: Thespian

2008-09-23T22:23:00.005-04:00

Just as things are getting shaky again, and on a day that Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and SEC Chairman Christopher Cox endure the slings and arrows (not to mention helpful guidance) of the Senate Banking Committee [Thank you Founding Fathers for ensuring the separation of powers!] to defend their bailout plan, Warren Buffett, with the dramatic flair of JP Morgan a hundred and one years ago, steps into the breach and invests $5 billion in investment banking firm Goldman Sachs. But he made this deal not without his pound of flesh, as the Goldman preferred shares he is buying yield a juicy 10%, and the warrants he gets are already in the money.

Nice deal Warren, and nice timing too. [Ya big ham - you know they're gonna be talking about this one for a while.]

Does the Financial Panic of 2008 now morph into the Financial Buying Panic of 2008?

Tough call - I'd guess yes, mainly based on observations of an orgy of negativity.

And there are probably a number of people short who have now overstayed their welcome.

Bloomberg: Goldman Gets Buffett's Backing in $7.5 Billion Fundraising Plan.

Links:

http://en.wikipedia.org/wiki/Panic_of_1907
http://www.bloomberg.com/apps/news?pid=20601087&sid=aM69.BQoLCbk&refer=home

Videos of the Week.

2008-09-20T15:38:00.004-04:00

CNBC: S&P Head on Downgrades.

Alternative title: Dylan Ratigan Goes Postal!

Dylan Ratigan lets a guy from ratings company Standard & Poor's have it in this first video, and justifiably so. The ratings agencies overrated (**way** overrated, judging by the crisis) debt instruments, and then, in a pure "There's gambling going on in here!" moment, pulled the rug out from companies that dealt and/or now hold them with downgrades based on the toxicity of these instruments. While many people are to blame here, the ratings agencies were supposed to stand above it all as impartial judges, an obligation they completely abrogated.

The quote of the year: "The ratings agencies were directly complicit in the creation of the securities that you now are, like a two year old with a bazooka, blowing people's heads off with."

CNBC: Making Sense of the Market.

Alternative title: Kenneth Heebner Goes Financial!

Perhaps even wilder than the first video, Kenneth Heebner reveals he's got an over 30% allocation to financials (mainly strong banks) in his CGM Focus Fund. And while it sounds nuts, Heebner has a knack for sector calls. I don't know if he's right or early (or WAY early), but gut wise, I like this call.

Links:

http://www.cnbc.com/id/15840232?video=859038023
http://www.cnbc.com/id/15840232?video=860916353

The global cooling debate.

2008-09-02T09:16:00.001-04:00

Daily Tech: Sun Makes History: First Spotless Month in a Century.

Quote:

The event is significant as many climatologists now believe solar magnetic activity – which determines the number of sunspots -- is an influencing factor for climate on earth.

Delta Farm Press: Global cooling gains momentum among scientists.

Quotes:

“Carbon dioxide is not to blame for global climate change, Sorokhtin said. “Solar activity is many times more powerful than the energy produced by the whole of humankind. Man’s influence on nature is a drop in the ocean.”

Canadian climatologist Timothy Ball said, “If we are facing (a crisis) at all, I think it is that we are preparing for warming when it is looking like we are cooling. We are preparing for the wrong thing.”

wattsupwiththat: Livingston and Penn paper: “Sunspots may vanish by 2015″.

Belfast Telegraph: Is there a cold future just lying in wait for us?

On-Line Opinion: Activity is quiet on the sunspot front.

Quotes:

At the time of writing the sun is still spot free. NASA solar physicist David Hathaway points out, quite rightly, that the sun’s behaviour is within major statistical limits - just. The average solar cycle lasts 131 months plus or minus 14 months and the current cycle - the quiet period counts as part of the old cycle - has lasted nearly 143 months. The solar cycle went quiet for years at the beginning of last century before restarting, Hathaway notes, so nothing out of the ordinary has happened - at least, not yet.

Another group at the US National Solar Observatory in Tucson, Arizona, William Livingston and Matthew Penn, believe that there may be a deeper process at work. Sunspots are highly magnetic regions that are somewhat cooler than the rest of the sun’s surface (they appear dark compared to the rest of the sun, but if seen separately would appear very bright) and the two researchers have been tracking both the temperature and magnetic strength of the spots. They found that the spots have been warming up and becoming less magnetic. An average of the trend is a straight line going down which hits the bottom of the graph at 2014. They have concluded that, although sun spots may appear briefly from time to time in the next few years, they will disappear by 2014.

This conclusion is in a paper submitted to the journal Science three years ago but rejected in peer review. With the sun now so quiet the paper has been resurrected from a filing cabinet in the observatory and circulated informally. Dr Livingston told me (by phone from his office in Tucson) that the paper had been rejected on the grounds that it was a purely statistical argument so it would be better to wait and see what happened, and he considered that a fair point. They are now waiting “for the right moment” to resubmit.

But what happens after 2014? Dr Livingston says that as they are using a purely statistical argument, without any theory to back it, they do not know. All they know is that the trend reaches zero in 2014. Conventional theory on the sun’s inner workings never forecast anything like this - in fact, forecast the exact opposite - but has been revised to say that the sun will restart some time next year.

Links:

http://www.dailytech.com/Sun+Makes+History+First+Spotless+Month+in+a+Century/article12823.htm
http://deltafarmpress.com/news/robinson-column-0825/
http://wattsupwiththat.wordpress.com/2008/06/02/livingston-and-penn-paper-sunspots-may-vanish-by-2015/
http://www.belfasttelegraph.co.uk/opinion/letters/is-there-a-cold-future-just-lying-in-wait-for-us-13938036.html
http://www.onlineopinion.com.au/view.asp?article=7824

Buffett: Oil Sands Visit for Info Only.

2008-08-23T08:56:00.002-04:00

Warren Buffett is nothing if not a disciplined investor, and he explains that his visit to the Alberta region was for information gathering only, something that he will file away and may use a few years from now. As he explains near the end of the interview, he's now gained knowledge on cost aspects of the business, but the biggest wildcard remains the longer term price of oil.

Note that he already holds $1.5 billion worth of ConocoPhillips stock, which claims to have the "largest position in Canadian oil sands".

It's mentioned that they visited CNQ's new project as well as an unnamed SAGD (steam assisted gravity drainage) site. Since COP has a joint venture with Encana (ECA), and since Encana has SAGD sites in production, my guess would be that they visited an Encana site.

CNBC: Buffett/Gates Energy Tour.

Link:

http://www.cnbc.com/id/15840232?video=829077555
http://www.conocophillips.com/NR/rdonlyres/31989B77-23F9-40A7-BB42-3D56B4A01420/0/UBSAustinMay22wnotesupdatedfor1Q08BPReseg.pdf

As the World Cools.

2008-08-21T09:09:00.003-04:00

In spite of the hub-bub about greenhouse gas linked warming, there are a number of scientists who are convinced that solar activity is a much larger factor. [Some scientists even suggest carbon levels rise after the earth heats up as a consequence, not before/as a cause.] Sunspots are one measure of solar activity, and there is a roughly 11 year cycle in sunspots, as well as some longer ones that we have not nailed down exactly. The current sunspot cycle is delayed, and it's possible this is linked to the bout of cooler weather we are experiencing.

There are scientists who are raising questions about the longer term solar cycle, suggesting that perhaps we are in for a lull in sunspots, and a bout of long term cooler weather. Some have pointed to the example of the Maunder minimum, which was a long period with little sunspot activity where the earth cooled fairly dramatically for those living through it.

While it's too early to draw conclusions, I'm keeping an eye on this story and on the sun's sunspot activity at Spaceweather. According to NASA, it should be picking up this fall. Note that longer than average cycles (above 11 years) are apparently associated with short periods of cooling. I also note that today we have a sunspot appearing, after a lull.

If you really want to go out on a limb, there are some (I think Charles Nenner, though I could be mistaken) who link sunspots with general human activity, and further stock market performance, I'd assume due to some geo-magnetic connection. A new sunspot perks up and it looks like the primary bull market in the investing world (commodities) might be pulling out of it's tailspin. A connection? Who knows.

Link:

http://en.wikipedia.org/wiki/Maunder_minimum
http://www.spaceweather.com/

Yahoo: This year so far coolest for at least 5 years: WMO.

Link:

http://uk.news.yahoo.com/rtrs/20080820/twl-environment-climate-2008-dc-1202b49.html

Maine Today: Brrr! Farmers' Almanac says cold winter ahead.

Link:

http://news.mainetoday.com/updates/031815.html

Milenio: Auguring brief era of ice in 2010.

Quotes:

An expert from the National Autonomous University of Mexico predicted that in about ten years the Earth will enter a "little ice age" which will last from 60 to 80 years and may be caused by the decrease in solar activity.

Link:

http://translate.google.com/translate?u=http%3A%2F%2Fwww.milenio.com%2Fmexico%2Fmilenio%2Fnota.asp%3Fid%3D651680&hl=en&ie=UTF8&sl=es&tl=en

I have more on this topic here, here, and here.

Link:

http://lobg2.blogspot.com/2008/06/theres-little-black-spot-on-sun-today.html
http://lobg2.blogspot.com/2008/04/prisoners-of-sun-ii.html
http://lobg2.blogspot.com/2008/04/prisoners-of-sun.html

Note: This blog is distributed through some media that doesn't handle links properly, therefore I will list the link address also for people to cut and paste if they wish.

MAN BITES DOG - er, POLITICIAN.

2008-08-21T07:40:00.003-04:00

Perhaps I should say "Man bites pandering politicians."

This is great, and amazing. A new poll showing that Americans are smart enough to figure out that windfall profits taxes on oil companies, SPR releases, and gas tax holidays are not going to fix the energy problem. Who'd have thunk it?

Coming soon: Obama on an offshore drilling platform, and Pelosi air kissing Rex Tillerson. (Maybe she ought to kiss-kiss the guy from Devon, he's actually better at finding resources.)

The Wall Street Journal: Voters Want Everything on Energy.

Quotes:

"Voters are telling us they want everything," said Neil Newhouse, a Republican who conducts the poll with Democrat Peter D. Hart. Mr. Hart said the results indicate that the current energy debate between Republican presidential candidate John McCain and his Democratic rival, Barack Obama, "is not the fight that the American public cares about."

The poll found greater levels of skepticism among voters about releasing oil from the Strategic Petroleum Reserve -- an idea advocated by Sen. Obama and many congressional Democrats -- and suspending the federal gas tax, an idea championed by Sen. McCain. Less than half of those polled thought those ideas were a step in the right direction.

"What these voters are saying is that there needs to be a whole new way of looking at our problems, and that they don't want the same old fights and the same old divisions," Mr. Hart said.

After weeks of criticizing expanded drilling, Sen. Obama has said he could support an expansion of offshore drilling, as long as it is part of a "genuine bipartisan compromise" that includes other measures to reduce the country's oil dependence.

Similarly, House Speaker Nancy Pelosi (D., Calif.) announced last week that her party is drafting legislation that "will consider opening portions of the Outer Continental Shelf for drilling, with appropriate safeguards, and without taxpayer subsidies to Big Oil."

Bill and Warren's Excellent Alberta Adventure.

2008-08-21T07:01:00.006-04:00

It's been a long time since I've done an Canadian oil sands post. These stocks have been clobbered along with everything else, but these are huge resources that will be producing for a long time. These projects aren't without issues, as it's carbon intensive, needs natural gas input as well as a large amount of water, and makes apparently one hell of a mess, so they need to get the environmental stuff done right.

The classic oil sands stock is Suncor, SU, but Bill Gates and Warren Buffett took a tour of the latest oil sands project, the Horizon project by Canadian Natural Resources, CNQ.

Other oil sands names include:

Canadian Oil Sands COSWF
Imperial Oil IMO
Nexen NXY
Encana ECA
ConocoPhillips COP
Husky HUSKF
ExxonMobil XOM
Shell RDSA
Devon DVN
Marathon MRO
Opti-Canada OPCDF

Because of the size and longevity of these resources, combined with the long term questions about reliable oil supply and peak oil, I have seen Suncor referred to as the "Microsoft of oil", with potentially 50 years of earnings growth ahead of it, as well as comments about oil sands stocks being "stocks to pass on to your grandchildren".

I'm looking forward to see what Warren Buffett has to say in his CNBC interview on Friday.

Financial Post: Buffett and Gates tour Alberta oil sands.

CNBC: Oilsands Stock Soars After Warren Buffett and Bill Gates Visit Alberta Project.

Insider buying in energy stocks.

2008-08-19T22:29:00.004-04:00

I started looking at this yesterday. Among names that are seeing some buying:

MMR
HK
GDP
CLR
HERO

It's nice to see insiders jumping in here, though sometimes they are a bit early. It looks like energy stocks may finally be finding a floor, after a solid month+ of a thorough thrashing.

Wall Street Journal: Oil, Gas Insiders Bet Energy-Stock Bull Is Primed to Resume Run.

Quotes:

Oil and gas insiders are betting big that the historic run-up in energy stocks isn't over.

Since energy stocks crested and retreated in early July, an unusually large number of directors, officers and large stakeholders have pumped money back into their own companies -- a sign, analysts say, that the boom is primed to resume.

Pickens: Not too long under $100.

2008-08-19T20:48:00.004-04:00

Using wind for electrical energy generation, shifting natural gas to a transportation fuel, reducing oil imports 50% in 10 years, yada yada yada. Ok, kidding about the yada yada yada, I've just featured Mr Picken's ideas a number of times now.

It's an extremely important issue, this is one guy with a decently sized plan that seems worth shooting for, so I'm personally for it.

Without any kind of plan (say, like the situation we find ourselves in right now..), we're liable to be as *&^%$# as the peak oil doomsters think.

On the oil price prediction of a roughly $100 floor for oil prices, he believes OPEC will actively try to support a floor around that price, which sounds correct to me.

Bloomberg: Pickens Says Crude Oil Isn't Likely to Drop Below $100.

Where is the oil price floor?

2008-08-18T21:47:00.003-04:00

I think Tom Petrie might be right - a natural floor might be around $80 to $90 for oil. But I think we don't get there because of the winter (which I suspect will be cold) and because the market is still going to leave a bit of a premium in the mix for the vagaries of the world.

Note the interesting headline flashed, but not discussed:

"Practical peak oil becoming broadly recognized as looming issue"

CNBC: Crude Heading Down to $80 a Barrel: Merrill Executive.

Quotes:

"I think it's pretty clear demand elasticities have been triggered in a way that will take prices lower," Petrie said. "I do think $80 to $90 is probably where the floor is."

Got shale?

2008-08-03T16:37:00.006-04:00

Alternative title: Taking the edge off peak oil.

Oil is unlikely to go back to $30, even with this potential boom in shale gas production in the US, but it's looking like we actually have something workable here, mid-term.

The peak oil doomsters are really not going to be happy about this development.

The answer, as always, was somewhere in the middle.

CNBC: Nat Gas Plays.

Star Telegram: Natural gas stocks take big drops since July 1.

Quotes:

XTO Chairman Bob Simpson told the paper that the shale-gas fields popping up across the country are proving to be "discoveries the size of which you haven’t seen for 50 years in our business."

He called the Barnett Shale "one of the greatest gas fields ever found" and suggested that the huge natural gas finds could boost demand because they suggest that there will be ample supply.

The actual reserves from the nation’s shale-gas fields are mostly speculative because the formations are relatively new and haven’t been fully explored.

The Barnett, discovered in 1981, is relatively mature, but others, like Louisiana’s Haynesville Shale and Appalachia’s Marcellus, are sparsely drilled.

That didn’t stop Friedman, Billings Ramsey analyst Rehan Rashid from working up his own estimates of the fields’ reserves, which he presented Wednesday in Houston. Rashid told Oil and Gas Investor magazine that he figures that the Barnett Shale holds 55 trillion cubic feet of recoverable gas.

