Refiners, natural gas, solar, uranium... the bull looks like it's back.
CNBC: Pickens Tells CNBC Oil Is Heading Higher.
Short the homebuilders? You've got company.
Reuters: Rogers shorts U.S. builders, eyes more losses.
Thursday, April 12, 2007
Monday, April 09, 2007
Warren Buffett: Ich bin ein Peak Oiler.
Right scenerio, wrong guys maybe. Ah, so let's try again..
Warren Buffett and Matthew Simmons walk into a bar...
Berkshire Hathaway disclosed over the weekend that it had acquired a circa $3 billion stake in railroad Burlington Northern Santa Fe, and then this morning CNBC reported that there are two other railroads that Berkshire is investing substantial amounts in, to the tune of around $700 million each.
Now, if you take a look at the charts of the various railroad stocks (BNI, UNP, CSX, NSC), you will see that Mr. Buffett isn't exactly acquiring these stocks at rock bottom prices. In terms of historical valuations, they don't look all that cheap either. This is clearly not a prototypical Warren Buffett investment, at least at first glance. But for some reason, Mr. Buffett wanted the railroad industry and he wanted in in a hurry.
The news media is mainly playing this up with the "Warren Buffett believes in the American economy" angle. I think they're all wet.
Now, while I'm sure there is more than one angle to this investment for him, I would wager a large amount of money that as he is more and more aware of the energy challenges the world has, he thus is investing in the cheapest form of long haul shipping that reaches most areas of the country. For one thing, the rails transport much of the coal that's shipped around the country, for another, they are shipping around grains and much of the ethanol (which, in theory, we will see more of in the future). Finally, shipping items by rail verus truck is immensely more efficient, I've read something up to 10 times more efficient.
So while people puzzle over why Mr. Buffett is going gangbusters over the rails, I submit that the following quote from Matthew Simmons has a lot to do with it:
Foreign Policy: Matthew Simmons on Softening Oil Peak Impact.
FP: If you were the secretary of energy right now, what policies would you recommend to President Bush?
MS: If we restructure the way we use fuels, we might be able to get along very well with oil in decline. The single-most energy inefficient way we use oil is large trucks delivering goods over large distances. If you take all the goods that are trucked more than, say, 50 miles, onto railroad tracks, depending on the length of travel, you’d use between 3 to 10 times less energy. If you put them on a marine vessel, it’s even more efficient. So forget about just-in-time inventory. Once you get the large trucks off the road, you make a tremendous dent in traffic congestion, which is public enemy one through five on passenger car fuel efficiency.
P.S. Don't forget his investments in ConocoPhillips, wind power, and ideas about nuclear energy.
Warren Buffett and Matthew Simmons walk into a bar...
Berkshire Hathaway disclosed over the weekend that it had acquired a circa $3 billion stake in railroad Burlington Northern Santa Fe, and then this morning CNBC reported that there are two other railroads that Berkshire is investing substantial amounts in, to the tune of around $700 million each.
Now, if you take a look at the charts of the various railroad stocks (BNI, UNP, CSX, NSC), you will see that Mr. Buffett isn't exactly acquiring these stocks at rock bottom prices. In terms of historical valuations, they don't look all that cheap either. This is clearly not a prototypical Warren Buffett investment, at least at first glance. But for some reason, Mr. Buffett wanted the railroad industry and he wanted in in a hurry.
The news media is mainly playing this up with the "Warren Buffett believes in the American economy" angle. I think they're all wet.
Now, while I'm sure there is more than one angle to this investment for him, I would wager a large amount of money that as he is more and more aware of the energy challenges the world has, he thus is investing in the cheapest form of long haul shipping that reaches most areas of the country. For one thing, the rails transport much of the coal that's shipped around the country, for another, they are shipping around grains and much of the ethanol (which, in theory, we will see more of in the future). Finally, shipping items by rail verus truck is immensely more efficient, I've read something up to 10 times more efficient.
So while people puzzle over why Mr. Buffett is going gangbusters over the rails, I submit that the following quote from Matthew Simmons has a lot to do with it:
Foreign Policy: Matthew Simmons on Softening Oil Peak Impact.
FP: If you were the secretary of energy right now, what policies would you recommend to President Bush?
MS: If we restructure the way we use fuels, we might be able to get along very well with oil in decline. The single-most energy inefficient way we use oil is large trucks delivering goods over large distances. If you take all the goods that are trucked more than, say, 50 miles, onto railroad tracks, depending on the length of travel, you’d use between 3 to 10 times less energy. If you put them on a marine vessel, it’s even more efficient. So forget about just-in-time inventory. Once you get the large trucks off the road, you make a tremendous dent in traffic congestion, which is public enemy one through five on passenger car fuel efficiency.
P.S. Don't forget his investments in ConocoPhillips, wind power, and ideas about nuclear energy.
Thursday, April 05, 2007
Warren Buffett, Boone Pickens, and William Greehey walk into a bar...
How'd you like to be a fly on that wall?
I don't know if these guys have ever gotten together, I'm not even sure if they all drink (Boone Pickens and William, ahem, Greehey, I'm going to go out on a limb and suggest these guys have probably both had a drink or three before), but we can try to imagine the conversation they might have together.
Warren Buffett, CEO of Berkshire Hathaway and one of America's greatest investors (if not the greatest), would probably talk about how he likes to buy companies with compelling businesses and strong, intelligent management at undervalued prices, and with his eye firmly on the long term. He might explain how he is seeking to diversify overseas these days, particularly since he has questions about the US dollar and deficits, and though he generally avoids 'commodity' businesses, has invested in the past few years in oil companies ConocoPhillips and Chinese oil major PetroChina.
Boone Pickens, CEO of hedge fund BP Capital, and perhaps the most famous proponent of peak oil in the financial world, would probably talk of his strong belief in peak oil and that we are right now at the production peak, his high regard for natural gas and Canadian oil sands, and his large stakes in Canadian oil sands producer Suncor, refiners Tesoro and Valero, and deepwater driller Transocean.
William Greehey, former CEO of Valero and architect of it's amazing rise, might then finish up with his current view of the refinery business, which is that with everybody focused on getting the last drop of gasoline out of the barrel, the asphalt side has been neglected and is going to become quite tight in 2007.
What company might they all three agree on?
ConocoPhillips, maybe, though Boone Pickens is not a huge fan of the majors as they struggle in keeping up with the ever faster treadmill of declining reserves.
[Update - It occured to me later that maybe I ought to look at BP Capital's recent filings to see if, in fact, they owned COP, and er, sure, enough, COP is the only one of the majors they do own. Oops. So I guess Boone does like COP. The other interesting thing that stood out to me from looking at his holdings was just how much Denbury Resources (DNR) BP Capital holds. Wow, they are way overweighting that one. They have some large CO2 resources and they buy old oil fields on the cheap and CO2 flood them to recover more oil.]
My vote for a play they all might find interesting: Canadian energy company Husky Energy (HUSKF or HSE.TO).
Why?
1.) Major natural gas discovery in the South China Sea.
2.) Sizable oil sands holdings in Canada.
3.) Major refiner of asphalt in Western Canada.
(Details here.)
35% of Husky is owned by Hutchison Whampoa, a Hong Kong conglomerate/holding company. There is some speculation that a Chinese company will purchase a Canadian producer to get a significant piece of the oil sands. I have no idea if Hutchison wants to sell, but I would rather not see that happen with Husky. (Frankly, I'd rather not see it happen with any of my holdings there.) Instead, I'd just like to collect my dividends over time and let current management keep running the joint, they've been doing a rather fine job.
Note: None of the above referenced investors has, as far as I know, ever actually suggested Husky as an investment. I'm just... speculating.
I don't know if these guys have ever gotten together, I'm not even sure if they all drink (Boone Pickens and William, ahem, Greehey, I'm going to go out on a limb and suggest these guys have probably both had a drink or three before), but we can try to imagine the conversation they might have together.
Warren Buffett, CEO of Berkshire Hathaway and one of America's greatest investors (if not the greatest), would probably talk about how he likes to buy companies with compelling businesses and strong, intelligent management at undervalued prices, and with his eye firmly on the long term. He might explain how he is seeking to diversify overseas these days, particularly since he has questions about the US dollar and deficits, and though he generally avoids 'commodity' businesses, has invested in the past few years in oil companies ConocoPhillips and Chinese oil major PetroChina.
Boone Pickens, CEO of hedge fund BP Capital, and perhaps the most famous proponent of peak oil in the financial world, would probably talk of his strong belief in peak oil and that we are right now at the production peak, his high regard for natural gas and Canadian oil sands, and his large stakes in Canadian oil sands producer Suncor, refiners Tesoro and Valero, and deepwater driller Transocean.
William Greehey, former CEO of Valero and architect of it's amazing rise, might then finish up with his current view of the refinery business, which is that with everybody focused on getting the last drop of gasoline out of the barrel, the asphalt side has been neglected and is going to become quite tight in 2007.
What company might they all three agree on?
ConocoPhillips, maybe, though Boone Pickens is not a huge fan of the majors as they struggle in keeping up with the ever faster treadmill of declining reserves.
[Update - It occured to me later that maybe I ought to look at BP Capital's recent filings to see if, in fact, they owned COP, and er, sure, enough, COP is the only one of the majors they do own. Oops. So I guess Boone does like COP. The other interesting thing that stood out to me from looking at his holdings was just how much Denbury Resources (DNR) BP Capital holds. Wow, they are way overweighting that one. They have some large CO2 resources and they buy old oil fields on the cheap and CO2 flood them to recover more oil.]
My vote for a play they all might find interesting: Canadian energy company Husky Energy (HUSKF or HSE.TO).
Why?
1.) Major natural gas discovery in the South China Sea.
2.) Sizable oil sands holdings in Canada.
3.) Major refiner of asphalt in Western Canada.
(Details here.)
35% of Husky is owned by Hutchison Whampoa, a Hong Kong conglomerate/holding company. There is some speculation that a Chinese company will purchase a Canadian producer to get a significant piece of the oil sands. I have no idea if Hutchison wants to sell, but I would rather not see that happen with Husky. (Frankly, I'd rather not see it happen with any of my holdings there.) Instead, I'd just like to collect my dividends over time and let current management keep running the joint, they've been doing a rather fine job.
Note: None of the above referenced investors has, as far as I know, ever actually suggested Husky as an investment. I'm just... speculating.
Sunday, April 01, 2007
The One Minute Peak Oil Investor.
Because the markets are my main hobby, in my off-blog life as a civilian I often wind up talking to people about stocks, investments, and energy. And although the concept of 'peak oil' has now gotten fairly widespread coverage, I still find many people aren't familiar with the concept. I'm not going to try to explain it in this post [I believe the most easily read book that explains the concept well is 'Hubbert's Peak: The Impending World Oil Shortage' by Kenneth Deffeyes].
In terms specifically of investments, many of the people I talk to also seem to be carrying a lot of cash (an outgrowth of their bad experiences in the bear market of 2000-2002). When I bring up the topic of how much energy people have in their portfolios, most don't know, or assume they have an average range (probably a reasonable assumption). Sometimes I get around to suggesting an energy stock or two that people might want to take a look at, and the usual reaction is fairly unenthusiastic. Energy just does not seem very sexy to most folks, I guess, certainly not as sexy as a nice tech play. Some people also say basically, "I just don't have the money, and don't want to sell what I have to make room."
Ok, understood, but given the world that we have today, with questions about long term energy supplies (both in terms of location and quantity), emerging markets and their demands on commodities, inflation, and a potentially declining dollar, I think most people should try to be gaining exposure to energy over time.
So here is my answer to this:
I believe an appealing way to gain additional exposure to energy in an inexpensive, low risk way is to use the Automatic Asset Builder program (essentially a dollar cost averaging program - invest a fixed amount every month to buy more on dips, less on spikes) at T. Rowe Price into their New Era Fund, which can be funded with as little as $50 a month. The New Era fund is focused around natural resources and has a healthy serving of energy. The manager (Charles Ober) amusingly is not a peak oil believer, nonetheless, his fund charter forces him to stay heavily invested in natural resources. The fund has returned about 30% per year over the past 3 years, so it's done a reasonable job of capturing the upside. If you take the time to read the article below, you'll learn also Mr. Ober is a believer in wind energy and is making investments in the sector.
Kiplinger.com: Oil Boom Runs Out of Gas.
T. Rowe Price: New Era Fund
In terms specifically of investments, many of the people I talk to also seem to be carrying a lot of cash (an outgrowth of their bad experiences in the bear market of 2000-2002). When I bring up the topic of how much energy people have in their portfolios, most don't know, or assume they have an average range (probably a reasonable assumption). Sometimes I get around to suggesting an energy stock or two that people might want to take a look at, and the usual reaction is fairly unenthusiastic. Energy just does not seem very sexy to most folks, I guess, certainly not as sexy as a nice tech play. Some people also say basically, "I just don't have the money, and don't want to sell what I have to make room."
Ok, understood, but given the world that we have today, with questions about long term energy supplies (both in terms of location and quantity), emerging markets and their demands on commodities, inflation, and a potentially declining dollar, I think most people should try to be gaining exposure to energy over time.
So here is my answer to this:
I believe an appealing way to gain additional exposure to energy in an inexpensive, low risk way is to use the Automatic Asset Builder program (essentially a dollar cost averaging program - invest a fixed amount every month to buy more on dips, less on spikes) at T. Rowe Price into their New Era Fund, which can be funded with as little as $50 a month. The New Era fund is focused around natural resources and has a healthy serving of energy. The manager (Charles Ober) amusingly is not a peak oil believer, nonetheless, his fund charter forces him to stay heavily invested in natural resources. The fund has returned about 30% per year over the past 3 years, so it's done a reasonable job of capturing the upside. If you take the time to read the article below, you'll learn also Mr. Ober is a believer in wind energy and is making investments in the sector.
Kiplinger.com: Oil Boom Runs Out of Gas.
T. Rowe Price: New Era Fund
Friday, March 30, 2007
V-SUV Day - Friday, March 30, 2007.
GM testing the waters on bringing high mileage mini-cars to the US.
BusinessWeek: GM VP: Considering Efficient Mini Car.
Quotes:
General Motors Corp. GM's top global product planner said Friday the company is taking a serious look at bringing low-cost mini cars to the U.S. market capable of achieving as high as 50 miles per gallon of gasoline and breaking ground in a virtually nonexistent segment in the world's biggest auto market.
GM Group Vice President John Smith said the auto maker is still in very early stages of investigating the U.S. market's appetite for mini cars. Such vehicles are significantly smaller than sub-compact cars currently sold in the region by several players. GM sells a Chevrolet Aveo sub-compact car in the U.S., but nothing smaller.
BusinessWeek: GM VP: Considering Efficient Mini Car.
Quotes:
General Motors Corp. GM's top global product planner said Friday the company is taking a serious look at bringing low-cost mini cars to the U.S. market capable of achieving as high as 50 miles per gallon of gasoline and breaking ground in a virtually nonexistent segment in the world's biggest auto market.
GM Group Vice President John Smith said the auto maker is still in very early stages of investigating the U.S. market's appetite for mini cars. Such vehicles are significantly smaller than sub-compact cars currently sold in the region by several players. GM sells a Chevrolet Aveo sub-compact car in the U.S., but nothing smaller.
Thursday, March 29, 2007
Rounding up The Usual Suspects.
Jim Rogers, Boone Pickens, and Matthew Simmons all popping up today and, each in his own way, intentionally or not, stoking the bull market in oil that's re-exerting itself. Although the economy's looking funky, so far there's no sign of it in gasoline demand.
