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ARCHIVED DISCUSSION FROM 12/15/1999
All times are U.S. Mountain Time
View Yesterday's Discussion.
elevator guy
(12/15/99; 23:56:02MDT - Msg ID:21126)
@nickel62
Thanks for your kind comment! I think everyone knows these things anyway, in their heart of hearts. Unless the administration has them in a mental choke hold.
Tanglewild
(12/15/99; 23:28:38MDT - Msg ID:21125)
U.S World Gold Fund:Hedging against correction
http://www.tfc.com/syndication/tulipsandbears/Mavens-MFGuest.html?G=MarketMavensReport&T=Mutual%20Funds&A=Mavens-MFGuest
http://www.tfc.com/syndication/tulipsandbears/Mavens-MFGuest.html?G=MarketMavensReport&T=Mutual%20Funds&A=Mavens-MFGuest
It seems to me they have the right call on a bullish gold market with what might be considered some wrong stock picks. Thanks, think I'll pass.
tw
Chris Powell
(12/15/99; 23:28:04MDT - Msg ID:21124)
Financial Times sees end to gold hedging
http://www.egroups.com/group/gata/313.html?
FT calls GATA a "fringe" group but
then validates everything GATA has
been saying.
Marius
(12/15/99; 22:24:22MDT - Msg ID:21123)
Some comments re: oil options
Canuck,
Almost every horror story I've heard about trading began with: "but my broker said..." I've learned that in futures trading you should tell your broker what you're going to do, after researching the question yourself and examining you own gut. Don't solicit his opinion, he will likely have some agenda you are unaware of. This isn't paranoia, it's the nature of their business.
That said, I still think there are a lot of reasons to expect that oil prices will continue to rise in the short term. I don't dispute that we may weather the increases with greater ease, but it doesn't take away from a set of circumstances which seem to assure some higher level of prices:
OPEC production cuts were extended 3 months.
Situation re: Iraqi oil is still not completely resolved
Demand continues to exceed supply in the near term
No one can accuately predict Y2K's effects, if any.
Are options risky? Depends on your perspective. I prefer to think of it in terms of risk to reward. An example from earlier in the year, when I "paper traded"** oil options. (**Trading "on paper" or hypothetically. Virtually every trading method taught recommends it, and I do it even while actively trading real money.) Back in February, a Dec 99 call with an $18/bbl. strike price cost about $800. By August that option was worth over $4,000. The only risk was the premium paid initially for the option. Can't afford to lose the $800? Don't trade! I recently bought Mar 00 calls at a strike of $27 (each option cost $1,240) March crude was at $25.15. It declined steadily for a couple of weeks, and is now nearly what it was when I bought. I plan to hold it until at least Jan., and then make a decision about liquidating. It wasn't my most timely or sophisticated trade, but it just felt right!
beesting
(12/15/99; 22:18:51MDT - Msg ID:21122)
Using water as fuel--When oil gets too expensive.
http://www.globalideasbank.org/BOV/BV-396.HTML
Hydrogen is an excellent fuel with an energy content 3 to 4 times higher than oil.
Using water as fuel a hydrogen car cost less than 1 pence a mile to run.The only exhaust is water vapor.
Olaf Tegstrom designed and lived in a house where the electricity came from a small computer-controlled Danish windmill in the garden.
The electricity was used to electrolyse filtered water into its constituents, hydrogen and oxygen, with the hydrogen gas used for cooking and heating the house and as fuel for a Saab car.
For complete article click above link.
Those in the know.....buy Gold.....beesting.
TownCrier
(12/15/99; 21:57:01MDT - Msg ID:21121)
The GOLDEN VIEW from The Tower
German Finance Minister Hans Eichel will be playing host to a meeting in Berlin Thursday to examine ways of involving emerging countries more closely to prevent financial collapse (to effectively avoid a repeat of the 1997 Asian crisis), but it will likely be dominated by discussion on International Monetary Fund reform...a recent initiative to redefine the mission of the IMF. This week Treasury Secretary Lawrence Summers has aggressively lobbied in what has been seen as an attempt to prevent further mission evolution of the IMF...returning them to a role of short-term financing, more in line with the original mission when the IMF was born after World War Two as a product of the Bretton Woods Agreement.
+
The Thursday meeting in Berlin will be the inaugural meeting of the G20, a combination of rich industrialized nations and key developing countries. This new Group is comprised of the G7 (Britain, Canada, France, Germany, Italy, Japan and the United States) and 11 other important and emerging national economies (Argentina, Australia, Brazil, China, India, Mexico, Russia, Saudi Arabia, South Africa and Turkey,) with the president of the ECB and the managing director of the IMF rounding out the 20.
+
Hans Eichel welcomed the initiative proposed this week by SecTreas Summers for the trimming of the IMF, but with a nod toward the 1997 Asian contagion, Eichel said, "We all know we want to solve these problems, but the approaches vary." This may strike many as a surprise...in citing an example of the U.S. and Europe not seeing eye to eye on all issues, Eichel said for instance, that European countries had an inclination to put more emphasis than the United States on getting the private sector to play a greater role in ensuring the economic stability of borrower countries. He also said Europe put a greater premium than the United States on transparency through publication of data to better reveal the picture of a country's economic health. Looks like the U.S. needs to relearn some of the market principles with which it was founded long ago. Your recognition of the IMF as one of the dollar's principle pillars should lead you to the proper interpretation of the writing on the wall as the world gathers to rein-in the IMF. Politically, what option does the U.S. have but to attend poised as a proponent of the changes at hand? Sorta like when Pee-Wee Herman trips and tumbles head-over-heels, and then picking himself up in an attempt to mitigate the humiliation by saying, "I meant to do that." Gold will stand sure-footed even as the dollar tumbles.
GOLD
Spot gold and Fubruary gold futures both gained $2.60 today, spot closing at $282.40 in NY and COMEX Feb contracts closing at $284.60. David Meger, senior metals analyst at Alaron Trading was reported by FWN as saying "We're seeing some decent physical support in the cash market almost every night and it's void of selling, which is keeping the market supported and causing the rally. Bridge News reported that Russian Central Bank Governor Viktor Gerashchenko indicated that as a gold producing nation, Russia would continue to be active in the market, though he refused to give details of Russia's plans for next year.
In COMEX dealings, delivery intentions were announced on 18 of the remaining handful of December contracts today, bringing the December delivery total to 8,140 contracts (814,000 ounces). One contract-worth of Eligible gold inventory was removed from the vaults, leaving only 62,219 Eligible ounces and 1,231,881 ounces in Registered inventory. Those of you who opt for the odd means of physical acquisition via the futures market rather than thru more common and direct spot purchases will want to take note of this rule change as provided by Bridge News:
New York--Dec 15--The New York Mercantile Exchange said it will, starting
Dec 20, establish a posting deadline of 1000 ET the next business day for
exchange of futures for physicals (EFPs) transacted on the COMEX division while
the open outcry market is closed.
When The Tower wants to engage in its own exchange of currency for physical (CFPs), we just give Centennial a call any time during Rocky Mountain business hours. MK is always a good one to talk to, and "Oh, the choices!" ...K-rands, Eagles, Philharmonics, Maple Leafs, etc, and a wide selection of pre-33's looking for a warm home for the winter.
PAPER
This was interesting an interesting comment by a bond trader today on the losses suffered by US Treasuries once again..."There just doesn't seem to be volume in the afternoon. So if you get any sellers, for any reason, you get these kinds of downdraft." He also said that the widespread market speculation a few months ago that Treasuries would gain from Y2K flight-to-quality purchases has so far failed to materialize...in fact, prices are heading lower. The Fed's purchase of $882 million of coupons was said to have had no effect on prices.
OIL
January crude settled up 63˘ at $26.36, the strong gains coming on the release of American Petroleum Institute data showing US crude stockpiles drop by 7.162 million barrels last week, well beyond analyst expectations of a 2-3 million barrel decline. US Department of Energy data was supportive, indicating a 5.6 million barrel drawdown.
After a three-week hiatus, Iraq will be resuming oil exports under the newest 6-month phase of the food-for-oil program as soon as the empty tankers arrive at the Gulf terminal of Mina al-Bakr and at
Turkey's Mediterranean terminal of Ceyhan.
Venezuela's Energy and Mines Minister Ali Rodriguez has sure been an active source of info for reporters lately. After earlier in the week indicating that production cuts may be eased and that prices may hold, he's now suggesting that OPEC would extend its 5-million-bpd cuts in oil output past their March 31st deadline "if necessary," and that the average price for Venezuela's basket of crude and refined products in 2000 could be higher than 1999's average. While admitting that it is impossible to predict oil price levels, he said "without a doubt taking into account the oil demand situation, oil cut compliance, the declarations that countries have made, inventory levels, we can expect a process of stabilization of oil (prices) for next year."
Now if we could only ensure a similar "process of stabilization" of the dollar for next year. We all know what's in a barrel of oil, but we don't all know what's in a dollar. Think about it...
And that's the view from here...after the close.
Number Six
(12/15/99; 21:55:49MDT - Msg ID:21120)
@Netking
Thanks for the advice and I bow to you knowledge in these matters.
I must emphasise however that this is a PURE y2k play, that's all, totally y2k-related... it's also Harry Schultz's number one pick, has been for a while. I know a lot of people slag the guy but he gets it right more often than not, and is well respected for his thorough research.
One more thing - having been taken to the cleaners with my gold (shares, physical) and silver (physical - I realise with both the game isn't over yet :o) ) investments recently, I would be kicking myself if i ***didn't*** make this trade, knowing what I know and having studied y2k for the last couple of years...
Thanks Netking, Ciao.
Number Six
(12/15/99; 21:47:22MDT - Msg ID:21119)
Reply to Canuck
Hi Canuck,
As an example - I have a bunch of crude call options, Feb 2000 which expire on Jan 17th 2000, at a stroke price of $35 each - I think I paid $50 each + commission - should oil go to $50 per barrel, each contract could be liquidated for $15,000, each contract being for 1,000 barrels. It sounds like easy money yes... I keep asking myself what the catch is... of course timing is everything here - my theory is that if there are disruptions worldwide these will be priced in VERY quickly by the market... but hey, I'm totally new at this so I may be completely wrong here. I was told of a story about oil just prior to Operation Desert Storm - everyone and his dog had calls expecting a skyrocketing price - in actuality crude *dropped* $12 a barrel...Gold call options work similarly with contracts for $100oz, Silver ditto at $5,000 contracts...
Good luck, you can email me privately at 2000EOD@prodigy.net if you like.
Netking
(12/15/99; 21:36:51MDT - Msg ID:21118)
Number Six - Crude
Number Six 21087;
I've been around too long & seen too much media manipulation in the markets.
My best pick is take the puts on crude & you'll soon see those commercial net shorts start to kick in for direction as you will also start to see a sharp decline in over bullish sentiment. Look for mid January to be significant for black gold. All the best in the markets.
Peter Asher
(12/15/99; 20:53:27MDT - Msg ID:21117)
FOA #21108
I am honored Sir, Thank you
ORO
(12/15/99; 20:51:29MDT - Msg ID:21116)
Oil price chart no work
http://sub0.economagic.com/em-cgi/data.exe/fedstl/oilprice:dpan12
Here are the data for WTI
Click the "GIF Chart" link on the second black bar to make a chart.
Farfel
(12/15/99; 20:42:49MDT - Msg ID:21115)
You Say You are Over 40...Well Kill Yourself Now!
Some time ago, I posted over at the other gold forum a notable observation concerning the ever popular ad on CNBC in which a young Gen Y kid (Stuart) struggles to teach an old fossil how to day trade. The network runs the ad about 20 times an hour and it serves as a subtle form of brainwashing.
The central concept behind the ad is this: the young kids are the true geniuses today while anybody over 40 is a retarded fossil with outdated views on everything from stock markets to good morals...and they positively have no idea of where the future is headed. The Over 40 crowd believes in the value of old fashioned nonsense such as low P/E's and real earnings and all kinds of stuff that do not matter in this brave New Era.
As I stated previously, if I had devised the ad, I would have taken it to its logical extreme. Instead of a young Gen Y kid named Stuart, I would have hired a gorilla to play the teacher role. I would have trained the gorilla to attempt to teach the old fossil how to day trade. Through loud grunts and fierce cries, the gorilla would struggle in vain to teach the stupid old fossil how to execute his online day trades. The central message: even a grunting Gorilla just off the boat from Africa is smarter than the average Over 40 fossil!
If you are going to portray the Over 40 crowd as a collection of morons, hell, you might as well go all the way!
In any case, given the negative portrayal of the Over 40 Crowd in America today, then every sane Over 40 member should be PRAYING for this current techno-youth worship to crumble. Otherwise, soon we will be left with a world run by young, smug, arrogant, rich kids who have never experienced any notable adversity and who hold little to no knowledge or respect for history...who reject the wisdom of the ages as being no more than "bad, false conditioning" and a thing irrelevant to the New Paradigm of Truth.
So for those members of the older generations who say they fear a mass societal disruption on account of y2k...I say, hell, they should welcome it as it will likely undermine the current pathological status quo, one which daily and subliminally urges every Over 40 member to "Kill Yourself Now! You are No Longer Necessary in this Brave New World (other than to greet shoppers at Wal Mart or hold STOP signs at crosswalks for schoolkids!"
Thanks
F*
Peter Asher
(12/15/99; 20:36:48MDT - Msg ID:21114)
#21080 -- Wall Street Journal Article Re Oil
Cannanami, Dragonfly
"The whole is equal to the sum of the parts"
Dragonfly's quote, posted the other night, is apropos not only now, but throughout our postings. In fact, it would actually make a perfect sub-title to the Forum heading
>>> John Donne (or Dunne?) said "Some truth there was, but dashed and brewed with lies, to please the fools and puzzle all the wise." <<<
Well in this case we might just say "SOME truth there was."
As cannanami say's "this looked like a serious piece of work, well-researched, concerning a hot topic on the Forum.
