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Short Term Oil

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January 07, 2009 – Comments (64) | RELATED TICKERS: OIL , USO , UCO

Wow man, what a roller coaster. Oil goes from $147 to <$35 a barrel in ~5 months. At $145 oil, people were calling for $200 oil (myself included at the time, what can I say I was wrapped up in Peak Oil, and didn’t account for the ‘bubble’ part of the bubble). When oil got below $40 people were calling for $20 oil (even the average extraction price in the Middle East is $20, why exactly would oil companies pump oil out of the ground for no profit?). The clear (in retrospect) reason for this behavior is speculation. There was so much money sloshing around the system from the credit bubble that much of it went into commodities. When this money gets scared from short term deflationary pressures, it blindly rushes into Treasuries. And what do we get? A bubble in treasuries (but that will be the topic for another blog), and a crashing oil market sold well below reason.

So talking about fundamentals for just a moment: In this current environment, oil at $147 is no more sustainable than oil at $25. It is simply ridiculous. Also consider the demand part of the equation. Since the peak in July, global demand has dropped off by only ~10%. Certainly not in line with the price drop. And a lot of projects that were moving forward based on >$100 oil are now stopping because it is no longer viable. So supply is also dropping. Now there are OPEC production cuts to consider. I have read a lot of analyst estimates, some much more trustworthy than others, and a range that makes sense based on the current economic landscape is something like $45 to $75 oil (at least it makes sense to me, others may argue, and that's fine. It is really semantics at this point).

But all that is very interesting, but it is neither here nor there. We are not interested in the fundamentals per se (even though taking a look will paint us a better more believable picture), we are interested in the technicals. So the technicals say that we went from overbought to severely oversold in a matter of months in one of the biggest commodities markets in the world. Everything has inertia. The system doesn’t simply go from overbought to the fundamentally-correct price, it overshoots. And with a market this big, there is a lot of investor ‘inertia’.

Additionally, older charts will show that in 2000-2002, $40 oil was a resistance level and there was long term support in the $30-$40 range. So the level the oil bottomed at recently was right into long term support.

So lets look at some charts. Click on this link to view a larger version of the chart below.



The left chart is a 6 month daily chart and the right chart is a 3 year weekly chart. The daily chart shows positive divergence in the technicals. And this recent bounce of $35 is very strong taking it to $50 and the 50 day SMA. I think both of these will serve as technical and psychological resistance. And the stochastics are a getting a little toppy. So in the very short term (less than 1 week) this rally might run out of steam and correct for a little while. But now turn your attention to the right chart. I think oil is starting to come out of this correction. It is bouncing off of historical support and was just so severely oversold. I am betting (in CAPS and with real money) and oil will stage at worse a good relief rally here or at best a convincing bottom. Either way, I think the correction that may show itself in the short term (next few days) will be a fantastic opportunity to buy into a multi week rally.

As always I would love to hear your comments!

The binv standard disclaimer: This in no way constitutes investing advice. All of these opinions are my own and I am simply sharing them. I am not trying to convince anybody to do anything with their money. I am simply offering up ideas for the sake of discussion. As always, everybody is expected to do their own due diligence and to ulimately be comfortable with their own investing decisions.

64 Comments – Post Your Own

#1) On January 07, 2009 at 5:30 PM, motleyanimal (93.53) wrote:

Oil prices did get ahead of the game, as evidenced by the 12% retreat today. I wasn't expecting to see $50 until the start of spring when refiners ramp up gasoline production. I think the best we can do here is to ferret out the low cost producers and those who have favorable hedges in place.

These are my current holdings, I have LINE, WHX, GTE, and PEO. I also have a small position in AEZ.

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#2) On January 07, 2009 at 6:28 PM, binve (< 20) wrote:

motleyanimal, yeah the recent rally from $35 to $50 was a bounce off historical support / selling exhaustion rally. So it didn't take much to spook oil back down >10%. But that is good (from my perspective), because it shakes out some of the unhealthy momentum players and gives rise to a stronger technical set up. Anybody looking at a daily chart might think oil is due for a sell off and could head lower. The weekly chart (see above) tell a very different story (well, it does to me at least).

So putting my long term investor hat on (binv271828) I like LINE, WHX, GTE and PEO very much at this price for some long term holds.

However, I will now put my technical hat on (binve) and I see:

LINE: I very much do not like the gap on the chart on Dec 29. Gaps have a nasty habit of eventually getting filled. VDSI is a perfect example. The was a large gap in October that sat unfilled for months. Then two days ago that gap was filled rather unpleasantly. On a daily, the RSI, MACD and Stochastics all look quite toppy for me. So short term, I defintely think LINE is coming down, but as I stated above and in the post, the short term weakness in oil is a shakeout of unhealthy players as a more powerful intermediate term rally sets up. 

WHX: The weakest of the bunch (as of now), it has not been able to stay convincingly above the 50 SMA for months. However it has tested the 10 level several times and bounced back and recent support looks good in the 10.50 area. All the panel indicators are positively divergin. If it comes back down to 10.50, I think that may be a good entry point. I am putting this one on my watchlist! 

GTE and PEO: Both look stong, have turned and are definitely trending up. They both look like they have stalled short term and will head down for a few days, but I would be interested in reevaluating. 

Thanks for sharing these! I have a question on WHX, is that yield for real? What are the odds that they are going to cut their dividends? My favorite trusts are BTE, PWE, PVX and ERF but PWE is probably going to cut. BTE did recently but I think they have the best hedges of the lot. I would be very interested in your opinions. Thanks!

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#3) On January 07, 2009 at 10:26 PM, motleyanimal (93.53) wrote:

WHX is a US trust, but unlike Canadian trusts it is passive and cannot borrow money. All income results from a 90% share of Whiting's production up to a defined BOE equivalent. The yield will vary, dependent on market prices, but most production is hedged through 2012. The 10K is worth a look. I use it for income and not much else. Distributions should average about $4.00 each year.

I think I've owned all of those Canadian trusts at one time or another. PWE and ERF were the better ones as I remember. I lost interest in them last year due to the tax laws, declines in oil and gas prices, and the Canadian Loonie falling. They may reinvent themselves as MLPs in the future or in the case of PWE, they can remain a trust for many years because they have a large reserve of tax credits.

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#4) On January 10, 2009 at 2:59 PM, Lenokis (21.61) wrote:

binve. can you recommend any good charting programs/applications?

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#5) On January 10, 2009 at 7:00 PM, binve (< 20) wrote:

Lenokis, Sure! In my opinion stockcharts.com is the best there is. It has an absolutely huge list of symbols (american exchanges, foreign exchanges, futures, bonds, etc.). And the free version has lots of capability. There are some drawback to the free version (only can do 3 panel indicators per chart, only plot one symbol or ratio at a time, and quotes are delayed 20-30 minutes, and can only go back 3 years). If you want more charting options, longer timeframes, or real time you have to pay. But I would definitely check them out!

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#6) On January 10, 2009 at 9:43 PM, Lenokis (21.61) wrote:

thanks!

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#7) On January 10, 2009 at 10:24 PM, BlueLakeVentures (< 20) wrote:

Supply and demand have always been in sync, and there was no reason for oil to go from $20 a barrel to $147.

http://newgenerationgas.com/energyfacts.html

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#8) On January 13, 2009 at 12:19 PM, madcowmonkey (< 20) wrote:

What is oil sitting at right now:) No wait that is already old news. It doesn't seem like oil can sit in one place long enough to really feel the urgency of alternative energies that can provide something other than energy.

If oil goes from 50 to 70, how much will that return for the average investor that is looking for the short term profits from the increase and how many will be able to get in at the right time. I really think there were some big losses that the average investor has accrued from the entire $200 oil debate. I was in the $75 dollar camp the entire time, so I can still see how oil will go up to the 70's with no problem, but will that even help with the projects that you mentioned and that everybody started when oil was at 140's. 

I still like the natural gas and oil plays, but I have been trying to stay out of the runs on this one. The one thing that I have learned is that what really changes these types of sectors is that the "consumers" really have the power to decide what oil is going to be sitting at. Not OPEC not the US government and not the people that drill. It has been said before that the consumers are the ones that have to change and I think some of the shennanigans that have been taking place in our economy have affected the consumer in such a way that oil will not go above 100 for some time.

Good luck on your positions and I am in no way pushing the alternative energy stocks at this time, but I still wouldn't mind seeing something make a push on oil so that the entire topic is put off for some time.

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#9) On January 13, 2009 at 1:30 PM, binve (< 20) wrote:

Hey madcow. What is oil sitting at right now:). Touche :). But from the original post above when I made it last week, I called for a drop as indicated by shorter term daily chart. $35 oil still looks like it is trying to constuct support. The NYMEX futures got down to $36 and then rallied up to $38 today. I think if a sustainable rally will occur (a tradeable rally that lasts for several weeks) it will originate from this level. The weekly chart looks even better for the formation of rally than the one I posted last week. This week should be interesting.

So let me talk about some of the points you brought up. First everything the I just described in this response was written from the viewpoint of the binve investor mindset, which is to play constructive setups from a technical viewpoint. Oil as of now looks like it will be making a near term constructive setup, and the risk/reward favors (in my opinion) going long oil or at least getting ready to go long. I think going short oil at this point is a very bad call based on the technicals. Again, I am talking in the near term (several days - several weeks).

That is very different than how I might answer if I were approaching oil from a long term viewpoint. So let me discuss these topics without setups or technical analysis, and looking at much longer horizon, as if binv271828 were speaking :)

I can totally emphasize with people who bought at the top and are sitting on huge losses. I am one of them :) Yeah, my oil longs are down about 40% right now. But I am not worried about that for the long term. And this is an illustration of the compartmentalization of long term / short term investing. I am still sticking to my long term thesis with my long term investments, but I am using different strategies with short term ones. I mean, in the short term there might be a rally in oil and I will play it on the upside. But if momentum stalls and it looks like it heads down, I might invested in an oil short ETF.

But back to the long term. Yeah, it is true the demand is dropping, but supply is also dropping. You are right, there are some projects that were never producing but proceeding on the basis of $100 oil (oil sands and stuff). But there are projects that are (were) producing, but only make profit at $50-60 oil. These are the really deep water rigs. Now some of these are still operating but at reduced capacity. The only oil sources that are profitable with oil at its current level ($35-$40) are Middle East and North Africa fields. Venezula, Mexico, Cananda all have (on average) slightly higher extraction costs and don't really make profit until oil reaches $40-50.