Has oil got it's mojo back? It certainly looks like it. $75 before $55, Boone Pickens says, and that looks reasonable.
Bloomberg: Jim Rogers.
CNBC: Pickens Tells CNBC: Fundamentals Pushing Up Oil, Not Politics
CNBC: Oil Supply Shock.
Has oil got it's mojo back? It certainly looks like it. $75 before $55, Boone Pickens says, and that looks reasonable.
Bloomberg: Jim Rogers.
CNBC: Pickens Tells CNBC: Fundamentals Pushing Up Oil, Not Politics
CNBC: Oil Supply Shock.
Friday, March 23, 2007
On the homebuilders in 2007: A-B-S.
Glengarry Glen Ross:
Moss: What's your name?
Blake: *&^% YOU, that's my name!! You know why, Mister? 'Cause you drove a Hyundai to get here tonight, I drove a eighty thousand dollar BMW. That's my name!!
....
Because only one thing counts in this life! Get them to sign on the line which is dotted! You hear me, you &^%$#@ &*$%&$&?
(Blake flips over a blackboard which has two sets of letters on it: ABC, and AIDA.)
Blake: A-B-C. A-always, B-be, C-closing. Always be closing! Always be closing!!
....
Moss: You're such a hero, you're so rich. Why you coming down here and waste your time on a bunch of bums?
(Blake sits and takes off his gold watch)
Blake: You see this watch? You see this watch?
Moss: Yeah.
Blake: That watch cost more than your car. I made $970,000 last year. How much you make? You see, pal, that's who I am. And you're nothing. Nice guy? I don't give a ^&$@.
....
I can go out there tonight with the materials you got, make myself fifteen thousand dollars! Tonight! In two hours! Can you? Can you? Go and do likewise! A-I-D-A!! Get mad! You sons of bitches! Get mad!! You know what it takes to sell real estate?
(He pulls something out of his briefcase)
Blake: It takes brass balls to sell real estate.
-----------------------------------
And on the homebuilders in 2007, I say:
A-B-S!
A-always, B-be, S-shorting.
Always be shorting!
Always be shorting!!
I'm being slightly tongue in cheek here, but I imagine that there were scenes in the real estate/mortgage business over the past few years that had some interesting parallels with the above scene.
What a mess. And they really jammed 'em in at the end, didn't they?
Still probably some meat on the bone on the short side, I think, and Centex is a particular 'favorite' of mine; Florida, California, up and down the coasts, what more exposure could you ask for?
Scary reading:
The Economist: Cracks in the Facade.
And the always great blog that covers the housing mess: Calculated Risk.
Moss: What's your name?
Blake: *&^% YOU, that's my name!! You know why, Mister? 'Cause you drove a Hyundai to get here tonight, I drove a eighty thousand dollar BMW. That's my name!!
....
Because only one thing counts in this life! Get them to sign on the line which is dotted! You hear me, you &^%$#@ &*$%&$&?
(Blake flips over a blackboard which has two sets of letters on it: ABC, and AIDA.)
Blake: A-B-C. A-always, B-be, C-closing. Always be closing! Always be closing!!
....
Moss: You're such a hero, you're so rich. Why you coming down here and waste your time on a bunch of bums?
(Blake sits and takes off his gold watch)
Blake: You see this watch? You see this watch?
Moss: Yeah.
Blake: That watch cost more than your car. I made $970,000 last year. How much you make? You see, pal, that's who I am. And you're nothing. Nice guy? I don't give a ^&$@.
....
I can go out there tonight with the materials you got, make myself fifteen thousand dollars! Tonight! In two hours! Can you? Can you? Go and do likewise! A-I-D-A!! Get mad! You sons of bitches! Get mad!! You know what it takes to sell real estate?
(He pulls something out of his briefcase)
Blake: It takes brass balls to sell real estate.
-----------------------------------
And on the homebuilders in 2007, I say:
A-B-S!
A-always, B-be, S-shorting.
Always be shorting!
Always be shorting!!
I'm being slightly tongue in cheek here, but I imagine that there were scenes in the real estate/mortgage business over the past few years that had some interesting parallels with the above scene.
What a mess. And they really jammed 'em in at the end, didn't they?
Still probably some meat on the bone on the short side, I think, and Centex is a particular 'favorite' of mine; Florida, California, up and down the coasts, what more exposure could you ask for?
Scary reading:
The Economist: Cracks in the Facade.
And the always great blog that covers the housing mess: Calculated Risk.
Saturday, March 17, 2007
An Inconvenient Investment.
Gonna have a little trouble explaining this one to the kids, but hey, if Soros can buy Halliburton and keep a straight face..
Green Car Congress: Study: Warming Causing Decline in Global Crop Production
Thoughts: DBA, CNH, TNH, DE, ADM, MON.
Most are extended, buy on pullbacks that bounce off trendlines.
Green Car Congress: Study: Warming Causing Decline in Global Crop Production
Thoughts: DBA, CNH, TNH, DE, ADM, MON.
Most are extended, buy on pullbacks that bounce off trendlines.
Thursday, March 15, 2007
Jim Rogers: Get the heck out of emerging markets.
There are no two ways about what Jim Rogers is saying here. Will he be right? Probably. Keep in mind, he recognizes things before others do, but he tends to be a little early.
Reuters: Top investor warns of Russia stock bubble.
Reuters: Top investor sees U.S. property crash.
Quotes:
"This is the end of the liquidity party," said Rogers. "Some emerging markets will go down 80 percent, some will go down 50 percent. Some will most probably collapse."
He says he'll still hold Chinese stocks though.
Reuters: Top investor warns of Russia stock bubble.
Reuters: Top investor sees U.S. property crash.
Quotes:
"This is the end of the liquidity party," said Rogers. "Some emerging markets will go down 80 percent, some will go down 50 percent. Some will most probably collapse."
He says he'll still hold Chinese stocks though.
Thursday, March 01, 2007
A warning shot.
CNBC: Jim Rogers on Commodity Moves.
Summary: Jim Rogers believes the sell off on Tuesday was a warning shot, and that there is further to fall as we are overdue for a stronger correction; he points out that there are gigantic amounts of liquidity in the system and believes something is going to happen to change that, and then lots of things are going to unravel. In terms of problem signs, he highlights housing starts, autos, the yield curve, sub-prime debt, and margin debt at an all time high. He suggests raising cash, selling short, or buying currencies other than the dollar, and he is bullish on agricultural commodities, utilities, and - strangely enough - airlines. [Not mentioned here, but Air China is a pick of his, but let it stabilize first.]
CNBC: Making Fast Money.
Summary: Jeff Macke says hold off on buying, and wants to buy higher risk, later; suggests waiting for the other shoe to drop, as he believes this is the first part of a multi-tier sell off, and is looking to buy towards the end of March. Tim Strazzini likes the semiconductors after we turn. Eric Bolling likes gold, oil, refiners, and foreign currencies (highlights FXE ETF). Guy Adami also says hold off, looking to buy Apple, South Korea and Taiwan ETFs when we bottom.
CNBC: U.S. Hits Record For Energy Demand.
Summary: Lest we forget our primary focus, US oil demand in the past 4 weeks was huge. Traders are keeping an eye on the macro picture (the economy) though, because oil demand should be affected if the economy deterioriates.
My own thoughts:
I think there is more work to be done on the downside. I also like agricultural commodities and Apple. My sector screen highlights SMH (semiconductors) as Tim Strazzini mentions. I am personally skeptical on this, but usually I hold my nose and trade this screen. Usually.
Summary: Jim Rogers believes the sell off on Tuesday was a warning shot, and that there is further to fall as we are overdue for a stronger correction; he points out that there are gigantic amounts of liquidity in the system and believes something is going to happen to change that, and then lots of things are going to unravel. In terms of problem signs, he highlights housing starts, autos, the yield curve, sub-prime debt, and margin debt at an all time high. He suggests raising cash, selling short, or buying currencies other than the dollar, and he is bullish on agricultural commodities, utilities, and - strangely enough - airlines. [Not mentioned here, but Air China is a pick of his, but let it stabilize first.]
CNBC: Making Fast Money.
Summary: Jeff Macke says hold off on buying, and wants to buy higher risk, later; suggests waiting for the other shoe to drop, as he believes this is the first part of a multi-tier sell off, and is looking to buy towards the end of March. Tim Strazzini likes the semiconductors after we turn. Eric Bolling likes gold, oil, refiners, and foreign currencies (highlights FXE ETF). Guy Adami also says hold off, looking to buy Apple, South Korea and Taiwan ETFs when we bottom.
CNBC: U.S. Hits Record For Energy Demand.
Summary: Lest we forget our primary focus, US oil demand in the past 4 weeks was huge. Traders are keeping an eye on the macro picture (the economy) though, because oil demand should be affected if the economy deterioriates.
My own thoughts:
I think there is more work to be done on the downside. I also like agricultural commodities and Apple. My sector screen highlights SMH (semiconductors) as Tim Strazzini mentions. I am personally skeptical on this, but usually I hold my nose and trade this screen. Usually.
Wednesday, February 28, 2007
So many experts, so little time.
A round up of the more interesting insights today.
CNBC Video: Stephen Schork on Energy.
Summary: Sees oil trading in a range of $55 to $65. If we go above $65, he feels we will likely quickly move to $70, and he believes $65+ oil is serious trouble for the economy; he believes the slowdown in GDP growth we saw at the end of last year was a lagged effect of the highs (~$78) we saw in oil prices last summer.
CNBC Video: Hugh Moore on the slowdown.
Summary: Continues to believe the US enters a recession in late 07 or early 08, also believes we are about halfway through the aftermath of the housing bubble.
Bloomberg TV: Jim Rogers on China's market.
Summary: China's fall is not unexpected, as China's investors were in a mania/bubble. He's not selling in China, but he's not buying either, it's run up too much. The US is probably in a recession, or will be soon, and stock markets will decline. Housing and autos in the US are already in recession. He believes this is the way stock markets begin a decline, with marginal markets, like China and emerging markets going first.
Bloomberg TV: Marc Faber on the overvaluation of all markets.
Summary: All markets are extremely extended, overbought, not particularly attractive in terms of valuations, and vulnerable to some type of disappointment. He points out that this is not a dramatic decline in historical terms, for example in 1987 the Dow Jones fell 21% in one day, other markets have fallen 30% in one week. We haven't had any corrections in the US in a long time, so everybody's leaning in the same direction. We're seeing liquidity being withdrawn in the US sub-prime market, in the Indian stock market, and this could continue like a financial bushfire. Suggests caution/raising cash, since we can't tell the difference between a crash, a bear market, or a correction yet; then check back in 3 months time.
CNBC Video: Saut & Sowerby debate the future.
Bloomberg TV: Robert Shiller on housing.
Bloomberg TV: Boone Pickens on oil.
Summary: Likes deepwater drillers, sees a shortage of deepwater equipment, believes (but sounds less confident than before) that we see $70 oil this year, it's also possible we go higher given the right (or wrong..) events, believes there will be more consolidation in the energy sector; his firm, BP Capital, has positions in Suncor, Valero, EOG; his major worry is a worldwide recession, which his analysts are keeping a very close eye out for.
CNBC Video: Stephen Schork on Energy.
Summary: Sees oil trading in a range of $55 to $65. If we go above $65, he feels we will likely quickly move to $70, and he believes $65+ oil is serious trouble for the economy; he believes the slowdown in GDP growth we saw at the end of last year was a lagged effect of the highs (~$78) we saw in oil prices last summer.
CNBC Video: Hugh Moore on the slowdown.
Summary: Continues to believe the US enters a recession in late 07 or early 08, also believes we are about halfway through the aftermath of the housing bubble.
Bloomberg TV: Jim Rogers on China's market.
Summary: China's fall is not unexpected, as China's investors were in a mania/bubble. He's not selling in China, but he's not buying either, it's run up too much. The US is probably in a recession, or will be soon, and stock markets will decline. Housing and autos in the US are already in recession. He believes this is the way stock markets begin a decline, with marginal markets, like China and emerging markets going first.
Bloomberg TV: Marc Faber on the overvaluation of all markets.
Summary: All markets are extremely extended, overbought, not particularly attractive in terms of valuations, and vulnerable to some type of disappointment. He points out that this is not a dramatic decline in historical terms, for example in 1987 the Dow Jones fell 21% in one day, other markets have fallen 30% in one week. We haven't had any corrections in the US in a long time, so everybody's leaning in the same direction. We're seeing liquidity being withdrawn in the US sub-prime market, in the Indian stock market, and this could continue like a financial bushfire. Suggests caution/raising cash, since we can't tell the difference between a crash, a bear market, or a correction yet; then check back in 3 months time.
CNBC Video: Saut & Sowerby debate the future.
Bloomberg TV: Robert Shiller on housing.
Bloomberg TV: Boone Pickens on oil.
Summary: Likes deepwater drillers, sees a shortage of deepwater equipment, believes (but sounds less confident than before) that we see $70 oil this year, it's also possible we go higher given the right (or wrong..) events, believes there will be more consolidation in the energy sector; his firm, BP Capital, has positions in Suncor, Valero, EOG; his major worry is a worldwide recession, which his analysts are keeping a very close eye out for.
Friday, February 23, 2007
Housing: The Worst is Yet to Come.
Richard Manoogian, the chairman and CEO of Masco, a company intimately involved in homebuilding, is guest host on CNBC this morning and he stated his view on housing pretty clearly: the housing situation is worse than most people realize and the worst is yet to come.
Does this eventually take it's toll on the rest of the economy? It seems likely to me.
CNBC: The Worst is Yet to Come.
Does this eventually take it's toll on the rest of the economy? It seems likely to me.
CNBC: The Worst is Yet to Come.
Wednesday, February 21, 2007
Some follow up on earlier posts.
On the idea of having some exposure to agricultural commodities via, for example, the DBA ETF as a play on the ethanol boondoggle and the vagaries of the weather:
Bloomberg: Corn Farms Replace New York Lofts as Hottest Property.
Quotes:
Marc Faber, a Hong Kong-based investor who manages about $300 million, says one of his favorite stocks is Cresud SA, a landowner in Argentina's Pampas region. The shares jumped 63 percent last year. Farmland is ``very inexpensive in a world of inflated asset prices,'' he said in an interview Feb. 4 from Bermuda.
....
Farm Bulls
Jim Rogers, the hedge fund manager who predicted the start of the commodity rally in 1999, said global warming will hinder crops and has advised purchasing farmland for at least a decade.
``Because of the disruptions, agricultural prices will go through the roof,'' he told reporters in Melbourne on Feb. 7. ``I am extremely bullish on agriculture.''
Australian crop production is the worst in 20 years due to an extensive and lengthy drought. The article suggests that rice production will be down 90%, as rice is an extremely water intensive crop.
A hotter summer this year in the American mid-west? That's all we need.
------
On Apple, the iPhone looks like a gamechanger and the demand appears to be there:
CNBC: iPhone Outlook.
------
The housing 'hangover' rolls on:
Bloomberg: Housing `Hangover' Kills Jobs as Spending Wanes; More Cuts Loom.
Quotes:
Housing and related industries account for about 23 percent of the economy, according to the center.
....
``The fallout in the early 1990s was much worse than what we've seen so far, but this downturn is not over,'' said Puryear, the head of real estate research for the unit of St. Petersburg, Florida-based Raymond James Financial Inc. ``The full impact hasn't hit yet.''
