[cube]

$this->bbcode_second_pass_quote('MrBill', '.')..
Source: THE TROUBLE WITH SUCCESS

It should come as no shock to learn that growing a fund of, say, $100,000 at 10% per annum is far easier than keeping a $1 million fund rising at the same rate. Yes, it can be done, but it requires increasing amount of skill, luck or both.

[MrBill]

$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('MrBill', '.')..
Source: THE TROUBLE WITH SUCCESS

It should come as no shock to learn that growing a fund of, say, $100,000 at 10% per annum is far easier than keeping a $1 million fund rising at the same rate. Yes, it can be done, but it requires increasing amount of skill, luck or both.

[Concerned]

$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('MrBill', '.')..
Source: THE TROUBLE WITH SUCCESS

It should come as no shock to learn that growing a fund of, say, $100,000 at 10% per annum is far easier than keeping a $1 million fund rising at the same rate. Yes, it can be done, but it requires increasing amount of skill, luck or both.

[MrBill]

Yes, not too many of us predicted this level 11-months ago. We all recognized that 'a super spike' above $100 was possible, but I think we assumed that would be on the back of a real supply disruption and/or a terrorist (or US) attack on an oil producing country.

What we are seeing now is truly a demand lead rally and that is why it has such long legs. It is almost foolish to try to call the top, but I doubt we will remain up here? Look at the way that WTI is outperforming Brent. Or the way the market has moved into backwardation. It is clear that the front end of the market is tight. I am not sure how long it will last though?

UPDATE: article on backwardation
$this->bbcode_second_pass_quote('', 'F')alling crude inventories and the shape of the futures curve will likely continue to feed back into each other and boost oil prices further until there is a meaningful change in the global supply picture.

Since July the market has been "backwardated," where the price of oil that is about to be delivered is higher than for later deliveries. Backwardation encourages the sell-off of stocks and is seen as a sign of supply tightness or even shortages, which further boosts prompt prices.

The current rally will likely go on until oil supplies rise or demand falls enough to reduce the incentive to sell off oil in storage, energy experts said on Wednesday.

[MrBill]

[align=center]Weekly Recap[/align]

The Fed has blown its load
The US dollar is lower
The stock market is lower than before they started easing
The credit crisis remains intact
Housing prices continue to implode with no end in sight
Any further rate cuts can be alteratively seen as capitulation and/or highly inflationary
Investors woke-up, realized Crocs are about as fashionable as mood rings and tie-dye t-shirts, and sold
Got cash?

Have a nice weekend. Cheers.

[IslandCrow]

$this->bbcode_second_pass_quote('MrBill', '[')align=center]Weekly Recap[/align]

The Fed has blown its load .....


Have a nice weekend. Cheers.

[MrBill]

$this->bbcode_second_pass_quote('IslandCrow', '
')I don't think that the horror movies over the weekend will scare me as much as your list!

I don't have much to post here, as I am not into trading, but it has been interesting for me to read your thoughts. Thanks a lot for the time you put in here.

[seahorse]

Mr. Bill and others,

You all may be familiar with Andrew McKillop, an energy analyst. If not, he has written some very interesting things, namely, the effect of high oil prices on the economy. Back as early as 2004, when oil was getting over $40 a barrel and most were saying higher oil means reduced demand, he was writing that it was the opposite, that higher oil prices would actually fuel economic growth, at least for awhile. At that time, he opined that oil prices up to $75 oil would continue to fuel the economic boom through 2007. If you aren't familiar with is writings, I would appreciate your thoughts about his theorys, especially in light of the fact that these were written several years ago, so we have some time and evidence to look back and test his premis.

Andrew McKillop Price Signals

[mkwin]

$this->bbcode_second_pass_quote('chris-h', 'D')isclaimer : I am not a trader do not intent to trade just expressing my honest opinion here.
I have not voted.
I predict $100 or more.
My explanation why prices are falling now.
Because traders really believe that producers mainly SA can produce more . Every time that SA says we are going to cut exports they think :
gee peak oil and depletion and Simmons are wrong : they just want to make more profit and we have military and economic power to make them change their mind.
Once traders understand that SA is lying and cannot produce more panic will ensue.
That is why i predict price of $100 or higher.

[MrBill]

Thanks for that link by Andrew McKillop, Seahorse. I have not read it, yet, but I will get to it.

This is another link on The Economic Effects of Energy Price Shocks

Basically, when pundits predicted that economies would seize up if prices got above $30, $45, $60, $75, $90 or whatever their favored number was is refering to a fixed pot of money that can only be spent in limited numbers of ways. Like if I buy gasoline I cannot afford groceries.

Probably on a local or individual level that line of thinking is correct. Not many of us can simply expand our budgets to include higher prices in not just energy, but everything else that has gone up in price due to energy price increases as well.

However, on a macro level or global scale that is what is happening. And it is happening through two distinct channels that are not totally unrelated, but lets look at them separately in any case.

One is obvious to everyone here at peak oil dot com, and especially amoung the gold bug subset, and that is through money supply growth. High prices that might limit demand through rationing is not being allowed to work its magic because central banks and those governments that run budget deficits are artificially expanding money supply giving us on an aggregate level more money to spend on not just more expensive energy, but also on everything else that goes up in price. That money flows into corporate coffers and then ends up as either strong capital spending and/or profits that are distributed as share buybacks and dividends. Ultimately it has to be inflationary and looking at gold it probably is already.

The second mechanism is through an expanding global economy. It is also growing by about 5% in real terms per annum. That is on top of mirage like gains as central banks and their sovereign wealth funds of OPEC and non-OPEC oil producers and Asian exporters sterilize their export earnings and instead increase local money supply. That also causes asset price inflation. But if you are a seller of assets that is disposable income in your pocket. At least for now.

