fatpitch2's Comments

High Gold Prices: It's the Oil, Stupid

Tue, 24 Nov 2009 09:38:16 -0500

Michael:

Matt Simmons, not a dumb-bunny, is pushing NH3 (Ammonia) as an alternate fuel source for transportation. His claim is that the current fleets can be converted to run on NH3 at a reasonable cost, and that NH3 can be mfg. from clean energy sources (wind, solar, wave, ....).

Have you any thoughts on this?

MolyCorp Issues Letter of Intent For The Purchase Of Great Western Minerals Group; A Rare Earth Play Gets Legs

Mon, 09 Nov 2009 09:06:44 -0500

Hey Jack!

I have been following your work for some time, but only just started looking at Great Western. I guess the deal with Moly Corp. fell appart since GWMG is still publicly traded?

I see they received a small contract from DARPA...

Are you still following these guys?

THANKS!

STEC's Massive Selloff: It All Hinges on EMC

Thu, 05 Nov 2009 19:25:45 -0500

proactive:

Are you seeing insiders buys at current prices?
I am not seeing that, but my information feeds may be slower than yours.....

I see no real activity since Masoud unloaded several MILLION shares back in early August.

Three Asset Classes that Can Actually Outpace Coming Inflationary Price Increases

Tue, 20 Oct 2009 08:45:52 -0400

Nice article, thanks.

I'm just going to toss out some random stuff here:

1) Indeed returns on gold do not seem to be well correlated with inflation but perhaps more correlated to periods of "unrest". So even without inflation on the horizon gold is not a bad place to park some cash?

2) Inflation vs. Deflation ... can't we have BOTH?
It seems to me it's not as simple as one or the other...
Certainly some assets/classes will be suffering "deflation" for years to come ... residential and commercial RE seem to have large inventories to work off for example. On the other hand it seems we could be in for shortages of ag. commodities, energy, and other "hard" assets. The stuff that the BRIC needs to build out their countries?

3) oil being held off the market - well I guess that could be the case, but a VLCC holds about 2M bbls, and with worldwide consumption at 80M+ bbls/day could there BE enough tankers willing to sit at anchor to really make a big difference???

Axion Power: Time Is Right for Gas Guzzlers to Dual Mode EV Conversions

Sun, 19 Apr 2009 13:53:03 -0400

John thanks again!

I bought Axion @ about $0.95 and at least at this point... wish I'd bought more... ;-)

Anyway... my comment:

Currently, as I understand it, there is no commercially feasable recycling method available for Li-base batteries, while there is recycling available for lead-based batteries.

I did not see a line item in your estimate for the scrap value of the 2 (3?) sets of spent lead-based battery packs... is there any scrap value, or does the cost of handling pretty much offset any residual value?

Thanks!

Has Crude Turned the Corner?

Mon, 06 Apr 2009 23:35:56 -0400

Don't forget the "supply" side....
Depletion rates are even by conservative estimates 5% or better ...
(Cantarel is dropping by double-digit rates) that's good for cutting production by at least 4M bbl/day off every year...

and it doesn't take a rocket scientist to figure out that with current low prices that capex spending is way down so new sources are not being found and new wells are not getting drilled. Stripper wells are shutting down. All of this activity takes a while to circle around to impact supply due to long lag times ... if may be interesting when we figure it out....

Don't forget that a lot of the oil stored in super tankers and other places is by design - taking advantage of the strong contango pricing of oil... buy now for $35/bbl hold it for 6-month sell it for $65/bbl even after carrying costs... what's not to like?

When Will the Oil Price Pop?

Thu, 12 Mar 2009 10:02:37 -0400

Jim:

Thanks for this review!

I have a couple of random comments:

1) My personal suspicion is that a 4.5% depletion rate is optimistically low. I suspect the current rate is perhaps 5% - 6% and that it will rise in the coming years. Cantarell is, for example, depleting at double-digit rates.

2) Nuclear energy could do a lot for us; but we gotta get moving. I attended a presentation last night by Duke power, Areva, and several other US players in the nuclear field and the time line for building a nuclear plant is as follows: 6 YEARS of paperwork (environmental impact, public comment, NRC, ....) then 6 years to actually build the plant.

3) Nuclear and most alternative energy sources, as we all know do not produce liquid fuels, a real bummer in our current world of liquid fueled transportation.

4) Even if wind and solar COULD become major contributors, and I am skeptical .... we will need additional technology behind these producers to "smooth" out fluctuations in supply -- the winds stops blowing, it is a cloudy rainy day, .....

