//\tI'm not an economist, but considering that GM is US$60BB in debt, isnt BK in effect a bailout? Anonymous | 12.19.08 - 3:55 pm | #
But by the bondholders, not the taxpayers.
(modulo some pension garauntees). \t Eric | \t \t \t \t12.19.08 - 3:59 pm | #//
eric, isnt it a bailout by all of the suppliers (debtors), as well as stock holders of course, but that is more an elective bulle tot teh head than having teh rug pulle dout on biz transaxtion. What is the conequential taxpayer bag we hold if the employees are on the dole?? Persoanlly Im not for a bailout seems bad eitehr way, curious if anyones tryied to quantify teh badness of both scenerios..
In a way, isn't $20B a pretty strong stimulus? Also, how long at this price level until we save enough to see improvements in the economy through high consumer spending?
just like 2-3 months ago when the closing contract spiked @25bucks in the last 2 days of trading, to close at $130.
It would be more interesting to know what the average price paid during the contract's life... and how many contracts were held for delivery vs the price on it's last day of trading.
I suspect that the average annual oil price in 2009 may exceed the average annual 2008 oil price of about $100--due to a combination of involuntary + voluntary net oil export reductions.
Our middle case is that the top five net oil exporters--Saudi Arabia; Russia; Norway; Iran and the UAE--will collectively approach zero net oil exports in about 23 years. Two other top 10 net oil exporters--Mexico & Venezuela--are in long term or terminal decline.
BTW, the current average futures price for next year is about $50.
But I see a whole lot of policies simiilar to what Japan tried. Look where it got them.
I'll fear inflation when the banks stop hording cash. I'll also be keeping a close watch on the consumer and his newfound "wait 'till it's cheaper" strategy towards buying stuff.
Once a well is put into production, the marginal cost to pump a barrel is relatively low. The biggest proportion of oil cost is the capital cost; finding it, drilling the well, and linking the well to pipeline network. As long as price per barrel is enough to provide positive contribution margin for a well, the well will be kept in operation. Based on historical trends that breakeven price is quite low.
Persecuted Comrade Anonymouse - The easy money in oil has been made...it was just like shorting banks...Ivy league not for me, give me a Ca university and some common sense!
I was reading TheOilDrum.com when it was still at blogspot. Those regular commenters - including one who posted above - have become frickin' nihilists. Disgusting vile Peter Schiff-alikes who just bash everything to do with the U.S. $ and worship commodities and oil like a New Christ. I hope they lose everything!
I was reading TheOilDrum.com when it was still at blogspot. Those regular commenters - including one who posted above - have become frickin' nihilists. Disgusting vile Peter Schiff-alikes who just bash everything to do with the U.S. $ and worship commodities and oil like a New Christ. I hope they lose everything! Persecuted Comrade Anonymouse | Homepage | 12.19.08 - 5:23 pm | #
My longview is supply in consumables is going to drop driving demand and inflation. The more retailers that go BK the fewer left selling a smaller amount of products. 6 months to a year should show some pretty hefty climbs in the CPI.
The retailers who survive and where they buy product from will also be telling for which countries rebound and which do not.
Oil will see much volatility and prices will rebound. Strength of currency and the dollar as reserve will be the most telling sign of what we can expect to pay here in the US.
Waves of change with little time for adjustment will further compound any recovery we can expect. Should be an interesting 3 years going forward.
Pray tell me what things about the U.S. we should be praising at this current time? I mean, come on, don't you think a heavy dose of criticism, if not mass demonstrations in the street, are due about now?
<a href="http://www.haloscan.com/comments/calculatedrisk/5817563855184539572/#785817>Here's something nice I posted yesterday.
I think a lot bearishness, esp. coming from reactionaries, easily turns into hatred of ordinary working people who are just trying to survive. That's the biggest thing I miss about Tanta. She clearly was sticking with the underdog.
One would have been well advised to heed my long time advice--which I call ELP (Economize; Localize; Produce). You can find the March, 2007 article by doing a Google Search for ELP Plan.
Most of our net export work can be found by doing a Google Search for Net Oil Exports + Jeffrey Brown.
I estimate that the world will probably have burned through close to 30% of remaining worldwide net oil export capacity in the 10 years from 2005 to 2015.
The oil price crash is a tragedy for the alternative-energy sector. Numerous solar and wind companies are going to go bankrupt unless Obama can quickly provide big bucks to Climate Change programs. Energy conservation will quickly lose favor, too.
On the bright side, resurgent sales of SUVs will temporarily boost the Big Three.
I get your point but with so much overproduction going offline and no credit available to bring new production online I wonder.
Corporations seem to be consolidating and when you only have a few big box stores to buy at won't their suppliers be the winners? Won't they then collude on price and availability?
I'm noticing significantly less choices in brands at the one stop stores. i.e. Wal mart, Best Buy, Fred Meyers.
"Jeffrey J. Brown writes:
I suspect that the average annual oil price in 2009 may exceed the average annual 2008 oil price of about $100--due to a combination of involuntary + voluntary net oil export reductions.
Sir,
I respectfully think that you are dead wrong. In 2007, before the price moonshot, oil was trading around $55 a barrel. And that was with an Iraq war premium built in. And we have learned that China was stockpiling fuel before the Olympics. I'll leave the speculation issue aside. Unless Iran finds a navy to blockade the Persian gulf, or some other catastrophic event occurs, I think the probability of $100 a barrel is 1%.
Anyone notice airfares declining? I haven't, and I fly a fair amount. I still get a fuel surcharge for trash collection and shipping. Not trickling down to me yet...
Jacked writes...mostly agreed. Many retailers and manufacturers are going away for good in the coming months. Those left will be in a strong position and the supply will drop below a rising demand fresh off of 70 year lows. My guess is it will take 12 to 18 months to play out before inflation is an issue.
Cash (for investment and business use) and demand are building every day that it is not used, not 1 to 1, but nonetheless it is increasing.
bearly writes:
Anyone notice airfares declining? I haven't, and I fly a fair amount. I still get a fuel surcharge for trash collection and shipping. Not trickling down to me yet
Tell me about it: We're flying to China 1/9/09 to adopt a little orphan girl. $1+K one-way flightto bring her back.
Haven't been hanging out in ND lately? Neither have I, but oil is/was driving their economy. Back to being poor farmers on mediocre farm land. Probably not the worst thing to be the next couple of years.
California state gov't unpaid furloughs and layoffs. Aparently equiv. to 10% paycut for all state workers. Sorry if link doesn't work - I'm new to this century. This should help oil demnad to tank further in the drivingest state in the nation.
I can't follow your logic any more than I can that of "Jacked"... You seem to be saying that the disappearance of retailers and manufacturers will result in insufficient supply to meet the demand.
What do you think the loss of jobs (implied by disappearing companies) will do to demand?
The way I see it, the demand has been artificially high for years by spending out of future earnings. Demand has only just begun its descent.
"Jeffrey J. Brown writes:
I suspect that the average annual oil price in 2009 may exceed the average annual 2008 oil price of about $100--due to a combination of involuntary + voluntary net oil export reductions."
I join Kung Fu Panda in extreme skepticism of this statement. I'll stick with my $25 a barrel average for 2009. I don't think we'll see $100 a barrel oil for a long time, unless there is a major war involving an oil producer.
I also respectfully ask, are you talking your book? Do you own any positions in oil?
Aside from owning a car and having a gas bbq grill, I don't really have a position in oil (or natural gas).
"What better time to also implement higher taxes on carbon fuels while the cost of energy is low?"
Isn't that a regressive tax? Maybe we should just implement higher taxes on carbon fuels for bankers, investment bankers, and mortgage brokers. Leave the auto workers and the farmers out of this.
Comrade V,
Oddly enough in our China trade. The inability of small importers to get reasonable cost letters of credit is already leading to large shutdowns in Chinese export manufacturing.
Soooo, anything that was cheap and made in China will now be sourced closer to home, and remember that China was No.#1 cheapo subsidized exporter.
That alone is a bit of inflation, but as long as cars and houses, and corn on the cob and beer get cheaper, all is well.
Hey, works for me.
Ignore the fact the cure for high oil prices has been a huge recession and the death of inflation. A lot of our economy was sacrificed to the oil bubble.
Now the biggest problem is the marginal production will not be ordered for the next decade, and countries like Venezuela and Mexico and the US will invest next to nothing in increased production- let alone invest enough to just offset depletion.
Mexico will almost certainly start disintegrating at these oil prices.
Contemplate millions of refugees swarming north just when we have an employment crisis, if this happens the world is going to be very ugly.
I am of the opinion that this dive is just as much of a bubble as the high was this summer.
The truth is the financial system is wobbling, and the hot money is sloshing from target to target, overwhelming and abandoning at near lightspeed compared to the old days.
Ok, oil is tanking and adjustibles that are allowed to go down are gonna adjust downward. Anybody calculate the 2nd factor? Enough to gradually get us out of the hole?
Between both factors?
Also neg mew means balance sheets are being repaired.
And frankly, we don't need a beggar thy neighbor attitude because people are not in the mood to spend money anyway.
Don't need to deliberately restrict imports, if people are not buying them anyway.
seems like oil has priced in:
peace in the middle east (whoo hoo!)
capitalist democracy everywhere
permanently declining demand
increased mexican and venezuelan "production"
ehh...i'm running low on snarkyness...
in my opinion the price of oil is way too low.
i'm long dxo as of yesterday and will probably add via dig and other etf's over the next few weeks.
Citizen AllenM writes:
Comrade V,
Oddly enough in our China trade. The inability of small importers to get reasonable cost letters of credit is already leading to large shutdowns in Chinese export manufacturing.
Isn't that a regressive tax? Maybe we should just implement higher taxes on carbon fuels for bankers, investment bankers, and mortgage brokers. Leave the auto workers and the farmers out of this.
Elvis
Tax everyone, and rebate the higher energy taxes based on income. The easiest (and hardest to cheat) tax is a tax/gal (auto gas), tax/ton (coal), or tax/nat. gas usage. Europe and other countries have had far higher gas taxes for a long time, and they've adapted.
We need to switch energy sources, and a good way to pay for the transition is through taxes now (pay/go). Rebate to low income makes sense, to ease regressiveness.
Elvis, viewed in a vacuum, the gas tax is a regressive tax. However, there are a host of other policy reasons for increasing gas taxes that outweigh that consideration in my view.
E.g., pricing negative externalities, and mmckinl's point above.
"We need to switch energy sources, and a good way to pay for the transition is through taxes now (pay/go). Rebate to low income makes sense, to ease regressiveness.
JimPortlandOR"
I'm shocked you are from Portland. Ever spend some time in Berkeley and Boulder? Boulder has some lovely sites. Living and breathing lovely sites.
We need to switch energy sources, and a good way to pay for the transition is through taxes now (pay/go). Rebate to low income makes sense, to ease regressiveness.
JimPortlandOR
~~~~~
Yep, when you want less of something ~ tax it ...
They should announce a minimum price of gas for every year going forward so that people can ease into the new paradigm. Tax credits would be great.
The speed and ferocity of this is the x factor. Years usually go by to give people time to adjust to the magnitude of the changes we are facing.
Ex: One day I'm living comfortably and warm, just like always. I hear a knock at my door and I'm told I have one week to move, no job, no food and no path to being comfortable and warm again. I think the shock from one extreme to the next is what will cause the social unrest we all fear.
The key point that virtually the whole world, IMO, is missing is that net export decline rates tend to accelerate with time.
We don't have the 2008 data, and they will be affected anyway because of the contraction in demand, but EIA data show that world net oil exports fell at -1.1%/year in 2006 and at -2.2%/year in 2007--primarily because of overall net export declines by the top five exporters.
IMO, the increase in oil prices was largely due to importers bidding for declining net oil exports, until the decline in demand outpaced the long term net export decline, but because of the accelerating nature of net export declines, I expect that the net export decline will soon outpace the decline in demand--augmented by some voluntary net export restrictions.
The pattern that we will see is fewer consumers paying a higher unit price for a smaller volume of exporter oil, probably with continued price volatility along the way.
The point is the mkt isn't working. Since they are gonna waste money subsidizing, why not try the letters of credit. Unless there is a good reason for no more letters of credit?
Could do it on a small scale and see if it works.
Not that I particularly want to benefit Chinese manufacturers, just wondering.
"Gary writes:
Elvis, viewed in a vacuum, the gas tax is a regressive tax. However, there are a host of other policy reasons for increasing gas taxes that outweigh that consideration in my view."
Add up the total loss in income from 4.5 million unemployed and I will match your 20 Billion and raise you 500 Billion. Citizens w/o jobs trumps a full tank any day!
Money Man writes:
Add up the total loss in income from 4.5 million unemployed and I will match your 20 Billion and raise you 500 Billion. Citizens w/o jobs trumps a full tank any day!
Yep. Anyone who saw the crash coming this past June should have bet on low oil $.
Where is our Polk when we need him? Now is the time to offer Mexico few dollars for the five northern estados bordering the US, plus all of Baja and if it takes an excursion south...is a lot closer to home than Iraq.
Build hundreds of acres of wind farms, solar arrays and a few dozen nuclear plants and we can forget the cost of petroleum in a few decades...which would be about $20 a bbl then.
I just had lunch with a friend who works for a green-tech startup. I asked her whether the plunge in oil is hurting the prospects of her company. Apparently because her company is more closely associated with electricity demand they haven't been impacted much by the drop in oil prices. BUT she did mentioned that the credit freeze is significantly impacting VC funding for her company.
So it looks like green-tech is getting impacted by lack of VC funding due to the credit-freeze and, depending on the green technnology, sometimes the drop in oil prices.
First time I read about "peak oil" was back in '02 (around the time I read about the housing bubble), and I think it was Noam Chomsky who wrote "peak oil is not a matter of if but when."
The problem with the oil bugs is they are 1 dimensional. Oil output may not peak for another decade because of the ongoing worldwide contraction. Same kind of pullback in demand - and supply - occurred in the beginning of this decade and to a more substantial extent in the early '80s when I was born.
