Powers Vow in 2007 as in 1932

[Guest]

Re: Powers Vow in 2007 as in 1932

OK, I guess that's "expanded" enough to make the point clear. It's looking a little blurry close up though. :rolleyes:

[GRG55]

Re: Powers Vow in 2007 as in 1932

OK, I guess that's "expanded" enough to make the point clear. It's looking a little blurry close up though. :rolleyes:

Thanks Lukester; for a moment there I thought my eyesight was failing...

A supplement to the very interesting (and amusing) exchange above:

Commodity price behaviour is considerably more complex than many of the analyses on iTulip and elsewhere that I've seen. Using oil as an example, the price behaviour, up and down, has elements of all of:

• US$ currency depreciation,
• post-2001 global growth supply/demand dynamics,
• rise in nationalization policies,
• open economy tax and royalty policies,
• supply region political instabilities,
• "flavour-of-the-day" search for return by speculative money,
• peak oil story, depletion trends, and other sentiment influences,
• and so forth

I have to chuckle every time I hear "analysts" (like the widely followed Dennis Gartman) make claims on TV such as "There's a $15 risk premium in oil". How do they "know" that? Who did they ask? How did they measure it? Who decides that its $15, or whatever number? People actually listen to this nonsense. The fact is nobody knows how much of the price on any given day/month/year is due to any one of all these factors in a complex interaction. Although some here have presented compelling charts that "it's all due to Fed inspired monetary inflation", I maintain a healthy degree of scepticism that is the "only" reason, or necessarily the dominant reason, for commodity price behaviour.

[FRED]

Re: Powers Vow in 2007 as in 1932

[QUOTE=GRG55;18159]

OK, I guess that's "expanded" enough to make the point clear. It's looking a little blurry close up though. :rolleyes:[/quote

Thanks Lukester; for a moment there I thought my eyesight was failing...

A supplement to the very interesting (and amusing) exchange above:

Commodity price behaviour is considerably more complex than many of the analyses on iTulip and elsewhere that I've seen. Using oil as an example, the price behaviour, up and down, has elements of all of:

• US$ currency depreciation,
• post-2001 global growth supply/demand dynamics,
• rise in nationalization policies,
• open economy tax and royalty policies,
• supply region political instabilities,
• "flavour-of-the-day" search for return by speculative money,
• peak oil story, depletion trends, and other sentiment influences,
• and so forth

I have to chuckle every time I hear "analysts" (like the widely followed Dennis Gartman) make claims on TV such as "There's a $15 risk premium in oil". How do they "know" that? Who did they ask? How did they measure it? Who decides that its $15, or whatever number? People actually listen to this nonsense. The fact is nobody knows how much of the price on any given day/month/year is due to any one of all these factors in a complex interaction. Although some here have presented compelling charts that "it's all due to Fed inspired monetary inflation", I maintain a healthy degree of scepticism that is the "only" reason, or necessarily the dominant reason, for commodity price behaviour.

Our position is not that monetary inflation via global central banks is the only cause of commodity price inflation but is the primary cause of both the correlation of global assets since 2004 AND commodity price inflation.

Recent gains in oil and gold appear to be largely driven by the Turkey/Iran security story:

Kurdish Rebels in Iraq May Announce Cease-Fire, Talabani Says

Oct. 22 (Bloomberg) -- Rebels from the Kurdistan Workers' Party, or PKK, may announce a cease-fire in their conflict with Turkey, Iraqi President Jalal Talabani said.

The fighters, who have bases in Iraq, may make the announcement ``soon,'' Talabani said in remarks made on Turkish television and carried on the Web site of his party, the Patriotic Union of Kurdistan.

To contact the reporters on this story: Camilla Hall in London at chall24@bloomberg.net

Which is, I believe, Tet's position on this.

[GRG55]

Re: Powers Vow in 2007 as in 1932

Our position is not that monetary inflation via global central banks is the only cause of commodity price inflation but is the primary cause of both the correlation of global assets since 2004 AND commodity price inflation.

Recent gains in oil and gold appear to be largely driven by the Turkey/Iran security story...

...Which is, I believe, Tet's position on this.

I think Gartman thinks the same...

[Guest]

Re: Powers Vow in 2007 as in 1932

Fred -

This is one of the few components of iTulip's positions I do not believe.

To ascribe the movement of oil or gold spot prices at each two month turn in the market to a fleeting geopolitical event particularly, seems to create a patchwork sequence of rationales which begin to evidence "slippage" when reviewed over larger segments of time.

