Monday, August 4, 2008

Starting to get interesting again

With oil down so hard I am starting to get the warm and fuzzies again.  I posted on June 28 that i just could not get excited about Oil at $142 per barrel, but that $120 would be interesting and $110 would get me aroused...

Oil's move from $70 to nearly $150 needed a good correction. 50% of the move would put oil under $115, and I would think that an attractive valuation, given declining future export supplies.

The first 500,000 barrels per day decline in oil supplies to the U.S. has been bought and paid for.  The easy stuff has been cut out.  What about next year?  Will another 500k - 700k decline in oil supplies be balanced at $125 per barrel.  VERY, very doubtful in my humble opinion.

Remember, it is the price you pay for the fundamentals underlying the investment that counts.  Oil inventories are as tight in terms of "days of supply" as they have EVER been, and the net long position by speculators in NYMEX Light Sweet Crude Oil at the's website (commitment of traders) has not been this low at anytime that I can find in over 1 year.

I am not suggesting you go out and reach for a falling knife.  But markets Zig and Zag, they don't Zig and Zig.  This has been one hell of a Zag.  The zig always comes out of nowhere.


The broader stock market did not benefit from the drop in the price of oil.  This just ain't a good sign.


So much for the rally in financials like  Lehman and Merrill.  It is all over but the gun shot.  Somebody give the guy with the blindfold a shot of whiskey and get it over with.


Tough week for Barak Obama.  Israel seems to support McCain over Obama, and that will have serious implications for Obama with South Florida's Jewish voters.  Without their vote, he can't win Florida.  Without Florida, he could very well win the popular vote and lose the election.  If he loses Ohio... I don't think he can get to 270 electoral college votes.  But what the heck do I know...

Yours for a better world,

Mentatt (at) yahoo (dot) com


Anonymous said...

It is great to live in a "Free" country where our "Free Markets" only require intervention from the SEC and the Fed once or twice each week!

It is great to live in a "Free" country where Israel gets to decide who the president of the USA will be!

It is great to live in a "Free" country where we can vote for John McSame or That Muslim even if the supreme court won't let our votes be counted.

Americans really Love Freedom!

Anonymous said...

Too bad for Obama, but as the pretty clothes come off, he'll be exposed as the stinky racist and Marxist that he is. His initials are BO, for goodness' sake. A vote for McCain may not be a vote for a more libertarian government, but a vote for Obama is certainly one for the fascists.

Anonymous said...

We fascists think you are nuts. We need to stick to the topics at hand. And the drastic drop in oil prices and what everyone says was its likely cause (plummeting demand for goods and services, though I still think China has something to do with this) is the real problem.

Anonymous said...

... the stock market went UP because the price of oil went DOWN
... because the US economy went DOWN because the price of oil went UP
... Will the economy go UP now that the oil price is DOWN? If so, the price of oil will go UP again...

How crazy is that?!

fallout11 said...

Liquid transport fuel use by the US (and most countries, oddly enough) is cyclical and seasonal. In the US, it peaks in early summer, followed by a long slow slide into the fall, and then a second lower peak near the holidays before repeating the cycle all over again but with a overall upward trend (1999-present, at least).
Combine with some demand 'suppression' from falling VMT, collapsing economy, and Chinese curtailment, and you have falling oil prices even in the wake of 'bumpy plateau' (WestTexas again) peak oil depletion.
Oil will fall to around $100 low, and then by next spring be well over this year's high ($170, anyone?). 2 steps up, 1 back. Lather, rinse, repeat.