Larry Bellehumeur

Apple's Tablet: Consumers Will Buy, But What About Businesses?

Miltie - I thought about that one (I mention Health Care Professional in the article). One of the problems may be ruggedization of the unit. Most Tablets that are used in the Medical field tend to be relatively rugged, since they have to be very reliable. As long as it was easy to find some sort of protective shield for it, or if the Tablet had some sort of drop resistance to it, it would likely do well in this space. It would also have to have Wi-Fi embedded to get any serious consideration (I doubt that this will be an issue, as even iPod Touches have Wi-Fi standard) Thanks for reading.

Apple's Tablet: Consumers Will Buy, But What About Businesses?

Roger - Good point, about the Educational market. However, having dealt with Educational boards for years, they tend to be quite "frugal", so we'd have to see if a price could be worked out.

Davswa - Thanks for your points. I would likely buy one, if it ran MAC OS. All initial "speculation" is that it won't, but that would be a huge difference. As for phones, I see your point, but have a hard time to believe that people will give up their PDA for phone use, and use a Tablet. As I mentioned, some will, but I don't see this being a mass exodus.

Dogs of the Dow: How Do They Look Today?

Wow, two articles in a row without someone cursing at me, must be a record......=)

Bobby - If investing was all about science, they wouldn't have people doing it, but rather computers. A great investor not only knows business, but is an expert in sociology, as you make as much money knowing when to "get off the wave" as you do knowing when to get on it.

BlueOkie - Very few investors are able to beat the market. Namely, you do it by buying companies that are undervalued and are likely to appreciate at a faster rate than the market, but then you have to sell when it reaches full value. If there was any guaranteed way to do this, it would have been found by now.

BioGuy - I have owned JnJ forever.....must be 7 years or more. Some companies just have Buy and Hold written all over them...

Peak Oil: Caused by Geology, Politics or Infrastructure Issues?

Alan -- an interesting, yet utterly frightening, read is Matthew Simmon's book, Twilight in the Desert. He brings up a good point.....when you factor in what the "proven reserves" were for the various Oil fields in Saudi back in the 70's, then subtract the known production since then, the number of 260 billion barrels of proven reserves is not possible. They have been producing at a rate of 3-5 billion barrels per year for 3 decades, yet their proven reserve actually went up.

There is no perfectly accurate way of knowing what the proven reserves are, and that is scary. Even if we could get past the Political motivations to overstate one's reserves (to allow for a higher quota), I agree that we don't have the expertise to know the exact number anyways.

thanks for reading!

Peak Oil: Caused by Geology, Politics or Infrastructure Issues?

I like your optimism, amdman, I think everyone who reads this article hope that you are correct. However, the world needs to find upwards of 15-25 million barrels per day, just to meet the expected drop off from producing wells. This is not a myth, wells do dry up and produce less over time. So, assuming that no extra demand is created, how long would any new discovery supply this, when this pace mean a billion barrels would last as little as 40 days?

Wood is renewable, and coal is much more abundant than Oil. Again, hope you are right, but you may be putting your head in the sand just a bit.....

Peak Oil: Caused by Geology, Politics or Infrastructure Issues?

Thanks to everyone for reading.....But, c'mon, I never consider an article to have been successful unless it raises enough controversy for me to be called "Idiot" or some other insult! =)

To answer the comments:

Dave - The crux of the article is that we may be entering Peak Oil for reasons that go beyond simple Geology. The Canadian Oil Sands (in theory) could sustain incredible production increases without causing any long term effect on production (unlike Conventional Wells that could have their long-term flow rates affected by over producing, the sand in the Athabasca Oil Sands is not pooled). So, you could (again, in theory, if money and environmental impact was not an issue) produce many times what they are doing now for many years (it is expected that the Oil Sands will be revised up to 300-400 Billion recoverable barrels before 2015, with newer technology). However, this will never happen, not because of Geology, but because of financial, Political and environmental concerns (which was point 2).

The same (to a lesser extent) would happen if Obama would open up ANWR and drilling on the coasts. The other problem is constructing the incredible pipeline and refinery upgrade that would be required to use this extra production. No one wants a pipeline/refinery in their "backyard", so aside from the Costs/resources/skilled labour restraints of building this new infrastructure....where would you put it?

