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| Tuesday Feb 20, 2007
Goodbye, Hubbert Peak Oil: The cyclical downturn of oil pricesTaipan Group's Dynamic Market AlertBy Andrew Mickey-- Goodbye, Hubbert Peak Oil: The cyclical downturn of oil prices ----------------------- TFN Exclusive Video: Tuesday February 20, 2007 TFN Smart Investing: Stock Busters Contrarian investor J. Christoph Amberger points out the obvious shortcomings of dollar-denominated commodities as a hedge against dollar inflation and recommends you look at gold investments just like you would at other speculative commodities. -----------------------
Goodbye, Hubbert Peak Oil: The cyclical downturn of oil pricesThose predicting $30/barrel oil (and cheaper!) now find themselves in good company by Andrew Mickey, BreakAway Investor The first time I uttered “$30 oil,” all I heard was a few snickering comments and references to the Hubbert Peak Oil Theory. But after five months of research, phone calls and impatiently waiting in airports, I’m done. Everything I’ve come across over that time points to oil prices heading downward over the long term. Rest assured, by 2009, oil will be back to $30. But all of a sudden, I find myself in good company. Steve Forbes, Cambridge Energy Research, Citigroup, and a bunch of top economists are starting to get on board with me. In fact, Kenneth S. Rogoff, a professor of economics at Harvard University, tries to do me one better: “I predict that we will see at least one period of $20 oil at some point over the next ten years.” But he’s just one of the many converts. I’ll get to that in a second. First, I have to address Hubbert’s Peak Oil Theory, which Dr. Mark Hubbert created in 1954. Recently, Cambridge Energy Research Associates (CERA), the top oil-industry consultancy group, categorically disproved the myth of peak oil and Dr. Hubbert’s theory. In a report titled “Why the Peak Oil Theory Falls Down,” CERA successfully dispelled any remaining evidence that the world has crested peak oil. CERA states the remaining oil-resource base is about 3.74 trillion barrels, including estimates of oil yet to be discovered. As a result, peak oil is 20 years off. To put 3.74 trillion barrels of oil in perspective, consider that the world has consumed a mere 1.08 trillion barrels of oil to date in the past 100 years. At current global consumption rates of about 30 billion barrels per year and a very generous assumption of 5% annual growth in oil consumption, that leaves us with 97-year supply of oil, according to CERA. So who’s right? CERA is the absolute authority on oil. The consultant is the leading advisor to international energy companies, governments, financial institutions and technology providers. In the energy industry, when you have a question about oil, you turn to CERA. We’ve got two options: You can listen to a guy that developed a theory more than 50 years ago or to the top energy consultant in the world. It’s your choice. Another reason oil prices are headed for a fall is due to the financial institutions that are responsible for a large part of the rise and the volatility over the past six months in oil prices. Today, there are more than 500 energy funds that are buying up oil on the open market. They have no use for it other than that they hope it goes up and down, and their traders are positioned properly to trade the swings in price. A hedge fund manager can’t take delivery of 100,000 barrels of oil in his Stamford, Connecticut high-rise; he’s just in it to trade. Oil prices have very little to do with supply and demand. After all, have you not been able to get heating oil for your house this year or visited a gas station that was out of gas? Twenty years ago, oil producers sold their oil and petroleum-based fuels directly to customers like airlines, trucking companies and manufacturers, and the few hedge funds and smaller trading departments at the banks left the oil market alone. And there’s nothing wrong with that, but their activity is just adding an additional layer of demand to oil prices. As of right now, there’s an additional $70 billion to $150 billion of speculative capital chasing oil prices up and down. As long as oil prices move somewhere, they’ll be making money. That’s why, when OPEC announces a production cut, oil prices fall and, when oil inventories decline, oil prices rise. It all depends on where the money is flowing. And now, those hedge funds and trading departments control oil prices. And just like the dot-coms, gold, silver and dozens of other trading vehicles of the speculative community, when they move out, they move out fast. And it’s the individual investors that are left holding the bag. They’ve already started to see the end coming. Andrew Safran, head of Citigroup’s energy, power and chemicals business, says, “Prices will trade in the $40 to $60 range in the coming years.” Philip Verleger, an oil economist who’s gained a reputation for early warnings on oil-price swings, says, “If pension funds decide they don’t want to take the risk anymore and bail out, we could see prices go a hell of a lot lower; I think prices could dip below $30. It really depends on what these pension funds do.” With as much as $150 billion in speculative capital pushing around oil prices, once the rest of the financial community turns bearish on oil the resulting oil bust will be hard and swift. I encourage you to take out an insurance policy against falling oil prices and put an “oil immune” stock in your portfolio. I’ve found the perfect play. Learn more about this “oil immune” stock here.