It's a huge mess ... and I am long energy

Oil: Despite Decline, A 'Must-Have' Profit Play

Sat, 14 Feb 2009 09:43:51 -0500

Demand is one thing... don't forget SUPPLY issues

Demand may be off slightly as a result of the current economic crisis but the emerging world does not all have to buy cars to boost demand ... just imaging say 5% of India and China's population buying an extra gallon of gasoline per week to put in their Moped? In the USA there is 1 car PER PERSON, in China there are roughly 3 cars per 100 people... lots of room to grow.

Now... how about SUPPLY?
I do not believe you will find any reputable source that will tell you that the depletion rate from current oil fields is less than 5%. Many geologists believe it is closer to 9%. Mexico's Canterell field is depleting at double-digit rates. So we have to add say 5M bbl/day just to keep even? With prices < $40/bbl do you think this is happening? I do NOT....

deep water projects are cancelled, oil sands CapEx is being slashed, stripper wells are being capped.... etc.................

When it turns around and as Keith says ... the date is not clear... but when it does... it will get FUGLY fast...

Just my humble opionion.

Asset Class Rotation: A Simple System

Mon, 09 Feb 2009 08:24:36 -0500

Mebane:

I just came back from the MoneyShow in Orlando and spent some time with FundX people. Overall, I was impressed, but as SteveTN asserts, the FundX family (except for a new offering they have just come out with: TACTX they do not do any "tactical" or market timing.

I was much impressed with your article a few months back: "The global tactical approach" I'm sure you have considered the paring of rotation with tactical allocation; what are the results?

Do any of the funds you've listed do something like this?

Thanks!

Does Wealth Equal Money?

Wed, 21 Jan 2009 10:33:02 -0500

Jim:

Any thoughts on the "net" effect on interest rates for LT treasuries?

I do agree that we have vaporized far more "virtual" dollars than the puny stimulus levels can (currently) overcome... but I do expect our government to keep trying harder and harder....

Here we are at what... ~2.25% which is what a 200 year low, and implies that buyers do not expect any inflationary pressures for 10+ years?

This in a bond environment where the government is ever rolling over existing debt and piling on new debt at a rate in excess of $1T+ per year for the next several years?

Thanks!
Jim

What Was Good About Boom-Era 'Lazy' Portfolios

Wed, 21 Jan 2009 08:49:47 -0500

Here is the review of Farrell's lazy options:

www.marketwatch.com/la...

3 year returns are all negative, 5 year returns are at best about neutral.

2 Geothermal Heat Pump Stocks to Consider

Wed, 21 Jan 2009 08:44:17 -0500

Chris B:
Sorry for the delay, I wish SA had a way for me to get notified when one of my comments was replied to ;-/

That price is from a good friend of mine who is in the residential and commerical business for HVAC.

Due to lack of large open spaces, in my area the ground loop is installed vertically in what amounts to a well shaft similar to a water-well with a loop of tubing in it. one well shaft is required for each ton or so of capacity - in my case 3.5 tons meant 3 well shafts @ 6K+ each for drilling, sleeves, tubing, ..... etc... very disappointing.

If I lived near a pond or if I could use the horiziontal approach it would be less for sure, I do not know by how much.......

On Dec 22 11:39 AM Chris B wrote:

> fatpitch2,
>
> $20k to dig a hole and install some tubing in the back yard? That
> seems kind of high to me. You could rent a backhoe yourself for
> a couple hundred a day! Sounds like you either have no space to
> work with or live on extremely rocky soil. If not, I'd suggest another
> estimate. Sometimes, a highball quote is a contractor's way of saying
> no thanks to a too-small job.
>
> Where I live there are dozens of subdivisions popping up in rockless,
> flat beanfields. Each house has the minimum insulation required
> by code and the cheapest HVAC system available. That's because most
> buyers are more interested in the paint and tile colors than the
> long term cost of operation. If those buyers would wise up, the
> builders would offer what they want. Likewise, if building codes
> improve, expect geotherm to get a look in such applications. That
> might not happen soon, but you can't go wrong investing in already
> profitable companies that have that possible upside.

Oil Futures Market: Unwinding the Bubble

Tue, 30 Dec 2008 18:21:25 -0500

Jimmy46:

I understand your point, and it is well taken, I appreciate it.
Two questions for you if you have time:

1) Clearly the "cash cost" of production varies considerably depending on the source; I would think that the middle east has the lowest cash costs while the Canadian oil sands might have some of the highest....???

Do you have any data on the cash costs for major producers?

2) If I were a producer and had cash cost less than current market price I would throttle production to the bare minimum that was required to cover my expenses and leave the rest in the ground for a better day and a higher price. Perhaps there are few producers with this much leeway, and they are all producing as much as they can in an attempt to cover expenses... ???
On the other hand, some producers having higher variable costs of production (oil sands?) might be able to more easily throttle production and still remain viable. Are there enough producers (any?) in the category to make a difference?