I do agree with a comment above as to the fact that it doesn't matter WHY we are in peak oil, we just are. The point of the article was just to point out a few reasons why.....but I agree, it is more important to act than to ask WHY.

Ferdinand - I'm kind of surprised that more hasn't been brought up in the news as to how the world's oil supply could follow the peak of the US Oil supply, and how Hubbert was correct in predicting that once a field (or supply) yields about 50% of its total return, its production rate will inevitably decline.

Cycling - I hope that you are right, but I have my doubts. China is going to pass the US over the next few decades for Auto use, India is adding millions of new vehicles and North Americans keep on building new suburbs to create more urban sprawl. I think that we won't be able to change our habits in time.....again, I hope you are right, however.

Kool - Look at Boone Pickens. The smart "energy" companies are already following his lead of adding Green energy. The problem will be that those technologies may not be developed in time to help us ween ourselves off of Oil.

Mark Anthony - Valid points. The point of the article was to point out what Oil Companies have been saying for years....Peak Oil is being brought on prematurely by factors that go beyond simple Geology. You can have all of the latest technology, and all of the money in the world, but if the Canadian Government (as an example) puts a clamp on Oil Sands development, you can't increase production. I saw Rick George (CEO of Suncor) speak and he said (rough quote), "We would not be entering Peak Oil for a long time if Oil Companies had access to all of the world's reserves and less Government restrictions".

Bruce - Thanks for plugging your own page on my article. In response to your comment, you are correct. When you have to expend 1.2 barrels of oil to get one out of the ground, it doesn't make sense. The same can be said if the cost of Oil goes beyond the point where consumers can afford to use it.

Natural Gas: Grim Outlook Through Late 2010

Wow, mn33....I'm glad you actually read my answer before making such a comment! =)

The reality is that it depends on what your timelines are. If you are a short term trader, it proved wise not to get involved in any NG-related activities. However, NG is the fuel of the next 10 years, and this would prove to be a good long-term entry point if you were patient.

But, I guess you didn't bother to read that far!

Is American Express Still Cheap?

AMEX is also very tied to the Business Travel / Corporate Market (both from their Travel Services sides, but more importantly, Business travelers tend to spend a lot and pay their bills). Until you start seeing a rebound in that space, it won't fully have wings.

As well, they are tied (as Einstein points out) more to the overall credit balance of consumers than a Visa or MC. Although this gives them great leverage when the consumers bounce back, it does make them more vulnerable. It would be the higher Beta way to play a Consumer recovery, that is for sure.

I do like AMEX long-term, as Consumers are loading up their savings, and once they see the job market going, it will be too hard for them to resist buying things again. I would think it may have spectacular earnings in 2011/2012, just no need to buy at this price. We could see a big pull-back on this (maybe 15-20%) in the fall, as I think we will fall into a "Mini Double-Dip". It would be a great entry point for a long-term hold at that point.

Disclosure - I do hold some AMEX, but a much lower position than I had before (I unloaded it in the low $30's).

Good article....

Multinationals: A Safe Way to Play the Coming Drop in the U.S. Dollar

Moon - I sure hope you are wrong, in term of Stimulus II, but you could be right. It would be a disaster, and make this article all the more relevant (something I wouldn't want). It would also mean that the upcoming Inflation issue would be a nightmare for a decade or more....

William -- It is a good point. The main reason that I was focusing on ADRs is the for the simple availability for everyone. As an example, being a Canadian, it isn't as easy for me to buy Foreign-listed stocks in London. Ultimately, the same effect would happen, just in a slightly different way (ADRs would appreciate because a depreciating dollar would boost the earnings per share, where as buying a Foreign listed equity in US dollars wouldn't help the earnings, but you would see the same benefit directly from the currency). Good point....

TheFounder - Also a valid point. My main goal for this article was more to bring up the likelihood of a US dollar drop (which is happening today, ironically), and to give some ideas on how to play it (aside from the usual Gold and other plays). There is no perfect balance, and I would recommend that investors of all ranks hold a large selection of them. Many of them, such as Gold and Oil Stocks, also offer an Inflation hedge, in case that happens too.

