We cannot drill our way out of this oil crisis. Since 2000, oil companies working in the U.S. have doubled the number of wells drilled per year.
Although increased drilling has added new oil to the nation's supply, it has not done so fast enough to offset the terminal decline of existing fields.
We are going to have to import more of our oil. Period.
What will be the best performing asset-class in 2008?
crude oil?
10%
[ 8 ]
natural gas?
5%
[ 4 ]
metals?
5%
[ 4 ]
precious metals?
28%
[ 21 ]
agricultural commodities?
40%
[ 30 ]
emerging market equity?
1%
[ 1 ]
bonds?
1%
[ 1 ]
other (please specify)?
8%
[ 6 ]
Total Votes : 75
Author
Message
Starvid Fission
Joined: Feb 20, 2005 Posts: 2487 Location: Uppsala, Sweden
Posted: Tue May 06, 2008 10:10 am Post subject: Re: Trader's Corner 2008
I feel a bit stupid investing in energy stuff, but not shorting stuff like the airline index. I mean, we have been talking about the airlines as the canary in the coal mine for so long it should have been bleeding obvious.
Joined: Oct 18, 2004 Posts: 266 Location: San Francisco, CA
Posted: Tue May 06, 2008 5:07 pm Post subject: Re: Trader's Corner 2008
So I've been investing in offshore drilling: DO, NE, RIG (missed PE by 50 cents and it's up almost $10/share !!$@!#!!).
Also GAGEX and USO, and I just bought UGA a few days ago which is already up 4.5%.
Anything else in this area I might have missed? I'm thinking about buying more UGA since it seems so certain gas prices will be sharply up this summer.
Joined: Feb 20, 2005 Posts: 2487 Location: Uppsala, Sweden
Posted: Tue May 06, 2008 7:22 pm Post subject: Re: Trader's Corner 2008
When you are talking about offshore drillers, what about Pride International (PDE)? It's my single biggest investment in a single share. Up 25 % recently due to Seadrill buying 10 % of the shares, but I'm in for the long run.
Or maybe you actually meant Pride when you wrote PE?
edit: Pride trades at $43 now and the people I trust have their target for Pride at $44. Hmm... It'll be interesting to see if they raise the target in their next report.
And now something for completely different. What do you guys think about the price of iron ore? It's up a fantastic 65 % this year, and that from already high levels.
Pros: very stong demand growth from emerging economies, takes 10 years to open new mines.
Cons: credit crisis might create global slowdown, peak oil might do the same thing except 10 times worse. _________________ Peak oil is not an energy crisis. It is a liquid fuel crisis.
Joined: Oct 18, 2004 Posts: 266 Location: San Francisco, CA
Posted: Wed May 07, 2008 11:02 am Post subject: Re: Trader's Corner 2008
Starvid wrote:
When you are talking about offshore drillers, what about Pride International (PDE)? It's my single biggest investment in a single share. Up 25 % recently due to Seadrill buying 10 % of the shares, but I'm in for the long run.
Or maybe you actually meant Pride when you wrote PE?
edit: Pride trades at $43 now and the people I trust have their target for Pride at $44. Hmm... It'll be interesting to see if they raise the target in their next report.
And now something for completely different. What do you guys think about the price of iron ore? It's up a fantastic 65 % this year, and that from already high levels.
Pros: very stong demand growth from emerging economies, takes 10 years to open new mines.
Cons: credit crisis might create global slowdown, peak oil might do the same thing except 10 times worse.
Yes I made a typo I meant PDE, I had put in a trade and it just zoomed up too quickly. I got the other 3 though.
Joined: Aug 03, 2006 Posts: 3615 Location: Working the Beat
Posted: Wed May 07, 2008 11:38 pm Post subject: Re: Trader's Corner 2008
DrilQuip is a Houston-based manufacturer of offshore drilling equipment for use in harsh environments. Symbol DRQ.
