Friday, September 21, 2007

Don’t deny what your eyes are seeing.

1. The October crude oil contract, now expired, closed out near $84 - a new record.
2. Gold front month is trading, as we speak, at $743 – it took out last year’s high in a single day and never looked back.
3. The U.S. Dollar is at a 40 year low as measured by the dollar index
4. Saudi Arabia, for the first time in many decades, did not move its interest rate policy in lockstep with the U.S. Federal Reserve – in layman’s speak the Saudi’s are depegging their currency from the U.S. Dollar
5. Commercial inventories of crude and finished product in the U.S., the world’s largest energy consumer, are declining at an alarming rate – about 10% in the past 3 months. Although prices have moved higher, there has been no change in the slope of the line measuring the inventory’s decline.

Now a definition:

“Occam's razor (sometimes spelled Ockham's razor) is a principle attributed to the 14th-century English logician and Franciscan friar William of Ockham. The principle states that the explanation of any phenomenon should make as few assumptions as possible, eliminating those that make no difference in the observable predictions of the explanatory hypothesis or theory. The principle is often expressed in Latin as the lex parsimoniae ("law of parsimony" or "law of succinctness"):

“entia non sunt multiplicanda praeter necessitatem,”

which translates to:

“entities should not be multiplied beyond necessity.”

This is often paraphrased as "All things being equal, the simplest solution tends to be the right one," or alternately, "we should not assert that for which we do not have some proof." In other words, when multiple competing theories are equal in other respects, the principle recommends selecting the theory that introduces the fewest assumptions and postulates the fewest entities (although this is not always the same as simplicity[1]). It is in this sense that Occam's razor is usually understood.

Originally a tenet of the reductionist philosophy of nominalism, it is more often taken today as a heuristic maxim that advises economy, parsimony, or simplicity in scientific theories.” –

Using Occam’s razor to keep us germane to the discussion at hand:

1. None of the solutions bandied about by glad-handing politicians and miscreant schemers such as hydrogen, ethanol, solar, wind, tidal, gerbils on a treadmills… have proven to have any potential to scale to our society’s current requirements.

2. Every data point available shows world production of crude oil and condensate in decline.

3. North American production of natural gas has been in decline for several years.

4. Even with a 700% rise in the price of crude oil since the beginning of the decade, no significant finds are on the horizon, despite the tremendous financial incentive of the exploration companies.

It then follows that a smoothed “peak” has been reached in world oil production, and in North America’s case, in natural gas as well.
The U.S. economy, currency, real estate, and financial markets are at serious risk. If you have assets, a business, etc… these risks and opportunities should be the very center-point, almost to the exclusion of everything else, of your personal and business strategies. If not, the sounds of “woulds, coulda, shoulda” will, to steal a line from the movies – “Echo in Eternity”
Yours for a better world,

Mentatt (at) yahoo (dot) com

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