So we have a very interesting dilemma right now. Global peak oil production is declining. However currently demand is dropping off faster. So there are some fields that are cutting back on production. But there are some non-producing projects that are now not going forward based on non-viable current economics and there are some producing projects that are also on hold. Ramping down and ramping up production is not a trivial thing, and it takes a long time for supply to react to demand on both the downside and the upside. We have price deflation ruling right now oil dropping a lot. We have alternative energy startups dying on the vine due to non-viable economics. So what happens when the economy does pick back up (perhaps years from now, who knows how long the depression/recession will last)? Peak oil is a real event. The mistake that myself and many others mad was assuming the peak oil was occuring at the same time the credit bubble (which was sloshing into commodities) was at its peak. But peak oil is waiting. And it will eventually have to be reckoned with.

That is why alternative energy investment right now is still critical. I like that Obama is still pushing it. I don't like that it is being paid for with money we don't have, but what else is new. If we are paying for things we can't afford, at least we are buying alternative energy and infrastructure (Obama) instead of more bombs and missles (McCain). But with current cheap oil and a "deflation-scare" it might be hard to find traction. Here is a link to an interview with John Rubino. http://www.howestreet.com/audio/johnrubino_2008_1217.mp3 The whole interview is good, but skip ahead to 10:45 where he talks about green energy and ways to fund it in this cheap oil environment. It will not be politically palateable, but I think that would be a necessary step.

Man this is a great discussion. Please let me know what you think about this! Thanks man :)

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#10) On January 13, 2009 at 9:22 PM, madcowmonkey (< 20) wrote:

"So we have a very interesting dilemma right now"

No doubt. Here is my hypothesis. If the market tanks, oil can stay where it is at without killing itself through demand and price. They can produce at this level right now, because they should have made enough during the $140 times that they can last for a little while (interesting if you really think about the timing for cheap oil). If the market tanks and oil goes up, there will be a really big hit to the entire supply demand notion. ( I doubt this will happen though).

If the market goes up, then oil will bounce big. Probably jump huge right from the get go and then stall around that 75-90 range. Meanwhile everybody will be expecting oil to shoot back to the 120's, so they will keep buying positions even at its new high. This is good for the oil bulls, but it will not be a long term run. I don't think oil will get over the 100 barrier for a while.

So the debate is really about buying oil at the price it is now and holding on to it if the market drops or making a decent amount on it if the market goes up. There really is no exit strategy for us little investors.....not with oil anyway. Oil has the rubber cement effect of bringing in new investors that get caught up in the upswing, so getting rid of oil stocks at a 70 range is really no issue....especially for us scumbags:)

Now with this idea, what does that leave it at for the hedgers. These guys buy big and manipulate most stocks. Well they have to create there exit....usually maliciously. They will drive the price up a couple days in a row when it hits that reasonable price and then when they are out, there will be a slight drop back to the 60 range.

Now that brings in the doubles and triples ETF. I hate these stocks....especially in oil. It brings out the savages in us:) Greed mongers that step on everybody. If oil doesn't go up while the market tanks, you can count these doubles and triples to be worthless (they might even go to zero). So I would stay away from these if you think the market will be going down.

This entire system makes me think more about a energy source that cannot be controlled by anything but the consumer. The consumers truly hold the keys to everything. If you don't know why oil went down yet, go back and look at the decline in miles people were putting on their cars and take a look at the airlines cutting back. The biggest consumer of oil truly is the Military. There is no way around that. If we want to take advantage of the situation right now, we could while the resource is cheap (oil) and come to terms with companies that are into different energy schemes. Most people know that I am an advocate of bringing back hemp to the states for a bio diesel. Just this addition alone, might help out GM and Ford's diesel division:) There really are some other great fuels as you well know, but nothing will happen when people are sitting back thinking $2 for a gallon of gas is cheap. There really shouldn't be a price tag on the alternatives, because we have given the oil producing companies a side door to our entire economy.

Most made a big stink about the high price of oil and now that it is down, nobody seems to care about the alternatives. I really feel this is the downfall of the American consumer. I don't think there is a better word to describe most Americans other than consumers. It is hillarious in a bad way if we sit back and think about it. Why would we ease up on the alternative debate when oil slides to less than 40 a barrel, shouldn't we kick it into high gear and have something ready for oil at 90? You think Mantle went for a single when he was given a hanging curve ball? Highly doubt it. I think the entire opinion about cheap oil and not needing a second fuel source (real one, not ethanol) is BS. Something somebody said during a news conference that stuck in everybodys mind. Why not take care of the peak oil issue way before it gets here? Oh wait, fantasy land was kicking for a little bit. Our senators would never budge on this issue.....isn't that the same opinion we said about the second half of the bailout for banks. I think we could push it through the system if we had enough people that could see peak oil needs to be dealt with.

All in all I think I agree with, "It will not be politically palateable, but I think that would be a necessary step."

I think this discussion has been put on the back burner with how much turmoil the banks and government is going through more so than the idea of cheap oil.

Your binve (short term) idea on oil would be (is) a great tact for the upcoming weeks.  Let me know if I need to clarify any of the above, Again, I am a numbers guy not a writer:) 

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#11) On January 14, 2009 at 9:19 AM, binve (< 20) wrote:

Dude, that was a great response! I love this:

"It is hillarious in a bad way if we sit back and think about it. Why would we ease up on the alternative debate when oil slides to less than 40 a barrel, shouldn't we kick it into high gear and have something ready for oil at 90? You think Mantle went for a single when he was given a hanging curve ball? Highly doubt it."

Did you listen to the interview link? Sounds like it, because we both agree. There are no such thing as cheap oil, just a temporary short term (on the order of months) hiatus where oil has come back down into the low double digits. This is the perfect time to subsidize alternative energy investment, because eventually the price is going back up anyways.

I also tend to agree with almost all of your assessments above. Yeah it is probably unlikely that we will get up to 100 oil this year. Yeah I think an upper target is on the order of 75. But it is all based on the consumer like you said. What will be interesting in the coming months is behavioral changes. People were really changing and buying hybrids and smaller cars and selling their SUVs when gas was >$4. Now that gas is less than $2?. While in the current environment people are buying less cars anyways, it will be interesting to see of the cars that are bought, which types are they?  

Consumers are fickle, which means demand is fickle. Once the economy picks back up (and it eventually will) will Americans go back to more consumptive habits because they can afford to? If so, what does that do oil? I hope we have a good toehold on alternative energy before the next round of global growth kicks in.

So here is the way I see it:

Timeframe 3-10 years (binv271828 mindset):
- Possibility A, real advancment in alternative energy:
Oil up a lot (there is no way to ween ourselves completly off oil in this timeframe)
Alternative energy up a LOT
- Possibility B, no real advancments in alternative energy:
Oil up a LOT

Timeframe 4 months - 3 years:
???? I have no clue. There is fickle supply and demand, a recession / depression to navigate, alternative energy infrastructure to begin building, willingness of the people to support it, .....

Timeframe several days - 4 months (binve mindset):
- This is done completely on the technicals. Right now oil is still very oversold. Picture looks good for a rally. How long and how strong? Don't know yet. But risk / reward at this point favors being long in oil vs. being short in oil.

Another one I agree with is 2x-3x ETFs from the point of view of long term investments. The point is, these are NOT long term investments. They really suck for that purpose. But from the purpose of momentum investing (days to weeks) they are fantastic and can really help your returns if you are calling the trend correctly. Obviously they are to be used sparingly.

Thanks for the reply man!

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#12) On January 14, 2009 at 11:38 AM, madcowmonkey (< 20) wrote:

Oil prices tumble as US crude inventories bulge

This trend needs to stop for your play to really work, but do you really want the trend to stop or not. I am fine with the American Consumers using less oil. 

I have been enjoying the discussion as well. I haven't really discussed anything on CAPS for a while. Too much other stuff is on the brain.

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#13) On January 14, 2009 at 12:17 PM, binve (< 20) wrote:

Hey man, yeah. I am not really concerned with the short-term play. If the setup starts going against me, then I will get out of the long positions and go short on oil. With the binve portfolio, I am not trying to be thesis investor, I am just trying to call the short term trends based on technicals, and I am bound to get some of them wrong :)

But I personally think decreased consumption is a fantastic thing! If we could decrease consumption AND transition to alternative energy I would be extremely happy! I would much rather live in a world where I could invest in a green economy instead of an oil one, nothing would make me happier. :)

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#14) On January 14, 2009 at 12:31 PM, anchak (99.86) wrote:

I have been keeping tabs on this one for a while....outstanding conversation.....

Incidentally binve.....look for technical support at the $30-35 - I think it may not hold. As madcow says- oil will trade with the market for a while. I think the market will eventually bottom sometime this year - it would be interesting to see where oil is at that time.

I personally think there is a very difficult investment thesis with OIL - other than to simply do the Dollar costing at lower level and take the long term upside. Like Madcow I also believe that Oil will stay possibly in the $70-90 range for a LONG time - even if it rebounds. Expolosive returns are only for speculators here - like DXO going from $1.80 to $3.30 in 10 days or so!

 

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#15) On January 14, 2009 at 12:51 PM, binve (< 20) wrote:

Thanks anchak!

Yeah, I agree. I real life I bought the last rally at ~$36 and sold ~$47 (made a nice profit on USO and DXO). My thinking now is that Oil is looking stronger than the broad market, even though it is trading with it. I am buying in in real life now (~$37) and I will average down to about $33. If oil breaks below $27 or so I may consider dumping out. It depends on how that level is arrived at. But I still think (again, think in the short term, on the order of weeks) oil has a shot at a good mult-week rally before it breaks this long term support level of $30-$40. 

But if it goes down to $25, well, I will be wrong :)

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#16) On January 14, 2009 at 3:09 PM, madcowmonkey (< 20) wrote:

I guess we should give some reasonable support for the 75-90 range for oil. The most notable reason for this is that, financially the world markets cannot sustaing oil over those levels for very long (government, businesses, nor consumers). Second, the state of the worlds economy has been beaten down and keeps getting beaten down with loss of jobs, credit, and so forth that this is my reasonable estimate for what oil can be sold for when demand for the product improves. Lastly, when oil does get in that range there involves more discussion about viable alternatives that should be used/infused into the mainstream.

I disagree with putting it into the the hands of the American Consumers right away though.

I really would hope that the US government finds an alternative that they use strictly for military purposes. That would aleve so much demand on the reserves, we could free up more oil for the needy consumers:) The reason I state this is because we could function with the government infrastructure with bases and hubs on an economic standpoint, but putting it into an infrastructure for all 50 states proves to be too much $ and this is one of the bigger issues with the alternatives that are sited during talks. Also, shouldn't cheaper oil free up some capital for the military's use of oil? It would only make sense to apply it to an alternative they could use.....besides regular diesel.