I heard form no less than several dozen leading "peak oil" experts that oil would precipitously decline by '05, '06, '07, '08 . . . They need to stop making predictions, esp. doomsday scenarios about the collapse of society from having to cut back on buying gasoline.
Typically, it's the purchasers who get the letter of credit so that the seller feels secure shipping the product. So the chain is breaking down because we have credit risks on both with both the purchasers and the banks.
But the bigger problem is how to handle the currency risks. Global trade can't handle the currency movements that we're having.
Does anyone seriously think oil prices will climb out of a global depression in less time than the depression takes to give way? China has closed 20% of her factories in the main mfg province already, and will just keep on closing them. They only work at boom cycle volumes. Oil at $23 and hang in below $30 for the next 3 to 5 years. My call.
Hate to leave everyone with a bad tasting bank failure right before Jesus's Birthday! Then after the new year we can gobble up all the rat finks and send them to their eternal damnation.
Off topic, up-to-date PE ratios of the major indices (trailing twelve months, from the WSJ$ Market Data Center):
Dow = 17.9
S&P = 19.2
Nasd = 21.1
Looks like a bear market bottom!
At least the Nasdaq is down from 34.5 a year ago....whereas the S&P has actually moved slightly higher from a year ago! Well, I guess value is all relative (look what you get for your money in treasurys!).
Social stability starts and ends with jobs. The US is incapable of living in third world squalor.
The Ford Factory video LAM is posting illustrates the future. Highly automated production with minimal labor BUT that is not feasible for a world with 6.5 billion people. Who will afford the products produced? How will that income be derived?
The US has tried to be that economy for 30 years. Produce little and offer services for income. I think a consensus of failure can be attached to that economic model. Finite resources and a history of environmental destruction has painted humans into a corner.
I have no solution. I see suffering and a major reduction in population in the third world is coming. The first world has long sacrificed the poor to ensure their own comfort, security and future. Truth. Painful.
ShortCourage writes:
Off topic, up-to-date PE ratios of the major indices (trailing twelve months, from the WSJ$ Market Data Center):
Dow = 17.9
S&P = 19.2
Nasd = 21.1
Looks like a bear market bottom!
At least the Nasdaq is down from 34.5 a year ago....whereas the S&P has actually moved slightly higher from a year ago! Well, I guess value is all relative (look what you get for your money in treasurys!).
ShortCourage | 12.19.08 - 6:03 pm | #
Yeah...cut them all in 1/2 and then we can talk value investing.
Michigan again had the highest monthly unemployment rate of all U.S. states in November, with the percentage of unemployed workers jumping to 9.6 percent from 9.3 percent in October, the Labor Department said on Friday.
Rhode Island was close behind with an unemployment rate of 9.3 percent. In October, the two manufacturing-heavy states had tied for the highest jobless rates.
Oregon recorded the largest over-the-month rate increase for the second month in a row, and 37 states and the District of Columbia all reported rises in their unemployment rates.
Jacked writes:
Social stability starts and ends with jobs. The US is incapable of living in third world squalor.
The Ford Factory video LAM is posting illustrates the future. Highly automated production with minimal labor BUT that is not feasible for a world with 6.5 billion people. Who will afford the products produced? How will that income be derived?
The US has tried to be that economy for 30 years. Produce little and offer services for income. I think a consensus of failure can be attached to that economic model. Finite resources and a history of environmental destruction has painted humans into a corner.
I have no solution. I see suffering and a major reduction in population in the third world is coming. The first world has long sacrificed the poor to ensure their own comfort, security and future. Truth. Painful.
I have been predicting DOW 6500 or where it was right before the 1990 beginning of the RE moonshot. I am just a dumba$$ appraiser...so give me some slack.
Money Man writes:
I have been predicting DOW 6500 or where it was right before the 1990 beginning of the RE moonshot. I am just a dumba$$ appraiser...so give me some slack.
Your guess is as good as anyone's--and your premises probably just as valid.
You never know. The Fed is doing all it can to keep asset prices up, so we might not get down to the historic 8-10 PE ratio on the S&P at the bottom. But I wouldn't bet against it!
Personal opinion only, very early days. Hard to imagine declining demand - particularly in face of accelerating unemployment - reversing quickly enough to offset slackening capacity/inventories. The old metaphor of a turning a ULCC at sea comes to mind.
Citizen Allen had an interesting data point on China suppliers; would be waiting for more, especially shortages closer to home.
Funny how the stock market "trend lines" seem to spit in the face of all the Trillions that the FED is pushing into equities. If the FED fails to scare folks out of treasuries/cash and back into stocks....look out below.
Chiming-in on the OT market valuation subject (as a born-again bear), I've got current SP500 PE (based on peak earnings) at 10.45, and it dropped down into the 7 area in the '74-'75, '80, and '81-'82 recessions.
Now that we're in a real-live recession I don't see how we avoid returning to that area of super-low valuations. Call it around 600 or so on the SP500.
Whew, that's a lot of bold predictions in one thread. I'm astonished by comments that say "book it", "count on it", etc in times like these. Everyone else seems much more certain of their position than I am of mine. The only thing I'm sure of is that I have no visibility of the next black swan, but that it is coming.
I'll save the thread for future reference.
That unemployment ranking is crazy to me. I am in California and we are ranked at #48 in the country. Can someone please forward this to all the delusional house sellers? I'd like to see some hefty price reductions please!
lawyerliz writes:
Aren't PE ratios supposed to get to, like, 12? But perhaps I forget.
My first thought was, darn, and i had the Farmer's Almanac in my hand yesterday, and didn't buy it.
If this were a pin the tail on the PE ratio, i would say there are no rules (now). This is not the paradigm of yesterday (yes, X12 would seem rational, and is the talk on the street). Relive 1873 in your mind, then update it to modern setting...what do you see?
I see a global economic dislocation, with a re-birth of domestic industry replacing those products than can no longer be shipped, because they are not being made 'over there'. Its not feasible 'over there' to do small runs on the line. 'The factory closed last month.' Came the reply.
Repatriate many lower tier industries in your mind. Then envisage someone important ask you to 'buy American' on national TV. Only then think about 2012 PE ratios.
The post-Aug 2007 oil price moon shot was driven by leveraged speculation sparked by Fed rate cuts. Deleveraging cut that out.
I have no investment position in oil either short or long. Too risky for a small investor. I just like to try to understand what's moving this particular commodity, as it affects what I pay at the pump and US relations with the rest of the world.
During George Bush's first four year term, the world consumed about 10% of all crude oil ever consumed. During his second four year term, we consumed about 10% of our remaining conventional crude oil reserves--based on Deffeyes' model (which put the world crude peak in 2005, within a range from 2004 to 2008).
EIA data show basically flat crude oil production at about 74 mbpd from 2004 to 2008, despite much higher oil prices. We have seen a slight bump upward in Total Liquids, which includes Natural Gas Liquids (NGL's), which Matt Simmons attributes to large dying oil fields, where their gas caps are being blown down.
But that is not the real problem. The real problem is an accelerating net export decline rate.
The advice I have been giving for more than two years is to assume deflationary trends in the auto, housing and finance sectors, with inflationary price trends in food & energy prices (do a Google Search for ELP Plan). I have been advising people to try to live of half, or less, of their income, in small energy efficient housing close to where you work, or along mass transit lines.
I heard form no less than several dozen leading "peak oil" experts that oil would precipitously decline by '05, '06, '07, '08 . . . They need to stop making predictions, esp. doomsday scenarios about the collapse of society from having to cut back on buying gasoline.
Persecuted Comrade Anonymouse | Homepage | 12.19.08 - 6:01 pm | #
PCA,
I think your statement is simply wrong.
There were NO "peak oil" experts, much less dozens of "them," predicting that oil would precipitously decline in the mid 2000s.
What they were saying is that peak oil production would likely be reached in the middle to second half of this decade.
I think their predictions were quite accurate and that peak oil production has been reached.
What was the highest amount of oil ever produced in a single day? I don't know exactly, but assume 86MMbbls. Do you think there will ever be a day in the future in which the world will produce MORE THAN 86MMbbls?
If not, peak oil has occurred. It really is that simple.
Better go long on companies that can re-tool our auto plants for companies that can make the goods you describe as domestic needed items not cost effective to ship from over there. If O would give companies incentives to do just that...it would put a lot back to work and we WOULD be PROUD to BUY AMERICAN! I still remember that saying when Toyota and Honda came over and started kicking our butts...However, go buy an American flag. You will see Made in China on it. Depressing...
If the Chinese have civil unrest due to all the newly unemployed Chinese, that will reduce the ability to produce and the desire of people to outsource there.
If oil has peaked due to the fact that there is less demand for it, that has entirely different connotations from having peaked because there isn't enough in the ground.
Of course, there is a physical limitation in the amount of oil, just as there is a physical limit to the size of the earth.
I have heard that the field have been replentishing themselves. Are the geological processes continuing to make more? Is it oozing in from below?
lawyerliz writes:
If the Chinese have civil unrest due to all the newly unemployed Chinese, that will reduce the ability to produce and the desire of people to outsource there.
Plus it might increase the demand for a distraction--i.e., war?
If oil has peaked due to the fact that there is less demand for it, that has entirely different connotations from having peaked because there isn't enough in the ground.
Liz, I am saying neither of those things, but rather simply that peak oil has arrived because the world cannot in the future ever again produce as much in one day as it has in the past.
"I was then constantly emailing friends and family with my latest reasons to get out of stocks, miners included, and to buy into Treasury MMFs and index puts. For the previous nine months I had been endlessly explaining the logic of deflation and its implications, having been dissuaded of Schiff-esque conclusions by the likes of Mish and Prechter, and I wanted to go on the record more publicly with my calls. Besides bragging rights, I wanted the pressure to dig deeper and get the details right.
I called for a depression worse than the 1930s. I said that the Dow was on its way to below 3500 (under 9500 by Christmas, I suspected), that commodities would tank, that gold would fall well under $700, that there would be huge bailouts for the crooks who blew the bubble (though I never thought wed see anything like $9 trillion by the end of 08), that Obama would win and back a new New Deal and that the long bond would yield less than 3% anyway."
The Chinese have had a number of civil unrest periods in their long history. Some with 10s of millions dying, perhaps more. some of these periods quite a long time ago. Saying it may happen again is not wishing it were so.
lawyerliz writes:
If the Chinese have civil unrest due to all the newly unemployed Chinese, that will reduce the ability to produce and the desire of people to outsource there.
The Chinese will recondition their model to manufacture junk for other countries. There is always a market for junk. They eat rice.
lawyerliz said: "...As I've said, my old real estate vultures are starting to vulch again; reductions in adjustable arms, reductions in gas for consumers, less mew..."
I got a call out of the blue from the mortgage broker that handled my refi in 2003, asking what they could do for me today now that rates have dropped. I've got people practically throwing money at me, I'm just not in the market for any big-ticket items at the moment. If this recession unfolds like others, there's literally no rush for me to refi again anytime soon, as even lower rates (imagine!) are on the way.
I've seen reports of anywhere from 5-10% domestic airline capacity being pulled, starting in Dec 2008. Even noticed a ton of "Cancelled" routes in the Southwest timetable, when I flew the other week.
bearly writes:
Anyone notice airfares declining? I haven't, and I fly a fair amount. I still get a fuel surcharge for trash collection and shipping. Not trickling down to me yet...
bearly | 12.19.08 - 5:39 pm | #
rich(Unrated) writes: \t>"More importantly, Glod will get crushed in the coming weeks. I'm long DZZ (double short Glod) since around $875 Glod."
>have you heard from Rich lately? Comrade V
Gold is going to get crushed because there is too much of it sitting on ships, right? \t rich | \t \t \t \t12.19.08 - 6:29 pm | # rich | 12.19.08 - 6:29 pm | #
Short-term gold will get hurt by the next deleveraging cycle that if you put the Madroff scandal and Paulson asking for another 350B for the tarp together is right around the corner.
rich | 12.19.08 - 6:29 pm | Gold is going to get crushed because there is too much of it sitting on ships, right?
Rich, throw an old dawg a bone. I am in the horns of a dilemma. I have three times now decided to load up on physical the following day. Each time i did not. I can't seem to make the decision.. please, order me to do so...then i have at least a poster-person to blame... or am i just lazy...this is killing me. Help.
Nope, not my vultures; they've been doing their thang for a long time.
My favorite is buying a place for 55k. Even he thinks it's too good to be true. Peaked at mid 200s; assessed for ummm, about 160k; assessments are looking medium accurate at the moment. 1/3 assessed value is a steal here and now. It's rented. Positive cash flow. What's to be toxic? He knows he can't sell it. Paying cash.
It's about flow rates. Apparently humans cannot extract oil from a field/region/country/planet at any arbitrary rate. Depending on the technology used, the flow rate of oil production can shoot up parabolically, reach some maximum rate, then decline in output indefinitely. But there may still be 50% of oil to be extracted left in any field/region when the flow rate peaks. So that's the "peak" part of "peak oil". We may have 50% of oil left to be recovered, but if the flow rate has hit its maximum, it has no where to go but down.
My complaint is that the peak oil experts/community were leading everyone with the impression - if not stating outright - that once the oil flow rate peaked, we'd have a precipitous decline in the oil flow rate. So we'd go from producing 86 mil/bbl/day to 60 mil/bbl/day in 5-10 years, then to 40 mil/bbl/day in another 5-10 years. It's fairly clear that, even if the flow rate has already peaked, the world economy will reduce demand, supply will be pulled back, and the decline in output will be by choice, not geology, and that the eventual oil flow decline could be rising and falling at the behest of the economy for several decades before being cut by even a third. It's not as scary as the doomsayers present.
"The latest selloff gave the company, which has annual sales of almost $600 million, a market valuation of less than $2 million.Gottschalks, which operates 59 department stores and three specialty stores in California and five other Western states"
Well, is mama earth making more oil or not? Even if verry sloooowly? Does anyone know for sure. I mean I saw those ads with smushed dinosaurs, but what about other squashed organic stuff?
