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  • Estimating the Breakeven Costs of Shale Gas [View article]
    I agree there is a gas contango, but now that the oil contango is behind us and oil prices are shooting back up, we need alternatives and gas fits the bill. Developing world demands for oil will outpace available supply; peak oil is real and as China and India grow, so will energy demand/price. Pick your poison as they all have drawbacks. Gas is clean, abundant and cheap relative to oil. China knows this better than we do and will pounce on gas in due time (CNOOC purchase of Chesapeake signals that they want Shale drilling technology and will probably produce equipment to drill in the future without us). The Chinese will further increase, the industrial and consumer demand (as well as the price) of natural gas.

    Pickens is right; development of a natural gas powered truck fleet is a sound idea. Best to get in on natural gas plays while you can, now that the elevator is near ground level again. It is a long term investment, though all it takes is a sympathetic U.S. Congress, to shorten the "long" play.

    "We are not there yet"? When we get there, the opportunity may have already passed us by.
    Nov 30, 2010. 03:05 PM | 5 Likes Like |Link to Comment
  • Does Rising Dollar Signal Beginning of the End for Commodity Bull Run? [View article]
    From short term perspective of 6 months or less, maybe commodity prices will stall or correct. From long term perspective, wake up! The dollar is doomed to depreciate and commodity prices will charge ahead. The world needs energy and "stuff" a lot more than it needs rapidly growing piles of increasingly worthless green paper.
    Oct 20, 2010. 01:27 PM | Likes Like |Link to Comment
  • Chinese Rate Hike Slams Equities [View article]
    The Chinese are thinking about the Chinese, and the Americans are thinking about the Americans. This is not a love in; just a place where our interests coincide...for now. But after the chips fall, a strengthening dollar gives the Chinese a chance to unload some treasuries that will be worth more, and buy less expensive commodities. All China needs to do is mention rate hikes and there is a reversal of fortunes from what occurred with the prospect of more US quantitative easing. What is striking is who is in the driver's seat now; China is now the de facto swayer of markets, and we are along for the ride.
    Oct 20, 2010. 01:42 AM | Likes Like |Link to Comment
  • The Fed’s BigTease Continues [View article]
    Better to pump the economy up then to allow it to derail into deflationary paralysis. But the self cannibalization can continue only so long; when the world finally decides that the greenback peg is too much of a moving target to use as a medium exchange, then the international community, including OPEC, will look elsewhere. That will limit the Feds options as the intrinsic worth of the
    dollar will rapidly plummet and accelerate the inflationary spiral to new levels. It
    will be like the dark days of The Weimar Republic. What then? Better to view
    dollar devaluation as an equitable tax on all Americans. Just because there is
    the remote chance that the Fed's moves will improve the export market does
    not mean it will work as intended and does not mean it will be a good thing. We are running out of time.
    Oct 10, 2010. 03:23 PM | Likes Like |Link to Comment
  • Did a Trade War Just Break Out? [View article]
    This bill is terrible because it indirectly will punish those whom it is intended to benefit. The legislation shows bad timing as well; why pick a fight when you are exhausted and sickly? Will it really help jobs? Do we really want them to stop buying our debt and subsidizing our lifestyles with inexpensive goods? Do we want them to lobby to eliminate the US dollar as the petrodollar and the peg for all other currencies. If so, then we need to anticipate blowback and an even greater risk of hyperinflation and lower living standards in the US...China will eventually run into internal problems without our input, as the Chinese middle class demand more stuff.