The price moves looked at collectively through any given year are not maintaining a clear or strict chronological coordination with their presumed geopolitical event cues. Some price movements appear early and some appear late, with many other geopolitical events evidencing zero corresponding price move with their presumed geopolitical event. In sum, accepting this as a significant cumulative factor to me does not seem at all a foregone conclusion.

Of course localized global events do affect spot prices, but I surmise a good deal less than is being ascribed in significance here as any clear cut or primary correlation.

Also, what such ascribing minimizes in importance is the fact that all these small localized "adjustments" in spot prices are very obviously sharply cumulative over five or seven years, as they've racked up 100's of percent in spot price gains.

In the context of 300% cumulative up-moves in a commodity across seven years, ascribing a recent sharp up-tick in oil prices as being "caused" by Turkey-Kurdistan tensions only serves to dilute the perception that this commodity is really rising primarily due to fundamental causes that have exerted by far the larger influence across those five to seven years than a mere sequence of small localized geopolitical events strung together.

The "mosaic of small geopolitical drivers" seems to me a definition who's prime characteristic as an explanation serves to obliquely mask some very large depletion derived causes instead.

I'm in fact expecting that in the end iTulip's view on this will be forced to adapt to the "primary depletion as primary mover" argument, as developing severe tightness in the petroleum market will make the fundamental causes irrefutable as the primary driver.

I have no doubt that this view of iTulip's analysis coming up short on this topic will considerably irritate some quarters here. As you know, to the point of encountering a migraine headache from reading me on this topic previously, this has been my one "beef" with the iTulip editorial position for a while.

[Jim Nickerson]

Re: Powers Vow in 2007 as in 1932

[quote=Fred;18169]

Our position is not that monetary inflation via global central banks is the only cause of commodity price inflation but is the primary cause of both the correlation of global assets since 2004 AND commodity price inflation.

Recent gains in oil and gold appear to be largely driven by the Turkey/Iran security story:

Kurdish Rebels in Iraq May Announce Cease-Fire, Talabani Says

Oct. 22 (Bloomberg) -- Rebels from the Kurdistan Workers' Party, or PKK, may announce a cease-fire in their conflict with Turkey, Iraqi President Jalal Talabani said.

The fighters, who have bases in Iraq, may make the announcement ``soon,'' Talabani said in remarks made on Turkish television and carried on the Web site of his party, the Patriotic Union of Kurdistan.

To contact the reporters on this story: Camilla Hall in London at chall24@bloomberg.net

Which is, I believe, Tet's position on this.

Ed. whoever you are.

You wrote, "Our position" is .....

Then you wrote "I believe is Tet's position."

The only person at iTulip of whom I am aware with any expertise in financial matters is Eric Janzen, aka EJ.

If "Ed." is Fred, then Fred ought to sign his posts, so that we can know it is the opinion being put forth by a computer geek.

Should not "Our position" be "Eric's position" and "I" be signed by a person rather than "Ed."?

[Rajiv]

Re: Powers Vow in 2007 as in 1932

Of course localized global events do affect spot prices, but I surmise a good deal less than is being ascribed in significance here as any clear cut or primary correlation.

Also, what such ascribing minimizes in importance is the fact that all these small localized "adjustments" in spot prices are very obviously sharply cumulative over five or seven years, as they've racked up 100's of percent in spot price gains.

It seems to me, that long term contract prices may be a better measure than the spot prices - since most oil trade gets done by medium to long term contracts, with price adjusters pegged to the spot price. Is there a data base for the long term contracts entered into by the various oil producers?

[Guest]

Re: Powers Vow in 2007 as in 1932

Rajiv -

Gotta head out to work.

Long term oil contracts seem to have little predictive capacity either in our new paradigm petroleum market now hitting the outliers of terminal decline, as evidenced by this short post from 2004. As you read below, how far off this long term contract was on even remotely predicting the newr future of the market.

I submit if we locate a table of long term contracts today, they'll be projecting a price at maybe $90 - $120 a barrel, and some of the more "sober" commentary will extrapolate from there the contract prices will / must "trend" back down to $65 three to five years out beyond that $125 long term contract estimate.

It's amazing, but the price estimates quoted below represented the cumulative wisdom of some of the best minds in the futures market at that time. The wisdom of the "market consensus". It gives you an idea of the sheer scale of the psychological adjustment that must eventually arrive - on correctly estimating pricing in our future depletion governed environment. There seems a lot of resistance to this idea even among very seasoned market participants.