But he pegs the Haynesville at more than twice that, or 120 trillion cubic feet, and the Marcellus at 68 trillion. Arkansas’ Fayetteville Shale follows the Barnett at 25 trillion, and Oklahoma’s Woodford Shale weighs in at 14 trillion.

He said he expects those fields to greatly boost the values of the companies that have staked holdings there.

CNBC: Peak Oil Theory.

CNBC: Drilling for Profit.

CNBC: Peak Performance?

Pickens Plan.

How do you spell relief?

2008-07-30T09:10:00.003-04:00

Apparently, S-H-A-L-E.

CNBC: Relief for America's Energy Crisis.

BRIC BRAC.

2008-07-20T14:12:00.002-04:00

Stephen Leeb makes the interesting suggestion that we re-think "BRIC" - Brazil, Russia, India and China and substitute "BRAC" - Brazil, Russia, Australia and Canada, i.e. substitute emerging countries with resource rich countries.

I like the idea for diversification as well. You never can tell who's about to nationalize, seize, go carbon-bonkers, or drink themselves silly (that would be the Australians, though come to think of it the Russians also qualify).

There are some well run, resource rich stocks in BRAC, among them Petrobras, Lukoil, Woodside Petroleum, Santos, Suncor, Canadian Natural Resources, Imperial Oil, or, as the article highlights, the country ETFs: EWZ, RSX, EWA and EWC.

istockanalyst: Changing BRIC for BRAC.

Quotes:

"The currencies of countries rich in essential resources—oil and other fuels, metals, agricultural products—are in strong demand," says long-standing market expert Stephen Leeb.

The editor of The Complete Investor explains, "Brazil, Russia, Australia, and Canada are awash in natural resources. And in a world of growing shortages, these countries can't miss."

"The acronym 'BRIC—standing for Brazil, Russia, India, and China—is in vogue as shorthand for the emergence of the developing world.

"But we’re herewith proposing an emended version: 'BRAC'—standing for Brazil, Russia, Australia, and Canada.

"That’s because these four countries are the ones most brimming over with essential natural resource, with each one a net exporter of fuels and other natural products. In a world where resource shortages will only get worse, these countries will stand out from the pack.

"Don’t get us wrong. China and India remain the largest and fastest growing emerging economies and still face exceptional futures.

"But their major resources are cheap labor, which will become less cheap as their economies keep growing. Indeed, labor costs in these countries already have begun to rise relative to the rest of the world.

"Meanwhile, continued gains in commodities mean that Australia and Canada are gaining relative to the rest of the world. It’s hard to overstate just how important relative resource independence is in a world where resources are becoming ever more scarce and expensive.

Is the oil bull market dead?

2008-07-17T20:11:00.004-04:00

CNBC: Oil's Biggest 3-Day Drop In 5 years.

I'm surprised there was little mention in this video of the supply and demand factor. Yesterday we saw a big build in crude and today a decent build in natural gas. The huge move in oil and natural gas that started early this year was about supply and demand, as a colder than average winter cut into natural gas supplies and pulled on heating oil supplies, which, combined with demand for diesel, pulled up crude prices.

We are now facing the other side of the supply demand equation, the one where supply is starting to build instead of declining. And price wise, neither natural gas nor crude looks like it's ready to make a stand today, they look like they have further to drop. Chart wise, I'm guessing natural gas could pull back to $9.50 and oil to $120, though crude at $110 wouldn't shock me at all. On the other hand, looking ahead further, if we get another cold winter, I think we revisit the highs.

This summer feels like a mild one, and I think back to this quote from a few posts ago:

The question Coxe raises, and one we cannot answer, is whether the lack of sunspot activity in this cycle portends a trend to cooler weather, shorter growing seasons, and increased space heating demands – or is it just a statistical fluke?

Investment Implications

Coxe argues that if the lack of solar activity is not a statistical fluke natural gas would be a ‘pure play' on this event due to the huge amount of natural gas used for space heating in North America . Natural gas is a very efficient and non-polluting heating fuel.

We would tend to agree with his assessment, but note that the incremental use of natural gas as a summer electrical generation ‘peaker plant' fuel may decline if air conditioner loads are significantly reduced.

Pure play natural gas and oil E&Ps are bearing the brunt right now, while big oil (XOM, CVX, COP) and big service (SLB, HAL, WFT) have paused. That suggests people are shedding excess exposure, but holding the core.

SLB reports tomorrow, apparently. How the market trades it will probably be a significant tell.

To answer the title question, while I don't think the bull market is dead, I do think that the huge move this year ate up a lot of our bull's "energy", and was a little too "easy". When it's that easy, it's often a sign that you're about to encounter trouble. Lesson learned.

Roque: Own commodities instead of stocks.

2008-07-14T21:13:00.005-04:00

I'm a bit of an agonistic on gold, but you can't bury your head in the sand and ignore it. Compounding financial crisis, inflation, printing money... gold is in.

CNBC: Commodities Explosion.

Haynesville Shale.

2008-07-06T09:43:00.006-04:00

shreveporttimes.com: CEO: Haynesville Shale is fourth largest in the world.

Quotes:

The Haynesville Shale is likely to become America's largest natural gas field and perhaps the fourth largest in the world, Chesapeake Energy Chairman and CEO Aubrey McClendon disclosed Wednesday in a conference call with its newest partner, Plains Exploration and Production Co.

See, among others:

CHK & PXP

Encana & Royal Dutch Shell

Petrohawk

and..

GDP
PVA & GMXR
CRK
STR
EP
SM
XCO
FST
DVN
APC
HP (driller)
XTO & Hunt
BRY & O'Brien
COG & undisclosed

Did I forget anybody? Probably.

The consequences of higher oil prices.

2008-06-28T11:52:00.002-04:00

This is an interesting discussion of the impact of higher oil prices from the newspaper of record in the heart of car country, the Los Angeles Times.

While I don't feel sorry for Ms. Carver and her Palmdale to Commerce commute (that was a bad idea even with cheap gas), lots of other assumptions from a world of cheap oil are going to be turned on their heads. India and China's stock markets have both been clobbered this year as being oil short (and generally food and resource tight) and manufacturing, export, and remote service long maybe doesn't look so good. Russia and Brazil, on the other hand, are holding up pretty well. As, until recently, was the US.

Los Angeles Times: Envisioning a world of $200-a-barrel oil.

There's a little black spot on the sun today.

2008-06-20T08:41:00.005-04:00

There's a little black spot on the sun today.
It's the same old thing as yesterday,
That's my soul up there.

I have stood here before in the pouring rain
With the world turning circles running 'round my brain.

The Police: King of Pain.

Floods in Iowa, a record cold winter in China, global temperatures suddenly dropping in the last year, it's all quite possibly linked to sunspots.

The Market Oracle: Solar Sun Spot Cycles Impact on Crop Yields, Energy Use and Weather Patterns.

Quotes:

Last month we listened to Donald Coxe's weekly presentation to institutional investors. Coxe is the Chairman and Chief Strategist of Harris Investment Management. He has been a bull on the commodity markets for some time now and has correctly pointed out numerous investment opportunities in the energy, metals, and grain markets.

Since the performance of so much of our portfolio is driven by the weather – especially companies in the energy and agricultural sectors – and since Coxe notes the current sunspot cycle may point to lower global temperatures, we decided to examine the issue. Other long term forecasters we follow have not raised the issue to date.

....

Coxe pointed out that we are at the low-point of the 11 year solar cycle (see chart above) – at the end of solar cycle 23 and at the start of solar cycle 24. Sunspot activity was expected to pick up significantly the last few months, with experts concerned about the impact of the powerful bursts of radiation on satellites, the electrical grid, and telecommunications systems.

But according to Coxe solar activity has been almost nil. He points out this has happened in the past. From 1645 to 1715 very little solar activity occurred after a normal series of cycles. Solar activity also declined from 1790 to 1830.

It is normal for the sun to have quiet periods between solar cycles, but some experts claim we've seen months of next to nothing activity-wise. While the start of solar cycle 24 seems to have materialized it “then abruptly disappeared.”

These historical periods of solar inactivity – dubbed the Maunder Minimum and Dalton Minimum after the astrologists who studied them - coincided with an irregular periods of rapid climate shifts. The climate cycles brought intensely cold winters, although periodically intense summer heat waves would also appear. The Maunder cycle is often referred to as the "Little Ice Age" – but climate experts claim the period is punctuated by both cold weather and rapid climate shifts.

These periods of low solar activity were also periods of sustained weather driven crop failures. Coxe notes that solar scientists strongly suspect there is a link between the Maunder and Dalton Minimums and the cold weather - but the exact mechanism remains elusive.

....

The question Coxe raises, and one we cannot answer, is whether the lack of sunspot activity in this cycle portends a trend to cooler weather, shorter growing seasons, and increased space heating demands – or is it just a statistical fluke?

Investment Implications

Coxe argues that if the lack of solar activity is not a statistical fluke natural gas would be a ‘pure play' on this event due to the huge amount of natural gas used for space heating in North America . Natural gas is a very efficient and non-polluting heating fuel.

We would tend to agree with his assessment, but note that the incremental use of natural gas as a summer electrical generation ‘peaker plant' fuel may decline if air conditioner loads are significantly reduced.

The Daily Galaxy: The Sunspot Enigma: The Sun is “Dead”—What Does it Mean for Earth?

Quotes:

Athough periods of inactivity are normal for the sun, this current period has gone on much longer than usual and scientists are starting to worry—at least a little bit. Recently 100 scientists from Europe, Asia, Latin America, Africa and North America gathered to discuss the issue at an international solar conference at Montana State University. Today's sun is as inactive as it was two years ago, and solar physicists don’t have a clue as to why.

....

Dana Longcope, a solar physicist at MSU, said the sun usually operates on an 11-year cycle with maximum activity occurring in the middle of the cycle. The last cycle reached its peak in 2001 and is believed to be just ending now, Longcope said. The next cycle is just beginning and is expected to reach its peak sometime around 2012. But so far nothing is happening.

"It's a dead face," Tsuneta said of the sun's appearance.

Tsuneta said solar physicists aren't weather forecasters and they can't predict the future. They do have the ability to observe, however, and they have observed a longer-than-normal period of solar inactivity. In the past, they observed that the sun once went 50 years without producing sunspots. That period coincided with a little ice age on Earth that lasted from 1650 to 1700. Coincidence? Some scientists say it was, but many worry that it wasn’t.

Geophysicist Phil Chapman, the first Australian to become an astronaut with NASA, said pictures from the US Solar and Heliospheric Observatory also show that there are currently no spots on the sun. He also noted that the world cooled quickly between January last year and January this year, by about 0.7C.

"This is the fastest temperature change in the instrumental record, and it puts us back to where we were in 1930," Dr Chapman noted in The Australian recently.

If the world does face another mini Ice Age, it could come without warning. Evidence for abrupt climate change is readily found in ice cores taken from Greenland and Antarctica. One of the best known examples of such an event is the Younger Dryas cooling, which occurred about 12,000 years ago, named after the arctic wildflower found in northern European sediments. This event began and ended rather abruptly, and for its entire 1000 year duration the North Atlantic region was about 5°C colder. Could something like this happen again? There’s no way to tell, and because the changes can happen all within one decade—we might not even see it coming.

More at a later time.

Prisoners of the Sun I.
Prisoners of the Sun II.

Ken Heebner hearts Petrobras.

2008-06-18T07:01:00.004-04:00

Ken Heebner is a mutual fund manager at CGM Funds and was recently dubbed "America's Hottest Investor" by Fortune Magazine.

Quotes:

"How do you explain genius?" muses Douglas Pratt, a former Invesco fund manager who was an analyst at Loomis. "Ken just sees things others don't."

A league of his own

Spend some time with Heebner, and it becomes clear why. His brain is wired differently. His ideas come faster, his focus is more intense, and his ability to sift through massive quantities of information and zero in on what matters is downright spooky. Pity the Salieris of the investing world who have to compete with this guy.

CNBC: Market Outlook Part 2.

Quotes:

I like companies that are benefiting from an environment where there is a short supply of key commodities, and the big one is energy. I think that, whether it's oil stocks or gas stocks or oil service stocks or coal stocks, they're all benefiting from the fact that demand for energy is growing faster than our ability to find it and deliver it to the marketplace.

....

I think in a world where the oil price is in an uptrend, this company, Petrobras, which has 12 billion barrels of reserves today, the discoveries that they're developing in the pre-salt, deep offshore Brazil are gonna add between 30 and 100 billion barrels to their reserve base, and five years from now we're gonna be looking at a company 5 to 10 times the size the company is today.

P.S. The ticker is PBR.

The horror.

2008-06-09T08:23:00.002-04:00

We sure had it nice for a while, didn't we?

Still a lot of conservation to go, apparently.

WSJ: Gasoline Hits Average of $4 a Gallon.

Quotes:

"It's just gotten out of hand," said 53-year-old Yvonne Brune of Des Moines, Iowa, referring to the rising cost of gasoline. Because of higher gasoline prices, Ms. Brune, who works for a printing company doing marketing on weekdays and separately as a bridal consultant on nights and weekends, no longer makes the drive home at lunchtime -- a 30-mile round trip -- to spend time with her dogs.

Please God, give us one last shale boom.

2008-06-03T09:08:00.003-04:00

We promise not to miss it this time.

Bakken: CLR, EOG, HES, ERF, WLL, MRO, NOG.

Haynesville: CHK, GDP, HK, GMXR, PVA.

Marcellus: CHK, ATLS, RRC, ATN.

Others: XCO, SM, BEXP, CRK, EAC, XTO.

Service: HP, CRR, WFT, etc.

Bloomberg: Dakota Oil Fields of Saudi-Sized Reserves Make Farmers Drillers.

Quotes:

His new wealth springs from the Bakken formation, a sprawling deposit of high-quality crude beneath the durum wheat fields of North Dakota, Montana and southern Saskatchewan and Manitoba. The Bakken may give the U.S. -- the world's biggest importer of oil -- a new domestic energy source at a time when demand from China and India is ratcheting up the global competition for supplies and propelling average U.S. gasoline prices to almost $4 a gallon.

And unlike the tar from Canada's oil sands, Bakken crude needs little refining. Swirl some of it in a Mason jar and it leaves a thin, honey-colored film along the sides. It's light - -almost like gasoline -- and sweet, meaning it's low in sulfur.

Best of all, the Bakken could be huge. The U.S. Geological Survey's Leigh Price, a Denver geochemist who died of a heart attack in 2000, estimated that the Bakken might hold a whopping 413 billion barrels. If so, it would dwarf Saudi Arabia's Ghawar, the world's biggest field, which has produced about 55 billion barrels.

Thin Deposit

The challenge is getting the oil out. Bakken crude is locked 2 miles (3.2 kilometers) underground in a layer of dolomite, a dense mineral that doesn't surrender oil the way more-porous limestone does. The dolomite band is narrow, too, averaging just 22 feet (7 meters) in North Dakota.

The USGS said in April that the Bakken holds as much as 4.3 billion barrels that can be recovered using today's engineering techniques. That's a fraction of the oil that Price said should be there, but it's still the largest accumulation of crude in the 48 contiguous U.S. states. North Dakota, where Bakken exploration is most intense now, won't become Saudi Arabia unless technology improves.

``The Bakken is the biggest thing in oil in the lower 48 right now,'' says Jim Jarrell, president of Ross Smith Energy Group Ltd., a research firm in Calgary. ``And among the least understood.''

To Fadel Gheit, with love.

2008-06-01T12:58:00.005-04:00

Something to think about, though I'd cite Tim Evans as a bigger skeptic, and so far, totally wrong.

MSN Money: The end of the oil stock rally.

When everyone agrees that oil stocks are the thing to own, where is the supply of new buyers going to come from? And without new buyers, oil stock prices will stagnate and then fall.

Fortunately, not everyone is convinced yet. Oppenheimer oil analyst Fadel Gheit, for example, continues to write that, fundamentally, oil shouldn't trade at more than $55 a barrel. To which I say, God bless. The minute the last skeptic turns into a believer and bellies up to buy oil shares, the rally in oil stocks is doomed.

