Oil - is it moving towards a bubble

[ladelfina]

eridanus: right.. and then we pay INTEREST on that. The bigger the deficit, the more we have to pay in interest to maintain the deficit. (But "deficits don't matter"!!). Which makes all the talk of lowering interest rates to 'stimulate' the economy a little suspect. Lowering rates gets some of our debt off the hook, as apparently some foreigners will buy treasuries no matter how low the rates get (although we may soon find out that no longer holds true).

 

[al_bundy]

I just saw a blurb on CNBC saying Goldman Sachs is predicting $200 oil.

that probably means sell

i was looking at the charts this weekend of a bunch of commodities and most look like the peak of a head and shoulders patterns. just like Toll Brothers right before it peaked in 2005

 

[al_bundy]

eridanus: right.. and then we pay INTEREST on that. The bigger the deficit, the more we have to pay in interest to maintain the deficit. (But "deficits don't matter"!!). Which makes all the talk of lowering interest rates to 'stimulate' the economy a little suspect. Lowering rates gets some of our debt off the hook, as apparently some foreigners will buy treasuries no matter how low the rates get (although we may soon find out that no longer holds true).

do you have any idea who owns most of the debt and collects the interest? there is a reason the deficit doesn't go away no matter which party is in power. it would cause too much social disruption if it did

 

[ladelfina]

true.

 

[Patrick]

that probably means sell

i was looking at the charts this weekend of a bunch of commodities and most look like the peak of a head and shoulders patterns. just like Toll Brothers right before it peaked in 2005

It just hit $107.50

 

[eridanus]

go look at the total debt every year, not the deficit. Total debt increased every year of the clinton presidency and so did government revenue after the evil tax cuts

You first mentioned percentage. The deficit:GDP went down under Clinton and up under Bush. That's a fact.

You're correct that the total debt has gone up.

The receipts went down when Bush came into office. They recovered, starting around 2004. The outlays have done nothing but go up, even when the receipts were declining from 2001-2004.

 

[al_bundy]

we had a recession start in 2000 and the stock market imploded because of

a. dot com bubble which i think was caused by LTCM
b. 9/11
c. enron/worldcom and all the other corporate games
d. the war in iraq

the market went up the day the war started, as it always does. most of the losses were because of the other 3 reasons which had nothing to do with any president.

and if you look at any long term commodity chart, prices hit a low in early 1996 or sometime around then and have been going up ever since. long before the media jumped on the weak dollar thing even though 99% of people can even tell you the ideal value of the dollar compared to other currencies

 

[al_bundy]

It just hit $107.50

i never said $105 was the exact peak. i said we are probably close to the peak and it was forming a head and shoulders pattern.

and i still think deflation is the bigger enemy here because if people were worried about inflation and stagflation the 10 year T-Bills wouldn't be trading with 3.5% yields

i could be wrong and i wouldn't short any oil investment at these levels. i'd wait for things to become a little clearer first

 

[Patrick]

i never said $105 was the exact peak.

I wasn't arguing with you, I was just posting the price for the general readership of this thread to see.

 

[tomintucson]

Oops- West Texas Intermediate at $108.13. Now how did that happen?

Again, I encourage serious and inquisitive investors to link to the Charles Maxwell piece from Ha's post a couple pages back, and maybe ask yourselves if you really believe that the hard-working and ambitious citizens of India and China are perhaps going to change their minds and decide that they don't want cars after all (at $2,500 from Tata Motors, anyone?).

Or if the world will overcome what may be the challenge of the century, that of discovering and developing viable alternatives to fossil fuels in what may be a very narrow window available to us.

We live in a nation that seems to be abandoning electronic balloting and returning to the reliability of paper ballots. Yet, having squandered the better part of our legacy of first-rate crude with which we were blessed, many seem to put forth some sort of impending technological rescue of biblical proportions. Heaven help us.

My money remains where my mouth is. I'm a big believer in investing in accordance with my convictions. I don't really know any other way.

 

[Marquette]

...maybe ask yourselves if you really believe that the hard-working and ambitious citizens of India and China are perhaps going to change their minds and decide that they don't want cars after all (at $2,500 from Tata Motors, anyone?).

But, if it's running on air:

The Air Car

then I suppose I wouldn't mind if every Ravi, Raj and Sri wants one.