Thanks!

On Dec 29 05:39 PM jimmy46 wrote:

> Why does oil keep going down? Surely, at under $40, marginal producers
> should just stop production and wait until price is good enough for
> them.""&quot.....
>
> For some of the recent deep water projects, the TOTAL COST OF PRODUCTION
> may be $70 or more.
>
> But, most of that cost is upfront drilling for the oil,
> once production starts the CASH COST OF PRODUCTION is probably no
> higher than for shallow water oil.
>
> CASH COST is what drives the extraction industry in the short term,
>
> TOTAL COST is only used for deciding whether to START a new project.
>
>
> RESULT: NO ONE IS GOING TO HOLD PRODUCTION DOWN TILL PRICES GO HIGHER.
>

2 Geothermal Heat Pump Stocks to Consider

Mon, 22 Dec 2008 10:14:55 -0500

Tom:
WFI & also on installing a ground loop heat pump at my house.
I was dismayed to learn that the cost of a ground loop system would be more than 3X that of the simple air-to-air system. The cost of creating the ground loop in my case (vertical well shafts) would add $20K+ to the system cost (for 3.5 ton unit). I live in typical suburbia so some of the other ground loop creation options are not available to me - trenching is not an option and I have no handy body of water to use either.... I live in the mid-atlantic and concluded that without some serious subsities the ROI was not going to close. In less temperate climates I do think they are a great idea.

Here is another interesting concept, have you hear of it?

Claim is 30% better efficiency, cheaper, and the working fluid is water
no special freon type gasses involved....

Even if only half true, still pretty good ????

blogs.zdnet.com/green/...

Your thoughts appreciated....

What Was Good About Boom-Era 'Lazy' Portfolios

Mon, 22 Dec 2008 09:46:17 -0500

Larry:
Yes, being "lazy" has not been good... of course being "anything" but in cash or gold for the calendar year 2008 has not been so hot ... as of about a week ago I read that gold was the only asset showing net positive return YTD.

No matter, in general being lazy (in the correct way) removes emotion and frees up time for important stuff like ... oh ... like having a life.

Based on your research can you recommend any semi-lazy portfolios?

I'm trying help build one for a young friend just leaving college with a small inherited nest egg, and as a younger boomer am trying to make my own portfolio lazier as well ;-)

Hedge Fund Redemptions May Crash Q1 Markets

Mon, 22 Dec 2008 09:40:40 -0500

I guess I wonder what is left to redeem?

Tudor Investment Group had $5.7 billion invested at June 30 as disclosed in its 13-F. Its September 30 filing shows only $453 million.

Atticus Capital, another much-celebrated hedge fund, went from $8.1 billion to $510 million.

SAC Capital, run by the Steven Cohen, went from $14.4 billion to $7.7 billion.

Vinik Asset Management, led by Jeffrey Vinik, who once ran Fidelity Magellan, went from $11.8 billion to $1.8 billion!

These numbers are as of September 30. So they do not include the awful months of October or November, so current assets at these funds would be even lower now, but if you are already down 90% .... who cares?

The reduction is of course the combination of selling to meet redemption requests, and a decline in market value of existing positions, if these funds are anywhere close to "typical" I have to conclude that downward pressure on the market on a go-forward basis has got to be minimal as ... well as they are all pretty much out of money....?

Bye Bye Greenback

Fri, 19 Dec 2008 09:33:13 -0500

I am current shareholder of both the Prudent Global Income Fund (PSFAX) and the BEARX fund. While the income fund has not done amazingly well it has held up in "relative terms". BEARX on the other hand I am pleased with....

Unfortunately the take over by Federated Investments results in the funds now becoming front-end load funds which is very disappointing for folks that are not current shareholders -- current no-load shareholders as of date of conversion are grandfathered into the no-load shares even for additional purchases ... at least as I understand it.

Why Buy T-Bills Now?

Thu, 11 Dec 2008 12:13:51 -0500

"Interesting observations on zero yield 3mo T-bill and prices of crude/gold. No explanation can satisfy me on the -0.05% 3mo rate 2 days ago...makes no sense at all. "

This made no sense to me either until I heard a good explanation... as follows:

If you have $10K you COULD and perhaps should just stuff it in a safe deposit box or a mattress. BUT if you have $10M or $10B to roll over as, for example, sovereign wealth funds and other "big" players have to do ... you can't really "stick it in the mattress"... you have to do something "digital" with it....