Still, I'm worried there aren't enough skeptics left. Oil stocks have looked increasingly frothy this year. One sign of that is the huge gains being racked up by obscure small-cap stocks in the sector. These are exactly the kinds of stocks that attract the extreme momentum traders as a sector nears a top.

....

Here's some advice
So what does all this mean to you? Five things:

* If you haven't bought oil stocks yet, I'd wait for a correction rather than chase them here.

* If you own oil stocks, you might want to take some profits in the sector. There's no need to sell everything, but check to see whether your portfolio is out of balance, and trim back your exposure to the sector.

* If you need to add energy stocks to your portfolio, take a look outside oil. Natural-gas stocks, for example, haven't had nearly the run that oil stocks have, and natural gas is still well below its historic peak of $15 per million British thermal units. If you need a suggestion or two in the sector, check out Chesapeake Energy (CHK, news, msgs) and Ultra Petroleum (UPL, news, msgs) in Jubak's Picks. Devon Energy, in that portfolio, is a big natural-gas producer, although not a pure play like Chesapeake and Ultra.

* Remember that the key to making money in the stock market is to buy low and sell higher. It's time to start looking around for unloved stocks in other sectors.

* We're by no means near the end of higher oil prices or of higher prices for oil stocks. Just wait. If oil drops to $110 -- the new floor, in my opinion -- you'll hear a huge chorus of doom saying that $50 a barrel is just around the corner.

That, of course, will be the time to buy.

....

At the time of publication, Jim Jubak owned or controlled shares in the following companies mentioned in this column: Chesapeake Energy, Devon Energy, Joy Global, and Ultra Petroleum. He did not own short positions in any company mentioned.

Will the real bubble please stand up?

2008-05-23T08:17:00.004-04:00

Say goodnight to the SUV bubble and the associated cheap gasoline consumption bubble.

The guy running GM needs to be thrown out. [Mulally at Ford came in from Boeing a couple of years ago and thus gets some slack.]

Wall Street Journal: Ford Stumble Signals Rising Risks.

Quotes:

Ford Motor Co.'s plan to return to profitability got run over by a truck.

The rise of gasoline prices toward $4 a gallon is causing a major shift in the U.S. auto industry that threatens to push the Big Three auto makers and some of their rivals to a new level of peril. In recent weeks, sales of pickup trucks and sport-utility vehicles -- already falling in recent years -- took an unexpectedly sharp tumble.

....

In a Thursday conference call, Chief Executive Alan Mulally said the industry has "reached a tipping point" and that the falling truck sales represent a long-term shift in the U.S. auto market, not a short-term dip.

"We saw real change in the industry demand for pickup trucks and SUVs in the first two weeks of May," Mr. Mulally said.

Leeb on the oil 'bubble'.

2008-05-23T05:40:00.002-04:00

jacksonsun.com: Author, chief of investment firm weighs in on oil crisis.

Quotes:

Question: Is what we are seeing with oil prices a pricing bubble, or are high oil prices here to stay?

Answer: With the housing bubble, people were just building and building and building and eventually the supply overwhelmed the demand in the housing case. But here, where is the supply?

You've got oil prices rising dramatically, but there is almost no evidence of increased supply. I mean in the past couple of months we have had both Saudi Arabia and Russia, which are the two biggest oil producers in the world, announce not in so may worlds, but certainly imply, that they have very little room left to increase oil production even going into the future, and that is not what you see in a bubble.

Basically you are seeing the market respond in a very rational way. Oil supplies are limited, and that is a very serious situation.

....

This bubble talk is ridiculous.

IEA: Better rethink that Certified Pre-Owned H2.

2008-05-22T08:23:00.004-04:00

MarketWatch: Report: IEA set to cut oil-supply forecast.

Quotes:

The Paris-based International Energy Agency is getting ready to issue a sharp downward revision of its oil-supply forecast, according to a published report.

A story in the online edition of the Wall Street Journal early Thursday reported IEA's forecast revision signals growing pessimism about whether oil companies can keep abreast of booming demand.

The Journal reported the IEA is attempting to assess the condition of the world's top 400 oil fields. Its findings won't be released until November, but it is clear that future crude supplies could be far tighter than previously thought, the report notes.

The IEA has predicted previously that supplies of crude and other liquid fuels will keep pace with rising demand, topping 116 million barrels a day by 2030, up from around 87 million barrels a day currently, according to the report, which added that the agency now is concerned that aging oil fields and diminished investment mean that companies could struggle to surpass 100 million barrels a day over the next two decades.

The decision to rigorously survey supply reflects an increasing fear within the agency and elsewhere that oil-producing regions aren't on track to meet future needs, according to the Journal.

The report quotes Fatih Birol, the IEA's chief economist and the leader of the study, as saying "the oil investments required may be much, much higher than what people assume. This is a dangerous situation."

Short covering rally?

2008-05-22T08:10:00.002-04:00

This last move in oil does have the feel of a short covering rally. If so, it will be interesting to see where it settles out when it's over. $110 would be my guess for a floor, but that's a long way down. That price still makes oil companies a lot of money.

Bloomberg: Blame Wall Street for $135 Oil on Wrong-Way Betting.

Quotes:

Oil's rally to a record above $135 a barrel came as traders bought crude to cover wrong-way bets that prices would decline, according to data from the New York Mercantile Exchange.

The number of outstanding futures contracts, known as open interest, fell 8.1 percent in a week to 1.36 million at the same time that prices rose 2.6 percent, the data show. Falling open interest and rising prices are signs that traders are buying to exit so-called short positions that would profit if oil fell, and lose money as they rose.

Somebody's a little off here.

2008-05-21T21:04:00.005-04:00

I'd guess the guy in the middle.

Bloomberg: Oil Rises Above $134 on U.S. Supply Drop, Bank Price Forecasts.

Quote:

``What we have here is a situation where essentially higher prices aren't generating any more supply,'' Paul Sankey, an analyst at Deutsche Bank Securities in New York said in an interview with Bloomberg radio. ``What we have to do is keep pricing the commodity higher until demand starts falling,'' which ``is around $150 a barrel.''

....

The price of oil should be ``somewhere between $35 and $65 a barrel,'' John Hofmeister, president of Shell Oil Co., the Houston-based subsidiary of Royal Dutch Shell, said at the hearing yesterday. Other executives said prices should be as much as $90 a barrel.

Financial Times: Shortage fears push oil futures near $140.

Quote:

Adam Sieminski, chief energy economist at Deutsche Bank, said: “The price is going to go up until governments that subsidise oil consumption in Asia and the Middle East can no longer afford it.”

Separating the men from the boys.

2008-05-21T06:54:00.006-04:00

CNBC: $12 Gas and Rationing? Possible, Says Expert.

Quotes:

"The prices that we're paying at the pump today are, I think, going to be 'the good old days,' because others who watch this very closely forecast that we're going to be hitting $12 and $15 a gallon, and then, after that, when world oil production goes into decline, we're going to talk about rationing," Robert Hirsch, Management Information Services Senior Energy Advisor, said on CNBC's "Squawk Box." "In other words, not only are we going to be paying high prices and have considerable economic problems, but in addition to that, we're not going to be able to get the fuel when we want it."

Hirsch argued that the maximum in world oil production has already been hit.

"The idea is that [world oil production] would hit a sharp peak and then drop off, and what's happened is, we've hit a plateau in world oil production, and that plateau has been ongoing since about the middle of 2004," he said.

Those who argue that new technology and new types of energy will solve the problem aren't on solid ground, Hirsch suggested.

"There's no single thing that's going to solve this problem, because it's as massive as one can possibly imagine," he said.

Wall Street Journal: U.S. Military Launches Alternative-Fuel Push.

Quotes:

Some Pentagon officers have embraced planning around the "peak oil" theory, which holds that the world's oil production is about to plateau due to shrinking resources and limited investment in many of the most oil-rich regions of the Middle East. Earlier this year, they brought Houston investment banker Matthew Simmons to the Pentagon for a presentation on peak oil; he warned that under the theory, "energy security becomes an oxymoron."

MarketWatch: Crude futures top $130 a barrel.

Quotes:

The Bank of England on Wednesday became the latest to signal their fears, with the central bank saying in minutes of its last meeting that tight supplies rather than speculation is driving prices higher.

"According to the Bank's market contacts, speculative purchases did not seem to be the prime cause of the recent increases in the oil price," the central bank said, referring to the rise in oil prices during the month of April.

"More fundamental demand and supply factors had probably been at the root of its steep rise during recent months, and there remained considerable uncertainty about the oil price outlook," it said.

New York Times: The Cassandra of Oil Prices.

Quotes:

Mr. Murti falls into the camp of oil analysts who believe that supply is likely to remain tight because of geopolitical factors. These analysts predict higher prices because production is declining in non-OPEC countries like Britain, Norway and Mexico.

The analysts who predict lower prices say there are supplies of oil that the bullish analysts are missing. “This year will be a year in which supply will be put into the market by stealth by OPEC and by countries we call black-hole countries,” said Edward L. Morse, chief energy economist at Lehman Brothers. China is one example, he said.

But while oil and gas prices have been rising for a while now, Americans have only just begun to reduce gasoline consumption, so their efforts to conserve have not dragged down oil prices.

“The fact that the U.S. gasoline demand can be down and that the U.S. gasoline consumer is no longer driving world oil prices is a monumental event,” Mr. Murti says. He spends most of his time talking to money managers and analysts, many of whom keep asking him if oil prices will stay high if speculators abandon the market, and says he applauds investors for driving up oil prices, since that will spur investment in alternative sources of energy.

High prices, he says, “send a message to consumers that you should try your best to buy fuel-efficient cars or otherwise conserve on energy.” Washington should create tax incentives to encourage people to buy hybrid cars and develop more nuclear energy, he said.

Of course, if lawmakers heed his advice, oil analysts like him might one day be a thing of the past. That’s fine with Mr. Murti.

“The greatest thing in the world would be if in 15 years we no longer needed oil analysts,” he says.

MarketWatch: Oil of oy vey.

Quotes:

As a trader, I'm not as concerned with the ultimate destination as much as the path that we take to get there. I've generally avoided the energy space this year and focused my attention on the financials and select technology, taking what the market gave me while preserving capital and keeping my powder dry.

Toward the end of last week, I began building short-side exposure in the energy realm. Catching cusps is a dangerous proposition, whether it's grasping at a falling knife or getting in the way of parabolic frolic. It's a generally accepted trading axiom that money is made between the twenties and we should avoid the red zone whenever possible.

With that said, I share these thoughts with two caveats. First, I'm typically early, which is as damaging as being wrong if you're not there to cash in your chips. Second, while a seismic structural shift could occur at any time, my motivation is to simply capture a trade.

The bull case for energy is loud and proud as a function of the price action. There are supply constraints, emerging market needs, incremental demand from China (following the earthquake), pressure on the U.S. dollar (the price of socialization), unreliable alternative sources, psychology (furthered by a recent Goldman Sachs report) and perhaps the biggest risk, in my view, the potential for geopolitical tension in Iran.

On the other side of that ride, we have political agendas into the election, incessant (unconfirmed) chatter that margins on crude futures will be raised, faltering demand by an already strapped U.S. consumer and the unfortunate truth that all roads will ultimately lead to debt destruction through deflation.

....

Again, the single biggest caveat to the short energy thesis, in my view, is an uptick in Middle East acrimony.

As the market is a prescient beast, that unfortunate thought would certainly explain the incessant bid we've seen to date.

[I think he's wrong there. It's Chinese demand and the idea that we'll have another cold winter that I think is driving this relentless move upwards. But I've been thinking about reducing positions too, though not actual shorting. So much focus on oil smells of some kind of top.]

CNBC: Fast Money Final Trade.

Quotes:

"Short Hess."

CNBC: OPEC Oil Supply Rising in May: Petrologistics.

Quotes:

OPEC oil supply in May is expected to rise by 700,000 barrels per day (bpd), led by higher output from members including Nigeria and Saudi Arabia, an industry consultant said on Wednesday.

The increase comes during a month in which oil has soared to record highs and indicates OPEC is again pumping more than its supply limit after a strike in Nigeria lowered output and Saudi Arabia opted to pump more.

All 13 OPEC members are expected to pump 32.4 million bpd this month compared with a revised 31.7 million bpd in April, Conrad Gerber of tanker tracker Petrologistics, told Reuters.

"There is a strong rebound in supply," Gerber said. "Iraq is having a good export performance and Nigeria is coming back up."

Pickens Wants to Move It, Move It to Natural Gas.

2008-05-20T09:21:00.003-04:00

Sorry, I just couldn't resist.

CNBC: Pickens: Oil Going to $150, So Move to Gas.

Quotes:

"Eighty-five million barrels of oil a day is all the world can produce, and the demand is 87 million," he said. "It's just that simple. It doesn't have anything to do with the value of the dollar."

He expects the price of a barrel of oil to reach $150 this year, and he insists speculation has nothing to do with it.

....

Pickens says natural gas is the only American resource that can reduce oil imports. He claims the effective use of natural gas could reduce oil imports by 40 percent. He dismissed ethanol as an alternative. He added that what reduced demand there has been in the United States has immediately been picked up by China.

"The only way I see that oil doesn't continue to rise [is] if we had a global recession." he said. "That will happen at some point, but I don't see the Chinese stumbling until after the Olympics."

Give me liberty or give me windfall profit taxes.

2008-05-20T05:56:00.003-04:00

I sort of admired Barack Obama when I first heard about him, but his idea about windfall profit taxes on oil companies is about the quickest legislative way to get to $200 oil that I can think of. If you want less investment in oil and natural gas production, vote for higher taxes on oil companies, and stand back and watch prices skyrocket. As mentioned below, things are already tight enough in the oil and gas business.

My guess is that John McCain will be the next president, but if Obama gets elected, I will be very interested to see what he does with this idea and what the consequences will be.

Reuters: Schlumberger sees threat to oil, gas output growth.

Quotes:

Less than 25 percent of worldwide reserves are open to private investment, he said, because many states are turning over their fields to government-controlled oil companies.

"This does not mean that (production) gains will not occur, but it does mean that they will take longer than if access had been more open," Gould said.

Schlumberger, the world's largest oilfield services company, and its peers have posted sharp revenue and earnings growth in recent years as energy companies increased spending, and Gould has predicted that trend will remain in place into the next decade.

Oil prices in the United States have jumped to record levels near $128 a barrel in recent days, and natural gas has surged to $11 per million British thermal unit.

For the energy producers, rising costs for raw materials such as steel have also help contributed to a 120 percent increase in exploration and production spending between 2004 and 2007, while the number of new wells drilled has risen by only 52 percent, he said.

High energy prices have also prompted governments around the globe to hike taxes and change investment terms to gain a greater share of producers' profits.

But added to the rising materials cost and the riskier nature of many new fields, "there is a real danger that this will cause underinvestment and simply exacerbate the problems," he said.

And what of McCain's gasoline tax holiday idea?

Newsweek: Should You Pay $6 Per Gallon?

Quotes:

Kloza goes a bit further, calling a gas-tax holiday "caca." "It represents pandering. You're not leveling with the American public," says Kloza. "All this talk of energy independence means nothing if you don't have energy discipline. When it comes to our gasoline consumption, we're the morbidly obese of the world. And like the person who weighs 350 pounds, we need to exercise more and consume less." To do that, though, first you have to look in the mirror and admit there's a problem—and it's not the price of gas.

Goldman Sachs: Fundamentals.

2008-05-16T08:47:00.003-04:00

MarketWatch: Oil and gas producers lead London higher.

Quotes:

Goldman Sachs on Friday raised its forecast for the average price of West Texas Intermediate oil in the second half of 2008 by 32% to $141 a barrel from $107 a barrel.

"We believe that the market is not defying fundamentals but rather experiencing a structural re-pricing much like it did in 2004, searching for a new equilibrium against an uncertain long-term supply environment," the broker said.

Bloomberg: Goldman Raises Second-Half WTI Oil Forecast to $141.

