BrucePile

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    • Sat Jun 14th 16:28 PM | Rating: 0 0
      Commented on:
      Calling a Bottom Here
      It was probably prudent to be a skeptic on the stock market for all last year and the first 4 months of this year untill one could see how the debt house-of-cards was going to go down. If the Fed, the big banks, and other big money players were to be unwilling to juggle the toxic hot debt potatos, the severe stock market collapse of January to April would likely have continued. If the monetary powers that be would have decided, as Jim Rogers says they should have, to take their medicine and a sharp recession and end the debasing of the dollar, the market collapse would surely be continuing.

      But it seems clear now (over the last month or two) that this will not be the course of the debt bubble burst. What seems likely is a contraction of credit, recession, much more dollar debasing with little medicine being taken in the near term, a juggling approch to the bad debt, and problem inflation in the long term. But the good news is that the market probably won't be in a persistent broad-based free fall. It seems to have broken out of that technical mode, but not out of bear market mode.

      The condition of the market seems to have morphed into a more gentle bear or even a sideways doldrums where bull market areas will mostly be allowed to do their thing. Witness what I call "market breaks" taking hold in the good areas. A market break is when you can overlay an index or stock with the S&P 500 and see the stock pretty much following the moves of the market and then start to break away and move to their own drummer. The energy stocks started doing this as a group a month or two ago. Other bull areas are doing the same.
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    • Wed May 28th 12:43 PM | Rating: 0 0
      Commented on:
      Perfect Oil Storm Brewing in the U.S.
      You should keep in mind that the comparison just released for miles traveled dropping 4.3% is between March '07 and now. Think back to March '07: oil had just come off a precipitous drop from $80 to $50 diffusing most drivers' fear of the gas pump. So you are comparing a 150% one year increase in the price of oil to a 4% pullback in motoring demand. This driving reduction probably came from fearless levels where every needless trip was gladly taken. The more reduction there is, the harder it is to accomplish.
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    • Wed May 28th 12:02 PM | Rating: 0 0
      Commented on:
      Smells Good: The Case for Natural Gas
      In addition to the monstrous advantages you point out for NG over oil, which to recap are:
      1. Over 5 times cheaper per BTU
      2. Much cleaner for the environment, thus much more likely to
      get favorable legislation enacted in any energy policy
      3. Redirects 700 billion dollars a year away from often
      unfriendly foreign governments
      you also have the basic fact that over the next 20 years or so, global gas production, and thus LNG trade, is going to be growing briskly while net exports of oil are going to be accelerating a downtrend already in place! Peak gas is projected to be around 2030 while peak oil is happening now and, more importantly, peak oil exports is probably history already. Just look at a chart of LNG trade and compare it to what net exports of oil have done over the last few years. One is rolling over into a decline per the ELM (Export Land Model) while the other is climbing sharply to a peak decades away.

      Historically, there has always been a tight correlation between oil price and natural gas price because of the rampant interchangability between the two in industry. When gas lags as far behind oil is it is presently doing, there is always a sharp slingshot move in gas to catch up with what oil is doing, which usually overshoots oil briefly. This seems to happens every 3 years or so, and if it happens again, it would take the price of gas to over $25.

      In addition to the usual industrial switchover activity from crude to NG, you are probably going to have a lot of transportation switchover this cycle as well (if Boone Pickens has his way, that is).
      If the Clean Energy model catches on, we could see an unprecedented megacycle in NG versus crude.
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    • Thu May 22nd 19:52 PM | Rating: 0 0
      Commented on:
      Oil Is Up Due to Fundamentals, Not Speculation
      There are only 3 things that can happen to a barrel of oil when it is bought:

      1. Contract delivery is taken and it is used
      2. Contract delivery is taken and it is stored.
      3. It is sold before contract expiration

      There is no speculation in #1. There is only short term speculation in #3.

      That leaves only #2, storage, as the only serious playground for persistant speculation. And oil storage isn't something you have to make wild guesses about or solve by issuing angry claims about evil manipulators behind the curtain. You have but to look at a chart of oil storage history! If you bother to do this, you see that there have been episodes of speculation in oil. In the 70s, America was awakened to the whole imported oil danger in 1973. The SPR was born and during the decade some large stockpiling was done by both government and everybody else. A huge demand surge was the fundamental driver of oil's 900% rise during this 10 years (there was no embargo that lasted the whole decade) but the large speculation and storage of oil also helped. In the early 80s, the death of the 70s icon land barge with it's 12 mpg along with a bad recession finally cooled the demand surge and oil started dropping. By 1986, the vast hoard of stockpiled oil looked a little ridiculous, so it was sold adding to oil's drop from $30 to $15.