[Gold is going to get crushed because there is too much of it sitting on ships, right?
rich]
I have lost more $$$ on gold than I have made, so I am not expert but I think it's a short right here. It seems to be an outlier in the commodities complex and either it alone is priced correctly or everything else isn't and should correct higher or there's speculative money left supporting gold.
Remember when the gov't also said smoking was "good" for you or other stuff that ended up killin' you? Don't believe the hype....Next week we will be running out of air and that we are also on a global freezing trend and all the Ice caps will cover the earth to the demise of all mankind. Yawn...
Short-term gold will get hurt by the next deleveraging cycle that if you put the Madroff scandal and Paulson asking for another
This is the little devil sitting on my left shoulder... whispering... but on my right, the little angel says, 'so what? Its open season on insecurity and panic.. so why wait to get aboard the safety train...better timing? seems dumb.
PCA, with all due respect, you are attacking strawmen.
The worldwide economic downturn in consumption has made the situation less apparent to the casual onlooker, but no one (that would be NO ONE) who spoke of peak oil in scientific terms was a doomsayer in political or economic terms.
There were some doomsayers who touched on Peak Oil as one of their reasons along with the Maya Calender and some five mile wide asteroid, but you really ought to avoid lumping those crackpots in with scientists and concerned citizens.
Peak Oil is a geological fact. The precise day it occurred/will occur is not known, but it's about now.
It will in fact have a profound effect on the future of the world and particularly energy guzzling parts of the world like the U.S.A.
Short-term gold will get hurt by the next deleveraging cycle that if you put the Madroff scandal and Paulson asking for another 350B for the tarp together is right around the corner.
Pissed Off In California,
The largest gold markets in the world are in Asia, where they haven't even heard of Madoff and Paulson.
Gold and silver were the official stores of value 5,000 years ago, in the world's four great early civilization, China, India, Egypt and Babylon. Each civilization chose gold and silver independently, and some values in this world do not change over centuries.
Gold always does well in times of economic stress and in times of high inflation, and both are coming. Don't buy it leveraged. Just buy a comfortable amount and hold. You'll be very happy in the long run owning something real as paper assets and paper money turn to sh*t all over the world.
If you believe leveraged hedge funds still own vast quantities of gold they'll have to dump on the market, then maybe gold will come under pressure temporarily. But nobody knows that's true, and it seems that hedge fund deleveraging is starting to lose steam.
Did you read anything I wrote? I basically agree w/ peak oil argument. But those who've presented it (like say Matthew Simmons) have been doomsaying in their predictions for the last several years. "We won't recognize the future - constant shortages of energy and food, etc." "Coming soon to a city near you." Those people should be ashamed.
I have no solution. I see suffering and a major reduction in population in the third world is coming. The first world has long sacrificed the poor to ensure their own comfort, security and future. Truth. Painful.
Jacked | 12.19.08 - 6:04 pm
I came to the same conclusions after watching the video LAM posted.
I am begining to think that only in Sci-Fi are you going to find realistic scenarios of what is ahead for us. Snowcrash,the book, Gibsons work, those type of writers.
With oil and most commodity prices down like 75% or more since last summer, and with glod at about last summer's price, how much more/less does it cost to extract an ounce of glod from the ground? So what is the intrinsic production value of glod? I'd say it's way way less than $875, where I double shorted it.
Biden: U.S. Economy in Danger of 'Absolutely Tanking'
December 19, 2008 3:42 PM
Vice President-Elect Joe Biden said the U.S. economy is in danger of "absolutely tanking" and will need a second stimulus package in the $600-billion to $700-billion range.
"The economy is in much worse shape than we thought it was in," Biden told me during an exclusive interview -- his first since becoming vice president-elect-- to air this Sunday on "This Week with George Stephanopoulos."
If you believe leveraged hedge funds still own vast quantities of gold they'll have to dump on the market, then maybe gold will come under pressure temporarily. But nobody knows that's true, and it seems that hedge fund deleveraging is starting to lose steam. rich | 12.19.08 - 6:48 pm | #
It has nothing to do with hedge funds owning gold. It has to do with all asset classes deleveraging en masse during deflationary cycles. It's happened during every deleveraging dump that we've had in the last 12 months.
" and it seems that hedge fund deleveraging is starting to lose steam."
Not sure how you're coming to this conclusion given that none of the facts out there support this assertation. There have been multiple 2-3 month periods of stability between the deleveraging rushes over the last 12 months. Citadel, one of the largest hedge funds in the world, closing their two main funds to redemptions last Friday is all you need to know to strongly indicate that Hedge fund liquidations are nowhere close to finished.
The truth is the financial system is wobbling, and the hot money is sloshing from target to target, overwhelming and abandoning at near lightspeed compared to the old days.
-Citizen AllenM
That's why I believe that many nations will throw up the shields to protect themselves and ultimately will at least partially 'unplug' from the global economy. If you can't have sustainable and predictable long-term investment because of the hot money slosh, it doesn't do you any good to have an open economy.
What better time to also implement higher taxes on carbon fuels while the cost of energy is low?
Pay the taxes out in investments in clean energy. JimPortlandOR | 12.19.08 - 5:42 pm | #
That is a tough sell in an economic downturn, given the regressive nature of the tax. Perhaps an incremental increase tax that goes up by some amount (1% YoY?) to give users and producers incentive and time to transition?
lawyerliz writes:
Well, is mama earth making more oil or not? Even if verry sloooowly? Does anyone know for sure. I mean I saw those ads with smushed dinosaurs, but what about other squashed organic stuff?
lawyerliz | 12.19.08 - 6:38 pm | #
Original source for oil is thought to be juicy animal micro-orgs deposited in oxygen-deficient waters and buried with settling clays minerals. Further burial (thousands of feet)results in exposure to heat, which cooks and releases the unoxidized hydrocarbons, which migrates to porous rocks. Takes millions of years.
Blackhalo writes: In the flight to saftey, gold is hard to beat.
I think we can all agree, gold is the ultimate in ' ultimate flights to safety' - there is no room for argument. The question is, will USD be perceived to fail - by the time it fails, it will be way too late for this discussion. The answer is, its an 'odds thing' - the odds are greater than zero, that USD will be perceived to fail. So, the wider perception is itself the event horizon. The correct answer suggests one must be in before the event horizon - not whether you paid a higher price for the seat on the life boat - or not.
Dollar has been weakening lately and this seems to correlate to Gold's recent strength. Nice to see it behaving the way it is supposed to. That said, the dollar will likely strengthen again once the ECB decides to cut its rates to match what we just did. Once they do that, dollar gains strength and gold goes down. Seems fairly straight forward if you can guess when the events will occur.
Disclaimer: I do NOT OWN any gold related investments. I keep my money in CD's stashed in random FDIC insured banks so what do I know?
So what is the intrinsic production value of glod? Persecuted Comrade Anonymouse | Homepage | 12.19.08 - 6:51 pm | #
This is relevant when gold trades as a commodity, in the deepest lows (Gordon Brown lows). When gold behaves like a currency, psychological factors apply instead. That and manipulation.
Gold is gradually resuming its role as a currency.
Cheap oil just raises the relative value of miners over the elemental metal.
830 is strong support for gold , expect some bounce to 850 area next week before plunge, too many people are aware of gold going lower and already having short positions which should be shaken off
Well, Madoff goes poof, Citadel shuts down redemption requests.
And don't forget that most of the hedge funds investing with Madoff were funds-of-funds which means that they will be forcing liquidation of other hedge funds as they wind down.
And then Paulson suddenly asks for the next 350B? Sounds like massive redemptions/liquidations coming in Jauary.
My understanding is that gold hasn't fallen like other commodities because of its relative uselessness, which is actually its main virtue in my mind. It is not sensitive to economic booms and busts in the same way oil is, for example. I would expect it to hold up in purchasing power, but could drop a lot dollar-wise if things continue as they have been and the Fed can't get any traction against deflationary pressures.
"An example, not of a black swan, but of a black cygnet"
Its easier to intercept via sky than via cable. But this means of interception is an old trick and not very subtle either, I might add. The game continues ...
And then Paulson suddenly asks for the next 350B? Pissed Off In California | 12.19.08 - 7:01 pm | #
I think not quite yet...
"Paulson said he would meet with lawmakers and President-elect Barack Obama's transition team to discuss when to ask for the rest of the rescue money. But some administration officials suggested that the final decision to request the funds might not come until after Obama takes office."
LAM writes:
Lionel, me think Biden was caught off guard for the 25K time. President elect needs to put this guy in a closet for a while.
LAM | 12.19.08 - 7:03 pm | #
"Gold is gradually resuming its role as a currency."
I would agree but say it's a 'symbolic currency' , and probably more rightly said, regaining its role as a form of wealth security. As squirrels store acorns for winter..
"Frank, a Massachusetts Democrat, said he plans to introduce legislation with Senate Banking Committee Chairman Christopher Dodd to release remaining funds in the $700 billion package next month."
Looks like Paulson doesn't even have to request it.
swampfella writes:
"Where is our Polk when we need him? Now is the time to offer Mexico few dollars for the five northern estados bordering the US, plus all of Baja and if it takes an excursion south...is a lot closer to home than Iraq.
Build hundreds of acres of wind farms, solar arrays and a few dozen nuclear plants and we can forget the cost of petroleum in a few decades...which would be about $20 a bbl then.
Color me hopeful."
At least this idea deals with the core problem: a dire shortage of electrical generation/transmission capacity. We're on the "Path to the Olduvai Gorge." Availability of oil is not the problem, electricity is.
I wonder if Obama will: (1) aggravate electrical shortages such as by blocking coal plants, thus accelerating the due dates for regional blackouts; or (2) take up "Swmapfellas'" ideas? He has the political clout to do either.
I am begining to think that only in Sci-Fi are you going to find realistic scenarios of what is ahead for us. Snowcrash,the book, Gibsons work, those type of writers.
Gold is a very unusual thing. Even people who work with it daily have trouble calculating its worth. Too much math. I understand gold, intimately, its no mystery to me whatsoever. Liz is right when she says people buy but do not as often sell gold. Gold in the hand overcomes such urges.
"Have you looked at sequential breakage in the suppply chain due to BK ?"
Sequential failure analysis way beyond my expertise. My asumption is remaining strategic suppliers have to first acheive monopoly pricing power to resist contracting demand. Whether through consolidation (M&A), BK or both.
mp - Does Conjure imbibe? Just wondering if he/she/it plans to watch teotwawki stone-cold sober or enjoy it from an altered state and, if so, what his/her/its substance of choice might be.
I'm thinking it'll still be pretty trippy, even sober.
Big difference between Peak Oil and Peak Exports. I do expect the world oil production decline to show a relatively low single digit exponential decline rate.
However, that is not what we see in exporting countries. They consistently show an accelerating net export decline rate.
For example, assume a country ("Export Land") producing two mbpd (million barrels per day) and consuming one mbpd. Their production declines at -5%/year and their consumption increases at +2.5%/year. Doesn't sound so bad does it? After all, they would still be producing 1.3 mbpd in nine years, but their net exports would be zero, because of a combination of falling demand and increasing consumption. Only about 10% of their post-peak production would be exported, with 90% being consumed locally. And their net export decline rate would accelerate from -12.5%/year in Year One of the decline to -90%/year in Year Eight of the decline.
This is the problem we are facing with all of the exporters that have peaked and that will peak. Just plug in consumption at final peak, and then model the production decline rate and rate of change in consumption. We did this for the top five, and our middle case is that they approach zero net oil exports in 23 years.
Mexico is a current ongoing example of net export declines. They are our #3 source of imported oil, and they peaked in 2004. They will probably approach zero net oil exports by 2012 or so, eight years after peaking.
The UK and Indonesia (a founding member of OPEC), were major net oil exporters, and like Export Land, they were consuming about half of their production at their final peaks. The UK went from final peak to zero net oil exports in 7 years, Indonesia went to zero in 8 years.
Citadel, one of the largest hedge funds in the world, closing their two main funds to redemptions last Friday is all you need to know to strongly indicate that Hedge fund liquidations are nowhere close to finished. Pissed Off In California | 12.19.08 - 6:54 pm | #
We may not have heard the name Maddoff yet, had redemptons not brought it all down.
Mexico's net exports peaked in 2004 at 1.8 mbpd. Last year, they were down to 1.4. I estimate that they will be down to 1.0 mbpd this year. They are following the same trend as Indonesia and Mexico.
Someone asked what is the production cost of gold. I had some gold leases once. Mind you they are placer, not hard rock. I would have to guess, because the memory is foggy, but i think my production cost was about 70%, and gold was probably $220...guessing (lazy)
Same costs probably still apply, with a escalated cost of three Cats, cost escalated forward 20 years. Nothing much.. fuel was a big one... leases are on tundra...limits operation.
Even at showcase mines, such as Newmont Mining Corporation's Batu Hijau operation in eastern Indonesia, where $600 million has been spent to mitigate the environmental impact, there is no avoiding the brutal calculus of gold mining. Extracting a single ounce of gold therethe amount in a typical wedding ringrequires the removal of more than 250 tons of rock and ore.
Source: The Real Price of Gold — National Geographic Magazine
Production of gold is what you make it. Send me 2 million tomorrow via WU, and i will grant you the place and knowledge to harvest 20 million...LOL.. got courage?
Same costs probably still apply, with a escalated cost of three Cats, cost escalated forward 20 years. Nothing much.. fuel was a big one... leases are on tundra...limits operation. Kondratieff canuk | 12.19.08 - 7:55 pm | #
Same costs probably still apply, with a escalated cost of three Cats, cost escalated forward 20 years. Nothing much.. fuel was a big one... leases are on tundra...limits operation. Kondratieff canuk | 12.19.08 - 7:55 pm | #
Production costs per ounce vary widely depending on the producer. This is from Newmont in April 2008:
... Costs applicable to sales dipped 2.2% to $396/oz in the quarter; however, Newmont said in February that production costs will rise as much as 11% this year to $425 to $450 an ounce from an average $406 last year. The company forecast gold output of 5.1 million to 5.4 million ounces in 2008, compared with 5.3 million ounces last year, down from 5.9 million ounces in 2006.
