FourBrane

Recession Is Over; Depression Has Just Begun

Good god! Jimmy Carter did all of this to us?
What load of tripe.

Liars, Damn Liars and Averagers: The Wall Street Journal on Stimulus

Socrateazz, tax cuts are not stimulative. It is shocking to hear so many intelligent people pretend that they are. What happens to tax money? The government spends every dime (and more), so taxed money always returns very quickly to the economy. On the other hand, individuals--most especially the wealthy--will generally "invest" large portions of the savings they get from tax cuts. Money they gamble on Wall Street is seldom productive or stimulative. Very little will ever cause a factory to increase output or a farmer to plant more corn. A significant portion winds up in Goldman-Sachs' shiny pockets or is lost into thin air when valuations decline. High stock prices just mean that the factory management rakes in millions in options money, pour their profits back into Wall Street buying some other company's stock so that a few more executives can pull billions out via their options packages. In short, six or seven thousand individuals get showered with cash beyond anyone's wildest need. It's like pouring all the fertilizer and rain on a ten square yards while the other acreage is left to fend for itself. That's not useful stimulation.

Jobs Report Better than Expected

Reading these comments, I discern two classes of people: a) "the go'mint is liars" and b) "all is gloom and doom, never to resume."
Whether you trust employment estimates or not, it is useful to remind yourself that the same people make these estimates each time. As Bespoke's scatter chart clearly shows, employment estimates more often fall on the Polyanna side and the most likely outcome is that reported numbers will be worse than estimated. This makes the difference between estimates this time (doom, doom) and reality (just gloom) quite interesting to anyone trying to figure out whether that vast and complex thing we call an economy is turning...and which way. Everyone making estimates must first make assumptions. We are seeing that the gloomy assumptions which lead to the current estimates didn't fit the facts.
Sure, employment numbers are horrific and will rise for another four months at least. Get over it. That's reality. Our job as investors is to look ahead into the fog trying to figure out where things will be in a year or two. To comment obsessively on how bad things are at the moment serves only to raise adrenaline levels, but not the quality of decisions.

Cramer's Stop Trading! The Bears' Big Bluff (4/17/09)

I'm no Cramer fan, but even a stopped clock is right two times a day. The bears here sound too confident and certain that they "know" what's going to happen and that's an alarm bell.

Unemployment numbers don't matter as much as some here seem to think. 90% of the newly-unemployed were barely making a living to begin with as, sadly, the first to go are always the ones who can afford it the least. Fat cats never lay themselves off, so the impact is always disproportionately directed to low-pay jobs. Hence, the economic impact is less than you might think.

The consensus appears to be that we'll be seeing an upturn in the economy by the fourth quarter, even though unemployment won't come down until much later next year. But the unemployed don't buy airplanes, new co-generation units, etc.

A summer pull-back, if seen, will be nothing more than the usual "everyone's-away-at-th... thing that happens every year.

Stewart vs. Cramer: A Cheap Shot

I don't understand what all the fuss is about. Cramer is a comedian. John Stewart is a comedian. Cramer spoofs market "analysts" while Stewart spoofs vidiot journalism. I don't expect real portfolio advice from Cramer and I don't expect real news from Stewart. I watch them both for the belly laughs.

Neither of these people are to be taken seriously and yet here I see a whole parade of people defending one or the other.

Everyone take a deep breath and remember Carville's famous guiding principle: IT'S THE COMEDY, STUPID!

OPEC's Cuts Can't Fight Global Recession Headwinds

Friday's drop in oil has to be seen in context: EVERYTHING has been dropping worldwide. Oil paid no attention to OPEC nor is it mechanically responding to supply or assumed demand destruction because the broader context is VALUE destruction. Market-wide, normal valuations (PE, etc) mean almost nothing. None of us are comfortable buying anything at any price (oil, gold, or grain) until we think we might actually have a chance to figure out the game.

Under these conditions, oil may momentarily drop to $30 and diamonds sell for the price of glass. The craziness probably won't end until at least the Japanese carry trade has been totally unwound and probably when most hedge funds are belly up with nothing left to dump.

The market is already pricing as though no one will ever drill for oil again. There are oil service companies selling at PEs below 2 right now. Their market values are below the fully depreciated replacement cost of their equipment...never mind other aspects of their usiness. Tellingly, even these companies can't be snapped up on the cheap because no one can borrow a dime.

It won't last. Without exploration, the price of oil will have to climb as pumping rates slowly decline. Peak oil is real and peak world population is nowhere in site.

Credit Default Swaps, Part Two: ICE and Other Exchanges

Aside from any likely share of the CDS market, volumes handled by ICE are still going up right now as the stock's price plummets. To date, October oil futures and options volume is 10% above an average month this year, while combined U.S. commodity, FX and Russell trading is up 37%. I don't have the patience to calculate the Canadian volumes as they don't report it conveniently.
Still, ICE is very thinly traded, so it cannot seem to get a stable price and that makes owning it (as I do) a difficult exercise in fear control. This stock bucks harder than a wild horse and many a rider has recently been thrown off.