I have been buying and selling this stock for a couple of years now. It seems to find a floor in the mid-$40s and then will go to the low $60s. Right now, I believe it is trading in the $50s (I don't own any right now).
The volume is light, but it's a good company, good return on assets, lots of insider ownership, great revenue and great earnings growth.
Watch it a while before you do anything and see how it moves in relation to the drillers, the majors and the indexes. With the light volume, a little interest can make for a big move.
I think I've been in and out of it three times so far this year: once for a $6 a share gain in two weeks; once for a $2 a share loss; and once for an $11 a share gain in about three weeks. Once it gets about a 10% bounce off a low, it tends to keep moving at least another 10%. Right now, it's drifting down from a $62 high. It will bottom somewhere and I will probably look to get back in when it does another 10% bounce. _________________ We're all Big Wave Riders. Some just don't realize it.
Posted: Thu May 08, 2008 3:58 am Post subject: Re: Trader's Corner 2008
I just got back from UAE and Bahrain this week. I cannot think of a more unsustainable development model? Dubai reminds me of LA for some reason. We spent almost all of our time in the car stuck in traffic trying to get from the hotel to the restaurant, from the restaurant to the Mall of the Emirates and from the Mall to the Dubai International Finance Center (DFIC), etc.
It is so hot that you cannot really be outside and air conditioning has to run 24/7. And it is not even summer, yet. Dubai has water, but their neighbors have to use natural gas to desalinate seawater. How sustainable is that? But regardless, Dubai still manages to use more water than it has. I mean they use gray water to irrigate the gardens and grass, but they still have to add an extra 40% of fresh water to make up the deficit, and they are still building, so their water needs can only increase.
It goes without saying that you cannot get to the top of a super tower over 600-800 meters without using a lot of electricity for elevators, and now they have towers planned that will be 1000 meters high. To be fair the architects say that those super towers can use wind, solar and outside temperature differences to produce rather than consume energy, but call me skeptical? For every energy efficient super tower on the drawing board there are dozens of low tech hotels and buildings that on average use up to 600% more energy than a similar European hotel.
Plus Dubai and all its neighbors must have been talking to the same urban planners and consultants because they are all pursuing the same business development model. Build it and they will come. All well and fine, but then they just end up competing with one another with a very similar strategy.
Did I mention it was hot? Good luck going golfing in the desert when it is 40-50 degrees Celsius outside. What else is there to do? If I did not know I was in the Mall of the Emirates I would have sworn I was in the Mall of America or West Edmonton Mall. Big whoop! I can find a dress shirt on the Miracle Mile for less than $200 thank you very much. So much for Duty Free bargains in Dubai. Not to mention the price tag just to get there. No cheap seat sales like to Vegas that is for sure.
And as you're headed for the Gulf they think you have money to burn in any case. A good one bedroom apartment rents for about $3000 per month. At least the taxis were dirt cheap. But inflation is making everything else expensive. And I just got back from Moscow and London. Also not cheap. But relative bargains compared to Dubai.
High energy and commodity prices are supposed to be a wealth transfer from consuming nations to producers, but if the proceeds simply get wasted in showcase projects then where is the net benefit? Simply put in the context of exporter land these countries cannot use their energy for their own ever increasing development and export it to earn income.
The development model that they have chosen could not be more energy intensive. At the moment the whole region reminds me of some pump and dump real estate scheme. Got $2 million burning a whole in your pocket? Why not buy a piece of air? Or an artificial island made of sand? Either way energy shortages and/or rising sea levels mean that your investment is on a shaky footing. But regardless you will still have a super sized power bill to foot every month.
Personally, a better investment would have been to use their oil wealth to buy small countries like Montenegro, and just relocate their Gulf citizens there instead of trying to build a metropolis in the desert. Actually, I believe that is what Abu Dhabi is doing? In any case, foreign investors beware. Places like Dubai may be building castles in the sand, but who says they are commited to running them down the road? As I said, I cannot think of a more unsustainable development model?
