stimulated

The Oil Price Conundrum

Oil will be one of the best investments of the next 2 years---might not be a day trade, however. Pls quote me on this. USO and DXO.

The Good, The Bad, And the Inaccurate Oil Forecasts

Even if Oil's downside is another $10-20, the risk / reward is one of the best oppurtunities currently:

1) Illiquidity continues to prevail. Hedge funds must raise cash and are forced to sell. Oil is under short term pressure.

2) to paraphrase Jim Rogers -'they have to cut down new forrests inorder to keep up w the Fed's new money printing press'- dollars will become less valuable over time and Oil, priced in dollars, will benifit.

(At this level, Oil is also priced here where is has been off and on where it has been over the last 20 years, at peaks. Dollars today- even w the short term deflation argument- are less valuable than in 1988.)

3) Has demand really waned as fast as thought? I dont know- but I am skeptical of this key argument for cheap oil.

4) emerging markets growth has slowed- but will conitune to grow. Oil goes up.

5) Current prices cut the NPV's of future supply projects- including ones for alternative energy. Oil goes up.

6) Lastly, unlike any number of securities, oil will never go to zero.

These are just my own personal observations. Let me know any counter arguments.

JC

Last Thursday Was the Bottom - It's Time to Get Back in

I agree w cos1000 in saying the government has been working on preventing "complete melt down in the world financial markets". SO FAR complete, utter, chaotic meltdown has been avoided. Hurray!!!

The ENTIRE SYSTEM IS IN QUESTION and the 'bad' is just starting to work its way through the economy. The 2002 tech bust was from one ancillary industry- not the entire bedrock of capitalism and the economy. Siimilar lows have only mometarilary been reached.

6 months of forward looking is not enough time to rebalance the excessess in leverage and unreasonable low costs of capital bourne from idiotic beliefs that the world is risk free.

Things are just STARTING TO GET BAD.







Notes for Tactius: Leverage : down ; Cost of Credit : up.


On Nov 30 02:42 PM cos1000 wrote:

> Market Bottom?? The Bottom, wherever that might be this time around,
> keeps being put off by artificial means. The government stimulus
> is just an attempt to stave off a complete melt down in the world
> financial markets. Government debt guarantees, the printing of money,
> all to support derivative financial instruments that have nothing
> to do with the underlying economy. All of these Credit Default Obligations
> that are off book, will need to be brought on to these companies'
> books in the upcoming year. That combined with the Commercial RE
> market, yet to be hit with defaults and foreclosures, bringing further
> job losses and bankruptcies still not yet reported, makes trying
> to predict a bottom in the stock market foolish at best. For traders
> temporary tops and bottoms are opportunities to make money, but for
> those trying to do business in this environment the waters are still
> treacherous. A buy and hold attitude in this environment will just
> was away any wealth a long term investor might have left. Moving
> to insured deposits and precious metals is more appealing here, preserving
> capital and taking advantage of fiat currency inflation over the
> next 12 -18 months.
>
> Other than bail out money from the government and the lowering of
> interest rates, nothing has really occurred to unwind the Residential
> RE market to a point of stabilization represented by flat values
> and moderate sales. With Commercial RE, paper is more short term
> and will be called in to reset over the next 12-18 months, with much
> tighter requirements. Foreclosures and bankruptcies in this sector
> will cause a new round of heartaches. With store closings(HD), and
> retail bankruptcies (Circuit City), not only Mall, but Office Building
> occupancy and revenues will be under pressure.
>
> I just can't see anyone calling a bottom after an 18% run, given
> all that is known and unknown about this historic economic event
> yet. I cannot trust the leadership that sat by watching all this
> develop, be the same experts that now will tell us that it is all
> OK now. I don't fault the author for being hopeful, but looking at
> the charts will show that we just came off a lower bottom and haven't
> even broke through the 13DMA yet to establish a higher top. My take
> is that we will not.

Last Thursday Was the Bottom - It's Time to Get Back in

The bounce in the stock market is the result of the announcement of more bailouts- in particular C and the mortgate market- which might actually help homeowner a bit- but on ave. 100bps. That is is great- but it does not fundamentally change the stituation. Here are a few ideas to consider before you do something stupid- like go long.

1) 70% of GDP is consumer spending. -- where is this going? Oh and on the retail front --the customer count / traffic this weekend was Ok---but just remember that most stores had huge mark downs to attract them.

2) House prices- the largest source of wealth for Americans- continues to go down. People cant afford what they used to. Period. Banks don't want to lend to even close to the LTVs they did prior (ie. 100k down gets you a 300k house vs two years ago when 100k got you a 1mil house)

3) Earnings in the S&P havent been fully revised downward- because of the high levels of uncertainty-- YES -its unchartered territory people- GDII- and analysts still bad case of perma-bull-I-tis. This might be the most important factor.


Governments dont fix economies- consumers do. The bailout reminds me of trying to sandbag a rising tide. Its not going to stop years of unbridled liquidity being reined in. Things will recover, but seriously- buy now?? Buyer beware.