-----
First Marc Faber said he sees a strong correction in the near future, now former hedge fund manager Michael Steinhardt is concerned the rally may be over sooner rather than later.
Bloomberg: Corn Farms Replace New York Lofts as Hottest Property.
Quotes:
Marc Faber, a Hong Kong-based investor who manages about $300 million, says one of his favorite stocks is Cresud SA, a landowner in Argentina's Pampas region. The shares jumped 63 percent last year. Farmland is ``very inexpensive in a world of inflated asset prices,'' he said in an interview Feb. 4 from Bermuda.
....
Farm Bulls
Jim Rogers, the hedge fund manager who predicted the start of the commodity rally in 1999, said global warming will hinder crops and has advised purchasing farmland for at least a decade.
``Because of the disruptions, agricultural prices will go through the roof,'' he told reporters in Melbourne on Feb. 7. ``I am extremely bullish on agriculture.''
Australian crop production is the worst in 20 years due to an extensive and lengthy drought. The article suggests that rice production will be down 90%, as rice is an extremely water intensive crop.
A hotter summer this year in the American mid-west? That's all we need.
------
On Apple, the iPhone looks like a gamechanger and the demand appears to be there:
CNBC: iPhone Outlook.
------
The housing 'hangover' rolls on:
Bloomberg: Housing `Hangover' Kills Jobs as Spending Wanes; More Cuts Loom.
Quotes:
Housing and related industries account for about 23 percent of the economy, according to the center.
....
``The fallout in the early 1990s was much worse than what we've seen so far, but this downturn is not over,'' said Puryear, the head of real estate research for the unit of St. Petersburg, Florida-based Raymond James Financial Inc. ``The full impact hasn't hit yet.''
-----
First Marc Faber said he sees a strong correction in the near future, now former hedge fund manager Michael Steinhardt is concerned the rally may be over sooner rather than later.
Monday, February 12, 2007
I'm with Art.
Art Smith, the head of John S. Herold, an energy research firm, was interviewed in Barron's this weekend, and it turns out he agrees with me on everything. [Okay, okay, so I agree with him on everything, calm down.] If you're into investing in the energy sector, I recommend buying a copy and reading the entire interview, but the highlights have been summarized in a post on Seeking Alpha.
Seeking Alpha Energy Stocks: Barron's: Oil Guru Art Smith's Picks for 2007.
My own summary:
- Big oil is struggling with exploration for various reasons, they will eventually have to step up to the plate to increase their reserves, most likely by takeovers of mid-size companies.
- Buy companies with large North American natural gas reserves. They are cheap and the natural gas situation in North America appears headed for a squeeze.
- Buy Canadian oil sands companies for their long term assets and relative lack of political risk.
In terms of specific stock recommendations, the Seeking Alpha post highlights Mr. Smith's stock picks. My favorites of that list are NXY, CNQ, APC, CHK, SU. Mr. Smith also highlights NXY and SU as likely to be taken over. NXY I think is a goner, highly likely to be acquired at some point, but I am skeptical of the idea that SU will be bought, due mostly to the fact that the price would be too high for any acquirer except somebody who desperately needs oil sands assets. (Think BP.) I think APC is also a good takeover candidate, once it finishes tidying up after it's recent purchases of Kerr-Mcgee and Western Gas Resources.
Seeking Alpha Energy Stocks: Barron's: Oil Guru Art Smith's Picks for 2007.
My own summary:
- Big oil is struggling with exploration for various reasons, they will eventually have to step up to the plate to increase their reserves, most likely by takeovers of mid-size companies.
- Buy companies with large North American natural gas reserves. They are cheap and the natural gas situation in North America appears headed for a squeeze.
- Buy Canadian oil sands companies for their long term assets and relative lack of political risk.
In terms of specific stock recommendations, the Seeking Alpha post highlights Mr. Smith's stock picks. My favorites of that list are NXY, CNQ, APC, CHK, SU. Mr. Smith also highlights NXY and SU as likely to be taken over. NXY I think is a goner, highly likely to be acquired at some point, but I am skeptical of the idea that SU will be bought, due mostly to the fact that the price would be too high for any acquirer except somebody who desperately needs oil sands assets. (Think BP.) I think APC is also a good takeover candidate, once it finishes tidying up after it's recent purchases of Kerr-Mcgee and Western Gas Resources.
Wednesday, February 07, 2007
Nelly on sub-prime mortgage losses accelerating.
It's getting hot in here, so write off all those loans.
Near the end of the recent US housingbubble enthusiasm, loan standards appear to have gone out the window. Now, the most vulnerable of those loans, in the sub-prime arena, are going bad at an increasingly faster pace. Combine this news with the warning from the CEO of JP Morgan, and I'd say you build a pretty good case for the housing market not yet having bottomed and for further interesting times ahead.
Although there is no way to predict exactly how this could play out, the general rule when you start to smell something burning in the financial markets is to reduce risk, make sure your bets are spread around, and not be afraid to let a little cash pile up.
Bloomberg: HSBC to Boost Loan-Loss Provisions on Bad Mortgages.
Quotes:
HSBC Holdings Plc, Europe's biggest bank, said it's setting aside 20 percent more than analysts estimated for loan losses in 2006 because the company's U.S. mortgage business is deteriorating.
....
Home loans to risky borrowers in the U.S. are going bad faster than HSBC expected just two months ago, the London-based company said yesterday in an e-mailed statement.
....
Home loans to borrowers with poor credit ratings or large debt burdens are defaulting at a faster rate than during the U.S. recession six years ago, according to calculations by Friedman Billings Ramsay Group Inc.
``The impact of slowing house price growth is being reflected in accelerated delinquency trends across the U.S. sub-prime mortgage market,'' HSBC said in the statement. ``It is clear that the level of loan-impairment provisions to be accounted for as at the end of 2006 in respect of Mortgage Services operations will be higher than is reflected in current market estimates.''
Near the end of the recent US housing
Although there is no way to predict exactly how this could play out, the general rule when you start to smell something burning in the financial markets is to reduce risk, make sure your bets are spread around, and not be afraid to let a little cash pile up.
Bloomberg: HSBC to Boost Loan-Loss Provisions on Bad Mortgages.
Quotes:
HSBC Holdings Plc, Europe's biggest bank, said it's setting aside 20 percent more than analysts estimated for loan losses in 2006 because the company's U.S. mortgage business is deteriorating.
....
Home loans to risky borrowers in the U.S. are going bad faster than HSBC expected just two months ago, the London-based company said yesterday in an e-mailed statement.
....
Home loans to borrowers with poor credit ratings or large debt burdens are defaulting at a faster rate than during the U.S. recession six years ago, according to calculations by Friedman Billings Ramsay Group Inc.
``The impact of slowing house price growth is being reflected in accelerated delinquency trends across the U.S. sub-prime mortgage market,'' HSBC said in the statement. ``It is clear that the level of loan-impairment provisions to be accounted for as at the end of 2006 in respect of Mortgage Services operations will be higher than is reflected in current market estimates.''
Tuesday, February 06, 2007
Chesapeake's Winter Call.
It looked like a pretty bad call when people were strolling around in shorts and sandals in New York City in mid December and many (probably most) analysts were suggesting another warm winter, but now Chesapeake Energy's weather team is looking pretty smart with their calls (notes here and here) for a more normal (i.e. cold) winter in 2007. Other natural gas stocks are looking stronger (XTO, COG for example), but CHK ought to be getting a bit more credit here, I think. The market feels CHK has been a bit too busy with deals and financings though.
Bloomberg: Crude Oil Rises as Cold Temperatures Signal Higher U.S. Demand.
Quotes:
Temperatures fell to 10 degrees Fahrenheit (minus 12 Celsius) in Boston overnight on Feb. 4-5, when 22 degrees is the normal low at this time of year, Michael Palmerino, a forecaster at Lexington, Massachusetts-based Meteorlogix LLC said yesterday.
``It will stay below normal and much below normal for the next week to 10 days,'' Palmerino said. ``It will take time for the weather pattern to change and for the cold air mass to retreat back into Canada.''
-------------------------------------------------------
Disclosure: I own CHK and XTO; not an endorsement.
Bloomberg: Crude Oil Rises as Cold Temperatures Signal Higher U.S. Demand.
Quotes:
Temperatures fell to 10 degrees Fahrenheit (minus 12 Celsius) in Boston overnight on Feb. 4-5, when 22 degrees is the normal low at this time of year, Michael Palmerino, a forecaster at Lexington, Massachusetts-based Meteorlogix LLC said yesterday.
``It will stay below normal and much below normal for the next week to 10 days,'' Palmerino said. ``It will take time for the weather pattern to change and for the cold air mass to retreat back into Canada.''
-------------------------------------------------------
Disclosure: I own CHK and XTO; not an endorsement.
Wednesday, January 31, 2007
The three most important things to know today.
In no particular order:
1.) China stocks are getting jiggy, too jiggy. When you see stocks move like that, you have to get nervous. Even the biggest China bull of all, Jim Rogers, is warning that investors might be in a hysterical state of mind. You never know when or exactly how one of these bubbles deflates, but deflate eventually they do. If you plan to put money there, you may want to hold off and see if you can come in after the panic.
2.) There are more funky noises coming out of the US subprime housing arena. On the other hand, there are people saying the housing market has bottomed. I think that's a premature call, and we need to see how this subprime issue plays out before we can make that call. And note the first line of the article from MarketWatch:
Rising defaults in some of the riskiest home loans offered by J.P. Morgan Chase & Co. signal a recession may be looming, Jamie Dimon, the bank's chief executive said Tuesday.
3.) Finally, it's funny how the Jack discovery by Chevron and Devon (coming to gas station near you in about, oh, 6 or so years, maybe) was huge news and the fact that one of the world's largest old fields, Cantarell of Mexico (and one very important to us) is seeing fairly steep production declines is not quite as important. While the oil market is seemingly (if you watch CNBC) focused on the weather and minute by minute updates of commentary (often conflicting) coming out of Saudi Arabia and OPEC, this news is actually more important.
1.) China stocks are getting jiggy, too jiggy. When you see stocks move like that, you have to get nervous. Even the biggest China bull of all, Jim Rogers, is warning that investors might be in a hysterical state of mind. You never know when or exactly how one of these bubbles deflates, but deflate eventually they do. If you plan to put money there, you may want to hold off and see if you can come in after the panic.
2.) There are more funky noises coming out of the US subprime housing arena. On the other hand, there are people saying the housing market has bottomed. I think that's a premature call, and we need to see how this subprime issue plays out before we can make that call. And note the first line of the article from MarketWatch:
Rising defaults in some of the riskiest home loans offered by J.P. Morgan Chase & Co. signal a recession may be looming, Jamie Dimon, the bank's chief executive said Tuesday.
3.) Finally, it's funny how the Jack discovery by Chevron and Devon (coming to gas station near you in about, oh, 6 or so years, maybe) was huge news and the fact that one of the world's largest old fields, Cantarell of Mexico (and one very important to us) is seeing fairly steep production declines is not quite as important. While the oil market is seemingly (if you watch CNBC) focused on the weather and minute by minute updates of commentary (often conflicting) coming out of Saudi Arabia and OPEC, this news is actually more important.
Monday, January 29, 2007
Jim Cramer says "tomato", we say "tomato".
If you've watched Jim Cramer on CNBC's MadMoney show, you probably have already come to realize that the man has some form of Investing Attention Deficit Disorder. One week he loves a particular theme, a month later he hates it. Appropriately, his nickname is "The Reverend Jim of the Church of What's Working Now". And that is what I believe Jim Cramer is best watched for, to get a view of where the main focus on Wall Street is right at the moment.
In this interview, he says he doesn't subscribe to peak oil theory, but that the cheap, easy to get oil is gone and we will have to pay higher prices for oil going forward for what's left, which is in difficult, hard to find places. I can't tell exactly from this interview if Jim does not believe that there will be a peak at some point and then a downtrend in global production due to depletion, or if he just thinks that point is still a long way off. It seems to be the later.
[That's okay Jim. That's how it starts. You'll get there.]
His stocks picks here run along the lines of service companies that help find and retrieve oil from far off or deep places (think Transocean/RIG), while he does not embrace stocks with high fixed costs like the Canadian tar sands producers, coal, etc.
I disagree with Jim there, because the Canadian tar sands producers will do well in the higher priced oil environment he envisions, where they can enjoy high prices without the risks of needing to find the oil, develop the infrastructure to extract and transport it, negotiate with sometimes hostile foreign governments etc.
TheStreet.com TV: Jim Cramer on Peak Oil.
Quotes:
"We're not running out of oil at all. We're just running out of oil that is easy to find and easy to get at. There are vast reservoirs, vast, far more than we need for multiple years. It's just not where we want it. So I don't subscribe to Peak Oil theory. What I do subscribe to is the cost of oil is going to be so much higher that the cost of oil is never going to come back below $40 ever again."
In this interview, he says he doesn't subscribe to peak oil theory, but that the cheap, easy to get oil is gone and we will have to pay higher prices for oil going forward for what's left, which is in difficult, hard to find places. I can't tell exactly from this interview if Jim does not believe that there will be a peak at some point and then a downtrend in global production due to depletion, or if he just thinks that point is still a long way off. It seems to be the later.
[That's okay Jim. That's how it starts. You'll get there.]
His stocks picks here run along the lines of service companies that help find and retrieve oil from far off or deep places (think Transocean/RIG), while he does not embrace stocks with high fixed costs like the Canadian tar sands producers, coal, etc.
I disagree with Jim there, because the Canadian tar sands producers will do well in the higher priced oil environment he envisions, where they can enjoy high prices without the risks of needing to find the oil, develop the infrastructure to extract and transport it, negotiate with sometimes hostile foreign governments etc.
TheStreet.com TV: Jim Cramer on Peak Oil.
Quotes:
"We're not running out of oil at all. We're just running out of oil that is easy to find and easy to get at. There are vast reservoirs, vast, far more than we need for multiple years. It's just not where we want it. So I don't subscribe to Peak Oil theory. What I do subscribe to is the cost of oil is going to be so much higher that the cost of oil is never going to come back below $40 ever again."
Friday, January 26, 2007
Coming Soon: Peak Extra Light Olive Oil.
This post isn't about crude oil, peak oil, investing, or any of those things, and, as far as I know, this isn't even a market that Boone Pickens is trying to corner, say, like long dated oil futures or water rights in Texas. (But give him a few weeks..)
No, instead, this post is about weight loss, and a wacky, extraordinarily simple method that I came across recently and have been having a good experience with. I wouldn't normally pass on something like this, but it is so simple and appears to be so effective I'm frankly astounded. And like everybody else with a sedentary job and not quite enough time for exercise, Icould should lose a few pounds.
It's called the Shangri-La Diet, and a wonderfully short book on it was just released. You don't really need to buy the book though, all the pertinent details are out on the web, and the basic concept can be explained in a couple of sentences.
Before I explain the diet though, let's introduce the author: Seth Roberts is an Associate Professor of Psychology at the University of California, Berkeley, with a penchant for self experimentation and some rather novel ideas. You can read some fascinating findings he made by experimenting on himself in the realms of sleep, mood, health and weight in this paper available on eScholarship.
So, more about the diet.