      In the 1990 Gulf War, there was another, much milder episode of this. On a chart that I'm going to post at theoildrum.com, you can clearly see the historical context of today's condition. Oil shortage concern and storage levels have always moved in lock-step, but over the last 5 years with the mother of all shortages setting in, we have nothing like the usual stockpiling of oil. The divergence between oil price and stocked oil is unlike what has happened throughout the history of oil! It is a strange absence of speculation.

      I don't know if this is because peak oil isn't taken as a serious supply threat or because stockpiling oil is just too expensive or what. But, as Gary Lucido points out, massive speculation just isn't the explanation for what's happening now with oil.

      So why has oil made such sharp moves both up and down the last couple of years with no war, production boom, or other obvious mover? Well we may be getting into the condition Kenneth Deffeyes discusses in one of his peak oil books where history shows that as demand approaches capacity for a high demand resource, pricing becomes chaotic and disconnected from the usual supply/demand adjustments. It becomes a bidding war where a barrel of oil is worth whatever someone is willing and able to pay for it - like a rare painting at an auction. You can't make up a new batch of rare paintings just because more people want them and we may be getting to the point where we can't whip up new supplies of crude adjusted by demand.
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    • Thu May 15th 15:41 PM | Rating: 0 0
      Commented on:
      Gauging Market Strength After a Move to New Highs
      Two key groups that led the market downturn, the retail index and the transports, seem to want to lead in a break of the downturn. And it's those two groups that are the sum of all fears in this market - consumer spending and oil.

      Speaking of fear, if you look at a VIX chart comparison between the '00-'03 bear market and now, you see a near clone of the movements of the VIX. I did a diagram posted at theoildrum.com/node/39... (scroll down a couple comments to the one by "netfind" in the May 14 Drumbeat). This diagram shows the market to be in limbo between bear and bull right now as far as the fear/complacency issues go that the VIX tabulates. Bear selloffs take the VIX to over 30 while bear rallies take it to a pivot range at around 16-18, where it either goes back to another bear crunch or does a quiet drift into the below 18 range that stable bull markets like to climb in. We are in that dangerous 16-18 pivot area right now. The VIX is looking like it wants to march strongly right through that pivot area and shows no signs of stalling. But that could turn quickly. Stay tuned.
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    • Mon May 12th 17:53 PM | Rating: 0 0
      Commented on:
      Weekly Street Sentiment: Facts Are Stubborn Things
      The market seems to be in limbo between ending a short bear decline and proceeding to a bigger decline. On the one hand, you have two lead groups, the transports and the retail index, acting like they want to lead in a break of the decline. But on the other hand, you have the broad indexes still showing classic bear market rally technical signs.

      If you look at how the previous bear market played out on the VIX chart, you see that post 3/'00 the VIX declined to about 18 just prior to each major sell off (Aug. '00, Feb. '01, Apr. '02). Currently, the VIX drifted down to around 18 in Oct. '07 (the top before the decline) and it also drfted down to 18 in Dec. at the top of a bear market rally just prior to the Jan '08 sell off. In each case ('00-'03 and now) you can actually draw a straight trendline across the tops of the bear rallies and label where VIX 18 occurs and the 18s all fall very close to the line. Guess where the VIX is at right now - smack on 18 again, which seems to be something of a red flashing warning light with siren and a sign that reads "get out of Dodge!

      But my advice, to add to the Starbucks coffee above, would be to maybe wait on the deployment of any new money to stocks and to watch carefully how the market works itself out of this repulsive limbo condition.
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    • Mon May 12th 17:09 PM | Rating: 0 0
      Commented on:
      Speculation: Stocks vs. Commodities
      Over at theoildrum.com, there is a study where they charted the climb in oil the last few years pricing it in various major currencies other than the USD. The huge climb happens in the other money, too.

      As for those darn speculators, Haven't we been told it's all their fault eversince $45/bbl? How many of these hot shots are of the buy-and-hold for 4 years type anyway? If they would all leave, would oil really go back to $30?
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    • Fri May 9th 17:47 PM | Rating: 0 0
      Commented on:
      The Iranian 'War Premium' Vanishes from Crude Oil
      I think the war premium is coming back into oil as of early April. You can see a technical change in behavior in the oil chart coinciding with Admiral Fallon's leaving and a banking war on Iran declared by the U.S. on March 20 effectively blacklisting any global bank doing business with Iran.
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    • Fri May 9th 17:29 PM | Rating: 0 0
      Commented on:
      Where's the Bursting Commodities Bubble?
      Commodity moves differ from stock moves in many ways, but a big difference is that the major moves have 2 to 4 year durations. If you look at the CRB chart going clear back to the 50s and construct a line going through all the big moves (over 20%), you find that at every single change in direction from down to up, the ensuing up move lasted 2 to 4 years - every single one for 40 years! We have just finished a near two year sinking spell from early '06 as we enter '08, so if this historical pattern continues, we are just starting the next 2 to 4 year climb.
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    • Fri May 9th 16:51 PM | Rating: 0 0
      Commented on:
      The Humble Arithmetic of Portfolio Management
      I've seen studies like the one above from '83 -'03 only for different time periods, and they showed exactly the same result. Market timing by fund holders drastically reduced the S&P average to a point where a CD would have done better.