Quote:
David Lehman, director of commodity research and product development at the CME Group, said that hedge funds, or other speculative money, have certainly added to the fever around these commodities lately.
But he added that the so-called hot money is not what is driving the market, as some have claimed in the oil and gold markets. The latest report from the Commodity Futures Traders Commission about outstanding rice contracts shows that only about 19% of them are held by non-commercial investors, or companies that might be speculating as opposed to actually hedging against price moves.
He said effects such as production problems, demand increases, the increase in energy costs for producers, and even the decline in the value of the U.S. dollar have all played even bigger roles in contributing to the surge in prices. The dollar itself has contributed to about 25% of the price increases in agricultural commodities, especially in corn and wheat, he said.
(continued)
Like with tech stocks, housing, and oil and gold before them, there is an element of a bubble to the surge in agricultural commodities prices. But unlike with the others -- even oil -- the result of higher prices has become a global problem almost immediately. It's one thing to lose your retirement money on Cisco Systems or Yahoo, or even to lose your house on a bad subprime loan. But these rising costs are threatening the survival of millions of people.
I did enjoy the indoor skiing though. My carbon footprint for the year. And having said that there is rich cultural diversity there with all the various guest workers from all parts of Asia and beyond. Plus I really did enjoy the dhows plying the Dubai Creek to and from the Persian Gulf on their way to far away places with strange sounding names.
Joined: Aug 03, 2006 Posts: 3615 Location: Working the Beat
Posted: Thu May 08, 2008 11:05 am Post subject: Re: Trader's Corner 2008
Was there a place called "Main Street Dubai" where you could buy kitzchy Arabacana plastic crap?
Las Vegas does come to mind, but I'll bet there's no $2.99 steak and eggs in Dubai. _________________ We're all Big Wave Riders. Some just don't realize it.
Posted: Thu May 08, 2008 12:55 pm Post subject: Re: Trader's Corner 2008
Got Gold? Watch out, Dudes. Like I've been warning everyone around here for weeks, pols will use the price of oil as a political platform, and this time, they might put bite into their bark. If you have recently purchased energy related shares, be careful. Safe haven money is going to exit. Gold has rallied over 15.00 today, perhaps partly because of this news.
From CNN:
Many politicians and energy industry analysts blame oil speculators for cashing in on the fuel cost crisis and, in the process, boosting the price of oil. Hedge funds, trusts, and independent investors have also poured funds into crude oil as a hedge against the weakened dollar.
"A major contributor [to high oil prices] is the rise in speculation," said Sen. Carl Levin, D-Mich, who estimated that speculation has added about $35 to a barrel of oil. "This is not a supply and demand issue."
Levin said the solution can be found in closing the loopholes that allow electronic traders to buy oil outside of the United States. Levin noted that the "Enron loophole" will be ended if President Bush signs legislation that Congress passed as part of the proposed Farm Bill.
The "Enron loophole" was codified in the Commodity Futures Modernization Act of 2000, allowing oil futures to be traded electronically in unregulated markets outside of the jurisdiction of the Commodities Futures Trading Commission.
Posted: Fri May 09, 2008 2:12 am Post subject: Re: Trader's Corner 2008
BigTex wrote:
Las Vegas does come to mind, but I'll bet there's no $2.99 steak and eggs in Dubai.
I have Dubai on my list of places to visit before I die. I wonder what that place will look like post peak. Will that 1 bedroom apartment still go for $3,000 / month?
Dubai is trying to turn itself into the playground for the rich. That's what Las Vegas *tried* to do by building upscale shopping malls, golf courses, fancy restaurants, and posh condos. It did not work. To use MrBill's words:
"At the moment the whole region reminds me of some pump and dump real estate scheme."
yeah that also describes Las Vegas pretty good too.
BTW Las Vegas is number 2 on the top cities with the highest foreclosure rate in the USA.