Quotes:

``Supply constraints and a lack of scaleable substitutes are set to continue driving the long end of the oil curve higher,'' Goldman analysts including Peter Oppenheimer and Jeffrey Currie in London wrote in a report dated today.

....

The trend in the growth of oil supply has fallen to 1 percent per annum, compared with global economic growth of about 3.8 percent, today's Goldman report said. ``Given this imbalance, long-term oil prices will need to rise.''

....

The near-term oil market is being driven by ``long-dated'' prices, or the price of oil for delivery 5 years forward, Goldman said. While an increase in U.S. stockpiles and declining demand growth due to the global economic slowdown is creating ``near-term fundamental weakness,'' this is not causing lower prices, according to the bank.

``We do not expect these softer fundamentals to translate into spot price weakness given the strength in long-term prices,'' according to the report. ``We expect the bullish structural market to dominate the bearish cyclical weakness.''

Supply Constraints

Goldman said it was unlikely prices would eventually rise enough to justify large scale investment in alternative sources of fuel, thereby offsetting the discrepancy between supply and demand, because of resource protectionism which constrains supply growth.

Instead, an increase in long-term oil prices is required to suppress demand growth and bring it in line with supply growth, Goldman said. It forecasts the long-date oil price to rise 14 percent to $148 a barrel by early next year.

``Long-term oil prices will need to continue to rise to bring trend oil demand growth in line with trend supply growth,'' the bank said. ``Eventually a price will be reached which incentivizes significant conservation, new technologies and political solutions which will eventually cap the price rises.''

Oil price: Speculators or fundamentals?

2008-05-15T20:37:00.004-04:00

[Fundamentals = supply & demand.]

I'm with Jerry Castellini. Oil is at ~ $125 mainly because of the fundamentals. If it were primarily speculation driven, there would be a larger inventory build up, which we are not seeing.

CNBC: Market Mavens.

Boone Pickens from Milken.

2008-05-10T09:34:00.001-04:00

Infectious Greed: Great T. Boone Pickens Interview from Milken.

Bizarro Headline of the Day.

2008-05-09T05:18:00.002-04:00

Amidst all of the noise, it's easy to forget that the US continues to be one of the world's largest exporters. The strong dollar policy is paying off, and this may be the reason we're not in a full blown recession.

The Wall Street Journal: Container Shortage Frustrates U.S. Exporters.

Quotes:

Surging U.S. exports on a range of goods including corn, soybeans and frozen pork are hitting a bottleneck in the nation's overloaded ports, threatening to crimp profits for U.S. farmers and agricultural processors at a time when it is easier than ever for them to sell their goods abroad.

The problem can be traced to a shortage of once-plentiful shipping containers and other transportation equipment, along with a lack of space on outgoing ships. The shortage is affecting other industries, including exporters of manufactured goods and sellers of scrap metal and paper.

What's going on with oil?

2008-05-08T21:32:00.003-04:00

Seeing CNBC with features on oil all throughout the day makes me nervous we may be at a short term top.

But what's going on with oil?

Everybody suddenly realized just how valuable it is.

CNBC: What's Going on With Oil?

For Hillary - Stand Down Margaret.

2008-05-08T08:25:00.005-04:00

Written originally for a woman of a diametrically opposed political view, I'd like to dedicate this song to Hillary Clinton.

She may not be ready to give in, and her opponent Obama doesn't appear quite ready for prime time either, but Hillary is done, as I thought back in December she might be.

Goldman Sachs Gone Wild!

2008-05-07T18:44:00.003-04:00

CNBC: Goldman: Natural Gas Crunch Possible This Winter.

Goldman Sachs: $100 oil reality, part 2: Has the super-spike end game begun?

[Otherwise known as the $150-200 Oil Report.]

He's back, too.

2008-05-06T08:16:00.002-04:00

Eric Bolling used to be on CNBC's Fast Money until FoxNews gave him an offer he apparently couldn't refuse. (A big loss for Fast Money and maybe for Bolling too as litigation kept him offscreen for a while.) He's appearing on Fox now, but since nobody much watches... Anyway, he's now also writing a column on stock picks for TheStreet.com, and because of his long background in energy trading, he is well worth paying attention to.

In the below article, he suggests that oil may be about to back off a bit, giving refiners better margins and extra breathing room. On that basis, he recommends Tesoro and Chevron.

TheStreet.com: Bolling: Chevron, Tesoro Ready to Roll.

He's back.

2008-05-06T05:31:00.003-04:00

The super spike is now moved from $105 to $200. Whoa boy. While U.S. demand is starting to actually fall, it's still rising in China and other places.

Bloomberg: Goldman's Murti Says Oil `Likely' to Reach $150-$200.

Quotes:

Crude oil may rise to between $150 and $200 a barrel within two years as growth in supply fails to keep pace with increased demand from developing nations, Goldman Sachs Group Inc. analysts led by Arjun N. Murti said in a report.

New York-based Murti first wrote of a ``super spike'' in March 2005, when he said oil prices could range between $50 and $105 a barrel through 2009. The price of crude traded in New York averaged $56.71 in 2005, $66.23 in 2006 and $72.36 in 2007. Oil rose to an intraday record $120.93 today on speculation demand will rise during the peak U.S. summer driving season.

``The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty,'' the Goldman analysts wrote in the report dated May 5

....

China, the world's fastest-growing major economy, has more than doubled oil use since New York crude oil dropped to this decade's low of $16.70 a barrel on Nov. 19, 2001. Record prices have failed to stem rising consumption in developing nations, with demand led by China, India and the Middle East.

....

``The core of our super-spike view has been that a lack of adequate supply growth coupled with price-insulated non-OECD demand growth'' is leading to higher prices, the analysts said. That could result in a ``sharp correction in oil demand,'' the Goldman analysts said. .

The tide turns, finally.

2008-05-02T09:07:00.004-04:00

The New York Times: As Gas Costs Soar, Buyers Flock to Small Cars.

Quotes:

Soaring gas prices have turned the steady migration by Americans to smaller cars into a stampede.

In what industry analysts are calling a first, about one in five vehicles sold in the United States was a compact or subcompact car during April, based on monthly sales data released Thursday. Almost a decade ago, when sport utility vehicles were at their peak of popularity, only one in every eight vehicles sold was a small car.

The switch to smaller, more fuel-efficient vehicles has been building in recent years, but has accelerated recently with the advent of $3.50-a-gallon gas. At the same time, sales of pickup trucks and large sport utility vehicles have dropped sharply.

In another first, fuel-sipping four-cylinder engines surpassed six-cylinder models in popularity in April.

“It’s easily the most dramatic segment shift I have witnessed in the market in my 31 years here,” said George Pipas, chief sales analyst for the Ford Motor Company.

....

Previous spikes in sales of smaller cars were often a result of consumers trading down during tough economic conditions or gas-price increases. When the economy improved or fuel prices dropped again — as they did after the oil-price shocks in the 1970s eased — buyers invariably went back to bigger vehicles.

But with oil prices expected to remain high for years, auto industry executives are seeing a turning point.

“The era of the truck-based large S.U.V.’s is over,” said Michael Jackson, chief executive of AutoNation, the nation’s largest auto retailer.

....

But there are some indications that the trend toward smaller vehicles will reduce the nation’s fuel use. In California, motorists bought 4 percent less gasoline in January than they did the year before, a drop of more than 58 million gallons, according to the Oil Price Information Service.

“That is an incredible year-over-year drop,” said Tom Kloza, the organization’s chief oil analyst. “Some of it clearly has to do with changes in the vehicle fleet.”

....

Factor in the economic benefits of fuel-efficient engines, and small cars have not only become practical, but trendy as well.

“This shift appears to be a permanent situation,” said Jesse Toprak, chief industry analyst for the auto information Web site Edmunds.com. “These new products have become more fashionable, just like small, fuel-efficient cars are in Europe.”

I noted V-SUV day, just over one year ago.

Boone Pickens on CNBC.

2008-04-29T21:04:00.003-04:00

CNBC: Picken's Next Prediction.

Quotes:

"The biggest move will come in natural gas, not oil."

I'm with ya there, Boone.

Bloomberg: Pickens Says Oil Prices May Rise to $150 by Year End.

The scale of the problem.

2008-04-29T09:03:00.004-04:00

Submitted by my friend Richard, and via fivecentnickel.com:

c|net Green Tech Blog: Can renewable energy make a dent in fossil fuels?

Quotes:

4.2 billion.

That's how many rooftops you'd have to cover with solar panels to displace a cubic mile of oil (CMO), a measure of energy consumption, according to Ripudaman Malhotra, who oversees research on fossil fuels at SRI International. The electricity captured in those hypothetical solar panels in a year (2.1 kilowatts each) would roughly equal the energy in a CMO. The world consumes a little over 1 CMO of oil a year right now and about 3 CMOs of energy from all sources.

Put another way, we'd need to equip 250,000 roofs a day with solar panels for the next 50 years to have enough photovoltaic infrastructure to provide the world with a CMO's worth of solar-generated electricity for a year. We're nowhere close to that pace.

But don't blame the solar industry. You'd also have to erect a 900-megawatt nuclear power plant every week for 50 years to get enough plants (2,500) to produce the same energy in a year to equal a CMO. Wind power? You need 3 million for a CMO, or 1,200 a week planted in the ground over the next 50 years. Demand for power also continues to escalate with economic development in the emerging world.

"In 30 years we will need six CMOs, so where are we going to get that?" Malhotra said. "I'm trying to communicate the scale of the problem."

The CMO is a figure you might begin to hear more as utilities and governments map out their renewable energy strategies. SRI's Hew Crane came up with the term as a way to normalize all the different measurements (kilowatt-hours, BTUs, million barrels of oil equivalents, cubic feet of gas, etc.) in the energy business.

It's also a big enough measure to suit the global energy market without saddling everyone with a train of zeros. Many of these stats and a far lengthier discussion of the issue will be found in a book coming from Oxford University Press by Crane, Malhotra, and Ed Kinderman called A Cubic Meter of Oil.

And judging by some of the stats Malhotra gave me, the book will alarm policy makers, environmentalists, and pretty much anyone else interested in weaning ourselves from fossil fuels.

....

If there's a bright spot here, it's that the world has a lot of fossil fuel, he claimed, so we won't be plunged into darkness yet. Oil reserves come to around 46 CMOs, while natural gas reserves total 42 CMOs. There are 121 CMOs of coal out there. These numbers all go up when difficult-to-extract energy such as tar sands are added.

"It's been 30 years of (oil) reserves for the last 50 years," he joked. "It's like your pantry. Do you look at it and say 'Oh, no. I'm going to run out of flour in two weeks'? You go out and buy more."

----------------------------

The only thing I would add, particularly to his parting comments:

At what price?

Prisoners of the Sun II.

2008-04-24T20:43:00.004-04:00

Investor's Business Daily: See Gore, See Spot.

Quotes:

A former NASA astronaut says the same solar phenomenon that doomed Napoleon's army may soon stop Al Gore's march to glory cold. Prepare for the big chill.

Napoleon's retreat from Moscow is a legendary military disaster. While historians and military buffs note the toll the Russian winter took on La Grande Armee, few if any appreciate the role solar activity, or the lack of it, played in one of the great military reversals in history.

Geophysicist Phil Chapman, the first Australian to become a NASA astronaut, and who served as mission specialist on the Apollo 14 lunar mission, writes in the Down Under newspaper the Australian that "the rout of Napoleon's Grand Army from Moscow was at least partly due to the lack of sunspots."

This is more than a historical footnote. The same pattern of solar activity that doomed Napoleon is occurring as we speak.

The sun goes through a series of 11-year cycles in which sunspots fluctuate in both number and intensity, greatly influencing Earth's climate and weather. The end of each cycle is called a solar minimum, where sunspot activity is at a low point. Activity usually picks up after that as each new cycle begins.

As Chapman notes, the most recent minimum occurred in March 2007. Sunspot activity should have increased shortly after that but sunspot activity has remained at a virtual standstill.

If you log on to www.spaceweather.com, you will see a current picture of the sun from the U.S. Solar and Heliospheric Observatory (SOHO) with but a single tiny sunspot, dubbed number 992. The previous time a cycle was delayed like this, according to Chapman, was during what was called the Dalton Minimum, a particularly cold period that lasted several decades starting in 1790. "Northern winters became ferocious," he says.

The success of Napoleon's march was not in the stars, at least not in the one closest to the Earth.

This has been a winter of record cold and record snowfalls. The four major agencies tracking Earth's temperature, including NASA's Goddard Institute, report the earth cooled 0.7C in 2007, the fastest decline in the age of instrumentation, putting us back to where the Earth was in 1930.

It snowed in Baghdad for the first time in centuries, and Chapman says "the extent of Antarctic sea ice . . . was the greatest on record since James Cook discovered the place in 1770."

So far this year, SOHO has detected just three sunspots, including number 992, which appeared on Monday. One was found in January and lasted only two days. Another appeared earlier this month but vanished within 24 hours. There should be more, many more. At its peak, the sun should look like a teenager's face before the prom.

Kenneth Tapping, a solar researcher and project director for Canada's National Research Council, oversees the operation of a 60-year-old radio telescope that he calls a "stethoscope for the sun."

Tapping reports no change in the sun's magnetic field so far this cycle and warns that if the sun remains quiet for another year or two, it may indicate another repeat of that period of drastic cooling of the Earth, bringing massive snowfall and severe weather to the Northern Hemisphere.

Chapman says the temperate climate we now enjoy is the exception, not the rule. We are currently in an interglacial period, the Holocene. "Under normal conditions," he says, "most of North America and Europe (is) buried under about 1.5 kilometers of ice."

Prisoners of the Sun I.

An hour with Boone Pickens.

2008-04-17T21:38:00.003-04:00

Okay, technically 51:29, but who's counting.. Mr. Pickens talks about oil & energy, but he covers other topics too, and he's a pretty funny guy.

A geologist, a savy, seen-it-all businessman, a decent American, he's warning us about our energy situation, and we seem (so far) not to be listening.

Bloomberg: Boone Pickens Expects Oil Prices to Continue to Rise.

Be Bullish.

2008-04-16T20:33:00.005-04:00

WSJ: Crude, Heating Oil, Gas All End at Record Highs.

Quotes:

Buyers also found inspiration in global demand. China imported 1.66 million tons of diesel from January through March, the General Administration of Customs reported Tuesday, a sevenfold increase from the 230,000 tons imported in the same period last year.

Yahoo Tech Ticker: High Oil Prices? You Ain't Seen Nothing Yet.

Yahoo Tech Ticker: 6 Ways to Profit from 'Peak Oil'.

Quotes:

Earlier, Charles Maxwell, senior energy analyst at Weeden & Co., made the case that "peak oil" theory is real and inevitable, and that $300 oil is coming in the next decade. While a frightening prospect with major societal implications, it's also one with significant potential for profit.

When investing in energy for the long run, it's best to avoid the major oil companies like Exxon Mobil, Chevron, and ConocoPhillips, Maxwell says. There's a reason these firms are cutting back on exploration even as oil prices and demand are rising: Facing both geological and geopolitical obstacles, they cannot find reserves big enough to move the production needle.

Instead, Maxwell recommends a basket of companies with "long-lived reserves," including Brazil's Petrobras and Canadian tar sands plays such as Encana and Canadian Natural Resources. Unlike the majors, these firms will be able to maintain and even increase production into the next decade, and thus able to take advantage of the expected sharp rise in oil prices.

------------------------------------------

Technically, he recommends PBR, LUKOY, SU, ECA, CNQ, NXY in the above video.

Prisoners of the Sun.

2008-04-10T20:43:00.011-04:00

First, kudos to anybody that caught that "Land of Black Gold" and "Prisoners of the Sun" are both Tintin adventures. Considering the limited audience here, and the obscure reference that makes.. probably nobody. Oh well. Spielberg's making a picture, or apparently three.

We are all (myself included) pretty sold on the theory of global warming by now. Humans are producing increasing carbon dioxide.. greenhouse gas.. climate warms, etc.

