[Doly]

$this->bbcode_second_pass_quote('MrBill', 'p').s. I am not sure what a software barrier is, but I am sure it has something to do with technical support if not IT support?

[MrBill]

$this->bbcode_second_pass_quote('Doly', '')$this->bbcode_second_pass_quote('MrBill', 'p').s. I am not sure what a software barrier is, but I am sure it has something to do with technical support if not IT support?

[truecougarblue]

I've got a question on brokerage house liquidity/viability.

I seem to remember that in '87 there were some big firms that went belly up due to margin calls. Is this a likely outcome if the gordian knot of derivatives and CDS come undone?

If there is a risk of this, how does an individual investor guard against it? Are there warning signs to look for in a brokerage? What would one look for in a firm that would give assurance?

Input appreciated.

BTW, out of miners long for a gain, still hold HBs short. Today is shaping up to be a nice down day.

[MrBill]

$this->bbcode_second_pass_quote('truecougarblue', 'I')'ve got a question on brokerage house liquidity/viability.

I seem to remember that in '87 there were some big firms that went belly up due to margin calls. Is this a likely outcome if the gordian knot of derivatives and CDS come undone?

If there is a risk of this, how does an individual investor guard against it? Are there warning signs to look for in a brokerage? What would one look for in a firm that would give assurance?

Input appreciated.

BTW, out of miners long for a gain, still hold HBs short. Today is shaping up to be a nice down day.

[MrBill]

I found the comment about dollar averaging versus buying a fixed amount per month interesting. I wonder if that is just looking back at historical data analysis though and not a forward looking approach to be honest?
$this->bbcode_second_pass_quote('', 'A')ll major consuming economies have agreed to keep supplies equal to 90 days of consumption on hand. The United States had about 127 days of consumption stockpiled in 2005, about half in the government's reserve and half in private inventories, GAO said.

The government watchdog agency also recommended that the government fill the reserve by buying a set dollar amount each quarter, rather than buying a set volume amount.
If the government had followed a dollar-cost-averaging approach from 2001 to 2005, it would have saved $590 million, GAO said.
The government should consider stockpiling heavy crude oil as well as light sweet crude, GAO said.

[mefistofeles]

Although my view probably isn't quite as nuanced as yours Mr. Bill all I know is that screwing with the oil producers (pushing down the price of oil) is like about as smart playing tag on with cars on the freeway.

If the EIA US production figures are right we are serious trouble. Believe it or not the US used to actually produce 8.2 million barrels of oil a day circa 1983! The daily average for 2006 has been 5 million barrels a day in 2006. Never mind the depletion in other production areas or demand growth.

The decline in US production alone requires supply in excess of current Venezeulan production to balance the loss to even sustain 80's level energy consumption.

In light of that data alone I think the game could get very ugly for oil consuming countries if the producers feel like doing something.

Playing tag on the freeway makes no sense.

[drew]

Mr Bill, Mr Bill........

Can't you hear me weeping over here in Ontario?

My Nexen 3 peat isn't paying out yet is it?

It isn't really taking a beating at all, it's even....

unlike the rest of my commodities heavy portfolio...

Wah......

It's only an unrealized loss for now-which really isn't a loss at all unless I was stupid enough to sell...

Won't do that will I?

Drew

[MrBill]

$this->bbcode_second_pass_quote('drew', 'M')r Bill, Mr Bill........

Can't you hear me weeping over here in Ontario?

My Nexen 3 peat isn't paying out yet is it?

It isn't really taking a beating at all, it's even....

unlike the rest of my commodities heavy portfolio...

Wah......

It's only an unrealized loss for now-which really isn't a loss at all unless I was stupid enough to sell...

Won't do that will I?

Drew

[mefistofeles]

$this->bbcode_second_pass_quote('', 'A')nd think themselves quite clever with their answers to why if we just abandoned the dollar or local currencies along with interest rates determined by the market that this would magically solve our energy problems and cure high prices at the sametime.

[MrBill]

ECB raises rates by 0.25% as expected to 3.25%. No surprises.

mefistofeles wrote:
$this->bbcode_second_pass_quote('', 'S')o when do we hit $5.00 a gallon here in the US?

