Thursday, April 23, 2009
Matthew Simmons' Latest Presentation
These are some snapshots from one of Matthew Simmons' presentations in late March. I highly encourage all visitors to take a look at this very informative presentation:
Saturday, April 18, 2009
Matthew Simmons - March 2009
Matthew Simmons discusses the current price of oil. He points the disconnect between "paper barrels" (financial trading) vs. "wet barrels".
Between 1998 and 2008, global oil demand increased by 12.6MMBD while crude oil production went up only 7.5MMBLD (the difference was picked by NGL's, refinery gains, synthetic crude and crude inventory liquidations)
Wednesday, April 15, 2009
Saturday, April 11, 2009
Be Careful What You Wish For
By Peter Schiff
Apart from the obvious financial distress that the current economic crisis has inflicted on most Americans, perhaps one of the more irksome byproducts of the meltdown has been the inescapability of clueless economic blather. It’s bad enough when so-called economists serve up the same Keynesian nonsense that has led us down the current cul-de-sac in the first place. At least those people have some incidental knowledge, however deeply flawed, of basic economic concepts. It’s far worse when political pundits, whose understanding of economics typically comes from Treasury Department talking points, hold forth as if they really know what is going on.
Last weekend I happened to watch the McLaughlin Group, a mainstay of Sunday morning political programs, which included a discussion that typified the lack of economic common sense that is so pervasive in our country. The program’s anchor John McLaughlin, undoubtedly an expert in political maneuvering and Washington horse-trading, offered viewers his assessment of the global economic landscape. McLaughlin identified China, Germany, and Japan as being prime offenders in the global economic meltdown. Their “offense” was that they ran persistent trade surpluses, had savings rates that were “far too high” and consumption rates that were “far too low”. McLaughlin identified these sins as responsible for the global economic imbalances. He urged the governments of those countries to adopt policies that would encourage their consumers to borrow and spend more. Exactly which school of economic thought informed his assessment is not entirely clear.
In the first place, if the creditor nations of the world actually follow Mr. McLaughlin’s advice and become borrowers themselves, from just where does Mr. McLaughlin believe the money will come? These countries already lend to America. Does he think that they also have enough leftover to lend to themselves? Does he believe that America, which is tens of trillions of dollars in debt, has enough excess savings to lend? Perhaps he’s eyeing the Martians’ accumulated savings? The point is: the entire world cannot borrow at the same time. Someone has to do the lending. The only reason Americans are able to borrow so much is that those “offending nations” are loaning us the money.
Mr. McLaughlin apparently believes that if those countries simply adopted policies to encourage more consumption, America would then be able to export more products. Just what American-made products does he expect the Chinese to buy? If China did spend more, which they ultimately will, they would simply buy more of their own products that they currently ship to us. After all, if Americans are not buying American-made products, why would the Chinese? In most cases, it’s not that consumers do not want to buy American products it’s just that there are so few American-made products that are competitive in the global marketplace.
One guest on the panel did try to correct Mr. McLaughlin by suggesting that Americans needed to save more and spend less, but he was quickly shot down. Why should we spend less, McLaughlin snapped, when they could shoulder some of the burden by spending more? The inference here is that we are doing our part by lugging home shopping carts full of consumer goods, while they are getting off easy by spending their days in muggy factories making the goods!
What he fails to understand is that nothing can be bought that is not first produced. We cannot all just decide to spend our troubles away. It is only because the “offending nations” are producing surplus goods (meaning more goods than they are themselves consuming) that those goods are available to Americans. In McLaughlin’s America, and indeed Obama’s, we would all be standing around empty shelves with wheelbarrows full of worthless cash.
If the creditor countries are indeed the offenders, it is only in the sense that they have enabled us to live beyond our means and have facilitated the growth of our phony economy. However if they do as Mr. McLaughlin suggests, the immediate impact on the American economy will be much different than what he expects: the dollar will collapse, both consumer prices and interest rates will rise sharply, and the current recession will deepen. Rather than holding us back, foreign creditors have actually been propping us up. As for Mr. McLaughlin, he should stick to his strong suit: the dissection of political posturing. To presume a level of economic understanding by listening to self-interested politicians and academics is to invite catastrophe.
Apart from the obvious financial distress that the current economic crisis has inflicted on most Americans, perhaps one of the more irksome byproducts of the meltdown has been the inescapability of clueless economic blather. It’s bad enough when so-called economists serve up the same Keynesian nonsense that has led us down the current cul-de-sac in the first place. At least those people have some incidental knowledge, however deeply flawed, of basic economic concepts. It’s far worse when political pundits, whose understanding of economics typically comes from Treasury Department talking points, hold forth as if they really know what is going on.