Clowns & Harlots: Labor Painsby Christopher Corbett Help is hard to get. No question about that. I thought of that last week when my old housekeeper announced she was going home to Argentina after 40 years in this country. When Anna walked down the front steps, I was reminded of all the Rosas and Conchitas and Espositas I have known. Although Anna was long a resident of the United States and a citizen, I’ll admit that once or twice in an otherwise blemish-free life I may have employed someone from overseas who might have been here under questionable circumstances. I don’t ask too many questions when I hear a foreign accent. Don’t ask, don’t tell applies to lots of things. On one occasion, some gentlemen from the great republic to the south of ours painted my house. Some of these companeros were not really the high-spirited exchange students that I was led to believe, but -- Dios mio! -- illegal aliens. I admit this now. But as they painted half the neighborhood’s houses, many belonging to prominent attorneys and even judges, over the course of several summers, I feel secure that I will not be the only one to swing. If I go down, I’m naming names. I suppose, like many Americans, I live in a world where it is best not to ask too many questions about the housekeeper, the nanny, the au pair or the little French exchange student. Many of these arrangements (never mind the violations of the Seventh Commandment) do not bear close examination. Friends employed a fresh-faced Irish colleen when their children were toddlers. Sure and begorra, this freckled lass had entered the United States on a visitor’s visa and simply never left. She was most definitely an illegal alien. But she was white and pretty and living in a big Victorian mansion in an upper-middle-class section of the city, and the chances of the INS SWAT team picking her up at Gourmet-To-Go weren’t high. Our friends loved her and their kids did, too. But she had a penchant for older men (she was 18!) and the racetrack. Use your imagination. And then there was the lady from Ecuador who used to stop by once a week for coffee and then, just for the heck of it, start vacuuming. Then after a spot of lunch she’d tidy up the bathrooms and kitchen, put out the recycling, dust, polish the furniture. This was a completely social relationship. She was an old family friend. That’s my story, and I’m sticking to it. I think the statute of limitations on that one has expired. I have been living inside the law now for a long time. But I still have occasions when I encounter folks from abroad. But I wouldn’t have been tempted by an illegal workforce had I been more successful with legal hires. The last American housekeeper I tried to employ stole so much that we simply could not afford to have her in the house. When my daughter was an infant I actually hired a convicted felon to care for her. I’d never hired a “child-care provider” before. It did not occur to me to ask about felony charges or parole or probation. My daughter is now in college and, as this experience does not appear to have had any irreparable effect on her, I may now reflect on it with a certain pensiveness I lacked at the time. Our child-care provider -- we’ll call her “Angel” -- had worked for us and another couple for about a year when, one night, several exciting chapters of her past came to light. I was watching the TV news while I cooked dinner. My daughter was in her high chair and Angel was perched on a stool in the kitchen. As the usual litany of urban horrors -- “if it bleeds, it leads” -- were reported, Angel offered some rather complex observations on the Maryland criminal code, an explanation of the difference between a felony, a misdemeanor and an infraction; and the higher principles of bail review, probation before judgment, and various other matters that she had not picked up reading Goodnight, Moon or Pat the Bunny to our tiny daughter. A kind of frozen moment occurred in our kitchen. My face seized up and I was unable to speak. Angel went on to describe a series of adventures she’d had some years back when, during a riotous affray at her aunt’s domicile, she had found it necessary to repeatedly stab her aunt’s then-boyfriend with a carving knife because he was being abusive. In the city that I live in this was a perfectly understandable domestic event. Angel was a big gal. And although I never knew her to be anything but gentle and good-natured, I could see that a person abusing her aunt might be in for rough handling if sharpened cutlery were handy. I did not call my wife at her office to tell her just who was minding our precious jewel. I let her get home first. We handled it well. First, we were hysterical. Then, we blamed the other couple (they hired her first). And finally, after a good night’s sleep, knowing how hard it is to find first-rate child-care, we decided to do nothing. Angel worked for us until she married and our daughter entered First English Lutheran Preschool, where, I believe, there were no convicted felons on the staff. But then, I never asked.
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Quote of the Day “Al-Qaida released another video tape from their No. 2 man. This one had a shocking revelation: ‘The great Satan will soon taste unspeakable suffering from our hands… Oh, and by the way, I am the father of Anna Nicole’s baby.’” - Jay Leno, Feb. 15, 2007
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