This a common vehicle of "Spin-doctor" journalism, telling the true parts of things while leading the readers attention away from noticing it is only a piece of the situation being described. Reductions in oil consumption have been achieved as described; Fine! How about the rest of the story. Was that an article about the total energy consumption activities on Planet Earth? Hardly. Then of course there are also all the myriad uses of oil as a chemical that is converted to plastics and vast other non combustive product uses.
Only a treatise that Quantitatively addressed ALL the uses of petroleum, with ALL the plus and minus consumption factors, would be relevant to oil prices.
It's a good article as far as informing on Man's improvements in utilizations of Earth's resources, and also it has some fine examples of the benefits of this Internet "Second Technological Revolution." However, as case for petroleum being plentiful in our economic future it is merely a distraction that fools only the ignorant..
ORO
(12/15/99; 20:27:29MDT - Msg ID:21113)
Oil - it is an issue of price
http://www.economagic.com/gif/g3802701910872030241709405779.gif
The point of the oil story in the 70s is that through the 60s the domestic oil industry did not reveal to the public that domestic oil would run out in 1970. The move from dirty coal to cleaner oil caught the US flat footed when the domestic reserves did not provide the requisite production.
When the abrupt fall off in domestic oil production began, there was a rapid escalation in prices, well before the Arabs put on the embargo.
Prices were just over $3 in the US, 1969 and Arab oil could be had under $2. Oil was not being imported in large quantities in 1969. By 1973, the oil supply was being significantly ammended by OPEC production. The US rapidly moved to resume the use of coal and to move towards fuel efficiency. Oil consumption was steady. In 1973 oil popped from $3.56 to $4.31, in 1974 the embargo brought oil to $10.11. That is over 3 times the 1969 price. Oil continued moving up at $1 per year into 1979. And was over $15, 5 times the level just 10 years prior to that.
The Iranian oil shock took prices to $40 and they stayed above $30 for 3 years, till Mexican gulf production, Alaskan oil and North Sea Oil were relieving some pressure. The rise was 10 fold. From 1% of the economy, oil expenditure by refineries became over 8% of the economy. Today it is back at under 1%. At the March bottom, it was all of 0.42%, It is back now at just under 1%. It has gone from insignificant to noticeable. Further rises in price would bring back its significance to the economy as in late 1970s.
This time, however, there is no need for Europe to support the US oil habit, and no more gold will be guaranteed by Europe to make the trade for oil.
Cavan Man
(12/15/99; 20:25:11MDT - Msg ID:21112)
Sir FOA
"...until politics makes a grand stand....for all to see"
Cavan Man comment:
We'll not witness any grandstanding until we're out of the woods with Y2K. Why waste precious eggs in a scramble when a nice quiche is much more satisfying?
I'm back to Malone's Jefferson bio for IMMEDIATE gratification. I am after all, a creature of Western habit.
Good night....CM
Cavan Man
(12/15/99; 20:03:55MDT - Msg ID:21111)
FOA
"The whole reason behind this effort........". But, why? What is your motivation? There is no free lunch. BTW, thanks. CM
Cavan Man
(12/15/99; 20:01:23MDT - Msg ID:21110)
CM 21105 For FOA
What do you think?
Number Six
(12/15/99; 19:56:51MDT - Msg ID:21109)
Japan - oil
Japan is one of our strongest trading partners and a net importer of oil...
This story goes back to March - what I am hearing on the y2k front is most oil exporting countries still expect disruptions as a possibility (inevitable IMHO reading between the lines)...
This is a Reuters story on YAHOO! (March 25).
* * * * * * * * * * * * *
Saudi Arabia is best prepared of all Middle East oil exporters to cope with
the Year 2000 computer bug problem but the whole region could do more to cope
with potential supply disruptions, a U.N. official said Thursday.
``Most Middle East producers have implemented programs to try and solve the
problem, and Saudi Arabia is at the head of them,'' said Mohammed Mrayati,
science and technology adviser for the Economic and Social Commission for
Western Asia (ESCWA).
``But in many of them no contingency plans exist in case things do go wrong
so we have advised them to develop measures.'' . . . .
``Nearly 50 percent of the oil used in the U.S. comes from foreign sources,
yet many of the countries have a high risk of failure,'' a Senate special
committee report said this month. . . .
``It wouldn't take more than a two percent cut in output -- 1.5 million bpd
-- to dramatically alter oil market fundamentals and lead to a significant
price increase,'' said Peter Bogin of Cambridge Energy Research Associates
(CERA) in Paris.
The biggest question mark will remain against how the big oil exporters of
the Middle East, Latin America and Africa will cope.
A senior Libyan technology official said that its state oil company was
working hard to minimize the threat of any problems, but admitted that time
was running short.
``We are taking the matter very seriously,'' he said ``But it will be another
six months before we know the full situation, and even then unforeseen
problems can never be ruled out.''
FOA
(12/15/99; 19:54:05MDT - Msg ID:21108)
Reply
A large thank you to everyone that enjoyed my #20954. Fortunately for us, it is but one in a very large selection of good thoughts presented by all the writers on this forum. Later I will pick up where we left off "on the road", as we consider "what to look for in this political game" and "what
to do as events progress".
----------------------------------
Strad Master (12/13/99; 23:12:31MDT - Msg ID:20985)
My friend, you are no doubt very "Strad Rich" in your ability to play. And yes, I did think of you when writing that piece (smile).
------------------------------
PH in LA (12/13/99; 22:58:37MDT - Msg ID:20984)
PH, your statement that --------" money invested in rare works of art has no need to be invested in stock markets or anywhere else"------- carries your years of wisdom. During all the great wars, invading armies carried off little currency, bonds or stocks but fought with themselves over the paintings, jewels, rare antiquities and certainly old gold coins! Our friend "The Master" can thank the stars they, at least cannot take his "talent".
------------------------
Peter Asher (12/13/99; 21:11:36MDT - Msg ID:20972)
Mr. Aster, Sir,,,,With this one statement you have said what it took me pages to describe!!
----- "Put their money to work?" But, money doesn't 'work', people use money to buy thing to work with. The passive investor abrogates his responsibility as a capitalist, and he does so at his peril!"---------
Excellent!
-------------------
Crossroads (12/14/99; 11:18:44MDT - Msg ID:21003)
Thanks for your comments!
------------------------
GFD (12/13/99; 20:58:41MDT - Msg ID:20968)
Hello GFD, you write: ---------- The irony here is that most would not even consider going to the strad auction - they feel that they have to keep their money working so that it will be there for them in their 90's. --------------
Yes, I know. But the whole world of money is not wrapped up in Western Thought as is evidenced by asking the question; "who has been buying all the gold?" Out there, somewhere, people are buying a value that is not expressed today but will be spent tomorrow. Indeed, buying one ounce of physical gold today is like buying a highly leveraged investment for retirement. That is, leveraged to the extent that the dollar has been printed.
We can do nothing to change the mindset of everyone, yet a few will understand now. Later, if a person has even "one good eye" and is shown where to look, the progression of events will mark the trail. Of course, the price and availability of bullion will be much higher them. This is why I fill in for Another until "politics makes a grand stand" "for all to see". After that will begin the "real" bull market in "physical gold" that I believe will bring more Posts from him.
The whole reason behind this effort, is to implant what is evolving in our gold markets in peoples minds, before the fact. This market is "not as before" and has evolved several times during the past few years as the chess players are moved on the board. Truly, an international power and money
game that gold is but one aspect of. It may very well be the most profitable investment for our time, but it still remains only one act of a large play. For this segment, the eventual outcome will remain the same, the rejection of the modern dollar based gold marketplace and it's effects on all the industry that uses it.
If one knows where the fire exits are ahead of time, some will get out without getting burned. But, some still think gold derivatives (gold stocks included) amount to the same exits. When this market matures, they will find those doors locked. Even more so today than in years past, investors are finding this to be true. And the real fire hasn't even started yet!
So, don't worry about the ones that are well fixed in their overall investment mindset. They may not make a good exit, but exit they will. This world has a way of teaching old dogs new tricks.
Thanks,,,,,,,,,,,,,,,,,,FOA
Cavan Man
(12/15/99; 19:33:35MDT - Msg ID:21107)
canamami
I agree with you. Euro has a tough road ahead. The reality is Europe is a collection of quasi-socialist states. What might enable their success (expeditiously)? Also, what have we here in the US ( well along the Road To Serfdom)but a collection of increasingly quasi-socialist states.
If you belive FOA is behind the stage curtain, then at least you can understand what the strategy is and should be. Your point is well taken. Euro/oil may not be successful. How would those entities define success though? Perhaps success for them is simply self-preservation.
YGM
(12/15/99; 19:21:32MDT - Msg ID:21106)
Also from IEA Site
Last Paragraph Noteworthy.........
INTERNATIONAL ENERGY AGENCY - MONTHLY OIL MARKET REPORT MARKET OVERVIEW
8 DECEMBER 1999 3 A THIRSTY MARKET
Oil demand exceeds oil supply. Inventories are being drawn down rapidly to meet the unsatisfied demand. And prices are rising. This is a thirsty oil market, waiting for more oil, which will have to come principally from OPEC countries.
Global demand is rising not only to meet seasonal heating requirements in the northern hemisphere but also to fuel the very strong economic growth in North America and the recovering economies of Asia. There are pockets of economic strength in the recently-sluggish European economies, especially in France. Oil supply from outside OPEC is increasing much less rapidly than demand. Maintenance at North Sea fields is over, and operating conditions in Alaska normally improve with the onset of colder weather. New fields in the North Sea, Australia and the Gulf of Mexico are offsetting declines in mature producing areas. But there has not yet been a major turnaround in upstream oil activity. Little of the production that was shut in or lost due to lack of workovers and other upstream investment during last year's price collapse has reappeared.
As a result, OPEC production and oil from inventory are the only sources available to satisfy the growing demand. But OECD inventories have already dropped, almost to the low levels of 1996 and there will be less and less inventory to draw down. Compliance with OPEC production targets has moved back to 89%, toward the upper end of the 83-93% range of the last seven months, and Iraq shut down exports in the last week of November both of which exacerbate the market tightness.
The consensus view is that the Iraq outage may be relatively brief (see Supply section page 19), because Iraq needs the money. But there are reasons why Iraq might choose to stay out of the market for a while longer. First, Iraq's fields may need a rest from the aggressive production of this year. Second, there is over $2 billion worth of approved humanitarian aid and oilfield equipment currently in the pipeline and another $2 billion in escrow awaiting United Nations approval. The windfall revenues of Phase VI's higher prices and higher export levels may take some time to digest. Last and possibly most important, Saddam Hussein has a rapt audience in the oil market and in political circles.
When will OPEC move to raise production? In other words, are inventories now low enough and prices high enough to motivate such a move? Any possible consumer buying to protect against Y2K risks would take place over the next three weeks, draining even more oil from already depleted primary stocks. Futures markets seem to think there will be more oil soon. The words from key producers about standing ready to help with any major Y2K problems are comforting, but their silence on the evident stresses building in the oil market is not.
Cavan Man
(12/15/99; 19:20:25MDT - Msg ID:21105)
canamami
Well, if it is intellectual combat I am engaged in then, I am woefully unarmed. Here's a thought on FOA/Another and OIL/GOLD:
Probably not in my lifetime (I'm 41) but oil will eventually be displaced as the #1 "resource" in the world by something else. What? You decide. Without even reading the article, I will agreee that the role of oil in the world economy has been marginalized and diminished by the author's suppositions simply for our conversation's sake. The Arabs know this. So, not only is it important for them to obtain REAL VALUE instead of FIAT for their oil product while the world turns, they have a strategy to utilize the REAL VALUE they've accumulated when the world's monetary reality goes into paradign shift overdrive. I believe the ultimate end game is not for the ME to sit on their chips and continue to supply oil but rather, to become a dominant entity in world finance. Well, they have been for years if you read Aristotle in the HOF (petrodollars). They've simply traded one valuable resource in this lifetime for another to be deployed in ANOTHER lifetime. We're dealing with a lot of wisdom here. Their genes go back over 5K years. What do you think? You have a better mind than me (in all honesty). Tell you what though; I strongly believe I'm right.
Sorry for the shabby thought processing. Perhaps the forum can help me out.
FOA: Do you agree?
YGM
(12/15/99; 19:14:38MDT - Msg ID:21104)
OIL.......International Energy Agency...(IEA)
http://www.iea.org/sitemap.htm
Next Issue: 20 January 2000 8 December 1999
HIGHLIGHTS
C
Oil markets are rapidly tightening, causing prices to increase. Seasonal demand growth exceeds the gains in non-OPEC supply, while OPEC supply, which had been held flat until the second half of November, is now lower. Inventories are moving sharply downwards.
C
World oil production averaged 73.9 mb/d in November, a decrease of 250 kb/d. Although non-OPEC output rose by 450 kb/d, mainly due to the North Sea and North America, crude supply from OPEC fell by 700 kb/d, because of reductions by Iraq and Iran.
C
Iraq rejected two short extensions of Phase VI of the oil-for-food programme; exports ended on 24 November. Iran reduced its exports to comply more closely with its production target. Preliminary estimates show that November compliance with OPEC's cutback agreements rose to 89% from a downwardly-revised 83% in October.
C
Global oil demand in the third quarter averaged 74.7 mb/d, 1.3% higher than a year earlier. Preliminary statistics for inland deliveries to OECD markets in October, totalling 36 mb/d, show an average 2.3% demand growth. Weekly statistics suggest that US demand in November grew by a robust 6% versus a year earlier. Fourth quarter global demand is estimated at 76.9 mb/d (+2.1%).
C
A moderate decline of 440 kb/d in OECD industry stocks in October is expected to intensify through the remainder of the quarter. Non-OECD stocks are believed to be quite low, so the burden of meeting demand growth lies with OECD stocks.
C
Refinery margins got caught in a squeeze in November, as product price increases lagged behind those of crude oil. At current margins, refiners are expected to cut runs, further increasing tightness in the product markets.
canamami
(12/15/99; 19:04:46MDT - Msg ID:21103)
Further reply to Cavan Man ($US as reserve currency)
Cavan Man,
Thx for your kind comments.