___________

Friday, December 03, 2004

Long Term oil prices (viewed from 2007 - now a time capsule)



Oil prices are tumbling down to quarterly lows of only $43.00/bbl. These price drops are reflective of both speculators leaving the energy market (most likely moving over to currency) and the news that there is better than typical weather hitting high home heating oil burning markets, which will be reducing demand. It is also aided by the Saudi claims that they can bring more capacity on line in the near future.

However, let's look at the long term chart for oil deliveries for Dec. 2009. These contracts are staying relatively stable at a price of $37.30/bbl. The high for the past six months was $40.10 on Oct. 28 and the low was $36.75 yesterday (Dec. 2). This is a relatively narrow trading range given that the short term contracts have fluctuated far more wildly.

It is interesting to me that the spread between the long term contracts and the short term contracts are shrinking despite the bond market's increasing expectation of inflation of 2.6% over the next five years. The long term future contract prices have a present, inflation adjusted value of $42.45, so that is about what I expect the floor on current prices will be for the winter.

UPDATE I am an idiot, I forgot to include the time value of the money paid for the future contract. Working off the yield of the 5year Treasury (non-inflation adjusted) of 3.6% as of this afternoon, the value of the futures contracts suggests a market price, today, of oil at $44.46

[0tr]

Re: Powers Vow in 2007 as in 1932

"Next week, we review our now year old forecast of a post housing bubble recession starting in Q4 2007. We've learned a thing or two since 2000 and expect this forecast to be better than half right. Evidence is that this will be, without a doubt, the most peculiar recession ever, with some sectors of the economy booming while others are crashing, some geographic areas of the US contracting while others are still growing. On a whole, we figure the Alternative Energy and Infrastructure bubbles need to get cranked up and boosting demand in 18 to 24 months to keep the US from running into Japan 1990s style debt deflation cycle. "

Question: In the past some comments about the effect of war and winding down a war on economy have appeared at itulip. Will you discuss how war/winding down war affect your prediction(s). And the timing thereof. It seems that war is adding something to the current peculiarities.

[FRED]

Re: Powers Vow in 2007 as in 1932

[QUOTE=Jim Nickerson;18176]

Ed. whoever you are.

You wrote, "Our position" is .....

Then you wrote "I believe is Tet's position."

The only person at iTulip of whom I am aware with any expertise in financial matters is Eric Janzen, aka EJ.

If "Ed." is Fred, then Fred ought to sign his posts, so that we can know it is the opinion being put forth by a computer geek.

Should not "Our position" be "Eric's position" and "I" be signed by a person rather than "Ed."?

Part of Fred's role is to remind readers of iTulip's long-standing editorial positions on certain topics, citing specific articles. Will try to use editorial "we" consistently but, hey, I'm only human! I think.

[WDCRob]

Re: Powers Vow in 2007 as in 1932

Aha! Or is it Eureka?

FIRE economy = deflating as credit dries up and overvalued assets are properly repriced/written off (trillions in imaginary value is destroyed).

Real economy/commodities = inflation, if Fed is successful; massive inflation if it is not. But no deflation possible in this sector of the economy (where I, and other mere mortals [but not Fred?] live).

I think I finally get it. So in the long term, be short the dollar and financial assets and long PMs/commodities.

[Sorry to simply restate a theme that's been said here several thousand times. Sad to say I just now understood it and couldn't curb my enthusiasm.]

[EJ]

Re: Powers Vow in 2007 as in 1932

Fred -

This is one of the few components of iTulip's positions I do not believe.

To ascribe the movement of oil or gold spot prices at each two month turn in the market to a fleeting geopolitical event particularly, seems to create a patchwork sequence of rationales which begin to evidence "slippage" when reviewed over larger segments of time.

The price moves looked at collectively through any given year are not maintaining a clear or strict chronological coordination with their presumed geopolitical event cues. Some price movements appear early and some appear late, with many other geopolitical events evidencing zero corresponding price move with their presumed geopolitical event. In sum, accepting this as a significant cumulative factor to me does not seem at all a foregone conclusion.

Of course localized global events do affect spot prices, but I surmise a good deal less than is being ascribed in significance here as any clear cut or primary correlation.

Also, what such ascribing minimizes in importance is the fact that all these small localized "adjustments" in spot prices are very obviously sharply cumulative over five or seven years, as they've racked up 100's of percent in spot price gains.

In the context of 300% cumulative up-moves in a commodity across seven years, ascribing a recent sharp up-tick in oil prices as being "caused" by Turkey-Kurdistan tensions only serves to dilute the perception that this commodity is really rising primarily due to fundamental causes that have exerted by far the larger influence across those five to seven years than a mere sequence of small localized geopolitical events strung together.

