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Re: Oil Bulls...
Old 01-17-2007, 08:07 PM   #41
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Re: Oil Bulls...

Quote:
Originally Posted by MasterBlaster
There is no "Fair value" price for oil. It's just what someone will pay for it and what someone else will sell it for. If you are trying to de-couple the price of oil from the world economy and world events and politics, then good luck with that !
I guess the same thing could be said for any asset. Tech stocks. Housing. Tulips.

Sometimes it makes sense to look at the historical foundations of value and the current and predicted supply/demand picture. I think the long-term picture looks pretty good for oil as an investment. Could be a rocky ride for a while, though.
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Re: Oil Bulls...
Old 01-17-2007, 08:14 PM   #42
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Re: Oil Bulls...

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Originally Posted by wab
I guess the same thing could be said for any asset. Tech stocks. Housing. Tulips.
Tech Stocks - I can make a pretty good estimate as to what the present value of Microsoft's future cash flow stream is worth.

Housing - I can make a pretty good estimate as to what the present value of future net rental income (or avoided expense) is worth.

Tulips - Just like oil, I haven't a clue. But in theory the price of a commodity should set at the marginal cost of production. I don't know what that is for tulips but I've seen estimates ranging from $20-$30 for oil.
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Re: Oil Bulls...
Old 01-17-2007, 08:37 PM   #43
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Re: Oil Bulls...

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Originally Posted by 3 Yrs to Go
Tulips - Just like oil, I haven't a clue. But in theory the price of a commodity should set at the marginal cost of production. I don't know what that is for tulips but I've seen estimates ranging from $20-$30 for oil.
I want to say that, for '05, in ND, the cost of production was a magic number like $36. I can't find a URL to confirm/deny. I'd assume it's higher now. It varies wildly depending on how you define some things.

Ew! Here's a link. Bad quality graph though.

Technically and economically recoverable.

No real explanation as to how this number is arrived at.

-CC
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Re: Oil Bulls...
Old 01-17-2007, 09:30 PM   #44
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Re: Oil Bulls...

Guess I don't see it as a bottom falling out. Pretty minor correction to me.

Consider, as of 12/31/06, Vanguard's Energy Fund Investor (VGENX):
YTD Returns 1 Year 5 Year 10 Year Since Inception Inception Date 19.66%19.66%25.75%16.53%14.77%05/23/1984 (Today's close, it is down 5.82% vs. 12/31/06.)

And, regarding gold, Vanguard's Precious Metals and Mining Fund (VGPMX):
YTD Returns1 Year5 Year10 YearSince InceptionInception Date34.30%34.30%34.72%13.92%8.55%05/23/1984 (Down 2.30% on today's close, vs. 12/31/06.)

2007 has a long ways to go.

I never understand the aggravation with commodities ... seems like a perfectly respectable asset class. Hell, the S&P 500 is 8.34% over the last 10 years, 12.23% since inception (1976). They go up, they go down ... growing world economy, ain't making any more of the stuff, weakening dollar. Some investors cry all the way to the bank with these funds ... Wouldn't put 25% of my portfolio here, but ...

Quote:
Tech Stocks - I can make a pretty good estimate as to what the present value of Microsoft's future cash flow stream is worth.
Really. What do you get for Google? Amazon?

Love the tulip reference. Now, if we can set up tulip mutual fund that performs like VGPMX or VGENX ... we've got a winner! Then, a South Sea REIT!
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