Engineer's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/213288/comments http://seekingalpha.com/article/115301-gold-cannot-be-inflationary-but-the-dollar-sure-can?source=feed#comment-359792 359792
Well guess what?...

...neither do treasuries anymore.

Just pointing out the obvious here.]]> Mon, 19 Jan 2009 10:28:02 -0500
Well guess what?...

...neither do treasuries anymore.

Just pointing out the obvious here.]]> http://seekingalpha.com/article/111791-the-pursuit-of-wealth-and-its-consequences?source=feed#comment-336663 336663 Tue, 23 Dec 2008 11:32:43 -0500 http://seekingalpha.com/article/111175-oil-majors-should-just-buy-real-gold?source=feed#comment-333129 333129
After all, this used to be the case by default for all current assets before 1971.]]> Thu, 18 Dec 2008 11:36:15 -0500
After all, this used to be the case by default for all current assets before 1971.]]> http://seekingalpha.com/article/108935-how-long-will-the-price-of-oil-remain-this-low?source=feed#comment-320063 320063
With respect to US demand destruction, petroleum product supplied is down 7% from Apr 18 08 to Nov 28 08. It appears to have bottomed in the second week of October 08 and has climbed back into the normal range since then (for now anyway). This is easily verified at the EIA's website:tonto.eia.doe.gov/dnav....

As for Japan, consumption was well down in August, but I don't quite see a Wile-E Coyote style trend going on here long-term. Consumption continues to hold steady at around 5m bpd. Check the graph on page 2 of this document, again put out by the EIA: www.eia.doe.gov/emeu/c....

To be sure, demand GROWTH will drop somewhat worldwide, but does this justify a 66% drop in value peak to date? I suppose only if the amount of debt used by speculators-gone-bust was on average 66%.

Another thing to keep in mind is that the world's major oilfields are declining at approximately 6% per year. See www.iea.org/textbase/p.... This is the natural progression of maturing oilfields. And with no exploration - doesn't pay at today's values - I can see trends reversing sooner rather than later.

Perhaps some of the oilcos are storing oil in tankers because they know an oil to $US trade right now could end up being a bum deal.
]]> Wed, 03 Dec 2008 14:04:51 -0500
With respect to US demand destruction, petroleum product supplied is down 7% from Apr 18 08 to Nov 28 08. It appears to have bottomed in the second week of October 08 and has climbed back into the normal range since then (for now anyway). This is easily verified at the EIA's website:tonto.eia.doe.gov/dnav....

As for Japan, consumption was well down in August, but I don't quite see a Wile-E Coyote style trend going on here long-term. Consumption continues to hold steady at around 5m bpd. Check the graph on page 2 of this document, again put out by the EIA: www.eia.doe.gov/emeu/c....

To be sure, demand GROWTH will drop somewhat worldwide, but does this justify a 66% drop in value peak to date? I suppose only if the amount of debt used by speculators-gone-bust was on average 66%.

Another thing to keep in mind is that the world's major oilfields are declining at approximately 6% per year. See www.iea.org/textbase/p.... This is the natural progression of maturing oilfields. And with no exploration - doesn't pay at today's values - I can see trends reversing sooner rather than later.

Perhaps some of the oilcos are storing oil in tankers because they know an oil to $US trade right now could end up being a bum deal.
]]> http://seekingalpha.com/article/108714-deere-execs-on-ethanol-and-commodities?source=feed#comment-318894 318894
-Much of the remains of distillation become animal feed - thereby freeing up other crops (and acerage) dedicated to such.

-The water used to produce ethanol returns to the environment as wet distillate which evaporates or is ingested by animals, and/or as a product of combustion when ethanol is burned.

Also here's another question that inquiring minds might want to know:

If we are producing more ethanol than ever before... why aren't there any "tortilla riots" going on right now?]]> Tue, 02 Dec 2008 11:08:17 -0500
-Much of the remains of distillation become animal feed - thereby freeing up other crops (and acerage) dedicated to such.