The "mosaic of small geopolitical drivers" seems to me a definition who's prime characteristic as an explanation serves to obliquely mask some very large depletion derived causes instead.

I'm in fact expecting that in the end iTulip's view on this will be forced to adapt to the "primary depletion as primary mover" argument, as developing severe tightness in the petroleum market will make the fundamental causes irrefutable as the primary driver.

I have no doubt that this view of iTulip's analysis coming up short on this topic will considerably irritate some quarters here. As you know, to the point of encountering a migraine headache from reading me on this topic previously, this has been my one "beef" with the iTulip editorial position for a while.

You have a lot of company. This report came out today...

Steep decline in oil production brings risk of war and unrest, says new study

• Output peaked in 2006 and will fall 7% a year
• Decline in gas, coal and uranium also predicted

World oil production has already peaked and will fall by half as soon as 2030, according to a report which also warns that extreme shortages of fossil fuels will lead to wars and social breakdown.

The German-based Energy Watch Group will release its study in London today saying that global oil production peaked in 2006 - much earlier than most experts had expected. The report, which predicts that production will now fall by 7% a year, comes after oil prices set new records almost every day last week, on Friday hitting more than $90 (£44) a barrel.

EWG's web site states, "The Energy Watch Group is financed by funds, which flow into the Ludwig-Bölkow Foundation." We sent them a note today asking where the group's funds come from.

[jk]

Re: Powers Vow in 2007 as in 1932

The Ludwig-Bolkow-Systemtechnik GmbH

Ludwig-Bolkow-Systemtechnik GmbH and Ludwig-Bolkow-Foundation have both been established by Dr. Ludwig Bolkow in 1982. Ludwig-Bolkow-Systemtechnik was created as a non-profit organisation in accordance to the charter of the Ludwig-Bolkow-Foundation.
In addition to the already existing organisations, in 1998 Dr. Bolkow founded the L-B-Systemtechnik GmbH. The aim of the company is to provide commercial consulting services. This new company took over the business and the employees of the non-profit company (which ceased to be active).
In 2004 the employees of L-B-Systemtechnik GmbH acquired the company from the heirs of Dr. Bolkow who had died in 2003. With effect from March 9th, 2006, the day of inscription into the Commercial Registry (HRB 120269) L-B-Systemtechnik GmbH has changed its name to Ludwig-Bolkow-Systemtechnik GmbH.
In 2006 further partners took an interest in LBST: LBST staff (29%), TÜV SÜD (47%), Ludwig Bolkow Stiftung (12%) and Mr. Gerhard Jochum (12%).
However, the company is still committed to the aims and the intellectual heir of Dr. Bolkow.
The main focus of the LBST work is on sustainable energy and transportation systems and related technologies.
Important fields of activity are: Renewable energies, energy efficiency, reduction of greenhouse gas emissions, introduction of hydrogen as an energy carrier produced by renewable energy sources, fuel cells, and future availability of fossil energies.

http://www.lbst.de/index__e.html?htt...ompany__e.html

i guess the question is whether this makes their statements more or less credible?

[Guest]

Re: Powers Vow in 2007 as in 1932

E.J. -

Don't know if you agree with their idea or not - but if I were to provisionally assume you do not, there may be less to clarify by investigating this German research group's sources of funding today, than can be clarified by merely waiting another two years to examine the evidence they are sticking their necks out to announce.

Either way, whether their reported 7% decline rate in global production holds true (or does not), iTulip only needs to sit back for 24 months to confirm even more definitively than researching their funding now, whether their thesis is correct or not. A 7% global decline rate is extremely large - so they are really making an audacious call.

An accumulated 14% decline rate over the next 24 months, paired up against 6%+ - 12%+ growth rates in 1/3rd+ of the global economy, should bring about some notable fireworks in the energy markets.

If data strongly supports their finding in two years, whatever this German research group's source of funding and / or political stripe would then matter a good deal less?

If they turned out to be correct and global petroleum production decliined 14% by end of '09, might iTulip then be re-examining all factors in the inflationary thesis looking out to 2010?

Respectfully.

[Jim Nickerson]

Re: Powers Vow in 2007 as in 1932

[quote=Fred;18184]

Part of Fred's role is to remind readers of iTulip's long-standing editorial positions on certain topics, citing specific articles. Will try to use editorial "we" consistently but, hey, I'm only human! I think.

It is still confusing and possibly misleading when anyone at iTulip who is not EJ posts opinions and assigns them a generic name--which as I understand could be any one of three or four Freds.