balois

The SEC Surrenders to the Oil Industry

@Alan von Altendorf
Thanks much for info. So, if it is not on* their balance sheets, I conclude that the risk of over-, under- or vague evaluation of reserves of the oil & gas industry may be annoying to shareholders, energy planners and the taxman but can hardly be qualified as "systemic" (meaning: the known oil & gas world would collapse if the reserves of one or the other would turn out to be bogus, grossly overvalued - btw wasn't t that the case with Shell, some years ago?)

Have a good day

*And if it is off their balance sheets, it does not really affect the solvency and capital adequacy, no? This is in stark contrast to the notional** trillions of derivative contract values of dubious quality with their on-balance sheet billions of positive/negative replacement values at financial institutions, with their comparatively minuscule equity but still very much intact monstrous government bail-out guarantees.

**GS' trillions of "notional" contracts www.marketoracle.co.uk... BIS OTC Derivatives Stats Q2 09 www.bis.org/statistics...

The SEC Surrenders to the Oil Industry

"...What are the consequences of allowing multi-billion-dollar systemically important multinational corporations to report their assets using proprietary mark-to-model tools involving discredited Monte Carlo simulations? I think we all know the answer to that one..."

No - sorry, I do not. As an example, I had a look at the balance sheet of Exxon Mobil Corp. here www.sec.gov/cgi-bin/vi...
I see Inventories (that s where the reserves ought to be, no?) crude, products and - to be generous - other current assets, together abt 15 billion. Then there are Investments, advances and longterm assets at 32 billion. OK, let s again be generous and also include the 7 billion intangibles. That adds to 54 billion, total, right? Against that we have 112 billion equity. So in my simple book, they could write down all their inventories to z e r o - a couple of times over - and still have some equity left!

Can someone help, please?!?

Time for the U.S. Economy to Reindustrialize

...How can we rebuild a strong manufacturing capacity that can compete in the world market while employing human beings?...”

I am not sure I get this but if it is meant to advocate building a manufacturing base without (qualified) human beings then this contributors view of the real economy in the real world is mightily skewed, imho.

Have you noticed that in countries (or areas) with a tradition of a strong small and medium manufacturing base, owned and operated by human beings, delivering top quality products and related services, the great recession is being managed as one of those economic ripples that is part of life. And home foreclosures are virtually nonexistent, just to mention one side effect. Even if the ride is getting bumpy again, their chance of survival is better than any proxy economy where it is left to others to do the real work. And China or any other “cheap” labor country is not such an issue either. Only the availability of enough qualified human beings.

Of course commentators who have never run a business (i.e. noted economists, analysts and media talking heads) pontificate about how wrong it is when, during harder times, companies hang on to their employees, thus preserving their real capital: human know-how. Another classic is when these egg heads worry about exchange rates, especially the ascent of the Euro (or falling Dollar), preach local consumption and predict the imminent demise of the “export dependent” economies of some countries that are full of specialist enterprises but are – oh wonder – still able to keep on selling to the world at large.

Our gurus forget that for excellent products and services there are only a few problems: Know and keep your customers happy, do not expand too fast and, if at all possible, stay away from banks and avoid going public. And since these successful leaders really, truly believe that their most precious asset is their people, they do not panic and have no worry, to share the burden of lean times, when necessary, as well as the profit during good times, even ownership of the company.

Have a good day


NB: As a side line: I heard somewhere that parts and replacement of critical steam generators for the US Nuclear Sub fleet have to be imported, serviced by specialists from abroad. Well if this is a indication tinyurl.com/l6g352 (one heavy forging press left in the US for ingots, less than half the size of foreign competition) then this may be more than just gossip?

Dave Fry: Thoughts on Leveraged ETFs

I agree with Mr Fry
There must be some serious sour grapes among brokers. I am not sure this is accessible to US investors but I ve been using the Lyxor ETF XBear DJ Eurostoxx 50 (bloomberg BXX:FP) to hedge my stock portfolio for preservation - and it works perfectly. I ll intend to keep it, especially in these volatile times, even medium term, up to 3 to 5 years or so.

Have good day

Gold Transforming into a Completely Demonetized Wealth Asset

Very well said, Mr. Price.

Gold has the voluntary recognition and consensus of trust of the people - all over the world.
Depending war and peace, bad or good economic times, the perception of us humans about the State of our Planet, other stores of wealth and means of barter and trading might take leadership over gold, hence the "value" can gyrate substantially, but it certainly warrants to take history into account and diversify ones portfolio accordingly.

have a good day

Goldman Sachs: It's Not About Taking Risks

"...To lose money on a total of only three days over the last two quarters defies the rules of logic..."

