Harry Newton's In Search of The Perfect Investment
Technology Investor. Auction Rate Securities. Auction Rate Preferreds.
8.:30 AM EST Tuesday, May 6, 2008:
I said oil was going to $100. Now I say it's
going to $200. You
don't have to become an oil guru to recognize five factors:
As China and India (and others) get richer and get cars, they use more oil.
Ditto for us and our idiotic love affair with the SUV, the Escalade and the
Suburban and the Expedition.
Old Oil is running out. New oil is in hard to reach, is in politically unstable
places and/or both.
OPEC's president, Chakib Khelil ""does not rule out oil prices reaching
$200 a barrel, even though supply is adequate, because the market is driven
by the dollar's slide." See. Sleepwalking
toward the oil precipice.
The Fed. By driving down interest rates, our Fed is driving up the price of
food, commodities, minerals and oil. For more on this, see a piece from this
week's Economist called Ben's
There's little left for hedge funds to gamble on. The stockmarket sucks. (That's
a technical term.)
are three easy ways to play oil. They're the ETFs:
OIL -- straight oil price. It's called the iPath Goldman Sachs Crude Oil Total
Return Index ETN.
OIH -- oil service providers.
IYE -- oil companies and service stocks. This ETF mimics the Dow Jones U.S.
favorite oil guru, Jim Kingsale, who writes Energy
Investment Strategies, posted a big important piece. Excerpts:
Surprise Party: Who Was There
The game plan
was that the Fed was done and the economy seemed suddenly not so weak so the
dollar would continue to strengthen. Plus the Saudis are bringing on
their last big new fields this year and next. Plus oil demand growth is slowing
all over except among the oil exporting countries. Plus oil tried to bust
$120 for a while and failed after a long and strong rise. So clearly the fundamentals
and the technicals are aligned to say that oil is headed for a correction.
And right on
schedule oil headed down for a test of $110, which held. It seemed like everyone
was following the script, but then things went kaplooey. Whats happened?
Well, there are a number of suspects who might resolve this mystery.
1. The dollar
stopped getting stronger. That might be partly because a number of analysts
over the weekend explained that last weeks miraculous Q1 GDP number
up .6% annualized was, like a lot of miracles, a bit questionable. It depended
importantly on the assumed inflation rate on which the government might have
been a tad optimistic, thus reporting stronger GDP than may actually be the
case. Furthermore, last weeks report of only a small loss of jobs last
month - 20,000 - was also a function of an assumption, this time something
called the birth/death number that relates to smaller businesses. Their birth/death
assumption turns out to be highly questionable and it resulted in a jobs report
that may have been vastly off base. So, bottom line, the economy may be a
lot weaker than the reports had caused the stock and futures markets to assume
it was. Today, those markets corrected taking the dollar down and gold and
2. Things are
getting worse in Nigeria, aggravating recent oil supply problems caused by
the British strike and previous Nigerian supply disruptions. I cannot accurately
describe what is happening in Nigeria. Im not sure many people really
know. A comprehensive report on the Nigerian oil situation in Aprils
Petroleum Review titled, Risky Business is the stuff of movie
scripts - think Casablanca. It seems the authorities are involved in the crimes.
The report says that when a kidnapping occurs, a fairly regular event,
to be the norm that SSS - the state security service responsible for intelligence
within the country - already knows who the perpetrators are and in what circumstances
the hostages are being held.
the militarily sophisticated rebel group that is supposedly seeking social
justice, has become more efficient. They have warned that during their attacks
on the oil infrastructure, if any security guard returns their fire he will
be killed. The result is that the guards flee when MEND arrives. There is
little or no effective security for the oil infrastructure now. MEND (which
may be short for mendacious) recently vowed to shut down the entire
oil export business. I doubt that would happen because MEND needs the oil
companies to be producing oil so that MEND can steal it. Still, Nigeria used
to supply 2.3 million b/d and now they are down a lot. Im not sure how
much, but the direction seems to be south.
3. It is starting
to appear that the Saudis are saving whatever spare capacity they may
have in case there is a true global emergency. Thus, they seem not to have
additional spare capacity to simply make up for ordinary supply disruptions
such as Nigeria and Bournemouth. Perhaps when KSA brings on its new fields
sometime later this year and next they will be more capable of bringing discipline
to the oil markets, but at this point they seem to have lost any pricing power
on the upside.
4. It is also
starting to seem that the Bushies are increasingly serious about reducing
the Iranian military involvement in Iraq. They frequently refer to a price
that must be paid by the Iranians for interference. Clearly they are
now pushing to put out new carrots. But it feels like they know the carrots
will be rejected and they just want to get the gesture out of the way to clear
the field for other actions. What sort? I would guess there could be limited
strategic bombings of munitions factories and like targets.
