Andy1234

Dr. Stephen Leeb on Commodities and Inflation - Is He a Genius or Alarmist?

Good article which basically describes my portfolio exactly. wow...its like Dr. Leeb looked at my portfolio and said these are the places to invest.

My Thoughts on Oil

Corrected below.


On Jun 04 03:34 PM Andy1234 wrote:

> I haven't tracked the difference in oil price and currency exchange
> difference and drawn any conclusions. Short term price fluctuations
> mean little significance.....using the stock market for any form
> of argument should not be used.....because as we know....markets
> are manic depressive and are often times emotional and irrational.
> Value investing would never exist if markets were 100% correctly priced...the warren buffets of the world
> and others investors wouldn't be who they are.....because everything
> would have a true reflection of the true intrinsic value. What actuality
> comes about is the market does not know the future like any of us.....and
> I am 100% sure that todays prices will be different 10 yrs from now...saying
> that at any static moment in time the market is 100% of the time wrong....otherwise
> you would NEVER have a stock move up or down since all cashflows
> are already reflected in the stock price:)


If the market was a good indicator of value.....then we would cease to have moves greater than a couple of percent.

My Thoughts on Oil

I haven't tracked the difference in oil price and currency exchange difference and drawn any conclusions. Short term price fluctuations mean little significance.....using the stock market for any form of argument should not be used.....because as we know....markets are manic depressive and are often times emotional and irrational. Value investing would never exist...the warren buffets of the world and others investors wouldn't be who they are.....because everything would have a true reflection of the true intrinsic value. What actuality comes about is the market does not know the future like any of us.....and I am 100% sure that todays prices will be different 10 yrs from now...saying that at any static moment the market is 100% of the time wrong....otherwise you would NEVER have a stock move up or down since all cashflows are already reflected in the stock price:)


On Jun 03 01:14 PM Michael Fitzsimmons wrote:

> Andy: did you compare the oil companies i mentioned? did you notice
> today when the US dollar was stronger how STO and BP were down more
> in comparison to XOM and CVX? these stock movements (when the US$
> is both up and down) over the past few years prove my point better
> than any other argument. so, i suppose we agree to disagree.
>
> Crocodillian: glad you brought up chu's exact quote, because it is
> a perfect example of his wrong-headed thinking and why he should
> be fired:
>
> first he says he is "agnostic" about using the most abundant, clean,
> and cheap energy resource in the US (natural gas) for transportation.
> nothing "nuanced" there. BAD ENERGY POLICY.
>
> second: he wants to develop biofuels. ethanol?? switch grass? terrible
> use of increasingly vital water supplies not to mention the distortions
> in the food market resulting in inflation across that sector. didn't
> 2008 teach him anything? not only that, biofuels is just another
> way to keep us addicted to *liquid* fuels (i.e. gasoline derived
> from foreign oil imports) when we should be transitioning to gaseous
> fules (i.e. natural gas) once again, BAD ENERGY POLICY.
>
> lastly, he uses the same old excuse XOM used to scare the hell out
> of congress in the 1970's: that using natural gas for transportation
> will strain the other uses (oh no!! we wont have gas to heat our
> homes!!). it's like a bush fear tactic! the truth is, US nat gas
> reserves are abundant, clean, and cheap. for a sitting secretary
> of energy to not understand the fundamentals behing the US's best
> weapon against foreign oil imports is almost criminal considering
> what is at stake. once again, BAD ENERGY POLICY.
>
> *** ENERGY SECRETARY CHU SHOULD BE FIRED ***
>
> oldwizard: to answer your question about auto companies and nat gas
> conversions, i think you would like to read hefner's book "the grand
> energy transition" where he describes how we could save the US auto
> manufacturers, dealers, and hundreds of thousands of jobs by converting
> existing american's SUV's (investments worth $30-50k) over to natural
> gas rather than expecting them to just junk them and buy EV's (a
> ludicrous expectation when all middle class americans are currently
> suffering mightily due to the oil crisis to begin with! i'm either
> very dense, or this is simply a no-brainer. it is so clear to me,
> yet our energy secretary, president, and auto companies just don't
> see it...one side is very wrong, and one is very right. i've been
> wrong before, but on this issue, i am like abraham lincoln once said:
> this is my opinion, and i am sticking with it until someone can convince
> me i am wrong. well, secretary chu's weak arguments are not convincing
> to me at all, and i would LOVE to debate him on CNN for a half an
> hour on the issue. after that half-hour, about more americans would
> have my opinion that he should be fired and go back to studying particle
> physics or whatever.