I think that both mechanisms help to explain how we can move from $15 to $90 or even higher without some sort of recession or severe oil related price shock rippling through the economy. Of course, it begs the question of how long the USA can keep running a $1 trillion deficit with the rest of the world because ultimately the balance of payments will mean that all that principle and interest will need to be repaid thus lowering future consumption both privately and publicly. However, at the moment we simply see some cutback on behalf of the consumer, if even only marginally, being taken up by spending by governments at the local, state and federal level.

Also this was brought up earlier today in another forum, but the assumption was that high oil prices would exclude developing markets and cut their own spending on non-oil purchases. Actually, this has not happened as many of these countries are exporters of energy, metals and commodities themselves that have gone up on the back of strong demand from Chindia and the rest of Asia as well as being driven higher in price by more expensive energy to begin with.

As has been pointed out by investment banks like Goldman Sachs is that we have long used up our spare capacity from the era of falling commodity prices and now are in an long-term investment phase where increased supply of energy, metals and commodities can only come from new projects. These are expensive and they take time. Of course, this assumes there is extra supply to be found and exploited. But this has not resulted in stunted growth in these developing countries. It has more or less stimulated growth as producers and consuming nations look farther afield for more supply of all these natural resources.

So although I have not read the paper, yet, I would not say that high energy prices increase demand or stimulate economic growth per se, but that strong growth stimulates the demand for energy, specifically petroleum, but also coal and other alternatives. And it is that stronger growth along with accompanying higher prices that puts money into those exporting nations pockets. Because at the end of the day high commodity prices are simply a wealth transfer from consuming nations to producing nations. The wealth is not destroyed, while faster growth elsewhere really is increasing the size of the global economic pie. Putting money into everyone's pockets (at least those exporters and those to sell stuff to them) with or without governments and central banks adding the extra stimulous (inflation) of money supply growth.

Thanks for the link and for bringing this subject up. Have a nice weekend. Cheers.

[mkwin]

Requesting Advice from MrBill and Others

I want to get exposure to nuclear and was wondering do you have any stock/fund ideas? I am looking for uranium miners, reactor builders, other nuclear equipment suppliers, power companies etc.

[seahorse2]

Mr. Bill,

Much of what you are saying sounds like what McKillop is saying. However, I understand very little about these issues except that what he was saying way back when was contrary to what most people were saying, thus I remembered it, and, with the world economies "withstanding" higher energy and commodity prices, maybe he was onto something. So, I hope if you do read it you will post to let us know what you think. In his conclusion, you will find he says that economic growth should be able to continue even with oil as high as $75-$100 pb.

Here's another short article on McKillop:

$this->bbcode_second_pass_quote('', 'T')he so-called ‘financial community’ and notably the presidents of the US, European and Japanese central banks claim that high or ‘extreme’ oil prices can only depress economic growth, which would lead to a fall in world oil demand growth, or even to zero growth (or a fall) of world oil demand.

In fact the real world, real economy does not operate this way. Increasing oil prices in fact tend to reinforce and increase economic growth at the world level, leading to further oil demand growth. This process will continue until oil prices greatly exceed US$75/barrel, which in constant dollar terms (corrected for inflation and world purchasing power of the dollar) is far below the most recent peak price attained in 1979-1980.

[MrBill]

$this->bbcode_second_pass_quote('mkwin', '[')u]Requesting Advice from MrBill and Others

I want to get exposure to nuclear and was wondering do you have any stock/fund ideas? I am looking for uranium miners, reactor builders, other nuclear equipment suppliers, power companies etc.

[MrBill]

$this->bbcode_second_pass_quote('seahorse2', 'M')r. Bill,

Much of what you are saying sounds like what McKillop is saying. However, I understand very little about these issues except that what he was saying way back when was contrary to what most people were saying, thus I remembered it, and, with the world economies "withstanding" higher energy and commodity prices, maybe he was onto something. So, I hope if you do read it you will post to let us know what you think. In his conclusion, you will find he says that economic growth should be able to continue even with oil as high as $75-$100 pb.

[eastbay]

So, as I understand it from reading this nice summary of our energy situation, the price of oil can continue to move up quite a bit without causing too much economic damage.

Nice summary. It's more good news for the short to mid-term energy investor.

[MrBill]

$this->bbcode_second_pass_quote('eastbay', 'S')o, as I understand it from reading this nice summary of our energy situation, the price of oil can continue to move up quite a bit without causing too much economic damage.

Nice summary. It's more good news for the short to mid-term energy investor.

[truecougarblue]

Sweet gain on CDE today. I knew there was a reason I kept that dog around...

[mkwin]

How much is the dollar decline putting on the price of oil in your opinion Mr Bill?

The situation is quite astonishing. If there is some good news about the US economy oil increases on the basis of strong future demand and if there is bad news it still increases on the basis of further FED cuts and more dollar declines.

[Starvid]

$this->bbcode_second_pass_quote('mkwin', '[')u]Requesting Advice from MrBill and Others

I want to get exposure to nuclear and was wondering do you have any stock/fund ideas? I am looking for uranium miners, reactor builders, other nuclear equipment suppliers, power companies etc.

[MrBill]

$this->bbcode_second_pass_quote('mkwin', 'H')ow much is the dollar decline putting on the price of oil in your opinion Mr Bill?

The situation is quite astonishing. If there is some good news about the US economy oil increases on the basis of strong future demand and if there is bad news it still increases on the basis of further FED cuts and more dollar declines.