A Couple Quick Words About Commodities [View article]
Normally I would applaud the voice of levity in this article but news of a rapid slow-down in Australian iron ore demand, along with news of the Australian Dollar rapidly losing value as a result of slackening Chinese demand gives me pause. It appears that China may be in the same "house of cards" situation regarding new construction as the US was in 2005-2007. Commodity valuations are largely correlated to how long investors will choose to remain blind to the fact that you can't rent luxury apartments to a population that spends most of their lives living in Corporate dormitories making 45 cents an hour.
I wasn't thinking of cyclical factors when I wrote the article but I very much appreciate the corroboration from a technical perspective. I find it interesting when you get cases where behavioral analysis and technical analysis produce nearly identical conclusions.
AstraZeneca: Saturn Trial Will Hamper Revenue Growth [View article]
Very good article. I for one feel the pharmaceutical industry profiteering from blockbuster drugs has run rampant for too long and am glad for the drug boon we're getting this year with so many blockbuster drugs coming off-patent. The potential for health-care savings is massive.
Consumers Are Responding To Energy Market Shenanigans [View article]
I would hold off on oil refiners at this point. You are correct in that we may see some significant pressure on refining margins in the next few months. Thank you for your comment. I like to look for structural changes that most of the mainstream authors overlook.
After IEA Experiment, What's Next for Oil Prices? [View article]
If you look at the amount of oil sitting in the SPR as reported by the EIA Weekly oil inventory you'll notice that the amount hasn't changed. Those 30 million barrels were never released. They were priced at $112 per barrel so that if NYMEX futures ever reach parity with North Brent Sea Crude then we'll see an effect on prices.
The reason there was no permanent impact was that the oil was announced as being available but the inventory was never actually released.
The Economy Cannot Sustain $3 Gasoline Without QE [View article]
Money is not printed for a slush fund. Money was made available to banks who cashed in bonds prior to their original maturity date so as to temporarily increase the money supply. In order for that money to end up becoming available to consumers there have to be capital investments that create jobs. The money doesn't just magically appear in the consumers pocket. Your logic is faulty and your response is inane.
The Economy Cannot Sustain $3 Gasoline Without QE [View article]
This is pure stupidity. QE doesn't benefit consumers. It's well known the majority of funds disbursed by the FED through Quantitative Easing are still sitting in the cash reserves of banks. Increased Capital lending to small and medium sized businesses precedes additional availability of funds to consumers via payroll disbursements and that process has only just begun.
This article was written as if the author believes that all the money in the economy just goes into one big slush-pot and doesn't follow any predetermined paths of circulation. If anything the end of QE will be the thing that helps to bring oil and gas prices down as a diminished money supply for Wall Street and reduced margin lending to investment houses leads to a reduction in over-speculation in commodities.
Petroleum Report: Supply Concerns, Record Brent Spreads [View article]
Excellent article, and I love the collection of oil charts. I don't think there's sufficient reason to fear a shortfall though. People tend to have certain numbers in their head that become behavioral markers and I believe the anomalous rise in consumption seen in last week's report is largely due to gasoline prices falling below certain price points where consumers decided "As soon as I see gas go below 3.xx per gallon I'm going to top off my tank before the price can start going up again". When consumers in various markets started seeing gasoline below $3.80 or $3.75 per gallon they went in and filled up the tank. I expect we'll see a drop back towards trend next week. Also, with Japan bringing more of its production capacity online I expect we'll see an acceleration of consumer purchases of smaller cars for as long as gasoline prices remain above $3.50 per gallon. When prices exceed that point buying a fuel efficient car is no longer a liberal versus conservative issue - at that point it's just a matter of common sense and practicality.
Warning Signals From the Oil Inventory Report [View article]
The other factor that's critical here is the 11 million+ barrel increase in non-SPR oil reserves that's been built up over the course of the last 3 weeks. That dramatic increase in oil reserves suggests to me that refiners themselves are expecting a pre-end of QE2 sell-off and simply don't want to take delivery of oil at current prices. It was the additional 1% drop to 81.7% from 82.7% the week before that was reported in last Wednesday's report that cemented that thought in my mind.
The other factor that I think is affecting consumption rapidly is the increase in vehicle fleet mileage. Average fleet vehicle mileage in 2008 was just a tic over 22 mpg. In the last three years we've seen a proliferation of smaller vehicles, along with many SUVs ending up being passed on to high-school or college kids who don't drive nearly as much as their moms and dads do.