Other that this ... I can offer no explanation either...

Will the Price of Oil Sink Much Lower?

Thu, 11 Dec 2008 09:14:53 -0500

Patient:

Can you post source(s) of the 5MBPD cuts rumors?

How Many iPhones Could Wal-Mart Sell?

Thu, 11 Dec 2008 09:14:07 -0500

Another question is:

In a declining economy, how many more people can afford to sign on for paying a minimum of $75/month for two years to get on-board?

Inflation on 'Sale' as Deflation Dominates Markets

Thu, 11 Dec 2008 09:03:51 -0500

Deflation AND inflation - why not both...

I would vote that we have both Deflation AND inflation spread across different sectors....

As others have pointed out, I think much RE will continue to DEFLATE, as will lots of luxury goods (Coach handbags, private jets, .....)

On the other hand, the essentials of modest everyday living are likely to respond to all this money printing by going up in price ... Why will the middle east want to continue to sell oil @ $45 USD/bbl when there are twice as many USD in the world as there was just a short time ago?

Why won't the price of food head north?

I suspect that many will not have their cake and not eat it either....

Considering a Position in Oil Again

Sun, 07 Dec 2008 15:07:15 -0500

CLH:

On the tanker situation - I'm not saying it is true, but another explanation for oil tankers sitting around full and not unloading cargo is that whoever owns the oil thinks prices will be higher soon and has the time keep the ship anchored until this comes to pass.

Random:
With regards to new supply coming on line, yes we have new supply scheduled to come on line, but who is excited to hurry these projects along at current $40/bbl let alone $25/bbl? Projects are now, and will continue to be pushed out. Petrobras has all their deep water fields but the cost of brining it to the surface is $50+/bbl... so I can't imagine they are in a hurry to spend billions to loose $10/bbl on the markets?

According to the IEA current producing wells are being depleted (i.e. their maximum production rates are falling) at a rate of 6% - 9% annually.... That means we have to bring more than 5M+ bbl/day on-line just to keep even --- assuming that demand if flat. The latest figures I have seen from sources like the IEA still conclude that world-wide demand is going to be slightly UP in 2009 despite this raging recession we've got going on... i.e. the developing world is picking up the slack...

TIPs to Protect Yourself from Future Inflation

Sun, 07 Dec 2008 14:48:06 -0500

Annette:

The simple answer to your question is "no" if you went into the market right now and bought some TIPS you most likely NOT get 8% annually, and the returns WILL most certainly fluctuate.

TIPS have a coupon rate (nominal interest payment made) and then
TIPS bonds' principal is linked to changes in the Consumer Price Index (up or down) and can provide an effective hedge against inflation in an investor's portfolio relative to standard Treasury bonds. As CPI rises, the principal in the individual TIPS bonds is adjusted upwards. The nominal/coupon interest on the bond is then paid on the higher principal, which raises the overall effective yield of the security.

Also, note that inflation is just one component of interest rates and that changes in the "real rate" or the risk free cost of capital will cause the value of TIPS bonds to oscillate up or down just like Treasury bonds. It is also important to note that because of the inflation adjustment on TIPS, the yield you get today is not set in stone and investors should be prepared for it to move up or down depending on the movements of the CPI.

It is more complicated than it appears at first glance.... but there are many good articles explaining how the work ... far better than I can do here...

TIPs to Protect Yourself from Future Inflation

Sat, 06 Dec 2008 16:54:51 -0500

Like other bonds the nominal return on TIPs (the part not connected to inflation) has been dropping. Take a look here: www.treasurydirect.gov...

For example it appears the last 5-yr note auction offers only 2%.

Yes, the TIP is inflation adjusted, but since the adjustment factor is based on the CPI which, at least I think, understates inflation you may not be doing all that well. That is to say that a 2% nominal return with a CPI adjustment that does not really make you "whole" from an inflation standpoint may not look so hot if inflation rates start rising....

Comments?

I do currently hold the Vanguard TIP fund in my 401k to keep the taxes simple, but I am starting to question myself on this.......

$25 Oil Could Happen Before a Return to $100

Fri, 05 Dec 2008 09:36:48 -0500

I keep trying to figure out how much of the demand is discretionary and will be extinguished by consumers turning down thermostats and etc...
Offset somewhat by the fact that it now costs only half as much to fill up gas tanks.

Industrial demand for energy is clearly down and will stay down ...

I'm too stupid to figure out the details on that stuff

BUT as Alan points out...

As the price of oil slides the marginal (highest cost) producers have to shut down in the longer term ... yes???