My Thoughts on Oil

you must be talking about thermal efficiency......an internal combustion engine is around 36-40% or so from the numbers I have heard and read.

an all electric system might add complexity to the system and may or may not be more efficient.......I guess it depends on what the electric cars look like....and what fuel is being burned/used for electricity....because I highly doubt that all energy could be gathered from alternative sources in any meaningful way.

I suggest becoming more efficient.....it seems being more efficient in anything is always a benefit........with little to no downside. Forcing people to change or doing something completely different based on faulty reasoning or logic may not be the answer. I am not convinced of global warming causes.....while the earth may very well be warming.....what makes us so sure of the causes of the warming? Its difficult enough to prove simple problems in the engineering world....yet you take something very complex and draw direct correlations to something......yet its quite possible that CO2 is a byproduct of global warming...not the cause. Methane and other CO2 molecules are trapped in snow and ice....yet when this is melted its released into the earth. More and more CO2 is released from population growth and more cows, auto's etc....but we also have more rooftops, black driveways, roads, wtc radiating heat everywhere......I havne't seriously looked into global warming....but I highly doubt you can draw any conclusions with much confidence in any design of expirements.

On Jun 03 02:38 PM user396040 wrote:

> That was my initial reaction - but the electric engine is sooo much
> more efficient - especially for stop and go city driving that the
> plug in hybrid may turn out to be a compelling solution for suburban
> commuters. As I understand it, the gasoline engine is about 18 percent
> efficient(much less so in city driving) and the electric engine is
> about 88 percent efficient. This compensates for the large loss of
> energy assoicated with the generation of electricity. It should also
> be noted that utilities have improved plant heat rates (how many
> btus necessary to generate a kwh) and may do more in this direction
> as time passes. Another factor to consider is that electricity can
> be generated a number of ways and so, as technology develops, new
> energy sources can be readily harnessed as transportation fuels.
> I am not sure how this all nets out but I think it is a key question
> to be analyzed as we go forward.

My Thoughts on Oil

The problem with our system is every heartbeat has a vote. Those who have little to no stake in society have a vote.....and can literally vote in ways that have effects on people who have large stakes in society.....and this is ass backwards. The people who pay the most amount in taxes should have the higher voting power.

The way the system was intially set up was only male white land owners could vote. I don't agree with this.....but we could set up a voting method where only people who pay taxes would have a vote....and possibly the more taxes you pay...the higher the voting power. I haven't thought in depth about it....

but when you can vote for money....it will be the end of the republic (ben franklin)

The constitution is shit on by government officials.....we need to change government and get a ligit one set in place who actually follows the rules.







On Jun 03 05:51 PM elcopone wrote:

> Very interesting article and comments. Thanks.
>
> To me it's all very sad that our elected officials are still acting
> in the best interests of special interests and not for the country
> as a whole. Obama promised change. Each and every day that is turning
> into an empty promise. Not that I think McCain would have been one
> ounce better. Both parties really have much more in common than they
> would lead on - self preservation and special interests drive all
> their decision making.
>
> How much longer can this go on? When will a legitmate alternative
> to the Blues and Reds come along that will actaully receive public
> support. It's all very disheartening.

My Thoughts on Oil

Its also because they have the strongest currency.