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#17) On January 14, 2009 at 3:47 PM, madcowmonkey (< 20) wrote:

BTW- anchak. I have been enjoying the discussions you have been having on other blogs as well. Nice to have you on this one too. I look forward to reading both of your blogs on a regular basis. I have been missing alot lately with work, kids, and snow removal.....the wife keeps me pretty busy too:)

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#18) On January 15, 2009 at 9:02 AM, madcowmonkey (< 20) wrote:

Binve- I think you need to throw some shorts in the mix on your portfolio to account for days like yesterday. It doesn't have to be oil or metals, but some shorts might keep your portfolio in the mix with the accuracy. Just some food for thought. I have done this for a while now and it keeps the portfolio from tanking otherwise the madcow would be the new binvd:) Not that we are worried about it, but it just makes sense in this type of atmosphere to have both sides covered (up and down days).

anchak- if the market does bottom this year (which were my original thoughts) and oil is in the 20 to 30's, that would definitely be the time that I would add everything oil related:) I think everybody is getting hung up on the idea that oil went from 140 to 40, but that isn't the only reason to buy oil right now. Like we said, the catalyst for oil will be the consumers, then the market, then opec and drillers. It will be fun to watch all this unfold.

I wonder where rudolphsteiner has been as of late. I would think he would have a ton of information about the entire oil debate.

Side note, I really thought healthcare would have done pretty well in this mess, but I have been hearing of hospitals cutting back like crazy and that lends me to believe that the entire industry is getting creamed. Things really have changed in this market since July compared to other bear markets in the past.

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#19) On January 15, 2009 at 9:16 AM, binve (< 20) wrote:

Hey madcow. I don't know if you have read my first binve post: I never met an 'e' I didn't like, but there I talk about how I am using the portfolio.

My picks will all be outperform picks. This has _absolutely nothing_ against short selling. I don’t begrudge short selling in real life or in CAPS. Underperform picks have a vital place in the market and in this game for metering reality (if that is possible for the market) and making the market more efficient. The simple reason I don’t for myself is simple: I hate margin. I want no debt, nor do I want access to it even for the purposes of making a short sale. It is simply a personal choice. So my green thumbs will not mean I am generally optimistic (which I am very much in certain sectors, and let’s face it, I tend to be a pretty happy guy :) ) it just reflects this personal trading stance.

So to reiterate, I have nothing against red thumbs. They are good. I just using this porfolio to reflect (more or less) what I am doing in my short term account. It is a good way for me to explore some ideas too.

But if you look at my closed picks, you can see that I have successfully been using ultrashorts.

Yeah, I hope my binve scored doesn't get binv'd too ... :) Thanks man!

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#20) On January 15, 2009 at 9:06 PM, madcowmonkey (< 20) wrote:

I remember you saying that I guess I just forgot. 

Way to go today. You made a nice run. I remember when the 100 point swings were really awesome and now you see people with 900 points in one day. Just crazy! I guess that is the all in on a few sectors idea eh. I am doubting that this supposedly rally is really going to form at this point. I am starting to think that oil will be flat instead of going north. Nothing is wrong with flat though. If the market tanks and oil stays flat, I guess you win in caps:) woopty doo:) Have you been looking in any other sectors than oil, metals, and mining? I hear book sellers are doing marvelous........I am generally optomistic too. I don't think I could live with the stress of thinking everything is going to die or be blown away. What a shatty way to walk around. I still have fun putting on my snow skiing boots and going to the beach, so that sums up the "fun" for me.

BTW- you better call the in laws. It gets cold in that part of NC when they hit the 20's. Trees start crashing down from all the ice.

Take care buddy. 

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#21) On January 15, 2009 at 11:02 PM, Tastylunch (29.54) wrote:

Oh man thanks madcow I forgot to add Binv's new account to my RSS feed

Binv

I'm more closely aligned to madcow's thinking than yours I think, although I tink there's a decent chance we get a geopolitical shock that could drive Oil back in the 50's around early Obama as some these Oil dictatrship guys like Chavez are getting desperate.However if that doesn't happen, I bet Oil goes down to 20 and stay range bound the rest of 09 (since I'm not the only one thinking this).

That being said until consumer drive more/use more oil as madcow  says I don't expect a major lasting recovery anytime soon. I'm more convinced daily that's this deflation is more powerful than most of us ever guessed.The latest forecast I'm reading on China is 0% GDP growth that's hugely negative for Oil.Not to mention that China is playing with our currency helping to keep propped up bysilently repegging the Yuan. You cna bet China and Japan will do everything in their power to refuse to let dollar drop. They need the exports to us too badly to let the dollar continue to slide.

I agree also wih madcow  about the dbl and triple Etfs although I admit I'm guilty of trading some. I fully expect the ETF bubble to pop at some point. It's wreaking too much havoc with the market, the repositioning after three o'clock is becoming very noticeable. If this keeps no company is going to want to list on the exchanges for fear a dbl or triple etf(s) will drive their volatility too high causing liquidity issues for leveraged companies.Between them and the hedgies and quants I believe that's why you had 150 oil and now 35.That's just nuts.

It does stink that solar is getting thrown to the curb because Oil is cheap, but you know that's why I don't necessarily believe in capitalism despite being an entrepreneur. Capitalism is purely reactive, there are some things in life you have to be proactive about in order to solve/achieve .It's capitalism's great flaw and it's nowhere more evident than in environmental issues. After all capitalism didn't save the Dodo and I doubt it will ever truly attempt save the environment until everything is on fire, that's a job that our culture and government is going to have to do.I'm confident it's doable, but still at the end of the day someone has got to do it and get it done. Chances are that'sgoig to be guys liek you and me. :-)

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#22) On January 15, 2009 at 11:15 PM, Jimmy2008 (< 20) wrote:

tasty,

If oil goes down  to $20, almost all commodities would go down, I guess. Would that mean that it isn't time to buy any commodity, including agriculture and indistrial. Correct?

 

Thanks!

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#23) On January 15, 2009 at 11:44 PM, binve (< 20) wrote:

madcowmonkey

Hey man, thanks. Yeah I tend to still think in terms of sectors. I look at the USDX, gold, silver, energy, industrial commodites, ag, and then equities in general. It is interesting to see to all the sectors move to their own rhythm. There will always be individual stocks / issues that move against the grain (like hathor moving against most uranium miners) but it is usually safer (safer, in this environment, that's funny) and more educational to look at the sector movements.

Yep, at the end of the day I believe everything is going to be okay. If house prices crash or they don't, if the US Dollar crashes or doesn't, if gold goes to the moon or doesn't, in the end it doesn't really matter. America will rebuild, this economy of debt will collapse and a new stronger better one will take its place. That is the economy that I am waiting for, the one that gets me excited for the future. Alternative energy will be a huge part and that makes me very optimistic. When will it happen? I don't know, 5 years? 10 years? It doesn't matter, because it will happpen, and that fills me with hope.

Yeah NC is taking a beating. They live on a farily sizeable mountain with very windy steep roads. They have Jeeps and even then they are stuck for days. Fun stuff. Speaking of fun stuff, since you live in NW Michigan, I bet you have heard pine trees exploding in the woods from collapsing under the weight of all that ice. That is pretty crazy.

Take care man, stay warm :)

Tastylunch

Hey man! Yeah, I hear you. Past Mid-February I have no idea where oill will go. So my timeframe for this oil play is strictly on the order of weeks. Where will it be in June? Could be $75, could be $25. I have no idea. It just looks very good for a technical bounce. Even with the schellacking today, I still like oil for a rebound that could last a few weeks. Now what happens after that rally is over? Maybe the charts will give an indication, but I can't hazard a guess at this point.

However, if oil does drop to $20-$25, nearly all of the deep water rigs in the world become unproftiable. South American and Candian oil is unprofitable to. Based on current extraction costs, only Middle East and North African wells stay profitable, and only barely. If oil goes down that low, and deflation sets in, I will transition back to long term accumulation (vs. short term trading which is what I am describing above). Because as much as I want to live and invest in a world where alternative energy is the normal (and I believe will be some day) it will still take decades to transition off oil. I am still believe that peak oil is an event we will see within the next 5 years, and I certainly believe that the world credit excess will be purged from the system by that point with most of the world economies recovering. But that is really just me rambling, we have all talked about this before :)

So in essence I agree with your projection about decreased demand from consumers for oil for 2009. Yes, I definitely agree deflation concerns will change people behavior. How that actually affects prices over the coming months I have no idea, but I can certainly believe many of these drivers will be bearish for oil, especially the China growth (or non-growth) story. 

Yeah, I hold 2x-3x ETF for about 2 weeks tops. Absolutely none are in my long term real life portfoilio, and they never will be. I completely agree, they are not to be trusted. They can juice returns in the short term, but if they are used wisely and sparingly. 

But I love your last paragraph. That sums up a lot of my sentiments. There have been a lot of discussions (all good ones) about free markets / capatilism / Mises and Austrian banking / Marxism / etc. The thing is not one approach is the way to go. I will paste at the end of this comment a bit that I wrote on DaretothREdux's blog, that sums up how governement can do things well by not doing too much, but at the same time providing direction. And that's exactly what needs to happen right now with solar and alternative energy. I told Madcow about this, but definitely checkout this interview with John Rubino. http://www.howestreet.com/audio/johnrubino_2008_1217.mp3 The whole interview is good, but skip ahead to 10:45 where he talks about green energy and ways to fund it in this cheap oil environment. It will not be politically palateable, but I think that would be a necessary step. And I am very much on board with your environmental thinking. Captalism does not address the fact that we are stewards of this planet and we need to take care of it. Capitalism is good becuase it is a freedom based systems, allowing risk/reward success/failure. But more is needed to allow for guidance of issues of the greater good, like the environment, child labor, worker health, etc.

Thanks for all the great comments!

Here are the other blog comments I described above

#23) On January 09, 2009 at 9:06 AM, binve (96.48) wrote:

DaretothREdux, Wow! Great Discussion! It looks like this discussion is morphing beyond the original questions (which is great, that is the point of all good discussions), but I will go back and give an example for the original question: "One single successful incident of a government, any government, injecting massive amounts of stolen money (I mean tax dollars) into anything (infrastructure or otherwise) and the overall outcome was economic GROWTH"

This depends on how you define incident, but I will take a few liberties and give an example: The early US Space Program up until the moon shot (Apollo). This event/mission saw one of the greatest explosions of useful employment and technology in the world. From this not only did we vastly increase our Aerospace knowledge but the real benefit was supporting technologies: The program really advanced developement of the integrated circuit, which gave rise much more compact electronics and eventually the digitial computer. Very obvious spinoff. But probably the biggest benefit was the explosion in materials science. Do you know how many varied and different materials it takes to get into space? Advanced metallic alloys were developed, new polymers, epoxies and resin systems, new classes of lightweight fiber materials. There were huges advances in antenna tecnology. There are many examples.