-The water used to produce ethanol returns to the environment as wet distillate which evaporates or is ingested by animals, and/or as a product of combustion when ethanol is burned.

Also here's another question that inquiring minds might want to know:

If we are producing more ethanol than ever before... why aren't there any "tortilla riots" going on right now?]]> http://seekingalpha.com/article/106181-what-does-the-recent-saudi-gold-rush-mean?source=feed#comment-308060 308060
At $10/oz, they would have been able to pick up 350M oz., more than twice the amount in the COMEX warehouse (in theory).

A question I'm wondering about (and I don't know the answer), is why - knowing that the silver market is so tiny compared to the gold market - someone doesn't take a stab at being Hunt 2.0?]]> Mon, 17 Nov 2008 13:09:05 -0500
At $10/oz, they would have been able to pick up 350M oz., more than twice the amount in the COMEX warehouse (in theory).

A question I'm wondering about (and I don't know the answer), is why - knowing that the silver market is so tiny compared to the gold market - someone doesn't take a stab at being Hunt 2.0?]]> http://seekingalpha.com/article/106039-time-to-fill-up-on-the-strategic-petroleum-reserve?source=feed#comment-306171 306171
The other long term side benefit in developing 'local and diffuse' sources of energy is that this will reduce geopolitical tensions.

Wind power, solar power and biofuels can be produced virtually anywhere. The technologies are simple and proven. Every nation can do this. There is more than enough renewable energy to supply ALL of the world's energy needs.

If you remove the tensions due to the procurement of energy, there will be fewer reasons to station large armies in the desert.

From being in this industry, I know the economics are currently marginal for these projects. But society needs to grow up and make sacrifices if necessary to do the right thing.

]]> Fri, 14 Nov 2008 12:13:34 -0500
The other long term side benefit in developing 'local and diffuse' sources of energy is that this will reduce geopolitical tensions.

Wind power, solar power and biofuels can be produced virtually anywhere. The technologies are simple and proven. Every nation can do this. There is more than enough renewable energy to supply ALL of the world's energy needs.

If you remove the tensions due to the procurement of energy, there will be fewer reasons to station large armies in the desert.

From being in this industry, I know the economics are currently marginal for these projects. But society needs to grow up and make sacrifices if necessary to do the right thing.

]]> http://seekingalpha.com/article/106053-the-stock-market-is-not-the-u-s-economy?source=feed#comment-306092 306092
www.bloomberg.com/news...

If you’re getting into trading seriously, I think it’s important to understand this. Ironically, these rational proprietary programs (basically more sophisticated investools), helped cause the very irrational crash of ’08, by going into self-reinforcing routines that kept triggering lower and lower stop-loss sell orders, overriding all fundamentals.

It’s fascinating to observe that when the future is supposedly predicted, the very knowledge of the prediction en mass ends up changing the future outcome.

IMO trading is a huge waste of time and effort directed toward something that provides little to no value to society. However, there is opportunity now to pick up bargains while the “masters of the universe” try to figure out what went wrong and reset their code for the next irrational move to the upside.]]> Fri, 14 Nov 2008 11:23:06 -0500
www.bloomberg.com/news...

If you’re getting into trading seriously, I think it’s important to understand this. Ironically, these rational proprietary programs (basically more sophisticated investools), helped cause the very irrational crash of ’08, by going into self-reinforcing routines that kept triggering lower and lower stop-loss sell orders, overriding all fundamentals.

It’s fascinating to observe that when the future is supposedly predicted, the very knowledge of the prediction en mass ends up changing the future outcome.

IMO trading is a huge waste of time and effort directed toward something that provides little to no value to society. However, there is opportunity now to pick up bargains while the “masters of the universe” try to figure out what went wrong and reset their code for the next irrational move to the upside.]]> http://seekingalpha.com/article/105441-trump-to-lenders-you-re-sued?source=feed#comment-304538 304538
Talk about killing the golden goose.]]> Wed, 12 Nov 2008 17:32:35 -0500
Talk about killing the golden goose.]]> http://seekingalpha.com/article/105526-the-most-misunderstood-chart-of-all-time?source=feed#comment-304528 304528
I think the other interesting thing this graph shows, is that in effect, the productive capability of the nation is more and more flowing to debt since money became fiat.