From the introduction to the book:
'Shangri-La? Odd name for a diet. Name of a spa, maybe. I chose it partly because Shangri-La, James Hilton's fictional Himalayan community, was a place of great peace and tranquility; and this diet puts people at peace with food. Within days after starting it, all sorts of food-related struggles (irresistible cravings, too many food-related thoughts, uncontrollable night eating) usually go away. Another reason for the name was that Shangri-La was meant to be a near perfect place and - not to boast - this is a diet with many advantages. It is simple, powerful, and does not require deprivation.'
Hyperbole? From my experience, no. [And for the record, no, I have never bought any bridges in Brooklyn.]
There is no calorie counting involved, no 'off limits' foods, no jogging, no strange Infomercial contraptions destined for a dark corner of your basement, no questionable pills, no meetings, and no expensive, cardboard tasting pre-packaged meals. None of that. (HURRAY!)
Just these very simple instructions:
Once or twice a day, depending on how much you want to lose, you should take in roughly 150 flavorless calories (either sugar or fat) and allow your body 2 hours to absorb them without any other foods/flavors.
Specifically, you either take one-two tablespoons of flavorless oil, either extra light (Note: not extra virgin, extra LIGHT) olive oil (referred to as 'ELOO' in his book) or canola oil, or 1-3 tablespoon fulls of ordinary table sugar mixed in water. You must take this on it's own, and you cannot eat anything for one hour before or after. Nothing. Plain water is okay though.
By ingesting these flavorless calories you are resetting your body weight set point, lowering it. It sounds... nuts. (Prompting no craving with me, by the way. Ice cream.. Nothing. Come up with a food - I dare you. I won't crave it.) If you want more detail on the concept, follow the links below or take a look at the book.
If your experience is similar to mine (and the author of the diet, and other people on line) you will notice after a few days that your food fullness meter has reset itself a few notches lower and you will magically (and effortlessly!) find yourself eating less at meals. Your between meal cravings go away also. And the weight will start to come off.
It is, in a word - mind boggling. Okay, in two words. Which is why I thought I'd take the time to share it.
You can read more details about this diet at the links below:
Website of the author, Seth Roberts.
Science behind the diet.
An interview with the author (mp3 format).
The Wikipedia entry (You may want to review the cons in the footnotes).
A detailed explanation from Calorie Lab.
Another blogger comments on his experience with the diet.
The book, The Shangri-La Diet at Amazon.
Anyway, back to our regularly scheduled programming..
----------------------------------------------------------------
Update: I meant to add this when I did the original post but I forgot, so I'm adding it a little later. In my experience, I also need to avoid coffee for several hours before the oil. If I have coffee say 2 hours before, it seems to send my blood sugar bouncing around at just the wrong moments and negate much of the effect. This is particularly noticeable at the beginning, I think.
No, instead, this post is about weight loss, and a wacky, extraordinarily simple method that I came across recently and have been having a good experience with. I wouldn't normally pass on something like this, but it is so simple and appears to be so effective I'm frankly astounded. And like everybody else with a sedentary job and not quite enough time for exercise, I
It's called the Shangri-La Diet, and a wonderfully short book on it was just released. You don't really need to buy the book though, all the pertinent details are out on the web, and the basic concept can be explained in a couple of sentences.
Before I explain the diet though, let's introduce the author: Seth Roberts is an Associate Professor of Psychology at the University of California, Berkeley, with a penchant for self experimentation and some rather novel ideas. You can read some fascinating findings he made by experimenting on himself in the realms of sleep, mood, health and weight in this paper available on eScholarship.
So, more about the diet.
From the introduction to the book:
'Shangri-La? Odd name for a diet. Name of a spa, maybe. I chose it partly because Shangri-La, James Hilton's fictional Himalayan community, was a place of great peace and tranquility; and this diet puts people at peace with food. Within days after starting it, all sorts of food-related struggles (irresistible cravings, too many food-related thoughts, uncontrollable night eating) usually go away. Another reason for the name was that Shangri-La was meant to be a near perfect place and - not to boast - this is a diet with many advantages. It is simple, powerful, and does not require deprivation.'
Hyperbole? From my experience, no. [And for the record, no, I have never bought any bridges in Brooklyn.]
There is no calorie counting involved, no 'off limits' foods, no jogging, no strange Infomercial contraptions destined for a dark corner of your basement, no questionable pills, no meetings, and no expensive, cardboard tasting pre-packaged meals. None of that. (HURRAY!)
Just these very simple instructions:
Once or twice a day, depending on how much you want to lose, you should take in roughly 150 flavorless calories (either sugar or fat) and allow your body 2 hours to absorb them without any other foods/flavors.
Specifically, you either take one-two tablespoons of flavorless oil, either extra light (Note: not extra virgin, extra LIGHT) olive oil (referred to as 'ELOO' in his book) or canola oil, or 1-3 tablespoon fulls of ordinary table sugar mixed in water. You must take this on it's own, and you cannot eat anything for one hour before or after. Nothing. Plain water is okay though.
By ingesting these flavorless calories you are resetting your body weight set point, lowering it. It sounds... nuts. (Prompting no craving with me, by the way. Ice cream.. Nothing. Come up with a food - I dare you. I won't crave it.) If you want more detail on the concept, follow the links below or take a look at the book.
If your experience is similar to mine (and the author of the diet, and other people on line) you will notice after a few days that your food fullness meter has reset itself a few notches lower and you will magically (and effortlessly!) find yourself eating less at meals. Your between meal cravings go away also. And the weight will start to come off.
It is, in a word - mind boggling. Okay, in two words. Which is why I thought I'd take the time to share it.
You can read more details about this diet at the links below:
Website of the author, Seth Roberts.
Science behind the diet.
An interview with the author (mp3 format).
The Wikipedia entry (You may want to review the cons in the footnotes).
A detailed explanation from Calorie Lab.
Another blogger comments on his experience with the diet.
The book, The Shangri-La Diet at Amazon.
Anyway, back to our regularly scheduled programming..
----------------------------------------------------------------
Update: I meant to add this when I did the original post but I forgot, so I'm adding it a little later. In my experience, I also need to avoid coffee for several hours before the oil. If I have coffee say 2 hours before, it seems to send my blood sugar bouncing around at just the wrong moments and negate much of the effect. This is particularly noticeable at the beginning, I think.
Tuesday, January 23, 2007
Thank you for burning hydrocarbons.
This is kind of an obvious thought, but with President Bush set to probably talk more tonight about energy independence, and with the vagaries of the climate at the moment, the Powershares Deutsche Bank Agriculture ETF (symbol: DBA) may be a good thing to take a hard (soft?) look at. (More info here.) This ETF is composed of wheat, corn, soybean and sugar futures contracts, and sugar and corn (mainly corn here) are used in the production of ethanol.
On top of the bio-fuels aspect, you have the interesting vagaries of the climate lately that may have an impact on crop production. Australia, for example, is experiencing a long drought that in 2006 impacted their wheat production. Australia is the world's #3 exporter of wheat. They have now gotten more rain in one week in some areas than they did all last year, so things may be easing. But unusual temperature and precipitation patterns can have an impact on crop production.
On a slightly different topic, though the beginning of winter went MIA, lately it has been coldish across much of the USA, and natural gas has been moving as a result. Additionally, El Nino suppressed hurricanes in 2006 and may now be dissipating.
On top of the bio-fuels aspect, you have the interesting vagaries of the climate lately that may have an impact on crop production. Australia, for example, is experiencing a long drought that in 2006 impacted their wheat production. Australia is the world's #3 exporter of wheat. They have now gotten more rain in one week in some areas than they did all last year, so things may be easing. But unusual temperature and precipitation patterns can have an impact on crop production.
On a slightly different topic, though the beginning of winter went MIA, lately it has been coldish across much of the USA, and natural gas has been moving as a result. Additionally, El Nino suppressed hurricanes in 2006 and may now be dissipating.
Sunday, January 21, 2007
Kenneth Deffeyes channels Gordon Gekko.
The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.
Gordon Gekko, Wall Street.
Surely one of the most memorable movie quotes ever, who can forget Michael Douglas giving that immortal speech. The magic of Hollywood...
Ah, okay, back to business. So what's the connection between that quote and Kenneth Deffeyes? Well, nothing directly, but I got a little nervous when I read the latest update from Kenneth Deffeyes and he's plugging energy stocks like a cheap, two-bit, um... blogger.
Call me old fashioned, but I prefer my academics to stay in the mystical realm of theories, research, higher ed, learning and the occasional socialist utopian rant. When I see academics talking money and stocks and sounding all Wall Streetish, I get dizzy, start having visions of LTCM, and start worrying that we've all gone to one side of the boat again.
However, we already took a pummeling this month, and hey, it's not like they interviewed him in Playboy for Chrissakes. So I'm gonna go with letting this one pass.
Beyond Oil: Update, End of 2006.
Quotes:
I could, and did, arrange my own non-sucker bet by investing in several oil and natural gas stocks on a scale larger than $1000. It worked out quite well, thank you, although I have to grit my teeth during the downswings in price: Grit, grind, crunch.
As I was writing this, a statement from the Saudi Minister of Petroleum was reported by Forbes, the International Herald Tribune, and the Washington Post. He announced that Saudi Arabia will increase its oil production from 9 million barrels per day to 12.5 million barrels per day by the year 2009. I hope they succeed. Meanwhile, it keeps the other investors complacent while I buy some bargain oil stocks.
I enjoy talking with financial firms about the oil problem. It is gratifying that many in the financial community took an early interest in the consequences of a downturn in world oil production. One of the nicest compliments that I received was in Tokyo. A fellow told me that he read Hubbert's Peak five years ago, believed it, and told me that he "made a hell of a lot of money." I wasn't quick enough to ask how many zeros were in a "hell of a lot of money," but he heads the largest hedge fund in Asia.
I'm not in the business of recommending individual stocks. That requires far too much homework; I don't have the patience. Recognition is growing slowly that the world oil situation is approaching a crisis. But whenever the price of gasoline goes down, a lot of people think that the problem has disappeared.
-------------------------------------------------------------------------
He also points out that May 2005 is so far showing up as the peak in conventional oil production according to EIA statistics, which isn't far from his prediction of December 2005. I take that with a grain of salt since the data is murky, subject to revision, and nobody really knows the complete story about current production. If we peaked back then, then this fall to $50 is an overreaction on the downside and we should have a strong move upwards later this year (basically, Boone Pickens' position).
I'm leaning towards the peak still being in front of us somewhere, mostly because I think we will see some wild price moves in oil prices around the peak, and especially by a year or two out. Wackier even than what we've seen so far, I think.
Gordon Gekko, Wall Street.
Surely one of the most memorable movie quotes ever, who can forget Michael Douglas giving that immortal speech. The magic of Hollywood...
Ah, okay, back to business. So what's the connection between that quote and Kenneth Deffeyes? Well, nothing directly, but I got a little nervous when I read the latest update from Kenneth Deffeyes and he's plugging energy stocks like a cheap, two-bit, um... blogger.
Call me old fashioned, but I prefer my academics to stay in the mystical realm of theories, research, higher ed, learning and the occasional socialist utopian rant. When I see academics talking money and stocks and sounding all Wall Streetish, I get dizzy, start having visions of LTCM, and start worrying that we've all gone to one side of the boat again.
However, we already took a pummeling this month, and hey, it's not like they interviewed him in Playboy for Chrissakes. So I'm gonna go with letting this one pass.
Beyond Oil: Update, End of 2006.
Quotes:
I could, and did, arrange my own non-sucker bet by investing in several oil and natural gas stocks on a scale larger than $1000. It worked out quite well, thank you, although I have to grit my teeth during the downswings in price: Grit, grind, crunch.
As I was writing this, a statement from the Saudi Minister of Petroleum was reported by Forbes, the International Herald Tribune, and the Washington Post. He announced that Saudi Arabia will increase its oil production from 9 million barrels per day to 12.5 million barrels per day by the year 2009. I hope they succeed. Meanwhile, it keeps the other investors complacent while I buy some bargain oil stocks.
I enjoy talking with financial firms about the oil problem. It is gratifying that many in the financial community took an early interest in the consequences of a downturn in world oil production. One of the nicest compliments that I received was in Tokyo. A fellow told me that he read Hubbert's Peak five years ago, believed it, and told me that he "made a hell of a lot of money." I wasn't quick enough to ask how many zeros were in a "hell of a lot of money," but he heads the largest hedge fund in Asia.
I'm not in the business of recommending individual stocks. That requires far too much homework; I don't have the patience. Recognition is growing slowly that the world oil situation is approaching a crisis. But whenever the price of gasoline goes down, a lot of people think that the problem has disappeared.
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He also points out that May 2005 is so far showing up as the peak in conventional oil production according to EIA statistics, which isn't far from his prediction of December 2005. I take that with a grain of salt since the data is murky, subject to revision, and nobody really knows the complete story about current production. If we peaked back then, then this fall to $50 is an overreaction on the downside and we should have a strong move upwards later this year (basically, Boone Pickens' position).
I'm leaning towards the peak still being in front of us somewhere, mostly because I think we will see some wild price moves in oil prices around the peak, and especially by a year or two out. Wackier even than what we've seen so far, I think.
Wednesday, January 17, 2007
Let the beatings, er, healings begin.
Every bull market has it's popular, cult like figures, and the most prominent one of this oil bull market is Boone Pickens. The bull market in oil dates a long way now, all the way back to 1998 when crude bottomed around $12 or so, and all bull markets get a little ahead of themselves and are subject to corrections.
We hit around $78 last year, and have fallen now down to around $50ish. The crude bears are out and strutting their stuff. Peter Beutel projects $20 crude in a couple of years. [I hear he's going to be interviewed in Playboy next month.. Nah, just kidding.]
Like the public marketplaces of yore, the markets of our day serve as a focal point for the public. Oil prices are now way, way down at $50~, and all kinds of sacrosanct technical trends have been broken.
The oil bulls are on the run!
For the offense of violating a trend, the market demands a sacrifice!
Something public.
Burn a witch, maybe?
Even better - bring out the oil bull and give him a public lashing!
Obligingly, the media dragged Boone Pickens out today [out of his workout, no less] and dropped hints he'd been massacred in the recent selloff (Sample quotes: 'The sharp drop in crude-oil prices is goring T. Boone Pickens, one of the biggest bulls in the energy market.', 'We've seen a huge drop, more than 16% just in the first few weeks of this brand new year. A lot of people have been talking about that steep drop, and kinda wondering what that's meant for you, because you've been bullish for so long. There've been a lot of rumors out there in the market...").
Burn the witch, they cried! Get the oil bull!
This, I believe, is healthy.
Let the healing begin.
CNBC: Boone Pickens on Oil Prices.
WSJ: Energy Bull Keeps the Faith. [$]
PS. Boone Pickens says oil will average $70 this year and would find a floor around $48. My amateur seat of the pants impression suggests to me $45 would be a floor and closer to $60ish a good average through what I think of as a consolidation phase.
We hit around $78 last year, and have fallen now down to around $50ish. The crude bears are out and strutting their stuff. Peter Beutel projects $20 crude in a couple of years. [I hear he's going to be interviewed in Playboy next month.. Nah, just kidding.]
Like the public marketplaces of yore, the markets of our day serve as a focal point for the public. Oil prices are now way, way down at $50~, and all kinds of sacrosanct technical trends have been broken.
The oil bulls are on the run!
For the offense of violating a trend, the market demands a sacrifice!
Something public.
Burn a witch, maybe?
Even better - bring out the oil bull and give him a public lashing!