Right - somebody at GS must have messed up really badly on those three days. Gimme Zero % Fed Funds and I ll guarantee, you wont lose on any day!

have a good day

Understanding Energy: Professional Money Management and Peak Oil

...or electricity (from a multitude of non-hydrocarbon sources, nuke, hydro and so on)? Have these peak oil scare mongers been to a car show latley?

Have a good day


On Oct 27 09:49 AM koolsool wrote:

> How would the peak oil story change if we switched transportation
> fuel from gasoline to natural gas??

Lehman's Collapse, Revisited

Joseph L. Shaefer writes:

“...I'm at the annual Wall Street head traders conference -- I can report they have learned NOTHING from the demise of Lehman. Like rats that eat each other when no other food is around, as long as they can see their own tail intact they are happy...”

Amen.

How well intentioned and naïve can one allowed to be before it becomes suspicious behavior, a convenient camouflage of, in fact, being in cahoots with the perpetrators? This includes a – these days - very sheepish A. Greenspan, who invokes, as explanation and excuse for his failings, the force majeur of the “imperfect nature of human beings” that suddenly descended upon the delicate financial construct that was his Wall Street*, full of honorable gentlemen and ethical ladies ... what a fool!

Working out of offices on lower Broadway (non financial sector) for more than a decade and spending the odd happy hour at the old Harry s Bar at Hanover Square, Delmonico s on Beaver Street and some other dives, confirmed to me that Frank Partnoy s book Fiasco was not a tale of a failed trader but plain fact. It also helped me, later, as your average gullible investor, to recognize and avoid some of these financial pit bulls on Wall Street* who have only one thing in mind: Rip off your face.

If there would be a will by the regulators, the politicians, the central bankers, to really clean up the Street* and make it safer, there are a few very effective and easy to execute solutions how to get on top, control and, if no other remedy works, decimate that wilding gang. Just starve them of Government feed and they ll fall on each other, rip themselves apart, cannibalize their own specie to oblivion (metaphorically speaking, of course). IF there would be a will...

Have a good day


*reps for City of London, Frankfurt, Zurich, Spore, Paris, HK, etc to be fair

Stock Price Strength Notwithstanding, Economy and the Dollar Are Still on the Skids

All other things being equal, I do expect that my (few) stocks quoted in US Dollar increase in inverse proportion to the Dollar s slide against the Index Currencies, because
- these US companies derive a good chunk of their revenue (also cost) in forex, overseas
- they have excellent products and services that tolerate price increases in US Dollar, without customers being turned away (or practically cannot do without, no or limited competition)
So anything around a, say, 20 % increase todate in my US Dollar quoted stock portfolio since early 09 for me simply represents correcting the forex effect.

Have a good day

Goldman Sachs: 'A Hybrid Hedge Fund and Bookie'

Brain washed? Collective blindness? Global dumbing down?
The Assets of the People of the United States, confiscated by the Washington Nomenclature and distributed to a few corrupt Comrades, dressed up as Wall Street Capitalists?
Where is the outrage? Where is the revolt?

Have a good day

September Unemployment: Ouch!

Just some outside (US) observation and question:

Weekly unemployment claims (as reported here seekingalpha.com/artic... ) is, I assume, a more or less robust figure, i.e. relatively easy to compile: number of claims, hard cash paid out, reported to the Bureau of Labor. And it does look quite positive or - more correct - a bit less negative.

Alternative measures of labor underutilization (as reported here www.bls.gov/news.relea... ) use metrics such as “marginally attached” and “discouraged” workers. The percentages do not look very good.

Given a total Civilian Labor Force of 153 Million people or thereabouts, I wonder how the Bureau of Labor comes up with the reported percentages? How and where do they find, count and evaluate the mood swings of all these “discouraged” workers – every month? No less to the tenth fraction of a percent? Precise but not accurate? Would appreciate pointers where I can find information about the methodology used, +/- uncertainty, confidence level, statistical population and so forth.

Have a good day

Scary Drop in Velocity of Money: Is Deflation Knocking?

Deflation – prices down, Inflation – prices up?

Top post, Michael Clark writes: “If the price of oil is going up and people are driving less and not buying oil, how can oil keep going up.” His answer is: “Manipulation”.

No wise guy here, but is this general wisdom correct? I do not think so. Prices – or better costing and pricing – of consumer goods can take on a life of their own, not necessarily linked with inflation/deflation (of money supply, debt, credit creation).

