Kenneth D. Worth's  Instablog

Most of us have seen, or at least heard of, what has been called "the worst music video ever made", a viral sensation that generated howls of protest from seemingly the entire American public.  As of this writing the official Youtube video of Friday has been downloaded 162,437,373 times.  That number exceeds all but a few of the most popular videos by the world's most popular artists.

How can this be explained?

Was it intentionally bad? But then why doesn't every intentionally bad music video, and thousands are made every day and uploaded to Youtube, generate such publicity?

Whenever there is a strong emotional reaction to an event or piece of artwork  that is seemingly inexplicable, one should look a little deeper.  If you do, you will find that "Friday," which apparently simply features a teenage girl hanging out with her friends and singing about the days of the week in a fashion that can only be described as utterly banal, is filled with subliminal messages. 

And these subliminal messages are not ones Americans want to hear! Hence, the emotional reaction and near lynch-mob hysteria accompanying the video's release several months ago.  And, hence, as well, its continued notoriety and viewing numbers that make even a star like Katy Perry jealous. You can see Katy's deplorable "Friday" parody here.

The message of the video is significant on a number of levels.  If you look closely, it addresses four very serious topics: resource scarcity, racism, communitarianism and moral values. Talk about lighting a fire!!  Let me show you how it does so.

Racism and resource scarcity: the subliminal message opens with a white American girl waiting for a bus and wondering whether she should sit in the front seat or the back. This is a subtle reference to the American Civil Rights movement and Rosa Parks, in case you missed it.  The girl then gets in a car with her friends and drives along, singing and happy. Middle-class Americans drive everywhere, right? Later in the video, after school, five girls are driving along in a convertible.  The three white girls are in the back seat, an African-American and Asian girl are sitting in the front and driving. Again, if you are paying attention, this is a clear reference to the ever-increasing demands on our planet's natural resources coming from the developing world.  The time has come, according to the creators of the video, for America to take a "back seat" and consume less. 

Global resources are becoming scarce. High prices for food and fuel are creating havoc in the world's poorest nations. Note the lyics early in the song, "gotta have my bowl, gotta have cereal."  In the West, resource scarcity is a nuisance, one less trip to Disneyland.  Elsewhere in the world, it means going to bed hungry.  A veiled reference is made to American militarism and the invasions of countries with oil such as Iraq and Lybia.  You can see this in the distortion of the singer's voice so that she seems to say "7:45 we're a German on the highway. Cruising so fast, I won! Time to fly!"  Another reference to oil is made by the distortion of Ms. Black's voice so that she seems to sing, "Yesterday was Thirsty, Thirsty. Today it is Friday, Friday"  Listen carefully, the I in Friday is again distorted, placing emphasis on the syllable and what it might mean about the supposed selfishness of the developed word and the competition against far weaker nations for global resources.

The communitarian as well as religious themes are expressed in the somewhat bizarre emphasis with which the lyrics are sung.  "Fr-iiiii-day, Fr-iiiii-day, getting down on Friday, looking forward TO the WEEEkend."  Parse that out; the emphasis on certain syllables generates the message, "I to We."  The message is not unlike one of those, "Live simply so that others may simply live," bumper stickers. This message is reiterated in the much maligned lyrics, "We, We, We, so exc-iiiii-ted, we so exc-iiiii-ted. We gonna have a ball today."  The "We" syllables ring out loud and clear.  The "I" syllables are again distorted, and thus discredited in a way.  The ball, referred to, of course, is that spinning little rock on which nearly seven billion of us now live, a rock possessing very limited food, water and fuel.

There are numerous other subliminal references in the video (many explicitly Christian in nature) that are outside the scope of this article.  Part of the extreme reaction to the video was certainly due to the way in which the video condemned and even mocked the mindless pleasure-seeking and the abandonment of moral values of American popular culture.  The video vaguely suggested that sinners are going to "Fry"(day) in hell, kinda skipped over Saturday and then extolled the beauty of Sunday, which comes, naturally, after-WORD-s.  How we do hate our flaws being pointed out to us.

It is clear, however, that at least part of the extreme reaction to the song is indicative of the extent that Americans are in a complete state of denial that the modern lifestyle simply cannot continue as it has for the past several decades.  The resources of planet earth are limited.  The most immediate problems are oil and food.  The video presents the prospect that the West will simply extract the resources it "needs" from the developing world by military force, or perhaps, will adopt a communitarian view and consider the resource needs of other people.

I cannot predict the actions of future American leaders.  However, one thing is certainly clear, like baseball fans in 1941 focusing on Joe DiMaggio's hitting streak while Japanese and German tanks rolled across Europe, Asia and Africa, Americans wish to remain oblivious to the tremendous threat that lies ahead, and if reminded of it, even subliminally, react with extreme emotion.


Disclosure: I am long UGA, BNO, XLE, XOP.

Silver is trying to form a bottom with trading over the past two weeks bouncing around in the low 30's.  Here is the three month chart for the iShares Silver Trust, SLV:


Clearly, there has been support for silver at $33 an ounce.  But will it hold?

Hard to say at this point, but given the support at 33 and a current price around 34, I think it is probably time to sell the Jul 11 SLV 45 puts I recommended when SLV was around 46. Cost basis for the puts was $2.91.  Friday's close was at $11.02.  Return: +279% in three weeks.  Readers will be reminded that I recommended the calls at 35 and selling them at 45.  That was also a trade that worked out rather nicely for those on the long side.