Golden Star here estimates their cash cost for 2009:
We anticipate production of 85,000 ounces of gold with a cash cost of $700 per ounce for the fourth quarter of 2008.
Obviously there are many factors that contribute to gold production costs. Energy, however, is a huge contributor. I should also note that methodologies for the calculation vary widely based on what I have seen.
Per capita income in this country of a billion people is $2,700, but it has been the world's runaway leader in gold demand for several decades. In 2007, India consumed 773.6 tons of gold, about 20 percent of the world gold market and more than double that purchased by either of its closest followers, China (363.3 tons) and the U.S. (278.1 tons). India produces very little gold of its own, but its citizens have hoarded up to 18,000 tons of the yellow metalmore than 40 times the amount held in the country's central bank.
mp - when we were very young counterpointers we had the Glenlivit applied of our chests when we had a cold and went down for the night. Or maybe is was Lagavulin.
There's also a folk remedy for colds of equal parts scotch and port. Dries you up, stickies your throat, and knocks you out. In the morning you either have a cold or don't.
If you still do, then you continue until it alleviates or spring comes.
Whether oil is high or low, rates are high or low, whether we have bailouts or bailins, whatever we have for house prices, there is one thing certain: we will not have a solid economy until we have stability. It simply can't happen. Economies depend on confidence and predictability.
Let's get this frigging price discovery over with, accept our due dose of deflation and then get on with life. The jacking around of mother nature by the Fed is doing nobody any good.
Jeffrey J. Brown writes:
The real life Indonesian case history is shown below. I put the final production peak in 1996. EIA net oil exports for Indonesia:
RE | 12.19.08 - 8:07 pm | #
I should also note that methodologies for the calculation vary widely based on what I have seen.
Yes, my favourite idea was to sluice river bottoms in Ve or Brit Honduras, but somehow i never made it there. I also have thing against big snakes. Life is full of so much potential, pity never enough time.
Ticker Tape of Doom writes:
....India produces very little gold of its own, but its citizens have hoarded up to 18,000 tons of the yellow metalmore than 40 times the amount held in the country's central bank.
Gold is a fashion statement in Indian culture, the more you can wear tastefully, the better. Its all 22k, different culture. Temple roof metals are gold coated.
lliz is right on the money with 55-160 pos. cash flow . Same game being played in the midwest with that move tossing 18k annl. renters in abund. lliz you Rock
Yesterday it was gold 1500 - buy, buy, buy! Today, it's gold 700 - sell, sell, sell! You guys can't make up your mind. RockyR | 12.19.08 - 10:35 pm | #
Thank you. I agree.
Question to ask... when gold was at $1000 how many barrels of oil did it buy? How many bushels of corn? Ask those same questions today - is it the better, worse or no difference?
If you are really going to be a 'gold bug' then forget about how many dollars it buys - worry about how many barrels and bushels it buys. If you can't do that then quite being a gold bug.
here is a link about a theory that is counter to peak oil:
"The opposing view to
this scenario is now generally referred to as the Russian-Ukrainian (R-U) theory
according to which chemical syntheses in the upper reaches of the earths mantle
have been and continue to be active locations where precursors of petroleum have
been and continue to be formed. According to this theory, petroleum is not a fossil fuel
but rather a renewable resource of great abundance at as of now difficult-to-reach or
inaccessible depths."
fafhrd(Unrated) writes: Byzantine Ruins gets my vote for deliverator.
Byzantine Ruins gets my vote for kitchen cabinet consultant or staff officer to the deliverator. My ambitions in life stretch no farther than a big house with a woodlot, someone else will have to play king.
Adornosghost writes:
Jeffrey J. Brown writes:
The real life Indonesian case history is shown below. I put the final production peak in 1996. EIA net oil exports for Indonesia:
It takes two months to contango
Woa
3rd
//\tI'm not an economist, but considering that GM is US$60BB in debt, isnt BK in effect a bailout?
Anonymous | 12.19.08 - 3:55 pm | #
But by the bondholders, not the taxpayers.
(modulo some pension garauntees).
\t Eric | \t \t \t \t12.19.08 - 3:59 pm | #//
eric,
isnt it a bailout by all of the suppliers (debtors), as well as stock holders of course, but that is more an elective bulle tot teh head than having teh rug pulle dout on biz transaxtion.
What is the conequential taxpayer bag we hold if the employees are on the dole??
Persoanlly Im not for a bailout seems bad eitehr way, curious if anyones tryied to quantify teh badness of both scenerios..
Time to top off the Strategic Petroleum Reserve at these price levels.
Ah yes, a sure sign of budding inflation!
I believe the inflationistas are going to wait a long time for the arrival of the dreaded hyperfinflation.
In a way, isn't $20B a pretty strong stimulus? Also, how long at this price level until we save enough to see improvements in the economy through high consumer spending?
$20B a month that is!
the active contract is Feb...@ $42
just like 2-3 months ago when the closing contract spiked @25bucks in the last 2 days of trading, to close at $130.
It would be more interesting to know what the average price paid during the contract's life... and how many contracts were held for delivery vs the price on it's last day of trading.
When I posted earlier this week that I thought the price of oil during 2009 would be 22-28, some people thought I was nuts.
My forecast still seems accurate, it's just arriving a little sooner than I thought.
I suspect that the average annual oil price in 2009 may exceed the average annual 2008 oil price of about $100--due to a combination of involuntary + voluntary net oil export reductions.
Our middle case is that the top five net oil exporters--Saudi Arabia; Russia; Norway; Iran and the UAE--will collectively approach zero net oil exports in about 23 years. Two other top 10 net oil exporters--Mexico & Venezuela--are in long term or terminal decline.
BTW, the current average futures price for next year is about $50.
Bo diggity, it'll be awhile ShortCourage.
But when it hits you'll shit bricks.
In the meantime, enjoy your 99 cent gas.
Strategic Oil Reserve finished being filled at $140/bbl
Another strike for Bush and a fine bit of planning. Buy high, sell low.
I think the stimulus will be minimal...the BUBBLE price was a short term thing...
whoocoonoade...ME!
yeah the government might be able to make some money by using the storage capacity. Borrow at 0% buy oil store it and sell forward.
Crude's going at least 10% lower, as confirmed by the USO this week. I'm short since Monday's high and will close when USO hits $28.70.
I took off my short positions on oil today...time for a nice vacation...
Size 10, Funny homepage.
Shnaps,
I don't know, maybe inflation will return.
But I see a whole lot of policies simiilar to what Japan tried. Look where it got them.
I'll fear inflation when the banks stop hording cash. I'll also be keeping a close watch on the consumer and his newfound "wait 'till it's cheaper" strategy towards buying stuff.
More importantly, Glod will get crushed in the coming weeks. I'm long DZZ (double short Glod) since around $875 Glod.
February contract was trading at $42 today. Futures expiry. A misleading article.
Once a well is put into production, the marginal cost to pump a barrel is relatively low. The biggest proportion of oil cost is the capital cost; finding it, drilling the well, and linking the well to pipeline network. As long as price per barrel is enough to provide positive contribution margin for a well, the well will be kept in operation. Based on historical trends that breakeven price is quite low.
Harry read admits that the welfare programs have been a complete and utter failure
Persecuted Comrade Anonymouse - The easy money in oil has been made...it was just like shorting banks...Ivy league not for me, give me a Ca university and some common sense!
I was reading TheOilDrum.com when it was still at blogspot. Those regular commenters - including one who posted above - have become frickin' nihilists. Disgusting vile Peter Schiff-alikes who just bash everything to do with the U.S. $ and worship commodities and oil like a New Christ. I hope they lose everything!
I was reading TheOilDrum.com when it was still at blogspot. Those regular commenters - including one who posted above - have become frickin' nihilists. Disgusting vile Peter Schiff-alikes who just bash everything to do with the U.S. $ and worship commodities and oil like a New Christ. I hope they lose everything!
Persecuted Comrade Anonymouse | Homepage | 12.19.08 - 5:23 pm | #
PCA, tell us how you really feel (:
My longview is supply in consumables is going to drop driving demand and inflation. The more retailers that go BK the fewer left selling a smaller amount of products. 6 months to a year should show some pretty hefty climbs in the CPI.
The retailers who survive and where they buy product from will also be telling for which countries rebound and which do not.
Oil will see much volatility and prices will rebound. Strength of currency and the dollar as reserve will be the most telling sign of what we can expect to pay here in the US.
Waves of change with little time for adjustment will further compound any recovery we can expect. Should be an interesting 3 years going forward.
PCA,
Pray tell me what things about the U.S. we should be praising at this current time? I mean, come on, don't you think a heavy dose of criticism, if not mass demonstrations in the street, are due about now?
Down goes Denver. Down goes Houston. Down goes North Dakota.
Persecuted Comrade Anonymouse - who was it??
...one could make a similar case about Harry Reid....
Oil Shock | 12.19.08 - 5:22 pm | #
When is that from, 15 years ago?
North Dakota?
from the "perhaps a legal name change is needed" department.
http://www.marketwatch.com/news/story/Manitowoc-Chairman-Terry-Growcock-retire/story.aspx?guid={E3BFB718-25D7-4B95-BB09-634E16AD8C6B}&dist=hplatest
Down goes Alaska & Louisiana
Jacked,
I believe that would be a first, if you think that over-capacity will cause rising prices as the excess production levels are adjusted downward.
It'll only happen if money is helicopter dropped directly into the hands of consumers.
ShortCourage,
<a href="http://www.haloscan.com/comments/calculatedrisk/5817563855184539572/#785817>Here's something nice I posted yesterday.
I think a lot bearishness, esp. coming from reactionaries, easily turns into hatred of ordinary working people who are just trying to survive. That's the biggest thing I miss about Tanta. She clearly was sticking with the underdog.
my href didn't close
crispy&cole writes:
give me a Ca university and some common sense!
Call the Terminator about the CA Univs.--he's unloading; can't help RE common sense...
Any BFF hints from FFDIC??
One would have been well advised to heed my long time advice--which I call ELP (Economize; Localize; Produce). You can find the March, 2007 article by doing a Google Search for ELP Plan.
Most of our net export work can be found by doing a Google Search for Net Oil Exports + Jeffrey Brown.
I estimate that the world will probably have burned through close to 30% of remaining worldwide net oil export capacity in the 10 years from 2005 to 2015.
The oil price crash is a tragedy for the alternative-energy sector. Numerous solar and wind companies are going to go bankrupt unless Obama can quickly provide big bucks to Climate Change programs. Energy conservation will quickly lose favor, too.
On the bright side, resurgent sales of SUVs will temporarily boost the Big Three.
Persecuted Comrade Anonymouse writes:
"More importantly, Glod will get crushed in the coming weeks. I'm long DZZ (double short Glod) since around $875 Glod."
have you heard from Rich lately?
When is that from, 15 years ago?
Gary | 12.19.08 - 5:28 pm | #
It sounds very much like it was from around 1995 in the run up to welfare reform under Clinton. Reid supported supported the law IIRC.
@SC
I get your point but with so much overproduction going offline and no credit available to bring new production online I wonder.
Corporations seem to be consolidating and when you only have a few big box stores to buy at won't their suppliers be the winners? Won't they then collude on price and availability?
I'm noticing significantly less choices in brands at the one stop stores. i.e. Wal mart, Best Buy, Fred Meyers.
reactionaries/militant-left loonies--please apply sparingly...rinse thoroughly w/ cold running water
Yes...Glod is the next one to get taken out...Book it!
"Jeffrey J. Brown writes:
I suspect that the average annual oil price in 2009 may exceed the average annual 2008 oil price of about $100--due to a combination of involuntary + voluntary net oil export reductions.
Sir,
I respectfully think that you are dead wrong. In 2007, before the price moonshot, oil was trading around $55 a barrel. And that was with an Iraq war premium built in. And we have learned that China was stockpiling fuel before the Olympics. I'll leave the speculation issue aside. Unless Iran finds a navy to blockade the Persian gulf, or some other catastrophic event occurs, I think the probability of $100 a barrel is 1%.
Jacked writes:
"My longview is supply in consumables is going to drop driving demand and inflation."
Stated differently, until we see shortages, inflation is not at the door. But where will they begin to appear first?
Anyone notice airfares declining? I haven't, and I fly a fair amount. I still get a fuel surcharge for trash collection and shipping. Not trickling down to me yet...
glod = uA?
not orthodox Mendeleev...
Jacked writes...mostly agreed. Many retailers and manufacturers are going away for good in the coming months. Those left will be in a strong position and the supply will drop below a rising demand fresh off of 70 year lows. My guess is it will take 12 to 18 months to play out before inflation is an issue.
Cash (for investment and business use) and demand are building every day that it is not used, not 1 to 1, but nonetheless it is increasing.
What better time to implement energy saving technologies while the cost of energy is low?
yay!
Gold should be taken down again if nothing goes wrong.
Simply look at the build up of commercial shorts! Breathtaking.
But then will it be different now? Time will tell.
What better time to implement energy saving technologies while the cost of energy is low?
001
What better time to also implement higher taxes on carbon fuels while the cost of energy is low?
Pay the taxes out in investments in clean energy.
bearly writes:
Anyone notice airfares declining? I haven't, and I fly a fair amount. I still get a fuel surcharge for trash collection and shipping. Not trickling down to me yet
Tell me about it: We're flying to China 1/9/09 to adopt a little orphan girl. $1+K one-way flightto bring her back.
"North Dakota?
Samdog"
Haven't been hanging out in ND lately? Neither have I, but oil is/was driving their economy. Back to being poor farmers on mediocre farm land. Probably not the worst thing to be the next couple of years.
California state gov't unpaid furloughs and layoffs. Aparently equiv. to 10% paycut for all state workers. Sorry if link doesn't work - I'm new to this century. This should help oil demnad to tank further in the drivingest state in the nation.
404 - Not Found - sacbee.com.
Elvis writes:
"North Dakota?
But won't the state give you land to live there?