The paragraph below sets out a reply I made at Gold Eagle to a similar question:
The effect on the US dollar, I don't know. It ties into the notion that the US dollar is the reserve currency, what benefits flow from that status, what losses will develop from the loss of that status (if it exists), and the role of the UK in maintaining the $US' role in that connection. That's all beyond me. I'm sorry.
Hence, my answer is: "I don't know".
One guru I follow is Don Coxe. In terms of the conflict between the Euro and $US, he has become more bearish vis-a-vis the Euro because of the more doctinaire socialist governments in Germany and France - i.e., Shroeder cannot shake his own party's left-wing and the Greens, whle Jospin is proving to be more of an old-line leftist. Against that, one must weigh that Euroland has a trade surplus, while the US runs a $1.1 billion per day deficit. Coxe suggests we may see a 1.12 Euro next year. From my perspective, it boils down to this: does the US' resilience and ability to adapt outweigh the trade deficit. I suspect the $US is in for a tumble once it loses the current short-term benefit of being the Y2K safe haven, but not to the degree FOA suggests.
Re reserve currency, I don't know if such a status even exists. The $US has not been an "alter ego" of gold since 1971, and currencies have not been pegged to it since 1973. It's just the most accepted of the "hard currencies", arguably. When it is less accepted, its relative value will fall until some eqilibrium is achieved. It will become less accepted because of the trade deficit and Euro competition, among other factors. I do not believe it will become as valueless as FOA hypothesizes; the $US will continue to be a hard, albeit weaker than present, currency.
I again suggest reading the Introduction to Raymond Aron's The Imperial Republic, as well as the chapter entitled "The Round Trips of the Dollars....".(1974 translation).
canamami
(12/15/99; 18:40:10MDT - Msg ID:21102)
Reply to Cavan Man, All
No, it's me who must apologize, for perhaps not reading posters' replies clearly enough, and perhaps incorrectly reading "over-reactions" into the replies.
I'm just used to the adversarial method of truth-finding, and I sometimes like to throw in contradictory articles to provoke some "intellectual combat" as part of the process of ascertaining truth.
Cavan Man
(12/15/99; 18:34:35MDT - Msg ID:21101)
canamami
I believe the headline referenced the US economy and the fundamental shift from oil dependent to non-oil dependent. Right? It's a big world out there! Too often many including myself are guilty of forgetting about everybody outside of N. America.
Oil aside, do you agree with the precarious position of the US$ as world reserve currency?
Cavan Man
(12/15/99; 18:24:47MDT - Msg ID:21100)
canamami
My apologies........I should have read the article. However right it may be I mean really, oil is the lifeblood of civilization as we know it today. The substance and its' corresponding price enable all that we do. I am on my way out to the store, I will look for a copy. Thanks.
BTW, over many months I have greatly enjoyed your contributions here. Thanks again!
Canuck
(12/15/99; 18:23:13MDT - Msg ID:21099)
megatron
Thanks for the advice. I am aware of Ashanti's demise; and don't worry, I won't write any call options.
YGM
(12/15/99; 18:19:26MDT - Msg ID:21098)
Gata......
http://www.lemetropolecafe.com
Le Metropole members,
The following article says it all in my
book. I will have more on this soon, but
GATA's efforts to focus attention on the big
hedgers like Barrick Gold is WORKING.
Not only has GATA influenced private investors
to sell Barrick (see below), but it had some
influence on one of its former 15 biggest
institutional shareholders that is no more.
Ms. O'Conner's article is right on the money.
With more press and shareholder awareness on
this issue, the Barricks of the world will
eventually have to cover and that will drive
up the gold price.
It makes no sense to own their stock anymore
unless they do cover.
Second thoughts over derivatives
Gillian O'Conner
Financial Times
December 15, 1999
Hedging has become controversial once more.
For the past few years an increasing number
of gold miners have relied on their portfolios
of derivatives not only to protect them against
the falling metal price but also to provide
supplemental profits.
The hedging frenzy peaked in the first half
of this year, when the bullion price sank to
just above $250 an ounce and raised the
spectre of profitless production or mass
redundancies.
But this left many companies vulnerable to
the price's sudden about turn in late
September. Ashanti, Ghana's pride,
notoriously racked up enormous paper losses
on its portfolio, and teetered on the brink
of default, because its banking counterparties
has the right to call for substantial cash
deposits which the company could not afford.
International investors were understandably
flabbergasted at the seeming paradox. When
gold goes down, miner's suffering are
understandable. When the price goes up, it
must surely be good news.
But the public anguish of Ashanti and the
Canadian Cambior showed that this is not
necessarily so.
And worries that hedge problems might be
lurking elsewhere mean that the FT Gold Mines
index has risen only slightly more than the
gold price since midsummer. This is highly
unusual.
Traditionally gold shares are bought as a
geared play on gold itself, and exaggerate
its movements in both directions.
Jo Foster, of US investment managers Van Eck
Associates, speaks for many when he says: "I
cannot overstate my disappointment. We get
a rally in the gold price and the result is
two nearly bankrupt companies."
In the UK, Mercury, a long-term opponent of
hedging, headed a recent letter to unitholders
in its Gold and General Fund "Alongside every
hedge there runs a ditch." Graham Birch,
manager, said that in recent weeks he had
been "astonished to hear gold company
executives declare that hedging 30-40 per
cent of reserves and production is a low
level of revenue protection. They also
cling to the idea that derivative contracts
with 10-15 year lives are attractive."
At Mercury, he added, "we are not prepared
to mandate companies to pre-sell vast
proportions of the ore reserve at low prices."
As a consequence Mr. Birch expects to have
"near permanent big holdings in stocks such
as Harmony and Gold Fields." Harmony has
never hedged. Gold Fields has publicly
recanted and closed out virtually the whole
of its hedge book.
Fringe US pro-gold action group GATA
(The Gold Anti-Trust Action Committee) has
been encouraging private investors to sell
companies which hedge, such as Barrick,
and buy those which do not, such as Gold Fields.
If such an attitude spreads and deepens,
companies may find themselves forced to
abandon hedging in defense of their share prices.
At the acceptable end of the spectrum come
the ordinary forward sales required by bankers
before they put up money for a new mine
development. Even Gold Fields still has some
forwards in place in relation to its
Tarkwa project in Ghana.
At the unacceptable end come some of the
exotics which exploded in their buyers'
faces in October: "escalating ounce" calls,
where the number of ounces the miner could
be asked to deliver rose with the gold price;
Parisians, where the price at which it could
be asked to sell fell as the market rose.
Exotics were always a minor part of the market.
What about the large area in between the two
extremes? This is where the argument will
be focused next year.
But it is not just about miners who are having
second thoughts about hedging. Bankers are
having second thoughts, too.
Most bullion banks are said to be reviewing
their credit and margin requirements, and some
banks for which bullion trading is a minor
activity could even discreetly leave the
field to their rivals. For both reasons
hedging habits are set to change.
<A HREF="http://www.LeMetropoleCafe.com/scripts/products.cfm">Le Metropole Cafe</A>
All the best,
Bill Murphy
Le Patron
www.LeMetropoleCafe.com
canamami
(12/15/99; 18:11:23MDT - Msg ID:21097)
Reply to Megatron, All
I wasn't trying to provoke a to-do about this WSJ article, nor do I even agree with much of what I repost. It's just I believe I'm a pretty good judge of what sounds credible and serious, and what isn't, and this looked like a serious piece of work, well-researched, concerning a hot topic on the Forum. That's all. I just felt it was perhaps being unfairly dismissed out of hand. The article may be inaccurate, particularly re the future - as Toe Blake used to say, "Predictions are for gypsies". (Is that an ethno-cultural slur?). Even serious and intelligent articles are as often wrong as right - the Economist had an article predicting $5.00 oil, just before the recent rally. Further, some commentators like Don Coxe speculate that this oil agreement may have staying power precisely because it includes the non-OPEC members, which is what gives it effectiveness. So oil may indeed drive inflation, usher in the Euro era and be the catalyst for a gold bull. Though seriously: If posters here find themselves reacting in an agitated manner to something that simply disagrees with the predominant position, perhaps it's time to start examining the reasons for such an agitated response.
Canuck
(12/15/99; 18:10:54MDT - Msg ID:21096)
Number Six
And if the price is 95 cents on Jan 26, you are 'in the money' by a dime times 42,000 = $4,200??
Canuck
(12/15/99; 18:07:51MDT - Msg ID:21095)
Number Six
To give you an example - today I bought some unleaded petrol calls, Feb (expiring Jan 26th 2000) at a strike price of 85c for .50, i.e. .50 of $420 which is what contracts are quoted in... the contract is for 42,000 galls.******
--------
So is the premium $210/contract?
JCS
(12/15/99; 17:40:12MDT - Msg ID:21094)
Cavan Man (12/15/99; 17:34:12MDT - Msg ID:21092)
Hey, Cavan Man. Did you get that article together that you mentioned a couple days ago? send to jclaude@bellsouth.net
thanks
megatron
(12/15/99; 17:36:59MDT - Msg ID:21093)
canuck
Anyone who has been in here for five minutes knows exactly what kind of damage futures can cause for the unsophisticated. We all know about Ashanti. People in the oil/gas biz will ,mathematically, do the same thing to themselves and the investors.
Cavan Man
(12/15/99; 17:34:12MDT - Msg ID:21092)
canamami
The WSJ article may be right or wrong.
The most valuable product(s) in the world today is/are petroleum derivatives. Energy calls the tune. We have created a contemporary civilization that cannot function without it. Rah, rah for solar, wind, thermal fuel cells, et al; I favor all alternatives to crude. Today, energy (oil) calls the tune. I believe gold's fortunes are tied to closely to it.
Please pardon my understatement.
Number Six
(12/15/99; 17:25:17MDT - Msg ID:21091)
@Canuck
Sorry - to clarify, the calls were $210 each + commission.
Number Six
(12/15/99; 17:23:21MDT - Msg ID:21090)
@Canuck
What is the price of unleaded gas? (USD/US gal.)
******* currently about 71c *******
I am having a little difficulty with the contract premium price. Let's look at gold because I can relate to this. The
Feb. 325 call is at 0.70 (Is the strike price 70 cents or is it the contract price 70 cents?) So does one contract at this strike price, at this expiry cost $70? That seems inexpensive?
The unleaded gas Jan. 77 cent strike is at 0.20 cents, does this contract cost 84 dollars? When is the 'unleaded gas' Jan. expiry? Do all futures options expiry on same dates?
******* Ok the Jan calls expire in December.
To give you an example - today I bought some unleaded petrol calls, Feb (expiring Jan 26th 2000) at a strike price of 85c for .50, i.e. .50 of $420 which is what contracts are quoted in... the contract is for 42,000 galls.*******
Hope this helps. Check out the web - there are many sites that explain the basics... good luck whatever you decide :o)
Canuck
(12/15/99; 17:21:40MDT - Msg ID:21089)
Hedging on oil
The portion of that recent article that struck me was UPS had bought into futures. This has saved they skin; there are probably many companies that owe their bottom line to such a practice. Now when these futures contracts expiry and they buy oil as todays prices a new ballgame may begin.
The spot price of oil has doubled (2 and a half) and some times we look for immediate increases. The ramifications of increases (inflation) may not always be instantaneous.
Thoughts?
Canuck
(12/15/99; 17:13:59MDT - Msg ID:21088)
Number Six
I saw my (new) broker again this afternoon. He doesn't want me near futures, explained it as too risky. He also added that futures options do not have as much upside potential as people think. I find this a little difficult to understand; can you comment.
I'm going over the futures options in todays paper, can you provide a scenario for unleaded gas. I feel gas may be a better play than crude because a supply problem of crude and/or refinery problems will both play into the hand of rising unleaded gas. Do you agree?
What is the price of unleaded gas? (USD/US gal.)
I am having a little difficulty with the contract premium price. Let's look at gold because I can relate to this. The
Feb. 325 call is at 0.70 (Is the strike price 70 cents or is it the contract price 70 cents?) So does one contract at this strike price, at this expiry cost $70? That seems inexpensive?
The unleaded gas Jan. 77 cent strike is at 0.20 cents, does this contract cost 84 dollars? When is the 'unleaded gas' Jan. expiry? Do all futures options expiry on same dates?
Sorry for all the questions, on the surface it seems like easy money.
Number Six
(12/15/99; 17:11:02MDT - Msg ID:21087)
@Netking
On the contrary, when they start running stories (puff pieces) like this you know the writing is on the wall!
Go long, load up on calls!
megatron
(12/15/99; 17:10:28MDT - Msg ID:21086)
cannami
No such thing. What I was referring to was the White House.
Certainly no one could accuse the WSJ of being liberal. My point was merely an observation about the timing of these kind of bullish/bearish articles, as anyone invested in gold knows too well. If your aware of these mens past work and it's validity then I'm out of line.
Number Six
(12/15/99; 17:06:56MDT - Msg ID:21085)
@Canamami Oil Article...
Oil prices spiked to their highest level in nearly a decade last month. But when the consumer price index was released Tuesday, it was up a whispery 0.1%. How is this possible?
******* I'll tell you how it's possible. Because the figures are rigged, the books are cooked, we all know that, you just cannot believe the inflation and rpi figures from Washington. Same thing happening in the Nasdaq and Dow - moving around companies in and out to make the indexes look good for the bubble.com "investors" *******
After all, this is oil -- the stuff that helped fuel recessions in 1973, 1980 and 1990. Why aren't rising oil prices walloping the economy the way they used to?
******* Can you say FED manipulation of the "economy" - in all aspects, at all levels, including cooking the figures and disinformation on a daily basis in all media *******
Part of the answer can be found at LTV Corp. The Cleveland steelmaker is responding to this year's more than doubling of petroleum prices by flicking a switch. Using technology it installed over the past decade, it is shifting the fuel that fires its blast furnaces and boilers to natural gas from oil. Computer modeling lets LTV know when it's time to make the change.
