richjoy

Commodities: Bubble or Not?

I appreciate the compliment from StateofCon, but I must respond to his comments on population growth:

Population growth in the USA is (fortunately) a bit above maintenance; it has declined over the last couple decades. Our growth is in large part due to peoples who have come here from other countries...both illegially and legally. (In fact, it is because we need population growth to support our economy, that our government, either democrat or republican, will only give lip service to border enforcement).

Europe is in a much more serious situation with respect to population -- many European countries, including Italy!, have declining populations. European social welfare costs are going to become staggering in a few years.

Yes, we do have a few Mormons here, and they do tend to have large families; however, their contribution to our population growth is not significant.

Commodities: Bubble or Not?

Global demand for oil exceeds supply by 1 billion barrels daily; thus the price goes up.

Some seem to (still) cling to the belief that gasoline demand in the USA influences price. For them, it seems there is no better wake-up than that gasoline demand is actually falling here (down by 7%), while the global price of oil is still rising.

If GLOBAL demand falls, it will first bring demand back to even with supply; than if there is a further falling of demand can bring down the price of oil significantly.

In the face of global growth in living standards, conservation can only produce limited (and temporary) results. I'm betting on increased demand (and thus prices) until alternative sources are actually widely implemented.

Commodities: Bubble or Not?

ETHANOL?...it is a cruel joke!

It is bad enough that a few farm state Congressmen and Senators (Grassly in particular) with seniority were able to ram through this legislation to the benefit of farmers and Archer Daniels Midland (gigantic campaign contributor); but they also included a 60 cents/gallon taxpayer subsidy, and prohibited cheaper ethanol from Brazil.

Than there is the matter of efficiency--it takes almost as much energy to make corn-based ethanol as what is produced. There are more negatives, but you get the idea; ethanol is politics at its worst!

Commodities: Bubble or Not?

We are making a big deal of the spot price of a barrel of oil at the wellhead. As consumers, our main use of oil is fuel, mostly gasoline. After driving 513 miles since my last fillup, I filled my car a few hours ago at $3.549 at a nearby Walmart. (Incidentially, no one mentions that SHARP 46-inch 1080i LCD HD televisions are now sold there for only $1300!).

So the issue is -- when is the price of gasoline going to hurt to the extent that it will change my lifestyle so much that I stop buying HD TV and other items?

I don't know the answer, but I well recall waiting in lines a block long for gasoline during both the 1970s Arab Oil Embargos, when I was glad to get gasoline--at any price!...and so would you! (There was no Strategic Oil Reserve)

Maybe one measure of our pain limit is the % of income devoted to purchasing gasoline. For most of us, $50 or $75 per week is far less than 5% of our gross income...it clearly hasn't hurt most of us yet, and another $25 a week (50% increase) may not hurt either.

It is embarrassing that Americans think cheap gasoline is their right. Gasoline is taxed even more heavily in many countries, and costs the equivalent of $8-$10 per gallon (including Europe); they don't like it either, but they have learned to accommodated it...and it is very likely we will too.

Riots?...nuclear war?...I think not! (Besides, we can't spare the troops from our other 2 wars.)

Whimps! Stop your whinning and war mongering!

Some good may come of this. Hopefully, we will finally get serious about alternative energies (and because it will take years to bring significant amounts of wind, solar, geo-thermal, etc. alternatives on-line, we should start drilling in ANWAR and our coastal areas ASAP). If Clinton had not vetoed ANWAR drilling 10 years ago, we would have 1.5 million barrels more oil today!

Commodities: Bubble or Not?

Sorrry I'm late to this excellent discussion.

When oil increases by 40% in a few months, this is a BUBBLE!...OK, I've said it.

But more needs to be said:

Basically, oil responds to supply/demand fundamentals--however, demand didn't increase by anything like 40% in a few months. But, like other investments, commodities do responds to speculation.

I'm investing in oil, natural gas, and base metals stocks and ETFs, but for no purpose than to make a profit--so, I guess I'm a speculator...arn't you also?

Bubbles burst, and the oil bubble may burst next week; but the bursting of these commodity bubbles are but brief temporary "corrections" that constitute buying opportunities to higher price levels.

This bubble-and-burst situation will continue until either supply increases sugnificantly (which will take decades), or demand is met (also may take decades).

With respect to grains (and unlike the other commodities), supply can be increased rather quickly, even within 1 year in some cases. Therefore, gain bubbles should be burst much faster than those for oil, steel, nat. gas, etc. Still, worldwide demand for grains continues to grow, and prices tend to rise again. Thus, I also continue to invest in grain ETFs.

Finally, I don't care what you call it--bubble, or fundamentals--it will continue to be a good investment.