///
moving away from the $2.99 steak and eggs and back to trading, there has been a pretty big slide in the commodities market last month which somewhat reminds me of what happened after the 2005 hurricanes. Right now the stock market looks like it *might* be good for a short. However I have to be careful with my timing, the last time I tried that I had to take a haircut.
Joined: Feb 20, 2005 Posts: 2487 Location: Uppsala, Sweden
Posted: Fri May 09, 2008 10:42 am Post subject: Re: Trader's Corner 2008
So, now they'vre increased their price target for Pride to $50.
Another interesting offshore operator (which I don't own though) is SeaDrill. The price is 155 and their target is 170. _________________ Peak oil is not an energy crisis. It is a liquid fuel crisis.
Posted: Mon May 12, 2008 2:21 am Post subject: Re: Trader's Corner 2008
Cube, I think last week's move marked the end of the rally that started on March 17th - the Bear Stearns picnic - at least for the S&P500. Now we should see a resumption of the downtrend.
However, for the S&P Energy Index (GSPE) it is less clear. We are still forming a double top, and with crude above $125 - despite a stronger US dollar - it would be a high risk short. I would sooner be a scale-up seller to take profit on some oil company longs to lock-in profits rather than sell it outright.
Too many articles out last week arguing that the financial crisis was behind us and that the housing market was finding its bottom. Too optimistic in my opinion, but then I have been surprised by the underlying strength in the stock market(s) despite weakness in the real economy.
Volumes are very low, so it is even harder to assess these moves, so I am avoiding large outright bets. The RTS and MICEX, for example, closed up strong last week - and now look overbought - despite being punished early in the credit crisis as Russian blue chips were sold-off to make margin calls and reduce risk.
We put on some collars to lock-in the upside and buy some downside risk protection in combination with some repo borrowing. But that is more opportunistic than taking an outright view. However, Russia is a special case as the state not the oil companies benefit the most from higher energy prices. Export duties and royalties are at record levels.
Our neighbors in Lebanon are guaranteeing that the geo-political risk premium remains in the price of crude headed into the summer driving season. As Israel turns 60 there is no end in sight to regional problems, and even within Lebanon it appears that internal politics is as big a problem as relationships with the outside world. Its too bad. Some of the figthing has spread into the Druze Mountains - mainly Christian areas - now that were relatively calm. I was skiing there in March.
Along with the Gini Coefficient there should be a Weenie CoefficientTM as well to measure wealth and poverty. The Weenie CoefficientTM basically states that if you are permanently at war with yourselves and your neighbors - and blowing-up your infrastructure instead of investing in the future - then you are not going to get wealthy - ever!
A large earthquake this morning in Asia. Hit China, Thailand, Singapore and area the hardest. 7.8 on the Richter Scale. May see Asian markets close lower due to traders reducing outstanding risk. Myanmar is certainly turning into an ugly mess. It certainly undermines arguments about respecting a country's sovereignty regardless of domestic abuses and lack of basic human rights. A failed state is a failed state. And the UN is a largely ineffective blunt instrument for dealing with them. Did anyone catch the BBC special on UN corruption in the Congo by Pakistani troops?
Quote:
In an investigation over 18 months the BBC has found evidence that United Nations has been involved in covering up allegations that some of its peacekeepers in the Democratic Republic of Congo dealt in gold and supplied weapons to some of the most notorious militia operating in the country.
Engaged in gold smuggling and selling arms to rebels. Were those Millennium Goals? Your tax dollars at work. Whoops! _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Joined: Feb 20, 2005 Posts: 2487 Location: Uppsala, Sweden
Posted: Mon May 12, 2008 6:38 pm Post subject: Re: Trader's Corner 2008
MrBill wrote:
Engaged in gold smuggling and selling arms to rebels. Were those Millennium Goals? Your tax dollars at work. Whoops!
Quote:
• Pakistani peacekeepers in the eastern town of Mongbwalu were involved in the illegal trade in gold with the FNI militia, providing them with weapons to guard the perimeter of the mines.