I haven't noticed a single company that tacked on fuel surcharges take those away with the drop in fuel prices.
Once you get someone used to paying you keep them paying or there is no such thing as a temporary tax.
bearly writes:
"Anyone notice airfares declining? I haven't, and I fly a fair amount."
Have you noticed any decrease in schedules?
GiezCubed,
I can't follow your logic any more than I can that of "Jacked"... You seem to be saying that the disappearance of retailers and manufacturers will result in insufficient supply to meet the demand.
What do you think the loss of jobs (implied by disappearing companies) will do to demand?
The way I see it, the demand has been artificially high for years by spending out of future earnings. Demand has only just begun its descent.
"Jeffrey J. Brown writes:
I suspect that the average annual oil price in 2009 may exceed the average annual 2008 oil price of about $100--due to a combination of involuntary + voluntary net oil export reductions."
I join Kung Fu Panda in extreme skepticism of this statement. I'll stick with my $25 a barrel average for 2009. I don't think we'll see $100 a barrel oil for a long time, unless there is a major war involving an oil producer.
I also respectfully ask, are you talking your book? Do you own any positions in oil?
Aside from owning a car and having a gas bbq grill, I don't really have a position in oil (or natural gas).
"What better time to also implement higher taxes on carbon fuels while the cost of energy is low?"
Isn't that a regressive tax? Maybe we should just implement higher taxes on carbon fuels for bankers, investment bankers, and mortgage brokers. Leave the auto workers and the farmers out of this.
Jeffrey J. Brown - the leverage and speculation in oil is gone for now...sorry, the bubble has burst
Comrade V,
Oddly enough in our China trade. The inability of small importers to get reasonable cost letters of credit is already leading to large shutdowns in Chinese export manufacturing.
Soooo, anything that was cheap and made in China will now be sourced closer to home, and remember that China was No.#1 cheapo subsidized exporter.
That alone is a bit of inflation, but as long as cars and houses, and corn on the cob and beer get cheaper, all is well.
Hey, works for me.
Ignore the fact the cure for high oil prices has been a huge recession and the death of inflation. A lot of our economy was sacrificed to the oil bubble.
Now the biggest problem is the marginal production will not be ordered for the next decade, and countries like Venezuela and Mexico and the US will invest next to nothing in increased production- let alone invest enough to just offset depletion.
Mexico will almost certainly start disintegrating at these oil prices.
Contemplate millions of refugees swarming north just when we have an employment crisis, if this happens the world is going to be very ugly.
I am of the opinion that this dive is just as much of a bubble as the high was this summer.
The truth is the financial system is wobbling, and the hot money is sloshing from target to target, overwhelming and abandoning at near lightspeed compared to the old days.
Fascinating, but highly unsettling.
Someday this war's gonna end...
Comrade V writes:
bearly writes:
"Anyone notice airfares declining? I haven't, and I fly a fair amount."
...ah yeah, cut supply to match lower demand, P1 = P2 = (you're still screwed)
Ok, oil is tanking and adjustibles that are allowed to go down are gonna adjust downward. Anybody calculate the 2nd factor? Enough to gradually get us out of the hole?
Between both factors?
Also neg mew means balance sheets are being repaired.
And frankly, we don't need a beggar thy neighbor attitude because people are not in the mood to spend money anyway.
Don't need to deliberately restrict imports, if people are not buying them anyway.
On the margin.
Stated differently, until we see shortages, inflation is not at the door. But where will they begin to appear first?
Comrade V
~~~~
Insightful comment ...
How close do you think we are ?
What better time to implement energy saving technologies while the cost of energy is low?
~~~~
Time to increase gas taxes so we don't end up in the same trap.
The job market.
"Once you get someone used to paying you keep them paying or there is no such thing as a temporary tax.
Jacked"
Sounds like the UAW. Anyone?
seems like oil has priced in:
peace in the middle east (whoo hoo!)
capitalist democracy everywhere
permanently declining demand
increased mexican and venezuelan "production"
ehh...i'm running low on snarkyness...
in my opinion the price of oil is way too low.
i'm long dxo as of yesterday and will probably add via dig and other etf's over the next few weeks.
I'm a Yankee Doodle Gold Bug
Yankee Gold Bug do or die
A diehard enemy of Uncle Sam
Every thing I'm told is a lie
I've got a Yankee Gold Bug sweetheart
She's my barefoot/pregnant wife
Yankee Gold Bug came to London taking all our Ponies
I am
that Yankee Gold Bug toy
....!!
Citizen AllenM writes:
Comrade V,
Oddly enough in our China trade. The inability of small importers to get reasonable cost letters of credit is already leading to large shutdowns in Chinese export manufacturing.
Yeah, and now imagine 10s of millions of
Ok, so why wouldn't the Chinese govt help them get the letters of credit??
And mouse, liked your Gold bug.
Chinese men w/ no wife or job...not what J Lennon had imagined....
(why'd I get clipped?)
Isn't that a regressive tax? Maybe we should just implement higher taxes on carbon fuels for bankers, investment bankers, and mortgage brokers. Leave the auto workers and the farmers out of this.
Elvis
Tax everyone, and rebate the higher energy taxes based on income. The easiest (and hardest to cheat) tax is a tax/gal (auto gas), tax/ton (coal), or tax/nat. gas usage. Europe and other countries have had far higher gas taxes for a long time, and they've adapted.
We need to switch energy sources, and a good way to pay for the transition is through taxes now (pay/go). Rebate to low income makes sense, to ease regressiveness.
Just watched Yankee Doodle Dandy. James Cagney was an incredible dancer.
"Ok, so why wouldn't the Chinese govt help them get the letters of credit??
lawyerliz"
Their gov't is smart (forget about human rights, environment, etc.). Let the market work.
"North Dakota?"
Yup, big oil patch there. Also Montana and Wyoming..the tax rev from oil & gas has been paying for a lot of frills since about 2002. Look out below!
I can recall a time several years ago when there was no place to store some nat gas coming in from Canada on the last day of the contract.
It sold for a dime a Bcf.
So I see last day delivery numbers more as a quirk than as a trend.
taxes will not help anything unless there are jobs.
Elvis, viewed in a vacuum, the gas tax is a regressive tax. However, there are a host of other policy reasons for increasing gas taxes that outweigh that consideration in my view.
E.g., pricing negative externalities, and mmckinl's point above.
"We need to switch energy sources, and a good way to pay for the transition is through taxes now (pay/go). Rebate to low income makes sense, to ease regressiveness.
JimPortlandOR"
I'm shocked you are from Portland. Ever spend some time in Berkeley and Boulder? Boulder has some lovely sites. Living and breathing lovely sites.
[Have you noticed any decrease in schedules?
Comrade V]
A few less choices of flight times, so yes.
We need to switch energy sources, and a good way to pay for the transition is through taxes now (pay/go). Rebate to low income makes sense, to ease regressiveness.
JimPortlandOR
~~~~~
Yep, when you want less of something ~ tax it ...
They should announce a minimum price of gas for every year going forward so that people can ease into the new paradigm. Tax credits would be great.
The Great Shutdown, worldwide.
The speed and ferocity of this is the x factor. Years usually go by to give people time to adjust to the magnitude of the changes we are facing.
Ex: One day I'm living comfortably and warm, just like always. I hear a knock at my door and I'm told I have one week to move, no job, no food and no path to being comfortable and warm again. I think the shock from one extreme to the next is what will cause the social unrest we all fear.
Re: citizen Kung Fu Panda
The key point that virtually the whole world, IMO, is missing is that net export decline rates tend to accelerate with time.
We don't have the 2008 data, and they will be affected anyway because of the contraction in demand, but EIA data show that world net oil exports fell at -1.1%/year in 2006 and at -2.2%/year in 2007--primarily because of overall net export declines by the top five exporters.
IMO, the increase in oil prices was largely due to importers bidding for declining net oil exports, until the decline in demand outpaced the long term net export decline, but because of the accelerating nature of net export declines, I expect that the net export decline will soon outpace the decline in demand--augmented by some voluntary net export restrictions.
The pattern that we will see is fewer consumers paying a higher unit price for a smaller volume of exporter oil, probably with continued price volatility along the way.
The point is the mkt isn't working. Since they are gonna waste money subsidizing, why not try the letters of credit. Unless there is a good reason for no more letters of credit?
Could do it on a small scale and see if it works.
Not that I particularly want to benefit Chinese manufacturers, just wondering.
"Gary writes:
Elvis, viewed in a vacuum, the gas tax is a regressive tax. However, there are a host of other policy reasons for increasing gas taxes that outweigh that consideration in my view."
Gary, it was purely tongue-in-cheek.
cassandra
and Alaska ...
Add up the total loss in income from 4.5 million unemployed and I will match your 20 Billion and raise you 500 Billion. Citizens w/o jobs trumps a full tank any day!
--
My 2005 forecast that during the coming depression the crude oil would fall below $25 doesn't look all that ridiculous, does it?
Maybe, I was too optimistic!
Jas
maybe oil is just pricing a total cessation of economic activity.
time to go long super blackhawks and mak-90's?
No bank failures?
Hey Saddam, time to burn some oil fields... ehhh... wait a minute!
Money Man writes:
Add up the total loss in income from 4.5 million unemployed and I will match your 20 Billion and raise you 500 Billion. Citizens w/o jobs trumps a full tank any day!
Yep. Anyone who saw the crash coming this past June should have bet on low oil $.
lawyerliz writes:
No bank failures?
lawyerliz | 12.19.08 - 5:58 pm | #
Not yet...Maybe Dubai goes down today?
Jeffrey J. Brown | 12.19.08 - 5:54 pm
Yep ... I see a see saw world economy moving ever lower as the recoveries bump up against lower oil supply.
bff moving west...
Where is our Polk when we need him? Now is the time to offer Mexico few dollars for the five northern estados bordering the US, plus all of Baja and if it takes an excursion south...is a lot closer to home than Iraq.
Build hundreds of acres of wind farms, solar arrays and a few dozen nuclear plants and we can forget the cost of petroleum in a few decades...which would be about $20 a bbl then.
Color me hopeful.
re: alternative energy.
I just had lunch with a friend who works for a green-tech startup. I asked her whether the plunge in oil is hurting the prospects of her company. Apparently because her company is more closely associated with electricity demand they haven't been impacted much by the drop in oil prices. BUT she did mentioned that the credit freeze is significantly impacting VC funding for her company.
So it looks like green-tech is getting impacted by lack of VC funding due to the credit-freeze and, depending on the green technnology, sometimes the drop in oil prices.
[No bank failures?]
Moratiorium on foreclosures until Jan so maybe on bank siezures too.
First time I read about "peak oil" was back in '02 (around the time I read about the housing bubble), and I think it was Noam Chomsky who wrote "peak oil is not a matter of if but when."
The problem with the oil bugs is they are 1 dimensional. Oil output may not peak for another decade because of the ongoing worldwide contraction. Same kind of pullback in demand - and supply - occurred in the beginning of this decade and to a more substantial extent in the early '80s when I was born.
I heard form no less than several dozen leading "peak oil" experts that oil would precipitously decline by '05, '06, '07, '08 . . . They need to stop making predictions, esp. doomsday scenarios about the collapse of society from having to cut back on buying gasoline.
mmckinl writes:
Jeffrey J. Brown | 12.19.08 - 5:54 pm
Yep ... I see a see saw world
That's a mouthful......
Typically, it's the purchasers who get the letter of credit so that the seller feels secure shipping the product. So the chain is breaking down because we have credit risks on both with both the purchasers and the banks.
But the bigger problem is how to handle the currency risks. Global trade can't handle the currency movements that we're having.
Gary, it was purely tongue-in-cheek.
Elvis | 12.19.08 - 5:55 pm | #
I should have known better
Not seeing fewer foreclosures filed in Fla. Foreclosure mills are already so busy they may not have noticed.
Does anyone seriously think oil prices will climb out of a global depression in less time than the depression takes to give way? China has closed 20% of her factories in the main mfg province already, and will just keep on closing them. They only work at boom cycle volumes. Oil at $23 and hang in below $30 for the next 3 to 5 years. My call.
Hate to leave everyone with a bad tasting bank failure right before Jesus's Birthday! Then after the new year we can gobble up all the rat finks and send them to their eternal damnation.
Off topic, up-to-date PE ratios of the major indices (trailing twelve months, from the WSJ$ Market Data Center):
Dow = 17.9
S&P = 19.2
Nasd = 21.1
Looks like a bear market bottom!
At least the Nasdaq is down from 34.5 a year ago....whereas the S&P has actually moved slightly higher from a year ago! Well, I guess value is all relative (look what you get for your money in treasurys!).
swampfella:
the good new is Mexico agrees...the bad news is we get the drug lords too.
Social stability starts and ends with jobs. The US is incapable of living in third world squalor.
The Ford Factory video LAM is posting illustrates the future. Highly automated production with minimal labor BUT that is not feasible for a world with 6.5 billion people. Who will afford the products produced? How will that income be derived?
The US has tried to be that economy for 30 years. Produce little and offer services for income. I think a consensus of failure can be attached to that economic model. Finite resources and a history of environmental destruction has painted humans into a corner.
I have no solution. I see suffering and a major reduction in population in the third world is coming. The first world has long sacrificed the poor to ensure their own comfort, security and future. Truth. Painful.
Short Courage,
Using my new 120 month forward looking P/E ratio and my assumption that credit will unfreeze within 100 years those PEs look fine to me.
Aren't PE ratios supposed to get to, like, 12?
But perhaps I forget.
CA unemployment is out 8.4%
ShortCourage writes:
Off topic, up-to-date PE ratios of the major indices (trailing twelve months, from the WSJ$ Market Data Center):
Dow = 17.9
S&P = 19.2
Nasd = 21.1
Looks like a bear market bottom!
At least the Nasdaq is down from 34.5 a year ago....whereas the S&P has actually moved slightly higher from a year ago! Well, I guess value is all relative (look what you get for your money in treasurys!).
ShortCourage | 12.19.08 - 6:03 pm | #
Yeah...cut them all in 1/2 and then we can talk value investing.
