Too Much Financialized Crap Analysis of World - And It's The Same Reason Roubini is "All Wet".

[touchring]

Re: Too Much Financialized Crap Analysis of World - And It's The Same Reason Roubini is "All Wet".

For a while though the USD could cap it's rise for Americans, due to the world's powerful collective delusion that the USD was their safest bet. After all if they insist on buy the crap out of it, how can it drop?

I think the dollar is rising because of dollar carry trade.

Banks are not rolling over loans denominated in US dollar, and this triggers a panick rush for dollar.

[c1ue]

Re: Too Much Financialized Crap Analysis of World - And It's The Same Reason Roubini is "All Wet".

Part of the reaction is dollar carry trade, part is deleveraging, but part is also 'beggar thy neighbor'.

I look towards secondary confirmation to try and distinguish.

One example is the ruble/euro cross.

Russia doesn't really care about the dollar/ruble cross because of the paucity of trade with the US. But they do very much care about the euro/ruble cross.

Check out what's happened with the euro/ruble since mid/late September:

http://finance.yahoo.com/currency/co...submit=Convert

A fairly constant 37 rubles/euro since March 2008, with a range between 35/36 going back many years, dipped once back to previous range but then spiked up in early September 2008, then spiked down to 34.5

Similarly with the Yuan vs Dollar: previous policy of yuan strengthening has clearly been replaced with keeping the the cross steady. The question is what happens from now on.

[friendly_jacek]

Re: Too Much Financialized Crap Analysis of World - And It's The Same Reason Roubini is "All Wet".

So, strictly from what I read (these are not my own insights): I think the USD will maintain relative strength for several years. And people inside the USD zone are going to have a tough slog with gold and silver for the next few years.

But from what I read the major currencies have a clear potential in this global recession to drop A LOT against the USD. So holding gold outside the USD zone in that eventuality would be a quality trade. Gold's rise for a half dozen years till now was a USD story. Everyone else was a spectator until 2005-2006. How harmonious it would be of history if for the next four years, gold would be playing "catch up" in all currencies other than the USD, while the USD > Gold ratio merely spun it's wheels?

Of course USD has an appointment with the truth, but possibly not before spending a few years wearing US gold holders down to a shadow of their former selves? BTW I read that in the next few years the EURO could plunge enormously vs. the USD. Southern tier EURO countries at real risk of fracturing away - which would be like a rocket boost for the USD if it occurred.

Owners of gold in the EURO zone (and Middle East and Far East) would be grinning from ear to ear, while owners of gold in the USD zone would be wandering about like forlorn wraiths in the desert. Of course, any person inside a currency zone where the currency drops fifty percent against the USD would do well if he was in gold. Why not? It would appear rather logical according to fundamentals, that the USD is not going to "soar" much against gold! For a while though the USD could cap it's rise for Americans, due to the world's powerful collective delusion that the USD was their safest bet. After all if they insist on buy the crap out of it, how can it drop?

Good comments on what is happening right now. It could be also described as Ka-Poom: Ka in USA and Poom everywhere else. After all, EJ's theory was correct!

As for the oil news, I'm not surprised, as the peak oil is a scientifically sound concept. I just don't believe investors can trade that easily in this highly deflationary environment, with raising oil prices destroying demand as much as we saw, and with the volatile forex.

[FRED]

Re: Too Much Financialized Crap Analysis of World - And It's The Same Reason Roubini is "All Wet".

Good comments on what is happening right now. It could be also described as Ka-Poom: Ka in USA and Poom everywhere else. After all, EJ's theory was correct!

As for the oil news, I'm not surprised, as the peak oil is a scientifically sound concept. I just don't believe investors can trade that easily in this highly deflationary environment, with raising oil prices destroying demand as much as we saw, and with the volatile forex.

Ka-Poom Theory isn't correct yet, just the first half of it. We shall see about the rest.

Food for thought: What do you suppose happens to the price of oil if in five years if the golbal economy is chugging along again due to $40 or $50 trillion in fiscal spending except that governments from the US to China to Russia to Brazil to Japan provide 50% of the global credit demand to keep their economies going?

Governments, as you know, aren't all that good at finding and producing oil, just at taxing oil producers for the oil they find.

[Mega]

Re: Too Much Financialized Crap Analysis of World - And It's The Same Reason Roubini is "All Wet".

Ka-Poom Theory isn't correct yet, just the first half of it. We shall see about the rest.

Food for thought: What do you suppose happens to the price of oil if in five years if the golbal economy is chugging along again due to $40 or $50 trillion in fiscal spending except that governments from the US to China to Russia to Brazil to Japan provide 50% of the global credit demand to keep their economies going?