When you export all your products and services.....and then convert it back to the YEN....but the YEN increased 10-30% against other currencies....things will look ugly. This directly relates to what I am saying in my previous posts.

This whole game is a currency exchange game.....and all countries HAVE to inflate like hell with the US as long as the US is the standard.

I am willing to bet a stronger more balanced country will eventually have their currency become the world standard....possibly China's or some other exporting country.


On Jun 03 10:51 AM Michael Fitzsimmons wrote:

> Righteous Dude: wrt your comments on japan importing 100% of its
> oil, i would note that japan's economy is one of the worst hit economies
> of this crisis, with economic growth -9.6 in the first quarter of
> this year. so, ok, you win, there is an economy out there more exposed
> than the US. my apologies. that said, we should look at japan as
> a warning for what can and will happen in the US if we don't do something
> about our foreign oil addiction.

My Thoughts on Oil

The price of oil going up is mainly inflation.

you need to price oil in terms of OZ of gold it takes to buy it or some other tangible asset. Or how many barrels of oil it takes to buy a house of equivalent size during a timeframe since paper currencies cannot be trusted and government figures are misleading.

Now countries who run trade deficits will get hit the hardest....basically they import more products and services then they export.......and the US basically just prints dollars to cover this difference.....but other countries are figuring out that they will never be repaid with products or services in return.....worthless paper is just that....worthless...be... paper is only worth the products and services you can buy with them.

So if you get your head around products/services/mate... and compare it to some other tangible asset/product/service that can be exchanged for it....thats the only way to make a fair comparison of purchasing power because the inflation data is just straight lies IMO.......a fiat currency system cannot be trusted IMO.

My Thoughts on Oil

yes, the purchasing power of your investment dropped by 8%....but the operational cost of the company whose currency increased by 8%...the operating costs of that company just rose 8%.....because they sell the oil in US dollars while their operating costs are in the local currency which just raised 8%. Unless people in Brazil or Russia who work at oil companies get paid in US dollars...which they don't.


get what I am saying?

forget about investment value. rather look at it from the businesses perspective first.


Take a snapshot in time of an oil company who sells oil on the free market.

Japanese company
Per Year
revenue of $1,000,000 US dollars
operating costs in yen but equiv to $700,000 USD
Profit of $300,000 USD
Oustanding shares of 1,000
EPS of $300/share


American company
Revenue of $1,000,000 US dollars
Operating costs in US dollars equiv of $700,000USD
Profit of $300,000 USD
Outstanding shares 1,000
EPS of $300/share


American investor owns 1,000 shares...the whole company of both companies above.

The yen appreciates 30% against the dollar. operational costs do not increase since its a rapid rise. The price of oil remains constent...the only change is a 30% difference from the yen to USD.

The new outlook for the company and investor.

Japanese company
Per Year
revenue of $1,000,000 US dollars
operating costs in yen but equiv to $910,000 USD
Profit of $ 90,000USD
Oustanding shares of 1,000
EPS of $90/share
a loss of 70% of profit due to a 30% change in currency.

American company
Revenue of $1,000,000 US dollars
Operating costs in US dollars equiv of $700,000USD
Profit of $300,000 USD
Outstanding shares 1,000
EPS of $300/share
unchanged....but a purchasing power of US dollars buying YEN products is 30%.

Catch my drift now?

The advantage is to buy the american companies...because essentially their operational costs go down with the dollar....while the oil price goes on up. They benefit from the decline of the dollar.