Thanks for reading!
Larry

Multinationals: A Safe Way to Play the Coming Drop in the U.S. Dollar

Hello Everyone,

Dave - The dollar has held up better than I would have ever expected in the past little while. All of the points in the article have been in place for at least months (if not, in the case of trade deficits/debt, years), but the market often flocks to what it knows in times of distress, I guess....

PVizzle -- I definitely wouldn't use these stocks as the ONLY way to play a falling US dollar. I wouldn't even use only stocks in general....gold, Energy Producers, Energy Services companies, REITs, TIPS and other instruments are all going to be necessary for every investors portfolio. I agree that Resource stocks can be a great hedge against a falling greenback. However, they do carry a fairly high level of volatility, and not all investors can stomach that. I wrote an article about Dr. Stephen Leeb a while back, and posted some recommended long-term resource plays in there, including Ag stocks.

To add to your other point, I hate to speculate too much in articles, although, one has to wonder just how long the rest of the world will continue to use the Greenback as both the Main world currency and as a way to price Global Commodities. If either one of those positions were to slip, look out below!

As for companies such as Monsanto, ADM, Syngenta, they do have a good future, and would be good choices to balance off US dollar exposure. You could arguably add in Mosaic, Potash and Agrium......only recently did they ever get down to an evaluation that even remotely made sense to me, however. I have owned Potash in the past, but flipped it out at close to $190 before (didn't reach the top, but didn't lose my shirt on the way down).

Disclosure - No position in any of the Ag stocks, long on a bunch of Energy producers/services, REITs, Gold and TIPS. So, you can see that I think inflation is going to kick in soon!

Cheers to all
Larry

Natural Gas: Grim Outlook Through Late 2010

Wiskey,

To add to my points above, I'm not saying that Natural Gas is dead forever. Everyone believes that prices will rebound. It is a matter of opinion when one thinks that they will, not a matter of fact. NOONE knows for sure. Not even Execs at EOG.

EOG may believe that Natural Gas is going to rebound like they do, that is their belief. Most analysts, as you know, since you follow it as close as you do, do not believe what EOG is saying. As well, since you also know the business as well as you do, you'll know that Service companies are not as booked up for the Winter drilling season as they would be, if the overall market was of the same belief as EOG. Many of my customers are Oil/Gas Services companies, and they have been told by the Producers to expect a lighter than normal drilling season, which for Canada, means a drop from over 25000 new wells that they saw in 2006/07, down to a lower 12-15K in the Winter 2009/10 drilling season. It is also light for Summer 2010 bookings.....Where is this bullishness?

I'm trying to see where you are coming from, but the market simply doesn't seem to think this is true. Natural Gas futures for February 2010 are only trading in the $5.50 range. If the belief was as obvious as you say, where are the hedge funds? They live for this stuff.....

The likelihood is that EOG didn't think that Natural Gas rates would be too low in the first half of 2010 when they put the hedges in place (a long time ago, I presume).....they are not alone, most companies didn't. When they bought the hedges, Natural Gas was on its way to $13 and beyond. EnCana, which is the example that I used, is probably the premier run Producer in North America, and even they didn't hedge to the extent that they needed...

Now, I'd love to be wrong, I'd love it if you were right. I make a lot of my living selling equipment to Natural Gas drillers. Unfortunately, it is that insight into the market that I get from talking to them daily that further exemplifies my belief that we will not see a big rebound as fast as you predict.

Just look at the EIA inventory. Based on the current pace, we may top out at close to 4 TCF by the time we start drawing from Inventory in November 2009. In order for inventory to hit its normal range by April 2010 (just normal, not low), we would have to draw about 2.6. Considering that the average draw in the past 5 years has been about 1.8 to 2, it would have be a pretty nasty cold winter, combined with a spike in demand / disruption in supply to have a chance. To see that happen by January 2010, we would have to be down to about 2.2 TCF, a draw of 1.8 TCF in two months! The average draw down from 04 to 08 is half of that....Impossible? No, but would you want to bank on that?

Again, I'd love to be wrong. I'd love to see us with $9 Nat Gas in December, at which time I'll gladly write a glowing retraction. It would just take an awful lot of things beyond the Industry's control for this to happen. Producers are doing what they can, as EnCana, CP Canada and Suncor/Petro-Canada, along with a few US ones have announced production cut backs.