But this in and of itself is not the point, it is the theme, which is: Goverment provides net benefit when it thinks of a goal for the nation, and takes some tax money toward acheving that goal, but allowing private industry to come up with most of the actual advances. 

Most of the new technolgies that I listed above were not invented in Washington or Cape Canaveral. They were developed in labs at private companies, or academic labs sponsored by private industry.

This really goes back to a point that you made Dare, and that is freedom. Government is good at coming up with a big picture idea. Private industry is good at finding solution to these goals and finding useful and economic solutions. In a lot of ways this is the opposite of the recent central planning tendencies of the government.

 

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#24) On January 15, 2009 at 11:44 PM, Tastylunch (29.54) wrote:

Jimmy2008

Well Oil hasn't gone down to 20 yet and it might not ever, we won't know for sure until it plays out.

But keep in mind 20 bucks a barrel is over a 40% haircut from now, so if you think oil is going down to 20 you would not want to take a 40% loss you don't have to take.At least I wouldn't. :-)

I guess my point and madcow's (to an extent I'm not sure how much he'd agree with me), is that Oil was overvalued and while it now may be undervalued from a fairsh price of say 60-80 bucks a barrel, there's no reaosn for it go up long term unless the American consumer starts increasing usage again. The speculators won't be interested in it uuntil they have a peak oil-ish rationale for big gains.

So far that isn't happening and there have been no signs of it.In fact in countries like France Oil use has dropped as much as 30%. So If anything there are signs it's getting worse on the demand side of things.

Additionally as long as the dollar rallies that's bad for commodities prices. As I said to Binv, I think the dollar is being manipulated up by external forces and it has some staying power.

So in short, I do not think it's  time to buy oil or any commodity really as an investment. You may be able to get some quick trades for a week or two but that's about it. But those trades would be high risk.

Gold is the hardest to read because it tardes like a commodity and a currency at times.

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#25) On January 15, 2009 at 11:44 PM, Tastylunch (29.54) wrote:

hope that clears up my thought process

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#26) On January 16, 2009 at 12:19 AM, Tastylunch (29.54) wrote:

binve

Hey man I didn't see your post till after I did, I'm a slow typer.

Oh yeah believe I know what 20 dollar oil will do to the Rigs, That's why I'm leaning towards what I call the Chavez Shock side fo things. Some OPEC country is going to do something dumb I can just feel it.Without some sort of interference I have bad feeling that's where it could go if the Quants keep tradin it the way they do. XOM may be the most overvalued blue choip stock out there right now. If they continue down the trend it's starting Oil ETFs might really start moving oil prices down as XOM is a big component of DUG/DIG I believe...

That being said I don't think we get any lasting big fun moves this year. At least I don't see a catalyst for it yet.I figure Oil could be anywhere from 20-50 which is a huge range but considering last year it doesn''t feel like it. :-)

I also agree about Peak oil, back when I was in the geo field I got see estimated numbers from Gwahar that one of my profs showed me and man they were scary,.Still deflation can throw a monkey wrench in things, it's kinda of a paradoxif we gradually transtiion into solar we may never get high enough oil prices to really push us to do it in time before we do too much damage. 

I'm with you on the daretooth thing (what's up with his name?), CAPS has a decidely libertarian bent which is cool and neat to see, but I've always felt the free market can't do everything like a lot of people here seem to think.  I'd hate to think what my lovelife would be like if my attractiveness was a publicly traded commodity. :-)  While I do think banks and whatnot should be allowed to fail, I don't think there should be no rules either.

I don't know what's the best way for the gov't to get the US green, but ultimately they are the only ones that look to me to have any sort of chance to make it happen. After all T Boone Pickens is a lot poorer now. :-)  

 

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#27) On January 16, 2009 at 8:47 AM, madcowmonkey (< 20) wrote:

So many valid and good takes on the price of oil on here. Way too much to comment on right away. I definitely want to get a solid hypothesis for what is coming up for that sector and then take a closer look at the commodities and ag sector. I still think too many on hung up on the price tag for oil and haven't priced in the deflation side of things. I still think this would be the time when an alternative could make a run at becoming viable, even with oil at 20-50 price range.

Did any of you hear in the news about the polar ice caps coming back? Somebody suggested that they are at the level of 1979 and I was just curious if any of you had heard of it as well.

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#28) On January 16, 2009 at 8:52 AM, binve (< 20) wrote:

Hey Tasty, Yeah even if oil does range trade, that is potentially a big range with some moves to made some decent money in. This could play out very weird. The thing is when someone asks where could oil be in 6 months, a realistic case could be made for 20, 50 or 80. That's a pretty big spread :) I don't think any of those levels will last for long and I think oil will continue to be very volatile this entire year.

Yeah, I agree about Gwahar, I have looked into that alot myself. The most recent estimates I have seen for global peak production capacity is that it will be dropping at 3-6% per year for the next decade. The reason why that doesn't affect prices now is because global demand has dropped off some 10% from the peak. So you are right, deflation concerns are ruling the day right now. I wonder what is going to happen when demand ramps back up years from now?

It would be so awesome to make a serious transition to alternatives now, while oil is still cheap. I think it would be such a prudent call (but a very politically tough one). But it would require serious investment in the near term and a lot of incentives to subsidize research and investment. I know that is part of the current plan. But the current defecits are just so unsustainable.

"I'd hate to think what my lovelife would be like if my attractiveness was a publicly traded commodity. :-)". LOL! Yeah, same here man :) Fortunately I lucked out in college. My wife is the best, especially for putting up with my nerdiness :)

Yeah, I hope the governemnt can make us green. Do you remember that post I wrote serveral months ago about a Green "Skunk Works" and the the USPS is actually the best equipped at this point to lead the charge? I would love to see a mandate based on CAFE standard (with a real change) leveraging a lot of investment the USPS has already made. Maybe make that research all public and provide grants (kind of in the form or SBIRs or STTRs) to small companies to provide enabling technologies or infrastructure to support the big 3. That might be the best way to protect the bailout investment. :) 

Thanks man.

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#29) On January 16, 2009 at 8:59 AM, binve (< 20) wrote:

madcow, Yep I think that would be fantastic. even in the 20-50 range. The only way to make alternatives viable would be subsidize the tech first and then give everybody access to it. That how the computer industry was formed. NASA needed computers to land on the moon. So they put serious R&D in to integrated circuit development, miniturization of electrical components, etc. Then made much of that research publicly availble to universities and this "cheap" access allowed for the birth of the computer industry. I highly doubt that any one company would have spontaneous subsidized computer development without some definied end goal. Sometimes the government does do really good things :)

No I had not heard about the ice caps, I will check those out!

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#30) On January 16, 2009 at 2:39 PM, BigFatBEAR (29.55) wrote:

Hey binve!

Good to see you back on the CAPS attack, and with a fresh new account. Your blogging has not deteriorated, I see!

You might remember me from my other profile, adventurerneil, that went long on all the gold/commodities your original one did (and is in a similar spot now as well). Well, I started this short portfolio back last summer, and got tons of points with the crash. It's a LOT more fun playing a highly visible all-star than it is with a ruined accuracy. ;)

Anyway, I'll add your new portfolio as a fave and look forward to reading more from you.

I'm a bull on oil long-term, as well, though the threat of long-term deflation definitely makes it a tad speculative.

-BFB

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#31) On January 16, 2009 at 2:55 PM, binve (< 20) wrote:

BFB! Hey man, I definitely remember Adventurerneil. Yeah, it is definitely good to try out different ideas in different portfolios. It is hard to be good in every portfolio (unless of course, you are GMX) :). Trying new strategies is a good thing.

Yeah, I will be adding you as a fave too.

I agree, oil is still a good long term call (5+ years). I think oil will be a good short term call (<2 months). But between 2 months and 5 years from now, I think we will see some pretty violent movement :)

Thanks man!

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#32) On January 16, 2009 at 3:03 PM, Tastylunch (29.54) wrote:

binve

I wonder what is going to happen when demand ramps back up years from now?

Well if to does Oil probably shoots up some. But I think we have to be careful that we don't assume that the demand will ramp back up.What if Germany and France replace enough fossil fuels that it permanetly dampens European demand? It's a possibility. They wnat energy independence from Russia badly.  Also if this really is a depression demand is likely to stay down for longre than we expect.

Really last time we had a a critical one-two punch of the dollar going down and demand going up.

Right now we have the reverse. I think it's likely to go to neutral before going back to what it was. Rarely do we have old investment themes pick right back up, it may take a long time (6 years maybe)for the oil/commodity mega bull to revive now. I guess I'm saying I'm not going to think it's coming until I actually see signs that it is.

But that's just me I'd rather be late than early as I'm more of a Trend trade/investor. I don't like picking bottoms because of all the false moves. Tops though seems like they are a bit easier to see although I missed the very top this time, I did get out close enough to make it worthwhile.

I'll have to go check out the skunkwerks thing agian. I can't remember what that was .:-) I have dealing with Columbus'es get green council so I'm always looking for ideas.

madcowmonkey

whoah no I hadn't heard that, in fact i've been hearing the oppposite. But if it's true it still doesn't necessarily invalidate the data as rarely does any system go straight down or up (still 'd have to see the data), just might mean it gets a lot more politically difficult to protect the environment. Either it's interesting. hmmmm...

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#33) On January 16, 2009 at 3:24 PM, binve (< 20) wrote:

Hey Tasty,

I agree, that is a bold assumption on my part, that demand for oil will pick back up where it left off in a few years time. To tell you the truth, I would be extremely happy if it never did. I would lose some money on my long-tem oil longs, but that would be fine because it would mean that I would now have an alternative energy economy to invest in :). Actually I picked some of my oil longs (like COP) exactly because they are oil giants AND they are investing heavily in alternative energy.

Some companies do see the writing on the wall, and are trying to be part of the new movement. And that is great.

I guess the real sentiment I should say is: When demand for _energy_ pick back up. If it is oil then I am hedged for that, and if it is alternative then I am hedged for that as well. Right now I am weighted more heavily on oil plays but if the Obama plan really takes hold, I will defintely weight toward alternative energy, especially while everything is still cheap :)

The link to that old post is here: http://caps.fool.com/Blogs/ViewPost.aspx?bpid=73292&t=01003940541747827267

I still have a feeling that we will not be seeing the last of inflation though. Even though deflation is here now, I don't think the Fed will be letting that one go. And the longer the banks don't lend, the more the Fed overcompensates and builds up the money supply. And at some point in the future it will make its way into the system. I could certainly be wrong (I am open to that possibility) but that's what I think :)

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#34) On January 16, 2009 at 3:48 PM, Tastylunch (29.54) wrote:

binve

I guess the real sentiment I should say is: When demand for _energy_ pick back up.