But, in an irony that will probably not be lost on history even if it has so far been lost on contemporary journalists, the year after Al Gore wins the Nobel Prize for his work on climate change [not a big fan personally of Al Gore, bit a wind bag if you ask me.. I digress], there came basically out of nowhere a good, old fashioned cold and snowy winter for North America and parts of Asia. Which by the way, caused us to burn a lot of natural gas and heating oil, and is, in my opinion, responsible for the strength in oil prices this year (and natural gas too).

Obviously, one season does not a trend make, but it appears there is another variable involved in our climate, one that is generally right in front of our eyes and which we seem to have left out of the global temperature equation altogether:

The sun, and it's associated cycles.

I need to do more research on this topic, but it's possible we have here what Micheal Steinhardt would refer to as a variant perception.

And, um, if there is truth to the below theory, it could be a big one.

The Bellingham Herald: Sun’s shift could mean global chill.

Quotes:

Fluctuations in solar radiation could mean colder weather in the decades ahead, despite all the talk about global warming, retired Western Washington University geologist Don Easterbrook said Tuesday.

Easterbrook is convinced that the threat of global warming from mankind’s carbon dioxide pollution is overblown.

In a campus lecture, he cited centuries of climate data in an effort to convince a somewhat skeptical audience that carbon dioxide’s impact on climate is being much exaggerated by former U.S. Vice President Al Gore and by scientists who appear to have won the debate over global warming.

“Despite all you hear about the debate being over, the debate is just starting,” Easterbrook said.

30-YEAR TREND

Easterbrook doesn’t deny that the Earth’s climate has been warming slowly since about 1980. But he argued that this warming trend fits a longstanding pattern of warming and cooling cycles that last roughly 30 years. Sunspot activity and other solar changes appear to explain the 30-year cycles, he said.

If that pattern persists, the earth could now be close to the next 30-year cooling cycle, Easterbrook said.

He noted that the 2007-08 winter set records for cold and snow in many parts of the globe. According to the data he displayed, the Earth’s temperature hit a peak in 1998 and has been steady or slightly cooler since then.

“One cold winter doesn’t mean much of anything,” he said. “A 10-year trend is interesting.”

He contended that warming periods appear to match periods of sunspot activity, which currently is at a low point.

Easterbrook noted that astrophysicists have been expecting that activity to begin increasing soon, but so far it has not.

Prolonged periods of low activity could lead to a dramatic cooling such as occurred in Europe during the so-called “Little Ice Age,” a term loosely used to describe cooler weather in the 14th to 19th centuries, Easterbrook said.

....

If the warming trend of the past 30 years really is reversing, it won’t take too long to become apparent.

“In three years we’ll at least know the direction we are headed,” Easterbrook said. “If we are one degree warmer in 2010 than we were in 2005, I will appear here and eat my words.”

While Easterbrook is skeptical about the risks from carbon dioxide, he said he strongly supports efforts to curb air pollution.

“There are a lot of things being put in the atmosphere right now that are way more dangerous than (carbon dioxide,)” he said.

But Easterbrook is far more worried about global population growth.

At present growth rates, the world would add another 3 billion people by 2050, putting enormous strains on supplies of food, water and other resources.

“Nobody is talking about it,” he said. “Nobody is doing anything about it, and it’s happening.”

The Australian: Climate facts to warm to.

Quotes:

"Is the Earth still warming?"

She replied: "No, actually, there has been cooling, if you take 1998 as your point of reference. If you take 2002 as your point of reference, then temperatures have plateaued. This is certainly not what you'd expect if carbon dioxide is driving temperature because carbon dioxide levels have been increasing but temperatures have actually been coming down over the last 10 years."

Duffy: "Is this a matter of any controversy?"

Marohasy: "Actually, no. The head of the IPCC (Intergovernmental Panel on Climate Change) has actually acknowledged it. He talks about the apparent plateau in temperatures so far this century. So he recognises that in this century, over the past eight years, temperatures have plateaued ... This is not what you'd expect, as I said, because if carbon dioxide is driving temperature then you'd expect that, given carbon dioxide levels have been continuing to increase, temperatures should be going up ... So (it's) very unexpected, not something that's being discussed. It should be being discussed, though, because it's very significant."

NASA: Long Range Solar Forecast.

Quotes:

The Sun's Great Conveyor Belt has slowed to a record-low crawl, according to research by NASA solar physicist David Hathaway. "It's off the bottom of the charts," he says. "This has important repercussions for future solar activity."

The Great Conveyor Belt is a massive circulating current of fire (hot plasma) within the Sun. It has two branches, north and south, each taking about 40 years to perform one complete circuit. Researchers believe the turning of the belt controls the sunspot cycle, and that's why the slowdown is important.

"Normally, the conveyor belt moves about 1 meter per second—walking pace," says Hathaway. "That's how it has been since the late 19th century." In recent years, however, the belt has decelerated to 0.75 m/s in the north and 0.35 m/s in the south. "We've never seen speeds so low."

According to theory and observation, the speed of the belt foretells the intensity of sunspot activity ~20 years in the future. A slow belt means lower solar activity; a fast belt means stronger activity. The reasons for this are explained in the Science@NASA story Solar Storm Warning.

"The slowdown we see now means that Solar Cycle 25, peaking around the year 2022, could be one of the weakest in centuries," says Hathaway.

You can read an update on solar activity here:

AARL: The K7RA Solar Update.

And view current sunspots here (none currently):

NASA: Sunspots.

Theory details:

Space and Science Research Center: The RC Theory.

I haven't read these two books yet, but I plan to:

Amazon: The Chilling Stars. A Cosmic View on Climate Change.

Amazon: Unstoppable Global Warming (Every 1,500 Years).

[Disclosure: If you buy the books via those links, I get a commission from Amazon. Just so you know..]

Charles Nenner: Energy Mania Coming.

2008-04-09T08:55:00.005-04:00

Charles Nenner predicting an energy and emerging markets mania to come, sees energy as one place to be for a couple of years.

CNBC: Oracle of Eyes.

P.S. Coming?

P.P.S. How did they keep Joe Kernen quiet in this piece?

Help, Svetlana, stop this crazy thing!

2008-04-03T08:36:00.003-04:00

Russia, which was able to outproduce Saudi Arabia for a couple of years there, may be on the oil production treadmill now too.

Reuters: Russian March oil output falls again, exports recover.

Quotes:

Russia failed to grow its oil output for a third month in a row in March and closed the first quarter with a one percent production decline year-on-year, confirming gloomy outlook by analysts for the whole of 2008.

Energy Ministry data showed on Wednesday March oil production edged down to 9.76 million barrels per day from 9.79 million bpd in February, and well below the post Soviet high of 9.93 million bpd reached in October last year.

In absolute figures, March production was over 5 million barrels - the size of five large tankers - down from October.

Since October, oil production in Russia has been balancing between decline and stagnation, prompting many analysts to revise down their oil production forecasts for 2008.

Play that funky music white boy.

2008-03-25T23:15:00.005-04:00

My prediction: Until we get this energy mess addressed, stocks as represented by the whole market/indexes aren't going to do anything worth writing a Page One Wall Street Journal article about.

On a side note, ever notice how white (and generally older) the Peak Oil establishment is? Sheesh. [Okay, some exceptions, but generally..] This mostly has to do with them being older oil types, I know.

Next prediction: Peak oil ain't gaining real traction until we pull in some hot chicks.

And maybe we need a band.. [My suspicion is that most people hear the lyrics of Sheryl Crowe's song as suggesting gasoline will be FREE, whee!, rather than understanding the message.] I digress.

Oh, if and hopefully when we realistically address the energy issue (way, and I mean, -WAY- simpler said than done), the market will rock, I predict.

WSJ: Stocks Tarnished By 'Lost Decade', U.S. Shares in Longest Funk Since 1970s;
Credit Crunch Could Prolong Weakness.

Quotes:

Over the past 200 years, the stock market's steady upward march occasionally has been disrupted for long stretches, most recently during the Great Depression and the inflation-plagued 1970s. The current market turmoil suggests that we may be in another lost decade.

The stock market is trading right where it was nine years ago. Stocks, long touted as the best investment for the long term, have been one of the worst investments over the nine-year period, trounced even by lowly Treasury bonds.

CNBC: Pickens: Oil Going to Remain Above $100 a Barrel.

Quotes:

Pickens thinks it's a mistake to follow daily price changes too closely.

"I can't play day trades, whether it's down one day, up the next, the volatility just eats my lunch," he said. "I've got to make a far-out play and stick with it."

....

Pickens says he's bullish on natural gas as well as oil, and he has a portfolio to prove it.

"My...picks for natural gas would be Cheaspeake Energy Corp [CHK], XTO Energy Inc [XTO], Sandridge Energy Inc [SD], and, if you're going to play the natural-gas fueling deal, you'd go to Clean Energy Fuels Corp [CLNE], on the Nasdaq," he said. "If you're going to play oil, on the domestics, I would say that Continental Resources [CLR], and Denbury Resources Inc [DNR] are the two best, plus Suncor Energy Inc [SU] the Canadian oil-sands one. Those are all in my portfolio."

CNBC: T. Boone’s Energy Plan.

CNBC: Oil Firms 'In Liquidation,' Says 'Peak Oil' Advocate.

Quotes:

All major oil firms, he said, are "overlooking the fact that they are actually in liquidation, their production has been in decline for several years [and] no matter how much money they intend to spend, they just can’t get ahead of their [production] decline curves. And their proven reserves are shrinking very rapidly.”

WSJ: Saudis' Big Gas Supply Looks Like It Is a Mirage.

Quotes:

Saudi Arabia's boast that its southern desert region contains vast reserves of natural gas is facing growing skepticism, amid a string of exploration setbacks by international oil companies operating there.

The kingdom had hoped that gas in the Rub al Khali, a vast desert that translates into English as the Empty Quarter, would be a key source of fuel for its booming economy. If the region turns out to be as empty as its name implies, Saudi Arabia runs the risk of a gas-supply crunch within the next decade at today's rate of demand.

Bernanke Begins (2008).

2008-03-19T09:13:00.001-04:00

Genre: Drama / Crime / Thriller

Tagline: It's not who he replaces but what he does that defines him.

Plot Outline:

Gotham is in crisis. The citizenry has lost confidence, the market's in a panic, home-less are everywhere, and the city's headlines are dominated by news of Bears running wild. Heck, it's gotten so bad, even The Joker's moved out!

Where's Batman? Can he save the day?

Cast:

Ben Bernanke -- Batman

Hank Paulson -- Robin

Jim Rogers -- The Joker

Ben Stein -- Himself

Okay, all kidding aside, I think we're seeing a moment where the Fed gains some traction, Ben Bernanke gains the market's confidence, the US financial authority reboot gets a little breathing room, and some of the dollar bears/market bears/gold bugs reign in their horns [and maybe it's time to go short gold, the euro, or the yen for a while].

The difficulties aren't over, but the relative bottom may be in.

For that price, I'd have &^%$#@ bought Bear Stearns.

2008-03-16T19:34:00.004-04:00

I was thinking I'd be buying Goldman Sachs this week, instead I'll be buying JPMorgan.

I'm not a fan of the financials (actually I hate 'em), it may not even be the bottom, and it's probably going to be a while before the smoke clears, but you have to admire this trade that Jamie Dimon just made.

How amazing is it that they kicked this guy out of Citibank? Makes me want to short Citi for good measure.

Bloomberg: JPMorgan Buys Bear Stearns for $2 a Share After Clients Flee.

In energy we trust. Everybody else pays cash.

2008-03-14T09:38:00.003-04:00

Almost time to buy Goldman Sachs, I think.

CNBC: Bear Stearns Gets Funding to Restore Confidence.

Quotes:

Bear Stearns received a secured loan facility from JPMorgan Chase as part of steps it is taking to shore up the market's confidence in its operations.

JPMorgan Chase will provide a secured loan facility for an initial period of up to 28 days allowing Bear Stearns to access liquidity as needed.

The Fed, through its discount window, will provide non-recourse, back-to-back financing to JPMorgan Chase, the commercial bank said. JPMorgan said it does not believe this transaction exposes its shareholders to any material risk.

"Bear Stearns has been the subject of a multitude of market rumors regarding our liquidity," said Alan Schwartz, president and chief executive in Bear Stearns, in a written statement. "We have tried to confront and dispel these rumors and parse fact from fiction. Nevertheless, amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated. We took this important step to restore confidence in us in the marketplace, strengthen our liquidity and allow us to continue normal operations."

Aubrey McClendon Still Buying.

2008-03-12T07:31:00.004-04:00

Aubrey McClendon, CEO of Chesapeake Energy continues his campaign of aggressively buying his companies' stock.

The company was on a large on-shore leasing spree for a while, accumulated a significant inventory, and now is working on bringing it's natural gas to production. It's been steadily rising up the list of American natural gas producers; it's now at number 3. It has a lot of debt, but with natural gas prices doing well, a lot of drilling ahead of it, a successful hedging program, and even a respected weather team, they look like they have a lot of room to run.

I own some already, and may buy a bit more on a dip.

World's central banks hit the gas.

2008-03-11T08:49:00.003-04:00

This move in oil to $109 has been pretty awe inspiring, and it even stomped all over a bearish call by Boone Pickens.

It wasn't terribly clear what was behind the move, as inventories are trending up, and gasoline demand appears to be backing off, but now we know.

The world's central banks are hitting the gas.

CNBC: Fed Leads Coordinated Move to Boost Liquidity.

Now that the cat is out of the bag, I tend to think that this oil rally will temper.

Surprise: Matthew Simmons on Fast Money.

2008-03-08T16:41:00.008-05:00

I've never seen the Fast Money traders as rapt, sober faced and quip-less as this appearance by Matthew Simmons, where Matt makes more jokes than this usually boisterous crew do.

The reason, of course: If he's right, and oil has peaked, it has implications for virtually every aspect of our economic system and lifestyle.

Among his comments, he says oil has probably peaked, it will get scarcer, prices will rise, and he gives the example of how in London they are paying $9 a gallon for gasoline, which equates to $378 a barrel for oil.

Surprise Friday indeed.. Video half way down the page.

CNBC: Surprise Friday.

No law at all in Deadwood.

2008-03-06T20:49:00.006-05:00

Some people, me included, would argue that the root of our current problems lies with the 'see no bubble' policies of Alan Greenspan as Fed Chairman. Internet bubble, real estate bubble, ARM bubble, it was all good under Easy Al, who couldn't stand to see a party end on his watch, even for the greater good, and even though he was supposed to be 'the law'. Heck, he even pimped some of this stuff himself - Take an ARM at a generation low in interest rates folks - forget the hangover, I've got something for that too!

One glaring example:

USAToday, Feb 24, 2004: Greenspan says ARMs might be better deal.

Quotes:

Federal Reserve Chairman Alan Greenspan said Monday that Americans' preference for long-term, fixed-rate mortgages means many are paying more than necessary for their homes and suggested consumers would benefit if lenders offered more alternatives.

While borrowers can refinance fixed-rate mortgages, Greenspan said homeowners were paying as much as 0.5 to 1.2 percentage points for that right and the protection against a potential rate rise, which could increase annual after-tax payments by several thousand dollars.

He said a Fed study suggested many homeowners could have saved tens of thousands of dollars in the last decade if they had ARMs. Those savings would not have been realized, however, had interest rates shot up.

"American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage," Greenspan said.

------------------

But that's the past, and we live in the present, with a burst debt bubble and consequences like these:

Citigroup to Pare Mortgage Holdings by $45 Billion.

Credit Swaps Thwart Fed's Ease as Debt Costs Surge.

Agency Mortgage-Bond Spreads Rise; Markets `Utterly Unhinged'.

Homeowner Equity Below 50% for First Time Since 1945.

As Dollar Tumbles, Should Fed Stop Cutting Rates?

Foreclosures at record as household wealth falls.

