Options Trader: Monday Outlook 11 comments
-
Font Size:
-
Print
- TweetThis
On August 25th, 1944, when the Allies were clearly going to win back Paris, Hitler ordered his General, Dietrich von Choltitz, to burn the city to the ground, rather than let it fall back into Allied hands. The General disobeyed and saved the city. Today Criminal Narrators Boosting Crude have the nerve to run with the headlines "Gasloline prices of $12 to $15 per gallon is not that far away" as the oil apologists would rather burn the US economy to the ground than let the price of oil fall back to a normal and affordable range.
There are 6Bn people on this planet and the Flat Earth Society can refer us to dozens of "reputable" scientists who will explain to us very clearly how the world is qute flat and they have research papers and "evidence" and everything. CNBC wheels out guests like Robert Hirsch without explaining that the full title of "The Hirsch Report" is "Peaking of World Oil Production: Impacts, Mitigation, and Risk Management" or that Dr. Hirsch makes his living speaking on the world oil crisis. No crisis, no money…
No crisis, no money for a lot of energy and other commodity bulls and you can see the panic building into a frenzy as the tide turns against them. Really, think about it - do you really believe that in the "near future" you will be pulling up to a gas station and handing over two $100 bills for a tank of gas? Oil bulls love to throw these numbers around but completely ignore the economics of it since gasoline is not the only thing people buy with their paychecks.
The only way we pay $200 for a tank of gas is for minimum wage to climb to $30 per hour. Perhaps, like post-war Germany, hyperinflation is the Administration’s end-game but don’t look for the rest of the world to take things lying down while the US inflates its way out of $10Tn in debt.
The oil bulls are trying desperately to inflate their way out of Trillions of dollars of investments that have been dumped into the energy markets - not just into the commodities themselves but into the energy stocks, which would be worth quite a bit less than their 2, 3 and 4x gains if oil were at a more moderate level. How much is Rio Tinto (RTP) worth without $300 copper? Is it still $500, or closer to the $150 it traded for in 2005, when copper was "just" $180? RTP has a market cap of $154Bn - think of how much money is tied up in hyper-inflated commodity stocks and what will happen if the energy bubble starts to look like the housing bubble.
Who are the apologists at CNBC really protecting? Bloomberg says it’s the investment banks, who have churned free Federal loans along with an investor frenzy into $596 TRILLION of speculative derivative investments "including those based on debt, currencies, commodities, stocks and interest rates." THIS IS A 44% INCREASE OVER LAST YEAR! Commodity derivatives alone expanded by 26.5 percent as the price of gold and oil reached records. Contracts based on gold rose the most in the second half, by 40 percent to $595 billion. COME ON BODMAN, TELL ME AGAIN HOW THERE’S NO SPECULATION DRIVING COMMODITIES!
Of course, the US doesn’t have the corner on idiot speculators. Futures trading in China was up 88% in May! All this money coming in is barely supporting record prices because professional investors are exiting while Cramer and company herd all their sheep in for the slaughter. The British have always been good sheep and FTSE commodity derivative shot up 27% over last year, to $9 Trillion "largely due to an increase in OTC traded energy contracts." According to the IFSL’s Commodities Trading Report, in the five years up to 2007, the value of global physical exports of commodities increased by 17% while commodity derivative trading on exchanges increased by 213% and the notional value outstanding of commodity OTC derivatives by 540%.
There is a chart on page 7 of that report which shows that the amount of capital invested in commodity indices, which cause the holding of actual commodities by speculators, has gone from $10Bn in 2001 (pre Enron loophole) to $220Bn in 2008.
As Rediff points out, GS et al are literally willing to burn the global economy in order to make their cut and they simply WILL NOT stop until WE, THE PEOPLE do something about it, either through representation or through revolution and Paris, as well as other cities will be burning if the governments don’t put a stop to this nonsense!Citigroup estimates that total funds invested in commodity markets through indices, hedge funds, exchange traded funds and short-term momentum players reached $400bn at the end of the first quarter of 2008, up from $330bn at the end of 2007.
