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lquadland10 (< 20)

Bush making nice with Iran? From the Seattle Times.

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4

November 04, 2008 – Comments (1) | RELATED TICKERS: AUY , GLD , OIL

http://seattletimes.nwsource.com/html/nationworld/2008304841_iran24.html   
Bush to seek diplomatic presence in Iran

The Bush administration will announce in mid-November, after the presidential election, that it intends to establish the first U.S. diplomatic presence in Iran since the 1979-81 hostage crisis, according to senior Bush administration officials.

By Warren P. Strobel

McClatchy Newspapers

WASHINGTON — The Bush administration will announce in mid-November, after the presidential election, that it intends to establish the first U.S. diplomatic presence in Iran since the 1979-81 hostage crisis, according to senior Bush administration officials.

The proposal for an "interests section," which falls short of a full U.S. Embassy, has been conveyed in private diplomatic messages to Iran, and a search is under way to choose the American diplomat who would head the post, the officials said.

Iranian President Mahmoud Ahmadinejad said last month that he would consider the idea, which first surfaced over the summer.

The U.S. had close ties to Iran's late shah, who was overthrown in 1979. Iran's ruling circles, however, are suspicious of U.S. attempts to expand its influence in the country. SEE the link at top and will you tell me what to pick?

1 Comments – Post Your Own

#1) On November 04, 2008 at 11:29 PM, DarkToast (39.71) wrote:

Oil.

Not GLD. I have read recently that precious metal ETFs don't have the physical gold on hand to actually 'cash out' their holders. I think I read something like 6 to 1. It was an article on http://www.marketoracle.co.uk/.

Not AUY because during the last few big run ups in gold prices the miners have not done nearly as well physical gold.

I believe that the current low price of oil paradoxically contains the seed of the future higher price of oil. Consider the 'new' sources of oil.  The Bakken shale field, the Canadian oil sands, the huge find under the salt dome near Brazil; some of these sources are not profitable (or not nearly as profitable) at current prices as they were a few short months agao. Development of some of these sources will slow or cease, until they become profitable. BEXP COSWF PBR CLLZF.

Once paused these developments will not begin again at the flip of a switch. Not long ago every oil drilling rig for hire in the United States was booked solid, to the point where companies were having equipment manufactured. KOG. There will be a lag from the perceived demand, in the form of higher prices, and the time these alternative sources of oil begin to be developed. Some of these sources will take several years to come online after development is restarted.

In the mean time the oil exporting developing countries will continue to experience the dual influence of decreasing oil output and increasing internal demand. The huge Mexican Cantarell field is rapidly declining in output at the same time that an the Mexican population is using much more fuel. This theme is repeated in many oil producing countries. The result will be much less oil available for export from these countries with what relatively little oil is available selling at a significantly higher price.

Bear in mind the relationship between the price of oil and the U.S. dollar. Except in extremely limited circumstances such as  transaction in euros by Saddam Hussein and Iran, the global oil trade is conducted exclusively in U.S. dollars. The recent explosion in the value of the dollar has mirrored a corresponding drop in the price of oil. Look at the U.S. dollar since August. That kind of parabolic curve isn't sustainable. Since August OIL has fallen from around $72 to around $40. I think that the U.S. dollar will retrace dramatically and that there will be a corresponding rise in the price of oil.

If for any reason the Straights of Hormuz are closed, for example if there is conflict with Iran, the price of oil will skyrocket. Similarly if Venezuela experiences disruption the cost of oil in the U.S. would be vastly increased.

The global demand destruction for oil that is the result of the global recession does not offset the increased demand from developing countries.

I believe that the current low cost of oil has been a combination of an overcorrection from the recent highs around $147 and election year massaging of the populace.

I had no intention of writing this much when I started typing... 

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