--------------------------------------------------------------------------------
Energy Secretary Warns U.S. May Act to Lower Oil Prices (Dec. 9)
Gains in Oil Prices May Not Fuel Speedy Rise in Capital Spending (Nov. 22)
Surge in Oil Prices Unlikely to Trigger Inflation in U.S. (Nov. 19)
--------------------------------------------------------------------------------
Next, consider UAL Corp.'s United Airlines. The Chicago air carrier paid about the same for jet fuel in the third quarter as it did a year earlier, thanks to futures markets that let it lock in long-term prices. Good thing, too, since competition has hindered air carriers from pushing through broad-based fare increases.
Indeed, nationwide, the same forces that have propelled the U.S. economy through the 1990s -- new technology, greater productivity, deregulation and sophisticated financial markets -- are cushioning the blow from oil's jump to more than $25 a barrel from a February low of $11.37 a barrel.
'Startling Changes'
True, oil is the main reason consumer prices have risen at a 2.7% annual rate so far this year, up a full percentage point from 1998. But inflation still remains tame.
******* Pure, unadulterated, bullcrap. Tame my ### *******
In fact, last month's CPI increase was half the rate of October's and the lowest monthly rise since June.
******* I wonder why??? *******
That's because oil has become less relevant as the U.S. economy moves away from manufacturing and toward services. Fuel-gulping manufacturers accounted for only 17% of the economy in 1997, down from 22% in 1977. The decline's impact has been so pronounced that even Oil Minister Ali Naimi of Saudi Arabia, the world's biggest petroleum producer, lamented in a speech last week in Washington the "startling changes" that have reduced oil's importance to the world's industrialized economies.
******* Tell that (not relevant) to all the dot.com yuppies in their gas-guzzling SUV's pal. The fact is that Americans have been spoilt for decades with low gas prices - compare gas in Europe at $5-6-7 a gallon, at any rate far far higher - that's why Europe leads the way in fuel efficient cars... perhaps this is the way the USA must head in the new enery-crunch era... they should be doing it anyway... *******
Among them: U.S. oil expenditures have fallen to an estimated 3% of gross domestic product from a high of 8.5% in 1981, according to the U.S. Energy Information Administration. Suggesting that the growth of the Internet and the service sector has produced lasting changes in the economy, the U.S. in 1997 and 1998 posted its sharpest energy-efficiency gains in a decade, according to an analysis by the nonprofit Center for Energy and Climate Solutions. In both years, energy consumed per dollar of GDP fell by 4%, compared with the previous decade's average decline of less than 1% a year.
Given that trend, "businesses should be spending no more time anguishing over oil prices then they do about pork bellies," says Mark Mills, senior fellow at the Competitive Enterprise Institute, a Washington think tank.
******* This is rich! Pure disinformation. the fact is that the FED CANNOT control the price of oil (unlike the POG) - it is just far too big, too important, too international. So now they have hacks coming out to say that oil prices are unimportant! *******
Of course, some industries still feel like they are over a barrel when oil prices climb. Hedging can't delay the pain forever, so airlines and other transportation businesses eventually feel the pinch. In recent weeks, trucking companies have begun to demand higher rates, citing higher fuel costs. And this year's oil-driven rise in the CPI will boost labor costs next year, since many wage contracts are pegged to that index.
The real test may be yet to come. If industries stock up on fuel ahead of the New Year or a lengthy cold snap grips the Northeast, some analysts think oil prices could creep above $30 a barrel -- a level seen only briefly during the Gulf War.
******* WRONG!!! It has hit $40. *******
That scenario worries some economists. If prices reach that height and stay there, "economic activity slows, and the trade deficit worsens," says oil economist Phil Verleger of the Brattle Group, a consulting firm based in Cambridge, Mass. "It can be a prescription for a fairly serious and sharp recession."
So ingrained is the perceived impact of oil prices on the economy that some worry higher prices will create inflationary expectations all their own. But economists say that even at today's prices, oil and its derivatives are relatively cheap. Adjusted for inflation and excluding taxes, a gallon of gasoline is 10 cents cheaper today than it was in 1973, according to data from the American Petroleum Institute and the Energy Department.
Meanwhile, those industries that still rely heavily on oil have learned to squeeze more out of every drop. In 1981, for instance, jet fuel accounted for 29.7% of airlines' operating expenses, says the Air Transport Association. With new energy-saving technologies, such as two-engine planes with the same kick as the old three-engine versions, fuel now represents only 10% of the industry's costs.
The sport-utility vehicle craze has put more gas-hungry cars on the highways. But computer-controlled fuel injection and new transmission technologies have raised the overall efficiency of the nation's auto fleet by about 5% since 1990. The average American car was driven about 2,000 more miles last year than in 1973, but it used about 200 gallons less gasoline, the Transportation Department says.
For their part, energy-intensive manufacturers, such as LTV, have protected themselves from oil-price swings by diversifying their fuel sources. Natural gas, in particular, has become a popular alternative, because it is plentiful and relatively cheap. "Just 30 days ago, we were in the process of ramping down gas and ramping up oil," says Marty Suhoza, LTV's director of energy and metals purchasing. "Now we're doing just the opposite," he adds. "Our average fuel prices are fine."
When the first oil embargo hit in 1973, almost 17% of the nation's electricity was generated by burning more than 560 million barrels of oil. Today, with utilities deregulating and facing more competition, 3.2% of the nation's electricity is generated with the use of just 178 million barrels of oil. Coal, natural gas and nuclear power have taken up the slack.
In Silicon Valley, the heart of the New Economy, Santa Clara County added more than 150,000 jobs between 1994 and 1998 while area utilities relied almost exclusively on natural gas and renewable resources, such as hydroelectric power, to fill the new demand. California's environmental laws also resulted in a wholesale shift away from oil. The state's utilities, which burned 12 million barrels of oil in 1990, used just 103,000 barrels in 1998.
Absorbing the Jolt
On the financial-management front, the explosion over the past five years in the number of companies using financial markets to hedge their energy costs has left the U.S. better able to absorb an oil jolt.
United Parcel Service of America Inc. has hedged nearly all its oil purchases for next year, and as a result, "we've removed ourselves from the spot market," says spokesman Norman Black. Of course, if oil prices stay where they are for the next year or so, the shipping company ultimately will face higher costs. But, "this gives us the flexibility to build our whole budget for next year with a predictable number," Mr. Black says. "That allows us to better manage our cash flow."
The oil-price jump also is coming at a time of phenomenal cost-cutting, thanks in part to the magic of the Internet. Alaska Airlines, for example, now sells 8% of its tickets via its Web site, up from 3% a year ago. Its $7.5 million-a-year savings is about half its cost of higher fuel prices.
Pass-Throughs to Price-Downs
Even if oil-dependent companies can't completely offset higher fuel costs, the odds those pressures will translate into significant inflation are much lower today than they were 10 or 20 years ago. Through the 1980s and early 1990s, "we had pass-through economics," says Gary Williams, vice president for supply-chain management for Borg-Warner Automotive Inc.'s Indiana powertrain-systems division. Contracts had built-in price increases pegged to wholesale-prices rises. "Today, most contracts have fixed prices with price-downs" or built-in cuts, Mr. Williams says. So far, Borg-Warner's suppliers haven't sought higher prices to offset higher energy costs. "Companies are reluctant to be the first guy to ask for a price increase," he says.
In other industries, a capital-investment boom and competition have tempered oil's impact. With new factories slated to open next year in western Canada, an additional two billion pounds of polyethylene, a petrochemical used to make plastic bags, will be aimed at the U.S. market, a 10% increase, says Earl Simpson, a senior consultant at Pace Consultants Co. of Houston. "There's too much competition to hold prices up," he adds.
A More Aggressive Fed
Like corporate executives, economic policy makers also have absorbed painful lessons from earlier oil shocks, and appear better poised to handle a rerun. In retrospect, most economists believe that the Federal Reserve erred in the 1970s by keeping interest rates low to make sure oil-related production cuts didn't push up unemployment. But the easy money accentuated oil's inflationary impact, leading to double-digit price increases.
Today's Fed is much more aggressive about pre-empting inflation, and today's economy gives the central bank more breathing space. With the economy growing at well above a 3% annual clip and the unemployment rate at a 29-year low of 4.1%, the Fed can afford to fight inflation by cooling growth and pushing joblessness higher. Alternatively, the Fed has ample room to let prices rise a bit.
The politics of oil also have changed radically over the past two decades. The most powerful producers have learned that higher prices are risky, encouraging conservation efforts and new producers, who are harder to control. That may not be obvious from the current state of petro-politics. After all, the main reason oil prices have soared is that the Organization of Petroleum Exporting Countries, along with nonmembers Mexico and Norway, agreed to cut production, and compliance has been unexpectedly good. The group is hoping to make up for a glut of oil in 1996 and 1997 that sent prices tumbling as production increased and Asian demand fell.
With world inventories reduced, many expect OPEC to increase production again when the current agreement expires in March. At meetings last week with U.S. Energy Secretary Bill Richardson, Mr. Naimi of Saudi Arabia and Sheik Saud Nasser Al-Sabah assured Mr. Richardson their interest was in stable prices, not an oil crisis. That reflects an improvement in relations since 1973, when the U.S. learned in a terse cable that oil supplies to its Sixth Fleet in the Mediterranean and U.S. forces in Europe were being shut off, as the Arab nations launched their oil embargo.
Just One Crisis Away
As a result of all these factors, oil experts are betting on lower prices next year, even if there is another wintertime spike. While spot oil prices now trade at around $25 a barrel for January delivery, futures contracts for delivery one year from now sell for about $5 less per barrel.
Producers know there is much technology waiting in the wings to displace oil if they allow a sustained price spike. Hybrid automobiles, which use fuel cells and gasoline engines, as well as teleconferencing are just a crude crisis away from wider use, says Joseph Romm, a former assistant energy secretary and now director of the nonprofit Center for Energy and Climate Solutions.
That's why the oil industry has been undergoing its own revolution. Many oil companies are producing more natural gas. They are even joining with auto makers to develop alternative fuels and moving into the power-generation business. And, at Texaco Inc.'s Houston research facility, geologists are using a new computer-based technology to figure out the best place to drill for oil and the optimum method of extracting it.
Texaco earlier this year announced its largest discovery in 32 years, a massive field underneath about 5,000 feet of water off the coast of Nigeria. Without the greater certainty offered by the three-dimensional seismic data the new technology generates, companies could never afford to drill for crude a mile or more below the ocean's floor.
Assessing the seismic data, which once took 10 or 15 people, now takes one or two. Development planning times that took months or years now takes weeks. "The visualization technology will allow our crop yields to go up and reduce our risk," says Michael Zeitlin, a pioneer of the technology. "It's going to keep the cost of oil relatively flat and help us maintain oil prices at a level that is competitive with other energy sources."
============================================================
Bottom line - happy happy smiley smiley hack reporting.
They have not factored in y2k, again, AT ALL.
As the Venezuelan Oil Minister said yesterday, "I do not see a rise in oil prices next year, rather a continuation of 1999 prices" [or words to that affect..]
YES, IN OTHER WORDS OIL WILL MORE THAN DOUBLE AGAIN IN 2000 :o)
Golden Boy
(12/15/99; 17:06:32MDT - Msg ID:21084)
Palladium and Stillwater
After reading Bill Murphy's bullish note on Palladium I'll send out a warning to investor's thinking of buying Stillwater. After talking with Franco-Nevada (who has a royalter in the Stillwater mine) they believe Stillwater was forced to sell palladium calls at a $380 strike price. It's not just the gold companies who are short their own commodities!
Netking
(12/15/99; 17:04:02MDT - Msg ID:21083)
Canamami - Crude Oil
Canamami(21080) - As soon as the WSJ (or any other media) start running stories such as that it just serves as another market confirmation to go short quickly. Don't get burnt on 'Black Gold'.
canamami
(12/15/99; 16:34:39MDT - Msg ID:21082)
Reply to megatron
Megatron,
Are you describing the WSJ as a "liberal" newspaper? If so, you are probably the first person I have encountered in any way, shape, form or medium to describe it thus.
The article struck me as being quite well researched and reasoned, actually. If you can effectively rebut it on its merits, I look forward to such a rebuttal.
Kindest regards,
canamami.
megatron
(12/15/99; 16:22:30MDT - Msg ID:21081)
cannami
Does anyone else find these kind of stories convienience comic? Wasn't some liberal mouthpiece whinning just days ago about the White house 'going to do something' about fuel prices etc? Are these reporters experts? Or are they New York "Analysts" hired to write this kind of thing? How are the morons in Des Moines supposed to get to the bottom of it all? They can't. They won't. They don't want to! 'Elvira, if it's in the Wall St. Gernal it got's to be true, gdun it!
canamami
(12/15/99; 16:03:21MDT - Msg ID:21080)
Wall Street Journal Article Re Oil
Below please find an article from today's Wall Street Journal, which appears to run contrary to the oil-driven hypothesis of FOA/Another/Oro:
The Price of Oil Has Doubled;
Why Is There No Recession?
By STEVE LIESMAN and JACOB M. SCHLESINGER
Staff Reporters of THE WALL STREET JOURNAL
December 15, 1999
Oil prices spiked to their highest level in nearly a decade last month. But when the consumer price index was released Tuesday, it was up a whispery 0.1%. How is this possible? After all, this is oil -- the stuff that helped fuel recessions in 1973, 1980 and 1990. Why aren't rising oil prices walloping the economy the way they used to?
Part of the answer can be found at LTV Corp. The Cleveland steelmaker is responding to this year's more than doubling of petroleum prices by flicking a switch. Using technology it installed over the past decade, it is shifting the fuel that fires its blast furnaces and boilers to natural gas from oil. Computer modeling lets LTV know when it's time to make the change.
--------------------------------------------------------------------------------
Energy Secretary Warns U.S. May Act to Lower Oil Prices (Dec. 9)
Gains in Oil Prices May Not Fuel Speedy Rise in Capital Spending (Nov. 22)
Surge in Oil Prices Unlikely to Trigger Inflation in U.S. (Nov. 19)
--------------------------------------------------------------------------------
Next, consider UAL Corp.'s United Airlines. The Chicago air carrier paid about the same for jet fuel in the third quarter as it did a year earlier, thanks to futures markets that let it lock in long-term prices. Good thing, too, since competition has hindered air carriers from pushing through broad-based fare increases.