 

[ladelfina]

many seem to put forth some sort of impending technological rescue of biblical proportions.

tomintuscon.. true.. and all technologies will require lots of fossil fuels to develop in the meantime, even if there is a glimmer of light at the end of any particular tunnel. I think there is going to be a sea change which at the very least will require a partial abandonment of "technology". We will need to be smarter about how we use and distribute resources on a personal and national scale.

tom.. so what sort of investments are in line w/your convictions right now?

 

[tomintucson]

ladelfina,

Thanks for your inquiry. I'm a 49-year old retired small businessman with an interest in finance and macroeconomics. Here's what I've been up to for the last 5 or 6 years:

-In 2002, I began to accumulate a position in energy, adding to it thru 2006. Currently 24% of liquid assets, all Vanguard Energy. (I'm a long-term, long-only investor, almost exclusively mutual funds. Call me a "strategic asset allocator".
-In 2003, I began purchasing shares in what was then called Vanguard Precious Metals. In 2004, I purchased 84 Krugerrands at an average cost basis of $413/oz., and 4,000 ounces of silver at $7.46/oz. Prices include commissions. I'm pleased with the results. Metals and metal shares are 26% of my portfolio.
-I enjoyed the wonderful ride offered by emerging markets from around 2001 until 2007. Mostly Asian holdings, Matthews Asian funds. Sold everything except their high-dividend-yield fund. Am on the lookout for what feels like a good reentry into Asian markets. Also own a little Singapore, more of a developed market.
-Heavy exposure to Japan from 2002 or 2003 onwards. Has served me very well until recently, although I have maintained my exposure in anticipation of a strengthening yen. An underweighted and very unloved market whose time may come again. I'm very impressed by the Japanese people.
-In January of this year I purchased 720,000 Chinese renmimbi, on deposit and FDIC insured with Everbank, diversifying out of the US dollar with a portion of my cash allocation, which is now about 18% of my portfolio.
-Most recently, I moved about 4% into agricultural ETFs, and 2% into Wintergreen Fund, a deep-value outfit managed by David Winters of Mutual Series fame. I'm interested in committing a lot more to Mr. Winter's care when it feels right. His fund is very expensive to own on the one hand, but can be viewed as a hedge fund in mutual fund's clothing, at a fraction of the exorbitant fees charged by hedge funds.

I'm very pleased, to varying degrees, with the performance of my portfolio. Probably the past 5 years have given the best returns I'll ever see. I'm feeling sort of hunkered down in capital preservation mode now. And while I've had some success with my equity portfolio, things haven't been peaches and cream with my real estate investments. I managed to sell one piece of mortgage-free investment property at the cusp of the peak, in May of 2005, but didn't get around to selling my primary residence and a parcel of raw land. I was too busy working, of all things, to take action when action needed to be taken.

I don't recommend my money management style to anyone. Smart people have recommended that we develop an approach that works for us, and stick to our guns. Passive, low-cost investing is absolutely the wisest approach, I think, for most investors.

 

[ladelfina]

wow.. that really puts new meaning to the idea of "courage" in the courage of yr. convictions. I get all these moves and even thought about a couple of similar ones in a vague way, but could never steel myself to really commit to anything that seemed too exotic, though I did buy a chunk of Chevron several years back.

 

[chinaco]

Didn't you know? It's Bush's fault for everything, including one of my fillings cracking and the fact it was snowing when the sun was out yesterday...........

If he doesn't pay attention to economic and domestic issues... he can't fix them.

Unfortunately he wanted to play war president. He has been distracted with the war in Iraq. That has consumed him. And once it became apparent he made a big blunder he spent all of his time trying to prove he was correct.

The man will exit office with the country not having any real prosperity during his term and in quicksand at the end. Quicksand of his making.

Pressure from the Whitehouse on monetary policy kept interest rate too low for too long and fueled a housing boom that was artificial. If rates had been raised back when they should, we would find ourselves right about at the same place today. The market has not really recovered from the tech buble and we have big inflation and a very weak USD.

Yes, his policies have not helped the country.

I find it interesting. Carter was much derided by republicans especially after the coup in Iran. GWB is the republicans equivalent of Carter.

Does GWB have a few credits to his presidency... sure. But those are by far overshadowed by his blunders. He will be the poster child of incompetent presidents for the next 30 years. Carter can hand over the baton.

 

[al_bundy]

and what magical power does the president have over the economy?