SOMETHING is being done by the CTFC but the Bush administration has played the "investigation" delay card before in order to take pressure off actual action being taken and that’s really not going to be enough this time as things are well and truly out of hand. People aren’t just running out of gas money, they are also starving to death and let’s hope that our finally Democratic Congress finds this as unacceptable as the people who voted them in think it is.
Not just Paris, but the whole EU is down considerably this morning, as the situation in England is now so bad that Bush’s new pal, Gordon Brown and his Labor Party, may be looking at their first defeat since 1997. England’s economy is not worse than the US, it’s just that the UK doesn’t change its systems of economic measurement to improve their numbers like we do. Shares across Europe are down about 1.5% on renewed concerns in the banking sector as well as rising concerns that fuel can’t fall fast enough to save the airline industry.
Asian markets were up a point, reacting to our Friday close (which we weren’t buying) as well as the recovering dollar. There are labor strikes in Vietnam as 25.2% inflation has pushed that workforce to the edge. The strikes reflect the anger of the tens of thousands of Vietnamese who have left rural farming communities to seek work in the new industrial zones around Hanoi and Ho Chi Minh City only to see the buying power of their wage packets dwindle amid rising food and fuel costs. As Jim Cramer said back in ‘06 - "Don’t Miss Saigon Opportunity!" (he’s so cute when he’s screwing people, isn’t he?).
The best news out of Asia today is the news we expected - Global chip sales are up 5.9% from last April as the obvious (to us) impact of smart-phone competition drove demand up despite a 14% decline in memory prices. Excluding memory chips, the dollar volume of other semiconductors grew 12%! Today is a good chance to pick up Intel (INTC) back around $22.50 (the Jan $20s are very cheap) or our old pals at Cypress Semiconductor (CY) if they drop bacck to $27 but that will only happen if First Solar (FSLR) drags the rest of the solars down with it now that other analysts are starting to see problems with that particular company.
Pim(p)co’s Bill Gross was on CNBC this weekend banging the inflation drum, making good points about what BS the government’s measure of inflation - of course looking to make the point that bond yields (which he holds Trillions of) should be adjusted up to reflect this fact. Consumers in the US are indeed strapped for cash and are raiding their retirement accounts to pay current bills - that is not good… Also not good at all is that 19 of the 20 worst cities in Florida and California have recorded a 500% INCREASE IN FORECLOSURES OVER LAST YEAR’S RECORD LEVELS.
So it’s burn baby, burn while Paulson plays the fiddle in the Middle East, on the first leg of his "Brother can you spare a Trillion dimes" tour to bring some investing dollars into the US economy. As I’ve been saying for days, I’m a bit bearish at the moment so we’ll watch today’s action and see how resolved the bulls are in the face of a pretty rough weekend’s worth of news.
Of course it can all be made better by a nice sell-off in oil and, as usual, the European traders are running for the exits ahead of our open but you know those scamps at the NYMEX, they’re ready and willing to sell our country down the river in order to line their pockets while CNBC cheers on the sidelines.
Let’s watch for some dramatic drops in Nymex Holdings (NMX) and Intercontinental Exchange (ICE) as regulation rears its ugly head and our pals at CME will be called on the Senate carpet to testify as to speculation on their exchange as well.
It’s going to be an interesting week - please be careful out there!
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
TraderMark
-
2
Don Dion
-
3
Cliff Wachtel
-
4
Mike Havrilla
-
5
James Quinn
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 11 comments:
THANK YOU
You really need to familiarize yourself with Peak Oil and why the commodity bull will last many more years. I encourage you to read some of my thoughts on the topics:
seekingalpha.com/autho...
