Peak Profit

Aaron · Posted: Thu Nov 08, 2007 2:00 pm Post subject: Peak Profit

Given that this community correctly predicted today's oil prices back in May ( http://peakoil.com/survey176-results.html&mode=thread&order=1&thold=-1 ) I wondered if anyone would like to do an armchair calculation on how much money a theoretical investor might have made if he followed our advice?
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MrBill · Expert Joined: Sep 15, 2005 Posts: 5406 Location: Eurasia

Average Joe's typical salary: $40.000
Take home pay: 60%
Net salary: $24.000
Personal savings rate: 10%
After-tax personal savings: $2400

Assuming 100% allocated to investing in crude
Assuming picked yearly low and yearly high give or take a dollar
Assuming bought futures on the margin with 10% down
Maximun investment: $2400 / 0.10 = $24.000

Yearly low: approx. $50
Yearly high: approx. $98
Maximum gain: approx. $48

$24.000 / $50 x 1000 barrels = 0.48 contracts
0.48 contracts x $48 x 1000 barrels = $23.040

$23.040 / $24.000 = 96%
ROI = 96% not including brokerage

typical miles driven: 15.000 miles per year
typical gas mileage: 30 mpg (give or take)
typical retail pump price: $3.00
typical gasoline consumption: 500 gallons
typical gasoline expenditure: $1500 per year

$23.040 - $1500 = $21.540 maximum possible outcome

Those are a lot of assumptions, but roughly had one been buying on dips, say using moving averages, and managed not to get stopped out along the way, that is what one might have made if they were very astute. In reality one would have been lucky to make, say, two-thirds of that, or around $14.432, which net of taxes is $8659. That does not sound like much, but it is still 36% of Average Joe's typical take home pay at the end of the day.

Of course, Average Joe American does not even save 10% of his net pay cheque so in reality he would have been SOL! ; - )
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Aaron · Posted: Fri Nov 09, 2007 11:30 am Post subject: Re: Peak Profit

I was thinking more along the lines of institutional investors actually. Ya know... the one's who missed this opportunity in oil speculation. Those folks who ignored the suddenly "clairvoyant" predictions made right here at peakoil.com.

But thanks!
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MrBill · Expert Joined: Sep 15, 2005 Posts: 5406 Location: Eurasia

Well, considering the S&P is flat on the year when measured in euros (actually -7.5%) there cannot be too many institutional money managers that are happy that they missed a potential 96% move higher in crude prices.

Total return is the only real measurement. Outperforming an under-performing or falling benchmark is kinda like only peeing your pants while everyone else made another kinda mess in theirs! ; - )

p.s. Bas updated my avatar. Thanks.
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The organized state is a wonderful invention whereby everyone can live at someone else's expense.

aahala · Intermediate Crude Joined: Feb 03, 2005 Posts: 954

Aaron · Posted: Wed Nov 14, 2007 10:49 am Post subject: Re: Peak Profit

My bad... wrong poll

http://peakoil.com/survey146-results.html&mode=thread&order=1&thold=-1
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"When you understand why you dismiss all the other possible gods, you will understand why I dismiss yours." - Stephen F Roberts.

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