Obligingly, the media dragged Boone Pickens out today [out of his workout, no less] and dropped hints he'd been massacred in the recent selloff (Sample quotes: 'The sharp drop in crude-oil prices is goring T. Boone Pickens, one of the biggest bulls in the energy market.', 'We've seen a huge drop, more than 16% just in the first few weeks of this brand new year. A lot of people have been talking about that steep drop, and kinda wondering what that's meant for you, because you've been bullish for so long. There've been a lot of rumors out there in the market...").
Burn the witch, they cried! Get the oil bull!
This, I believe, is healthy.
Let the healing begin.
CNBC: Boone Pickens on Oil Prices.
WSJ: Energy Bull Keeps the Faith. [$]
PS. Boone Pickens says oil will average $70 this year and would find a floor around $48. My amateur seat of the pants impression suggests to me $45 would be a floor and closer to $60ish a good average through what I think of as a consolidation phase.
Saturday, January 13, 2007
The best quote I've seen in a while.
The Wall Street Journal: Rare Bears. [$]
Quote:
"With hedge funds and the pressure they're under to perform, we're getting this Texas Hold'em poker style of investing: all-in or all-out," he says.
[Quote from Vinny Catalano, chief investment strategist of Blue Marble Research.]
-----------------------------------------------------------------
I don't think hedge funds are the only guilty parties here, but they are probably a little more guilty than other folks.
Anticipating these moves can make you money though. Clearly, so far in 2007, energy is out and tech is in.
Quote:
"With hedge funds and the pressure they're under to perform, we're getting this Texas Hold'em poker style of investing: all-in or all-out," he says.
[Quote from Vinny Catalano, chief investment strategist of Blue Marble Research.]
-----------------------------------------------------------------
I don't think hedge funds are the only guilty parties here, but they are probably a little more guilty than other folks.
Anticipating these moves can make you money though. Clearly, so far in 2007, energy is out and tech is in.
Wednesday, January 10, 2007
It's gonna be a long year.
As this Wall Street Journal article points out, the first five day indicator is looking bad this year. The basis of this indicator is that in years when the first five days are positive for the market, the market has a tendency to finish the year up. In years where the first five days are negative, the market has a tendency to finish the year down. There was a lot of bullishness coming into 2007, and that can be a contrarian signal. (See 'Too much of a good thing' and 'Smokey the Bear says: "Only you can prevent portfolio losses."')
Energy in particular has gotten totally clocked out of the gate. Sure, the freakish warm weather had a lot to do with it, but I would also say the magazine indicator strikes again.
This article mentions that technology has done very well so far in 2007. In my own sector analysis work, I also find technology an interesting place to focus on in 2007. Which doesn't quite mesh with my bearish bent for 2007, but I try not to let my own peccadillos get in the way. My sector work also doesn't highlight energy this year.
By the way, check out this demo of the Apple iPhone. Wow. Keep an eye on that stock.
WSJ: A Rocky Start to 2007 for Stocks. [$]
Quotes:
The first five trading days of the year are over, and if they are any indication of how the Dow Jones Industrial Average will perform in 2007, traders may be in for a rocky ride.
On Tuesday, the Dow industrials fell 6.89 to 12416.60, leaving the blue-chip average down 0.4% so far this year. Since its inception, when the Dow has finished the first five trading days in the red, it has risen for the full year just 49% of the time. In contrast, the Dow has risen in 73% of the years in which it finished the first five days in the black. In all, the Dow industrials have risen 71 out of 110 years, or 65% of the time.
"The first week predicts the month, and January predicts the year," said Phil Roth, chief technical analyst at Miller Tabak. "We are solidly down the first five trading sessions, and it's starting out looking ominous." Mr. Roth said this is the time of year when stocks are "almost always strong," with new money coming into the market. But that money is not appearing, he said, suggesting investors are putting it to work elsewhere.
The broader market was mixed, pulled down by the energy sector as crude-oil prices extended last week's slide. The Standard & Poor's 500-stock index was off 0.73 at 1412.11, also down 0.4% for the year. But technology stocks were a bright spot, with the Nasdaq Composite Index up 5.63 to 2443.83. The tech-heavy index is up 1.2% so far in 2007.
Energy in particular has gotten totally clocked out of the gate. Sure, the freakish warm weather had a lot to do with it, but I would also say the magazine indicator strikes again.
This article mentions that technology has done very well so far in 2007. In my own sector analysis work, I also find technology an interesting place to focus on in 2007. Which doesn't quite mesh with my bearish bent for 2007, but I try not to let my own peccadillos get in the way. My sector work also doesn't highlight energy this year.
By the way, check out this demo of the Apple iPhone. Wow. Keep an eye on that stock.
WSJ: A Rocky Start to 2007 for Stocks. [$]
Quotes:
The first five trading days of the year are over, and if they are any indication of how the Dow Jones Industrial Average will perform in 2007, traders may be in for a rocky ride.
On Tuesday, the Dow industrials fell 6.89 to 12416.60, leaving the blue-chip average down 0.4% so far this year. Since its inception, when the Dow has finished the first five trading days in the red, it has risen for the full year just 49% of the time. In contrast, the Dow has risen in 73% of the years in which it finished the first five days in the black. In all, the Dow industrials have risen 71 out of 110 years, or 65% of the time.
"The first week predicts the month, and January predicts the year," said Phil Roth, chief technical analyst at Miller Tabak. "We are solidly down the first five trading sessions, and it's starting out looking ominous." Mr. Roth said this is the time of year when stocks are "almost always strong," with new money coming into the market. But that money is not appearing, he said, suggesting investors are putting it to work elsewhere.
The broader market was mixed, pulled down by the energy sector as crude-oil prices extended last week's slide. The Standard & Poor's 500-stock index was off 0.73 at 1412.11, also down 0.4% for the year. But technology stocks were a bright spot, with the Nasdaq Composite Index up 5.63 to 2443.83. The tech-heavy index is up 1.2% so far in 2007.
Monday, January 08, 2007
Marc Faber predicts severe correction.
According to this Bloomberg article, Marc Faber predicted the crash of 1987 in the US stock market. He's now predicting a strong correction for global assets. Volatility has come in with a bang in 2007, and sometimes that's a sign of a larger move ahead.
Bloomberg: Global Markets Face `Severe Correction,' Faber Says.
Quotes:
Marc Faber, who predicted the U.S. stock market crash in 1987, said global assets are poised for a ``severe correction'' and says it's time to sell.
``In the next few months, we could get a severe correction in all asset markets,'' Faber said in an interview with Bloomberg Television in New York. ``In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate.''
Faber recommends investors steer clear of shares in the world's biggest developing economies after the emerging markets in 2006 outperformed their developed counterparts for a fifth straight year.
....
``Emerging markets could get kicked in the next three months so I'd be careful of buying Russian shares,'' Faber said. ``I'd also be careful of buying China and India shares now.''
Bloomberg TV: Marc Faber.
Bloomberg: Global Markets Face `Severe Correction,' Faber Says.
Quotes:
Marc Faber, who predicted the U.S. stock market crash in 1987, said global assets are poised for a ``severe correction'' and says it's time to sell.
``In the next few months, we could get a severe correction in all asset markets,'' Faber said in an interview with Bloomberg Television in New York. ``In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate.''
Faber recommends investors steer clear of shares in the world's biggest developing economies after the emerging markets in 2006 outperformed their developed counterparts for a fifth straight year.
....
``Emerging markets could get kicked in the next three months so I'd be careful of buying Russian shares,'' Faber said. ``I'd also be careful of buying China and India shares now.''
Bloomberg TV: Marc Faber.
Sunday, January 07, 2007
Big Oil: All Hat, Not a Lot of Cattle.
Howard Simons of Bianco Research makes a point in the below video that bears repeating. Right now, the major public international oil companies are in an interesting position where they are producing huge amounts of oil every year, yet their reserve replacement ratios (what percentage of their reserves, or potential future production, they are able to replace each year) are declining. The main factor is the increasing oil nationalism that's occuring around the globe, which forces them to take smaller pieces (if any at all) of potential projects.
Last year Weeden & Co oil analyst Charles Maxwell appeared on Bob Brinker's Moneytalk radio show and in response to a caller's question, suggested that 5-10 years or so down the line ExxonMobil would split itself into a exploration and production operation and a royalty trust. The E&P would aggressively hunt for new sources of production, while the royalty trust would hold the legacy production assets and throw off high dividends as those assets depleted.
CNBC Video: Energy Breakdown.
Quotes:
"I would stay away from the producing side, but the service side, the drillers, the equipment, these firms are all gonna do fine. One of the things we have to remember about the producers, especially the international majors right now, is they are actually self-liquidating companies, they're not able to replace their reserves, and they're not able to acquire new reserves worldwide because of political considerations. But the service and equipment sectors can do that, so those are long term plays, and they're gonna do just fine."
Last year Weeden & Co oil analyst Charles Maxwell appeared on Bob Brinker's Moneytalk radio show and in response to a caller's question, suggested that 5-10 years or so down the line ExxonMobil would split itself into a exploration and production operation and a royalty trust. The E&P would aggressively hunt for new sources of production, while the royalty trust would hold the legacy production assets and throw off high dividends as those assets depleted.
CNBC Video: Energy Breakdown.
Quotes:
"I would stay away from the producing side, but the service side, the drillers, the equipment, these firms are all gonna do fine. One of the things we have to remember about the producers, especially the international majors right now, is they are actually self-liquidating companies, they're not able to replace their reserves, and they're not able to acquire new reserves worldwide because of political considerations. But the service and equipment sectors can do that, so those are long term plays, and they're gonna do just fine."
Friday, January 05, 2007
ECRI: Recession is no longer a serious concern.
Lakshman Achuthan of ECRI appearing on Bloomberg TV this morning saying that their indicators suggest that recession is no longer a serious concern in the US.
I'm basically leaning the other way, but I always listen to the views of those with good track records and sound statistics, and ECRI certainly qualifies.
Additionally, he sees signs of a bottom in the housing market (though he wants to see a few months more of data), and believes, based on that bottoming and their recession call, that the Fed will not lower interest rates soon.
Earlier observations from ECRI here.
Bloomberg TV: Lakshman Achuthan of ECRI.
I'm basically leaning the other way, but I always listen to the views of those with good track records and sound statistics, and ECRI certainly qualifies.
Additionally, he sees signs of a bottom in the housing market (though he wants to see a few months more of data), and believes, based on that bottoming and their recession call, that the Fed will not lower interest rates soon.
Earlier observations from ECRI here.
Bloomberg TV: Lakshman Achuthan of ECRI.
Thursday, January 04, 2007
Too much of a good thing.
Yesterday was an interesting day. Energy in particular took it on the chin as there is so far no winter to speak of in the Northeastern US, as well as mild winters in several other parts of the globe. The rest of the market traded kinda all over the place. Frankly, I think an important element was that so many people took time off in December combined with a 4 day closure of the market and a full moon leading to some excess pent up energy that needed to be worked off.
But in general, there was a lot of bullishness coming into 2007, and that is often a contrarian indicator.
New York Magazine cover: Jim Cramer's Runaway Bull. (see top right headline)
Article: Lucky 2007.
USAToday: Ten Reasons the S&P 500 Could Make a New High in 2007.
12 Top Wall Street Analysts Agree on Rally for 2007.
The writer of the USAToday article comes to his senses the next day with this article:
Up, up, up: Beware, because no one sees a bear in 2007.
But in general, there was a lot of bullishness coming into 2007, and that is often a contrarian indicator.
New York Magazine cover: Jim Cramer's Runaway Bull. (see top right headline)
Article: Lucky 2007.
USAToday: Ten Reasons the S&P 500 Could Make a New High in 2007.
12 Top Wall Street Analysts Agree on Rally for 2007.
The writer of the USAToday article comes to his senses the next day with this article:
Up, up, up: Beware, because no one sees a bear in 2007.
Tuesday, January 02, 2007
Resolution Trust Company here we come!
Many pundits who predict market gains for 2007 have a caveat - "as long as the housing market doesn't crack". The housing market so far hasn't cracked, but it is making some unusual noises.
One place to keep an eye on is subprime loans and lenders. Subprime loans are loans made to questionable borrowers of one type or another, and to reflect their risk (at least in theory), they carry higher interest rates. The borrowers are a little iffy and these loans are usually the first loans to go bad as the economy softens. There were an orgy of these issued towards the end of the housingbubble enthusiasm we just experienced. The market for these already showed problems in 2006, so the fact this company continued to increase it's lending even in 2006 shows somebody was asleep at the till.
But the bigger question is: who's holding these types of loans, how much is going to go bad, and how will it hit the rest of the real estate market as these types of loans dry up further and foreclosed homes come on the market.
Calculated Risk: Mortgage Lenders Network stops loans.
Quotes:
The rumors are true. From Reuters: Mortgage Lenders Network stops loans, sets layoffs
Mortgage Lenders Network USA, a large U.S. subprime lender, said it has stopped funding loans and accepting applications for loans, citing deteriorating conditions in the mortgage market, and has temporarily laid off about 80 percent of its 1,800 employees.
...
Meanwhile, some lenders have been pinched by being forced to buy back loans they sold because of rising delinquencies, and as "warehouse" lenders pull credit lines, analysts said.
Unlike most subprime rivals, Mortgage Lenders increased its lending throughout 2006. It made $3.31 billion of subprime loans in the third quarter, ranking 15th nationwide, according to data from National Mortgage News.
The firm, however, said wholesale market conditions have "deteriorated dramatically" in the last two months.
---------------------------------------------
The Resolution Trust Company, by the way, was the government owned agency that tried to clean up after the Savings & Loan debacle of the 1980's.
One place to keep an eye on is subprime loans and lenders. Subprime loans are loans made to questionable borrowers of one type or another, and to reflect their risk (at least in theory), they carry higher interest rates. The borrowers are a little iffy and these loans are usually the first loans to go bad as the economy softens. There were an orgy of these issued towards the end of the housing
But the bigger question is: who's holding these types of loans, how much is going to go bad, and how will it hit the rest of the real estate market as these types of loans dry up further and foreclosed homes come on the market.
Calculated Risk: Mortgage Lenders Network stops loans.
Quotes:
The rumors are true. From Reuters: Mortgage Lenders Network stops loans, sets layoffs
Mortgage Lenders Network USA, a large U.S. subprime lender, said it has stopped funding loans and accepting applications for loans, citing deteriorating conditions in the mortgage market, and has temporarily laid off about 80 percent of its 1,800 employees.
...
Meanwhile, some lenders have been pinched by being forced to buy back loans they sold because of rising delinquencies, and as "warehouse" lenders pull credit lines, analysts said.
Unlike most subprime rivals, Mortgage Lenders increased its lending throughout 2006. It made $3.31 billion of subprime loans in the third quarter, ranking 15th nationwide, according to data from National Mortgage News.
The firm, however, said wholesale market conditions have "deteriorated dramatically" in the last two months.
---------------------------------------------
The Resolution Trust Company, by the way, was the government owned agency that tried to clean up after the Savings & Loan debacle of the 1980's.
Monday, January 01, 2007
We're Number 2! We're Number 2!
Can anyone believe that the energy sector actually finished the year okay, given what a volatile year we had? Oil prices finished the year close to unchanged, and most of the gains in energy stocks came towards the end of the year, but what the heck, we'll take it.
