Commodity Bubble Proponent

Ghost Malls: Coming to Your Town

To James: Grow up and stop being so melodramatic and learn how to interpret the data behind your argument.

I agree with Tazman. You will have some vacant malls, some stores will close down, but people will still shop.

An 8% reduction in consumer spending as a percentage of the US GDP hurts, but it is not a doomsday number.

These malls will eventually be redeveloped. In retail, there has been a significant shift in the last 10-15 years to outdoor, pedestrian friendly shopping and away from the titan malls of the 1980s. These outdoor malls (and there are a few in my area) have done quite well and are not in danger of becoming ghost town.

What's in Store for 2009? Gold, Metals and Other Markets

Interest piece...just a quick comment.

One of the big things you (and most of the inflation proponents) are missing is that we have a massive delevering going on right now in the system. The trillions of dollars of asset backed securities, derivatives, bad commodity investment instruments, stock market and real estate declines are far outweighing the stimulus that the Fed is putting into the system. Much of the run-up in a lot of the investment ideas you have up here was based on being able to leverage 20-30 to 1 with tons of hedge fund money.

My take is that there is going to be a massive shortage of dollars in the system because the Feds are not going to be able to paper over the trillions of dollars of losses. I expect alot of the fear in the system to continue for the foreseeable future.

That being said, I'm not sure how you would take these points into account in your analysis. I guess you would almost have to look at total losses v. new money inserted into the system to really get a good sense of whether or not inflation is really occuring or about to occur.

People are taking a too simplistic approach to analyzing the issue. Its too easy just to point at the fed's money pumping and not look at the other side of the equation

Despite Economic Headwinds, Gold Will Outperform

Your chart right there shows that Gold is a bubble. Investors are buying it like candy.

Look out below once the fun ends

Options Trader: Tuesday Outlook

Great work as always Phil. I don't believe we'll have a sustainable stock market rally until it is led on a consistent basis by a S&P group that is not oil/gas or commodity related

Crudomania Is Over

Nice piece...a couple of comments

1. Much of the run-up was due to highly leveraged "investments" in oil futures that have now gone the other way.

As for that 86 million barrels/day of demand, it never really existed b/c much of that stuff was hidden in oil tankers and floating storage facilities that were recently constructed. I can point you to plenty of articles about how Iran was storing millions of barrels of oil in tankers in June, and how Singapore's floating storage tanks were full, etc. There is a TON of oil out there that no one wants.

2. Oil will not quickly reverse b/c now we have millions of barrels of spare capacity in OPEC countries (almost 5 million of spare capacity-- 1.5 million before the OPEC cuts +4.2 million of supply cuts). Demand has collapsed dramatically and is not likely to just come back on a whim. Dramatic changes are occuring globally in terms of how we use energy that will permanently affect demand (just as in the 1980s).

3. As more oil equipment gets built, the cost of developing new oil fields will go down. Much of the rise in the cost of finding new oil was due to the fact that oil rig prices tripled in 2 years. These rigs suddenly didnt become more valuable or hard to put together. Oil service companies will adjust to that economic reality and construct new oil equipment at a breakneck speed.

4. Alternative energy investments while curtailed are still ongoing due to climate change and other political agendas. As second generation biofuels come into play that aren't corn/sugar and are more sustainable, this will create supply side pressure on oil (even by historical standards, $50 oil is still really really expensive).

Whenever people start talking about the long term outlook for oil (greater than 5-10 years), remember that investments in other forms of energy will become commercialized during this period too as Obama and the democrats are not going to let this go

The Ghost of Crude Oil Futures (Part 2/2)

Interesting article

You're point about the oil market prices rising rapidly misses one key point however.

1. Companies will scale back on long term projects, not ones where they have already invested in infrastructure. As a result, most of the new production that has been invested in should get built b/c of the amount of money already sunk into those capabilities.

2,. When OPEC cuts production, they increase spare capacity. As a result, when demand starts to increase, OPEC has spare capacity that can handle the new demand. This acts as a damper to rapid price increases. (Spare capacity is now at a healthy 3 million barrels/day)

U.S. Treasuries Are the Biggest Bubble of All

Gold and treasuries are linked b/c investors are scared. When treasuries decline once the market starts to right itself, Gold will follow suit.

The fact that the Dow to gold ratio is so out of whack should tell you that Gold is overpriced

Gold Poised to Move Higher

The secular commodity bull is over. Oil down 70%, Copper down 70%, corn down 65%, silver down 50%, steel down 70%, etc.

Gold's turn is coming. In past historical commodity downturns, gold is usually the last commodity to crack. For instance, in the 1980s commodity price runup, gold peaked after all of the other commodities did. Same thing happened in the 1970s.

I expect another run up of 30-40% in the next 6-9 months, followed by a horrific collapse once investors cannot borrow money to buy gold.

Commodities are cyclical and will not be the first to come back once the market economy improves. The next significant rally will be late 2010s when no one is looking.

Enjoy the ride boys

Oil Futures Market: Unwinding the Bubble

Nice piece...you should also point out that a large portion of the "run-up" in oil costs was due to the fact that guys like Transocean, Diamond, Schlumberger, etc. were getting ridiculous profit margins on their rigs. Once more of these things get built, the cost of production will naturally go down.

