Friday, May 30, 2008
BIG Wall Street Firm says "Peak Oil Here or Near"
Yesterday morning I had CNBC on in the background (I was having too good a day so I needed some aggravation) when I heard that energy investment banker Matt Simmons was on next. I stopped what I was doing and listened to the CNBC air heads ask all of the wrong questions, and was happily amused that Matt was finally having a little fun at the interviewer's expense.
No surprises from Matt: "Oil was cheap and going much higher..."
After Matt was the Vice-Chairman of Merrill Lynch saying "Peak Oil is here or near." That got my attention. Merrill has an ARMY of brokers/salesmen, and over 1 $TRILLION of client assets under management. This is a firm that can truly move markets. It is one thing when a small firm gets behind something, but with Goldman Sachs and Merril Lynch getting behind "Peak Oil"... things are going to happen much faster in the markets - UP and DOWN.
On another note...
For the past several years China, India, and other Asian nations have been able to export their cheap labor to the U.S. With oil well over a $100 per barrel, that is coming to an end. When oil breaks the $200 per barrel barrier and remains there, there will be little opportunity to arbitrage China/U.S. labor because of the cost of shipping. This will be of necessity on another front. The U.S. trade deficit for oil will be so great that there will be no room for trade deficits for other goods and services.
Give that some thought before you go head long into some investment in China. This is not to say that the Yuan could not appreciate greatly, it certainly could, but there is much to consider here before I would be willing to extend myself here.
Meanwhile, back at the ranch...
Oil has given up all of its gains since Goldman's call for an average price of $141 for the second half. Oil will be much higher in 2 years, but establishing positions here will likely be frustrating (at least it is for me; I bought a little long dated yesterday after the inventory report and immediately got killed). Have a plan, and keep this in mind:
Would you rather be long U.S. $'s, or indispensable commodities?
Mentatt (at) yahoo (d0t) com
Posted by The Short Story Man at 4:08 AM