Aren't PE ratios supposed to get to, like, 12?
Avg is 6.
Aren't PE ratios supposed to get to, like, 12?
But perhaps I forget
lawyerliz | 12.19.08 - 6:05 pm | #
During the last 3 severe recessions PEs hit 6,8 and 10.
Kondratieff canuk:
you're talking $CAN, right?
Loooong way to go to get to the bottom then.
So another third to half off dow. Shheeesh.
CA unemployment is out 8.4%
~~~~
Double that is the better estimate ... Now with Cal stopping construction and cutting back state employeees.
Michigan again had the highest monthly unemployment rate of all U.S. states in November, with the percentage of unemployed workers jumping to 9.6 percent from 9.3 percent in October, the Labor Department said on Friday.
Rhode Island was close behind with an unemployment rate of 9.3 percent. In October, the two manufacturing-heavy states had tied for the highest jobless rates.
Oregon recorded the largest over-the-month rate increase for the second month in a row, and 37 states and the District of Columbia all reported rises in their unemployment rates.
lawyerliz writes:
Aren't PE ratios supposed to get to, like, 12?
~~~
Somewhere below 10 ...
Jacked writes:
Social stability starts and ends with jobs. The US is incapable of living in third world squalor.
The Ford Factory video LAM is posting illustrates the future. Highly automated production with minimal labor BUT that is not feasible for a world with 6.5 billion people. Who will afford the products produced? How will that income be derived?
The US has tried to be that economy for 30 years. Produce little and offer services for income. I think a consensus of failure can be attached to that economic model. Finite resources and a history of environmental destruction has painted humans into a corner.
I have no solution. I see suffering and a major reduction in population in the third world is coming. The first world has long sacrificed the poor to ensure their own comfort, security and future. Truth. Painful.
Yeah, but damn, we had fun gettin' here....
For me, ComstockFunds.com is a great place to go to learn about historic PE ratios, and where they might head.
http://comstockfunds.com/files/NLPP00000/294.pdf
The long-term average they show in this chart is about 16, but typical bear-market bottoms are at about 8-10.
Not sure if this corresponds with the calculations used in the WSJ though.
I have been predicting DOW 6500 or where it was right before the 1990 beginning of the RE moonshot. I am just a dumba$$ appraiser...so give me some slack.
<a href="http://money.cnn.com/pf/features/lists/state_unemployment/>All states ranked UER
Money Man writes:
I have been predicting DOW 6500 or where it was right before the 1990 beginning of the RE moonshot. I am just a dumba$$ appraiser...so give me some slack.
Your guess is as good as anyone's--and your premises probably just as valid.
lawyerliz,
You never know. The Fed is doing all it can to keep asset prices up, so we might not get down to the historic 8-10 PE ratio on the S&P at the bottom. But I wouldn't bet against it!
Stocks are no longer seen as 'securities'--what a misnomer...
The Fed is doing all it can to keep asset prices up, so we might not get down to the historic 8-10 PE ratio on the S&P at the bottom.
~~~~
Yep, another bubble bursting ... you can't add value where there is no value ...
mmckinl writes:
"How close do you think we are ?"
Personal opinion only, very early days. Hard to imagine declining demand - particularly in face of accelerating unemployment - reversing quickly enough to offset slackening capacity/inventories. The old metaphor of a turning a ULCC at sea comes to mind.
Citizen Allen had an interesting data point on China suppliers; would be waiting for more, especially shortages closer to home.
Funny how the stock market "trend lines" seem to spit in the face of all the Trillions that the FED is pushing into equities. If the FED fails to scare folks out of treasuries/cash and back into stocks....look out below.
Yeah, securities are not secure. Life insurance is really death insurance. Banks don't have anything real banked.
Hmmm, commodities are actually something.
Chiming-in on the OT market valuation subject (as a born-again bear), I've got current SP500 PE (based on peak earnings) at 10.45, and it dropped down into the 7 area in the '74-'75, '80, and '81-'82 recessions.
Now that we're in a real-live recession I don't see how we avoid returning to that area of super-low valuations. Call it around 600 or so on the SP500.
But I've been wrong in the past.
Sebastia
The FED sure is scaring me, right out of USD.
Whew, that's a lot of bold predictions in one thread. I'm astonished by comments that say "book it", "count on it", etc in times like these. Everyone else seems much more certain of their position than I am of mine. The only thing I'm sure of is that I have no visibility of the next black swan, but that it is coming.
I'll save the thread for future reference.
That unemployment ranking is crazy to me. I am in California and we are ranked at #48 in the country. Can someone please forward this to all the delusional house sellers? I'd like to see some hefty price reductions please!
lawyerliz writes:
Aren't PE ratios supposed to get to, like, 12? But perhaps I forget.
My first thought was, darn, and i had the Farmer's Almanac in my hand yesterday, and didn't buy it.
If this were a pin the tail on the PE ratio, i would say there are no rules (now). This is not the paradigm of yesterday (yes, X12 would seem rational, and is the talk on the street). Relive 1873 in your mind, then update it to modern setting...what do you see?
I see a global economic dislocation, with a re-birth of domestic industry replacing those products than can no longer be shipped, because they are not being made 'over there'. Its not feasible 'over there' to do small runs on the line. 'The factory closed last month.' Came the reply.
Repatriate many lower tier industries in your mind. Then envisage someone important ask you to 'buy American' on national TV. Only then think about 2012 PE ratios.
If the FED fails to scare folks out of treasuries/cash and back into stocks....look out below.
we'll, the bright side is we'll fund the deficit w/o the Chinese and taxes.
Comrade V
Have you looked at sequential breakage in the suppply chain due to BK ?
lawerliz--that's why I takin' up farming....
The post-Aug 2007 oil price moon shot was driven by leveraged speculation sparked by Fed rate cuts. Deleveraging cut that out.
I have no investment position in oil either short or long. Too risky for a small investor. I just like to try to understand what's moving this particular commodity, as it affects what I pay at the pump and US relations with the rest of the world.
During George Bush's first four year term, the world consumed about 10% of all crude oil ever consumed. During his second four year term, we consumed about 10% of our remaining conventional crude oil reserves--based on Deffeyes' model (which put the world crude peak in 2005, within a range from 2004 to 2008).
EIA data show basically flat crude oil production at about 74 mbpd from 2004 to 2008, despite much higher oil prices. We have seen a slight bump upward in Total Liquids, which includes Natural Gas Liquids (NGL's), which Matt Simmons attributes to large dying oil fields, where their gas caps are being blown down.
But that is not the real problem. The real problem is an accelerating net export decline rate.
The advice I have been giving for more than two years is to assume deflationary trends in the auto, housing and finance sectors, with inflationary price trends in food & energy prices (do a Google Search for ELP Plan). I have been advising people to try to live of half, or less, of their income, in small energy efficient housing close to where you work, or along mass transit lines.
Just my 2 cents worth.
Welcome seb, welcome.
I'm now starting to look at the wee early signs of turnaround.
As I've said, my old real estate vultures are starting to vulch again;
reductions in adjustible arms, reductions in gas for consumers, less mew.
Lots of pain, but don't lose hope, if seb has become a bear, then a bull mkt may only be a coupla years away.
It's going to be interesting to see how Sarah Palin governs now that oil is $33. Louisiana is cracking...
stretch002 writes:
That unemployment ranking is crazy to me. I am in California and we are ranked at #48
From the bottom or the top?
Louisiana is cracking...
LA's been cracking since the French owned it....
I heard form no less than several dozen leading "peak oil" experts that oil would precipitously decline by '05, '06, '07, '08 . . . They need to stop making predictions, esp. doomsday scenarios about the collapse of society from having to cut back on buying gasoline.
Persecuted Comrade Anonymouse | Homepage | 12.19.08 - 6:01 pm | #
PCA,
I think your statement is simply wrong.
There were NO "peak oil" experts, much less dozens of "them," predicting that oil would precipitously decline in the mid 2000s.
What they were saying is that peak oil production would likely be reached in the middle to second half of this decade.
I think their predictions were quite accurate and that peak oil production has been reached.
What was the highest amount of oil ever produced in a single day? I don't know exactly, but assume 86MMbbls. Do you think there will ever be a day in the future in which the world will produce MORE THAN 86MMbbls?
If not, peak oil has occurred. It really is that simple.
Persecuted Comrade Anonymouse @ 5:49 pm
Wow - I'm still doing the body count.
Better go long on companies that can re-tool our auto plants for companies that can make the goods you describe as domestic needed items not cost effective to ship from over there. If O would give companies incentives to do just that...it would put a lot back to work and we WOULD be PROUD to BUY AMERICAN! I still remember that saying when Toyota and Honda came over and started kicking our butts...However, go buy an American flag. You will see Made in China on it. Depressing...
sorry meant to say "manufacture over there"
If the Chinese have civil unrest due to all the newly unemployed Chinese, that will reduce the ability to produce and the desire of people to outsource there.
OT:
Comrade V, many thanks for W. J. Perry.
" There were NO "peak oil" experts, much less dozens of "them," predicting that oil would precipitously decline in the mid 2000s."
Defn 'Expert' - a guy from out of town with a briefcase.
Liz you describe the hell on earth scenario....I don't want to see that.
tangentially related?:
Third undersea Internet cable cut in Mideast - CNN.com
In the 86MMbbls/d, I include NGLs given their high Btu content.
Sorry for the all italics.
If oil has peaked due to the fact that there is less demand for it, that has entirely different connotations from having peaked because there isn't enough in the ground.
Of course, there is a physical limitation in the amount of oil, just as there is a physical limit to the size of the earth.
I have heard that the field have been replentishing themselves. Are the geological processes continuing to make more? Is it oozing in from below?
lawyerliz writes:
If the Chinese have civil unrest due to all the newly unemployed Chinese, that will reduce the ability to produce and the desire of people to outsource there.
Plus it might increase the demand for a distraction--i.e., war?
An example, not of a black swan, but of a black cygnet:
BBC NEWS | Technology | Severed cable disrupts net access
lliz,
Turnaround already? Oh, that was nearly painless.
(Going full Jim Mora Mode)
Turnaround!? Turnaround?! Don't talk about a turnaround, are you kidding me?! Turnaround?!
Those vultures are eating toxic!
If oil has peaked due to the fact that there is less demand for it, that has entirely different connotations from having peaked because there isn't enough in the ground.
Liz, I am saying neither of those things, but rather simply that peak oil has arrived because the world cannot in the future ever again produce as much in one day as it has in the past.
You all think you're bears. Here's a bear --
"I was then constantly emailing friends and family with my latest reasons to get out of stocks, miners included, and to buy into Treasury MMFs and index puts. For the previous nine months I had been endlessly explaining the logic of deflation and its implications, having been dissuaded of Schiff-esque conclusions by the likes of Mish and Prechter, and I wanted to go on the record more publicly with my calls. Besides bragging rights, I wanted the pressure to dig deeper and get the details right.
I called for a depression worse than the 1930s. I said that the Dow was on its way to below 3500 (under 9500 by Christmas, I suspected), that commodities would tank, that gold would fall well under $700, that there would be huge bailouts for the crooks who blew the bubble (though I never thought wed see anything like $9 trillion by the end of 08), that Obama would win and back a new New Deal and that the long bond would yield less than 3% anyway."
So, where are we now? - The Sovereign Speculator
The Chinese have had a number of civil unrest periods in their long history. Some with 10s of millions dying, perhaps more. some of these periods quite a long time ago. Saying it may happen again is not wishing it were so.
Gold is going to get crushed because there is too much of it sitting on ships, right?
lawyerliz writes:
If the Chinese have civil unrest due to all the newly unemployed Chinese, that will reduce the ability to produce and the desire of people to outsource there.
The Chinese will recondition their model to manufacture junk for other countries. There is always a market for junk. They eat rice.
Enough talk about PE ratios. This time it is different.
happy holidays to the CR crowd and special thoughts for Tanta's family this holiday season.
I'm gonna rock some guitar with tanta in my thoughts.
lawyerliz said: "...As I've said, my old real estate vultures are starting to vulch again; reductions in adjustable arms, reductions in gas for consumers, less mew..."
I got a call out of the blue from the mortgage broker that handled my refi in 2003, asking what they could do for me today now that rates have dropped. I've got people practically throwing money at me, I'm just not in the market for any big-ticket items at the moment. If this recession unfolds like others, there's literally no rush for me to refi again anytime soon, as even lower rates (imagine!) are on the way.
Sebastia
I've seen reports of anywhere from 5-10% domestic airline capacity being pulled, starting in Dec 2008. Even noticed a ton of "Cancelled" routes in the Southwest timetable, when I flew the other week.
bearly writes:
Anyone notice airfares declining? I haven't, and I fly a fair amount. I still get a fuel surcharge for trash collection and shipping. Not trickling down to me yet...
bearly | 12.19.08 - 5:39 pm | #
I have heard that the field have been replentishing themselves. Are the geological processes continuing to make more? Is it oozing in from below?
~~~~
Total caca ...
rich(Unrated) writes:
\t>"More importantly, Glod will get crushed in the coming weeks. I'm long DZZ (double short Glod) since around $875 Glod."
>have you heard from Rich lately?
Comrade V
Gold is going to get crushed because there is too much of it sitting on ships, right?
\t rich | \t \t \t \t12.19.08 - 6:29 pm | #
rich | 12.19.08 - 6:29 pm | #
Short-term gold will get hurt by the next deleveraging cycle that if you put the Madroff scandal and Paulson asking for another 350B for the tarp together is right around the corner.
rich | 12.19.08 - 6:29 pm | Gold is going to get crushed because there is too much of it sitting on ships, right?
Rich, throw an old dawg a bone. I am in the horns of a dilemma. I have three times now decided to load up on physical the following day. Each time i did not. I can't seem to make the decision.. please, order me to do so...then i have at least a poster-person to blame... or am i just lazy...this is killing me. Help.
Nope, not my vultures; they've been doing their thang for a long time.