Hah very good point.

Speaking of alt-e it looks like we will have major contraction in solar the next two years from the numbers I'm seeing, but on the plus side whoever survives will have a big Tech/funding headstart and big market share. I.e. great for the Sunpowers ,very bad the GT Solars of the world...I figure after some of the wannabes go bankrupt, it will be a good time to invets in teh winners.

I agree about inflation man, as long as we don't go back to the gold standard at some point it will be back. I just don't know if it will ever get hyperinflationary though anymore. It ertianly is the intutitive answer, but I doubt the banks are anymore anxious to commit infaltioanry suicide than we are. At any rate loan demand has dropped significantly so it's a moot point for now.Too early to say.

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#35) On January 16, 2009 at 8:56 PM, madcowmonkey (< 20) wrote:

wasn't it binv2..... that did a post on bio-thermal and solar a long time ago. I would think that would be more viable than just solar on its own. I know up here, the norm is going from propane to the outdoor wood burners that heat the house and water, but that is a lot of trees to heat one house during the summer. My neighbor has one, it works great, but it just doesn't seem right:)

Here is the link I found for the Ice caps stuff.

http://www.dailytech.com/Sea+Ice+Ends+Year+at+Same+Level+as+1979/article13834.htm 

Dont know what it really means, but still interesting tid bit I guess.

I am still working on my hypothesis for the ag and commodity sectors. I don't think oil will pull those sectors down, but I can see those sectors pulling oil down. The ag sector has always been tricky with all the different variables that are thrown in with it. Still a good sector to stick with though. I mean lets face it, it is what helps us sustain strong workers and a strong and healthy working appetite will be the mainstay for the workhorses. 

 

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#36) On January 17, 2009 at 2:19 AM, binve (< 20) wrote:

Hey madcow, yeah in my first blog I did a bunch of alternative energy ideas and in my second I focused on Solar Thermal. I love the technology!!!. Most of the companies that do solar thermal systems / manufacturing are still private. And in this economy they probably will stay private, and not turn public until things pick back up. In the meantime, my favorite plays on solar thermal are FPL and PCG. These utiliites have made substantial alternative energy investment and particularly in solar thermal. Right now PCG has a 4% dividend yield and FPL has a 3.5%.

That is a technology that still gets me very jazzed. I keep looking for developments in CA, AZ, UT and NV that are doing large solar thermal installations. That is great.

What is really interesting about low oil is that the cost inputs to gold/silver/copper/etc. miners go down a lot. Same thing for agriculture, since both of these industries are so energy intensive. I would continue to keep my eye on those sectors this quarter. They are going to be showing improved profits where most other sectors earnings will be going down. You can see I added a bunch of miners on this pullback. There charts look very good. Strong but pulled back to oversold levels in last weeks selloff.

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#37) On January 17, 2009 at 2:57 PM, Tastylunch (29.54) wrote:

madcowmonkey

The thing I worry about Ag is that I hear Russia is reopening the Steppes to farmers (mainly wheat), if that's he case we could have massive supply coming in the short term. Might be worth checking out in your thesis to see whether that is actually happening.

Long term you are probably very right. Jim Rogers thinks the US is going back to agarian economy and that farmers will be the nw rich. We'll see. :-) It is the one thing we have (besides weapons) that US can get up and running for exports pretty quickly. And we do badly need to balance the trade deficit if we are ever going to get out of this mess.

binve 

yeah I like FPL too, I've held in CAPS before

very very good point also about energy costs to miners (that's what killed my beloved GSS!), I guess it just depends on where they are located, if they are in locales where there is state dictated energy prices those miners may not benefit if the state didn't cut their prices...

I would think that would be good news for guys like GG which operates in canada..

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#38) On January 17, 2009 at 3:59 PM, Tastylunch (29.54) wrote:

First off just read Israel is calling a truce with Hamas, that's very bearish for Oil on tuesday but good news for sanity!

madcowmonkey

Just read the Sea Ice article. Hunh very interesting. However that being said I don't view as contradictory of the current main view. Sea ice as the article noted is more sensitive to quick changes so it's more likely to change directions . I still think the longer term trend is pretty decidely warming, if I remember my schooling right we *should* actually be in a cooling period (Milankovich theorem, Vladistock ice core sample trends) which is part of the evidence for why this warming is unnatural. I  have to admit I'm very rusty, it's been about 7-8 years since i did work in the field.

Interestingly enough when I did work in Iceland, the Icleandic geologists I worked with were convinced global warming would cause an over corrective response into global cooling. Their model never made sense to me and I think it's largely a manifestation of their own personal fears (global cooling means Iceland becomes really an Ice land) but this data is interesting when viewed in that context.

So it is worth noting, I think it's better for all of us if the mainstream were to turn out to be wrong, but I doubt that it will. I think the danger from an investor's POV is that this evidence could make it politically more difficult to fund Alt-E projects (personally I always felt politicians should just pitch ALt-e as an energy independence issue to make it palatable and attractive to everybody, the cost savings/save the issue get too controvesial for many as sad as that may sound.)

At some point I'm really going to have to bone up on the subject again. 

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#39) On January 17, 2009 at 5:45 PM, binve (< 20) wrote:

Tasty, Excellent! Yes that is very good news for sanity. I would much rather have sanity than high oil :)

I knew you had a geology background, but I didn't know you did research in Iceland! That is so cool!. That is fascinating about the overcorrecting cold and hot. And I will give you a mechanical corollary. It has to do with control systems and control laws. You may be familiar but bear with me.

Most stable systems (airplanes that are perturbed in flight and return to a level angle of attack, a cantilevered beam that has some impact loading on the end and the vibrations eventually die out) have some sort damping mechanism. A way for the system to naturally return to a state of equilibrium. Now when systems natural damping tendency is messed with (in the case of the airplane, if the pilot oversteers with the ailerons it can lead to divergence or loss of control, or it an aircraft is near its flutter speed you can even get aileron reversal) you can get: increased oscillations that take longer to damp out, a crtical point where no input changes the output, or infinitely diverging responses (the oscillations grow over time, they do not shrink).This was the case with “galloping gertie” check this out http://en.wikipedia.org/wiki/Tacoma_Narrows_Bridge

So with global warming, the increased level of greenhouse gases is messing up the Earth's natural damping mechanisms to deal with short and long term weather and climate instabilities. These cyles can be very long, so we may have experienced an warmer warming period, but because of this damping phenomena we may be a colder cooling period. In essence the climate my "overcorrect". 

Now I just made a lot of that up. I have no idea how the climate damping phenomena actually works. But I have a _lot_ of experience dealing with thermal and mechanical responses to physical systems. And since the Earth's climate is a closed system, it is quite possible it will tend to follow system like behavior as I described. Interesting to think about.

Another analogy can be made with the money supply. I am going out on a limb here, so bear with me. Even though fractional reserve banking is an artifically created system, it still behaves like most physical systems. There have been cycles throughout modern history (last 300 years) where there have been booms and busts, fueled by inflation and deflation. There is also capacitance / inertia in the system, i.e. money tends to lag the actual response. As soon as money is created by the Fed and Treasury it isn't immediately avaliable to the world's markets. It has to go through the banking system first. This lag makes it suspectible to oscillations. But thoughout modern history these oscilations damp out from market demand. 

However in the last ~50 years with the advent of chronic and persistent inflation in our money system, these natural maket forces have not been allowed to work. The Fed has been changing the "damping coefficent" of the system by perennially increasing the money supply. Additonally it is trying to manage the short term oscillations through intrest rate manipulation.

Now here is where things get interesting.

If the system were allowed to naturally repsond, because we have been on the positive slope of the oscillation curve for so long (inflation fueld boom) eventually the system needs to correct by the same magnitude in the other direction. Which is defaltion on credit contraction. We are all observing this taking place. Deflation signs are everywhere. The market wants to, rather _needs to_ go through the contraction.

But now the interesting part: Physical systems are subject to more than just oscillations. There are ways to excite any system, but two common ways are impluse/impact loading or step loading. A step function is exactly what it sounds like, it is at one level up to some time and then it jumps immediately to another higher level after that time. What a step input does to an oscillating system is that it very violently initiates a new positive oscillation no matter where you are on the cycle. However it makes the new positive peak MUCH higher than it would be if the system were allowed to naturally osciallate.

So if you show me an inflation/deflation graph of the money supply (M3) for a couple of hundred years but didn't tell me what is was, just that it was some transient signal, I would tell you it was some vibrating / osciallting system. Essentially this is the output response. Then next you show me an input signal (in this case M1). And do you know what the M1 chart looks like over the last couple of months. 

Yep, you guessed it. From my point of view it looks exactly like a step function. It was mostly hovering around one level until the end of last year. Then it violently rose, not quite vertical but pretty close, and it is still rising. Who knows where it will eventually level off, but the point is that M1 has increased substantially and rapidly. And the Fed has said outright that the will increase it to whatever level possible to fight deflation.

That is why I am very skeptical that deflation will be allowed to set in for very long. Because once the Fed's money supply "step function" hits the system, It will start a whole new inflation cycle potentially larger than the last one. And like I was desribing above, our money supply system has a lag built in. This is why inputs to the money supply don't show up in M3 right away.

So that is a Mechanical Engineer's take on the money supply :) I have no idea if I am right or wrong, but based on all of the systems that I have had to analyze over the years (which is a lot) that is a very compelling analogy.

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#40) On January 17, 2009 at 9:49 PM, Tastylunch (29.54) wrote:

binve

man i've missed having you around. This is why you rock Binv :-)

Your dampening cycle analogy pretty much sums exactly how I view systems like this. Directioanal Oscillating cycles like inflation/deflation and globa climate change. You could easily argue the American economy as awhole is one these types of cycles. My only difference would be that I think deflation is a bit morepersistent that it might appaear to you (mainly because I think Japana and China are countering all our moves to inflate ou of self perservation instincts of their own). It's ahrd to say because I think infaltion/deflation has moved into the realm of geo-politics now so now you have to guess what Political entities are going to do besides loking at the underlying data.

I do think the decreasing/increasing ice caps can cause Albedo to run in huge bursts of positive/negative feedback cycle loops. However what I thimk most people miss about globla climate change is that it predicts mainly more extreme weather variations, not just uni-driectional temperaure change. A lot of the Paleo guys I knew back in the day thought the huge continental size of Pangaea etc coupled with global climate change might have caused one of the two Pulses of the Permian Extinction(which opened the way for  advent of The Dinosaurs in the Triassic) through extreme droughts, famines, typhoons what have you.

