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8:30 AM EST, Wednesday, November 21, 2007: This morning, I woke up with a stiff back. But I woke up. I'll stretch, and my stiff back will go away. Tomorrow I'll give thanks for my stiff back (and the fact I'm still alive.) I'll also give thanks for my wife and two kids, and for portfolio diversification. When you manage a portfolio you can neither control nor predict -- which is what all of us do -- you give thanks for diversification. This is the tool that saves our tushy when things get squirrelly -- as they are now. I also give thanks for obsession. Being obsessive about due diligence, being obsessive about being extra-nice to your customers, being obsessive about your kids' education and being obsessive about CHECK, CHECK, CHECK are key success traits. Obsession works.

Oil moved over $99 yesterday: On its way to $150. You've heard me say that before. I'm a cracked record. My oil guru, Jim Kingsdale has just posted a new piece on his Energy Investment Strategies web site. In it he says,

The media is focused on oil as never before. Will it breach $100? Will it decouple from the dollar? Will it cause a recession? What does the giant Brazilian discovery mean? And of primary interest, how much oil could the world really produce if it tried its hardest? Oil is becoming the media’s new Paris Hilton and it’s getting a little hard to decipher the noise from the news. But let’s try.

The most interesting thing to me is how oil moved in the past week against a negative news background. The IEA reduced its forecast for oil demand last week, a U.S., if not global, recession was looking increasingly likely, and the weekly oil numbers failed to deliver the expected inventory decline. What happened? Oil dropped from the mid-90’s all the way down to…nearly $91. And then it bounced right back up.

A second interesting move was a noticeable reduction in the degree of backwardization in the “strip,” the series of oil futures prices going out five years. Backwardization means the prices are lower in later periods. It suggests that traders believe high prices are a more near term phenomenon than one that will persist. The opposite is called “contango” and the market seems to switch between the two for reasons that are not clear to me, or, as far as I’ve been able to discern so far, to anyone else either. If anyone knows of a good analysis of this, I’d love to get a reference to it. Anyway, over the past week or so, the out months of oil contracts have gotten stronger than the front months.

What these two actions say to me is that oil is damn strong and looking to get stronger in the more distant future. Why? The real answer: nobody knows. But for what it’s worth, I think it’s not because we might bomb Iran (we won’t), or because Pakistan may fall apart (it might), or because speculators are speculating (they are). It is simple because the reality of Peak Oil is becoming understood by more and more people. It’s sinking in that demand for oil is simply stronger than supply and that eventually supply will reach a peak and not be able to grow any further. People are starting to get it.

You can see that in the news. Not so much The Wall Street Journal’s front-page story on 11/19, which said that global production might max out at 100 mb/d in a few years (they’re still in denial; it will max out at a good deal less than that). But more because of the story a few days earlier quoting the Russian oil minister to the effect that Russian production will grow about 2% a year through 2010, instead of 10% as in the past. The logical conclusion from that: with the Russian economy growing at 7%, Russian oil exports will be declining. It is no small matter that Russian exports will decline from here because Russia produces more oil than any other country in the world.

In fact, declining exports are the essence of the story behind rising oil prices. They result not just from the exporters’ increasingly difficult production challenge of getting enough oil out of the ground to offset the natural declines in older fields. But just as important, as I have said before, declining exports also have a psychological basis, which is the new trend toward Hoarding. Underlying Russia’s slow projected growth, for example, is a series of decisions made in the Kremlin that Russia will not encourage (or allow) as much investment as is needed to maximize oil production.

Hoarding is a big part of the stalling growth of oil production today even though no country will admit to it. They blame lack of investments (Russia) or fear that alternative fuels will reduce future oil demand (Saudi Arabia) or the need to fund social programs instead of oil production investments (Chavez). But the reality is that they all look at the world and see the same thing: oil is becoming more scarce so it’s better to keep more of it in the ground for future sale or domestic use. They also, incidentally, notice that the U.S. has prohibited drilling off our coasts or in our Alaskan nature preserve, which looks like an excuse by “the smartest guys in the room” to hoard. I wish we actually were that smart.

In addition to the impressive strength of the oil price, another thing to notice is that while the oil price has been rising, stock prices have been falling, including to a lesser degree oil stocks. How ominous is that?

Please read JIm Kingsale's entire piece. Click here.

A heartwarming story: Remember the new (and still uncompleted) apartment building on New York's Central Park West overlooking the park? The development was so successful, the developers, selling off the plans, raised the prices on the apartments 19 times.

The typical price for the apartments was $2,500 a square foot. My friend paid $5,000 a square foot for one of the bigger apartments. Someone has just offered him $8,000 a square foot. And he hasn't moved in yet. I don't make this stuff up. Meantime, someone who bought a 2,700 square foot apartment for $6.7 million is trying to sell his apartment for $12.5 million -- and might well get it.

All those beaten-down biotechs will come back, one day: Put a handful of these biotechs -- Ziopharm, Vioquest, Hana Biosciences, Manhattan Pharmaceuticals -- in a portfolio that's labeled, "Don't look at until 2011." Here's what these four have in common: First, they're all way out of favor, beaten down to near-oblivion. All biotech is. Second, they've all sprung from Paramount BioSciences, a company run by an obsessive called Lindsay Rosenwald. Third, they've all got promising drugs, none of which have been approved, but some will be -- around 2011. At least one will succeed beyond your and my wildest expectations. A portfolio of these four would make a great bar mitzvah present.

My favorite magazine cover of late:

Look carefully. That's Chuck Prince of Citigroup, Jimmy Cayne of Bear Stearns, John Mack of Morgan Stanley and Stan O'Neal of Merrill Lynch. Now you know why they're called brokers. They'll all make you broker. And they did.

The perfect turkey receipe -- sick 1.

1. Cut aluminum foil into the desired shapes.

2. Arrange the turkey in the roasting pan, position the foil carefully.

3. Roast according to your own recipe and serve.

4. Watch your guests' faces...

What we're being sold -- sick 2

Poor Big Bird -- The sickest cartoon -- sick 3

And finally, the sickest Thanksgiving story of them all -- sick 4

‘A young man named John received a parrot as a gift. The parrot had a bad attitude and an even worse vocabulary. Every word out of the bird's mouth was rude, obnoxious and laced with profanity. John tried and tried to change the bird's attitude by consistently saying only polite words, playing soft music and anything else he could think of to "clean up" the bird's vocabulary.

Finally, John was fed up and he yelled at the parrot. The parrot yelled back. John shook the parrot and the parrot got angrier and even ruder. John, in desperation, threw up his hands, grabbed the bird and put him in the freezer. For a few minutes the parrot squawked and kicked and screamed.

Then suddenly there was a total quiet. Not a peep was heard for over a minute. Fearing that he'd hurt the parrot, John quickly opened the freezer door. The parrot calmly stepped out onto John's outstretched arms and said "I believe I may have offended you with my rude language and actions. I'm sincerely remorseful for my inappropriate transgressions and I fully intend to do everything I can to correct my rude and unforgivable behavior."

John was stunned at the change in the bird's attitude. As he was about to ask the parrot why he had made such a dramatic change in his behavior, the bird continued,

"May I ask what the turkey did?"”

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 on this site. Thus I cannot endorse, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.
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