With Ford and GM being in on the small car band-wagon and with many of those SUVs built in the pre-recession era getting passed on to younger drivers or going off to the junk-yard in the next five to ten years I expect to see surprisingly large increases in US National Fleet fuel economy.
Oil exploration is demand based, not supply based - we really need to chase these supply side fallacies out of the economics profession as they do nothing but provide lame arguments for dishonest people.
Why Oil Prices Could Soon Be at $64 [View article]
I'm hopeful for an increase in margin requirements on oil futures just like we saw recently with Comex and silver futures. Realistically as the Chinese Yuan appreciates versus the US Dollar we'll need to see progressive increases in margin requirements to prevent over-speculation and crushing oil futures and gasoline prices.
Hopefully wisdom and a sense of reality will prevail over demagoguery and the desire for a quick buck.
Gas Price Relief May Happen Before June [View article]
I disagree on the point regarding refineries. Refinery capacity utilization in the last EIA Oil Inventory was still sitting at less than 85%. I don't believe it's unrealistic to expect refinery managers to be able to maintain 7/8ths of their existing capacity in a productive state at any given time, and if they really aren't able to do that, then it's time for a shake-up in that industry. So long as refinery capacity utilization is sitting at less than 87.5% -and from following the EIA report on a weekly basis for some time now I can tell you that it very rarely exceeds that percentage- I do not accept the lack of refineries argument.
Also, the need to maintain production volumes to show investors that a company does not need to rely on $4+ gas prices to maintain profitability is a very real concern. Would you want to invest in a company that is likely to go into the red as soon as QE2 ends in June and an appreciating dollar leads to lower commodity prices and reduced margins?
Weighing the Week Ahead: Hoping for Good News on Jobs [View article]
I expect it will be. I'm expecting some panic selling at the end of June with the DOW finally becoming bearish for a period to reflect the adjusted real value of the dollar. Personally I think the DOW is a bit over-priced at the moment and a correction to the 12000 to 12100 range is appropriate.
Weighing the Week Ahead: Hoping for Good News on Jobs [View article]
I agree with you 100% regarding the jobs report, but what I'm really waiting to see is if we will really get an anticipatory sell-off prior to the end of QE2. If the Gold and Silver bears are right, and we see coincident declines in industrial metals and fuel prices we could be in for a very fine summer.
A Couple Quick Words About Commodities [View article]
Is The Oil Bubble Bursting? [View article]
AstraZeneca: Saturn Trial Will Hamper Revenue Growth [View article]
A Pullback In Metals Manufacturing May Trigger Significant Energy Market Declines [View article]
Consumers Are Responding To Energy Market Shenanigans [View article]
After IEA Experiment, What's Next for Oil Prices? [View article]
The reason there was no permanent impact was that the oil was announced as being available but the inventory was never actually released.
The Economy Cannot Sustain $3 Gasoline Without QE [View article]
The Economy Cannot Sustain $3 Gasoline Without QE [View article]
This article was written as if the author believes that all the money in the economy just goes into one big slush-pot and doesn't follow any predetermined paths of circulation. If anything the end of QE will be the thing that helps to bring oil and gas prices down as a diminished money supply for Wall Street and reduced margin lending to investment houses leads to a reduction in over-speculation in commodities.
Petroleum Report: Supply Concerns, Record Brent Spreads [View article]
Warning Signals From the Oil Inventory Report [View article]
The other factor that I think is affecting consumption rapidly is the increase in vehicle fleet mileage. Average fleet vehicle mileage in 2008 was just a tic over 22 mpg. In the last three years we've seen a proliferation of smaller vehicles, along with many SUVs ending up being passed on to high-school or college kids who don't drive nearly as much as their moms and dads do.
With Ford and GM being in on the small car band-wagon and with many of those SUVs built in the pre-recession era getting passed on to younger drivers or going off to the junk-yard in the next five to ten years I expect to see surprisingly large increases in US National Fleet fuel economy.
Big Oil's Big Tax Break [View article]
Why Oil Prices Could Soon Be at $64 [View article]
Hopefully wisdom and a sense of reality will prevail over demagoguery and the desire for a quick buck.
Gas Price Relief May Happen Before June [View article]
Also, the need to maintain production volumes to show investors that a company does not need to rely on $4+ gas prices to maintain profitability is a very real concern. Would you want to invest in a company that is likely to go into the red as soon as QE2 ends in June and an appreciating dollar leads to lower commodity prices and reduced margins?
Weighing the Week Ahead: Hoping for Good News on Jobs [View article]
Weighing the Week Ahead: Hoping for Good News on Jobs [View article]