If the cost to produce a barrel of oil from the tar sands is $70 why would I go to the trouble to produce and sell only to loose $20/bbl. Indeed I have some fixed overhead I would like to support etc.. but do I not continue to do what is already being done... stop CapEx for expansion and hunker down

How much SUPPLY gets extinguished incrementally as the price of oil drops and producers throw in the towel and go home?

Further... since it is much easier to take production OFF-line than it is to put it back ON-line ... will we not wake up some day after a cold snap wishing for more oil only to find that it will take producers 3 months to bring some extra production back on line?

My head hurts as bad as my commodity-over-weight portfolio....

Considering a Position in Oil Again

Fri, 05 Dec 2008 09:32:55 -0500

Point #1:
Very interesting, I had not considered reductions in transit time.

See if I have this down:
If we assume that "supply" at the export point is constant then the temporary "oversupply" we are seeing here should diminish over a period equal to about 1x to 3x the elapsed transit time for a tanker to make it from the export point to the USA. Does anybody know how much time it takes?

Point #2:
Yeah what you said ... the US dollar has been the (I think temporary) beneficiary of the flight-to-safety and demand for dollars has been increased as they are the currenty used for settlmeent in the liquidation of much of the leverage in hedge funds and those exotic financial instruments we hear so much about... this is winding down I think ... and we have Mr. B printing paper and digital US dollars as fast as he can....

Point #3:
Yeah... I keep trying to figure out how much of the demand is discressonary and will be extingushed by consumers turning down thermostats and etc...
Offset somewhat by the fact that it now costs only half as much to fill up gas tanks.

Industrial demand for energy is clearly down and will stay down ...

I'm too stupid to figure that out....

New question:
As the price of oil slides the marginal producers have to shut down... ???

If the cost to produce a barrel of oil from the tar sands is $70 why would I go to the trouble to produce and sell only to loose $20/bbl. Indeed I have some fixed overhead I would like to support etc.. but do I not continue to do what is already being done... stop CapEx for expansion and hunker down

How much SUPPLY gets extinguished incrementally as the price of oil drops and producers throw in the towel and go home? Further... since it is much easier to take production OFF-line than it is to put it back ON-line ... will we not wake up some day after a cold snap wishing for more oil only to find that it will take producers 3 months to bring some extra production back on line?

My head hurts as bad as my commodity-over-weight portfolio....

How Impossible Is Market Timing?

Sat, 22 Nov 2008 09:26:25 -0500

Mebane:

Thank you for your postings.

I read your longer article regarding using the very simple (approximately) 200 day moving average indicator and was quite impressed with the result.

Given that these are VERY unusual market conditions I wonder how this technique might perform "going forward". I assume the 200 day average at this point has you OUT of pretty much EVERY asset class. So a student of this model is more or less prepared for Great_Depression_2 alas.... the big question ... if you are not "invested" in any asset class and are sitting on the sidelines then you are (presumably?) actually "invested" in the paper currencies of one or more governments ....

Now I recall the pictures of post-war Germany where it took a wheelbarrow full of money to purchase a loaf of bread and that folks resorted to burning currency in their home furnaces as it was the least expensive fuel and wonder how/where one should SAFELY sit "on the sidelines" ....

Thanks!

Breaking the Back of Buffett

Fri, 14 Nov 2008 10:12:24 -0500

Mr. Buffet is quite a guy ...

I have only one concern about buying BRKB....

Any thoughts on what might happen to BRK shares if he were to leave the company?

Reality Hits Oil Market, Dollar Could Benefit

Wed, 12 Nov 2008 14:08:48 -0500

The IEA has released its latest report --- It says peak oil won't get here until 2030 ... That's the headline anyway.......

When you read the rest of the article it says we only need to spend $1T+ per year and (unless you're a bank in trouble I don't see anybody getting ready to spend $1T a year on recovering more oil in a declining market...)

Oh yeah, and IEA says we need to go find 64 million barrels of oil equivalent a day of additional gross capacity between now and 2030 --- the equivalent of six times the amount Saudi Arabia produces today!

Piece of cake???? mmmmmmmmm I think not ....
Why invest in rigs and exploration ....

I think we will see declining supply soon -- production coming OFF-line shortly as the marginal cost is above market price this coupled continued yr-over-yr increases in world-wide demand for oil will (yes WW demand is still increasing even in this crappy envronment) ...

This will NOT be pretty ...

Buy, Sell or Hold: iShares MSCI Brazil Upholds 'Order and Progress'

Tue, 28 Oct 2008 21:06:02 -0400

Mr. Marquez:

Thank you for the insightful article. I have heard rumor that the government might create new agreements for the oil finds that would be less favorable to PBR ... can you comment on this prospect?

Thanks!