[jupiters_release]

Hi guys,

My mother just retired very recently told me last night before talking to me first she's moving her 401K into a traditional IRA savings account and had the papers already signed. Obviously I would rather the money be put into oil and gold mutual funds, I googled around but couldn't find out if she's allowed to invest her IRA into such market accounts without the prohibitive withdrawal tax penalty?

thanks!

[mefistofeles]

$this->bbcode_second_pass_quote('', 'M')y mother just retired very recently told me last night before talking to me first she's moving her 401K into a traditional IRA savings account and had the papers already signed. Obviously I would rather the money be put into oil and gold mutual funds, I googled around but couldn't find out if she's allowed to invest her IRA into such market accounts without the prohibitive withdrawal tax penalty?

[jupiters_release]

Thanks Mefistofeles,

Right now the IRA she just signed into is non-market where she gets 4.8% or thereabouts a year, lower than inflation correct?

So if she transfers to a market IRA theres no problem I'm assuming. I will have her look into an IRA rollover and see what happens.

best,
jr

[mefistofeles]

$this->bbcode_second_pass_quote('', 'S')o if she transfers to a market IRA theres no problem I'm assuming. I will have her look into an IRA rollover and see what happens.

[MrBill]

Obviously we are back in a situation where well supplied markets on one hand versus geopolitical instability on the other mean that the implications of OPEC's planned 1 mbpd production cuts could have the effect of reigniting a bull rally on the back of commercials filling up heating oil storage ahead of the winter season. Heating oil is trading at a nice 20-25 cent premium to gasoline, but the heating oil itself is still in contango, so there is no apparent physical shortage just the same. Net/net that means a tug of war between $59 and $61 or $62 as the bulls try to reassert an upward seasonal bias whereas the bears still have the weight of the well supplied markets and the technicals on their side.

But what is really going on? N.Korea despite technically being in discussions with Russia, China, S.Korea, Japan and the USA tested a nuclear weapon. I do not think this is coincidental timing and coincides with negotiations over Iran's own nuclear enrichment program. This has sent the yen to a low against the dollar and the euro especially. And has dragged the precious metals a little higher as well despite the stronger dollar, which is hugging the $1.2600 level in its $1.25-1.30 range. That despite the ECB raising rates while the FED has opened the door, slightly, for easing should the US economy slow even more or more quickly than expected.

I think clearly that 2006 has become a watershed year for many underlying trends such as the bull market for commodities and energy as well as base metals on the back of the Asian growth story. And as more investors begin to question global imbalances more seriously. As a fund manager it is becoming increasing difficult to allocate funds to equity (slowing economy, US hard landing); bonds (high core inflation); commodities, energy, based metals (slowing economy, US hard landing); emerging markets (qualitative tightening of money supply, higher real interest rates); etc. Of course, these are all familiar threads, but it is a hard call to anticipate on which side of the growth/no growth scenario we will land?

From a resource depletion perspective my favored scenario would be a global slowdown that helps correct financial imbalances without a collapse in the dollar or commodity prices that either disrupts the market or sends the false signal that tight supplies were just a temporary blip and now it is back to consumption as normal.

But also I am biased for a multi-lateral solution to both the Iran and N.Korea problems backed by China and Russia as well, so that the USA is not forced to go it alone either with economic sanctions or direct intervention. The risks to the global economy are too great for unilateralism at this point. And clearly it is in China's and Russia's own best interests as well to ensure a stable external environment, and a gradual unwinding of those global imbalances. Will it happen? Dunno?

In the meantime I hope that the high prices resulting from the bull market of the past 5-6 years will stay fresh in consumers' and investors' minds for conservation measures and in the search for alternatives even if temporary price relief means back to business as usual.

[cube]

$this->bbcode_second_pass_quote('MrBill', '.')..
In the meantime I hope that the high prices resulting from the bull market of the past 5-6 years will stay fresh in consumers' and investors' minds for conservation measures and in the search for alternatives even if temporary price relief means back to business as usual.

[MrBill]

Cube wrote:
$this->bbcode_second_pass_quote('', 'H')owever before any conservationists decides to celebrate, lets not forget that "Chinda" has over 1.5 billion people and they all want the American Dream too....which of course includes car ownership. Fuel demand may have stabilized in the industrialized world but it's exploding in Chinda so the net global demand for oil is still rising.

[MrBill]

Living on an island is sometimes interesting to say the least. The bureaucrats here work a cozy 22-hour workweek here as well as enjoy higher salaries and more benefits than your average Cypriot. There is a lot of competition to get these jobs, and let us say a lot of inside connections help. So be it, so long as it does not affect me.

