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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.

All 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 your fish.

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."

How 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."

9. "Just beyond the Narrows, the river widens."

8. "With 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."

7. "Andre, a simple peasant, had only one thing on his mind as he crept along the East wall: 'Andre creep... Andre creep... Andre creep.'"

6. "Stanislaus 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."

5. "Although Sarah had an abnormal fear of mice, it did not keep her from eeking out a living at a local pet store."

4. "Stanley looked quite bored and somewhat detached, but then penguins often do."

3. "Like an over-ripe beefsteak tomato rimmed with cottage cheese, the corpulent remains of Santa Claus lay dead on the hotel floor."

2. "Mike 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 this one:

"The lovely 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.' "


Harry Newton

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, click here and here.
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