      With stocks, the rule is buy low and sell high. But the next several years will probably see a vigorous commodity bull market, and there are different rules for investing there. The climbs are usually more protracted and the pullbacks swifter. The rule changes to buy low and hold high. That is, don't be too cute and take every nickel and dime profit; and add new money in areas where a swift pullback has fizzled.
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    • Tue May 6th 16:24 PM | Rating: 0 0
      Commented on:
      It's a Rally and It Feels So Good
      Some follow up thoughts on my post on Iran above: First, I apologize for the spelling; I was away from my own PC and they closed the computer center before I could proofread.

      It should also be kept in mind that any predicting about an Iran strike means crying wolf since signs have been in the rumor mills since '04. Scott Ritter, the former Iraqi arms inspector, has been credited as predicting 6 out of the last 6 Iran invasions (none of which happened). Actually, he has predicted preparations for strikes, not actual strikes. From what I gather, such a strike seems to be an on again/off again thing with Bush. He is said to have been preparing to strike in late '04 just before the elections (when he didn't know if he would have a second term to do it in) and again in early '06. He changed his mind each time, seemingly caught in the middle of the dove (Rice, Fallon) vs hawk (Cheney, Petraeus) fight that has raged in the group.

      The boat shuffling thing probably isn't a good indicator for any strike. I mentioned above that a third aircraft carrier group was in the Gulf area. The dispute between Fallon and Bush over the third group was about a year ago, and I think for awhile there were four groups in the area; but they only keep one actually in the Gulf rotating it every 6 months or so. Anyway, they probably juggle these boats around with no perceptable pattern with actual strikes because they are such an easy thing for everyone to monitor. CBS News reported in late April that a second carrier went into the Gulf with two more going from the South China Sea to the Gulf. I think the second one in the Gulf has left, but that would still leave the 3 in the area that Fallon said was unnecessary unless a strike were in the offing.

      Gordon - in January, some Iranian boats like the ones that attacked the Cole, approached some U.S. ships in the Gulf and actually radioed them telling them they were going to sink them! We were nearly at war then with the U.S. ships preparing to fire. Fallon stopped this personally and White House staff were reportedly "furious" with Fallon over this. They may have wanted such an incident as a gift triggering mechanism for a strike buildup.

      The triggering mechanism Bush has in mind may be the ultimatum to Iran the State Department is drafting now that, according to CBS, will center on Iran fighting U.S. troops in Iraq. This probably would be covered in all the signed agreements between Bush and the Congress allowing him to do what is needed in the Iraq war. The ultimatum "will demand Iran cease its support or else, the war becomes direct" meaning directly between the U.S. and Iran. Then they need but to wait untill the first bullet is issued from the Iran soldiers.

      I don't know how important the dark of the new moon is, but the monsoon wind pattern has been much written about and seems a much bigger consideration if they are going to use the new "useable" tactical nuclear bunker busters. They need to make the strike as clean and popular as possible, and the radiation in monsoon season would dirty it up big time. When you consider the stipulations on the bunker buster and SPR orders for early April, Fallon's leaving, the current ship deployment, the ultimatum now being issued, and Bush's determination not to leave office with Iran in limbo, you come up with now through early June in front of monsoon weather as what they have in mind. Otherwise, it could be after September, when there will be only 3 months left in Bush's time.
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    • Sat May 3rd 15:08 PM | Rating: 0 0
      Commented on:
      How the Stock Market Is Like a Dog on a Leash
      The dog-on-a-leash analogy is so right for the movement of a stock. The day to day moves are spastic random noise like the annoying dog. That's why moving averages are important guides - like the sidewalk.

      The problem with using them to sell with is that in the very big moves, a stock will typically be at or outside a boundary it usually resides in all the way up a monster climb. And it's those big, unusual climbs that make for good performance in a portfolio - something to mix in with all the small scale gains and loses that average nothing.
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    • Fri May 2nd 17:49 PM | Rating: 0 0
      Commented on:
      It's a Rally and It Feels So Good
      This is a very dangerous stock rally to buy into for several reasons. But let's look at just one, the Iran thing.