• Indian peacekeepers operating around the town of Goma had direct dealings with the FDLR, the militia responsible for the Rwandan genocide, which is now living in eastern Congo.
What do you expect from those who in UN parlance are called people from "non-skiing nations"? _________________ Peak oil is not an energy crisis. It is a liquid fuel crisis.
Posted: Tue May 13, 2008 1:37 am Post subject: Re: Trader's Corner 2008
Starvid wrote:
What do you expect from those who in UN parlance are called people from "non-skiing nations"?
Not to be contentious, but the skiing in Nepal, India, Pakistan and Kashmiri are definitely on my list of things to do.... This year I managed to knock-off Cyprus, Lebanon and Dubai (new countries). Next year maybe Turkey, Israel and/or Syria? I would even go to Iran if they would forgive my skepticism about the viability of the IOB? ; - )) Although I would also like to ski telemark and go hut to hut in Norway as well. Someday I hope to cut fresh tracks all over this globe, God and peak oil willing! Call it my one indulgence! ; - ))
As for the UN and its members it is a bad joke! As Dag Hammarskjold, the UN's second secretary-general, put it, "the UN was not created to take humanity to heaven but to save it from hell." Let's just say, that if the UN did not exist we would probably have to invent it. It is hard enough to get 192 nations to agree on anything. Much less grandstanding and politicizing each and every issue or even symbollic step. Hugo Chavez called Angela Merckel a quasi Nazi and a fascist descendant on Sunday for Christmas' sake!
Ban Ki-moon is no Dag Hammarskjold and neither was Kofi Annan for that matter. However, Ban Ki-moon's comments yesterday about Myanmar were not quite pathetic, but darn near close. If the collective weight on the UN's 192 members are not sufficient to deliver humanitarian relief to Myanmar to save tens of thousand of lives then one has to really wonder about the seriousness of pundits like Jeffrey Sachs that propose giving the UN even more money?
If the UN cannot fulfill its mission with its existing budget then doubling or tripling it without measurable objectives, and tight controls against waste and corruption, is just throwing good money after bad. And it does matter because on the backside of post peak oil resource depletion we will collectively have less wealth - and less will - to deal with these issues. Peak oil may well signal peak international cooperation and the flipside of that is nationalism, zenophobia and resource wars.
Not really Trader's Corner stuff, but we are all citizens of the world, so it does matter even if it means keeping markets relatively free, fair and competitive as opposed to giving control to the bureaucrats and policy makers that have proven time and again that they value politics and gamesmanship over sound economics, trade and development. I will climb off my soapbox now.
A Canadian group is urging the government to send the Disaster Assistance Response Team to China to help earthquake survivors, but the team is still waiting for permission to enter Burma.
Source: Group urges Canada to send DART to China _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Tue May 13, 2008 7:45 am Post subject: Re: Trader's Corner 2008
Interesting development, Seahorse, it may force more transparency on integrated firms with regards to transfer pricing between heavy oil extraction and selling natural gas. As the price of extraction rises as well as the cost of natural gas it would be harder to justify subsidizing heavy oil. That would be good as it may favor nuclear power in the longer term and improve EROEI.
Quote:
Food prices have been rising steadily in the past few months and the effects are being felt globally. As agricultural commodities such as wheat and dairy trade at record highs, some governments, such as Russia, are implementing price controls on selected types of bread, cheese, milk, eggs and vegetable oil.
But why is food getting more expensive? What role do biofuels play and how has the weather affected crop yields this year? How does the cost of oil factor into the price of food? Our multimedia feature explains.
In 1973 Richard Nixon, US president, under political pressure because of rising domestic food prices, banned the export of soyabeans. The policy had predictably dire results, but today, with the world in the grip of another bout of food price inflation, governments worldwide are rushing to distort the market with subsidies and quotas, price controls and export taxes. They should stop.
Source: The high cost of cheap food _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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