Governments, as you know, aren't all that good at finding and producing oil, just at taxing oil producers for the oil they find.

Fred
I like to pick you up on that point, do you mean that these dumb-ass types will wake up one morning and find that because the DID just TAX the oil that we ran out?

BTW Please tell EJ he did a brill job with the "Disney" descrpion the other day. Franly he leaves me most times wondering at what he driving out, but this time he hit the mark!
Mike

[metalman]

Re: Too Much Financialized Crap Analysis of World - And It's The Same Reason Roubini is "All Wet".

Fred
I like to pick you up on that point, do you mean that these dumb-ass types will wake up one morning and find that because the DID just TAX the oil that we ran out?

BTW Please tell EJ he did a brill job with the "Disney" descrpion the other day. Franly he leaves me most times wondering at what he driving out, but this time he hit the mark!
Mike

what if oil is pricing in gov't nationalizing broke oil companies globally? during recession, prices not down as much as otherwise. after.... :eek::eek::eek:

[Guest]

Re: Too Much Financialized Crap Analysis of World - And It's The Same Reason Roubini is "All Wet".

Found this over on Chris Martenson's blog: (his own comments - gives a sense of scale to the event we are due to slam into shortly - BTW this has absolutely nothing to do with deflation and everything to do with it's opposite.)

cmartenson


Gold Member
Posts: 468
Joined: 2007-06-07

A 9.1% decline is important because...

...the highest prior published decline rates for existing fields are 1/2 to 1/3rd that rate.

So if past estiamtes were predicated on a 3% to 4% rate of decline then a lot of models are badly off if it turns out the real number is closer to 9%.
So let's play a numbers game.

Assuming that the 74.5 mbd of conventional crude production is declining at 9%, then this means that 6.70 mbd will need to be brought online over the next year just to keep output even. Forget about growth, the 6.7 mbd is like needing a new #4 producer each year.



Source

I'm not saying that can't be done, it's just that with the oil majors struggling to simply replace their own reserves I 'd need to see the data on exactly which oil field prospects are being proposed to fill that rather magnificent void.

And certainly the drop-off in oil field investment as a consequence of falling oil prices and tough credit conditions will not help bring the most new oil out of the ground over the next few years.

_______________

Tuesday, October 28, 2008, 10:13 pm, by cmartenson

I know that the whole issue of Peak Oil seems to be on the back burner, given the financial crisis. Many think that oil demand will be knocked far enough back that even if Peak Oil were happening right now we'd have several years respite before it becomes a significant problem due to demand destruction. So I've been patiently waiting for any estimates that would allow us to compare world oil production declines to demand destruction to see where we are in the oil sweepstakes race.

On the demand side, I've seen estimates that world oil demand will fall off as much as 4%-5% this next year.

Now for the supply side.

Today the Financial Times got their hands on a draft of this year's IEA annual report, the World Energy Outlook. I certainly hope there's a misprint in the early version, because this authoritative field-by-field assessment of the rate of decline from existing fields is stunning. They are projecting a 9.1% rate of production decline (collapse?) for all existing fields.

World will struggle to meet oil demand

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term demand. The effort will become even more acute as prices fall and investment decisions are delayed.

This rate of decline is anywhere from two to three times larger than most other assumed rates of oil field declines. It is also much higher than any estimates of demand shrinkage I've yet seen.

A complicating factor here is that a lot of the new oil finds that we were counting on to cover this gap are hideously expensive. Think of the Jack II find in the Gulf of Mexico, recently trumpeted as a major find, but which had to break four drilling records to get to. It was still being evaluated for its economic viability back when oil was over $120/barrel.

Or the find in Brazil, which had to break six drilling records to be reached. Also a very expensive proposition to consider. The trend in oil production costs has been sharply up over the past few years, both because of rampant inflation for labor and materials, and because the finds themselves are deeper, more remote, and smaller.

Any slowdown in the investment for new field exploration and development will almost certainly translate into massive shortages, once the credit crisis is over and countries attempt to return to their respective paths of growth. This is worth keeping on our radar screens as time goes on....

[touchring]

Re: Too Much Financialized Crap Analysis of World - And It's The Same Reason Roubini is "All Wet".

i'll take such report with a pinch of salt, when the fiscal crush really comes, you will see iran and venuezula pumping as much oil as they can, and oil wells that didn't exist on record suddenly appear.

[Shakespear]

Re: Too Much Financialized Crap Analysis of World - And It's The Same Reason Roubini is "All Wet".

Lets also keep in mind that oil fields take time to develop. Wells need to be drilled to hit the best spots and then produce them. Sometimes this takes years to do. While existing field production decline year after year will continue :-(