      Everyone knows Bush and Iran have been threatening a major rumble for years now, but there are some serious signs it may be coming to a head in this merry month of May (when you really might want to sell and go away). Global intel analysts have been buzzing about this for over a month, but even the mainstream U.S. News & World Report had an eye opening article; go to usnew.com/blogs/news-d... us-may-be-headed-for-w... and you can read some of the analysts at analyst-network.com/ar....

      When you start connecting these 6 dots and several others, an picture starts to emerge.

      The Israeli strike on a building in Syria in Sept. '07 was billed as a strike on a nuclear facility. But there is doubt on the photos presented as being that, some clumsy trumping up efforts some say similar to the WMD presentations in late '02 prior to the early '03 invasion of Iraq. The practical purpose may have been the cold war ploy of forcing the newly installed anti-aircraft electronics to be turned on so as to get an electronic signature for them under a likely invasion air route. And the political purpose may have been expressed by Bush last week commenting on the "strike" - "We have an interest in sending a message to Iran and the world for that matter, about just how destabilizing nuclear proliferation would be in the Middle East".

      CENTCOM chief Fallon, who has been opposed to an Iran strike and would not carry it out has abruptly resigned for no apparent reason except some babble about creative differences. It is reported that Fallon got into dispute with Bush over orders to deploy a third aircraft corrier battle group to the Gulf to be on station in April. Fallon took the position that a third group was unnecessary unless a strike on Iran was in the offing, and refused to carry out the order. The third group is now there as "overlap" for a few days with the more normal two and in what they've called a "show of strength".

      UK's Guardian newspaper 7/16/07 had an article "Cheney Pushes Bush To Act On Iran" where a well placed source stated a common observation about George Bush by those closest to him - "Bush is not going to leave office with Iran still in limbo".

      It's been noted by several experts that if the strike on Iran happens, it would have to use the nuclear-tipped bunker busters to get the underground nuclear facilities. A development that has analysts worried is that Saudi Arabia reportedly started taking measures to prepare for nuclear fallout a day after Cheney met with Saudi officials on his attack planning tour last month. Okas, a government guided paper, said they started "national plans to deal with any sudden nuclear and radioactive hazards that may effect the Kingdom following expert warnings of possible attacks on Iran".

      Bunker busters ordered by Bush many months ago had the stipulation on them that they be delivered by early April '08.

      The topping of of the nation's SPR (Strategic Petroleum Reserve) ordered by Bush while Oil is $100+ also had the stipulation that it be done by early April (it's full now).

      A major weather consideration for a strike involving the nuclear bunker busters is the monsoon prevaling winds that go from Iran over Pakistan and India starting in June and lasting through September. This would cause possible radiation problems, so a strike would preferably be done before June, which agrees with Bush's orders on the bunker busters and SPR being so concerned with "by April" fulfillment.

      Israel has just completed in April the largest scale ever defense drills for simulation of Syrian and Iranian incoming missles. The shelters have bben put into the utmost state of readiness ever.

      The last two Middle East invasions have been planned for execution on the dark of the new moon (the '03 version was launched a little early since they thought they knew where Saddam was). The next such date is May 5 and the only new moon left before June.

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    • Tue Apr 29th 16:26 PM | Rating: 0 0
      Commented on:
      Market Rallies Since the Start of the Credit Crisis
      The current rally is impressive. And it's made more convincing by the fact that the lead group that led the turn into the decline, the retailers (RLX index) , has broken the resistance downtrend line obeyed for months. Maybe that's just a one week dumb money move fomented by the stimulus checks going out. The other major indexes are not showing such a technical change from bear mode just yet.
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    • Mon Apr 28th 13:17 PM | Rating: 0 0
      Commented on:
      Why Do Oil Prices Keep Rising?
      Inflation debates always just make my head spin. You should keep in mind that there are two types - monetary inflation and price inflation.

      Monetary is increasing the money supply, which doesn't have to cause any particular price to go up. Price inflation is when there's a shortage of something that people are willing to pay up for, which doesn't have to come out of any increase in money supply. You can have one without the other in any particular area of the markets.

      So, with commodities, with or without practical use shortages, there is price deflation in homes, price inflation in soybeans, price deflation in hedge funds, price inflation in rice, price deflation in anything that smacks of packaged debt, and price inflation in anything that smacks of practical use. The markets are a zero sum game - every dollar you gain over and above the index's performance comes from an underperformer's pocket. So deflation/inflation is always going on no matter the supply of money it's being done with.

      There is always a wandering herd of investment money out there (made bigger and more energetic by increasing money supply) moving in and out of various areas. So instead of trying to figure out inflation or deflation per se, I just try to see where the wandering herd is leaving and where it is going. We have a major cycle now of the herd wandering away from financial assets and into hard assets. You can plainly see this on a historical chart, a cycle that runs every 15 years or so.
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