Last weekend I happened to watch the McLaughlin Group, a mainstay of Sunday morning political programs, which included a discussion that typified the lack of economic common sense that is so pervasive in our country. The program’s anchor John McLaughlin, undoubtedly an expert in political maneuvering and Washington horse-trading, offered viewers his assessment of the global economic landscape. McLaughlin identified China, Germany, and Japan as being prime offenders in the global economic meltdown. Their “offense” was that they ran persistent trade surpluses, had savings rates that were “far too high” and consumption rates that were “far too low”. McLaughlin identified these sins as responsible for the global economic imbalances. He urged the governments of those countries to adopt policies that would encourage their consumers to borrow and spend more. Exactly which school of economic thought informed his assessment is not entirely clear.
In the first place, if the creditor nations of the world actually follow Mr. McLaughlin’s advice and become borrowers themselves, from just where does Mr. McLaughlin believe the money will come? These countries already lend to America. Does he think that they also have enough leftover to lend to themselves? Does he believe that America, which is tens of trillions of dollars in debt, has enough excess savings to lend? Perhaps he’s eyeing the Martians’ accumulated savings? The point is: the entire world cannot borrow at the same time. Someone has to do the lending. The only reason Americans are able to borrow so much is that those “offending nations” are loaning us the money.
Mr. McLaughlin apparently believes that if those countries simply adopted policies to encourage more consumption, America would then be able to export more products. Just what American-made products does he expect the Chinese to buy? If China did spend more, which they ultimately will, they would simply buy more of their own products that they currently ship to us. After all, if Americans are not buying American-made products, why would the Chinese? In most cases, it’s not that consumers do not want to buy American products it’s just that there are so few American-made products that are competitive in the global marketplace.
One guest on the panel did try to correct Mr. McLaughlin by suggesting that Americans needed to save more and spend less, but he was quickly shot down. Why should we spend less, McLaughlin snapped, when they could shoulder some of the burden by spending more? The inference here is that we are doing our part by lugging home shopping carts full of consumer goods, while they are getting off easy by spending their days in muggy factories making the goods!
What he fails to understand is that nothing can be bought that is not first produced. We cannot all just decide to spend our troubles away. It is only because the “offending nations” are producing surplus goods (meaning more goods than they are themselves consuming) that those goods are available to Americans. In McLaughlin’s America, and indeed Obama’s, we would all be standing around empty shelves with wheelbarrows full of worthless cash.
If the creditor countries are indeed the offenders, it is only in the sense that they have enabled us to live beyond our means and have facilitated the growth of our phony economy. However if they do as Mr. McLaughlin suggests, the immediate impact on the American economy will be much different than what he expects: the dollar will collapse, both consumer prices and interest rates will rise sharply, and the current recession will deepen. Rather than holding us back, foreign creditors have actually been propping us up. As for Mr. McLaughlin, he should stick to his strong suit: the dissection of political posturing. To presume a level of economic understanding by listening to self-interested politicians and academics is to invite catastrophe.
Sunday, April 5, 2009
Instability & Depletion Add Uncertainty to Energy Sector
by Joseph Dancy, LSGI Advisors, Inc. | April 3, 2009
Energy use correlates closely with economic growth. Last month the World Bank forecast the global economy will likely shrink for the first time since World War II. International trade will decline by the most in 80 years according to the report, a stark trend in an economy that has been ‘globalized’ over the last several decades.
Crude oil exporters on the list of those at high risk of political instability account for nearly 26 million barrels per day of production—a very high percentage of global petroleum output. Keep in mind globally we use roughly 85 million barrels of liquids per day, which is near the global capacity to produce.
With current crude oil prices around $45 substantial volumes of production will be shut-in or not developed according to analysts. Stanford Bernstein forecasts U.S. crude oil production will decline by 400,000 barrels per day next year if current crude oil prices remain in place.
Depletion, which runs anywhere from 4% a year upward (note Cantarell’s nearly 40% decline rate referenced above), reductions in capital expenditures, depressed energy prices, limitations imposed by the global credit crunch, nationalized oil fields, all will adversely impact future production levels.
Crude oil futures remain in ‘contango’ – a situation where the value in the future is much higher then at the present. Some analysts claim this is bullish for the commodity, an indication that the supply and demand for oil remains bullish. Companies can use this curve to hedge production from current reserves in the ground (chart courtesy Financial Times).
Marc Faber Interview - March 30 2009
As usual, Marc Faber does an excellent analysis of current market events.
He argues that almost all assets values could go higher, mostly due to money printing by the fed.
Although the US dollar will do so-so in the next couple of months, the US dollar will weaken against most currencies, especially against Asian currencies. I highly suggest visitors watch this interview (video has been divided into three parts)
He argues that almost all assets values could go higher, mostly due to money printing by the fed.
Although the US dollar will do so-so in the next couple of months, the US dollar will weaken against most currencies, especially against Asian currencies. I highly suggest visitors watch this interview (video has been divided into three parts)Jim Rogers: Go get Yourself a tractor
Jim Rogers is bearish on stocks and bullish on commodities. "The only place where the fundamentals have improved is commodities"
Subscribe to:
Posts (Atom)
Posts