My favorite is buying a place for 55k. Even he thinks it's too good to be true. Peaked at mid 200s; assessed for ummm, about 160k; assessments are looking medium accurate at the moment. 1/3 assessed value is a steal here and now. It's rented. Positive cash flow. What's to be toxic? He knows he can't sell it. Paying cash.
West coast retailer on the verge of collapse:
Bakersfield Bubble
lawyerliz,
It's about flow rates. Apparently humans cannot extract oil from a field/region/country/planet at any arbitrary rate. Depending on the technology used, the flow rate of oil production can shoot up parabolically, reach some maximum rate, then decline in output indefinitely. But there may still be 50% of oil to be extracted left in any field/region when the flow rate peaks. So that's the "peak" part of "peak oil". We may have 50% of oil left to be recovered, but if the flow rate has hit its maximum, it has no where to go but down.
My complaint is that the peak oil experts/community were leading everyone with the impression - if not stating outright - that once the oil flow rate peaked, we'd have a precipitous decline in the oil flow rate. So we'd go from producing 86 mil/bbl/day to 60 mil/bbl/day in 5-10 years, then to 40 mil/bbl/day in another 5-10 years. It's fairly clear that, even if the flow rate has already peaked, the world economy will reduce demand, supply will be pulled back, and the decline in output will be by choice, not geology, and that the eventual oil flow decline could be rising and falling at the behest of the economy for several decades before being cut by even a third. It's not as scary as the doomsayers present.
FDIC: Press Releases - PR-142-2008 12/19/2008
FDIC Announces $114 Million Settlement With Subprime Credit Card Company Charged With Deceptive Credit Card Marketing
"The latest selloff gave the company, which has annual sales of almost $600 million, a market valuation of less than $2 million.Gottschalks, which operates 59 department stores and three specialty stores in California and five other Western states"
Well, is mama earth making more oil or not? Even if verry sloooowly? Does anyone know for sure. I mean I saw those ads with smushed dinosaurs, but what about other squashed organic stuff?
[Gold is going to get crushed because there is too much of it sitting on ships, right?
rich]
I have lost more $$$ on gold than I have made, so I am not expert but I think it's a short right here. It seems to be an outlier in the commodities complex and either it alone is priced correctly or everything else isn't and should correct higher or there's speculative money left supporting gold.
layerliz,
No. We're f*#%ed in the "new oil" department.
I think that once people buy physical gold they mostly don't sell it again.
Down goes Alaska & Louisiana
crispy&cole | Homepage | 12.19.08 - 5:29 pm | #
Alaska yes, LA? That Oil still needs to be refined, no matter the price.
Liz....Oil comes from decomposing organic "stuff" and not just the dinos...so I am willing to go out on a limb and say...YES SHE IS.
Really mouse?
Other geological processes continue. I think it would be fun to study geology after retirement.
Alaska yes, LA? That Oil still needs to be refined, no matter the price.
Blackhalo | 12.19.08 - 6:40 pm | #
Did you read the Nytimes today? Budget deficit of $2 billion...nice CONservative gov...
Off to make spaghetti. Our spaghetti trees had a bountiful harvest.
On the bright side, resurgent sales of SUVs will temporarily boost the Big Three.
Invisible Hand | 12.19.08 - 5:35 pm | #
Uggh the worst of both worlds. Militant Islam get to keep getting their monthly cheques and CAFE never gets fixed.
Btw, what's happened to Rhode Island? (#2 highest UER) Did 3 more people get fired
Remember when the gov't also said smoking was "good" for you or other stuff that ended up killin' you? Don't believe the hype....Next week we will be running out of air and that we are also on a global freezing trend and all the Ice caps will cover the earth to the demise of all mankind. Yawn...
Short-term gold will get hurt by the next deleveraging cycle that if you put the Madroff scandal and Paulson asking for another
This is the little devil sitting on my left shoulder... whispering... but on my right, the little angel says, 'so what? Its open season on insecurity and panic.. so why wait to get aboard the safety train...better timing? seems dumb.
PCA, with all due respect, you are attacking strawmen.
The worldwide economic downturn in consumption has made the situation less apparent to the casual onlooker, but no one (that would be NO ONE) who spoke of peak oil in scientific terms was a doomsayer in political or economic terms.
There were some doomsayers who touched on Peak Oil as one of their reasons along with the Maya Calender and some five mile wide asteroid, but you really ought to avoid lumping those crackpots in with scientists and concerned citizens.
Peak Oil is a geological fact. The precise day it occurred/will occur is not known, but it's about now.
It will in fact have a profound effect on the future of the world and particularly energy guzzling parts of the world like the U.S.A.
Yawn....again.
Yes...Glod is the next one to get taken out...Book it!
crispy&cole | Homepage | 12.19.08 - 5:36 pm | #
I won't belive it until I see a reabound in T-Bills. In the flight to saftey, gold is hard to beat.
On average, it's all good. However, stability and predictability are necessary cornerstones of any major economy.
Not much of either lately.
I think the probability of $100 a barrel is 1%.
citizen Kung Fu Panda | 12.19.08 - 5:38 pm | #
Over what time-frame? I might be inclined to buy an option on that.
The largest gold markets in the world are in Asia, where they haven't even heard of Madoff and Paulson.
Gold and silver were the official stores of value 5,000 years ago, in the world's four great early civilization, China, India, Egypt and Babylon. Each civilization chose gold and silver independently, and some values in this world do not change over centuries.
Gold always does well in times of economic stress and in times of high inflation, and both are coming. Don't buy it leveraged. Just buy a comfortable amount and hold. You'll be very happy in the long run owning something real as paper assets and paper money turn to sh*t all over the world.
If you believe leveraged hedge funds still own vast quantities of gold they'll have to dump on the market, then maybe gold will come under pressure temporarily. But nobody knows that's true, and it seems that hedge fund deleveraging is starting to lose steam.
sportsfan,
Did you read anything I wrote? I basically agree w/ peak oil argument. But those who've presented it (like say Matthew Simmons) have been doomsaying in their predictions for the last several years. "We won't recognize the future - constant shortages of energy and food, etc." "Coming soon to a city near you." Those people should be ashamed.
Money Man | 12.19.08 - 6:43 pm | #
You sure those are yawns? Smells like farts.
I have no solution. I see suffering and a major reduction in population in the third world is coming. The first world has long sacrificed the poor to ensure their own comfort, security and future. Truth. Painful.
Jacked | 12.19.08 - 6:04 pm
I came to the same conclusions after watching the video LAM posted.
I am begining to think that only in Sci-Fi are you going to find realistic scenarios of what is ahead for us. Snowcrash,the book, Gibsons work, those type of writers.
rich,
With oil and most commodity prices down like 75% or more since last summer, and with glod at about last summer's price, how much more/less does it cost to extract an ounce of glod from the ground? So what is the intrinsic production value of glod? I'd say it's way way less than $875, where I double shorted it.
PCA, I read everything you wrote on this thread.
You've now switched from peak oil is a joke to peak oil is real, but it was being sold by conmen.
I'm glad you recognize peak oil is real.
As to its impact on our futures, that will depend on how long we live.
Peace,
Lurking on CR Biden reports
U.S. Economy in Danger of 'Absolutely Tanking' December 19, 2008 3:42
PMhttp://blogs.abcnews.com/george/2008/12/biden-us-econom.html
Just when things were looking up for Christmas, scrooge chimes up.
Biden: U.S. Economy in Danger of 'Absolutely Tanking'
December 19, 2008 3:42 PM
Vice President-Elect Joe Biden said the U.S. economy is in danger of "absolutely tanking" and will need a second stimulus package in the $600-billion to $700-billion range.
"The economy is in much worse shape than we thought it was in," Biden told me during an exclusive interview -- his first since becoming vice president-elect-- to air this Sunday on "This Week with George Stephanopoulos."
Biden: U.S. Economy in Danger of 'Absolutely Tanking' - George's Bottom Line
If you believe leveraged hedge funds still own vast quantities of gold they'll have to dump on the market, then maybe gold will come under pressure temporarily. But nobody knows that's true, and it seems that hedge fund deleveraging is starting to lose steam.
rich | 12.19.08 - 6:48 pm | #
It has nothing to do with hedge funds owning gold. It has to do with all asset classes deleveraging en masse during deflationary cycles. It's happened during every deleveraging dump that we've had in the last 12 months.
" and it seems that hedge fund deleveraging is starting to lose steam."
Not sure how you're coming to this conclusion given that none of the facts out there support this assertation. There have been multiple 2-3 month periods of stability between the deleveraging rushes over the last 12 months. Citadel, one of the largest hedge funds in the world, closing their two main funds to redemptions last Friday is all you need to know to strongly indicate that Hedge fund liquidations are nowhere close to finished.
Where did I say peak oil is a joke? I said those "experts" and their predictions are a joke.
The truth is the financial system is wobbling, and the hot money is sloshing from target to target, overwhelming and abandoning at near lightspeed compared to the old days.
-Citizen AllenM
That's why I believe that many nations will throw up the shields to protect themselves and ultimately will at least partially 'unplug' from the global economy. If you can't have sustainable and predictable long-term investment because of the hot money slosh, it doesn't do you any good to have an open economy.
I think it's time to take a pool on when Gary become disillusioned with BO.
I get Feb 2010
What better time to also implement higher taxes on carbon fuels while the cost of energy is low?
Pay the taxes out in investments in clean energy.
JimPortlandOR | 12.19.08 - 5:42 pm | #
That is a tough sell in an economic downturn, given the regressive nature of the tax. Perhaps an incremental increase tax that goes up by some amount (1% YoY?) to give users and producers incentive and time to transition?
Just when things were looking up for Christmas, scrooge chimes up.
~~~
The futures are down already ... maybe some more bad news will give us a rall y on Mnoday ...
lawyerliz writes:
Well, is mama earth making more oil or not? Even if verry sloooowly? Does anyone know for sure. I mean I saw those ads with smushed dinosaurs, but what about other squashed organic stuff?
lawyerliz | 12.19.08 - 6:38 pm | #
Original source for oil is thought to be juicy animal micro-orgs deposited in oxygen-deficient waters and buried with settling clays minerals. Further burial (thousands of feet)results in exposure to heat, which cooks and releases the unoxidized hydrocarbons, which migrates to porous rocks. Takes millions of years.
Blackhalo writes: In the flight to saftey, gold is hard to beat.
I think we can all agree, gold is the ultimate in ' ultimate flights to safety' - there is no room for argument. The question is, will USD be perceived to fail - by the time it fails, it will be way too late for this discussion. The answer is, its an 'odds thing' - the odds are greater than zero, that USD will be perceived to fail. So, the wider perception is itself the event horizon. The correct answer suggests one must be in before the event horizon - not whether you paid a higher price for the seat on the life boat - or not.
Dollar has been weakening lately and this seems to correlate to Gold's recent strength. Nice to see it behaving the way it is supposed to. That said, the dollar will likely strengthen again once the ECB decides to cut its rates to match what we just did. Once they do that, dollar gains strength and gold goes down. Seems fairly straight forward if you can guess when the events will occur.
Disclaimer: I do NOT OWN any gold related investments. I keep my money in CD's stashed in random FDIC insured banks so what do I know?
So what is the intrinsic production value of glod?
Persecuted Comrade Anonymouse | Homepage | 12.19.08 - 6:51 pm | #
This is relevant when gold trades as a commodity, in the deepest lows (Gordon Brown lows). When gold behaves like a currency, psychological factors apply instead. That and manipulation.
Gold is gradually resuming its role as a currency.
Cheap oil just raises the relative value of miners over the elemental metal.
830 is strong support for gold , expect some bounce to 850 area next week before plunge, too many people are aware of gold going lower and already having short positions which should be shaken off
What about decrease in prices of tires, motor oil , asphalt etc .
More de-leveraging come January ?
anyone ?
Rescue 4 Investigates Ford Employees - Video - WDIV Detroit
More de-leveraging come January ?
mmckinl | 12.19.08 - 6:59 pm | #
Let's call the Goldman Sachs trading desk and ask them.
More de-leveraging come January ?
anyone ?
mmckinl | 12.19.08 - 6:59 pm | #
Well, Madoff goes poof, Citadel shuts down redemption requests.
And don't forget that most of the hedge funds investing with Madoff were funds-of-funds which means that they will be forcing liquidation of other hedge funds as they wind down.
And then Paulson suddenly asks for the next 350B? Sounds like massive redemptions/liquidations coming in Jauary.
Chinese men w/ no wife or job...not what J Lennon had imagined....
Samdog | 12.19.08 - 5:51 pm | #
Now THAT is scary! That leads to war. Tiwan? India? It is an imbalance that has an unpleasant resolution.
Lionel, me think Biden was caught off guard for the 25K time. President elect needs to put this guy in a closet for a while.
PCA,
You said oil may not peak for another decade just before the rant that caught my eye and hence my reply:
I heard form no less than several dozen leading "peak oil" experts that oil would precipitously decline by '05, '06, '07, '08 . . .
I don't believe anyone in the scientific community ever said that and thus that you ever heard that from anyone of any significance.
I understand you're short oil, you're double short gold, everyone who disagrees with you in a frickin nihilist who hates America and the dollar.
You, sir, are a crackpot talking your book and nothing more.
My understanding is that gold hasn't fallen like other commodities because of its relative uselessness, which is actually its main virtue in my mind. It is not sensitive to economic booms and busts in the same way oil is, for example. I would expect it to hold up in purchasing power, but could drop a lot dollar-wise if things continue as they have been and the Fed can't get any traction against deflationary pressures.
Pavel Chichikov writes:
"An example, not of a black swan, but of a black cygnet"
Its easier to intercept via sky than via cable. But this means of interception is an old trick and not very subtle either, I might add. The game continues ...
And then Paulson suddenly asks for the next 350B?
Pissed Off In California | 12.19.08 - 7:01 pm | #
I think not quite yet...
"Paulson said he would meet with lawmakers and President-elect Barack Obama's transition team to discuss when to ask for the rest of the rescue money. But some administration officials suggested that the final decision to request the funds might not come until after Obama takes office."