I'm still not entirely sure what The Iclelanders thought the catalyst of a mega reversal would be, I can see fluctations like we are having now, but in this case I think we may have overpowered the system's long term ability to self correct. Most models I'm familiar with predict we should be in acooling cycle not warming at all. I'm personally more afraid of a runaway positive feedback cycle "fireball earth" scenario over the long term like what happened to Venus during it's formation (If you have ever read Paul Hoffman's theory of "snowball earth" it's very interesting though imperfect example of how it could/could have happen/happened the other way).

In the longest term (millions of years) excluding the heat effect of the Sun expanding and gettig mre proximate to Earth, the earth should be cooling as we are slowing our rotations and losing heat from the core due to entropy (volcanic eruptions, radiocative decay what have you) I would think, but that doesn't mean we can't get very warm over the next couple thousand years, especially if our atmosphere traps more Heat.

I'm far rustier and less proficient than you in my old field than you are in yours, So I hope you'll forgive me if made any misstatements. :-) It's nice to see we have a similiar mindset, especially since all the hydrologists I knew thought engineers had all their numbers were upside down (apparently our two fields have different nomenclature standards. In one equation we put your numerator in our denominator and vice versa. Can't remember which equation it was/is)   :-)

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#41) On January 17, 2009 at 10:39 PM, Buffetisbest (71.04) wrote:

UCO- Double long oil proshares DJ-AIG; speculative oil increasing play

 

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#42) On January 17, 2009 at 11:29 PM, StockSpreadsheet (74.73) wrote:

Tasty,

The Icelanders could have been worried about the collapse of the thermoheline (sp?) layer effect, (a la "The Day After Tomorrow").  As the Earth heats up, and the snow melts, the fresh water runs off into the North Atlantic.  Right now, Iceland and most of Europe are benefiting by the Earth moving warmth north through the Gulf Stream, (which is why Northern Europe isn't as cold as Saskatchewan or Siberia).  Warm water moves north, releases its heat into the surrounding system, cools, falls to the ocean floor and then flows down near the equator and the Gulf of Mexico/Caribbean.  There, surface water is heated and moves north, pulling colder water from the depths up to the surface to keep the whole cycle going.

The problem with the cycle is that if a bunch of fresh water is released near the poles, it will float on top of the heavier salt water.  Thus, it won't sink, so won't make way for the warmer water that wants to flow north.  Without the northward flow of warmer water, Iceland and Northern Europe will then revert to temperatures more normal for their latitudinal mean, (i.e. Saskatchewan and Siberia).  Once this takes affect, it can be thousands of years for the normal Atlantic storms to mix the fresh and salt waters enough to get the system running again.  At least, so said many programs I have seen on the Discovery and Science Channels.

Also, I have heard that we are in a cooling trend due to decreasing sunspot activity.  The sunspot activity has much more effect on our planet than any heating/cooling of the Earth's core, (other than catastrophic events like a Tambora, the Siberian Steppe Flows or the rise of the Himalayas).  I have heard some scientists say that we would be cooling if it weren't for all the greenhouse gasses we are pumping into the atmosphere.  The only problem is that we have no way of knowing when enough is too much and are likely to overshoot, leading us to a runaway greenhouse effect even when the sun's lower energy output means that we should be cooling.  If we are around in a 100 years and if the cycle reverses and the sun starts putting out more energy, if we continue on our greenhouse ways, things could get very worse very quickly, maybe a lot more quickly than we can do anything about.

If you are looking for ideas regarding Columbus's Get Green council, check out the "Rebuilding Greensburg" stuff on the Planet Green website.  There a whole town is being rebuilt with green technology.  It might give you some ideas and some companies that you can get good products from.

Good discussion guys.  Have a nice day.

Craig 

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#43) On January 18, 2009 at 10:33 AM, binve (< 20) wrote:

Tastylunch, man this just made my day:

"man i've missed having you around. This is why you rock Binv :-)"

Seriously, thanks Tasty. I love writing on yours and madcows blogs and having conversations with you guys. Because we are trying to figure the situation out, and the fact that we all come at it from different backgrounds gives us unique viewpoints. But the most important thing is we are all reasonable people. Which makes these conversations very useful and educational, but more importantly fun.

This is why I always stay interested in Caps, because there are so many people on the site with similar mindsets (being reasonable and wanting to have civil discussions) and similar goals (be educauted, to contribute, and to make good investment decisions). I have read blogs on Caps where people talk trash about the Motley Fool. I think they are defintely in the minority. I think all of us agree that the Motley Fool has done and continues to do a great thing, and that Caps, despite its minor imperfections, is one of the most useful financial sites on the web. Because where else would I have met Tastylunch or Madcow, right? :)

Cycles are powerful phenomena, and most people ignore them. The problem is, most are so long that you don't notice them on a day to day basis. There is the Dow / Gold super cycle and I do not think we have reached the bottom on that one. There is also another cycle that lasts 33 years. It is sort of related to Kondratiev Cycle (K-Wave theory), but it manifests itself in a different way. It is Long Valuation Wave Theorey, and it is not a study in Dow "price" it is a study of Dow "valuation", P/E ratios specifically. It is fascinating. But the jist is, based on the timing of the last 3 cycles, the next 10 ish years will be met by very low valuations for the market on average. Now that doesn't necessarily mean price will drop, because price is a function of money supply. But anybody who is expecting the end of this secular bear market anytime soon is going to be disappointed (at least in my opinion). This is something I have been interested in for awhile, I may do a post on it.

But back to your points, that is exceptionally interesting! I am very interested in Albedo. When I am doing Spacecraft thermal analysis, particularly for satellites in Low Earth Orbit (LEO) I am very interested in Albedo because it affects the thermal envrionment of the spacecraft. There is atmospheric albedo (sunlight reflected of the tops of clouds and back into space, or in my case, onto my satellite) and then there is polar albedo, reflected of the ice caps. Polar albedo is very important to polar orbiting missions, particularly ones trying to stay in sun-synchronous orbit. When I think about it, because the suns rays hit the poles at such an oblique angle (as opposed to the equator when the sun rays hits the surface dead on) you get much colder temperatures, and then because it is cold enough to form ice and ice is _highly_ reflective it further reinforces the cold temperatures. So from thermal-analysis-speak: The effective solar absorptivity at the poles is very small. But because it is precisely so small, small changes make it very susceptible to large changes. If just a little bit of warming were allowed to occur and some of that ice changes to water, then the whole reflective profile is off. Because water has a much higher solar absorptivity than ice. So just a small amount of water on glaciers change the overall absorptivity of that glacier by a lot. Estentially the "solar gain"  of this "feedback system" is very sensitive. And after that balance is perturbed all kinds of unintended consequences can ensue.

You can have prolonged warming like we have been observing, and then you can might have prolonged cooling, a la the damping / current mechanism that StockSpreadsheet talks about. 

To me, all of this says that we as humans better clean up our act and really start paying attention to what the planet is trying to tell us. We study and characerize systems all the time. We build whole industries around how systems work. We need to take the next leap to figure out how these industries really affect the planetary system. It just makes good sense. We are stewards of this beautiful world, and we should be good stewards.

Also I am only slightly familiar with Hoffman's "snowball earth". It is exceptionally interesting though. I saw two Science Channel shows. One was on snowball earth (i believe) and one was the long term climatological history of the earth. Moving continents, ice ages, etc. So fascinating!

Man, from where this post started, we got an incredibly interesting discussion out of it, didn't we? :) Thanks man!

Buffetisbest

I listed UCO at the top of the post in the "Related Tickers" list. I agree it is speculative.

StockSpreadsheet

Craig! Great to see you!

Thanks for all of that info. Yeah, how all of those currents feed the heat from the equator to the poles is fascinating. That current system is delicate, and like I was saying above about glacier Albedo/ice/water, it is a system that when it becomes unbalanced can have rapidly severe consequences. Also it was really interesting on one of the Science Channel shows talking about the formation of these massive current systems, that one of the ice ages stopped basically because the land bridge between North and South America formed (Pananma) and it broke that equatorial current and forced it toward the poles. The Earth is a fascinating system!

I agree, Planet Green has a lot of great shows on it! Did you see the one where the Greensburg art center was the first one to be Platinum LEED certified in the state? Rebuilding is had, but it is inspriational to see they are doing it environmentally responsibily.

Thanks for the contribution Craig!

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#44) On January 18, 2009 at 11:14 AM, GoodVibe4Ever (< 20) wrote:

Boy! That was very interesting and long conversation. The longest I read so far on Caps! Thanks binve for your thoughts and for hosting all the bloggers' heavy gunners on the topic of oil.

I don't have much to add here but saying that DXO is gonna go to $8 at least before it goes down further than its current lows $1.76 and if ultra ETFs survive the next market fall and the new world order, then DXO might be our ticket to huge returns on oil from pennies to big bucks. My favorite play to go long.

GoodVibe

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#45) On January 18, 2009 at 11:28 AM, binve (< 20) wrote:

GoodVibe4Ever, Thanks! That's the least I could do. I love picking the brain of the Caps community and having good discussions. I definitely like you and your style, you are insightful and generous with your opinion, and definitely not attacking. That is why I added you as a favorite.

Yeah I agree. Most of the commodites are so oversold, and oil in particular. I definitely am not arguing for the case that this is the bottom and we will never see lower prices. But I defintely think this is a bottom, and we are technically due for a decent bounce that is likely to be very profitable. I agree 100%, best call is to go long here :). Thanks!

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#46) On January 18, 2009 at 2:22 PM, Tastylunch (29.54) wrote:

StockSpreadsheet

You know the thermohaline angle is the one I would have thought they would have been talking about but they wer actually thinking of a whole global system, Not just a  collapse of te Gulfstream. I agree a temporary (but long in a human's perspective) collapse of the Gulfstream is very probable if the seaice/Anatartic shelf siutation gets bad enough. One Icelander I talked to constantly talked about how shipping woud be affected by Ice that would reach up from South America. There was some language issue, my icelandic never got very good since most of the Reykjavik residents I met were quad-lingual (Icelandic, German, Danish and English)!!! So I I was never forced to really learn Icelandic beyond pleasantries. It was a long time ago and it was in a bar where some of us were very drunk (not me I don't drink much), so I'm not really sure of the accuracy of the details discussed :-)

 I have heard some scientists say that we would be cooling if it weren't for all the greenhouse gasses we are pumping into the atmosphere....  If we are around in a 100 years and if the cycle reverses and the sun starts putting out more energy, if we continue on our greenhouse ways, things could get very worse very quickly, maybe a lot more quickly than we can do anything about.

That's exactly right from myre recollection, we have should entered a new Ice Age about 600 years ago ('the Little Ice Age" should have been the beginning of a new one). If I remember correctly Ice ages usually last mutliple thouasand years on average so we should have plenty of time to overshoot...