Sam Stovall, chief investment strategist of Standard & Poor's, recaps a couple of historical tendencies that suggest 2007 could be a positive year for the stock market overall in this interview with Bloomberg News. He discusses the energy sector, which ended the year as the number 2 performing sector in the S&P500 with a 22% return and is the cheapest sector in the S&P500 with a 9.7 forward price to earnings ratio (ie. based on analyst's predicted 2007 earnings). S&P predicts a gradually rising trend for oil in 2007, with an average crude oil price of $64.50 and price toward the end of the year of $66. Mr. Stovall makes the observation that they hope energy will remain a "page 3 story" instead of a "page 1 story" in 2007.
Bloomberg News: Sam Stovall of Standard & Poor's.
---------------------------------------------------
To explain the year in further detail:
The 22% comes mainly from the integrated oil majors (which I define as: XOM, COP, CVX, MRO, OXY) and select oil service names. The majors, because they have exposure to most or all parts of the oil supply chain (production, refining, distribution, marketing), are seen as better plays as oil prices fall or moderate because they can usually pick up profits somewhere along the chain. Other sectors, for example coal, natural gas, refiners, E&Ps, all did less well this year, a number with outright losses. If you own energy mutual funds, you may notice yours was above or below the 22% return, depending on where your manager overweighted or underweighted. The Vanguard Energy fund, which I use as proxy for the average energy fund, returned 21.21%.
Sam Stovall, chief investment strategist of Standard & Poor's, recaps a couple of historical tendencies that suggest 2007 could be a positive year for the stock market overall in this interview with Bloomberg News. He discusses the energy sector, which ended the year as the number 2 performing sector in the S&P500 with a 22% return and is the cheapest sector in the S&P500 with a 9.7 forward price to earnings ratio (ie. based on analyst's predicted 2007 earnings). S&P predicts a gradually rising trend for oil in 2007, with an average crude oil price of $64.50 and price toward the end of the year of $66. Mr. Stovall makes the observation that they hope energy will remain a "page 3 story" instead of a "page 1 story" in 2007.
Bloomberg News: Sam Stovall of Standard & Poor's.
---------------------------------------------------
To explain the year in further detail:
The 22% comes mainly from the integrated oil majors (which I define as: XOM, COP, CVX, MRO, OXY) and select oil service names. The majors, because they have exposure to most or all parts of the oil supply chain (production, refining, distribution, marketing), are seen as better plays as oil prices fall or moderate because they can usually pick up profits somewhere along the chain. Other sectors, for example coal, natural gas, refiners, E&Ps, all did less well this year, a number with outright losses. If you own energy mutual funds, you may notice yours was above or below the 22% return, depending on where your manager overweighted or underweighted. The Vanguard Energy fund, which I use as proxy for the average energy fund, returned 21.21%.
Energy Hot Spots to Watch in 2007.
Christopher Edmonds of Pritchard Capital and thestreet.com highlighting the energy spots to watch in 2007 in this interview with Bloomberg News. The hot spots include Iran, Russia, Nigeria, Oklahoma, and Iraq. [Okay, one of those was thrown in to see if you've cleared your head yet from New Year's - Happy New Year, btw.] Chris suggests a 'normalized' (I assume this means the price absent a geopolitical event) price of oil is $55-65, and that if troubles develop in one of these areas, a spike to $80-100 a barrel oil is possible.
Bloomberg News: Christopher Edmonds of Pritchard Capital Partners.
Bloomberg News: Christopher Edmonds of Pritchard Capital Partners.
Thursday, December 28, 2006
Ah, breaker one-nine, this here's Rubber Duck...
What the heck happened to the Convoy?
ATA: ATA Truck Tonnage Index Plummeted 3.6 percent in November.
Quotes:
“November 2006 marked the single worst month for for-hire truck tonnage since the last recession,” said ATA Chief Economist Bob Costello. “Both the month-to-month and year-over-year decreases indicate that the economic slowdown is in full gear. The most troubling number is the 8.8 percent contraction from November 2005, despite the fact that year-over-year comparisons are difficult due to the very robust volumes during the same month last year. One month certainly doesn’t make a trend, but if we continue to see year-over-year reductions of similar magnitudes in the next couple of months, it could indicate a greater economic slowdown than economists are projecting at this point.”
----------------------------------------------------
All jokes aside, the peak in truck tonnage was around January of 2005 [see chart on linked page], which is a few months before the housing situation reached it's own climax. The downtrend from Jan 2005 to now is pretty clear, and the recent numbers don't suggest a near term turnaround. Focusing on energy, in addition to the fuel that trucks themselves burn, the fact that there is less truck traffic (less trucks hauling stuff) also indicates that the economy is cooling down. The economy cooling down means less demand for energy, which generally means energy prices would fall. Of course, OPEC wants $60 and is trying to hold it there with production cutbacks. 2007 is going to be very interesting.
Look's like we got a bit more to worry about than some Smokies.
Hat tip:
The Big Picture: Truck Tonnage Plummets.
ATA: ATA Truck Tonnage Index Plummeted 3.6 percent in November.
Quotes:
“November 2006 marked the single worst month for for-hire truck tonnage since the last recession,” said ATA Chief Economist Bob Costello. “Both the month-to-month and year-over-year decreases indicate that the economic slowdown is in full gear. The most troubling number is the 8.8 percent contraction from November 2005, despite the fact that year-over-year comparisons are difficult due to the very robust volumes during the same month last year. One month certainly doesn’t make a trend, but if we continue to see year-over-year reductions of similar magnitudes in the next couple of months, it could indicate a greater economic slowdown than economists are projecting at this point.”
----------------------------------------------------
All jokes aside, the peak in truck tonnage was around January of 2005 [see chart on linked page], which is a few months before the housing situation reached it's own climax. The downtrend from Jan 2005 to now is pretty clear, and the recent numbers don't suggest a near term turnaround. Focusing on energy, in addition to the fuel that trucks themselves burn, the fact that there is less truck traffic (less trucks hauling stuff) also indicates that the economy is cooling down. The economy cooling down means less demand for energy, which generally means energy prices would fall. Of course, OPEC wants $60 and is trying to hold it there with production cutbacks. 2007 is going to be very interesting.
Look's like we got a bit more to worry about than some Smokies.
Hat tip:
The Big Picture: Truck Tonnage Plummets.
Wednesday, December 27, 2006
Shark Bait 2007.
CNBC had several interviews today discussing the future for energy in 2007, the upside for select energy stocks, and the possibility of takeovers.
I've heard speculation over a takeout of Suncor (SU) before, and Tim Guinness (manager of the Guinness Atkinson Global Energy Fund) mentions it in the first video, but it doesn't strike me as likely. How can we determine an acceptable value for Suncor's 30 years of reserves? There aren't futures that far out; thirty years of production even takes you past CERA's peak and into their fabulous 'undulating plateau'. The value a purchaser could justify for Suncor would probably be unacceptable to Suncor stockholders, and a value acceptable to Suncor shareholders would probably be unacceptable to a purchaser. So I don't see it, personally.
In the second video, the analyst highlights 6 stocks he believes have significant upside. He mentions Occidental Petroleum (OXY) as a possible takeout candidate. I was daydreaming the other day and came up with the idea that Royal Dutch Shell should do an Anadarko and purchase both OXY and Nexen (NXY), which was once Canadian Occidental. That's probably a bit more bold/big than Shell is looking for. Husky Energy might be more Shell's style. I expect ExxonMobil to jump in to, but not until a whiff of recession is in the air, and I'm thinking XOM takes out either Devon (DVN) or Anadarko (APC).
Other names mentioned are Ultra Petroleum (UPL), CNX Gas (CXG), XTO Energy (XTO), EOG, and Range Resources (RRC).
CNBC Video: Tim Guinness
CNBC Video: Oil Patch Plays 2007
I've heard speculation over a takeout of Suncor (SU) before, and Tim Guinness (manager of the Guinness Atkinson Global Energy Fund) mentions it in the first video, but it doesn't strike me as likely. How can we determine an acceptable value for Suncor's 30 years of reserves? There aren't futures that far out; thirty years of production even takes you past CERA's peak and into their fabulous 'undulating plateau'. The value a purchaser could justify for Suncor would probably be unacceptable to Suncor stockholders, and a value acceptable to Suncor shareholders would probably be unacceptable to a purchaser. So I don't see it, personally.
In the second video, the analyst highlights 6 stocks he believes have significant upside. He mentions Occidental Petroleum (OXY) as a possible takeout candidate. I was daydreaming the other day and came up with the idea that Royal Dutch Shell should do an Anadarko and purchase both OXY and Nexen (NXY), which was once Canadian Occidental. That's probably a bit more bold/big than Shell is looking for. Husky Energy might be more Shell's style. I expect ExxonMobil to jump in to, but not until a whiff of recession is in the air, and I'm thinking XOM takes out either Devon (DVN) or Anadarko (APC).
Other names mentioned are Ultra Petroleum (UPL), CNX Gas (CXG), XTO Energy (XTO), EOG, and Range Resources (RRC).
CNBC Video: Tim Guinness
CNBC Video: Oil Patch Plays 2007
Goldilocks, meet Baby Bear.
I'd frankly never heard of this gentleman until about 4 or 5 months ago when I saw him on CNBC. His name is Hugh Moore, his firm is Guerite Advisors, and he appears to be gaining more notice in the press with his predictions for a mild recession in 2007 based on a model that he believes can predict recessions with very high accuracy rates. Mr. Moore claims the model has predicted recessions over the last 50 years with very few false alarms. It's not explicitly mentioned here, but I assume the model was developed with back tested data, which raises the question of whether the investigator just kept playing with the data until they got something they liked, which can lead to some questionable conclusions.
According to this interview, the data that go into the model are the inverted yield curve, housing construction rates as a percent of GDP, leading economic indicators, and their own in house indicator, 'the Guerite indicator', which he doesn't elaborate on further.
The interview is short, but his prediction is for a mild recession coming in mid to late 2007. Of the predictions for an upcoming recession, I would say this is one of the milder ones and one I find easier to mull over than the fairly dark views of people like Nouriel Roubini or, even more depressing, Warren Brussee.
CNBC Video: Hugh Moore, Guerite Advisors
Quotes:
"We don't believe in the soft landing, but then we also don't think that the world is going to hell in a handbasket either."
According to this interview, the data that go into the model are the inverted yield curve, housing construction rates as a percent of GDP, leading economic indicators, and their own in house indicator, 'the Guerite indicator', which he doesn't elaborate on further.
The interview is short, but his prediction is for a mild recession coming in mid to late 2007. Of the predictions for an upcoming recession, I would say this is one of the milder ones and one I find easier to mull over than the fairly dark views of people like Nouriel Roubini or, even more depressing, Warren Brussee.
CNBC Video: Hugh Moore, Guerite Advisors
Quotes:
"We don't believe in the soft landing, but then we also don't think that the world is going to hell in a handbasket either."
Friday, December 22, 2006
They Shoot Journalists, Don't They?
So, the inevitable happened, and Shell and it's Japanese partners caved in and let the Russian government Gazprom buy a stake in Sakhalin 2. Basically, they had absolutely no choice.
If you ask the Russians, they will say that the West took unfair advantage of them when they were down, and that now these deals will be renegotiated, one way or the other. And to some extent, these events are not a huge surprise, as this Russian re-nationalization of it's resource industry is just another in a fairly long line of re-nationalizations that have happened in resource rich countries.
The scary part though is that at the same time this is happening, other unsettling events are occuring inside and outside Russia, including a takeover/intimidation of the media, murders/intimidation of prominant opposition members, etc. It is basically the Wild West there, and the danger is that something spins out of control at some point, and you get serious foreign capital flight as a result. And with the general popularity of emerging markets these days, you have to wonder if something were to happen in Russia, would it trigger a more widespread sell off in emerging markets in general?
A year ago I suggested Gazprom was worthy of a speculative investment and the stock has gone up since then. There is probably more upside to this stock in the future and to Russia in general.
But seriously here: caveat emptor.
New York Times: Russians Buy Control of Oil Field.
[Note the article headline says "Russians" and not "Gazprom" in a sly reference to the fact that Gazprom is basically an instrument of the Russian government.]
Quotes:
Gazprom, the Russian energy monopoly, bought control of the world’s largest combined oil and natural gas development Thursday after a highly publicized campaign of pressure on its foreign operator, Royal Dutch Shell.
Shell’s sale of 50 percent plus one share followed months of accusations against the project by a Russian environmental regulator — a problem that President Vladimir V. Putin, in announcing Gazprom’s entry, said would now most likely be resolved.
Critics of the sale called it the first effective nationalization of a large foreign oil or gas project in Russia, which this year surpassed Saudi Arabia in oil production.
If you ask the Russians, they will say that the West took unfair advantage of them when they were down, and that now these deals will be renegotiated, one way or the other. And to some extent, these events are not a huge surprise, as this Russian re-nationalization of it's resource industry is just another in a fairly long line of re-nationalizations that have happened in resource rich countries.
The scary part though is that at the same time this is happening, other unsettling events are occuring inside and outside Russia, including a takeover/intimidation of the media, murders/intimidation of prominant opposition members, etc. It is basically the Wild West there, and the danger is that something spins out of control at some point, and you get serious foreign capital flight as a result. And with the general popularity of emerging markets these days, you have to wonder if something were to happen in Russia, would it trigger a more widespread sell off in emerging markets in general?
A year ago I suggested Gazprom was worthy of a speculative investment and the stock has gone up since then. There is probably more upside to this stock in the future and to Russia in general.
But seriously here: caveat emptor.
New York Times: Russians Buy Control of Oil Field.
[Note the article headline says "Russians" and not "Gazprom" in a sly reference to the fact that Gazprom is basically an instrument of the Russian government.]
Quotes:
Gazprom, the Russian energy monopoly, bought control of the world’s largest combined oil and natural gas development Thursday after a highly publicized campaign of pressure on its foreign operator, Royal Dutch Shell.
Shell’s sale of 50 percent plus one share followed months of accusations against the project by a Russian environmental regulator — a problem that President Vladimir V. Putin, in announcing Gazprom’s entry, said would now most likely be resolved.
Critics of the sale called it the first effective nationalization of a large foreign oil or gas project in Russia, which this year surpassed Saudi Arabia in oil production.
Tuesday, December 19, 2006
Smokey the Bear says: "Only you can prevent portfolio losses."
The stock market has a tendency to zig when everybody expects it to zag. This is partially due to the fact that when everybody is optimistic, usually they have already invested most of their money, leaving them with less new cash to invest. At the same time people tend to be most optimistic on the stock market after a period of steadily rising markets. But that may well be at a time when stocks are priced fairly richly, due to the rising market. People tend to turn most bearish on stocks after a period of steadily falling stocks, which because of falling stock prices, turns out to be the time that values are low or reasonable.
Thus, the fact that the top market strategists are uniformly bullish is...?
... a warning sign.
Bloomberg: Stock Strategists Raise Alarms With Call for Rally.
Quotes:
Strategists at 12 of the biggest Wall Street firms agree that U.S. stocks will rally next year. The last year that happened was for 2001, when the Standard & Poor's 500 Index dropped 13 percent.
....
``People are bullish, and the strategists are too,'' Bernstein, 48, said in an interview. ``We all are.'' The New York-based forecaster expects the index to reach 1570, up 10 percent from its current level, in the next 12 months.
....
``I'm an old believer that when everyone believes something is going to happen, the opposite happens,'' said David Kotok, who oversees $850 million as chief investment officer at Cumberland Advisors Inc. in Vineland, New Jersey. ``That causes me concern because I'm bullish too.''
---------------------------------------------------------
I leave you with the wisdom of Warren Buffett:
"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well."
Saturday, December 16, 2006
Turn-ons: Hydrocarbons, my G4, honesty, brunettes.
