Monday, October 29, 2007

CNBC should be ashamed

I watched, in absolute awe, the show “Kudlow & Co.” on CNBC this evening. Larry was talking about Global Warming and Peak Oil, though he can’t quite get himself to use the term “Peak Oil” (a rose by any other name…).

Rather than have guests such as Dr. David Goodstein of Cal Tech or Dr. Ken Deffeyes of Princeton University, you know someone who has actually STUDIED the problem, Kudlow did the courageous thing and had Pat Buchanan appear in their stead. The 2 proceeded to shout at the top of their lungs their view of Peak Oil and Global Warming, not once uttering a shred of empirical data. But they did so with such force and verve! I have to say, I am quite relieved. We have nothing to worry about. Larry Kudlow and Pat Buchanan said so. My bet is most of America agrees with Kudlow and Buchanan.

Oil for December delivery dropped $3 today

The front month oil futures contract has been on an unbelievable tear up nearly 50% for the year and 15 % for the week, before giving up ground the past 2 days. It is due for some profit taking. Could that profit taking bring crude down to $75 by year-end? Sure. Could we see $100 before year-end? Sure. Trading the near contracts is going to be a hard way to make a living for a while, but has been pretty good to us lately. On the longer end, the futures price never got above the low 80’s. The multi year trend of higher highs and higher lows is still very much in place and the supply/demand situation continues to support that trend. As I say time and time again: “Markets zig and zag, they don’t zig and zig”. The front month contract went from $68 to nearly $94 in less than 3 months – we are due for a zag, but you got to keep an eye on the production and inventory numbers.

The Fed's interest rate decision tomorrow could have a big impact on energy prices. If the Fed cuts more than expected, say 50 basis points, the U.S. Dollar could really react quite negatively and lift the price of Oil, and Gold, in dollars. I have no opinion on what the Fed will do, and I never will. I merely react.

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