If you are looking for ideas regarding Columbus's Get Green council, check out the "Rebuilding Greensburg" stuff on the Planet Green website

Very very cool thanks man!

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#47) On January 18, 2009 at 2:31 PM, Tastylunch (29.54) wrote:

binve

 We are on the smae wavelength man, Although my POV is not as sophiscated as yours since I'm out of the science game and am obviously less proficient/ up-to date on it as you are.

Yeah I should have specified that I was talking about Polar Albedo, not as much atmospheric. 

About valuation cycles, agaian I whole heartedly agree,especially if we do get inflation like you fear. Xthecritic had a great post on how inflation compressess P/e ratios. But this is also why I'm so bearish on stocks this year all the data Im seeing suggests major contractions coming in E part of P/E which means the market isn't nearly as cheap yet as it appears (since that would make the P/e ratio go up obviously)

GoodVibe4Ever

hey goodvibe nice to see you here. 8 bucks for DXO?. That would be sweet. I would think if DXO does go extint USO is a another dbl oil long play that should survive it. As always be careful (as I'm sure you know as you strike me as an experienced trader) with these double levered ETF things since they only mirror daily moves not cumulative. 

For me I think I'll stick more money in oil microcaps  that actually produce Oil like KAZ when I think oil  is ready to pop. That could easily go from 1ish -5ish  bucks.

Btw Binv what's your take on KAZ? They have a big  tax issue but if oil gets going again I like their chances of getting bought out by a bigger company.

 

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#48) On January 18, 2009 at 5:37 PM, StockSpreadsheet (74.73) wrote:

Tasty,

The only global system I have heard about that sends us into hot and cold cycles is the sunspot cycle.  The sunspot cycle affects the whole planet.  More sunspots, more energy directed at the Earth and we heat up.  Fewer sunspots, less energy gets directed at the Earth and we cool down.  Few enough sunspots, (there have been periods supposedly where there were no sunspots), and we go into an ice age.  The longer the nadir of sunspots lasts, the deeper and more extensive the ice age can be.

There can be other things that will affect the Earth on a super-local way, (potentially in a global way).  One of these was the rise of the Himalayas.  They affected global weather patterns by redirecting global windstreams around them.  These affects can make changes over hundreds or thousands of years,  (the time it takes the mountains to form and force the changes), and then the Earth will eventually adapt a new steady-state system, (like the system that happened after the rise and before the Industrial Revolution where the effects were assimilated and the world adapted).  

Another super-local/global changer would be something like a major volcanic eruption, (Tambora, to a lesser extent Krakatoa and Mt. St. Helens, etc.), an asteroid/comet impact or some other tectonic plate shift, (such as when Antartica traveled from near the equator to end up at the South Pole).  By the way, the specials I have seen say that if Yellowstone ever erupts, the whole human race could be in for a MAJOR problem, potentially a global extinction event, (that could even potentially include us).

Of all of these, the only one that I know of that is cyclical is the sunspot cycle, so I would be forced to assume that that is what they were talking about in Iceland when you were there.   I could be wrong, but that is the best explanation that I have.

 

Binve,

Yeah, I saw the episode on the Arts Center.  I liked the one on the John Deere dealership better because if I remember correctly it had more included systems, (wind turbines, water reclamation and solar heating/cooling/lighting, from what I remember).   I might have the two episodes confused though, so maybe it is the Arts Center that had all those systems, but I don't think so.  Haven't watched "Rebuilding Greensburg" since my Tivo died.  I'll have to buy another one sometime because all the shows I like are almost never on when I have the time and desire to watch some TV.  (Plus I hate commercials, so not being able to fast-forward through them is really annoying.) 

I think the Greensburg exercise could be an example for the whole country.  Sure, not everyone can do everythig that they are doing, (as most people are not building from scratch), but some of the stuff can be added to existing structures.  Some of the wind turbines for example.  Also, the geothermal heating/cooling system could be put almost anywhere you have room to bring the drill in.  (I'm talking about the one where they dug a 500 foot hole, or whatever the actual depth, ran the loop of 3-inch hose down it and used the Earth's natural steady-state temperature to help regulate the temperature inside the building.  I thought that was pretty cool, and it could be done anywhere in the country.  

Craig 

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#49) On January 19, 2009 at 9:10 AM, binve (< 20) wrote:

Tastylunch, man I would love to go to Iceland some day. Did you like your time there (based on the scenery, how could you not, right?). Hey I bet on exchange rates now, you could get a good deal on a trip. If only I could afford one .... :(. Someday :)

Also I knew you were talking about polar Albedo. I was just going through the more detailed example to illustrate how it is the reflected sunlight further reinforces cold temperatures, which makes the poles very susceptible to change. It was really to illustrate that usually there is more than one effect on a system, and these effects sometimes combine, but if they are disturbed sometimes they combine in the opposite direction as well.

Yeah earnings are a nightmare. I don't know if you read John Mauldin's stuff, but he has been hammering on the fact that over the last 2 years earnings estimates (based on average estimates from analysts, just just super pollyanna or super bearish) have consistently gone down. Each quarter they are revised downward. Right now the P/E of the S&P is sitting around 21-22!!!! Are you kidding me? And people are calling stocks "cheap". They are cheap compared to the S&P P/E of ~40 a couple of years ago. But they are certainly not cheap historically and they are most definitely not cheap when compared to the state of the economy.

Also I don't know a lot about KAZ. I liked it well enough to pick it for binv271828 months ago (small company, oil and gas play, foreign assets / currency outside of USD) but I can't say I have develed too deep into their taxe issues. However I looked at the weekly chart and the setup is very similar to crude oil. It is coming out of oversold with positive divergence. If oil make a rally in the near term I think KAZ has a very good shot of rallying with it.

StockSpreadsheet, Oh I didn't catch the one on the John Deere center. That's too bad sound like it was a good one. It sounds like you would really like (you probably already know about him) Mike Reynolds. He is an architect in New Mexico and he is one of the earliest proponents / advocates for Earth Ships. Here is his website: http://www.earthship.net/web/ I have seen a lot of videos on him / by him some of which were on the Discovery channel. He is really trying to make Earth Ship designs basic enough so that anybody can build them, giving them the know how for: cheap insulation, green roofs, rain water collection, thermal mass walls, solar home positioning, etc. He is really challenging the convention, so much that the New Mexico legislature suspended his architecture liscense for awhile. But enventually it was reinstated after he went to the Tsunami areas and showed people how to build homes from scratch using all these principles with scrap materials. It is really a great story!

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#50) On January 19, 2009 at 1:50 PM, Tastylunch (29.54) wrote:

binve

I enjoyed it quite a lot. It's a very different place. The icleanders are friendly but very isolated/sheltered. They have a very skiewed view of Amerincans because their only regular exposure to us was our troops stationed in Keflavik (the base has since closed). They seem to think we are hyperviolent and listen to Elvis and the Beastie Boys only. At least that's what it was like when I was there in the late 1990's.

They are a funny people,seem very tall compared to most Americans. Not many 5'8 guys there. They dnt seem to believe much in marriage while they do couple up for a decade or so, somethig like 35% ever make it official.I think the cheap healthcare system is actually a disincentive to marry! as most women there don't worry about how to provide for thei kids so they seem to have less tolerance for their man's shenangian. Doctors there are pretty poor, while Geologits are pretty rich. Energy is very cheapand they are proud of usuing green electricity, yet they have zero emission standrads on cars (it was gross dude) and they shoot any polar bear that comes on the island (they have snipers who camp out in the northern part waiting every year for the errant polar bear to straggle onto icleandic soild off arttic ice floes).HAHA, the lectures they used to give me (since I was obviously an ignorant American who pollutes)were pretty funny in that context, just reminds me that no matter who you are, where you are economics/convenience seem to trump environment causes for most humans. :-(

There's basically one city (Reyajavik)on the island which has less people than basically where I work everyday. The rest of the island is isolated hamlets locatedon the southern borders near the sea.

due to the nature of the island's creation (rift zone combined with a hot spot) the interior of the is very raw. Lots of exposed basalt very little vegetation (in fact Icleand has to utilitize greenhouses to grow virtually anything as the soil is very basic in palces and was badly over grazed by sheep in the 1970's. The icleanders held a massive sheep genocide more or less to solve the problem but they ahve sill have a massive erosion problem)). So you have a weird situation where the interior is very young and infertile/inhospitable and the exterior is very green and old. Unfortunately the hotspot can only support so much weight so with each eruption more or the good parts of the island (the old fertile parts) slide into the ocean.

There's plenty of other cool stuff too, lots of interesting hot springs, an industrial waste site they've turned into a tourist trap ('The blue lagoon" haha it's really just waste water from their geothermal plants that failed to stay injected into the ground yet they tell foreigners it cures cirrhosis!) , Neat glaciers and you cna see why the apollo astronauts used the terrian to train for their moon landings.

It looks like a very cold Hawaii full of Scandavian people. Which maskes sense since both are Hotspots of basalt.

It's very fun  definitely good fun for a week or so. And now for the first time it's cheap since their currency colapsed. When i was there it was wicked expensive. Now plane tickets etc cost 1/4 of what I paid. :-( They are really cheap is time of year where it's dark 20 hours out of the day. :-)

There is a lot a ton of neat human history there. the icleanders' isolation has led them to preserve their ancient culture moreso than other western country so they have lots of weird old buildings and traditions (they have the world's oldest parliament e.g.)

So yeah it was a lot of fun, I was there for two months which might have a been a bit much . But you could easily have a blast there for two weeks or so, especially if enjoy natural beauty (man some of those glacial waterfalls were simply amazing!)

Only major downside to the trip was their food is gross. It's pretty a meat/seafood only place since vegetables are hard to come by. My veggie friends were literally starving (in fact one had to give it up she was losing so much weight) So they have some odd dishes like Puffin and dried shark...The dried shark is disgusting. Not reccommended. I couldn't bring myself to eat Puffin since I had gotten to see some in the wild (the birdlife is awesome).

They had one Mexican restaurant in the whole country when I was there and it was the worst stuff I have ever eaten in my entire life. :Unsuprisingly the fish tacos were the only thing that was edible.-)

You should have seen what they thought "USA Pizza" was like. Haha gross!

Fun times.

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#51) On January 19, 2009 at 1:53 PM, Tastylunch (29.54) wrote:

StockSpreadsheet

Don't worry man you don't have to figure out what they were talking about (it wasn't sunspots either I remember that much), it was a very long time ago and I like I said I'm not sure how sober my friends were.

unfortunately the icleanders have their geologic terminology that in many cases has become the international standard (geysir comes icleandic e.g.) so they don't like to use ours (national pride!) much which made understanding gaps quite common for me.