Is it time now perhaps to go long again?

If you are dollar-cost-averaging into physical metal, by all means make your usual trip down to your local coin or bullion dealer. The mania has passed, and a dollar here or there won't matter much for the long-term investor, especially those readers whose holding period ends with the arrival of Armageddon.

But what about speculative long positions?

After any violent downward move, such as that seen in late April and early May in silver, traders should be very cautious establishing new long positions.  It is often best to let the dust settle a little. There are probably institutional investors out there who probably still want to close out their long positions for a gain, but the price just dropped too quickly for them to get out at their desired price point.

Those late to the party who bought on the way up in the high 30's and 40's will want to at least break even because everyone hates taking a loss, even if it is the smart thing to do. These institutions and individuals will likely be selling into any strength.

A crash creates a lot of overhead resistance whether you are talking equities or precious metals because it leaves a lot of sellers waiting on the sidelines still wanting to get out at the old higher prices.

I would be a buyer on any dip below $30, unless the downward move looks like a resumption of the intense selling pressure of the past which could take us even lower.  The Jan 12 $36 SLV calls are looking pretty tempting at $3.60, but I think I'll just head down to my local coin dealer instead.  I want to see a good solid base form before taking any speculative long position. 

On the other hand, if you pay a little more for physical metal than you really have to, you can at least rest in the knowledge that you won't be selling anytime soon, so it won't very much matter in the long run whether you paid $35 an ounce or got a bargain at $25.  And it still looks just as pretty either way.

Doesn't it?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: Long physical silver.

In what can only be interpreted as a subtle but frank admission that Peak Oil is here, Saudi Arabia inadvertantly announcedthis weekend that its production capacity is falling rapidly.  Saudi oil production for March 2011 was 8.3 million bpd, or 800,000 bpd lower than the prior month of 9.1 mbpd.  Thus, despite the loss of 900,000 bpd of Libyan production in February 2011, due to civil war, Saudi Arabia was not only unable to provide the replacement barrels desired by global consumers, it actually cut production by 800,000 bpd citing “poor demand.” The combined loss in production was 1.7 million bpd. 

Global economic growth would typically require an additional 200,000 bpd of capacity each month as developing economies expand and as developed economies recover from the recent recession and Japanese earthquake.  In response to these dramatic production declines, refiners worldwide have had to draw down their inventories in hopes of a quick end to the fighting in Libya or a resumption of Saudi production at former levels of around 9 million bpd, or preferably both.

On April 20, 2011, however, it has been announced (or perhaps inadvertantly leaked, is the more appropriate term) that Saudi Arabia intends to maintain production (if it can, of course) at current levels of 8.2 million bpd and then gradually increase production to 8.7 million bpd by the year 2015, if possible.

According to a research paper presented to the Arab Energy Club by Majed Al Moneef, Saudi Arabia’s OPEC governor, Saudi output averaged 8.2 million bpd in 2010.  If current trends continue,

"[T]he kingdom's crude oil output in 2015 and 2030 could rise to 8.7 million b/d and 10.8 million b/d respectively, compared with an average 8.2 million b/d in 2010."

This means that during the next five years, the kingdom's crude oil production will not rise but will start to increase after 2015 at an annual rate of around 1.5 percent to 2030.

Taking this statement at face value, Saudi Arabia has no intention of raising production significantly above current levels of 8.2 million bpd until 2015 at the earliest. 

Gone, apparently, are the valiant proclamations of the past that the Kingdom could produce 12, and then 15 million, barrels per day to supply global oil markets in the future when called upon to do so.

Rather, under the current view, production “could rise” to 10.8 million bpd by 2030.  More likely, of course, Saudi production will continue to decline from current levels, at what we can only hope will be a gradual pace.

These statements are the closest thing we have yet had of an admission by an OPEC official that Peak Oil has in fact arrived.  All mainstream predictions (e.g. IEA, EIA, et al.) of increased global oil production (or even of a plateau of global production) rely heavily on dramatic increases in OPEC production over the coming decades.  Now even OPEC admits that these will not be forthcoming.

The result can only be a significant decline in global oil production in the future.   Peak Oil is becoming more and more clearly visible in history’s rear view mirror.

Al Moneef also discussed the issue of net exports and acknowledged that given the rapid increase of domestic consumption (around 5% per anum) within Saudi Arabia, less and less oil will be available for export in the years ahead.

"If this rate of growth [5%] continues in line with economic and population growth as well as demand for power generation, water and transport, then a larger proportion of production will be directed gradually toward meeting domestic demand, which is rising at a higher rate than expected average output growth, which will reduce the volume available for export.

This means that the value of exports [and revenues] will depend primarily on global oil prices and not on the volume of production and exports. This is not a new development but will become clearer over the next two decades."

In other words, the oil importing nations will be faced with ever diminishing exports from OPEC in the years ahead (not to mention prices that continue to rocket ever higher.)  This subject has been discussed frequently on The Oil Drum, in numerous excellent articles by Jeffrey Brown (via his Net Export Land Model.)

A decisive turning point appears to have been reached in the Peak Oil debate.  Now even OPEC seems to agree that it has arrived.

Disclosure: I am long UGA, BNO, XLE, OIH, XOP.