That's a good one -- thanks! Same thing is going to happen here -- 50%+ drop in house prices relative to AWE over a period of 6-10 years, as credit dries up. It may have already started.
Meanwhile we have the fascinating spectacle of a major bear market to watch unfold. The end result in both is bargains for those with cash to spend and the patience to wait. And all the while, the permabulls provide endless entertainment.
Just having a look at the maths, in round figures, world production @ 90m bpd x $140 = a $12.6trillion industry.
As no one seems to be disputing the 70% speculator factor, that's $8.8t. At 100:1 leverage thats a $12.6t industry controlled by an investment of $88billion.
That's an industry about the size of the US GDP controlled by speculative interests.
Correct me if my maths is wrong as I don't invest in this market.
Circling back to Masters' question - what would happen if speculators turned negative on oil futures, the way the Hunts eventually did on silver - my answer is almost nothing. Futures market speculators did turn massively negative on oil November 2005 when crude was $57 a barrel. What happened? Oil was $61 by year-end. "It's a different ballgame with oil than it was with silver," Tuccille told me in an interview. "As you said, they're not taking delivery."
The story of the Hunts cornering the silver market confirms what most academics have been saying all along about oil.
Severin Borenstein, a Berkeley economist and the director of the University of California Energy Institute, contends that in order to push oil prices 30% above fair market value, speculators would have to hoard the equivalent of 2.5 million barrels a day.
"At that rate," Borenstein writes in a new paper, "in less than a year this secret market manipulator would have built an inventory larger than the entire U.S. Strategic Petroleum Reserve."
This manipulator would have had to escape the attention of the U.S. Department of Energy and the International Energy Agency, both of which report that oil inventories are declining, not rising. "That much oil," Borenstein concludes, "would be very difficult to hide."
Where are the Hunt brothers of today stashing all their oil?
The story of the Hunts cornering the silver market confirms what most academics have been saying all along about oil.
Severin Borenstein, a Berkeley economist and the director of the University of California Energy Institute, contends that in order to push oil prices 30% above fair market value, speculators would have to hoard the equivalent of 2.5 million barrels a day.
"At that rate," Borenstein writes in a new paper, "in less than a year this secret market manipulator would have built an inventory larger than the entire U.S. Strategic Petroleum Reserve."
This manipulator would have had to escape the attention of the U.S. Department of Energy and the International Energy Agency, both of which report that oil inventories are declining, not rising. "That much oil," Borenstein concludes, "would be very difficult to hide."
I sent Masters an e-mail with my findings on the Hunts but have yet to hear back. The question I now have for him - or for anyone else who believes speculators are responsible for $140 oil - is simple:
Where are the Hunt brothers of today stashing all their oil?
Given the sophistication of some past scams and the lack of transparency in the market, can anyone categorically say something like this isn't or can't happen.
Of course, anything can, but I think we are clutching at straws of hope against rsising odds that things are looking very much worse than we would like to accept.
Just to recap the domino effect, given that the markets were recovering from the credit crises and oil is becoming the thorn in the recovery and as the USD appreciates, oil depreciates, add in tighter regulation and I think you have a recipe for big investers jumping out of oil and gold to some extent and back into shares.
The manufacturing revolution of China and her satellites has been built on cheap transport over the past decade. At a stroke, the trade model looks obsolete.
No surprise that Shanghai's bourse is down 56pc since October, one of the world's most spectacular bear markets in half a century.
Come what may, globalisation has passed its high-water mark. The pendulum will now swing back from China to America. The mercantilists will have to reinvent themselves.
"So you may sell your underperforming shares and quickly get back in next year but selling off and not buying back in is probably criminal at this point," Mr Sebastian said.
It was a message reiterated by Colonial First State chief equities analyst Hans Kunnen, who urged investors to think long-term.
He also suggested it would be dangerous to sell out this week in a bid to lock in losses for tax benefits, and potentially miss the boat the following week
potentially miss the boat !!!
potentially miss the bludy boat !!!
Nobody mentioned it was the sister ship of the flaming Titanic !!!
)
Jim Sinclair’s Commentary
“Hello, I am from the government here to help you.” Sure!
We're All Homeowners: Nationalization of Fannie, Freddie Unavoidable
Posted Jul 08, 2008 12:09pm EDT by Aaron Task in Investing, Recession, Banking
Fears about Fannie Mae and Freddie Mac retreated somewhat Tuesday after their federal regulator, OFHEO Director James Lockhart, said new accounting rule changes should make "no difference in the risks of the two firms."
On Monday, Freddie and Fannie shares plummeted after a Lehman Brothers analyst said a new FASB rule could require the two firms to write-down as much as $75 billion.
Rather than the accounting rules, what's really got investors spooked is a growing realization the government will have to nationalize Fannie and Freddie, says Kevin Depew, executive editor of Minyanville.com.
The two mortgage lenders are simply too big to fail and too critical to the housing market, Depew says. Given Fannie and Freddie own or guarantee 50% of all housing debt, according to the WSJ, continued stress on their balance sheets means higher borrowing costs for the firms, and ultimately higher mortgage rates for individuals. It also means another round of write-downs for the battered financial sector generally, which owns a lot of Fannie and Freddie-backed paper.
But nationalizing the firms, each created by an act of Congress, would mean a wipeout for equity holders, who have already seen their holdings decimated in the past year.
More…
Ya know lol - I was happily in cash as of 30 June -
then I did what these idiots suggested and got back in ... because "selling off and not buying back would probably be criminal"
The only thing criminal mate, is that flaming advice lol !!.
This article from 26June refers (wish I'd never researched the matter) - also posts 2651 to 2653.
http://www.news.com.au/business/money/story/0,25479,23922142-5013953,00.html
potentially miss the boat !!!
potentially miss the bludy boat !!!
Nobody mentioned it was the sister ship of the flaming Titanic !!!
Yet again these flaming experts are oh-so-wise ... AFTER the event
Oooo-ahhhh!And the signs just keep getting worse. How much longer before the very real correction gets going.
explod m8, lol - or praps that's "we'll be hung out together" ...But its ok 2020, we hang in together, its what makes ASF the best thing I know.
AJ said:As far as the media goes, on Bloomberg today for instance, we have two articles side by side - one claiming "U.S. raises oil, gasoline price forecasts on strong demand and supply concerns" yet the other claims "Oil tumbles more than $5 on speculation slowing economies will curb demand".
Hahaha! Take your pick
Tumbling oil prices fuel Wall St rally
NEW YORK - Tumbling oil prices has fuelled a rally on Wall Street, etc
But I'm prepared to bet that due to the apparent low level of accountability and transparency in the oil market and the potential at least to corrupt the market, that the regulatous will eventually regulate it down pretty tight to avoid another economic disaster like the subprime credit crunch.
Just to recap the domino effect, given that the markets were recovering from the credit crises and oil is becoming the thorn in the recovery and as the USD appreciates, oil depreciates, add in tighter regulation and I think you have a recipe for big investers jumping out of oil and gold to some extent and back into shares.
It remains to be seen but I'll take bets on the POO being much lower and the stock markets being much higher by years end.
When will you finally admit you were wrong?
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