It is also interesting to see in this graph that post-fiat recessions (early 1980s, 1990s and 2000s) are mere blips compared to the 1930s.

I think this trend ends up in one of two places: you hit a theoretical max and oscillate about this max, or have hyperinflation and all debts are cleared.]]> Wed, 12 Nov 2008 17:22:30 -0500
I think the other interesting thing this graph shows, is that in effect, the productive capability of the nation is more and more flowing to debt since money became fiat.

It is also interesting to see in this graph that post-fiat recessions (early 1980s, 1990s and 2000s) are mere blips compared to the 1930s.

I think this trend ends up in one of two places: you hit a theoretical max and oscillate about this max, or have hyperinflation and all debts are cleared.]]> http://seekingalpha.com/article/104507-the-bleak-christie-s-sale?source=feed#comment-299719 299719
That way a painting could be bought and sold multiple times simultaneously (on paper), and many people would be able to enjoy owning works of art and speculating on their values without actually owning them.

(I'm joking of course - we really don't need this) ]]> Thu, 06 Nov 2008 17:11:45 -0500
That way a painting could be bought and sold multiple times simultaneously (on paper), and many people would be able to enjoy owning works of art and speculating on their values without actually owning them.

(I'm joking of course - we really don't need this) ]]> http://seekingalpha.com/article/103197-why-jim-rogers-is-still-bullish-on-grains-and-gold?source=feed#comment-295225 295225
I remember during the tech boom everyone was calling Buffet a man of the past and out of touch because of his archaic habit of focusing on fundamentals. He was eventually vindicated.]]> Fri, 31 Oct 2008 12:35:09 -0400
I remember during the tech boom everyone was calling Buffet a man of the past and out of touch because of his archaic habit of focusing on fundamentals. He was eventually vindicated.]]> http://seekingalpha.com/article/103010-the-home-ownership-bubble?source=feed#comment-295149 295149
Home ownership might be a bit of a misnomer - the other trend that is going on behind this graph is that increasingly, new "owners" are basically renting from the bank.]]> Fri, 31 Oct 2008 11:22:32 -0400
Home ownership might be a bit of a misnomer - the other trend that is going on behind this graph is that increasingly, new "owners" are basically renting from the bank.]]> http://seekingalpha.com/article/103208-is-the-financial-industry-salary-boom-over?source=feed#comment-295122 295122
It will be nice to see useful people finally getting paid what they are worth (and vice versa).]]> Fri, 31 Oct 2008 11:09:42 -0400
It will be nice to see useful people finally getting paid what they are worth (and vice versa).]]> http://seekingalpha.com/article/102154-sluggard-silver?source=feed#comment-292573 292573
With respect to silver production, approximately 60% comes from other metal mines as a byproduct.

When commodity values drop below the cost of production, these mines will simply shut down.

In a normaly recessionary environment, the existing surplus warehouse stockpiles will be drawn down unitl the price rises above the cost of production and the mines then reopen.

However, In our bizzare recessionary environment, the existing stockpiles of silver (and all metals by the way) are by all historical standards...LOW. It is estimated that there are now approximately only 1 billion oz available to investors compared to 20 billion oz in the 1970s. This is the result of decades of skewed trading to the short side making silver almost not worth the effort to mine and produce.

Watch this market closely to see if Adam Smith eventually triumphs.]]> Tue, 28 Oct 2008 13:01:50 -0400
With respect to silver production, approximately 60% comes from other metal mines as a byproduct.

When commodity values drop below the cost of production, these mines will simply shut down.

In a normaly recessionary environment, the existing surplus warehouse stockpiles will be drawn down unitl the price rises above the cost of production and the mines then reopen.