I appreciate your attempt to educate me. Please do remember that I live in Calgary (where we live and breathe Nat Gas), and have a lot of access to key people in the Industry.....all of which who would love to see EOG's scenario develop. They just don't believe it (re: see production cuts above)

Cheers....keep up the comments, I love having debates, it is what makes this fun. I don't get any money for this, but rather, it is something I do in my spare time.

Natural Gas: Grim Outlook Through Late 2010

That should read "....would not just stop" on the third line

Natural Gas: Grim Outlook Through Late 2010

Wiskey -- thanks for your note. Your assumption is that production will stop completely, and everyone will just burn through all of the inventory. If that were the case, you have a point. Since production just not just stop, do you really think we will burn through our excess capacity in that little of time?

If I accurate knew the exact answer as to how long it will take to bring supply down to a more normalized levels, I'd be much richer than most people. The reality is that Natural Gas is very much linked to weather, and unless we have a very hot August/September, then a really cold start to fall and winter, this inventory is not going to be burned off anytime soon.

You're entitled to your opinion, but it should be noted that your comment on how fast we can burn through inventory isn't accurate. The world's energy producers aren't going to seize production, just not bring on new production....

Zorro -- the reality is that most producers that I follow would not have hedged more than 30-40% of their production that far out, when prices were good. My point was more a long the lines that most producers who have hedged are likely to see a significant drop in revenue as those hedges come off....your point is well taken, but I would expect that it is more the exception than the rule to see hedges of really high values (say north of $6) and high percentages (say north of 50% production) for too far into 2010

Natural Gas: Grim Outlook Through Late 2010

Ok, a lot to digest here....here goes some comments:

Naturallight - That is scary. My point was more that Shale Gas (which is deemed the saviour to the US Foreign energy crisis) declines fast. I don't have as much knowledge of Off-shore, but if you are right, that is crazy.

Mmark - In the article, I talk about someone at a drilling company. He did mention that he had seen them that high, but 50% was more the norm. Either number is scary, considering the lack of production.

Barbarous - My source was the US Natural Gas Inventories report for August 13th (by EIS). It shows that storage from Producing wells climbed up to 1073 Bcf, which compares to the 5 year historical comparison (2004-2008) of 794 Bcf. Maybe the actual production isn't up, but the storage produced from producing wells is up. I probably should have worded it different.

Buck East - depends on what your cost per well is. Some of the deep wells aren't economical as less than $6. Other formations are much less complex to drill. Baker's rig count may be up compared to other months, but the more accurate comparison is to compare it YoY..

Natural Gas: Grim Outlook Through Late 2010

Tipalia - Thanks as always for your kind words. I've written before on Natural Gas, but never really focusing heavily on the Income Trust side. I'm also a Canadian, but never really cared too much about the US dollar exposure (as you're getting that exposure anyways with the NG price being in US dollars, and many Canadian Producers looking at declaring their earnings in US dollars (like EnCana).

In terms of the Trusts in particular, I like ones that are relatively well split between Oil/Gas, or ones that are more focused on Oil at this stage. Ones like Crescent Point (no position) and Bonavista (no position) are two of my favourite, as they give both nice exposure to the Bakken Oil Play, as well in the case of Bonavista, some nice exposure to the Montney play in NE BC / NW Alberta, for when the Gas price does rebound.

Specifically for Canada, I would look at some of the drillers, but only when you believe that Nat Gas has really turned for the upside. Look at ones such as Trican, Ensign and CalFrac (no position in any).

Ferdinand -- It does sound really high. This is the approximate number that I was given by a Supervisor of Drilling at one of the major drilling companies. I have read higher....

Here is a clip from an article from Ross Smith Energy:

Total U.S. production had remained relatively flat year-over-year prior to a recent increase in gas drilling activity in 2007 that
continued through most of 2008. According to the analysis, the average annual first-year decline rate for new shale gas wells was
relatively unchanged, between 40% and 50%
.
The base decline rate of U.S. production had remained fairly steady at 26% to 28% since 2003. “The decline, which needed to
be fought, during 2007 (declines from 2006 and prior drilling) was around 27%.”