Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Friday, April 1, 2005: I've
written I expect oil to hit over $60. Goldman Sachs thinks it could rise
to $105. This will not be good. All recessions of the past 40 years were
begun with big spikes in oil prices. This story hit the newswires yesterday:
"NEW YORK (Dow Jones)--Oil markets have entered the early stages of a "super
spike" phase that could see prices rise as high as $105 a barrel, Goldman
Sachs analysts said Thursday. With global production capacity constrained and
unlikely to grow much in the near term, only a reduction in demand will balance
the market. But demand has proven much more resilient than expected, so oil
prices are likely to rise sharply before reaching a level that adversely affects
consumption, the analysts said in a research note. Spare capacity has withered
even without interruptions of output in major producing countries, Goldman noted.
A significant supply disruption could send prices soaring, the bank said. "Because
spare capacity throughout the energy supply chain is limited and given any supply
additions take a very long time to complete," Goldman wrote, "only
a sharp sustained increase in energy commodity prices will meaningfully reduce
energy consumption and recreate the kind of spare cushion that existed through
much of the 1980s and 1990s."
Goldman raised its "estimated super spike trading band" to $50-$105
a barrel for U.S. benchmark West Texas Intermediate crude, up from $50-$80 previously.
The bank also raised its oil price forecasts for 2005 and 2006, to $50 and $55,
respectively, up from $41 to $40. The move helped sent oil futures up by $1.66
to $55.65 a barrel in New York Thursday morning. Goldman's forecast shows how
banks are tossing aside their previous conservative approach to commodity price
forecasting as oil prices remain stubbornly high.
Goldman's new price forecast for 2005 is broadly in line with most forecasters',
including the federal Energy Information Administration's,
although most analysts expect prices to slide in 2006 from this year's extremely
high levels. ... Phil Flynn, an analyst at Alaron Trading Corp., said Goldman's
projection isn't that far-fetched. But, he said, "it will take some type
of an event" to cause prices to spike above $100.
Developments of the last two years seem to bear out Goldman's assertion that
it will take a sustained period of much higher prices to bring down oil consumption.
Demand has grown strongly, even as prices have continued to set new records.
The EIA and other forecasters expect oil demand to grow this year despite high
prices, although at a slower pace than last year. But Goldman said current high
prices won't have much negative effect on consumption. U.S. gasoline prices,
currently at a record high above $2 a
gallon at the pump, will have to top $4 for Americans to stop buying gas-guzzling
SUVs, the bank said. As a result, Goldman said its estimate of
high prices may turn out to be conservative. But when demand does start to feel
the effects of high prices, and producers increase capacity, the global output
cushion will thicken, weighing down on prices, Goldman said."
One minute after
I posted this story, a reader wrote: "If they say oil might hit $105,
I'd read that to mean they just bought a huge number of oil call options...who
trusts these charlatans any more?"
Point well taken.
about catfish farms: The first thing you learn about catfish farms
is that the biggest threat to them as a business are pelicans. They can eat
their bodyweight of fish every day. The bird can easily weigh 25 lbs. And they're
great at catching your fish.
Their beak is designed to catch your fish. If you let them, they'll eat all
The second thing
you learn about fish farms is there's an unlimited demand, it seems, for fish.
The third thing
you learn is that farm raised fish can be healthier than ocean fish. The fish
farm I visited feeds its fish all organic feed -- not because of being a "do-gooder"
-- but simply because the resulting fish taste better.
The fourth thing you learn about fish farm is that these days they're a real
estate play, especially if they're located in a place developers want to build
houses -- millions of them.
California's Coachella Valley may be the last place in paradise to build affordable
housing -- despite recent prices going through the ceiling. I'll write more
about real estate on Monday. I'm off to San Diego to meet with more real California
estate people today.
Google's Gmail is excellent: My friend Frank
Derfler writes, "Yes, Harry, Google's gmail is excellent and yes I plan
to continue using it. At first, gmail was only available through a browser interface
and they put up ads selected according to the topic material in the email. Actually,
the ads were kind of fun.
But now, the
Google folks allow a POP3 interface. So, I do not quite get the business plan.
I get a Gigabyte of storage with superb SPAM, virus, and pfishing protection
for free. It has proven, so far, to be much more reliable than the mailboxes
I PAY Network Solutions to keep for me. Network Solutions email service sucks,
but their Web hosting is good, so I keep the domain names there. Gmail is much
more reliable than Hotmail. I have re-directed all of my incoming accounts to
route through gmail. I don't even let Outlook empty any other accounts.
What does Google
get in return for giving me all this for free? Information on my email content?
Huh. I'm missing something in the business plan and I'm waiting for the other
shoe to drop, but meanwhile it works great."
to write good, bad: SAN JOSE, Calif. - The latest competition to
see who can write the worst possible opening sentence for a novel has produced
entries even more deplorable than those last year, contest judges at San Jose
State University say. Here are the winners:
10. "As a
scientist, Throckmorton knew that if he were ever to break wind in the echo
chamber, he would never hear the end of it."
beyond the Narrows, the river widens."
a curvaceous figure that Venus would have envied, a tanned, unblemished oval
face framed with lustrous thick brown hair, deep azure-blue eyes fringed with
long black lashes, perfect teeth that vied for competition, and a small straight
nose, Marilee had a beauty that defied description."
a simple peasant, had only one thing on his mind as he crept along the East
wall: 'Andre creep... Andre creep... Andre creep.'"
Smedley, a man always on the cutting edge of narcissism, was about to give his
body and soul to a back alley sex-change surgeon to become the woman he loved."
Sarah had an abnormal fear of mice, it did not keep her from eeking out a living
at a local pet store."
looked quite bored and somewhat detached, but then penguins often do."
an over-ripe beefsteak tomato rimmed with cottage cheese, the corpulent remains
of Santa Claus lay dead on the hotel floor."
Hardware was the kind of private eye who didn't know the meaning of the word
'fear'; a man who could laugh in the face of danger and spit in the eye of death
-- in short, a moron with suicidal tendencies."
And the winner is...
1. "The sun
oozed over the horizon, shoved aside darkness, crept along the greensward, and,
with sickly fingers, pushed through the castle window, revealing the pillaged
princess, hand at throat, crown asunder, gaping in frenzied horror at the sated,
sodden amphibian lying beside her, disbelieving the magnitude of the frog's
deception, screaming madly, 'You lied!"
I personally liked
woman-child Kaa was mercilessly chained to the cruel post of the warrior-chief
Beast, with his barbarian tribe now stacking wood at her nubile feet, when the
strong clear voice of the poetic and heroic Handsomas roared, 'Flick your Bic,
crisp that chick, and you'll feel my steel through your last meal.' "
This column is about my personal search for the perfect investment. I don't
give investment advice. For that you have to be registered with regulatory authorities,
which I am not. I am a reporter and an investor. I make my daily column -- Monday
through Friday -- freely available for three reasons: Writing is good for sorting
things out in my brain. Second, the column is research for a book I'm writing
called "In Search of the Perfect Investment." Third, I encourage
my readers to send me their ideas, concerns and experiences. That way we can
all learn together. My email address is .
You can't click on my email address. You have to re-type it . This protects
me from software scanning the Internet for email addresses to spam. I have no
role in choosing the Google ads. Thus I cannot endorse any, though some look
mighty interesting. If you click on a link, Google may send me money. That money
will help pay Claire's law school tuition. Read more about Google AdSense,
here and here.