Sure, if less buyers are showing up at my gas station, I may try to keep on selling the same quantity of oil by lowering the price. But so does my buddy across the road. At some point, though, we are both unable to cover our fixed cost and stop the ruinous competition and actually increase prices to try to restore our margin in order to pay our bills – based on less oil sold.

All the way upstream, the same may happen: transport cost, storage, refining, repairs and maintenance cost must be distributed over – or covered by – a smaller cake of oil sold, hence cost per unit sold go up and prices may be adjusted – up.

When times are tough and governments are lacking money, it is also know that they increase taxes, royalties. So my cost go up even though I sell less oil.

And lets not forget: Cost may increase, irrespective of the quantity of oil sold, due to ever increasing environmental, safety, health concerns and related laws and regulations.

The same can affect a multitude of everyday products, construction, manufacturing, services. Hence the consumer sees prices going up although more foreclosed houses are lining his street and jobs are lost at a fast clip. He lives inflation during depressing, deflationary times.

Have a good day

AIG Is Dead, Long Live AIG

Now there s a juicy conspiracy theory rumored in Europe.

Consider:

- Unprecedented, gigantic Gov bail out to prevent the AIG house to go bust and burst open to the public eye, scrutiny.
- The ugly dozen investment banks kept entirely whole on their empty CDS bets - akin to reimbursing the losers on the roulette table. Keep them happy at all cost?
- Lame and tame political, media reaction to paying foreign banks in full for such pure casino gambling, eventually at the expense of the US taxpayer!
- Only most trusted members of the most inner circle of the US Treasury-Fed-Financial complex involved in the rescue effort.
- around the world, and specifically in Zurich, sizable office buildings, housing AIG related entities and nobody knows exactly what they are doing.

Unusual coincidences? Not so, if this is the reason:

AIG is/was the world wide offshore paymaster for the US intelligence agencies, the clandestine banker to the CIA & Co, to handle the myriads of financial transactions. AIG the secret G & A backbone of these US services. Without it, they cannot function. Hence the scramble to keep AIG from filing for ch 11 or similar open process... and at least some explanation for the relative resilience of the stock...

Nothing more exciting than a cockamamie conspiracy story to ponder over the weekend, no?

Have a good day

Prime Mortgages Are Also Going Sour

Gabe Borenstein – my favorite!

His clairvoyant prophetic words of wisdom Sep 22 2008 “...As the economy recovers, the financial issues will be resolved...”

But, when necessary, Gabe doesn't shy away from being brutally honest either: Oct 02 2008 “...Article after article on this platform spews economic garbage full of criticism and no logical and constructive ideas...”

And just so that we dummies do not forget his logical and constructive ideas:

Aug 21, 2008
“...both agencies (note: FNM, FRE) appear to be financially sound and their reserves are more than sufficient to cover any realistic exposure. Let's see if there are any more fairy tales left...”

July 20, 2008
“...It is the irrational rumors and the panic disseminated by some market segment and pseudo economists at a well known financial news TV program that have created the debacle...”

July 25, 2008
“...While economic deceleration is unnerving ,we are not in a recession...”

July 28, 2008   
“...All of the question marks about the U.S Financial institutions or system are waste of time...”

June 23, 2008  
“...Over the next 18 months, the Euro will slide to .80$...” (note: hurry up - 12 months down and we are at 1.45$)

June 20, 2008
“...the financial institutions...had written off most of the potentially risky exposure...”

May 07 2008
“...Perceived risks of today are not reality in the period ahead...”.

April 25, 2008
“...The housing market will recover by the third quarter of this year...all derivatives...will stabilize and stage a major rally...All the unrealized losses will turn into mega realized profits..”

April 09, 2008
“...the FED'S actions ,especially the "rescue" of Bear Sterns...had convinced me that the worse is over...”

March 30, 2008
“...all of the bond insurers can finally sit back and relax ...The FED ...is guaranteeing every institutional component of our system...”

Amen

GlobalX Launches First Pure-Play Nordic Region ETF

Dear Thomas Ekman,
you appear to be a most sincere and serious person and you are of course correct. But, similar to a very dear Norwegian friend of mine and acquaintances in Finland, they sometimes have a problem with my tongue-in-cheek sense of humor en.wikipedia.org/wiki/... . Sorry.
It was also meant as a bit of a jibe regarding some recent scaremongering broadcasts in the US re other countries "socialist" health care systems - without taking the trouble to look at all the facts and getting a more balanced view.
And of course I am looking forward to my next visit - taking along a few bottles as a gift, though...

have a nice day