------------------

The upside of a crisis is that there will be opportunity. To mix metaphors, we're in a forest fire, the dead wood and the good wood is burning, but ultimately this is the way the forest rebuilds. Wait for the bankruptcies though.

MarketWatch: Scion Capital shuts Asian funds to focus on U.S.

Quotes:

Scion Capital LLC, a $1 billion hedge fund firm run by Michael Burry, is shutting its Asian funds to focus on opportunities that will be created by a U.S. economic slowdown.

....

"The primary motivation for this move is that I foresee a significant opportunity to invest in dramatically undervalued distressed assets and out-of-favor businesses over the next several years," Burry wrote.

"The sheer magnitude of the troubles facing the leading companies in what is still the world's largest and most significant economy cannot be missed," he explained. "The global credit bubble has burst, and the world has not yet learned the full impact."

------------------

Extra credit: Al Greenspan or Al Swearengen?:

"God rest the soul of that poor family .... and pussy's half price, next fifteen minutes!"

"All the nat gas stocks are buys."

2008-03-01T16:43:00.003-05:00

He said it, not me.

As in, Guy Adami of CNBC's Fast Money commenting on EOG Resources, which he thinks is a bit rich valuation wise; he prefers APA. Recognize that you are betting against Boone Pickens here, at least temporarily.

CNBC Fast Money: Stock Pops & Drops.

More nat gas please. (And ag.)

2008-02-26T09:16:00.003-05:00

National Post: Forget global warming: Welcome to the new Ice Age.

Quotes:

Last month, Oleg Sorokhtin, a fellow of the Russian Academy of Natural Sciences, shrugged off manmade climate change as "a drop in the bucket." Showing that solar activity has entered an inactive phase, Prof. Sorokhtin advised people to "stock up on fur coats."

He is not alone. Kenneth Tapping of our own National Research Council, who oversees a giant radio telescope focused on the sun, is convinced we are in for a long period of severely cold weather if sunspot activity does not pick up soon.

The last time the sun was this inactive, Earth suffered the Little Ice Age that lasted about five centuries and ended in 1850. Crops failed through killer frosts and drought. Famine, plague and war were widespread. Harbours froze, so did rivers, and trade ceased.

It's way too early to claim the same is about to happen again, but then it's way too early for the hysteria of the global warmers, too.

Boone Pickens on CNBC.

2008-02-21T08:40:00.003-05:00

Boone Pickens was interviewed this morning on CNBC and he spoke for a while about the long term challenges for energy in America, how none of the presidential candidates had any kind of reasonable plan for really dealing with this, and the fact that we are sending a half a trillion dollars a year overseas to pay for oil to people that we don't know, and who may not be our friends. His solutions include wind and solar, natural gas as a transportation fuel, clean coal, and ethanol (which appears to be a notable change of heart).

He's also currently short both oil and natural gas as he expects them to fall over the next couple of months. Oil he said might drop $10-15 into the second quarter, but he predicts it will be back above $100 in the second half. Natural gas he believes is unusually high due to the weather and will back off.

CNBC: Pickens Expects Oil, Natural Gas Prices to Fall.

Go Aggies!!

2008-02-19T23:32:00.002-05:00

My slightly tongue in cheek prescription for 2008:

Buy ag and natural gas and take the rest of the year off.

Bloomberg: Food Is a Great Asset -- Minus the Fund Manager: Andy Mukherjee.

Quotes:

Investors can't afford to ignore food. As a hedge against a possible U.S. recession, and direct exposure to rising urbanization and wealth in Asia, it's an asset class that's tailor-made for the present times.

As Jim Rogers of New York-based investment firm Rogers Holdings puts it: ``If you're in agriculture, you don't know that there is a recession, you don't care.''

....

Global food inventories are running thin.

The amount of wheat, rice, corn, barley and other grains stored at warehouses around the world is enough to meet less than 60 days of global demand, a 35-year low, according to Merrill's analysis.

High Returns

Shortages are also emerging in the supplies of soybeans, palm oil and other oilseeds.

Slaughter rates are rising as cattle-feed prices soar.

All this should mean tidy profits for those investing in agricultural-commodity futures, provided they have the appetite for the higher risk of price volatility that's often seen in commodities where the stockpiles are small.

Gary Gorton, a University of Pennsylvania finance professor, recently demonstrated that inventories play a significant role in determining returns on commodity futures.

Gorton and his colleagues studied the performance of futures contracts on 31 commodities from 1969 through 2006, grouping them in portfolios of lower-than-normal and higher- than-usual inventories; the former returned more than 13 percent annually, while the gains from the latter were less than 5 percent.

`Chindia' Effect

Eventually, food supplies will rise to match the present elevated levels of demand. But it may take time because of the ``Chindia'' effect.

Millions of Chinese and Indian households are becoming a little more prosperous every year, and demand for protein is very income-sensitive.

That's bound to put further pressure on stretched food supplies. Investors have a chance to profit from agricultural commodities because their prices are still ``relatively low,'' Marc Faber, the Hong Kong-based investor and publisher of the Gloom, Boom & Doom report, said earlier this month.

Boone Pickens: The answer, my friend, is blowin' in the wind.

2008-02-10T11:41:00.000-05:00

NewsOk.com: Boone Pickens shares his views on energy, politics, the Olympics, OSU's new president.

Quotes:

Before 2010, the price for a thousand cubic feet of natural gas will be $10, Boone Pickens predicts. And oil prices will reach $100 a barrel again before the end of this year.

For those and other reasons, Pickens is betting on alternative energy for the future.

"We are importing 62 percent of our oil now, and the two largest producers are Saudi Arabia and Russia,” Pickens said. "And the two largest consumers of oil are ourselves and China.

"When you look at that, you say, ‘We have kind of got ourselves in a bit of a spot that is going to get even more uncomfortable.'”

Pickens said the U.S. will spend trillions of dollars to get the imported oil, and that the nation can't be sure where that money is headed.

"Now, that is a real transfer of wealth. We have got to figure out something different than what we have,” Pickens said.

"Different,” he told The Oklahoman on Tuesday, means using natural gas to power vehicles and wind and solar sources to generate electricity.

....

"I promise you, natural gas will be a real transportation fuel. If I am successful about what I am doing, it will make a difference in Oklahoma because natural gas will sell at a higher price than it is now for heating homes and for electrical generation,” he said.

He also is busy building what he calls the nation's largest wind farm, capable of generating 4,000 megawatts of power once it comes online. He predicts similar projects could be built between the Texas Panhandle and the U.S.-Canadian border, providing jobs, income and a secure environment for a significant piece of the nation's energy infrastructure.

Power transmission corridors are needed to get the power from the farms to East and West Coast communities, and he said private industry will provide the infrastructure if the government gives it suitable incentives.

"I think that it is very realistic that it can be done,” Pickens said.

He noted that in his Mesa Power project alone he has been approached by 20 potential partners, each of whom has provided studies on the wind farm project at his own expense.

"All of them have a plan for how this can be accomplished,” Pickens said.

"We have not picked any banker and we have not picked any partner,” he quickly added. "It is kind of nice ... I have decided I can get pretty far down the track” before having to make those choices.

Pickens said his company will start buying turbines — from 1,700 to 2,000 — next month at a cost of $200 million to $300 million.

In all, it will cost the company $11 billion to build the field and get its power from the Texas panhandle more than 300 miles south and east into the Texas area's power distribution system, he said.

A video interview is available here. He thinks it's possible we'll see a softer oil price at the beginning of the year, as low as $85 a barrel, but then it'll rise back up to $100.

The Recession Will Be Televised.

2008-02-05T05:33:00.000-05:00

This article explains a little more on ECRI's thinking on the window of opportunity of averting recession.

MSN: Where's a safe harbor now?

Quotes:

There's an odd paradox at work, you see. Lakshman Achuthan, the head honcho of the Economic Cycle Research Institute, which has successfully called the past several U.S. recessions, notes that all the recent pessimism about the economy may actually have had a beneficial effect. He says that the biggest negative impetus in any recession comes from the manufacturing sector, which is in turn driven mostly by the inventory cycle.

Unaware of an approaching recession, he observes, businesses typically produce goods in anticipation of rising demand. When, to their surprise, demand for their products starts falling, inventories mount, forcing production and job cutbacks, thus reducing income and spending power. The spending cuts force further production cutbacks to work off the excess inventory, and a vicious downward spiral ensues.

At present, Achuthan says, we have the opposite scenario. Prolonged pessimism about the economy and a surprise acceleration in growth through last summer has resulted in a sharp drop in business inventories, taking the inventory-to-sales ratio to a record low. Thus there is little inventory left to whittle down in response to slackening demand, blunting much of the downward impulse for recession.

This is where Congress and the president come in. They can still throw American retailers, manufacturers and service providers a lifeline if they pass a $150 billion package of tax rebates quickly and cut checks in the next two months. If a timely stimulus results in a quick burst of consumer spending, manufacturers will boost production instead of reducing inventories, thus preventing economic Armageddon. Time is of the essence: The Economic Cycle Research Institute suggests even a three-month delay in getting rebate checks out could spell the difference between a bone-crushing recession costing thousands of jobs and a nice, soft landing.

Top Things We Don't Want to Hear - #2.

2008-02-04T07:15:00.000-05:00

ECRI indicating the risk of recession is very high, and the window of opportunity to avoid it is about to "slam shut". ECRI has a pretty good track record of calling these things.

Reuters: Gauge of economy falls, recession looms: ECRI.

Quotes:

A weekly gauge of future U.S. economic growth fell hard and its annualized growth rate plunged to a six-year low, a research group said on Friday, indicating the risk of recession is very high.

....

"WLI growth has dropped back to the six-year low seen in early January," Achuthan said.

"While the economy and employment did continue to grow through the end of 2007, the window of opportunity to avert a U.S. recession is about to slam shut."

Weeden Oil Analyst Charles Maxwell on Moneytalk.

2008-02-03T13:04:00.000-05:00

Last night, Charles Maxwell, senior energy analyst at Weeden and Co., was again a guest on Bob Brinker's Moneytalk radio show.

[You can listen to this show for the next 6 days at KGO-AM 810 radio here.]

There wasn't a lot of new stuff in the discussion, but a caller asked him to project oil prices going forward and his new projections are incrementally higher than they were in the past. (Some prior projections from 2005 are here.)

Mr. Maxwell projected that oil prices could fall for a little while, perhaps getting as low as the $70's area, but then would continue in their relentless uptrend due to the peaking of world oil production, which he believes will happen around 2013-2015.

His price projections:

2008 - average of $80 a barrel
2009 - high $80 to $90 range
2015 - $180
2020 - $300

Again, he believes the peak in oil production will fall around the 2013 - 2015 time frame, with perhaps a 2 year plateau, and then we begin a downward trend in oil production.

He spoke briefly about how we will cope with this issue, and he suggested we find our way through via a combination of efficiency/conservation and alternative forms of energy production (natural gas, clean coal, uranium, etc), but he also felt that energy in the future will be "much, much more expensive".

Bob Brinker has increasingly caught up with the issue of peak oil in the past few years. A couple of weeks ago he had on a former professor from Berkeley, Bill Wattenburg, who believes we must urgently begin a program of building nuclear power plants to be able to shift natural gas from power generation to transportation, as well as to avoid some of the serious downsides to burning coal. (You can read more on this here.)

The recession is in.

2008-01-27T11:47:00.000-05:00

I'm not quite sure what to make of this statistic that Google searches dropped month by month for October, November and December of last year. The article mentions that normally searches drop around Christmas, but I don't consider October and November to be 'around Christmas'. And I am not aware of another search engine that is taking that kind of market share from Google.

Some are saying a recession started late last year, and something has definitely gotten both the Fed and Administration motivated to stimulate the economy in a hurry.

I suspect this statistic is telling us something important.

Investor's Business Daily: Even Vaunted Google Ad Business Susceptible To Recession.

[If you can't view that, also available at CNNMoney.]

Quotes:

Some evidence suggests a search slowdown. The average number of daily Google searches in the U.S. fell from 4.4 million in October to 4.2 million in November to 4 million last month, says Nielsen.

The average number of topic searches per user also dipped, falling to 37.9 in December from 40.8 in November, Nielsen says.

Analysts say it's too early to make much of these figures, since search activity typically falls around Christmas, but a continued decrease in search traffic likely will mean consumers are buying fewer products online, Parr says.

Update:

Reading a bit more about search and Nielsen's work, it seems there may be two factors that confound this bit of data [I think here of the quote about 'lies, damned lies, & statistics'..].

One, Microsoft appears to have taken a bit (a small bit) of market share away from Google in December via the giveaway of trinkets.

Two, Nielsen apparently changed their methodology for rating search share in.... October. Since the data cited above begins in October, this means the data could be suspect.

The observation though, is about the trend of lower searches and I can't find a statistic on overall searches. But I did find an article and search data provider (Comscore) that indicates that a related item, paid search, decelerated recently. (See 'Why Google Got Crushed Today'.) So the general theme is alive.

I'd also highlight this observation about the shipping index:

Financial Post: What could rattle Canada?

Quotes:

One statistic stood out. The Baltic Dry index, a composite index of shipping costs for dry bulk items such as cement, sugar and coal, posted record drops two days running.

Having lost 20% last week, the index is now down 42% from its November peak.

"The recent collapse in the Baltic Dry Index ... is a warning sign that the commodity boom could be about to come to an abrupt end," warned Julian Jessop, chief international economist at Capital Economics in London in a note.

The index is considered a good proxy for global growth, although it must be pointed out the declines last week were magnified by disruptions as a Brazilian miner cancelled 30 large cargoes of iron ore in a pricing wrangle with China.

Here's the fairly substantial financial incident.

2008-01-24T20:40:00.000-05:00

Little quicker than I thought, but it appears to explain that torrent of selling overseas Monday.

Bloomberg: Societe Generale Reports EU4.9 Billion Trading Loss.

Quotes:

Societe Generale SA said bets on stock index futures by a rogue trader caused a 4.9 billion-euro ($7.2 billion) trading loss, the largest in banking history.

Jerome Kerviel, 31, was the trader responsible, the Paris- based bank said today. Societe Generale plans to raise 5.5 billion euros from shareholders after the loss and subprime- related writedowns depleted capital. The Bank of France, the country's banking regulator, is investigating the alleged fraud.

The trading loss exceeds the $6.6 billion Amaranth Advisors LLC lost in 2006, and is more than four times the $1.4 billion of losses by Nick Leeson that brought down Barings Plc in 1995. An offer by Chairman Daniel Bouton to resign after the trades were discovered this past weekend was refused by Societe Generale's board, the bank said.

``At first this seemed like a joke,'' said Nicolas Rutsaert, an analyst covering European banks at Dexia SA in Brussels. Societe Generale ``was a leader in derivatives and was considered one of the best risk managers in the world.''

A Random Run Down Wall Street.

2008-01-22T08:48:00.000-05:00

Note to self:

A stampede eventually tires and gets pretty hungry. Keep an eye on the grains. Not saying buy, just keep an eye.

e.g. DBA, RJA.

There will be blood.

2008-01-22T08:19:00.000-05:00

Note to self:

Do not buy any financials or any major market average that is dominated by financials until you see a fairly substantial financial incident.

Walks like a duck, talks like a duck..

2008-01-18T09:11:00.000-05:00

Pretty obvious, really. The question is, does it get worse, stabilize, or gradually recover? A week or so ago I thought to myself as I listened to interviews on CNBC and Bloomberg that, boy, most of these people sound pretty cavalier. Now the mood has changed. I just heard Bob Pisani say on CNBC that the Street wants to see more fear, which is to say it will probably get worse. That sounds right.

MarketWatch: A long-time bull throws in the towel.

Stock market bulls lost an important ally on Wednesday: Dan Sullivan is now convinced that we are in a major bear market.

Sullivan is editor of two newsletters, The Chartist and The Chartist Mutual Fund Letter. Sullivan has been publishing the first of these since the late 1960s, nearly 40 years ago. Very few others have been continuously editing an advisory newsletter for any where close to that long a period.