However, In our bizzare recessionary environment, the existing stockpiles of silver (and all metals by the way) are by all historical standards...LOW. It is estimated that there are now approximately only 1 billion oz available to investors compared to 20 billion oz in the 1970s. This is the result of decades of skewed trading to the short side making silver almost not worth the effort to mine and produce.

Watch this market closely to see if Adam Smith eventually triumphs.]]> http://seekingalpha.com/article/101817-gold-in-a-credit-crisis?source=feed#comment-291571 291571
A speculative short position is NOT A FUND LIQUIDATION, it is capital at risk. A speculative short position in a silver secular bull market - equal to the entire COMEX warehouse stockpile - is an INSANE level of risk...

...unless one knows it is a sure thing.

For an alternative view on these matters, check out www.investmentrarities...
]]> Mon, 27 Oct 2008 12:05:13 -0400
A speculative short position is NOT A FUND LIQUIDATION, it is capital at risk. A speculative short position in a silver secular bull market - equal to the entire COMEX warehouse stockpile - is an INSANE level of risk...

...unless one knows it is a sure thing.

For an alternative view on these matters, check out www.investmentrarities...
]]> http://seekingalpha.com/article/102027-what-if-warren-buffett-is-wrong-about-the-markets?source=feed#comment-291506 291506
This is the way investing used to be before Wall Street somehow convinced everyone that trading is investing.]]> Mon, 27 Oct 2008 11:16:07 -0400
This is the way investing used to be before Wall Street somehow convinced everyone that trading is investing.]]> http://seekingalpha.com/article/101280-pay-attention-to-indian-silver-buying-spree?source=feed#comment-289010 289010
See for yourself: www.usmint.gov/mint_pr...

Interestingly, the dollar value of silver eagles sold this year is only slightly less than the dollar value of gold products sold by the mint - and both are up sharply this year.

The investment demand is there. Now where is the supply?]]> Thu, 23 Oct 2008 15:22:14 -0400
See for yourself: www.usmint.gov/mint_pr...

Interestingly, the dollar value of silver eagles sold this year is only slightly less than the dollar value of gold products sold by the mint - and both are up sharply this year.

The investment demand is there. Now where is the supply?]]> http://seekingalpha.com/article/100538-is-gold-ready-to-fly?source=feed#comment-287197 287197
THERE ARE TOO MANY PEOPLE MAKING A LIVING OFF TRADING right now. There is very little value add to society in the process of trading.

The stock market is a secondary market driven by fear and greed. It absorbs too much of our attention, and too much of our capital all in excess of its only value add of price discovery. Aside from investing at the pre-IPO or IPO stage, when you make a trade in the stock market, you are merely circulating currency.

Real capitalism is when you deploy capital to add value to society (i.e. building a power plant). You are rewarded according to the risk you take and the value you bring to society.

I don't know how to fix this problem, or if it even possible. Personally, I am investing my surplus cashflow into my own businesses going forward, at modest returns based on the value they provide.]]> Tue, 21 Oct 2008 13:28:33 -0400
THERE ARE TOO MANY PEOPLE MAKING A LIVING OFF TRADING right now. There is very little value add to society in the process of trading.

The stock market is a secondary market driven by fear and greed. It absorbs too much of our attention, and too much of our capital all in excess of its only value add of price discovery. Aside from investing at the pre-IPO or IPO stage, when you make a trade in the stock market, you are merely circulating currency.

Real capitalism is when you deploy capital to add value to society (i.e. building a power plant). You are rewarded according to the risk you take and the value you bring to society.

I don't know how to fix this problem, or if it even possible. Personally, I am investing my surplus cashflow into my own businesses going forward, at modest returns based on the value they provide.]]> http://seekingalpha.com/article/99979-gold-s-relationship-with-real-estate?source=feed#comment-283110 283110
In the early 1970s, shortly after the US defaulted on its gold standard, you could buy an average home in the US for 200 to 300 oz of gold. However, during the subsequent crisis of confidence of 1979/80, the ratio dropped to around 100 oz per home, simply because the value of gold skyrocketed.