Salesforce.com: Pricey and Coming Down Fast

SalesForce.com has been lifted by the fad for cloud computing. No largish company bets its business on off-the-shelf solutions, let alone solutions hosted "somewhere." What differentiates me from my competitors when they can rent the same business system I'm using? How can I know my data is secure? Who do I call when the site's down or there's a bug?
SalesForce is a model that might be attractive to a little company which can't afford the rupees to contract an Indian programmer and has an owner who believes pretty screens can make salesmen sell better (hah-hah-hah-hah). If they are lucky, it's a formula for "getting by," but never getting big.
Some years ago I looked into developing on salesforce's platform, but just couldn't justify the time and effort. Not only was I going to have to originate the product, but I'd have to sell it to. If I can sell, I can host, so what did I need them for?
I wouldn't buy this stock at $5, $2, or $1. I'll sell it all day at $30 though.

World Wrestling Entertainment, Frontline: High Yield Dividend Payers

I've held FRO for years and have no inclination to sell at any price. True, my shares are "free" since the steady dividends have paid back my entire purchase price, but that's not why I'm holding. I'm holding because time and time again I've seen John Fredrikson and his talented managers at Frontline pull profits out of a hat. These guys know more about making money in this business than anyone else in the world. Do your due diligence, folks. Read all FRO's news releases over the years and you'll be watching some masterful businessmen in action. Be sure to pay attention to alll the "extra" stuff they own (and which may get spun off to create more dividend bonanzas). I've never seen anything else like it.

On Board the 'U.S.S. Titanic'

It never ceases to amaze me that so many people, presumably interested enough in the stock market to bother reading SeekingAlpha, can be fooled by the phrase "bail out." (Yes, it is a phrase, not the ignorant coinage "bailout," by the way.)
This is an investment. The U.S. will buy tranches of mortgages at fire sale prices which are supported underneath by actual houses sitting on actual land. Furthermore, the vast majority of these mortgages are actually current! The securitized bundles have lost value, not because we "know" how many mortgages are delinquent, but precisely because we do NOT know. This uncertainty poisons the true value. The U.S. Treasury, however, can print money which it does not have to pay back to anyone, so it can afford to hold these mortgages for five or ten or even twenty years until home prices have recovered and the financial system can re-absorb the mortgages. This is as much a "bail out" as Buffet raping Goldman-Sachs when they desperately wanted his $5 billion. There is little chance of a long-term disappearance of housing need so in just a few years this $700 billion investment in U.S. property and U.S. homeowners by the U.S. government will become a particularly profitable deal. In fact, if the U.S. Treasury later turns around and lets us buy pieces of their deal, most of us will be quite eager to buy.

Now's the Time To Give Your Portfolio a HERO?

Zenfar, if the vote you refer to was the one to allow states to permit offshore drilling (which most would probably do), this would create new demand for jackup rigs, accelerating the movement of rigs out of the Gulf, and raise day rates everywhere. In short, HERO will benefit. Further, any Congressional action to promote more use of natural gas will also help HERO.

Forget $100 a Barrel - Oil Will Plummet to $30

Oil drilling rigs are not "booked until 2012." There's plenty of idle capacity available right now, as anyone invested in drilling asset stocks already painfully knows. The current price of oil has not been in place long enough to give exploration companies the confidence to start investing in drilling at nearly the level needed to soak up capacity.

Oil vs. the Market: Major Changes Expected This Month

mjaniec: "the recent conflict?" What a relief. I guess the war is over.

Crude Sell-off: Solid Entry Point into U.S. Oil Majors

Pokeyclips2020, the water usage in tar sands extraction is not as high as you presently think. The water is recycled. The CRS Report for Congress (RS34258) dated January 17, 2008 claims that 2-3 barrels of water from the Athabaska River are needed per barrel of bitumen produced, but notes that this is before recycling. Makeup water is only .5 barrel per barrel of bitumen. (To make this clear, the first barrel of bitumen takes 2-3 barrels of water. The process loses about .5 barrel to escaped steam, etc. and thus the second barrel of bitumen needs just .5 barrels of additional "makeup" water.)
Alberta is indeed concerned about pollution problems surrounding the extraction process and are likely to do several things, all of which will increase the production price. First on the list may be a 30% increase in royalties.
I am long oil-related stocks, and momentarily taking a beating, but I look at the next five years and see no way for oil to remain below $150 per barrel. While I think your 300% margin requirement may be a trifle high (new side scanning techniques make drilling dry holes less likely), E&P is still an intensely risky, capital burning business and it will take oil remaining well above $100/bbl for at least a year before we see some serious new development. The oil exploration industry has to feel comfortable that the high price will still be in force 2-3 years from now when their production starts flowing before they will start shoveling money out the door to find and develop new expensive domestic resources. There are still millions of acres under contract in the Gulf of Mexico (GOM) which have not been explored, let alone drilled. Putting more unexplored acres under contract in the Atlantic or Pacific won't result in a single well being drilled until the price per barrel has stayed high for a long time and all of the GOM tracts have been drilled and are producing. The GOM comes first because flowline infrastructure already exists close to every new tract, so it's cheaper to get that oil to market.

Intercontinental Exchange and the New ICE Age

Amusing, the idiot who wants to nationalize oil. The US is a net oil importer because we do not have enough of the stuff inside our own territories to supply our needs. If you nationalize oil, I'll be looking for a good printing press so I can bid on printing the ration cards.