Oil rig builders do not need 50% IRRs to justify the development of new equipment.

Peter Schiff: Outlook for the Gold Market

Just to quickly illustrate my points from some of the comments I see up here.

As to point 5, "middle class" in China means that you make more than $2,000 per year. To put that in comparison, even at today's prices, $2,000 per year is the average fuel expenditure for the typical American for the year. Chinese demand is really a big myth if you look at the demographic figures

As to the guy who wants to know whats happening to the money that the fed is printing, it is going to replace the depleted capital from all of the bank writedowns. This is not new money that will lead to new lending.

For the gold bugs, the inflationary spike is OVER. The inflation and big spike in asset values occurred with the total relaxation of credit standards globally. Between 2001-2007, if you take into account subprime loans, derivatives, etc., there was tens of trillions of dollars of new money "created" by banks. The fed is a small party in this game with its 2 trillion in new money. As a result, the inflationary boom that Mr. Schiff preaches about endlessly actually died with the collapse of endless credit where people could spend without any regard for their income.

All the Fed's quantitative easing will do is simply slow down the deflationary forces (i.e. imagine what would have happened to oil prices had Goldman/Morgan been allowed to fail in October).

Peter Schiff: Outlook for the Gold Market

Anyone who buys Schiff's arguments is a moron for a couple of reasons:

1. The deflationary forces from the current de-leveraging are far larger than the quantative easing that the Fed can do. In the last year, we've lost nearly 20 trillion in global equity valuations, not counting the several trillion in global real estate assets, corporate bonds, municipal bonds, etc etc etc. The fed even on its best days may be able to only inject 2-3 trillion/yr into the system. what they are doing is basically trying to fill a bathtub with a squirt gun.

2. Gold investing has been a leveraged activity over the past 18-24 months. Look at all of the Gold ETFs. They basically allow investors who never buy a single ounce of gold to partake in the price action. ETFs are now the fourth largest holder of gold supplies. If there is any serious hiccup in these entities, forced liquidations could cause the ETFs to flood the market with gold.

3. There is no replacement currency for the dollar. The ECB has proven that they are ass backwards in their thinking, the Japanese are still having problems with deflation, the Chinese are corrupt as hell and their banks are burdened with trillions of dollars of non-performing loans from the communist days, and we've all seen what's happened to Russia lately.

4. The Chinese consumer is not powerful enough to rescue the world economy. The average Chinese person earns roughly $2,100/yr and the average American earns $50,000. This means that the Chinese guy must increase his marginal income nearly 24x to hit the same level that the American guy is at. In order to get there, either that guy needs to earn 24x as much or the dollar needs to depreciate 97-99%. None of those things are likely to happen.

5. COMMODITIES were all a bubble and are not likely to reflate anytime soon. I'd expect this to happen only when all of the commodity bulls give up and go play somewhere else (which given the current CNBC offerings of advice will be a while).

Own Gold? Time to Fold

Nice piece....I'd like to add one point to that

One of the largest holders of gold are gold ETFs. Given that these are financial instruments created by complex securities backed by deriviatives and default swaps on futures exchanges, I expect all hell to break loose within these trading instruments.

Watch out if the streetracks Gold ETF has to liquidate its gold stores or any of these other large trading vehicles. This is the supply shock I'd be concerned about, not government liquidations.

As for watching the CRB and Jim Rogers/Boone Pickens/Matt Simmons/OPEC getting proven increasingly wrong every single day...all I have to say is that it couldn't happen to a nicer bunch of guys.

Think the Commodities/Mining Boom Is Over? Insiders Don't

I can point you to homebuilder quotes in 2006 where they thought their slowdown in demand was a temporary blip.

Phase I of the bubble bursting is denial

Oil Won't Stay Down for Long

Davy,

want to talk about your earlier predictions about how oil wasn't a bubble?

Once again, you are wrong.

Readers: If you followed this guy's advice over the past year, you'd be down 65% over the last 6 months, just like Boone Pickens.

This is just another commodity bubble guy who wishes for the good old days of $200 oil and $4 copper.

Deflation Fears Hearken Back to a Simpler Time of Sound Money

I'm going to call bulls*** on the inflation argument for two reasons:

1. The inflation already occured during the massive derivatives/credit bubble that occured between 2001-7. Since this bubble is now collapsing on itself, the speed at which capital/equity is being destroyed is far greater than the governments ability to pump money into the system.

Since October of last year, world stock markets have plunged by some $22 trillion dollars in market value, not to mention the collapse in global real estate values, derivatives, credit default swaps, etc.. This is a FAR FAR FAR FAR greater number than the $2-3 trillion of "stimulation" that the Fed is providing right now.


2. Commodities were a bubble with a capital B. If you followed Jim Rogers and T.Boone pickens advice one year ago, you'd be down 50% on your investments. I'm not much of a genius, but the S&P has so far outperformed all of the commodity gurus.

I fully expect Gold to collapse under its own weight once these leveraged ETFs start having to sell due to the credit crunch. Given that gold ETFs are the third biggest holder of gold in the world, once they have to liquidate all hell will break loose.