In 2001, the average US home in gold peaked at a valuation of around 700 to 800 oz. Since then it has declined steadily to around the 300 oz level. If we are to see a re-test of the 100 oz mark, either homes would have to decrease in value another 2/3 (!!), or gold would have to increase in value by three times, or some intermediate combination of the two.

I'm not sure if this 100 oz valuation will be retested anytime soon, but I do get the sense that Gresham's Law (good money goes into hiding when bad money appears, en.wikipedia.org/wiki/...) will act even stronger in the years to come until we can figure out some way of putting ridges on "paper money".]]> Wed, 15 Oct 2008 14:08:24 -0400
In the early 1970s, shortly after the US defaulted on its gold standard, you could buy an average home in the US for 200 to 300 oz of gold. However, during the subsequent crisis of confidence of 1979/80, the ratio dropped to around 100 oz per home, simply because the value of gold skyrocketed.

In 2001, the average US home in gold peaked at a valuation of around 700 to 800 oz. Since then it has declined steadily to around the 300 oz level. If we are to see a re-test of the 100 oz mark, either homes would have to decrease in value another 2/3 (!!), or gold would have to increase in value by three times, or some intermediate combination of the two.

I'm not sure if this 100 oz valuation will be retested anytime soon, but I do get the sense that Gresham's Law (good money goes into hiding when bad money appears, en.wikipedia.org/wiki/...) will act even stronger in the years to come until we can figure out some way of putting ridges on "paper money".]]> http://seekingalpha.com/article/99424-this-isn-t-a-bottom-it-s-a-disturbance-in-the-force?source=feed#comment-279360 279360 Fri, 10 Oct 2008 16:58:39 -0400 http://seekingalpha.com/article/99023-global-financial-crisis-makes-oil-a-great-hedge?source=feed#comment-277893 277893
Why on earth would I produce oil if I'm losing money on each barrel? I'm going to shut in my wells and tell everyone to go home.

Oil is NOT getting cheaper to produce. It is getting more and more expensive to produce. The world is still dependent on it for virtually all of its transportation needs. Go short if you must, but only on a short term basis, please.]]> Thu, 09 Oct 2008 13:32:53 -0400
Why on earth would I produce oil if I'm losing money on each barrel? I'm going to shut in my wells and tell everyone to go home.

Oil is NOT getting cheaper to produce. It is getting more and more expensive to produce. The world is still dependent on it for virtually all of its transportation needs. Go short if you must, but only on a short term basis, please.]]> http://seekingalpha.com/article/96400-the-artificial-inflation-of-stock-prices-due-to-the-short-selling-ban?source=feed#comment-259574 259574
Never mind that short sales - indeed NAKED short sales - are still A-OK for distorting the rest of the equities and commodities markets.

What an age we live in.]]> Fri, 19 Sep 2008 17:35:39 -0400
Never mind that short sales - indeed NAKED short sales - are still A-OK for distorting the rest of the equities and commodities markets.

What an age we live in.]]> http://seekingalpha.com/article/96330-precious-metals-scapegoats-to-skyrockets?source=feed#comment-259410 259410 Fri, 19 Sep 2008 15:17:04 -0400 http://seekingalpha.com/article/94767-ishares-silver-trust-inventory-climbs-as-metal-price-plunges?source=feed#comment-251718 251718
The "price of silver" we are seeing has little relation to the underlying physical product. This is easy to do thanks to how the futures exchanges have been structured. On the futures exchanges market makers can go long and short at the same time being both buyers and sellers setting prices in a zero sum game. Also, there is no obligation to physically deliver on a contract - you can pay out in cash equivalent, therby discouraging those who hope to arbitrage between paper and physical. Furthermore, there are limits on the amount of physical product that can be taken off an exchange per month - this is what stopped outsiders like the Hunts. And 100 times the amount of silver trades on paper than actually physically backs it - in other words if they are not able to source the silver from elsewhere, the intrinsic value of 99 out of 100 contracts is ZERO.

