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21459 messages, Last post on Dec 02, 2009 at 7:02 AM
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Replying to: tagman (Jan 08, 2009 6:24 pm) The problem with oil is that the capacity to pump is still far greater than demand. There are so many false Chinese factors (especially the olympics) that have to removed from the normal demand factors of the past 12-18 months that so many analysts used. Now you also have the lessening of large SUV's to deal with and the fact that the recent boom in prices caused auto mfrs and the public to adjust their whole thinking to buying cars. All that has to be factored in and of course you have an economic problem. On the supply side OPEC and others got used to pumping high volumes so how do they deal with cutting those volumes back while prices fall. That's a monstrous double hit. What has happened to oil is what the Saudi's always tried to prevent by keeping adequate supply. The problem is we had a massive hedge fund caused rally in oil when in fact we had more than adequate supply all along. So there should never have been a rally. In fact when oil hit the $80's it should have topped out there and fallen off to $55-65. If that had happened we'd have had stable prices all along and a pricepoint similar to the $55-65 range Dewey noted. In a local weather board I sometimes post on I started a thread titled it's time to short oil. That was in late 2007 when oil was at $90. I looked like a fool for 7 months but I kept posting that oil would fall under $65 and every price rise simply meant the fall would be all the more bigger. Now folks on that board think I'm some kind of a financial genius with a crystal ball. All I was doing was looking at usage dropping while prices rose and more oil got pumped. Logic 101 said inventories had to be rising somewhere. In all honesty I just apply logic, fundamentals and trade news (including tidbits like that 2 minute discussion tonite) to most things and if fundamentals don't add up I stay out. If fundamentals are lacking than you have anything from a ponzi scheme to irrational exhubearnce that will crash after it gets most to buy into what has become a gambling parlor rather than rational investing. IMO oil has a false bottom in the high 20's (I seriously doubt OPEC will ever adhere to its cuts) and then trades long-term in a $40-60 range. In reality it should never have gotten aove $65. I think the mistake most folks make in commodities is they forget everything has to go through the trade to be produced so ultimately no matter how you slice it commodities is about inventory management. Investing in inventory management is very different than investing in a stock or sector that you think is strategically well positioned. Finally I think as lending starts to resume a normal course (late February looks reasonable to me) and fundamentals get looked at properly I think you'll see a lot of folks jump back into stocks. Commodities - don't know. i think folks got badly burned by a complete mis-understanding of the manufacturing process and followed a handful of 30 year old commodity analysts that didn't have a clue about it either. But right now I agree that many folks think we have a lot of market manipulation but i also think many think Obama policies will help guard against that. In the end the perception of what Obama might do will IMO lbe a lot more important than the reality of what Obama does do. |
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Replying to: ljflx (Jan 08, 2009 8:01 pm) I think the perception will linger as more collusion gets washed out. Your post is fantastic regarding the oil markets and inventory management. When will markets learn balance? Very inefficient to me. The federal investigation that prompted Gov. Bill Richardson of New Mexico to withdraw his nomination as commerce secretary offers a rare glimpse into a long-simmering investigation of possible bid-rigging, tax evasion and other wrongdoing throughout the municipal bond business. Three federal agencies and a loose consortium of state attorneys general have for several years been gathering evidence of what appears to be collusion among the banks and other companies that have helped state and local governments take approximately $400 billion worth of municipal notes and bonds to market each year. Muni Bid Rigs Regards, OW |
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Replying to: ljflx (Jan 08, 2009 8:01 pm) Thank you for that well-written reply... you offer a very good insight into the aspects of supply/demand... but, I would still like to hear your take on why diesel fuel maintains a very high price. It has barely fluctuated compared to the major price swings of gasoline. The Chinese Olympics were originally to blame, partially, with the explanation that the Chinese had been stocking up on massive supplies of diesel, as a backup to posible energy requirements during the Olympics... but that card is now played out and has proven to have been meaningless media hype. Another explanation has been that production of diesel fuel is limited compared to gasoline, and/or that production can't keep up with the demand from the trucking industry. In your opinion, what's the real reason diesel fuel has stayed so damned expensive while gasoline prices have dropped like an anchor? As an unfortunate consequence, of course, the modern clean diesel vehicles that have finally made their way to our shores will never get the kind of market penetration that they otherwise deserve. TM |
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Reference link -- http://www.cfif.org/htdocs/legislative_issues/federal_issues/hot_issues_in_congr- ess/energy/Not-So-Fast-the-Electric-Cars-Buried-Study-Says.htm gfr1 |
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Replying to: ljflx (Jan 08, 2009 8:01 pm) Thanks for your informative post. You certainly are well researched in the oil markets. Just want to clarify a statement I made which is not 100 percent accurate. I had stated that oil prices in the long term cannot depart too far from marginal costs. From Economics 101---competitive commodities markets in the long term must equate to the following: Marginal Revenues = Marginal Costs But in the oil industry long term marginal revenues can exceed marginal costs Unfortunately oil is not a perfectly competive market. Certainly not with OPEC and the with the increase of if oil companies being nationalized worldwide. Dont forget most of the cheapest to drill oil reserves worldwide are in countries that are not Pro-Western. One thing that cannot be underestimated is that market oil prices can be influenced in the long term by countries with political agendas that are against the interests of the west. |
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Replying to: ljflx (Jan 08, 2009 8:01 pm) You maybe right? I know there are quite a few investors who make big returns with their own market forecasts. I am not one of them. In my case I am completely indifferent about market forecasts. I just pick individual stocks and usually hold them for many years in the future. My focus is very narrow in the investment field " buying high margin of safety stocks" for my clients. My sole criteria for my picks are disclosed corporate financials and the financial news. Nothing else. I never communicate with anyone from corporate investor relations or read management opinions about their companies since I am not interested in paid cheerleaders. Also hypothetically all material corporate news should be publicly disclosed otherwise that would be insider information If the markets rains or shines it does not matter to me as long as the companies I pick improve their financial fundamentals relative to their market prices. I
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Replying to: tagman (Jan 08, 2009 10:22 am) Hope everything goes well. Except I may have some bad news for you. I read somewhere that the Honda hybrid CR-Z coupe is cancelled. I will have to google up my source but right now I am kind of pressed with time. Take care.
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Replying to: dewey (Jan 09, 2009 1:42 pm) Honda Axe Regards, OW
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Replying to: circlew (Jan 09, 2009 1:48 pm)
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Replying to: dewey (Jan 09, 2009 1:15 pm) Certainly not with OPEC and the with the increase of if oil companies being nationalized worldwide. What I meant was Certainly not with OPEC and with the increase of oil companies being nationalized worldwide. |
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