Ah, okay, so that last one is mine. But whoa boy, am I a little nervous right now.
Why?
Well, first up, the Playboy interview in the January 2007 issue [link good only till they update with next month's issue] is with Boone Pickens. (Along with, natch, a cover of Pamela Anderson. Do we need to see any more of her? No.) Boone Pickens is of course these days probably the most familiar mainstream proponent of peak oil, as well as the head honcho of several very successful hedge funds focused around energy.
Secondly, the January 2007 issue of Bloomberg Markets magazine has a cover shot and profile ['Macro Man' - pdf warning] of my other favorite hedge fund manager, Peter Thiel, who's performance has also been remarkable over the past few years, and naturally his peak oil views are mentioned in the article.
Okay, so it isn't quite like Time Magazine picked James Kunstler for Man of the Year or something, and it's not on the level of the famous BusinessWeek cover proclaiming "The Death of Equities", or even the Economist's cover in 1999 predicting $5 oil as far as the eye could see.
But when two major media outlets pick up on our two favorite fund managers and prognosticators simultaneously after both having had a significant period of out performance under their belts, wow, it's really got to raise your contrarian hackles something awful. The herd, my friends, is gazing our way with a longing sort of look. We can only hope they get distracted by Miss January, who, interestingly enough, has the word "Respect" tattooed right over her.. Well, I'll leave that little detail to be uncovered in your research. Remember folks, since it's all about your investments, it's not only tax deductible, but you can actually justify it to the wife.
What does it all mean? Maybe nothing, maybe something. Keep an eye out. Stops in place. Discipline rules.
[Sidenote: Oddly enough, reading the Bloomberg profile, I discovered that Peter Thiel and I share a similar background. We were both born in Frankfurt, he in 1967, I in 1966; his family moved a lot, and he attended 7 elementary schools in different countries, similarly, I attended 5 elementary schools in assorted countries; he eventually settled in San Francisco and attended a local college (Stanford), I eventually settled in Los Angeles and attended a local college (UCLA), he drives a Mercedes McLaren SLR, I drive a... okay, so we diverged a little bit somewhere in the middle.]
I leave you with the contrarian wisdom of Groucho Marx:
"I sent the club a wire stating, PLEASE ACCEPT MY RESIGNATION. I DON'T WANT TO BELONG TO ANY CLUB THAT WILL ACCEPT ME AS A MEMBER."
Why?
Well, first up, the Playboy interview in the January 2007 issue [link good only till they update with next month's issue] is with Boone Pickens. (Along with, natch, a cover of Pamela Anderson. Do we need to see any more of her? No.) Boone Pickens is of course these days probably the most familiar mainstream proponent of peak oil, as well as the head honcho of several very successful hedge funds focused around energy.
Secondly, the January 2007 issue of Bloomberg Markets magazine has a cover shot and profile ['Macro Man' - pdf warning] of my other favorite hedge fund manager, Peter Thiel, who's performance has also been remarkable over the past few years, and naturally his peak oil views are mentioned in the article.
Okay, so it isn't quite like Time Magazine picked James Kunstler for Man of the Year or something, and it's not on the level of the famous BusinessWeek cover proclaiming "The Death of Equities", or even the Economist's cover in 1999 predicting $5 oil as far as the eye could see.
But when two major media outlets pick up on our two favorite fund managers and prognosticators simultaneously after both having had a significant period of out performance under their belts, wow, it's really got to raise your contrarian hackles something awful. The herd, my friends, is gazing our way with a longing sort of look. We can only hope they get distracted by Miss January, who, interestingly enough, has the word "Respect" tattooed right over her.. Well, I'll leave that little detail to be uncovered in your research. Remember folks, since it's all about your investments, it's not only tax deductible, but you can actually justify it to the wife.
What does it all mean? Maybe nothing, maybe something. Keep an eye out. Stops in place. Discipline rules.
[Sidenote: Oddly enough, reading the Bloomberg profile, I discovered that Peter Thiel and I share a similar background. We were both born in Frankfurt, he in 1967, I in 1966; his family moved a lot, and he attended 7 elementary schools in different countries, similarly, I attended 5 elementary schools in assorted countries; he eventually settled in San Francisco and attended a local college (Stanford), I eventually settled in Los Angeles and attended a local college (UCLA), he drives a Mercedes McLaren SLR, I drive a... okay, so we diverged a little bit somewhere in the middle.]
I leave you with the contrarian wisdom of Groucho Marx:
"I sent the club a wire stating, PLEASE ACCEPT MY RESIGNATION. I DON'T WANT TO BELONG TO ANY CLUB THAT WILL ACCEPT ME AS A MEMBER."
Thursday, December 14, 2006
OPEC: "No more Mr. Crooked Guy."
OPEC has preliminarily agreed to a further oil production cut of 500,000 barrels a day starting in February, on top of an earlier agreement to cut 1.2 million barrels a day. Apparently, they mean business on the idea of a floor of roughly $60 a barrel or so. (Most OPEC oil sells at a discount to light sweet oil like WTI, so whatever price is being bandied about in the press, most OPEC producers are seeing something several dollars below that.)
Traditionally, an output cut from OPEC was treated as a joke because there was so much cheating. (Highlighting, by the way, the lack of reliable production statistics from around the world.) However, according to the article below about two thirds of the earlier cut has been implemented, and so we are talking about meaningful amounts of oil production being pulled from the market.
I see people interviewed regularly on various business programs who say "Hey, there's too much oil, it's going to $50. (or $40 etc)." They seem to be ignoring the fact that OPEC earlier this year clearly stated it wanted $60 and that this time, they have the means and apparently the will to hold it there.
CNBC: OPEC Agrees to Cut Oil Ouput In February by 500,000 Barrels a Day.
Quotes:
OPEC ministers agree the market is oversupplied -- stocks in the U.S., its top consumer, are the highest since 1998 for the time of year -- but some fear cutting during peak demand could drive prices further above $60 and hurt consumer nations.
The opinion of leading exporter Saudi Arabia is key in determining OPEC output policy. Oil Minister Ali Al-Naimi told reporters on his arrival the market was in better shape than when ministers last met, at October's emergency talks.
"The fundamentals of the market are much better than they were in October," he said, adding: "We probably have a little work to do to make it an even better, more stable market."
"We have to work together as a team," Naimi said. "We have done well so far, we may have to do some more."
U.S. Energy Secretary Sam Bodman and International Energy Agency head Claude Mandil have called on OPEC to wait until next year before deciding on further supply reductions.
A delegate from one of OPEC's Gulf members said there was a strong case for holding fire. "No cut, compliance -- this is the view up until now from the Gulf members," the delegate said.
Traditionally, an output cut from OPEC was treated as a joke because there was so much cheating. (Highlighting, by the way, the lack of reliable production statistics from around the world.) However, according to the article below about two thirds of the earlier cut has been implemented, and so we are talking about meaningful amounts of oil production being pulled from the market.
I see people interviewed regularly on various business programs who say "Hey, there's too much oil, it's going to $50. (or $40 etc)." They seem to be ignoring the fact that OPEC earlier this year clearly stated it wanted $60 and that this time, they have the means and apparently the will to hold it there.
CNBC: OPEC Agrees to Cut Oil Ouput In February by 500,000 Barrels a Day.
Quotes:
OPEC ministers agree the market is oversupplied -- stocks in the U.S., its top consumer, are the highest since 1998 for the time of year -- but some fear cutting during peak demand could drive prices further above $60 and hurt consumer nations.
The opinion of leading exporter Saudi Arabia is key in determining OPEC output policy. Oil Minister Ali Al-Naimi told reporters on his arrival the market was in better shape than when ministers last met, at October's emergency talks.
"The fundamentals of the market are much better than they were in October," he said, adding: "We probably have a little work to do to make it an even better, more stable market."
"We have to work together as a team," Naimi said. "We have done well so far, we may have to do some more."
U.S. Energy Secretary Sam Bodman and International Energy Agency head Claude Mandil have called on OPEC to wait until next year before deciding on further supply reductions.
A delegate from one of OPEC's Gulf members said there was a strong case for holding fire. "No cut, compliance -- this is the view up until now from the Gulf members," the delegate said.
Wednesday, December 13, 2006
Gazprom issued License to Kill.
Deals, that is.
Wow, fascinating statistic from the below CNBC video: 78% of the top energy executives in Russia are ex-KGB.
And we thought the Cold War was over. Nah, it just took on a whole new meaning.
By the way, watch Mr. Shuvalov (a senior economic advisor to Russian President Vladimir Putin) being interviewed here closely. He expresses himself pretty clearly in this video.
CNBC Video: From Russia, With No Love.
Which is why I find the following interesting: When interviewed by Forbes magazine, Mr Shuvalov answered a question about ExxonMobil's status in Russia in a somewhat ambiguous way, if you ask me. Well, let's hope Rex Tillerson [ExxonMobil's CEO] is current on his pledges to the St. Petersburg ballet. [Not that they need any money over there, it just pays to hang out with the right crowd.]
Forbes: Russia's Western Strategy.
Quotes:
Q: I'm interested to hear you had such positive interactions here. A lot of people are troubled about Russia's role in the oil and gas sector--and that worry is increasing. From an investment perspective, Lukoil, TNK-BP, we're starting to see government influence.
A: Government influence in these companies?
Q: There's discussion that TNK-BP is going to be forced to give up the [East Siberian] Kovykta field. Lukoil is doing business with Gazprom. Within that context, following what happened in Ukraine, people are starting to worry.
A: TNK-BP and Lukoil, they have nothing to do with government influence. We welcome [Lukoil's] partnership with the American company ConocoPhillips. If [Lukoil has] other partnerships to exploit something new, not existing ones, it's OK. To be honest, it's a kind of nonsense. There is no government influence or interference in their business.
It's true we're working with Lukoil and Rosneft and Sakhalin and others--they were told by environment agencies to fulfill environment laws. But not the business as a whole. Again, for me, TNK-BP and Lukoil, they're completely private companies. I know the investors and the management of the companies pretty well.
There is a lot of speculation that the Russian investors of TNK-BP are going to sell the shares. It's not true. I spoke with [majority shareholders Victor] Vekselberg and [Mikhail] Fridman. Their position is that they are strong, long-term strategic investors. They are not giving up; they don't want to sell their shares. They think that the value of them is growing also. There were a lot of articles about possible change in investors, but it's not true.
Q: What about Lukoil? Is ConocoPhillips' stake safe?
A: [Looks surprised.] I think so. Why not?
Q: What is it you think we don't understand?
A: For you, I think in general Russia is an unpredictable partner. Whatever you get from my country, any kind of signal, you would like to interpret it in a negative way, because you don't understand what's going on, so any kind of information for you is bad, first, and then you would like to find justification for better things. But we may have mismanaged our explanation of what we aimed at the beginning, why we raised the gas prices, why we behaved like this with Sakhalin and everything else.
But again, we support the principles outlined in the G-8 strategy first, and we internally changed our plans for energy strategy. And we announced plans for growth to raise gas prices by 2011, to build new coal power stations. Everything is changing in Russia--and changing toward a positive scenario.
If our Western clients and consumers would like to get enough gas on time, they need to understand we need cash to maintain the reserves and exploit the fields. It's our commodity, and we would like real cash for that. We would like to be seen--and we will be pursuing this--that Russia is the most reliable partner for energy for the United States and other G-8 countries.
Q: Do you see how people can be panicked after all the scandals that happened in Sakhalin? Companies invested billions of dollars, they're working fine, and suddenly--
A: But not suddenly. First, they knew exactly what they did, and possible outcomes. Everything was obvious. I met with one of the top managers of the Shell company, and they're meeting [this] week with the minister of energy in Russia, and they're quite positive they will be able to resolve the issue.
Q: So do you think Shell will be able to stay?
A: No doubt about that. Shell will stay, and it is one of the biggest and best investors in Russia with a good reputation. We accept that Sakhalin is a very important project for Russians. There are difficulties, and they have to resolve them. At the end, it will be a successful story. Exxon had cost overruns, but Shell's was twice more than planned.
Q: So Exxon has no problems?
A: [Shakes head.]
----------------------------------------------------------------
The squeeze starts:
----------------------------------------------------------------
AP: Gazprom Nears Deal to Join Shell Project.
Quotes:
Earlier Tuesday, Oleg Mitvol, of the state environmental watchdog Rosprirodnadzor, said Sakhalin-2 had caused environmental damages worth $10 billion, news agencies reported.
He said a final evaluation of the damages would be completed by fall next year and that by March he would be ready to sue the company in Russia and in the Arbitration Institute of the Stockholm Chamber of Commerce, which settles such disputes.
Mitvol and other Russian officials say that the Shell-led consortium developing the energy project has silted rivers and felled trees illegally.
Representatives for the consortium, Sakhalin Energy, were not immediately available to comment.
Mitvol also said he planned to begin an inspection of the Sakhalin-1 project, which is 30 percent-owned by Exxon Mobil Corp.
--------------------------------------------------------------------
Oh, and Lord Browne [BP's CEO]. I suggest an appearance as Santa at the St. Peterburg's Childrens hospital, and a whole lot of Elmo TMXs.
--------------------------------------------------------------------
Further quotes from AP article above:
If control of Sakhalin-2 does eventually go to Gazprom it could set a precedent for BP PLC's Russian joint venture: Prosecutors have threatened to revoke TNK-BP's license for the giant Kovykta gas field in Russia's Far East for alleged underproduction.
Wow, fascinating statistic from the below CNBC video: 78% of the top energy executives in Russia are ex-KGB.
And we thought the Cold War was over. Nah, it just took on a whole new meaning.
By the way, watch Mr. Shuvalov (a senior economic advisor to Russian President Vladimir Putin) being interviewed here closely. He expresses himself pretty clearly in this video.
CNBC Video: From Russia, With No Love.
Which is why I find the following interesting: When interviewed by Forbes magazine, Mr Shuvalov answered a question about ExxonMobil's status in Russia in a somewhat ambiguous way, if you ask me. Well, let's hope Rex Tillerson [ExxonMobil's CEO] is current on his pledges to the St. Petersburg ballet. [Not that they need any money over there, it just pays to hang out with the right crowd.]
Forbes: Russia's Western Strategy.
Quotes:
Q: I'm interested to hear you had such positive interactions here. A lot of people are troubled about Russia's role in the oil and gas sector--and that worry is increasing. From an investment perspective, Lukoil, TNK-BP, we're starting to see government influence.
A: Government influence in these companies?
Q: There's discussion that TNK-BP is going to be forced to give up the [East Siberian] Kovykta field. Lukoil is doing business with Gazprom. Within that context, following what happened in Ukraine, people are starting to worry.
A: TNK-BP and Lukoil, they have nothing to do with government influence. We welcome [Lukoil's] partnership with the American company ConocoPhillips. If [Lukoil has] other partnerships to exploit something new, not existing ones, it's OK. To be honest, it's a kind of nonsense. There is no government influence or interference in their business.
It's true we're working with Lukoil and Rosneft and Sakhalin and others--they were told by environment agencies to fulfill environment laws. But not the business as a whole. Again, for me, TNK-BP and Lukoil, they're completely private companies. I know the investors and the management of the companies pretty well.
There is a lot of speculation that the Russian investors of TNK-BP are going to sell the shares. It's not true. I spoke with [majority shareholders Victor] Vekselberg and [Mikhail] Fridman. Their position is that they are strong, long-term strategic investors. They are not giving up; they don't want to sell their shares. They think that the value of them is growing also. There were a lot of articles about possible change in investors, but it's not true.