You are right that not many people will be able to pay $200 for a whole tank of gasoline. But not many people will own a car and use up a whole tank of gasoline in half a week either. You need to understand how all the biggest oil fields are depleting fast. My next article will be discussing about it.
I think who said it best was an oil executive at imperial oil company.
Journalist: The second question is about an intense debate that have been circulating in some Swedish newspaper the last couple of days. It has got to do with the Peak Oil theory and the ideas of professor Kjell Aleklett in Uppsala University. I know that Lundin has in partly been financing his researches and his work. What's your view on the Peak Oil theory and professor Aleklett's ideas about that?
Ashley Heppenstall: I very much believe in the theory of Peak Oil. I think the big question is when will Peak Oil occur. It's no question in my mind that it will occur. I think that the for the last two or three years we've been talking about Peak Oil as a company and we were interested in helping professor Aleklett in terms of that work because we think it's extremely important. The simple facts are to me very easy to understand. We have continued increasing demand for oil. The International Energy Agency (IEA) are forecasting 1.6% increase in oil demand. Last year it was over 3%, and this year it's forecast at 1.9%. This demand is coming from China, India, and as with the world, the world grows and develops. So if you extrapolate those numbers from where we are today, the world needs 130 million barrels a day. More than 50% more than what it's producing today within the next 25 years. At the same time the world is being consuming more oil since 1985 than what it's been finding. It's been catching up by revising the reserves of existing fields. That simply cannot continue, and if you take a very conservative 6% decline rate on the existing 85 million barrels a day of production and assume we don't develop any new oil or find any new oil, which is obviously not correct, but then the production which we currently have will drop to 15 million barrels a day in that 25 year period. This basically means that we need to find over 100 million barrels a day of new inverted common oil. In my view, sitting where I am in the industry at the moment, and looking how difficult it is to find oil; the big oilfields have been found, I firmly believe that is not possible. Therefore, the only thing that can give is that something got to happen on the demand side. Today is 70% of oil consumption used in transportation. Whether we like it or not, people talk about alternative forms of fueling transportation, we haven't found a viable substitute at this point. Even if one looks at electricity or electrical cars, the huge costs in terms of transferring our fleet to electricity will mean that it will take years to be able to achieve that. So I do agree with the Peak Oil theory. The big question is when it occurs. Ultimately, if we do reach the Peak Oil then oil prices are going to go up and at some point it's got to have an impact on demand. The world's a very bright place; there's a lot of intelligent people around and somebody will find an alternative. That's in part, I think, driving the oil price, or part of the oil price, today.
His comments are about as unbiased/meritless as George Bush saying that Iraq has weapons of mass destruction.
What a ridiculous piece of financial "journalism". This displays a total lack of professionalism, not to mention ignorance and nationalist prejudice. I notice there are numerous other personal insults used in this article - Pim(p)co's Bill Gross???
I am disgusted with the tone of this article, and the rudeness and unprofessionalism which Mr Davis displays. I encourage anyone who agrees with me to join me in contacting Seekingalpha's editorial team to register extreme dissatisfaction. And Mr Davis, if you are reading this, I suggest you apologise and then clean up your act.
AndyMan - the man works in the oil industry. What do you expect him to say?! ... oh we have tons of oil and you lot are nuts to pay us so much ... He probably can't believe he is getting to pump all his stuff free in a news interview.
User 115810 - I think most read Phil to for decent financial analysis supported with facts. I don't think it is for rose tinted English prose a la Shakespeare. If you find it offensive then I have a suggestion for you. .. Don't read it. Personally I find the passionate form of writing highly entertaining.
Read my latest article on Peak Oil and investments:
stockology.blogspot.co...
As for Saudi oil. Just because they don't talk doesn't mean we can't know. I suggest you buy a copy of "Twilight In The Desert" and read it. It will be the best investment decision you made. It's now only $11.53. I guess the author doesn't want to earning the copyright fee but just want people to know the topics:
www.amazon.com/Twiligh...