Indeed, nationwide, the same forces that have propelled the U.S. economy through the 1990s -- new technology, greater productivity, deregulation and sophisticated financial markets -- are cushioning the blow from oil's jump to more than $25 a barrel from a February low of $11.37 a barrel.
'Startling Changes'
True, oil is the main reason consumer prices have risen at a 2.7% annual rate so far this year, up a full percentage point from 1998. But inflation still remains tame. In fact, last month's CPI increase was half the rate of October's and the lowest monthly rise since June.
That's because oil has become less relevant as the U.S. economy moves away from manufacturing and toward services. Fuel-gulping manufacturers accounted for only 17% of the economy in 1997, down from 22% in 1977. The decline's impact has been so pronounced that even Oil Minister Ali Naimi of Saudi Arabia, the world's biggest petroleum producer, lamented in a speech last week in Washington the "startling changes" that have reduced oil's importance to the world's industrialized economies.
Among them: U.S. oil expenditures have fallen to an estimated 3% of gross domestic product from a high of 8.5% in 1981, according to the U.S. Energy Information Administration. Suggesting that the growth of the Internet and the service sector has produced lasting changes in the economy, the U.S. in 1997 and 1998 posted its sharpest energy-efficiency gains in a decade, according to an analysis by the nonprofit Center for Energy and Climate Solutions. In both years, energy consumed per dollar of GDP fell by 4%, compared with the previous decade's average decline of less than 1% a year.
Given that trend, "businesses should be spending no more time anguishing over oil prices then they do about pork bellies," says Mark Mills, senior fellow at the Competitive Enterprise Institute, a Washington think tank.
Of course, some industries still feel like they are over a barrel when oil prices climb. Hedging can't delay the pain forever, so airlines and other transportation businesses eventually feel the pinch. In recent weeks, trucking companies have begun to demand higher rates, citing higher fuel costs. And this year's oil-driven rise in the CPI will boost labor costs next year, since many wage contracts are pegged to that index.
The real test may be yet to come. If industries stock up on fuel ahead of the New Year or a lengthy cold snap grips the Northeast, some analysts think oil prices could creep above $30 a barrel -- a level seen only briefly during the Gulf War. That scenario worries some economists. If prices reach that height and stay there, "economic activity slows, and the trade deficit worsens," says oil economist Phil Verleger of the Brattle Group, a consulting firm based in Cambridge, Mass. "It can be a prescription for a fairly serious and sharp recession."
So ingrained is the perceived impact of oil prices on the economy that some worry higher prices will create inflationary expectations all their own. But economists say that even at today's prices, oil and its derivatives are relatively cheap. Adjusted for inflation and excluding taxes, a gallon of gasoline is 10 cents cheaper today than it was in 1973, according to data from the American Petroleum Institute and the Energy Department.
Meanwhile, those industries that still rely heavily on oil have learned to squeeze more out of every drop. In 1981, for instance, jet fuel accounted for 29.7% of airlines' operating expenses, says the Air Transport Association. With new energy-saving technologies, such as two-engine planes with the same kick as the old three-engine versions, fuel now represents only 10% of the industry's costs.
The sport-utility vehicle craze has put more gas-hungry cars on the highways. But computer-controlled fuel injection and new transmission technologies have raised the overall efficiency of the nation's auto fleet by about 5% since 1990. The average American car was driven about 2,000 more miles last year than in 1973, but it used about 200 gallons less gasoline, the Transportation Department says.
For their part, energy-intensive manufacturers, such as LTV, have protected themselves from oil-price swings by diversifying their fuel sources. Natural gas, in particular, has become a popular alternative, because it is plentiful and relatively cheap. "Just 30 days ago, we were in the process of ramping down gas and ramping up oil," says Marty Suhoza, LTV's director of energy and metals purchasing. "Now we're doing just the opposite," he adds. "Our average fuel prices are fine."
When the first oil embargo hit in 1973, almost 17% of the nation's electricity was generated by burning more than 560 million barrels of oil. Today, with utilities deregulating and facing more competition, 3.2% of the nation's electricity is generated with the use of just 178 million barrels of oil. Coal, natural gas and nuclear power have taken up the slack.
In Silicon Valley, the heart of the New Economy, Santa Clara County added more than 150,000 jobs between 1994 and 1998 while area utilities relied almost exclusively on natural gas and renewable resources, such as hydroelectric power, to fill the new demand. California's environmental laws also resulted in a wholesale shift away from oil. The state's utilities, which burned 12 million barrels of oil in 1990, used just 103,000 barrels in 1998.
Absorbing the Jolt
On the financial-management front, the explosion over the past five years in the number of companies using financial markets to hedge their energy costs has left the U.S. better able to absorb an oil jolt.
United Parcel Service of America Inc. has hedged nearly all its oil purchases for next year, and as a result, "we've removed ourselves from the spot market," says spokesman Norman Black. Of course, if oil prices stay where they are for the next year or so, the shipping company ultimately will face higher costs. But, "this gives us the flexibility to build our whole budget for next year with a predictable number," Mr. Black says. "That allows us to better manage our cash flow."
The oil-price jump also is coming at a time of phenomenal cost-cutting, thanks in part to the magic of the Internet. Alaska Airlines, for example, now sells 8% of its tickets via its Web site, up from 3% a year ago. Its $7.5 million-a-year savings is about half its cost of higher fuel prices.
Pass-Throughs to Price-Downs
Even if oil-dependent companies can't completely offset higher fuel costs, the odds those pressures will translate into significant inflation are much lower today than they were 10 or 20 years ago. Through the 1980s and early 1990s, "we had pass-through economics," says Gary Williams, vice president for supply-chain management for Borg-Warner Automotive Inc.'s Indiana powertrain-systems division. Contracts had built-in price increases pegged to wholesale-prices rises. "Today, most contracts have fixed prices with price-downs" or built-in cuts, Mr. Williams says. So far, Borg-Warner's suppliers haven't sought higher prices to offset higher energy costs. "Companies are reluctant to be the first guy to ask for a price increase," he says.
In other industries, a capital-investment boom and competition have tempered oil's impact. With new factories slated to open next year in western Canada, an additional two billion pounds of polyethylene, a petrochemical used to make plastic bags, will be aimed at the U.S. market, a 10% increase, says Earl Simpson, a senior consultant at Pace Consultants Co. of Houston. "There's too much competition to hold prices up," he adds.
A More Aggressive Fed
Like corporate executives, economic policy makers also have absorbed painful lessons from earlier oil shocks, and appear better poised to handle a rerun. In retrospect, most economists believe that the Federal Reserve erred in the 1970s by keeping interest rates low to make sure oil-related production cuts didn't push up unemployment. But the easy money accentuated oil's inflationary impact, leading to double-digit price increases.
Today's Fed is much more aggressive about pre-empting inflation, and today's economy gives the central bank more breathing space. With the economy growing at well above a 3% annual clip and the unemployment rate at a 29-year low of 4.1%, the Fed can afford to fight inflation by cooling growth and pushing joblessness higher. Alternatively, the Fed has ample room to let prices rise a bit.
The politics of oil also have changed radically over the past two decades. The most powerful producers have learned that higher prices are risky, encouraging conservation efforts and new producers, who are harder to control. That may not be obvious from the current state of petro-politics. After all, the main reason oil prices have soared is that the Organization of Petroleum Exporting Countries, along with nonmembers Mexico and Norway, agreed to cut production, and compliance has been unexpectedly good. The group is hoping to make up for a glut of oil in 1996 and 1997 that sent prices tumbling as production increased and Asian demand fell.
With world inventories reduced, many expect OPEC to increase production again when the current agreement expires in March. At meetings last week with U.S. Energy Secretary Bill Richardson, Mr. Naimi of Saudi Arabia and Sheik Saud Nasser Al-Sabah assured Mr. Richardson their interest was in stable prices, not an oil crisis. That reflects an improvement in relations since 1973, when the U.S. learned in a terse cable that oil supplies to its Sixth Fleet in the Mediterranean and U.S. forces in Europe were being shut off, as the Arab nations launched their oil embargo.
Just One Crisis Away
As a result of all these factors, oil experts are betting on lower prices next year, even if there is another wintertime spike. While spot oil prices now trade at around $25 a barrel for January delivery, futures contracts for delivery one year from now sell for about $5 less per barrel.
Producers know there is much technology waiting in the wings to displace oil if they allow a sustained price spike. Hybrid automobiles, which use fuel cells and gasoline engines, as well as teleconferencing are just a crude crisis away from wider use, says Joseph Romm, a former assistant energy secretary and now director of the nonprofit Center for Energy and Climate Solutions.
That's why the oil industry has been undergoing its own revolution. Many oil companies are producing more natural gas. They are even joining with auto makers to develop alternative fuels and moving into the power-generation business. And, at Texaco Inc.'s Houston research facility, geologists are using a new computer-based technology to figure out the best place to drill for oil and the optimum method of extracting it.
Texaco earlier this year announced its largest discovery in 32 years, a massive field underneath about 5,000 feet of water off the coast of Nigeria. Without the greater certainty offered by the three-dimensional seismic data the new technology generates, companies could never afford to drill for crude a mile or more below the ocean's floor.
Assessing the seismic data, which once took 10 or 15 people, now takes one or two. Development planning times that took months or years now takes weeks. "The visualization technology will allow our crop yields to go up and reduce our risk," says Michael Zeitlin, a pioneer of the technology. "It's going to keep the cost of oil relatively flat and help us maintain oil prices at a level that is competitive with other energy sources."
Write to Steve Liesman at steve.liesman@wsj.com and Jacob M. Schlesinger at jacob.schlesinger@wsj.com
Copyright © 1999 Dow Jones & Company, Inc. All Rights Reserved.
Number Six
(12/15/99; 15:52:55MDT - Msg ID:21079)
Good point Camel
The Crude price tends to react the quickest in the market, followed by the downstream refining product. The trick will be to liquidate at the right time in Crude if you are in the money, not to be too greedy, as it is likely to be very volatile (no pun intended!) with perhaps wild swings. Your point is well taken, that's my feeling too.
Camel
(12/15/99; 15:39:35MDT - Msg ID:21078)
oil and Y2K
If the refineries went down because of Y2K wouldn't that decrease the demand for crude oil as well as the value of the drillers and service companies? In that case, wouldn't it be advantageous to have options on the refined products such as gasoline rather than crude?
ORO
(12/15/99; 15:12:27MDT - Msg ID:21077)
TownCrier - Issing
They Are
TownCrier
(12/15/99; 14:32:08MDT - Msg ID:21076)
They could just as well be talking about gold
http://quote.bloomberg.com/pgcgi.cgi?T=markets_newsfeat99.ht=&ptitle=EMU%20Top%20Stories&touch=1&s=a901e7c844f988646cab5d4ee8593f7d
HEADLINE: Duisenberg Says Euro Has `Upward Potential;' Timing Uncertain
Today, European Central Bank President Wim Duisenberg and ECB Chief Economist Otmar Issing both predicted an inevitable appreciation of the euro.
Ahead of this week's G20 meeting, Mr. Duisenberg told reporters, "We only know the euro has an upward potential rather than anything else. Of the timing we can't be certain."
Earlier in the day Mr. Issing said it was "only a question of time" until the euro rises against other major currencies.
TownCrier
(12/15/99; 14:12:12MDT - Msg ID:21075)
Hello Sir Cavan Man
http://www.usagold.com/halloffame.html
This link will take you to the page, then click on the appropriate TownCrier link in the index to skip down the page directly to the post on Repos and Banking Reserves. (Otherwise, you could simply scroll down the page, or better yet, read your way down through posts by Sirs ORO, Aristotle, Aragorn III, FOA, and Holtzman.
For future reference, this link can always be found at the top of the daily posts in the line that looks like this:
"WELCOME TO TODAY'S DISCUSSION. (Forum Archives)(Hall of Fame / Important posts 6/99 to present)"
Simply click on the HoF link, which is the same one I've provided above in hypertext transfer protocol format. Thanks for your interest in these important matters. Understanding modern currency and banking facilitates a true understanding of gold and what it means to be *real money*.
TownCrier
(12/15/99; 13:58:27MDT - Msg ID:21074)
A look through a crack in the U.S. "Strong Dollar Policy"
http://biz.yahoo.com/rf/991215/2j.html
U.S. Treasury Secretary Lawrence Summers said in an interview today when asked about current weakness in the euro, "As we've said many times our focus is on fundamentals. We believe that a strong currency is in our interest BUT it is important in general that countries around the world focus on strengthening their fundamentals.'' [emphasis added at The Tower]
Further, "I think in Europe the important priority has to be creating a strong set of fundamentals... If we can strengthen those fundamentals then that's what's ultimately best for currencies." In regard to the American economy the SecTreas said, "I believe the momentum of our expansion should continue because our fundamentals are strong." Key among those fundamentals would be domestic demand-led growth...the very same concept that has been force-fed to Japan since SecTreas Rubin's days in office.
It must be pointed out that the vigor of a currency (as opposed to solid gold money) is always walking upon a razor's edge...imminent failure awaiting on either side. If left unattended by the doting hand of officials, the regular marketplace would soon enough ravage the currency beyond any meaningful use. Gold, on the other hand, has the power to stand forever on its own legs.
Cavan Man
(12/15/99; 13:43:09MDT - Msg ID:21073)
Town Crier
What is your post number explaining "repos" in excellent detail? Thank you.
TownCrier
(12/15/99; 13:31:00MDT - Msg ID:21072)
The Fed adds new money to the banking system today in more flavors than Baskin-Robbins
http://biz.yahoo.com/rf/991215/01.html
It's been quite a busy morning within the halls of the Federal Reserve as they manuever to keep the banks awash in liquid green stuff.
On this final day of the current two-week banking reserve maintenance period, analysts saw little remaining add need for the Fed to accommodate. Dana Saporta, economist at Stone & McCarthy Research Associates told Reuters, "There is only about $1 billion left for the Fed to do today, so we say either nothing or a small overnight (repo) is possible."