    I agree and hope that the senate crushes it as well.
    Sep 30, 2010. 11:29 AM | 3 Likes Like |Link to Comment
  • How Investors Get Suckered Time After Time [View article]
    As I understand it, the Main reason that gold crashed in relative value (U.S. Currency) during the 1990's was because we had massive appreciation in equity prices without proportionate inflation; it made no sense to buy or hold gold under these unusual circumstances. Why did this occur? 1. Tech bubble: but this does not explain the low inflation rate. 2. The Chinese manufactured and sold us more goods and undercharged for these goods to stimulate industrial growth. The Chinese government then turned around and bought U.S. Bonds to help subsidize our purchasing power; at the same time, China invested minimally in domestic programs in order to prevent domestic inflation (labor and goods costs). The yuan remained pegged to the dollar as well. Therefore, a Chinese subsidy prevented significant inflation in this country during one of the greatest stock market price climbs in American history; not normal circumstances. Well, things are different now. We will eventually be responsible for paying back our subsidized excesses or devalue our currency either actively or passively (through inflation.) If we are to have significant growth going forward, inflation is better than deflation. We have printed hundreds of billions of dollars in an effort to kick start the economy through credit. If, or rather when, this money makes it out of banks then we will have a huge problem. Then the value of Chinese debt will decrease which will anger the Chinese. Will they buy more debt then? I doubt it. My best guess is that in the near and intermediate terms, the Chinese have the ability to generate inflationary and deflationary cycles in the American currency. In doing so they can dump dollars, during deflationary periods and buy commodities (buy cheap commodities with more valuable dollars) and sell expensive commodities during inflationary periods and buy more Dollars (sell expensive commodities for cheap dollars.). The Chinese government does not betray it's secrets very readily so we will not see these cycles coming until after China controls a large swath of industrial commodities and precious metals. Furthermore, will Saudi Arabia stop backing the petrodollar? Quite possibly. Then the dollar may go down in value, possibly quite rapidly. The bottom line is that gold may have cycles in the near and intermediate term, but the pressure on the dollar is real and the world's faith in the U.S. Dollar as a reserve currency (and for that matter, the world's faith in all fiat currencies) has/have been eroded. Though I am not in finance and not an expert by any stretch, nor do I give investment advice, I think that gold has a bright future. Any comparison of U.S. Dollar denominated gold prices now and in the future to the 1980-2000 period seems irrelevant. We need inflation just to keep the stock market afloat. Unless we can find someone else to sell us cheap goods and buy our massive debt pile in return, then the U.S. Dollar appears not to be a good long term bet and gold appears a good safe haven.
    Sep 17, 2010. 12:48 AM | 3 Likes Like |Link to Comment
  • Rethinking Oil and Natural Gas Prices [View article]
    Excellent article. I am not in the energy industry, but am wondering about the viability of gas to liquids coversion if the technology is perfected or at least improved and scaled in the future. As I understand it, there have been cost overruns in some GTL projects, but if the gas to oil price spread is large enough (like it is now) these projects can pay off. I agree with assertions that we need to strike a balance between environmental and economic concerns and that the conversion of NG to liquid petroleum synthetics will generate more CO2 and reduce some of the environmental benefits of NG. However, if the economic situation is dire enough to warrant an oil substitute, and natural gas is abundant and cheap, there would be tremendous financial incentives to develop new technologies or approaches that permit GTL to progress.

    Why GTL? For one it would eliminate the costly steps of retrofitting vehicles, lessen the explosive or terrorist threat risks of more ubiquitous but combustible natural gas. I believe GTL would also provide cleaner diesel fuels. From an economic viewpoint, the price spread needs to come down
    Apr 12, 2010. 10:30 PM | 2 Likes Like |Link to Comment
  • Bank of America, Citigroup, JP Morgan and Wells Fargo Stocking Up on Liquidity [View article]
    Looks to me like the huge cash infusions to the banks were to serve one purpose only: Stop deflation while discouraging lending or even tying bankers hands to keep cash on the books. In this way, solvency is buttressed but inflation is theoretically kept low and circulating money supplies increase little. In the event that money does make it out and there is inflation, then all of these bad loans are reduced by decrease in the value of the dollar through a dilutional effect. That being said, inflation remains a better option than deflation and so far, it has worked. But what about unintended and unanticipated consequences? Stay tuned....
    Nov 3, 2009. 10:23 PM | Likes Like |Link to Comment
  • US Dollar: "I'm Not Dead Yet!" [View article]
    Look for trends in the interaction between emerging economies (especially China) and U.S. monetary policy over the past 20 years. Who is leading whom? The Chinese have been slowly amassing money and investing it in dollars; as their stake has grown, so has U.S. borrowing of easy money 2 stock market gold rushes (1992-2000 and 2003-2008) . Chinese progress has driven up the cost of all commodities. Then we have the crash of 2008 and all the hedge funds sold off their commodities at fire-sale prices. Meanwhile, the cash rich Chinese gobbled up these commodities as fast as U.S. fund managers could unload them. Now we have a run up in commodity prices and Chinese investment in domestic infrastructure which indicates that they might no start spending this money at home and developing their economy from the demand side. But what about these now again expensive commodities and all those Chinese T-Bills that are depreciating in value? If I were China (and make no mistake, the ball is in their court, we are just too naive or arrogant to accept it) I would maneuver for another crash that necessitates a flight to safety (still the American Dollar and Yen (but less so the dollar, now that we have all these dollars floating about and in bank vaults and a negligible interest rate). Then all these people/funds who gobbled up commodities on margin and neeed to cover their positions sell off; then the commodity price drops and the dollar gains and viola! We have another fire-sale on commodities so the Chinese can unload more of their (now more valuable) U.S. dollar. Then expect a cycle of these boom busts but at lower amplitude as the dollar continues its inexorable slide to worthlessness.
    Oct 7, 2009. 03:00 PM | 2 Likes Like |Link to Comment