Here's the revelation: the "market price" that we all check in the morning has the appearance of reality in that it's a number we all look to to determine our reality. In other words we make it real because we believe it to be real. However, does it really represent the value of silver? Or is it more and more beginning to represent the value of paper?]]> Thu, 11 Sep 2008 12:21:32 -0400
The "price of silver" we are seeing has little relation to the underlying physical product. This is easy to do thanks to how the futures exchanges have been structured. On the futures exchanges market makers can go long and short at the same time being both buyers and sellers setting prices in a zero sum game. Also, there is no obligation to physically deliver on a contract - you can pay out in cash equivalent, therby discouraging those who hope to arbitrage between paper and physical. Furthermore, there are limits on the amount of physical product that can be taken off an exchange per month - this is what stopped outsiders like the Hunts. And 100 times the amount of silver trades on paper than actually physically backs it - in other words if they are not able to source the silver from elsewhere, the intrinsic value of 99 out of 100 contracts is ZERO.

Here's the revelation: the "market price" that we all check in the morning has the appearance of reality in that it's a number we all look to to determine our reality. In other words we make it real because we believe it to be real. However, does it really represent the value of silver? Or is it more and more beginning to represent the value of paper?]]> http://seekingalpha.com/article/93651-gold-futures-dirty-secret-part-i?source=feed#comment-244616 244616 I too have experienced the same thing: the dealer that I have dealt with for the last three years is completely out of silver, and is running low on gold. And this is a MAJOR dealer in my area.

Obviously, the recent rigged "long squeeze" has given someone a chance to unload their paper to buy the physical before the next collosal short squeeze.]]> Wed, 03 Sep 2008 12:35:36 -0400 I too have experienced the same thing: the dealer that I have dealt with for the last three years is completely out of silver, and is running low on gold. And this is a MAJOR dealer in my area.

Obviously, the recent rigged "long squeeze" has given someone a chance to unload their paper to buy the physical before the next collosal short squeeze.]]> http://seekingalpha.com/article/93405-a-compelling-energy-ratio?source=feed#comment-244015 244015
Could the downward trend in your first graph imply that since 2003 oil is seeing more upwards pressure on the cost of production than natural gas?

I think some of us sense that the "low hanging fruit" is gone with respect to the world's major oilfields.

That it pays (and pays well!) to scrape up two tonnes of dirt in the tar sands just to squeeze out one bbl should tell you something.

Unless the cost of producing natural gas also rises to meet the historical norm, this might be a long-term downward trend and you might not see a bounce to the extent you are expecting.]]> Tue, 02 Sep 2008 15:19:08 -0400
Could the downward trend in your first graph imply that since 2003 oil is seeing more upwards pressure on the cost of production than natural gas?

I think some of us sense that the "low hanging fruit" is gone with respect to the world's major oilfields.

That it pays (and pays well!) to scrape up two tonnes of dirt in the tar sands just to squeeze out one bbl should tell you something.

Unless the cost of producing natural gas also rises to meet the historical norm, this might be a long-term downward trend and you might not see a bounce to the extent you are expecting.]]> http://seekingalpha.com/article/93067-is-this-the-death-of-gold-silver-stocks-part-ii?source=feed#comment-240921 240921
I must also admit I am somewhat mystified by all this talk of the juniors collapsing. Collapse from what? You can find good adequately capitalized juniors now for a lower "metal in the ground" price than you could in 2003!]]> Thu, 28 Aug 2008 11:57:09 -0400
I must also admit I am somewhat mystified by all this talk of the juniors collapsing. Collapse from what? You can find good adequately capitalized juniors now for a lower "metal in the ground" price than you could in 2003!]]> http://seekingalpha.com/article/93053-how-to-explain-fiat-currency-to-silverbugs?source=feed#comment-240890 240890 Thu, 28 Aug 2008 11:20:28 -0400 http://seekingalpha.com/article/93053-how-to-explain-fiat-currency-to-silverbugs?source=feed#comment-240887 240887
(This is not a trick question).]]> Thu, 28 Aug 2008 11:18:12 -0400
(This is not a trick question).]]>