Apparently the need for funds within the banking system has gotten beyond the point of reliable analysis and predictions...the analysts got it wrong again whereas they used to be fairly on target. In all fairness, Carol Stone, senior economist at Nomura Securities International said in light of the Fed's afternoon action yesterday to provide a 21-day forward repo of $6 billion to be effective today, "There may be some residual (add need). They don't have complete information the afternoon before ... so there may be some modest amount (today)."
FUNDS COME IN 31 FLAVORS
Following Tuesday's late afternoon $6 billion 21-day forward repo (for Wednesday), today the Fed added an additional $2.755 billion in temporary reserves to the banking system though overnight system repurchase agreements during its regular morning operation.
And as if that weren't enough, the Federal Reserve later engaged in the outright purchase of Treasury securities (dated Feb. to Nov. 2001) to add $882 million in permanent reserves to the banking system.
Don't drop that spoon yet...there's more.
The Fed announced early this afternoon that yet another flavor...a five-day forward repurchase agreement...had been arranged to add temporary reserves over the period Dec. 30 through Jan. 4th. The size of that specific RP agreement was given at $2.5 billion. This is the second day in a row that the Fed has utilized afternoon operations with forward repos...a specific reserve-adding tool that they haven't used since June.
YGM
(12/15/99; 12:19:58MDT - Msg ID:21071)
Palladium Alert.......
BULLETIN!!! Palladium Alert!!!! plus President Clinton comment on Y2K and gold
X-Mailer: Allaire ColdFusion Application Server
Le Metropole members,
The palladium market is a precious metals
market on the move, trading in
life of contract high ground - and is now
likely to go much, much higher according
to The Café's John Brimelow.
The turnover on the Tocom in Japan today
(1.45 million ounces) was extraordinary.
U.S participants do not realize this because
activity on the Merc in the U.S. is moribund.
Because of the significant demand for palladium
from the automobile industry (catalytic
converter needs), the price of palladium keeps
rising to ration that demand.
Russia supplies 70% of the market and has been
doing so for several years. They have been
shipping palladium steadily for months (unlike
platinum in which there have been supply
disruptions). Whether they will continue to
do so remains a mystery, but John Brimelow brings
us a bombshell which few know about. The U.S.
has been quietly supplying 10% of the markets
needs for palladium and that is about to run
out. The reason is that the U.S. is allowed
to sell 200,000 ounces from its strategic
stockpile this budgetary calender year which
began October 1, 1999. Doing diligent homework,
John Brimelow has learned that the U.S has
already sold close to 194,000 ounces in the
past 2 and 1/2 months. They have little left
to sell to hold down the price. A trade house
source confirmed John's investigative work.
Meanwhile on the demand side, we have some
elephants (the automotive companies) out
there that could panic at any time and with
their infinite buying power snatch up whatever
the can in the short term as they need palladium
for their cars. That is liable to cause a
price explosion.
As he has expressed many times before, John
Brimelow would not be surprised to see $500
palladium before the end of the year.
In late 1989 rhodium, in a similar situation,
abruptly quadrupled. The last thing the U.S
wants is to have a precious metal explode in price
going into the Y2K concerns that will affect
us all soon. After all President Clinton made
the following statement in the recent People
magazine according to the Associated Press:
DON'T LET Y2K SCARE YOU
"In the article Clinton say's in an interview
with" People "Magazine " If I were you, I
wouldn't hoard gold or go out into the
country and hide or do any of that" the
president said
The article went on to say the Fed has spent
$8.38 billion on Y2K preparedness so far."
Wonder who gave that to President Clinton
to say? The why is obvious.
<A HREF="http://www.LeMetropoleCafe.com/scripts/products.cfm">Le Metropole Cafe</A>
All the best,
Bill Murphy
Le Patron
www.LeMetropoleCafe.com
ORO
(12/15/99; 11:00:28MDT - Msg ID:21070)
Bill - Hell breaks loose
When it is perceived that the dollar is breaking from gold, then the quality of the dollar is at risk, rather than its quantity.
Think in terms of Hathaway's inverted pyramid.
The tip is the gold.
Next up are gold accounts.
Next up is the cash dollar and oil supply contracts.
Up from there are the other currencies using the dollar as part of the reserves that give them value.
The slice afterwards is dollar lending/accounts/bonds.
One above this are Derivatives of debt, of gold, of oil.
Finally, currency derivatives, stock derivatives, leveraged bond holdings and carry trades...
So, what are we speaking of?
The pyramid is upside down and rests on a tiny needle tip that we rarely see and most are oblivious of.
As the structure above grows in boom times, the weight of the structure goes up, and it becomes less stable.
In a contraction, the parts of the pyramid where damage occurs lose their value relative to the rest. The activity of the top layers moves down into the next layer down in an implosion like process. The lower down the pyramid the damage, the quicker and more damaging the destruction.
If a low layer falls appart, the whole of the structure above it will be immolated, because the upper echelons are derived from the bottom ones by additional degrees of leverage. If the system is to remain stable, the gold at its pointy base must remain in place and available to the banking system. If the leveraged gold instruments break, then the whole of the system above them will collapse into the base, and widen it into the right proportions to absorb all the monetary value of the top layers.
Number Six
(12/15/99; 10:58:04MDT - Msg ID:21069)
Canuck - Oil and Unleaded Gasoline call options
http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001zHV
First, ORO, excellent analysis on embedded chips.
I am privvy to inside information concerning refinery readyness in the USA,(with more anecdotal evidence about Saudi Arabia) alas which I cannot divulge yet (it may go public sometime next week if the Chief Engineers in question agree to have their names exposed - at this point that seems unlikely) - suffice it to say that what I have learned points to very serious disruptions in refining.
Check out John Whitley on www.sightings.com realudio 1999 archives dated November 30th - John goes into great detail and cites a (now removed from the web/net) gov. report predicting a 70% decrease in ref. production. This meshes well with my insider information.
One thing to bear in mind - an industry wide shut-down and fresh start-up, as ORO predicts to a certain extent, is of itself an unprecedented hazard, because tiny misjudgments in start-up can be very costly, and destroy a plant. The hazards of having plants started-up without control by sufficiently experienced "start-uppers" might be almost as hazordous, and on a global scale, as any embedded chip problems.
The other point is - these chips will need to be replaced. It will all hinge on the chip vendors coming up with the good, accessibility of the chips, and personnel who can custom re-program the chips. Many experts say it would be easier and cheaper to build new refineries than fix-on-failure old ones that are "gummed up" for want of a better phrase. Additionally refining and pipelines need reliable elctricity to function - crude in pipelines gels at 40 degrees pretty quickly depending on weather conditions... a re-start can take anywhere from 60 days to 6 months.
Just think of the Alaska pipeline...
Canuck - check out the link above on making money on crude oil options - it will tell you all you need to know. I currently have 85 calls ($9k) at various strike prices and months in crude, and just this morning, based on the info. I was outlining above, am bidding on gasoline calls for Feb 00 (expire on Jan 26th 00) - it's a gamble, but the open interest on these calls (crude) is even stevens at 1.6million puts/calls each. That means there are a lot of other nuts out there thinking along the same lines as myself! :o)
Having studied y2k for two years I'm putting my money where my mouth is. I've taken heavy losses on gold and silver (mainly shares - all sold now), so maybe Black Gold will save my hide!!! :o)
Caveat - my big concern is collecting the moola if I'm right. To do this the Exchanges need to be up and functioning, ditto my broker and his systems, ditto my bank and inter-bank systems in general. I'm not at all sure this will be the case... I think it's going to get very ugly next year.
I really hope I'm wrong, i'd rather lose $9k if it's going to be a nightmare than collect profits in a world of suffering. Thing is, this is now outside all of our control, all we can do is position ourselves for any eventuality as best we can.
A few more links here on oil and y2k - well worth reading through...
http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=00205O
http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001zh5
http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001zSh
Netking
(12/15/99; 10:54:44MDT - Msg ID:21068)
Canuck
Mr Canuck - I personally would prefer to get a put option on Crude.
Netking
(12/15/99; 10:51:04MDT - Msg ID:21067)
Canuck-Crude Oil
http://www.fyicharts.net/cgi-local/chartgen.pl?clh0.prn
Canuck(ID:21042) Perhaps Crude has already done it's run? Crude shows real signs in recent days of being overbought.
Scrappy
(12/15/99; 10:35:48MDT - Msg ID:21066)
Hans Sennholz
http://www.gold-eagle.com/editorials_99/sennholz121599.html
Plain English type of read--International bubbles, y2k, gold.
Bill
(12/15/99; 10:31:41MDT - Msg ID:21065)
ORO ?
What did you mean by this?
"The gold play is the most dangerous - if the rug is pulled, rather than just a stop of its roll out (see Washington Agreement), then all hell will break loose".
Thanks
ORO
(12/15/99; 10:22:28MDT - Msg ID:21064)
THC - End game for $
Someone let Spike out to play with Spot?
Barring a politically motivated move to pull the rug - which FOA seems to think is not in the cards for now, there would be a steady grind composed of alternate busts and failed booms as dollars come "home" amid great plunges, then rebound sharply as the $ denominated debt outside the US is trying to extricate itself amid periodic shortages of dollars - particularly because the US will be exporting more "stuff" and less dollars - thereby restricting $ supply.
FOA sees Forex controls in the US and a "hands off" European attitude. This would indicate that the visible blame will be wholly within the US. That leaves the Fed some tricks to play. Steep interest rate hikes should keep the dollar from keeling over at first, as long as liquidity is maintained (as the past year indicates, high interest rates and heavy liquidity do the markets enough good to maintain the dollar and stocks. The Japanese will do their best to help (unless we completely alienate them too) by maintaining low interest rates. Europe will keep interest rates within their price control range.
The Fed will have to keep the M1-M3, particularly M1, going as they purchase Treasury and Agency debt and raise interest rates in tandem. Greenspan will have to print more and more currency as stock declines cause pension problems and activate Washington guarantees. FDIC will do the same if liquidity isn't maintained at the right pace to prevent banks from going under.
So:
The Fed will try to keep US debt from growing exponentially by keeping short rates at the high end. This would tend to keep imports cheap and prevent stocks from rallying strongly. This would also have the effect of converting more foreign $ denominated debt into Euro debt. That would increase support for the $ in the short term and hurt it in the long term.
Because of the difficult debt repayment under these circumstances, and because of the decline in $ liquidity X-US drawing liquidity from the US, there would be a need for liquidity in the US banking system. The Fed would create it at the necessary rate to prevent wholesale bankruptcies. They will allow some weaker institutions to fall.
Once the dollar supply to the outside is too great - because of high US rates increasing debt payments, there would be a decline in the dollar - fairly steep - of some 20% over 6-9 months. If there is support from Japan and Europe at this point, the dollar could stabilize for up to one year - perhaps two - in a mild declining trend. During this time, more foreign dollar debt would continue to disappear and the dollar will loose further future demand till one day it will break the balance again and the dollar will crash.
Lacking support from Europe and Japan being at the end of their capacity - which is how I think it sould turn out - the dollar will fall steepky and at a growing pace. Once it starts, Fed tightening will only exacerbate the problems by causing more dollars due for payment on US external debt - till the dollar printing for interest payments overwhelms the dollar and it cracks hard, falling 30-35% shortly.
The gold play is the most dangerous - if the rug is pulled, rather than just a stop of its roll out (see Washington Agreement), then all hell will break loose.
Gotta go, sorry I had to rush the answer.
Canuck
(12/15/99; 9:53:46MDT - Msg ID:21063)
Oro, Black Blade and ss of nep
Thanks for oil info and 'Schlumberger' details.
I guess a bet/hedge on rising oil is an unsure thing. Any ideas outside of a call option (crude)?? Conversely is a call option for crude a good hedge for Y2K??
P.S.: I will assume any feedback as an opinion not "investment advice".
Al Fulchino
(12/15/99; 9:43:24MDT - Msg ID:21062)
Report from the Y2K Retail Front
Mobil Oil has sent all my locations an "emergency pak" of manual credit slips <chuckle>. The package came with y2k emblazoned in big yellow letters. I suppose Mobil is just hoping for the best? Also, they have asked my 24 hour location to report in with word on my having or not having electricity, POS (satellite) and pumps and registers working info. Funny thing is, I hope the phones work so I can tell them what they want to hear.
Oro and Cavan, thanks for your words on chips.
USAGOLD
(12/15/99; 9:41:40MDT - Msg ID:21061)
Today's Gold Market Report: Brown Comments "Clintonesque"
MARKET REPORT(12/15/99): Gold was up marginally in light trading
overnight and at the open in New York. The ECB announced a reduction in
gold reserves of $31 million euros -- about 3.5 tons -- related to the
Dutch liquidation. The white metals, including silver, are beginning to
see some price movement ahead of year end. This has yet to spill over to
the gold trading pit.
It is beyond comprehension how an enemy of the gold market like British
Chancellor of the Exchequer,Gordon Brown, could take credit for its
recovery from lows in the $250 area earlier this year, but that is
precisely what he has done. The gold market was snickering behind its
collective hand yesterday when Brown proclaimed, in Clintonesque
fashion, that UK gold policies -- including the Bank of England gold
sales policy -- had been responsible for gold's "recovery." At least now
he admits that he is, if not responsible for, then receptive to, the
gold sale policy and the British people need look no further than the
Chancellor of the Exchequer's office -- and the Blair government -- to
find who's responsible for the ongoing selling off of a significant
portion of that nation's gold holdings. He refused to admit to his role
in the sales when strong opposition surfaced earlier this year
Brown claimed that his policies brought "greater transparency and
stability" to the gold market, but nothing could be further from the
truth. In reality, gold plummeted on the Bank of England's announcement
and recovered only after the European central banks announced a policy
of limiting gold sales and leases. It was the policies of continental
Europe that brought some sense of stability back to the gold market, not
the Bank of England and Gordon Brown. As for transparency, many in the
gold market and the British parliament would like to get to the real
motivation for the sudden change in British gold policy and criticize
the Blair government for its lack of transparency -- a far cry from the
claims of Gordon Brown. If anything, the Bank of England holds primary
responsibility for the volatility in the gold market that has pushed
several mining companies to the brink of bankruptcy and wreaked havoc at
gold trading houses around the globe. The reality is quite a distance
from Mr. Brown's interpretation. And this is the man who would like to
head the International Monetary Fund? As they say on this side of the
pond: "Give me a break!"