Sullivan, therefore, has seen lots of different kinds of market environments, which is why we should place more than the usual weight on what his intuition tells him. And right now, as he said in an interview Thursday afternoon, his "gut feeling" is that we're in a bear market that we will need to let "run its course."

....

Sullivan mentioned two major factors. The first is technical: In recent days, all of the major market averages convincingly broke below their August lows.
The second is the breakdown of the industry groups that were previously leading the market. Sullivan believes that each bull market is dominated by groups with exceptional relative strength, and that the bull market's end is often signaled when those groups lose that strength. As recently as early January, Sullivan had argued that these market leaders were still bucking the downdraft. He says that they are doing so no longer.

As a result, Sullivan has liquidated his two model stock portfolios and gone completely to cash. The last time he was in an all-cash position was in early April 2003, nearly five years ago.

Tough call.

2008-01-08T08:52:00.000-05:00

The economy is clearly slowing, and the market is getting fearful, but, as this note points out, it's a crap shoot whether this is medium term negative or positive for the market. Basically, it depends on how long and hard this slump is, which is tough to predict in advance.

The beginning of this year does not look like fun though. The stuff that's been working? Health care, consumer staples. Think ESRX, CL, MO.

NY Times: Bad Start, Recession Near?

Quotes:

The maven of S.&P. numbers, Howard Silverblatt, points out that today ranks No. 6 among the worst first days of a year for the S.&P. 500. The index fell by 1.4 percent.

Every one of the previous five came when the economy was in a recession, or not far from one.

Here’s the list:

1. 1932, down 3.7% on the first day. Thus began the last year of the worst part of the Great Depression. The National Bureau of Economic Research thinks the recession that began in August 1929 lasted until March 1933.
2. 2001, down 2.8%. A recession began in March.
3. 1980, down 2.0%. A recession began that month.
4. 1949, down 1.6%. A recession had begun in November 1948.
5. 1983, down 1.6%. A recession had ended in November 1982.

Now even if you make the leap that this somehow forecasts the economy, it doesn’t do much for the stock market investor. The stock market had great years in 1980 and 1983, and a good year in 1949. On the other hand, getting out at the beginning of 1932 or 2001 turned out to be a wise decision.

Death to the housing oil bubblers!

2008-01-04T08:45:00.000-05:00

Tech, housing, oil.. all great bull markets come to an end at some point.

And this was my year to sell, I started to think. Maybe sell 'em all. That's right, sell everything.

Adios.

Auf wiedersehen.

Hasta la vista, baby.

I came in pretty nervous, after all. A bull market that dates (with brief respites) back to 1998, which major mojo starting in 2003. 2006 was a little so-so, but 2007 was another barn stormer. And everybodys now talking about oil.

Money Magazine [the most mediocre of the finance magazines by a long shot], for crying out loud, a huge skeptic of oil in 2004 (and a housing bubbler till the bitter end), even getting bullish.

And the kicker: CNBC turning to all oil, all the time lately.

And now Doug Kass.. - DOUG *&^%$#@ KASS - [do you have ANY idea how skeptical this guy is?!], called for $135 oil in his 2008 Surprises (See "20 Surprises for 2008.", it's number 15.

Number 15..? After a huge bull run we can't even make the *&^%$#@ top 5?!)

But then, I ran across this video:

CNBC: Sector Stars for 2008.

And I listened to the survey on how many money managers believe energy will repeat as the best sector this year.

Go ahead, what percentage would you guess?

Half?

A third?

A quarter?

One or two?

How about - none. Yep - no money managers believe in energy this year.

Energy is back, baby!

Ok, I'm kidding. Even I don't think energy will be the best sector of 2008. But zero - that has got to get your contrarian hackles up a bit.

I'm a little skeptical on financials being the best performing sector of 2008, but I've had GS on my potential buy list for a while, and maybe this is my year to buy it. Not sure I'm buying until somebody big blows up there though.

What's looking healthy right now? Bought a little TEVA (generic drugs) the other day .

No sex. No drugs. No wine. No women.

2007-12-31T00:21:00.000-05:00

Or perhaps, more wine. Lots more wine.

Via the excellent housing blog, Calculated Risk:

Times: Top economist says America could plunge into recession.

Quotes:

Losses arising from America’s housing recession could triple over the next few years and they represent the greatest threat to growth in the United States, one of the world’s leading economists has told The Times.

Robert Shiller, Professor of Economics at Yale University, predicted that there was a very real possibility that the US would be plunged into a Japan-style slump, with house prices declining for years.

Professor Shiller, co-founder of the respected S&P Case/Shiller house-price index, said: “American real estate values have already lost around $1 trillion [£503 billion]. That could easily increase threefold over the next few years. This is a much bigger issue than sub-prime. We are talking trillions of dollars’ worth of losses.”

P.S. The Vapors.

P.P.S. Love Heebner, but I'm worried like Schiller.

Heebner: I'm Cuckoo for Petrobras.

2007-12-28T17:47:00.000-05:00

Kenneth Heebner of CGM Funds apparently really likes Brazilian oil producer Petrobras (PBR), and he's bullish on the economy of Brazil in general. The Fortune article I highlighted earlier mentioned Heebner is a fanatical researcher, that's on display in these videos.

Note: I believe there is an error in the CNBC video. CNBC displays the chart of PZE, which subsequently rose 15% today. But PZE is a subsidiary of Petrobras, and I believe it is focused on Petrobras' Argentina properties. PBR is the right symbol for Petrobras, and it is the symbol that Bloomberg uses.

CNBC: Focusing on Return$.

Bloomberg: Kenneth Heebner.

P.S. As mentioned before, I own Petrobras.

Wolves in mutual fund manager's clothing.

2007-12-25T09:18:00.000-05:00

Both Kenneth Heebner of CGM Funds and Robert Rodriguez of FPA Funds run mutual funds, but they are both by nature hedge fund managers; highly intelligent with strong opinions, they are not afraid of going against the grain (or tides) by concentrating their bets in certain areas or avoiding certain areas entirely, and neither one toes the 'I must remain diversified" line.

There are differences; Heebner is a growth oriented manager, with an 'anticipate and ride the momentum' style, while Rodriguez is value oriented and generally more conservative. Both have participated in the energy sector over the past few years, Heebner with a mix of production and service, Rodriguez a little more tilted to service. Both also managed to avoid the housing/financial debt crisis, Heebner by riding and then shorting the homebuilders, Rodriguez by dumping his mortgage bond related investments before the slaughter.

Of the two, Heebner has the super hot hand right now, up 60%+ this year, and up a Warren Buffet like 24% over the past 10 years. Rodriguez is having a bad year this year, but has a solid long term record.

It's interesting to note how different their calls on 2008 are. Heebner believes the economy will escape recession in 2008, and continues to be bullish on global growth and the energy sector in particular. His favorite energy stock right now is Petrobras, but note that Heebner can and does change his mind on a dime. Rodriguez, on the other hand, believes a recession in 2008 is likely a certainty.

Personally, I am leaning more towards Robert Rodriguez's outlook, but I will let the market guide me in my positions. Disclosure: I also own Petrobras.

Kiplinger.com: Heebner's World View.

Quotes:

Ken Heebner played the market like a fiddle in 2007. His CGM Focus fund (symbol CGMFX) gained nearly 70% to November 12 (when the January issue went to print), crushing the S&P 500 by 65 percentage points. As of December 17, the fund was up 66%. We visited Heebner at his office, high above Boston Harbor, to get his take on the current environment.

Although the U.S. housing market is mired in a depression, says Heebner, he thinks the economy will still escape recession in 2008. "It really takes a sledgehammer blow to turn this economy down, and I don't think the housing market itself is that blow," he says.

....

His favorite sectors -- energy, industrial raw materials, infrastructure builders and agribusiness -- satisfy the voracious appetites of fast-growing emerging markets. For instance, he recently had 30% of his fund's assets in oil-production and oil-services companies. "As people go from bicycles to motorcycles to cars, there is a big increase in fuel consumption," he says.

Heebner is bullish on Petrobras, an oil giant half-owned by the Brazilian government. He reckons that Petrobras will be able to raise production significantly over the next five years, based on deep-water offshore discoveries. It announced recently that one of its deep-water sites may contain up to eight billion barrels of oil and natural-gas equivalents. Heebner also likes oil-services outfits, such as Baker Hughes and Schlumberger, that are able to sell globally to national oil companies, such as Saudi Aramco. "The oil-services company has really replaced the international oil company as the Western face of oil production," he says.

Fortune: The best stocks for 2008.

Quotes:

Petrobras

We're on record as saying that $95 a barrel is not a sustainable price for oil. Yet The Hottest Fund Manager in America - a.k.a. CGM's Ken Heebner- now has us hedging our bets.

For those unfamiliar with Heebner, understand that his stock picking over the past eight years has been genius (as it has been for much of his 30-year career). He made a bundle short-selling tech and telecom stocks in 2000. He bet big on homebuilders in 2001 only to get out just before they crashed. He plowed his homebuilder profits into energy stocks in 2005 and eventually doubled down on commodities with a big bet on copper.

The result: His CGM Focus fund was up 66% through early December - while juicing his returns with short positions on Indymac and Countrywide Financial, mortgage lenders whose stocks have been circling the drain.

With that kind of track record, we listened when Heebner laid out an argument that $100 oil is not only coming but will be here to stay. "There is still strong growth in Latin America, China, India, and a host of smaller countries like Poland and Thailand," he says.

That means a need for some 1.5 million more barrels of oil a day. The problem, Heebner explains, isn't just finding another 1.5 million barrels; it's finding them even as some of the most productive oil fields in the world are declining.

Heebner, who is a fanatical researcher, questions the conventional view that OPEC has enough spare capacity to fill much of that void. Heebner cites one Saudi Arabian source whom he declines to name who asserts that output at Ghawa r- a legendary Saudi field that produces about 6% of the world's oil - is declining at 9% a year. (The Saudi authorities vociferously dispute this.)

"So I'm connecting all the dots," Heebner says. "It's a tight situation to start with, but add to that a loss of a million barrels a day for the Saudis, and suddenly it gets very interesting on the upside for the price of oil."

That brings us to Petrobras (PBR), Brazil's largest oil company and the stock Heebner thinks is the best way to play oil right now. With petroleum prices so high, a big risk for oil companies is that host countries will demand a bigger and bigger share of the profits in the form of taxes or royalties. "One way you can avoid this," says Heebner, "is if the government owns half the company you've invested in. That's Petrobras."

Petrobras is cheap enough, at 16 times earnings, that it can be a winning investment even if Heebner is proven wrong about $100 oil. The company just announced a huge find offshore from Rio de Janeiro, a field said to have up to eight billion barrels of recoverable oil. (See correction.)

Morningstar: Top Value Manager Even Gloomier on 2008.

Quotes:

Just when you thought Bob Rodriguez couldn't get any gloomier, the highly regarded value investor has become even more downbeat.

Rodriguez, the hugely successful manager of FPA Capital, recently announced he put a halt to purchases of stocks and high-yield bonds at both portfolios on Dec. 14. His decision is a reaction to the subprime mortgage-induced credit crunch, which he expects to worsen in coming months. Rodriguez says he'll review his actions weekly, but he doesn't anticipate any change in course until February or March 2008.

Rodriguez's move is virtually unprecedented. Many investors, including Rodriguez himself, aren't shy retreating to cash when they're nervous. But few money managers have ever publicly foresworn stocks and bonds altogether.

....

As a result, Rodriguez's prognosis for the economy in 2008 is grim. In his September 2007 letter to FPA Capital shareholders, he wrote that the odds of a recession were 50% or greater. But in a conversation with Morningstar, he noted that as recently as a month ago, he would have placed the odds at 70%. Now he says the odds are closer to 100%.

A chicken in every pot, and $1.5099 oil for every SUV in the garage.

2007-12-23T16:29:00.000-05:00

When the race first started, I heard from a lot of people that this woman was going to win. I couldn't see it then, and I don't see it now.

This news byte is hilarious to me either way. Oil prices flit around in the short term, but longer term they are ultimately determined by supply and demand, not by speculators or pandering politicians.

If they really wanted to cut oil use they would put a straight tax on it, a significant one, as they do in Europe. But because they don't like to take tough measures (as we don't - they are elected by us), our politicians do quarter measures like raising the MPG requirements.

Daily news: Elect me and oil prices instantly drop, says Hillary Clinton in Iowa.

Charles Nenner: 2008 to be rough.

2007-12-06T09:08:00.000-05:00

In a bit of a hurry, but Charles Nenner predicting a stock market rally into the end of the year, then a pretty rough 2008, and a deflation scare.

There are no absolutes, but under most scenarios, a deflation scare doesn't have bullish implications for oil or oil stocks.

Goldman: Sell Smoke 'em if you got 'em.

2007-11-27T21:37:00.000-05:00

Goldman Sachs basically downgrading the US economy, saying there's a 45% chance of a US recession next year, and turns neutral on integrated oil and oil service ['oil service' corrected from earlier 'refiners' sorry.], among other things.

Oh, but they figure everybody will be stressed out enough that they'll smoke more. Think MO. Actually, that stock just makes money no matter what happens, even as they kill their best customers. I digress..

CNBC: Goldman Turning Bearish on US.

More available here.

The fat lady gets a Prius.

2007-11-27T09:08:00.000-05:00

Note the prediction of an oil price drop to $60 to $80 over the next several years as consumption actually declines. Note also that Henry Groppe has a track record of solid predictions. (search for his name, I'm in a rush right now).

The Aspen Times: Where virtue, market meet.

Quotes:

And it's happened. Americans have responded. People who don't need trucks to visit the mall are looking for more fuel-efficient vehicles, and the guzzlers are sitting on the lots. Seems to be a recent change.

To find out how recent, I consulted an oil-price analyst — not just any energy expert, but Henry Groppe, a Houston-based veteran and independent thinker. "All our work indicates consumption has actually been flat these three years," he said.

In 1980, when the Iranian revolution sent oil prices soaring, everyone else — Exxon, Shell, the U.S. Department of Energy — predicted that a barrel of oil would soon cost $80, $85, $100 a barrel. In a contrarian forecast, now legend, Groppe said that oil would fall below $15 a barrel. And that's what happened.

Why did his firm, Groppe, Long & Littell, expect the price collapse? "We thought there would be a significant drop in consumption," he said.

Groppe sees consumption dropping now. "Everybody is still in denial about the magnitude of the changes." He predicts the annual average price of oil will fall back to $60 to $80 a barrel in the next several years.

The faulty forecasts, Groppe says, reflect a reliance on the flawed work of the International Energy Agency. His group gathers its own data.

For example, the IEA last year forecast a major rise in production by nations outside of the Organization of Petroleum Exporting Countries. The actual increase was tiny.

"The Saudis made a mistake taking the IEA forecast seriously and cutting production when they should not have done it," Groppe said.

That raised prices to the point where consumers started using less energy. The Saudis want us hooked.

As for the Americans' part in this, Groppe thinks that "the most important thing is more efficient usage — particularly greater mileage performance of our vehicles."

Please God, not the cover.

2007-11-26T09:10:00.000-05:00

Making the cover is usually a great contrarian signal. Not there yet, but if oil slices through $100 too easily, look out for the Man of the Year (also a contrarian signal) to be oil or alternative energy related.

Time: Peak Possibilities

Quotes:

In July 2006, the world's oil rigs pumped out crude at a rate of nearly 85.5 million bbl. a day. They haven't come close since, even as prices have risen from $75 to $98 per bbl. Which raises a question of potentially epochal significance: Is it all downhill from here?

Page A1, with a bullet.

2007-11-18T23:42:00.000-05:00

It's not really polite for me to quote the whole article, so I suggest you buy a copy to read. And for posterity, of course.

The Wall Street Journal: Oil Officials See Limit Looming on Production.

Quotes:

A growing number of oil-industry chieftains are endorsing an idea long deemed fringe: The world is approaching a practical limit to the number of barrels of crude oil that can be pumped every day.