Q: What about Lukoil? Is ConocoPhillips' stake safe?
A: [Looks surprised.] I think so. Why not?
Q: What is it you think we don't understand?
A: For you, I think in general Russia is an unpredictable partner. Whatever you get from my country, any kind of signal, you would like to interpret it in a negative way, because you don't understand what's going on, so any kind of information for you is bad, first, and then you would like to find justification for better things. But we may have mismanaged our explanation of what we aimed at the beginning, why we raised the gas prices, why we behaved like this with Sakhalin and everything else.
But again, we support the principles outlined in the G-8 strategy first, and we internally changed our plans for energy strategy. And we announced plans for growth to raise gas prices by 2011, to build new coal power stations. Everything is changing in Russia--and changing toward a positive scenario.
If our Western clients and consumers would like to get enough gas on time, they need to understand we need cash to maintain the reserves and exploit the fields. It's our commodity, and we would like real cash for that. We would like to be seen--and we will be pursuing this--that Russia is the most reliable partner for energy for the United States and other G-8 countries.
Q: Do you see how people can be panicked after all the scandals that happened in Sakhalin? Companies invested billions of dollars, they're working fine, and suddenly--
A: But not suddenly. First, they knew exactly what they did, and possible outcomes. Everything was obvious. I met with one of the top managers of the Shell company, and they're meeting [this] week with the minister of energy in Russia, and they're quite positive they will be able to resolve the issue.
Q: So do you think Shell will be able to stay?
A: No doubt about that. Shell will stay, and it is one of the biggest and best investors in Russia with a good reputation. We accept that Sakhalin is a very important project for Russians. There are difficulties, and they have to resolve them. At the end, it will be a successful story. Exxon had cost overruns, but Shell's was twice more than planned.
Q: So Exxon has no problems?
A: [Shakes head.]
----------------------------------------------------------------
The squeeze starts:
----------------------------------------------------------------
AP: Gazprom Nears Deal to Join Shell Project.
Quotes:
Earlier Tuesday, Oleg Mitvol, of the state environmental watchdog Rosprirodnadzor, said Sakhalin-2 had caused environmental damages worth $10 billion, news agencies reported.
He said a final evaluation of the damages would be completed by fall next year and that by March he would be ready to sue the company in Russia and in the Arbitration Institute of the Stockholm Chamber of Commerce, which settles such disputes.
Mitvol and other Russian officials say that the Shell-led consortium developing the energy project has silted rivers and felled trees illegally.
Representatives for the consortium, Sakhalin Energy, were not immediately available to comment.
Mitvol also said he planned to begin an inspection of the Sakhalin-1 project, which is 30 percent-owned by Exxon Mobil Corp.
--------------------------------------------------------------------
Oh, and Lord Browne [BP's CEO]. I suggest an appearance as Santa at the St. Peterburg's Childrens hospital, and a whole lot of Elmo TMXs.
--------------------------------------------------------------------
Further quotes from AP article above:
If control of Sakhalin-2 does eventually go to Gazprom it could set a precedent for BP PLC's Russian joint venture: Prosecutors have threatened to revoke TNK-BP's license for the giant Kovykta gas field in Russia's Far East for alleged underproduction.
Tuesday, December 12, 2006
Gazprom: "No more Mr. Nice Guy."
Well, it looks like it's going to get very interesting in Russia soon. This is not good news for ExxonMobil, BP, and ConocoPhillips, all of which have fairly substantial investments in Russia.
WSJ: Shell May Cede Control of Project To Russia's Gazprom. [$]
Quotes:
The person close to Gazprom also said gaining a controlling stake in Sakhalin-2 would set a precedent for Gazprom to press for control of other big Russian gas projects, such as the Kovykta field in Siberia, currently owned by the Anglo-Russian venture TNK-BP Ltd.
----------------------------------------------------------------------------
Be all that you can be. Sign up for Operation Alberta Freedom now.
WSJ: Shell May Cede Control of Project To Russia's Gazprom. [$]
Quotes:
The person close to Gazprom also said gaining a controlling stake in Sakhalin-2 would set a precedent for Gazprom to press for control of other big Russian gas projects, such as the Kovykta field in Siberia, currently owned by the Anglo-Russian venture TNK-BP Ltd.
----------------------------------------------------------------------------
Be all that you can be. Sign up for Operation Alberta Freedom now.
Monday, December 11, 2006
From Russia With Love.
Shell finally throwing in the towel on this thing and ceding control to Gazprom? Not entirely unpredictable, but wow.
Reuters: Gazprom yet to decide on Shell Sakhalin offer.
Quotes:
Russian gas monopoly Gazprom said on Monday it had yet to decide on Royal Dutch Shell's offer for it to take majority control in the Sakhalin-2 project due to ecological concerns.
CNBC Video (free for 24 hours): Gazprom to control Sakhalin-2?
Reuters: Gazprom yet to decide on Shell Sakhalin offer.
Quotes:
Russian gas monopoly Gazprom said on Monday it had yet to decide on Royal Dutch Shell's offer for it to take majority control in the Sakhalin-2 project due to ecological concerns.
CNBC Video (free for 24 hours): Gazprom to control Sakhalin-2?
Sunday, December 10, 2006
Same as it ever was..
I'm not sure.. Do they start these Gulf get togethers with the same toast every year? Because nothing has changed in the past 30 or so years.
So, while on the one hand it sounds sort of newsworthy that the Saudi king suggested the Middle East is on the verge of exploding, on the other hand, when you review the names, the places - Israel, Palestine, Iraq, Lebanon - they have a certain familiar ring to them and the thought has to creep into your mind (along with that beat):
Same as it ever was... same as it ever was... same as it ever was...
What does this mean for oil prices? The usual, volatility.
AFP via Yahoo! News: Gulf summit opens with warning of regional explosion.
Quotes:
RIYADH (AFP) - Saudi King Abdullah opened the annual summit of Gulf leaders with a warning that the Arab world was on the brink of exploding because of conflicts in the Palestinian territories, Iraq, and Lebanon.
----------------------------------------------------------------------------------
[Ever wonder if this thought enters President Bush's mind? I do.
My God! What have I done?
Note: Not a political statement, just sort of a reflective question.]
PS. Select lyrics from the Talking Heads: Once in a Lifetime.
So, while on the one hand it sounds sort of newsworthy that the Saudi king suggested the Middle East is on the verge of exploding, on the other hand, when you review the names, the places - Israel, Palestine, Iraq, Lebanon - they have a certain familiar ring to them and the thought has to creep into your mind (along with that beat):
Same as it ever was... same as it ever was... same as it ever was...
What does this mean for oil prices? The usual, volatility.
AFP via Yahoo! News: Gulf summit opens with warning of regional explosion.
Quotes:
RIYADH (AFP) - Saudi King Abdullah opened the annual summit of Gulf leaders with a warning that the Arab world was on the brink of exploding because of conflicts in the Palestinian territories, Iraq, and Lebanon.
----------------------------------------------------------------------------------
[Ever wonder if this thought enters President Bush's mind? I do.
My God! What have I done?
Note: Not a political statement, just sort of a reflective question.]
PS. Select lyrics from the Talking Heads: Once in a Lifetime.
Let it snow, let it snow, let it snow..
A follow up on Chesapeake Energy's predictions for winter:
TheStreet.com: Two Resources for Energy Insights.
Quotes:
Watch the Weather
One of the more important variables in predicting energy-commodity prices in the month of December is weather. Winter officially begins the middle of the month, and bone-chilling cold is bullish for the energy markets. In fact, last year's historically warm winter was the primary cause of the swoon in natural gas prices this past summer.
Hence, all energy investors have at least one eye on the forecasts, especially the longer-range forecasts for January and February. So I decided to check in with Chesapeake Energy (CHK - commentary - Cramer's Take - Rating), the large natural gas producer, which has its own uncannily accurate meteorologists. Cheapeake's meteorologists were some of the few who accurately predicted last winter's warmth.
The accuracy continues. My sources suggest Chesapeake's forecasters were spot-on in predicting last week's cold-and-snow snap through the upper Midwest. The Chesapeake gang's forecast for the coming week suggests slightly warmer-than-normal temperatures, followed by a holiday cold snap that, if it happens, could help rally energy prices.
More important, the Chesapeake weather team sees a more normal winter season come 2007, compared with the past 30 years. That means that, when compared with the last 10 years (which have been consistently warmer than longer-term norms), winter weather should be colder than normal, a positive for energy investors.
You can keep an informal eye on the weather via these links.
TheStreet.com: Two Resources for Energy Insights.
Quotes:
Watch the Weather
One of the more important variables in predicting energy-commodity prices in the month of December is weather. Winter officially begins the middle of the month, and bone-chilling cold is bullish for the energy markets. In fact, last year's historically warm winter was the primary cause of the swoon in natural gas prices this past summer.
Hence, all energy investors have at least one eye on the forecasts, especially the longer-range forecasts for January and February. So I decided to check in with Chesapeake Energy (CHK - commentary - Cramer's Take - Rating), the large natural gas producer, which has its own uncannily accurate meteorologists. Cheapeake's meteorologists were some of the few who accurately predicted last winter's warmth.
The accuracy continues. My sources suggest Chesapeake's forecasters were spot-on in predicting last week's cold-and-snow snap through the upper Midwest. The Chesapeake gang's forecast for the coming week suggests slightly warmer-than-normal temperatures, followed by a holiday cold snap that, if it happens, could help rally energy prices.
More important, the Chesapeake weather team sees a more normal winter season come 2007, compared with the past 30 years. That means that, when compared with the last 10 years (which have been consistently warmer than longer-term norms), winter weather should be colder than normal, a positive for energy investors.
You can keep an informal eye on the weather via these links.
Tuesday, December 05, 2006
Oh the weather outside is frightful..
And owning energy is so delightful..
Keep an eye on this chart, it's going to determine the price of oil and natural gas for the next couple of months. So far, we've had a couple of good cold blasts run through, but in between temperatures have been mild. Still, a lot of natural gas was burned, and it's still fairly early.
Weather.com: USA Current Temperatures.
Additional charts showing temperature deviations from normal highs and showing deviations from normal lows will highlight where we are versus prior year averages. Lots of negative numbers, particularly in the Mid-West and Northeast are good.
Keep an eye on this chart, it's going to determine the price of oil and natural gas for the next couple of months. So far, we've had a couple of good cold blasts run through, but in between temperatures have been mild. Still, a lot of natural gas was burned, and it's still fairly early.
Weather.com: USA Current Temperatures.
Additional charts showing temperature deviations from normal highs and showing deviations from normal lows will highlight where we are versus prior year averages. Lots of negative numbers, particularly in the Mid-West and Northeast are good.
Monday, December 04, 2006
Bare Naked Capitalism.
Bloomberg: Cerberus May Buy Delphi Car-Parts Plants, People Say.
Ben Stein on Cavuto on Business (Fox News) keeps making this suggestion, and it is sort of interesting, so I thought I'd bring it up.
So, here's the pitch:
A money losing auto parts making operation, currently in bankruptcy, desperately in need of major restructuring, saddled with sky-high union salaries, serious pension obligations, spun off from a parent automaker (General Motors) that is in similar shape.
Sounds awesome, right? It's Delphi. (DPHIQ.PK - the 5 character symbol and .PK because it is in bankruptcy and booted off the major exchanges)
Well, maybe.
Normally, you should run for the hills from this kind of investment (I hesitate to call it an investment, let's call it a speculation.) Or perhaps you buy the bonds. Never, never, never, ever buy the stock. Except maybe this time.
All kidding aside, normally when a company goes into bankruptcy, the stock is ultimately worthless, anyone holding the stock loses everything, and the bondholders end up owning the company with newly issued stock (think Kmart). So even though you may see stocks trade during bankruptcy, it is almost always people flushing their money straight down the toilet.
However, in Delphi's case, you have a major hedge fund - Appaloosa Capital - with a very sharp manager - David Tepper - as a major holder of the stock, trying to work a deal here where the unions accept lower pay rates, various factories are sold off to interested parties, other costs are rationalized, etc. etc. [Note that the article highlights Cerebrus. I'm more interested in Appaloosa, which is also mentioned.] Obviously though, getting people to take huge pay cuts is not easy. If things go wrong, the stock will be worthless, the bondholders will end up with everything. And, we'll also note, Kirk Kerkorian, an investor who knows a few things, just dumped his entire stake in General Motors when he lost faith in their ability to make the major changes he was seeking. So Mr. Tepper has his work cut out for him.
I will note that in response to Ben Stein's suggestion to buy the stock, former hedge fund manager Jim Rogers suggested buying the bonds instead, which is safer. But if this works out for Appaloosa, the stock is going to give you much more juice than the bonds.
I leave you with the wisdom of Oingo Boingo:
There's nothing wrong with Capitalism
There's nothing wrong with free enterprise
Don't try to make me feel guilty
I'm so tired of hearing you cry
There's nothing wrong with making some profit
If you ask me I'll say it's just fine
There's nothing wrong with wanting to live nice
I'm so tired of hearing you whine
About the revolution
Bringin' down the rich
When was the last time you dug a ditch, baby!
Ben Stein on Cavuto on Business (Fox News) keeps making this suggestion, and it is sort of interesting, so I thought I'd bring it up.
So, here's the pitch:
A money losing auto parts making operation, currently in bankruptcy, desperately in need of major restructuring, saddled with sky-high union salaries, serious pension obligations, spun off from a parent automaker (General Motors) that is in similar shape.
Sounds awesome, right? It's Delphi. (DPHIQ.PK - the 5 character symbol and .PK because it is in bankruptcy and booted off the major exchanges)
Well, maybe.
Normally, you should run for the hills from this kind of investment (I hesitate to call it an investment, let's call it a speculation.) Or perhaps you buy the bonds. Never, never, never, ever buy the stock. Except maybe this time.
All kidding aside, normally when a company goes into bankruptcy, the stock is ultimately worthless, anyone holding the stock loses everything, and the bondholders end up owning the company with newly issued stock (think Kmart). So even though you may see stocks trade during bankruptcy, it is almost always people flushing their money straight down the toilet.
However, in Delphi's case, you have a major hedge fund - Appaloosa Capital - with a very sharp manager - David Tepper - as a major holder of the stock, trying to work a deal here where the unions accept lower pay rates, various factories are sold off to interested parties, other costs are rationalized, etc. etc. [Note that the article highlights Cerebrus. I'm more interested in Appaloosa, which is also mentioned.] Obviously though, getting people to take huge pay cuts is not easy. If things go wrong, the stock will be worthless, the bondholders will end up with everything. And, we'll also note, Kirk Kerkorian, an investor who knows a few things, just dumped his entire stake in General Motors when he lost faith in their ability to make the major changes he was seeking. So Mr. Tepper has his work cut out for him.
I will note that in response to Ben Stein's suggestion to buy the stock, former hedge fund manager Jim Rogers suggested buying the bonds instead, which is safer. But if this works out for Appaloosa, the stock is going to give you much more juice than the bonds.
I leave you with the wisdom of Oingo Boingo:
There's nothing wrong with Capitalism
There's nothing wrong with free enterprise
Don't try to make me feel guilty
I'm so tired of hearing you cry
There's nothing wrong with making some profit
If you ask me I'll say it's just fine
There's nothing wrong with wanting to live nice
I'm so tired of hearing you whine
About the revolution
Bringin' down the rich
When was the last time you dug a ditch, baby!
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