That's it for today, fellow goldmeisters. We'll see you here tomorrow.
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fox
(12/15/99; 9:41:29MDT - Msg ID:21060)
fox
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Gold Fields says court backs St Helena deal
Johannesburg - Gold Fields Ltd said on Wednesday the High Court of South Africa sanctioned the company's acquisition of shares it does not already own in gold miner St. Helena.
"This transaction is a logical and beneficial next step for the shareholders of both St Helena and Gold Fields," Gold Fields Chairman Chris Thompson said in a statement.
Gold Fields last month offered one Gold Fields share for each St. Helena share to acquire the remaining 45.8% of St. Helena it did not already own.
St. Helena shareholders voted overwhelmingly in favour of the offer on December 6.
About 4.4m new Gold Fields shares will be issued under the transaction.
St. Helena will be delisted from the Johannesburg and Nasdaq stock exchanges at the close of business on Friday, November 17.
Cavan Man
(12/15/99; 9:17:53MDT - Msg ID:21059)
ORO
Thanks for your take. You are too kind and modest.
ORO
(12/15/99; 8:57:17MDT - Msg ID:21058)
Cavan Man - chips in the old block
This is far from my area. Process control was always the weak point for me. At least the upside down and transformed math of it. Strategies are clear enough.
What I was reading shows the following:
1. Embedded chips are a problem if they are installed in the typical distributed control systems. 1 in 10 chips in industry is or has an RTC.
2. These systems vary greatly in their structure and not all of them have RTCs with date tracking. Of those that do, the date does not necessarilly play any role in their logic function. Say 1 in 10 to 1 in 20 do.
3. The RTCs get their dates from the central control computer whenever anything is reset, which is quite often - sometimes a few times per hour or even every few mins. So - the important piece here is to know that all the distributed RTCs get an update immediately after the date switch. Controllers that don't get the change from the central computer could blow. So you have some danger there, but the date does not matter for routine operations that are hourly, only those that are one or more days apart - perhaps 5% of systems.
4. The control modules I worry about are those in the maintenance functions. These sit arround for days and even weeks without resets. Their failure is the long drawn out kind - when you think everything is running smoothly, the reserve pump is supposed to kick in when the oil was to be changed in the primary pump, but the pumps are controlled by a bad program and as it checked today's date, 1,15,00 - it was well before the 4 week period from the 12,10,99 maintenance (because 1.15.00 -12.10.99 is less than 4 weeks). The pump won't have its oil replaced and will eventually blow, or the maintenance people visiting the local oil reservoir to refill (if this is still done at all) will notice.
So we have 0.5% to 1% of systems being in danger. In a Refinery that is 150-500, in a Rig some 50 -100 - only we don't know which they are till there is a problem. So, everyone at the controls will be on edge, waiting for something to go wrong and will shut the whole plant down at the first suspicion of trouble - i.e. trigger happy. So by the end of 1 Jan 2000 we should not have any chemical plant or refinery in the US functioning at full capacity. There will be restarts galore and most will work. Later there would be a few problems with low frequency operations, and "brownout" type problems will recurr. We won't loose all operations all of the time. Just a significant portion every once in a while. Reprograming will be the daily drudge of the consulting techs. Lots of money - they cost the plant 100-150 per hour on regular work, what will they be charged when there is nobody to be found?
The central computers at the control stations will probably run ok in the beginning, but will eventually go bonkers here and there. Every couple of days, then every week, then once a month. Then it will settle down.
I would not be able to assess the depth of damage to production, I would guess that operations will come down 25% of the time, and overall output would fall 30%-50% at one point during Jan, and revive quickly thereafter. It sounds bad, but it isn't - the repairs will usually not involve replacing components but reprogramming from the central console. Maybe 10 or 20 systems would need to be replaced in the Rig, perhaps 50 -100 at the plant.
Distribution and scheduling in JIT systems is what bugs me. Add sprinkles of spot shortages of energy materials and raw materials. The problems are going to be not very sharp but sporadic and persistent, the inventory cushion is completely gone from all mechanical operations, and much reduced in the chemicals businesses. Like all protracted supply shocks, expect price inflaiton, reduced output, bankruptcies, and a lot of rich electronics technicians.
Take this with a lb of kosher salt.
That's been my thinking to date on this subject. Mind that I have not worked in a plant in over 3 years, and have not worked in a refinery since 1985 (e.g. programmed display layouts for Honeywell computer consoles in refinery)
nickel62
(12/15/99; 7:31:51MDT - Msg ID:21057)
Elevator guy Great post about Allan Greenspan!
You hit it right on the head. There are unfotunately many who are "turned" in this way.Probably move dangerous than the perpetrators,because at least the perpatrators look the part.
Cavan Man
(12/15/99; 7:29:10MDT - Msg ID:21056)
ORO
While we're on the subject of oil, what is your take on the embedded chip issue as it relates to production, transportation and refining of crude? Good morning.
THC
(12/15/99; 7:11:15MDT - Msg ID:21055)
Question for Oro
Good morning, Oro! Thanks for the quick response.
I'm trying to figure out how the post-bubble US$ scenario will work out, and I'd like to hear your opinion.
I think it is likely that when the US equity bubble breaks for real:
1. Foreign investors will run for the doors, selling US equities and US$.
2. The $ will go down along with US equities.
3. AG will be torn between lowering rates to save the stock market and raising interest rates to save the dollar.
How do you think AG will respond, and what interest rates and US$ exchange rates would you expect?
Another issue I see is that when the bubble breaks:
1. Corporate profits and tax payments will be down --> lower gov't revenue
2. Individual income and capital gains will be down --> lower gov't revenue
3. Higher interest rates will increase debt service burden --> higher gov't expenditures
Do you see any conflict between the need to raise interest rates and the effect it will have on the debt burden?
Thanks & have a great day!
THC
ORO
(12/15/99; 6:40:44MDT - Msg ID:21054)
Black Blade - good point
The comm and measurement systems are way easier to upgrade than the rig equipment itself, especially the older ones. I don't know what their position is at the moment, but I think a quick look at the subtext (what they tried to avoid saying outloud) in their 10Qs and 10ks would be interesting.
Black Blade
(12/15/99; 6:40:20MDT - Msg ID:21053)
Market correction soon?16 more days to y2k.
s&p futures down -6.00 and Au +0.40. Will the market indices begin their overdue correction soon along with tax loss selling and y2k fears? Time will tell. Human nature suggests that people will wait till the last minute before the herd stampedes toward the exits.
ORO
(12/15/99; 6:36:46MDT - Msg ID:21052)
Rothschild gold
I know they bought at least 2500 tonnes in 1983 alone - from Marcos, I think it was the Brit branch. I don't know if they bought it for themselves alone.
One of Mundell's great observations, from his Gresham article, is that a government can print funny money at par with it's official (or by secret treaty) gold backing till substantially all the available real money (gold) has exited the country. At that point, all excess printing ends up raising prices.
Gold hoards grow during the initial printing period, till saturation. During this time, global prices tend to rise following the introductions of new editions of currency. Beyond this point, prices rise mostly locally and the currency declines from trade at par with the official rate.
The Rothchilds would be expected to slowly trade their currency for gold and real assets during the initial period, and hold on to it during the inflationary period. Once the currency in question ($) fails and a new gold standard comes along, they will re-lend their gold and it will fall into the markets.
Black Blade
(12/15/99; 6:33:40MDT - Msg ID:21051)
Schlumberger and oil service providers
Schlumberger (SLB) sold off their Sedco Forex division (deep water drilling) to TransOcean Offshore (RIG) last month. RIG is set to be the largest or one of the largest deep water/harsh environment petroleum drillers. If y2k is not a problem for these guys, then they should do well going forward as they are presently undervalued. However, if y2k is a major problem for the oils beyond the 60 day grace period, the question remains, what is their exposure to civil suits? Then again, would some wells shut down over an extended peroid and spur additional drilling?
ss of nep
(12/15/99; 6:27:29MDT - Msg ID:21050)
Number Six (12/15/99; 1:50:23MDT - Msg ID:21040)
Thank you Number 6,
I had not been able to go further back in history
w.r.t. Rothschild than about 1780.
My opinion is that all that is going on in the world
today is all smoke-and-mirrors, that most people
even those making great posts here, are NOT paying
sufficient attention to that which is the real driving
force behind all that is available to be observed on a
daily basis.
ORO
(12/15/99; 6:12:42MDT - Msg ID:21049)
Slumberger
Schlumberger Ltd. Ticker: SLB
oil & gas exploration and production services; also in oil ocmpany communications and measurement services, hardware and software production.
9 months ended 9/30/99, revenues fell 23% to $7.02B.
Net income fell 52% to $355.4M.
Results reflect a lower rig count, decline in Oilfield Services from all geographic regions, lower gross margins and increased interest expense.
Price $ 56.13 Avg Monthly Vol. 60.994 Mil.
52W High $ 70.69 Avg Daily Vol. 3.137 Mil.
52W Low $ 43.06
Beta 1.06
12M EPS $ 1.05 Ann. Div. Rate $ 0.75
P/E 53.50 Div. Yield 1.34 %
5 Yr High P/E 89.04 5 Yr Avg Yield 1.70 %
5 Yr Low P/E 16.55 Last Dividend Decl. $ 0.19
Last Div Ex-Date 12/23/99
Last Div Pay Date 01/07/00
INSTITUTIONAL OWNERSHIP
# of Institutions 1,809
% Shares Out. Owned 83.94 %
3 Month Net purchases 18.95 Mil.
Return on Equity 7.80
Total Debt to Equity 0.52
3 Yr Rev Growth 15.86
3 Yr EPS Growth 10.69
Current Assets (liquidity) 8,637,996
I have them pinned as a good company with a moderate tendency to financial engineering. From what I can tell, they actually fell below breakeven earlier this year.
Earnings expected for next year in the $1.70 range, and growth of 15% for the next 4 years after (straight line with revenue growth).
Analysts are still lowering their estimates for the near future.
ss of nep
(12/15/99; 6:08:16MDT - Msg ID:21048)
@Canuck
I have been writting software for 25 years.
I have NEVER seen 1 project completed on time.
ORO
(12/15/99; 5:55:48MDT - Msg ID:21047)
THC - La Chart
http://members.xoom.com/Nebucadnezer/GoldDDD.htm
THC (12/14/99; 22:40:24MDT - Msg ID:21028)
--->Q1. Is this chart intended to show the effects of overseas DDD on the POG and the $? If so, does that mean that the demand figures are overseas/non-US
All non-financial $ debt outstanding is the reference, the purpose is to show that the dollar supply-demand balance is a driver of the currency value. It also intends to show the similarity of currency and gold behaviors. The wild swings of the Burns and then the early Volcker Feds were followed by Greenspan's gradualist approach. Finally, it intends to show that since 1981, the market had changed in some fundumental way.
--->Q2. Is outstanding debt defined as all $ denominated debt in the world, or all overseas $ denominated debt?
The demand side is the outstanding debt of all non-financial corporations within the US and the (my lowest) estimate of Eurodollar debt outstanding.
--->Q3. What interest rate are you using? Long-term, short term, Eurodollar, domestic US govt debt rates, corporate debt rates, etc?
The effect was so gross that I just used my first draft using the 6 month Eurodollar rate. The interest payment stream should lag the interest rate going up (since many loans are long term) and move in lock step with it on the way down (because of refinancings)
--->Q4. What is the definition of debt growth? (Domestic US, global, or non-US?)
Global debt, calculated quarterly as a change from the same quarter last year.
--->Q5. Would it be possible/useful to plot the above values in some aggregate/cumulative format, rather than in year-year changes?
Yes, it is useful, but the charts are all very familliar to anyone with an interest in the financial markets. (Of course this does not matter to net-heads.)
--->I think that most of these could be answered by just adding footnotes to the graphs, showing the definitions/sources of figures for each parameter.
I will do that, and had intended to. I was trying to see how strong the charts are on their own. Besides which, I was pressed for time, and wanted some input before I start writing.
--->Many thanks, THC
Ditto, Thanks
Canuck
(12/15/99; 5:34:47MDT - Msg ID:21046)
ss of nep
How are you, long time..no hear, nice white morning!
That's a scary post. How do they feel re: chances of failure? oil industry in general? is F.O.F. true? even for our western Canucksters?
ss of nep
(12/15/99; 5:19:33MDT - Msg ID:21045)
@Canuck
My brother-in-law and his wife, both chemical Engineers,
work for Syncrude in Fort McMurray.
They are both on stand-by over the date change.
Hence, the companies DO NOT KNOW.
Canuck
(12/15/99; 5:08:21MDT - Msg ID:21044)
Last two posts
The last two posts are contradictory if 'Schlumburger (sp)'
is a oil (extracting) company that is deemed compliant.
I definitely need help/input on this, going in circles again.
Canuck
(12/15/99; 5:03:38MDT - Msg ID:21043)
Oil
Had a novice thought the other day; might be onto something or possibly deep left field.
If crude is to rise significantly because of Y2K failure, primarily middle eastern/South American issue, would the companies extracting in Alberta stand to gain handsomely
(assuming they are compliant).
Thinking out loud and indeed speculating.
Thoughts?
Canuck
(12/15/99; 4:56:36MDT - Msg ID:21042)
Elevator guy / Anyone
You wrote, "I'm going long in crude early am .."
I saw my broker the other day, asked him if buying crude call options was a good idea. I gave him the 'hedge' against Y2K business. He rattled on and on that he thought it was a bad idea. He suggested buying shares of a company named 'Sclumburger'(sp.) I am a little perplexed about buying shares of an oil company when I feel they themselves may be the problem.
May I ask you a question? How do you intend to 'go long' on crude? How does one position oneself for increasing 'POC'?
Thanks in advance.
Netking
(12/15/99; 2:17:56MDT - Msg ID:21041)
Number Six
Good work #6 - Great post to keep us awake.