On Jun 03 09:32 AM Michael Fitzsimmons wrote:

> DonFurio: exactly - i called for topping off the SPR when oil was
> under $50. china is outmanuerving the US on obtaining long-term oil
> supplies by using their financial superiority while the US, even
> under obama, apparently seems to bank on its military to obtain oil
> via oil wars (and that is what afghanistan is...it's all about getting
> caspian sea energy to the ocean for transport and cutting russia
> and iran out of the path).
>
> DeanM: well said and better than my earlier response.
>
> montyman: you guys are killing me with this conversation - i love
> it. good luck and good action with the bus chicks. wish i had a bus
> here, i'd test your theory.
>
> Andy1234: look at it this way. if you owned 100 shares of a US energy
> company at $10/share, you had a $1000 investment. over the couple
> months, the US dollar dropped roughly 8%. so, your purchasing power
> dropped $80 by owning that investment when compared with a basket
> of international currencies. for the same reason, it is more expensive
> to travel to europe now, for example. this is why it is a good idea
> to invest in international stocks when the US dollar is dropping.
> look at BP, STO, and PBR recently when the US dollar dropped and
> compare those to XOM, CVX, and COP over the past couple months. by
> investing in those companies (BP, STO, and PBR) you not only get
> the bump due to rising oil prices, but you also get the bump (as
> an american) because the US dollar is dropping in value. don't get
> me wrong, i like american oil companies, i just think it also makes
> alot of sense to invest in international energy companies. and, you
> also have the kicker that due to recent idiotic US foreign policy,
> alot of oil rich countries would rather deal with STO or Eni of Total
> than the US big 3. sad, but very true.

My Thoughts on Oil

If you have company A who is based in USA and has almost all its operations in USA and you have company B based outside the USA and has almost all its operations outside.....each have their own currency....and both sell oil.

You have the oil difference......and you have the currency difference.

Both companies will get any oil fluctuation or difference....since they both sell oil in US dollars.

If a currency B increases 30% against the dollar.....and the cost of both companies remain static.....the cost of company B increased by 30% in relation to the cost of oil....even if oil remains the same price. In fact......company B is making less profit and will distribute less dividends because they really made less money as company A.........the US investor in company B does get some currency exchange benefit....but the dividend will still be less as the operational costs have increased for the company.

On the other hand....the US company is unaffected as no change has occured.

Now the difficult part is.....things aren't static.....and the government has in its own interest to understate inflation for GDP purposes, interest rate purposes, etc, etc, etc....all interest is for the government to UNDERSTATE inflation. But we know...gold investors, oil investors etc....that the real rate of inflation is much higher than whats being stated.

In my view.....its most likely that companies are giving raises more in line with reported inflation numbers the government uses.....while the real inflation is higher. Oil prices and currency exchange rates will more than likely show the real inflation....yet wages and GDP calculations are more likely to mimic what the government reports inflation is.

I am willing to bet the cost of operations will move up slower in US based companies than those of foriegn companies.....not because of the raises the companies give out...because of the way some report inflation....but the market won't be tricked.

Then there is government risk......I could definitely see our government under Obama setting price controls if things get too far out of hand......and/or tax oil companies if they are making large profits.....so in the end....diversification is good...regardless of currency risk. Just beware of currency exchange rates and the effect they have on a company if they have costs in one country...and mainly sell their product in another.





On Jun 03 08:15 AM Norwell wrote:

> I would think you would go the other way. If you think of markets
> as really world based, then if the dollar is dropping which is boosting
> the price of oil then US based oil companies would probably stay
> even at best.
>
> I think the non-US companies involved would see the best appreciation:
> higher oil prices combined with appreciation in their local currency
> against the dollar.
>
> On Jun 02 08:23 AM Andy1234 wrote:

My Thoughts on Oil

I meant an indirect way of playing the strength of commodites without betting on any direct commodity.