Link
LAM writes:
Lionel, me think Biden was caught off guard for the 25K time. President elect needs to put this guy in a closet for a while.
LAM | 12.19.08 - 7:03 pm | #
It's hard to beat: "This sucker's going down."
Conjure says, "Everyone knows what needs to be done. As for the innocent and the guilty, let God sort it out."
Doc at the Radar Station writes:
That's why I believe that many nations will throw up the shields to protect themselves
That gets my vote..
a bit tardy, but
... and down goes W.Virginia, Arkansas, Pennsylvania, New York ... and Canada
"Gold is gradually resuming its role as a currency."
I would agree but say it's a 'symbolic currency' , and probably more rightly said, regaining its role as a form of wealth security. As squirrels store acorns for winter..
"Frank, a Massachusetts Democrat, said he plans to introduce legislation with Senate Banking Committee Chairman Christopher Dodd to release remaining funds in the $700 billion package next month."
Looks like Paulson doesn't even have to request it.
swampfella writes:
"Where is our Polk when we need him? Now is the time to offer Mexico few dollars for the five northern estados bordering the US, plus all of Baja and if it takes an excursion south...is a lot closer to home than Iraq.
Build hundreds of acres of wind farms, solar arrays and a few dozen nuclear plants and we can forget the cost of petroleum in a few decades...which would be about $20 a bbl then.
Color me hopeful."
At least this idea deals with the core problem: a dire shortage of electrical generation/transmission capacity. We're on the "Path to the Olduvai Gorge." Availability of oil is not the problem, electricity is.
I wonder if Obama will: (1) aggravate electrical shortages such as by blocking coal plants, thus accelerating the due dates for regional blackouts; or (2) take up "Swmapfellas'" ideas? He has the political clout to do either.
I am begining to think that only in Sci-Fi are you going to find realistic scenarios of what is ahead for us. Snowcrash,the book, Gibsons work, those type of writers.
Byzantine Ruins gets my vote for deliverator.
Gold is a very unusual thing. Even people who work with it daily have trouble calculating its worth. Too much math. I understand gold, intimately, its no mystery to me whatsoever. Liz is right when she says people buy but do not as often sell gold. Gold in the hand overcomes such urges.
And then Paulson suddenly asks for the next 350B? Sounds like massive redemptions/liquidations coming in Jauary.
Pissed Off In California
~~~~
Thanks. Someone on the board here noted tat the last big market drop was the beginning of last quarter due to de-leveraging ...
mmckinl writes:
"Have you looked at sequential breakage in the suppply chain due to BK ?"
Sequential failure analysis way beyond my expertise. My asumption is remaining strategic suppliers have to first acheive monopoly pricing power to resist contracting demand. Whether through consolidation (M&A), BK or both.
mp - Does Conjure imbibe? Just wondering if he/she/it plans to watch teotwawki stone-cold sober or enjoy it from an altered state and, if so, what his/her/its substance of choice might be.
I'm thinking it'll still be pretty trippy, even sober.
"History Repeats Itself in Different Hues- Japan vs. United States"
Conjure says, "It's a very interesting read."
http://www.ntrs.com/popups/popup_noprint.html?http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0812/document/dd121908.pdf
My asumption is remaining strategic suppliers have to first acheive monopoly pricing power to resist contracting demand.... Comrade V
~~~~
With the rate of collapse I think we'll see some system failures due to disorderly markets.
burnside writes:
"... many thanks for W. J. Perry."
You're very welcome. Its always a pleasure to remember the great ones among us.
Feckless, you must be new here. Conjure can drink everyone here under the table.
Even then, he's a stone-cold son of a ...
Feckless, Conjure drinks any single malt scotch, but particularly enjoys Glenlivet because he grew up with it.
Cheers, everyone. Christmas parties to go to. Have great weekend.
Big difference between Peak Oil and Peak Exports. I do expect the world oil production decline to show a relatively low single digit exponential decline rate.
However, that is not what we see in exporting countries. They consistently show an accelerating net export decline rate.
For example, assume a country ("Export Land") producing two mbpd (million barrels per day) and consuming one mbpd. Their production declines at -5%/year and their consumption increases at +2.5%/year. Doesn't sound so bad does it? After all, they would still be producing 1.3 mbpd in nine years, but their net exports would be zero, because of a combination of falling demand and increasing consumption. Only about 10% of their post-peak production would be exported, with 90% being consumed locally. And their net export decline rate would accelerate from -12.5%/year in Year One of the decline to -90%/year in Year Eight of the decline.
This is the problem we are facing with all of the exporters that have peaked and that will peak. Just plug in consumption at final peak, and then model the production decline rate and rate of change in consumption. We did this for the top five, and our middle case is that they approach zero net oil exports in 23 years.
Mexico is a current ongoing example of net export declines. They are our #3 source of imported oil, and they peaked in 2004. They will probably approach zero net oil exports by 2012 or so, eight years after peaking.
The UK and Indonesia (a founding member of OPEC), were major net oil exporters, and like Export Land, they were consuming about half of their production at their final peaks. The UK went from final peak to zero net oil exports in 7 years, Indonesia went to zero in 8 years.
Fairly new, yes. Still unsure what form of entity Conjure is - now guessing a Celtic Spirit who enjoys Celtic spirits.
Exporters will sell for income if oil price is high enough. Export land model exists in a hypothetical world only.
Citadel, one of the largest hedge funds in the world, closing their two main funds to redemptions last Friday is all you need to know to strongly indicate that Hedge fund liquidations are nowhere close to finished.
Pissed Off In California | 12.19.08 - 6:54 pm | #
We may not have heard the name Maddoff yet, had redemptons not brought it all down.
The Real Price of Gold:
The Real Price of Gold — National Geographic Magazine
Feckless, the best description of Conjure I can offer is that he is a combination of The Highlander and Cousin Itt.
The real life Indonesian case history is shown below. I put the final production peak in 1996. EIA net oil exports for Indonesia:
http://tonto.eia.doe.gov/country/img/charts/ID_net_imports_large.png
Mexico's net exports peaked in 2004 at 1.8 mbpd. Last year, they were down to 1.4. I estimate that they will be down to 1.0 mbpd this year. They are following the same trend as Indonesia and Mexico.
Sorry, same trend as Indonesia and the UK.
So what bank(s) were taken over today by FDIC?
And here is the EIA production chart for Indonesia. See the difference between Peak Oil and Peak Exports?
http://tonto.eia.doe.gov/country/img/charts/ID_petro_large.png
Don't know whether to picture a hairier Adrian Paul or Cousin Itt with tam and kilt.
Best not to dwell, I suppose.
ew thread...
And here is the EIA production chart for Indonesia. See the difference between Peak Oil and Peak Exports?
Jeffrey J. Brown | 12.19.08 - 7:49 pm | #
Thanks for your posts. They are very informative and valuable.
Someone asked what is the production cost of gold. I had some gold leases once. Mind you they are placer, not hard rock. I would have to guess, because the memory is foggy, but i think my production cost was about 70%, and gold was probably $220...guessing (lazy)
Same costs probably still apply, with a escalated cost of three Cats, cost escalated forward 20 years. Nothing much.. fuel was a big one... leases are on tundra...limits operation.
"Cousin Itt with tam and kilt."
Close. Add a Macanudo.
Anyone know what a Ross Box is? I thought not...
Even at showcase mines, such as Newmont Mining Corporation's Batu Hijau operation in eastern Indonesia, where $600 million has been spent to mitigate the environmental impact, there is no avoiding the brutal calculus of gold mining. Extracting a single ounce of gold therethe amount in a typical wedding ringrequires the removal of more than 250 tons of rock and ore.
Source:
The Real Price of Gold — National Geographic Magazine
Production of gold is what you make it. Send me 2 million tomorrow via WU, and i will grant you the place and knowledge to harvest 20 million...LOL.. got courage?
Same costs probably still apply, with a escalated cost of three Cats, cost escalated forward 20 years. Nothing much.. fuel was a big one... leases are on tundra...limits operation.
Kondratieff canuk | 12.19.08 - 7:55 pm | #
Same costs probably still apply, with a escalated cost of three Cats, cost escalated forward 20 years. Nothing much.. fuel was a big one... leases are on tundra...limits operation.
Kondratieff canuk | 12.19.08 - 7:55 pm | #
Production costs per ounce vary widely depending on the producer. This is from Newmont in April 2008:
... Costs applicable to sales dipped 2.2% to $396/oz in the quarter; however, Newmont said in February that production costs will rise as much as 11% this year to $425 to $450 an ounce from an average $406 last year. The company forecast gold output of 5.1 million to 5.4 million ounces in 2008, compared with 5.3 million ounces last year, down from 5.9 million ounces in 2006.
Golden Star here estimates their cash cost for 2009:
We anticipate production of 85,000 ounces of gold with a cash cost of $700 per ounce for the fourth quarter of 2008.
Obviously there are many factors that contribute to gold production costs. Energy, however, is a huge contributor. I should also note that methodologies for the calculation vary widely based on what I have seen.
Per capita income in this country of a billion people is $2,700, but it has been the world's runaway leader in gold demand for several decades. In 2007, India consumed 773.6 tons of gold, about 20 percent of the world gold market and more than double that purchased by either of its closest followers, China (363.3 tons) and the U.S. (278.1 tons). India produces very little gold of its own, but its citizens have hoarded up to 18,000 tons of the yellow metalmore than 40 times the amount held in the country's central bank.
It's kinda funny, i was expecting price to break out this week after consolidating last week. it broke up and then totally broke down.
Looking at the weekly chart, it looks like a sell if this week's low gets taken out.
How 'bout anyone who suggests a tax gets taxed ten times the tax that they suggest?
It's all about envy. Being a loser who can't compete and envy.
Tax this.
hmmm...
macabre
macadam
macadamia
macaque
...Macanudo?
mp - when we were very young counterpointers we had the Glenlivit applied of our chests when we had a cold and went down for the night. Or maybe is was Lagavulin.
There's also a folk remedy for colds of equal parts scotch and port. Dries you up, stickies your throat, and knocks you out. In the morning you either have a cold or don't.
If you still do, then you continue until it alleviates or spring comes.
My great aunt is smiling now.
C
Whether oil is high or low, rates are high or low, whether we have bailouts or bailins, whatever we have for house prices, there is one thing certain: we will not have a solid economy until we have stability. It simply can't happen. Economies depend on confidence and predictability.
Let's get this frigging price discovery over with, accept our due dose of deflation and then get on with life. The jacking around of mother nature by the Fed is doing nobody any good.
Jeffrey J. Brown writes:
The real life Indonesian case history is shown below. I put the final production peak in 1996. EIA net oil exports for Indonesia:
Westexas?
y. that's him. the entire blogosphere is now one big cicrle of confusion.
pay -per- view special offer at 49.95...tonight a 9pm PST
Crispy Vs Jeff Brow
RE | 12.19.08 - 8:07 pm | #
I should also note that methodologies for the calculation vary widely based on what I have seen.
Yes, my favourite idea was to sluice river bottoms in Ve or Brit Honduras, but somehow i never made it there. I also have thing against big snakes. Life is full of so much potential, pity never enough time.
Ticker Tape of Doom writes:
....India produces very little gold of its own, but its citizens have hoarded up to 18,000 tons of the yellow metalmore than 40 times the amount held in the country's central bank.
Gold is a fashion statement in Indian culture, the more you can wear tastefully, the better. Its all 22k, different culture. Temple roof metals are gold coated.
Yesterday it was gold 1500 - buy, buy, buy! Today, it's gold 700 - sell, sell, sell! You guys can't make up your mind.
lliz is right on the money with 55-160 pos. cash flow . Same game being played in the midwest with that move tossing 18k annl. renters in abund. lliz you Rock
Yesterday it was gold 1500 - buy, buy, buy! Today, it's gold 700 - sell, sell, sell! You guys can't make up your mind.
RockyR | 12.19.08 - 10:35 pm | #
Thank you. I agree.
Question to ask... when gold was at $1000 how many barrels of oil did it buy? How many bushels of corn? Ask those same questions today - is it the better, worse or no difference?
If you are really going to be a 'gold bug' then forget about how many dollars it buys - worry about how many barrels and bushels it buys. If you can't do that then quite being a gold bug.
Or maybe is was Lagavulin.
Counterpointer | 12.19.08 - 8:19 pm | #
OK, so Lagavulin is exceptional stuff. I haven't found it in the US, yet. Haven't really looked, though.
"Drill Baby Drill!!!"
LMAO and trying to locate my '73 Dodge Polara
maybe there is more oil than oil salesmen want customers to know.
see: russian ukranian theory
maybe oil price has never really reflected supply and demand till now.
or, since our entire society is based on oil and our entire society is collapsing it makes sense for oil price to collapse.
however, you cant deny political elasticity of oil price. meaning it seems to rise and fall coincidentally with political advantage of some.
here is a link about a theory that is counter to peak oil:
"The opposing view to
this scenario is now generally referred to as the Russian-Ukrainian (R-U) theory
according to which chemical syntheses in the upper reaches of the earths mantle
have been and continue to be active locations where precursors of petroleum have
been and continue to be formed. According to this theory, petroleum is not a fossil fuel
but rather a renewable resource of great abundance at as of now difficult-to-reach or
inaccessible depths."
and the link:
http://www.ddponline.org/ppt/06penner.pdf
why is it that i am always last one to leave a thread...
otishertz,
Take your cash and go make your millions then...
and
Crispy Vs Jeff Brown
ZeroPointZero | 12.19.08 - 8:59 pm | #
Jeff Brown in a knockout.
fafhrd(Unrated) writes:
Byzantine Ruins gets my vote for deliverator.
Byzantine Ruins gets my vote for kitchen cabinet consultant or staff officer to the deliverator. My ambitions in life stretch no farther than a big house with a woodlot, someone else will have to play king.
Adornosghost writes:
Jeffrey J. Brown writes:
The real life Indonesian case history is shown below. I put the final production peak in 1996. EIA net oil exports for Indonesia:
Westexas?
Yep - it's him.