Number Six
(12/15/99; 1:50:23MDT - Msg ID:21040)
y2k and gold backed currency...
http://greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=0020pV
Interesting post from Timebomb 2000
============================================================
Why is gold low? To answer this you must understand the role of the Rothschilds and their control of the gold markets:
The English House of Rothschild (N.M. Rothschild & Sons)
Of the two major Rothschild Houses (French and English), the London House (New Court ), founded by Nathan Mayer Rothschild and operating today as N.M. Rothschild and Sons, is undoubtedly the most influential, especially as it pertains to gold and currency trading. Twice daily a Rothschild agent sits in a cloistered room "fixing" the price of gold in the world's largest bullion trading market: the London Bullion Market Association ( LBMA ). Historically, N.M. Rothschild was owner and operator of England's Royal Mint Refinery and was the primary gold agent to the Bank of England.
To this day, N.M. Rothschild & Sons of London still lists as its primary business the selling and buying of treasuries and gold bullion. N.M. Rothschild helps fix the price of gold in London each day through the LBMA. A recent London Times articles explained that the gold price fix ceremony where five men (including a Rothschild) talk on their phones for 10 minutes, then lower tiny Union Jacks sitting on their desks, thereby fixing London's gold price each day. This ceremony takes place at 10:30 a.m. and 3 p.m., like clockwork, the same way, in the same place, and with mostly the same firms participating since the first gold fixing was enacted at Rothschild in St. Swithin's Lane on Friday Sept. 12, 1919. The company's name is also associated with many gold mining companies (e.g. Trillion Resources Ltd. and other Canadian mining companies).
Rothschild interests touch virtually every aspect of our lives. They helped found and finance Royal Dutch Shell and De Beers. Following World War II they invested in vast areas of resource rich properties in Canada, possibly gold rich deposits. Joey Smallwood, premier of Newfoundland, Canada, described the 50,000 square mile land purchase by Rothschild as the biggest land deal in Canadian history. Their influence extends to the Bank of England, Bank of France and the U.S. Federal Reserve, and possibly the IMF. They thus have enormous influence on the world's monetary policy.
The Rothschilds and the LBMA: The World's Central Bank?
Consider the Rothschild's profound position of influence in the LBMA and the transaction fees they are earning on each and every transaction of treasuries and 42 million ounces of gold transactions DAILY (recently reported volumes of physical, leased, forward sales). . The Rothschild business earns income from "transactions" (including transfers, calls, puts, trades, leases) and one can only begin to imagine the transaction costs associated with last reported trading of over 42 million ounces of gold per day through the LBMA (more than twice South Africa's annual gold production).
Also consider their involvement and influence over monetary policies exercised by the Bank of England and the Bank of France (and possibly the US Federal Reserve System) and in Geneva. Consider the world's above ground gold reserves is roughly 120,000 tons -- with roughly 40,000 tons or 33% held by central banks. How is the remaining "private" gold holdings distributed? Does anyone have such an account? Certainly not the World Gold Council and their statistics. If a single private owner held 5% of world's remaining gold, would that not constitute majority share holdings? If any player could have accumulated, and could afford a 5% holding of the world's gold supply over the last 200 years, it would be the Rothschilds. Could it be that the Rothschilds through their involvement in daily London gold trades are quietly amasing more of the precious metals in their private vaults, while the confidence game of the Central Banks tries desperately to avoid what Soros calls "unsustainable" fiat currency built on unsustainable debt? It was Mayer Amschel Rothschild who kept a secret subterranean vault full of gold beneath the House of Rothschild in Frankfurt in the 1770s (Morton, 1962) .
While the world is led to believe that gold is a barbaric relic of the past, a huge confidence game is being played out in fiat currency markets, illustrated by the events in Asia. In order to maintain confidence in inherently unsustainable fiat currencies and unsustainable debt, confidence in gold must be depressed, given that it is the only alternative store of value. The increasing volume of gold transacted through LBMA reflects the crescendo this confidence game has reached. These large volumes also suggest that gold is trading as currency and not as a barbaric commodity, as the press is apt to suggest. Could it be that the LBMA is being used as a testing ground for the establishment of a new gold-backed world currency system? If so, the Rothschilds are in a position of enormous influence over such a genesis process.
Consider these words of Stanley Fisher (WSJ, Nov. 12, 1997), IMF's Deputy Managing Director: "What is needed at this point in the world's economic affairs is leadership in setting up a SYSTEM more dependable than using IMF bailouts as a guide to the future value of money. Where that leadership comes from is a tough question."
Indeed, will the leadership and system Fisher is speaking come from the House of Rothschild through the central institution of the LBMA? Only time will tell.
If the Rothschilds, through the LBMA operations, are effectively cornering the world's gold supply they would undoubtedly be in a prime position to benefit from a currency crisis - which they and Soros undoubtedly expect, given Soro's claims that the Asian, and thus by implication all fiat currencies, are inherently unsustainable. This crisis of sustainability is already engaged in Asia and will undoubtedly wash over Europe, England and the U.S. And who recently announced another bailout package? The IMF, of course.
The Houses of Rothschild, more than any other players, knows the historical power of gold and importance of a gold-backed currency system. The English system they helped engineer remained resilient and sustainable for over 200 years until the early 1900s. The Rothschilds believe in gold as the ultimate store of value; always have and always will Undoubtedly they do not consider the metal a barbarous relic of the past.
Now finish the story by reading my posts in:
Has anyone else thought this explains all the terrorism/hacker warning?
http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=00209Z
The price is low because they like it low while they accumulate. When the institute the next phase, a world currency, they'll back it with gold.
Now before you think this is all bunf, read the thread linked above and learn just what power the Europen Banker Families have. What is presented is irrefutable proof from the laws of our and from our congressional record and the public positions of the Contitutional Framers, Jefferson, Jackson and many others.
-- Interested Spectator (is@aol.com), December 15, 1999.
============================================================
Here's my take (this is not fully thought out and it asssumes you already understand the TRUE nature of "Federal" Reserve).
To learn about the Fed see http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001zOc
The Federal Reserve and other such central banks are the real power brokers of any country as they control the issuance of currency. The governments where they operate are completely at their mercy. If you don't believe me then believe the following:
President James Garfield observed that "Whoever controls the volume of money in any country is absolute master of all industry and commerce." And we shouldn't forget old Anselm Rothschild, founder of the clan: "Give me the power to issue a nation's money; then I do not care who makes the laws." It would seem settled, and indeed is obvious, that the creator of money in any community is a power to be reckoned with.
Now the Federal Reserve and Bank Of England are owned by Rothschilds and other German Banker Families and a few from the UK and are fully unaccountable to the governments of the countries they operate in and have never been audited.
These folks are getting a little tired of the games they have to play while each country has its own currency and would very much like to centralize all such central banks under their control along with the IMF and World Bank (which are the means by which they control countries whose central banks they do not directly control) under a world currency.
In order to institute a world currency there must be a catastrophy of such magnitude the when the populations are told the only way out of the mess is a world currency the populations will say "do it please, get us out of this suffering".
Well y2k just rolled along as the perfect cover. If y2k really causes a blow up, great we'll go ahead with our world currency plan. If y2k does not pan out to be a real bombshell, then we'll make it one (who's going to know the difference by the time they get all the staged virus releases, cyber attacks, and general armed goons mobilized)
So my guess is that the y2k effect will happen with or without computer problems. There will not be another chance for these people like y2k to cover up huge finacial debacles in such a nice tidy fashion.
Sounds out there, but then who would have believed the US Congress would pass a law in 1862 stating that the US Government's own currency will not be accpeted by the US Government for payment of the US Government's own taxes on its own citizens! (if you don't believe this check out the link to "The Comming Battle" (printed in 1899 and based on congressional records) in one of my replies at the URL at the begining of this reply).
-- Interested Spectator (is@aol.com), December 13, 1999.
============================================================
FYI, I have been a software engineer, IS manager, CIO at a bank, and so forth in the computer industry for over 20 years. I have a degree in Computer Science and Mathematics.
Bin Ladden is a pip-squeak. I would not worry about him. He is just the latest patsy promoted by .gov to distract you from the real power-brokers - the Federal Reserve. I mean lets compare who is more powerful. Does Bin Ladden compare to this (and after all, all you know about Bin Ladden is what the press told you - how do you know it is even true - we know what is list below is irrefutable fact and the press who pride themselves on "investigative reporting" can't (won't, ordered not to) report on this which is the truth):
Federal Reserve/European Banker Families have:
a) the power to get congress to pass an unconstituional law that gives them the sole power to print the "US" dollar (really the Federal Reserve dollar which the US uses as its currency). The Constitution strictly states that only Congress shall have the power to coin money.
So hideous is the Federal Reserve Act that it fully realized the Constitutional Framers worst fears.
You may be surprised to learn that the Federal Reserve is the fourth central bank the United States has had, the previous three having crashed in inevitable raging inflation and widespread economic disaster. So clearly did our Founders understand and fear worthless paper money forced on the public by legal tender laws (precisely what we now have) that they filled the proceedings of the Constitutional Convention with statements of their horror of it. Americans today, deprived of hearing such truth, need to listen to their words:
* George Mason of Virginia: I have a mortal hatred of paper money.
* John Langdon of New Hampshire: I would rather reject the whole [Constitution] than grant the new government the right to issue fiat money."
* George Reed of Delaware: The right to issue fiat money would be as alarming as the mark of the beast in Revelation."
* Thomas Paine: The punishment of a member of Congress who should move for such a law ought to be death."
b) the power to get congress to pass a law to allow them to remain private and unregualted, unauditable accountable to no one and pay no tax even though they are a private organization.
c) the power in 1862 to force the Congress to pass a law that states that the US government should not accept its own currency on import duties it levies on its own citizens and that the US government must accept payment of its Bonds in paper currency but pay interest to the bond holders in gold. Effectively they have the power to make the US Government announce to the world we don't think our currency is good enough for these two items and only gold should be used. Guess where they had to buy the gold from to pay the interest on the original debt. Guess where the importers had to buy the gold from to pay the duties. Guess who got all the gold back when the government paid its interest on its bonds. The bankers who bought the bonds in the first place.
d) The power to cause the US debt to go from $1B in 1913 when the Fed was set up to $24B by the late 20's. How? Because the Federal Government must borrow money simply to keep the currency in circulation. Ever heard of anything so stupid. Yet that is what has been going on since 1913. Ever wonder why the debt keeps growing. It is mathematically not possible for it be paid back.
e) the power to bring a sitting president to his knees and state after he signed the Federal Reserve Act to state:
"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men."
The Bottom Line is as we understand from my earlier reply this means they control the country. If the government wishes to do X, and the Feds don't agree X will not be done. If the Feds want to do Y, the government will comply else the Feds will induce a financial crisis that would get the government thrown out. End of story.
This is called power. This is the power to dicate the American Government. This is the power to have the full resources of the American Government at your disposal to do with as you please. Do not assume for a moment that this power will be foresaken for any body.
This power has been enjoyed be these Banker Families since 1694.
In 1694 William III was involved in a war with France. He needed money and he needed it in large quantities. The British coffers were empty so he asked for vast loans of money from a super-rich Englishman named William Paterson and some of his wealthy friends. Paterson and his friends were perfectly agreeable to the loan providing they were allowed to do two things:
1.Set up a privately-owned bank to be called the Bank of England.
2.Receive authority from the king to issue their own bank notes or certificates as the official legal tender of England.
Forget about Bin Laden he is a nobody. He is just a distraction to keep your attention away from the real worry: The Federal Reserve. You are slaves of the Federal Reserve through your taxes which go to pay them interest and their control of inflation. They require you to pay taxes so they can collect interest. They require the IRS for this. The IRS requires Social Security for this as that is how they have juridiction over you. Guess what everybody knows Social Security is the only government agency that has been taking y2k seriously and has been working on it for 10 years. Ever wonder why? Its because they won't let their jurisdiction and control fail.
In 1862 the Bank of England/Rothschilds (do not be deceived by name, "Bank of England"; Bank of England was/is a *private* bank) issued, and distributed to American banksters, the following document, The Hazard Circular, quoted in part below:
"Slavery is likely to be abolished by the war power, and chattel slavery abolished. This, I and my European friends are in favor of, for slavery is but the *owning of labor*, and carries with it the *care of labor*, while the European plan, led on by England, is that capital shall control labor by controlling wages. The great debt that capitalists will see to it is made out of the [Civil] war must be used to control the value of money. To accomplish this, the Government bonds must be used as a banking basis.
"We are now waiting for the Secretary of the Treasury of the United States to make this recommendation. It will not do to allow greenbacks, as they are called, to circulate as money any length of time, as we cannot control that, but we can control the bonds and through them the bank issues.
Like I said this is called power, the rest is irrelevant and just a distraction to keep your mind busy.
-- Interested Spectator (is@aol.com), December 14, 1999.
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SHIFTY
(12/15/99; 0:14:13MDT - Msg ID:21039)
tedw
Do you have any idea about DeBeers and hedging?
I never hear anything good or bad , what do you think?
Have you heard anything?
SHIFTY
(12/15/99; 0:06:57MDT - Msg ID:21038)
tedw
It may take 3 or 4 years. But its worth a try.
tedw
(12/15/99; 0:02:08MDT - Msg ID:21037)
Freedom of Information Act
http://www.usa.gold
I faxed a Freedom of Information Act Request to the Treasury Department yesterday, demanding they supply documents which answer the 11 questions posed by GATA in
Roll Call.
The Treasury Department is obligated to respond (and will) to the request. Ill post it on this forum when they respond.
Failure to respond opens a venue in US District Court to
compel the Treasury Department to provide the documents.. At this point in life, Im outraged enough to take them into court.
Anyone who wants to file their own FOIA send an e-mail
to Tedw@internetcds.com and Ill e-mail a form to you.
Their failure to respond will also give you a good reason to call your Congressman and get their office involved.
These Bastards are supposed to work for us.
PS: If my body is found floating down a river, suspect Bill Clinton and Alan Greenspan
Click Here to view yesterday's discussion.
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