I doubt I'll ever know what it was, all I know was it wasn't an explanantion that I had heard before or ever commonly adapted (like sunspots is).

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#52) On January 19, 2009 at 4:58 PM, binve (< 20) wrote:

Tasty, man that must have been some experience! I would love to go there to see all the geology and formations, especially the waterfalls. That is the image that compels me when I think about Iceland. Your description as a "cold Hawaii full on Scandinavian people" is great, I would go there based on that description alone :) And wildlife watching, man that is really cool tool. There are just so many fascinating places on this planet!

"They seem to think we are hyperviolent and listen to Elvis and the Beastie Boys only." LOL !, well I do like Elvis and the Beasie Boys. Huh. Maybe I am hypeviolent too and I don't even know it :)

Yeah, your description of the zero emission control on the cars really speaks to human nature. They are worried as a culture about the environment, but as soon as you impose emissions standards (which probably ups the import price and they probably pay a hefty fee to get the cars shipped in the first place) then they back off. Ahhhhh, humans... :)

"You should have seen what they thought "USA Pizza" was like. Haha gross!" ....  I can only imagine. Dried shark and puffin on a mayo sauce perhaps? Ewwwwww ... :)

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#53) On January 19, 2009 at 5:30 PM, anchak (99.86) wrote:

Finished reading this monster - but what an enjoyable monster it was!

Binv....The analogy on the impedance ( if I remember correctly) was awesome. The Tacoma incidence was where essentially the external intervening effect wavelength matched the internal system - and just became self-reinforcing causing the collapse.

Man I love this systemic stuff!

Tasty nice to see you contribute to this one man.....I lost track of this post for a few days ...just getting caught up. You are right - if the hedgies are allowed they would take Oil down to 20/25 in a heartbeat. But I think it does wreck havoc on the long-term systemic dependencies of so many industries. But I think they hold so much sway _ I believe we will see a week with Oil between $27-$29 in 2009 

Madcow.... I understand....things aren't really calm and balm right now - so calls on time are understood/expected.

BigFatBear..... I remember adventureniel too....welcome back!I dont like Big Fat Bears - but again - that's what we have to live with for a while maybe

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#54) On January 19, 2009 at 5:59 PM, StockSpreadsheet (74.73) wrote:

I saw a "No Reservations with Anthony Bordain" show one time where he went to Iceland.  He said it was the grossest food he has ever eaten, (and considering he has been all around the world and eaten some pretty gross things, that is saying a lot).  He said one of the worst things was the rotted shark.  It seems that Icelanders like to eat this shark.  When fresh caught, it is highly poisonous, so they bury it in the snow for six months or so, (either natural snow or put it in a refridgerator), and let it rot.  As it rots, the poison gets neutralized, so after six months or so, it is edible, (from the sense that the poison won't kill you, but Bordain said that the taste might).

Evidently, the Icelanders have a festival once a year where they celebrate their heritage and make a lot of traditional dishes, (such as the rotted shark).  Bordain was there for the festival and there was a large buffet where he tried a lot of the dishes, (including the puffin).  He said it was the only time he had ever been to a buffet where he could not find a single item he could describe as edible.  He said the only thing worth consuming on the whole island was the Icelandic vodka, (which he said was pretty good).

He did say that the scenery was great.  Unfortunately for him, he was there in late winter/early spring I think, so he said the weather was very cold.  He was supposed to have some picnic out on the ice somewhere but a blizzard came up and he nearly froze to death before the people bringing the picnic basket showed up.  (There was a scene of him in an ice cave drinking vodka and saying that he might not make it out of this episode alive.)  They eventually came and got him of course.  Anyway, the show ended with him first showing an Iceland promo video, ("Come visit Iceland for the great weather and scenery", etc.), and then showed his own promo video, ("Come visit Iceland and freeze to death while trying some truely gross food", etc.).

The scenery looked great, but you might want to pack some power bars, trail mix and other items that keep well so that you have something to eat while you are there.

As for the cars being so poluting, I find that somewhat surprising.  After all, as far as I know, most of the European countries have some smog regulations.  (I hear that ours are more strict, so a car legal in Europe would not pass smog regulations here, but any Western European cars should be easily imported and not too polluting.  (The cars from the old Eastern Europe were another matter entirely, but I would assume that Iceland would import Western European cars due to the Common Market, (which I think they are part of), so don't see the Eastern European cars as being part of the problem.  I could be wrong.))

Craig 

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#55) On January 19, 2009 at 6:34 PM, Tastylunch (29.54) wrote:

StockSpreadsheet 

Oh yeah man it is way way nasty  but the Icleanders think it's hilarious. I swear they just keep the food around to play tricks on their guests.

This Icleandic guy I got to be chummy with , Yakob, took me and my teammates to a rural part of Iceland  where some of the agarian Icelanders still make that stuff fairly often I guess on holidays and whatnot.

They dug the carcass out  of the ground just the way  like I guess it happened for Bordain (ours looked like a sickly pale yellow/whitish thing) and cut us off some slices and had "sprite" prepared for us (we warned it would taste awful). It was like eating sandpaper man crossed with rotting cinnamon. You ever try to eat  cinnamon straight? what it does is it instantly dehyrdates you, so you feel like you want to dry heave compulsively. So naturally me and the rest went right for the Sprite pronto

except it wasn't Sprite but Brennevin. Brennevin is icelandic vodka and it's roughly translated as "Black Death" , it's also their word for Bubonic plague. 

OMG that Brennevin burned so bad, It's like drinking Acid.I had had some before but not ever chugged about 8 ounces at once. My esophagus and stomch burned for hours. Holy cow was that bad. Yakob and the locals thought it was the funniest thing they had ever seen :-)

yeah the pollution thing is more due to their gridlock in reyjavik than anything else. They don't like to spend money on new roads, since eruptions, glaciers, glacial floods tend to wreck them nearly yearly in palces (they have one road that is replaced every 10 months or so near the biggest glacier, can't remember the name) A the time they weren't part of the EU so they had no standards... I'm pretty sure they still had some cars that ran on leaded gasoline because so many were so old.

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#56) On January 19, 2009 at 6:36 PM, Tastylunch (29.54) wrote:

alright I've threadjacked enough. I'll shut up now. :-)

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#57) On January 19, 2009 at 8:14 PM, binve (< 20) wrote:

Tasty, No worries man! I think this a a great discussion and am very interested in your Icelandic observations. You are not threadjacking, don't think twice about it :)

Oh man, that sounds like a really bad hazing ritual. Dig the old shark carcass out of the snow and wash it down with some "sprite". Meanwhile everybody is giggling behind you. Nice :)

This reminds me of a random story. When I was in high school my friends and I used to play Axis and Allies. So we all have snacks for the game because it take hours to play. We one of my friends brought some "Romulan Ale" (from Star Trek) which in the episodes you will recall is a blue liquid. They tell me it is just Sprite with blue food coloring. So they offer and I accept. After I drink a glass they start laughing. I say "what"? No nothing. (chuckle chuckle). After a half hour I need to go to the bathroom. They start laughing again. I say "What!"? No nothing (chuckle chuckle). I go into the bathroom and they all hear a very loud "Holy S**T!". My pee is bright blue! They put a dog urinary tract medicine in the Sprite. Nice huh :)

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#58) On January 19, 2009 at 8:49 PM, binve (< 20) wrote:

anchak, Thanks man! Yeah I like trying to make analogies to physical analyzeable (is that a word?) system. Sometimes it is a bad analogy. But most times the behavior does have a corollary. Thanks :)

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#59) On January 19, 2009 at 9:01 PM, StockSpreadsheet (74.73) wrote:

binve,

Haven't seen you on the Stinky board in a while.  You still check in there now and again?

Just curious.  Would have sent email, but CAPS email is still broken.

Craig 

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#60) On January 19, 2009 at 9:15 PM, binve (< 20) wrote:

Hey Craig, only very occasionally. I was away from Caps and blogging for several months due to work. But work has calmed down enough to start blogging again. I hope it calms down some more so I can contribute to stinkyfeet again. Thanks man :)

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#61) On January 25, 2009 at 9:14 PM, madcowmonkey (< 20) wrote:

Speaking of the oceans and this climate change/warm or cold spell thing:) Has there ever been a study showing the drop in fresh water into the ocean from damming of rivers and streams? People were talking about the snow melt increasing the fresh water......what would happen if we cut the dams out of the equation or was there any effect from cutting off the fresh water getting to the oceans? 

I just remembered this idea from an earlier post about the stimulus in infrastrucure spending, so I didn't really get to think about writing it down and I am all flustered, because my wife said she had a surprise for me. I love surprises.

PS- This post is way too long, thanks for putting up a new one.  

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#62) On January 25, 2009 at 10:41 PM, StockSpreadsheet (74.73) wrote:

madcow,

I don't think that most of the dams make any great change on the amount of fresh water reaching the oceans.  After all, I think most of them are hydroelectric dams, which would just mean that they change the rate over time and even it out somewhat over the calendar year, instead of all the fresh water running into the ocean at springtime and almost none flowing in during fall/winter.

For those dams that aren't hydroelectric and are instead irrigation dams, then after the water spreads out on the land through irrigation, it will either flow into the streams downstream from the dam or evaporate into the air and rain down on another place.  (Some will soak into the ground and be sequestered into aquifers, but I would bet that that would constitute a very small percentage of the water.  Most areas with decent aquifers don't set up too many irrigation dams.)

Therefore, I don't think the dams make any difference, (unless of course a lot of them failed all at once, (which could happen with a major meteor strike, but then we would probably have more serious problems than the dams failing)).

Just my thoughts.

Craig 

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#63) On January 26, 2009 at 9:58 AM, binve (< 20) wrote:

madcow, no problem :) The post is long, but man these discussions are phenomenal. I really glad this post evolved into what it did. Thanks man.

Craig,  "...which could happen with a major meteor strike, but then we would probably have more serious problems than the dams failing...". Indeed, I think I will concur with that statment :)

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#64) On January 26, 2009 at 2:18 PM, madcowmonkey (< 20) wrote:

Environmental impacts of dams - Wikipedia, the free encyclopedia

 I understand what you are saying Craig, but I think there is more to it. Small list:

Sediment, Erosion, Salt, and Temperature all come to mind.

The water that we release comes from either the bottom where it hasn't seen sunlight for 8 months or it comes from the top where it is just a bit warmer than the balmy 40 degrees at the bottom of the lake.
Sediment, erosion, and salt all kind of go hand in hand....so I guess the salt would be a questionable, since I believe that is why the ocean is salty......rivers.

I didn't really think of the evaporation, but I agree with you.

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