On Jun 02 01:14 PM Andy1234 wrote:

> Yup...I do agree the dollar will go down.....just look at history.....its
> the rate of decline which should definitely accelerate.
>
> You make a good point....I was just stating that when choosing oil
> companies.....double check the cost side....as that can often times
> be overlooked.
>
> Its like someone who lives in austraila.....they might invest in
> an index like DBC or something.....have it go up 20%...but the austrialian
> currency might go up 30% against the US dollar......essentially they
> lose money when converted back to austrailian dollars.
>
>
> again....I would buy the companies where the oil resides and diversify.
>
>
> Another way I am playing the markets is buying REITS in countries
> that are strong (Canada) and have strong exports of materials/commodities.
> Those economies should be strong.....and you get a nice dividend
> a month...especially when converted back to the US dollar when the
> dollar gets crushed in the future. Its an indirect way of playing
> the US dollar weakness.
>
> On Jun 02 09:07 AM Mmarrkk wrote:

My Thoughts on Oil

Yup...I do agree the dollar will go down.....just look at history.....its the rate of decline which should definitely accelerate.

You make a good point....I was just stating that when choosing oil companies.....double check the cost side....as that can often times be overlooked.

Its like someone who lives in austraila.....they might invest in an index like DBC or something.....have it go up 20%...but the austrialian currency might go up 30% against the US dollar......essentially they lose money when converted back to austrailian dollars.


again....I would buy the companies where the oil resides and diversify.

Another way I am playing the markets is buying REITS in countries that are strong (Canada) and have strong exports of materials/commodities. Those economies should be strong.....and you get a nice dividend a month...especially when converted back to the US dollar when the dollar gets crushed in the future. Its an indirect way of playing the US dollar weakness.

On Jun 02 09:07 AM Mmarrkk wrote:

> Andy1234: Directionally you are right regarding US-based oil/gas
> companies with respect to falling dollar. However, if you look at
> international oil/gas companies like BP, Total, Eni, Royal Dutch
> Shell, etc., they are international companies but sell a product
> based on the US Dollar (oil). And many of them have costs that are
> tied to US Dollar as well. So they tend to move in tandem with their
> US counterparts like XOM, COP, CVX, etc. Plus, the US-based companies
> all have huge portions of their operations in international locations.
> XOM has a majority of their income from international sources as
> do others.
>
> But if you are banking on a collapsing dollar, oil should prosper.
> And who wouldn't bank on the collapse of the dollar? We are printing
> greenbacks like toilet paper, our budget has blown up and we now
> own that crappy company GM in partnership with the villains who put
> them there...the UAW. The only other more dismal partnership than
> a US Govt/UAW partnership is the Fiat/Chrysler/UAW partnership...crappy
> Italian management combined with crappy engineering combined with
> excessive labor costs!! And with a bunch of marxist gov't officials...can't
> wait to see their first product off the assembly line. It will probably
> be a high top tennis shoe sized little clown car that plugs into
> the wall, gets a bazillion miles to the gallon, but only goes 3 miles
> and is a rolling casket for anyone in it when it encounters another
> vehicle...or a bike!

My Thoughts on Oil

Operation costs.


On Jun 02 08:23 AM Andy1234 wrote:

> If you suspect oil to increase......and the dollar to decrease...wouldn't
> you want to own american oil companies and the companies that are
> based in the US for oil drilling services?
>
> When you invest in foriegn companies...you run the risk of their
> operations increasing faster than the price of oil....have a currency
> exchange risk.
>
> Nintendo is a great company...selling record units....yet they got
> smoked when the yen rose against all over currencies.
>
> Just one more thing to think about...although I would still buy a
> diversified basket of oil exploration and drilling service companies...especially
> where all the oil is;)

My Thoughts on Oil

If you suspect oil to increase......and the dollar to decrease...wouldn't you want to own american oil companies and the companies that are based in the US for oil drilling services?

When you invest in foriegn companies...you run the risk of their operations increasing faster than the price of oil....have a currency exchange risk.

Nintendo is a great company...selling record units....yet they got smoked when the yen rose against all over currencies.

Just one more thing to think about...although I would still buy a diversified basket of oil exploration and drilling service companies...especially where all the oil is;)

7 Questions to Ask Warren Buffett

HAHA.

best line of the day!

"When you made your billions through capitalism, why would you impose socialism on everyone else ? "