When I moved here from Russia the authorities insisted that I write exams for my local licenses. Usually I have been grandfathered in in other jurisdictions. We argued that I had already passed these exams in the UK, so as member of the EU, I should not have to write them again. Basically, someone somewhere made a decision and they were not backing down, so two years ago I re-wrote the basic exam. No big deal.

Then they wanted me to write a specialists exam. So again we argued that Cyprus was part of the EU, that I already had my licenses in the UK, along with my practical experience, so it was not necessary. Well, in any case, they gave me an excemption after two years of arguing. BUt, not to let me off the hook, they insisted I re-write the basic exam again, the same one I passed two years ago! No logic there?

So I have been in Nicosia attending some seminars and preparing to write my exams again next week. That is why I have not been around. But...

I wrote:
$this->bbcode_second_pass_quote('', 'A')nd China announced yesterday that they would start filling their own SPR with imported Russian oil. That should also help demand as well as give China another place to spend some of their burgeoning foreign exchange reserves versus buying low yielding US treasuries (agency bonds actually) that are at risk of currency devaluation. Probably a sensible policy now that crude prices have some down some 20-25% from their highs, and physical markets in Asia and the USA are well supplied enough that this extra demand is unlikely to upset markets too much.

[cube]

There can be no rally until OPEC gets off it's ass and makes a serious pledge to cut production, spelling out exactly how much each member has to cut. But that's rather obvious huh? Until then I'll just sit here and enjoy the sideways trend.

BTW you guys may remember a month ago there was no shortage of
"self-proclaimed experts" (damn I LOVE that phrase) within the financial news media confidently declaring that the bull market in commodities is officially over. With the recent surge in wheat and corn prices (hitting a 10 year high) those former loud voices are sounding rather sheepish latey.

A 22-hour workweek!
And I thought the French had it easy with their 35-hour workweek?
If you value your time stay away from South Korea

[MrBill]

GS, almost alone in some quarters, remains fundamentally more bullish the energy complex than other investment banking firms. Perhaps this is due to the concentration of energy in the GSCI? This is contrary to the views of the Great Mogambo Guru (GMG) who last week seemed to imply that Treasury Secretary Paulson had some influence over GS removing HU from their commodity index, and that this had some effect over the US government's own measurements of inflation via CPI?

The move out of HU and into RBOB was the result of a change in EPA standards, and a contract phase out on the NYMEX. While the GSCI still remains energy top heavy compared to other commodity indices. And Mr. Paulson's presumable influence aside, GS does not help calculate the US' own inflation basket. Also, until Mr. Paulson screws up, I would prefer to give him the benefit of the doubt. Markets certainly seem to prefer him over Jack Snow and other more recent Wall Street hires in Washington.

Goldie Sachs wrote:
$this->bbcode_second_pass_quote('', 'E')nergy markets are the anomalous bears on
growth

Energy markets are pricing in recessionary conditions

The most recent performance of the energy markets relative to other commodity and financial markets underscores our view that temporary factors have likely driven the energy price declines, rather than more persistent concerns over a slowdown in the US or global economy. The energy markets are pricing in recessionary conditions, which is sharply inconsistent with consensus economic expectations and the behavior of the rest of the markets.

2006 oil surplus due to weak demand not strong supply

It is very important to emphasize that much of the inventory surplus that developed over the past nine months was the result of weak demand and not strong supply growth. Demand during the first quarter was suppressed due to a record warm winter. During the second quarter weak demand resulted from a 60% rise in motor gasoline prices from 1.40 cpg to over 2.25 cpg in a two month's time span. By third quarter, demand growth began to stabilize and by September, to reaccelerate, such that global demand growth during the fourth quarter of this year is likely to be in excess of 2.2 million b/d.

A US centric market ignores European draws

The market has been trading recent US inventory data as if it were representative of the global balance. Data this week, however, confirmed that the situation outside of the United States is far less weak.

Mixed evidence on natural gas storage capacity

US natural gas inventories built by an average 62 Bcf this week, leaving natural gas storage at very high levels. The ability to inject at average rates for this time of year despite the nearrecord-
high inventory levels may be providing evidence that more storage capacity exists than in the past. However, the cash market may be telling a different story.