Some predict that, despite the world's fast-growing thirst for oil, producers could hit that ceiling as soon as 2012. This rough limit -- which two senior industry officials recently pegged at about 100 million barrels a day -- is well short of global demand projections over the next few decades. Current production is about 85 million barrels a day.

The world certainly won't run out of oil any time soon. And plenty of energy experts expect sky-high prices to hasten the development of alternative fuels and improve energy efficiency. But evidence is mounting that crude-oil production may plateau before those innovations arrive on a large scale. That could set the stage for a period marked by energy shortages, high prices and bare-knuckled competition for fuel.

....

The emergence of a production ceiling would mark a monumental shift in the energy world. Oil production has averaged a 2.3% annual growth rate since 1965, according to statistics compiled by British oil giant BP PLC. This expanding pool of oil, most of it priced cheaply by today's standards, fueled the post-World War II global economic expansion.

....

Compounding the problem: Most of the world's biggest fields are aging, and production at them is declining rapidly. So, just to keep global production at current levels, the industry needs to add new production of at least four million daily barrels, every year. That need is roughly five times the daily production of Alaska, with its big Prudhoe Bay field -- and it doesn't assume any demand growth at all.

Rate of Decline

Mr. Simmons scoffs at estimates that production from proven fields will decline only 4.5% a year. He thinks a more realistic rate of decline is 8% to 10% a year, especially because modern technology actually succeeds in depleting fields faster.

If he's right, the industry needs to add new daily production of at least eight million barrels -- 10 times current Alaskan production -- just to stay even.

Will the wolf bull survive?

2007-11-13T08:01:00.000-05:00

A very serious question. Trendlines, support lines, and the next week or two are very important, as are stop losses.

Barron's: Are Energy Stocks Out of Energy?

Quotes:

THE AMAZING RUN IN THE ENERGY SECTOR has hit a ceiling. While the much-ballyhooed $100 per barrel price for oil is very near, it looks as if it is going to have to wait just a while as the market shakes out some of its excesses.

....

The questions now are, "How far down can the ETF fall?" and "Is the energy bull market over?"

The answer to the latter question is "no." The long-term trend is still very much in place and the trendline that defines it can help us answer the former question. A correction of another five or six points would place the ETF squarely on that trendline, as well as on key chart support from last summer. In other words, a drop to the mid to high 60s should be viewed as a buying opportunity at this time.

....

If we make the fundamental assumption that energy demand is not going away and the technical assumption that long-term trends are still intact then we have a sector to watch for bargains in the near future. The only caveat is that energy stocks are still stocks and will be affected by the major trend in the stock market. If you don't think the market is heading into a bear then energy stocks should provide opportunity soon.

CNBC: Commodities Bubble?

Louise Yamada, Louise Yamada Technical Research Advisors.

Quotes:

We think that commodities are still in structural bull markets, so, I would say correction at this point, because the overall market has been looking like it's wanting to correct.

On the bear case, Jim Melcher, up 175% this year on bets against subprime and housing:

NY Sun: Talk of Worst Recession Since the 1930s.

Quotes:

Mr. Melcher, a market bear, had some pretty discouraging words. "What I think is not good for the country, but good for me." he says. His basic advice to the country's roughly 80 million stock players: Run for the hills — the worst is far from over. An investor's stock portfolio now, he believes, should be only about half of what it might normally be.

With the housing market in a state of collapse — and he says he believes it is far from over — Mr. Melcher argues that average homeowners will not be able to withstand the kind of recession he sees, given the added burdens of rising energy and food costs, and continued deterioration in the credit markets.

....

Asked how he could conceivably give credibility to such an ominous forecast, Mr. Melcher observes: "I've never seen a market with more risk and what's significant is that risk is not yet priced in."

Given his grim expectations, he says there is no equity market in the world he would play right now. "When the American market goes down, other equity markets around the world should follow," he says.

As of now, his portfolio is pretty much devoid of stocks, save for an exchange-traded fund focused on leading companies in oil services, which he regards as an ongoing growth industry. The ETF, the Oil Services Holders Trust, trades on the American Stock Exchange under the symbol OIH. Although enthusiastic about the industry's growth prospects, Mr. Melcher says he would be reluctant to recommend oil services stock because he believes the price of oil could easily drop 50% in the recession he envisions.

See Dick Run [From the Financials].

2007-11-08T09:34:00.000-05:00

In case you get the urge to buy the financials. He's not advocating shorting, but he sure isn't buying them either.

Bloomberg: Dick Bove of Punk Ziegel.

John Roque: Oil Good, Financials Bad.

2007-11-06T06:41:00.001-05:00

Bill Miller of Legg Mason called the other day for buying the financials. That was a call he must have placed from his yacht off a very sunny coast somewhere. Though some of them may have seen the worst of their downside, I'd say financials have a long road ahead of them. Jim Rogers says avoid the financials like the plague, and apparently he's still short.

John Roque of Natexis Bleichroeder is a technical analyst, he looks at charts to try to determine trends.

CNBC: Fast Money Chartology.

Quotes:

"We agree that the financials now, and this might be a bold call, are actually akin to what the semis were in 2000 when they broke. The Street wasted a lot of energy and time trying to pick the bottom, the better thing to do is just to leave them alone, they're going to be underperformers for a long time."

....

"The trend for oil, for gold, for silver, for all commodities remains up. The last three major commodities cycles are 14 years in length. You could start this one in 1999, this is the eighth year, if history is some guide, we still have some time."

$94 oil? Still sorta cheap..

2007-11-05T20:24:00.000-05:00

Somebody forgot to mention that:

- crude oil, natural gas or coal is an input to some (many?) of the 'alternative' fuels.

- most of them don't scale well, particularly not to the volumes we use (currently..)

- the current infrastructure was built for and around oil; if you need to build an infrastructure for an alternative, you're going to have to factor that into the cost too

There's always the possibility of dramatic breakthroughs, but oil is still amazingly useful and relatively cheap, as Matt Simmons would be quick to point out.

Wall Street Journal: Biofuel Costs Hurt Effort To Curb Oil Price.

Quotes:

Rising costs of biofuels and other alternative energies are making them less viable as substitutes for crude oil, a development that could frustrate efforts to bring oil prices down in the years ahead.

A few years ago, many energy economists predicted that higher oil prices would ensure the success of alternative energies such as biodiesel or wind power by making them more financially attractive. In many cases, though, the opposite has occurred: Even as crude-oil prices approach $100 a barrel, some alternatives look less attractive than in the past.

One reason: Energy demand is now so intense that supplies of just about every kind of fuel are in short supply, driving up prices of the raw materials involved in making many alternative energies. Some biofuels also rely on agricultural commodities that already are facing higher demand as foodstuffs, a situation which drives up prices further.

The problem is most acute for crop-based alternative fuels, like ethanol and biodiesel, though it has also proved true to some degree for solar power, nuclear power and other competing energy sources.

Biodiesel, a fuel made from farm crops like soybean oil and palm oil, was in some cases supposed to be economically competitive with crude-oil prices as low as $50 a barrel, according to analysts who studied the industry.

But a sharp rise in the price of biodiesel raw materials -- including a more than 90% jump in palm-oil prices over the past three years -- has dramatically altered the economics of the industry. M.R. Chandran, former head of the Malaysian Palm Oil Association, says crude oil would now have to be as much as $130 a barrel before palm-oil-based biodiesel is competitive.

Supply constrained = peak?

2007-11-05T05:47:00.000-05:00

This Bloomberg article is about coal, but what I find interesting is the comparisons between coal and oil use and prices dating back to 1998 and 2002.

Both coal and oil are energy sources, but they are not perfect substitutes for one another; coal is used mostly for generating electricity, while oil is mostly used for transportation. However, a growing world economy would (and has) demanded more of both.

Economics tells us: With demand up, prices or supply should rise. If prices get too high, demand will likely fall.

While apparently coal use (demand) has grown 27% since 2002, or three times faster than crude, oil prices have risen much more than coal; according to this article, from roughly parity in 1998 to where oil is now 5 times as expensive as coal.

So coal supply is growing in response to the price rise.

With oil on the other hand, we are seeing a much larger price response (rise). This suggests supply is a problem (i.e. supply has not risen in response to much higher prices), and demand is, so far, not backing off much.

Those pundits who believe the oil price rise is unjustified/temporary suggest that the oil price rise is due to (pick any 3):

- speculators
- terrorist/war premium
- OPEC
- oil companies manipulation
- oil companies refusing to invest

We can't rule those out, and they all probably add a little something to the mix, but these facts suggest that supply is the constraint, just as it would be as we get closer to a global peak in oil production.

Bloomberg: Gore Nightmare Wins as Europe Pays to Ship U.S. Coal.

Quotes:

Now that the price of coal is at a historic low relative to oil, there's no stopping consumers and producers alike from embracing Al Gore's nightmare.

A ton of U.S. coal is so cheap at about $47 that European utilities will pay $50 to ship it across the Atlantic, according to Galbraith's Ltd., a 263-year-old London shipbroker. While oil and coal cost the same as recently as 1998, West Texas Intermediate crude is five times more expensive after climbing to a record $96.24 on Nov. 1.

Peabody Energy Corp., Consol Energy Inc. and Arch Coal Inc., the three biggest U.S. coal companies, forecast the largest increase in exports in 20 years, degrading the call for a moratorium on coal plants by former U.S. Vice President and this year's Nobel Peace Prize winner Al Gore. Coal use worldwide has grown 27 percent since 2002, three times faster than crude, said BP Plc. U.S. East Coast coal has risen 71 percent, while oil tripled on the New York Mercantile Exchange.

``Coal is by far the cheapest fuel because there's no price on how much damage it causes,'' said John Holdren, a Harvard University professor of environmental science and director of the Woods Hole Research Center in Falmouth, Massachusetts. ``Unless you get policies to put a price on carbon dioxide and other emissions, no other plants can compete.''

U.S. coal prices are equal to $1.98 for each million British thermal units of energy, compared with $12.51 for fuel oil and $6.91 for natural gas, data compiled by Bloomberg show. A million British thermal units is the equivalent of eight gallons of gasoline.

It's Hard Out Here for a Peak Oil Pimp.

2007-11-04T09:06:00.000-05:00

Actually, with $90+ oil, and articles like these, it's not so hard anymore. I used to make a proactive effort to try to explain the concept of peak oil and the possibilities of oil investing at work, in personal conversations, at dinner parties, but I found people were rather blase about the idea, for a variety of reasons. [Though some co-workers did eventually invest and make some nice money. Though at that point it could be more attributed to trend following.]

Now I just blog and generally keep my mouth shut, unless somebody else brings it up.

International Herald Tribune: IEA says oil prices will stay 'very high,' threatening global growth.

Quotes:

The rapidly growing appetite for fossil fuels in China and India is likely to help keep oil prices high for the foreseeable future - threatening a global economic slowdown, a top energy expert said Wednesday.

The unusually stark warning by Fatih Birol, chief economist of the International Energy Agency, about the impact of Asia's emerging giants comes as the agency prepares to issue its influential annual report next week, which will focus on China and India.

In preparing the report, Birol said he had experienced "an earthquake" in his thinking.

"China plus India are going to dominate growth in the oil markets," Birol said during an interview at an oil industry conference. During the past 18 months, he noted, more than two-thirds of the growth in global oil demand came from China and India alone.

Demand for oil in China, he added, would eventually equal the entire supply from Saudi Arabia.

Crude Realities with Matt Simmons.

2007-11-02T08:28:00.000-04:00

Interesting interview, particularly the fact that the CNBC anchor, Becky Quick, keeps overtly referring to "peak oil".

Sea change? I think so.

$100 oil will do that to you, I suppose, as will Matt Simmons' calculations that fair value for oil is, oh, around $300 a barrel or so.

CNBC: Crude Realities.

Energy is early in the cycle.

2007-11-02T08:00:00.000-04:00

CNBC: Jerry Castellini

Jerry Castellini, President/CIO at CastleArk Management talks about the Fed, housing and then oil.

Quotes:

"This oil move, it's ironically still in that debate phase, where people are still trying to debate where $50, or $30, or $60; the reality is the stuff has to be priced at $100 to $200 over the next 10 years to attract enough capital to keep it flowing."

....

"It's still way early, Mark. This is no different than the retail/consumer space in the 80's, or the tech space in the 90's. This is a 10+ year cycle. We haven't even found that price point yet where consumers will stop using it."

[Maybe soon enough we will..]

Kenneth Heebner, CGM Capital Management, highlights one of his favorite stocks, Petrobras.

CNBC: Kenneth Heebner.

Alberta Royalty "Adjustments".

2007-10-31T08:42:00.000-04:00

If you haven't already heard, Alberta wants to raise the royalties oil and gas producers are paying in the Canadian province. The theoretical fly in the ointment for the government is that several producers, among them the largest producers from oil sands, Suncor and Syncrude, have contracts that extend until 2015 or so that stipulate their royalties. [I believe Canadian Natural Resources also has a deal.] But as the energy minister of Alberta makes clear in this video, while there won't be unilateral adjustments to these contracts by the government, they are going to figure out a way to get their money one way or the other.

The clear message of this and the various other adjustments being made around the world: If you choose to invest in oil and gas producers, spread your money around. And note that as royalties rise, development hurdles usually get higher, some projects become potentially uneconomic, timelines extend, etc. This is thus bearish for some affected producers, but may be bullish for others elsewhere, as well as for oil prices in general.

Bloomberg Video: Knight of Alberta.

It's not easy being printing the green.

2007-10-29T22:25:00.000-04:00

Come on Jim, tell us what you really think..

Bloomberg Video: Jim Rogers.

Quotes:

"I would urge everybody listening to your show to figure out ways to start getting money out of the US dollar.."

"We now have a madman at the head of the Federal Reserve.."

"... now America's given him the printing presses, and he is running them as fast as he can."

------------------------------------------------------------------

I'm not sure Bernanke has much choice. We've got a leaning tower of Pisa: too much debt, sliced and diced into too many derivatives, slipped into too many places. Jim Rogers advocates no more rate cuts, and a recession to clean out the mess. [Which is a heck of lot easier to advocate when you're not a working stiff.] He's looking for a Fed head with the backbone of Volcker, but I'm not sure you can be a Volcker, or even a demi-Volcker, in this highly visible media age.

The flipside of the lower dollar is it makes our exports more competitive. Exports seem to be the likely explanation why the whackage in housing hasn't taken the toll so far one would expect.

Somebody wake up Hicks.

2007-10-29T08:42:00.000-04:00

Via The Oil Drum, a link to a copious set of notes from the recent ASPO Conference in Houston. The associated slides from the presentations are here.

P.S. The quote is from Aliens.

Porsche. Oil. There is no [easy] substitute.

2007-10-26T08:14:00.000-04:00

This is a very interesting article and research paper on energy alternatives. The stock market clearly supports solar and doubts ethanol, and the data in these support those views. We're a long way off from the vision of solar charged vehicles on a mass scale though.

MSN Money: Shuck the ethanol and let solar shine.

Quotes:

New research by a University of California petroleum engineering professor suggests that worldwide crude oil supplies will start to run so low over the next nine years that resource-blessed countries like Saudi Arabia will begin to hoard them for domestic use instead of exporting -- and states with large reservoirs of natural gas, like Montana, will seek ways to avoid sharing with less-advantaged neighbors like Oregon.

Attempts to forestall the political and economic damage by turning aggressively to agriculture for "renewable" transportation fuel in the form of ethanol will prove futile, according to professor Tad W. Patzek, as new calculations show that the entire surface of the Earth cannot create enough additional biomass to replace more than 10% of current fossil fuel use.

....

One better solution is solar energy created at the municipal level by massive photovoltaic cell facilities, at the street level by home-based grids and at the transportation level at lots where electric vehicles' batteries can be charged. Photovoltaic cells lose only about 80% of the sun's energy to dissipation, making them at least 100 times more efficient than ethanol after the fuel cost of growing and refining the biomass feedstack is accounted for.