A military strike
against Iran could well bring chaos to the oil markets. No doubt that would
bring on whatever reserves KSA has, plus there would likely be releases from
the Strategic Petroleum Reserve in the U.S. and other countries. Still, the
possibility of a Bush military strike against Iran is a growing threat to
anyone short of oil.
5. Which brings
me to a major participant in the surprise oil rally: short covering. It appears
that all the reasons advanced above for oil to fall had attracted a significant
number of shorts to the oil market. Apparently, there was a mass exodus of
the shorts from the oil market Friday and today, as oil topped $120.
We are living
in interesting times.
they can't manage their own business, how can they manage your money? From today's
May 6 (Bloomberg)
-- UBS AG, battered by $17.3 billion of first-quarter losses at its investment-banking
unit, plans to cut 5,500 jobs. ...
reputation is tarnished,'' said Dieter Winet, a senior portfolio manager who
helps oversee 63 billion francs at Swisscanto Asset Management in Zurich.
The job cuts
are on top of 48,000 reductions announced by the world's biggest banks and
securities firms in the past year, as writedowns and losses from the U.S.
subprime crisis swelled to $319 billion. ...
Citigroup Inc., which has suffered almost $41 billion in writedowns and losses
from the subprime crisis, cut about 15,200 jobs and Merrill Lynch & Co.
reduced 5,220 positions. Investment banks may have to eliminate as much as
35 percent of employees as leveraged lending dwindles and the pace
of mergers and acquisitions slows, Kenneth Moelis, the former president of
UBS's investment bank, forecast last month.
buy a computer with Windows Vista: My 89-year
old friend complained bitterly on the weekend about his new Vista-loaded laptop.
He said it locked up frequently, was as slow as molasses and was cumbersome
to use . In short, he hated it. What could I do to "downgrade" him
to Windows XP? This is an old story. I repeat it again in case you missed my
warnings: Do not buy a computer loaded with Vista. End of story.
you buy an expensive SLR digital? There are three reasons:
It doesn't have "shutter lag." You catch the Kodak moment.
2. It can use bounce flash. And that's 1000% better than direct-on flash --
your only option in point-and-shoots.
3. Your friends will be impressed with your wallet and fortitude. SLRs and their
lenses are heavy.
are four reasons not to buy one:
New point and shoots are simply incredible. High pixels and increasingly short
shutter lag. If I presented you two I defy you to pick which picture
2. They fit in your pocket. You can take them everywhere. You don't have to
think about taking them.
3. You'll leave the SLR in the closet more than you ever imagined. I speak from
4. Bounce flash is pricey. I spent $900 on a powerful strobe and a huge, heavy
external battery to power it.
on Lyme Disease: From reader David Troen-Krasnow:
I thought that was you that had talked often about Lyme disease...I wish I
had remembered more.
This past summer,
while on Cape Cod my wife woke with a bite...swelling in her face and a headache...after
spending the morning trying to sleep it off...she called her Physician who
told her to go to the ER. She spent 8 hours at the ER, CAT scans, etc....follow
She has trouble
remembering words, she says. It scares her and has her Dr. do more tests...more
A few weeks
back...swelling in her face, numbness. I trip to the BI in Boston. MRI/CAT
Scans...an overnight stay....they want pictures of her to make sure her smile
isn't droopy...(by the way, she's 44). They tell her its high cholesterol
(based on a non fasted test...)
A few days after
the hospital stay she takes the kids to the pediatrician...she's still not
feeling 100% and Dr. notices...they talk and the first thing he asks..."been
tested for Lyme?"....wife's calls her Dr. and does another blood test.
Tests positive. Has a visit with the an infectious disease specialist Thursday.
We love this practice. I'm not surprised they caught it.
is two ERs never even looked for it, neither did her primary. When both incidents
occurred we were with my folks, both pharmacists (and dad is working on a
masters in Pain Management...he'll be 70 when he graduates)...again...no one
thought about it.
The fact that
its gone on for almost a year is concerning...but it least we know what it
The female deer tick, enlarged many times.
From the Minnesota
Department of Natural Resources:
Deer ticks are
also referred to as black-legged ticks or seed ticks. As the primary transmitters
of Lyme disease, they are ectoparasites (external parasites). They eat the
blood of animals, primarily deer and cattle. They are not able to jump onto
animals but rather must transfer from plant to host by the host brushing up
against the plant. They are generally found along forest paths and trails.
Two natural forms of tick control are the Ichneumon wasp and Guineafowl. The
two-year life cycle consists of the larva, nymph, and adult stages. When in
the immature stages, they feed on rodents, which is where the tick acquires
the spirochete that causes Lyme disease (see
Deer Ticks Control in Wisconsin). Symptoms of Lyme disease include
fever, headache, fatigue, and skin rash.
There's more on
Lyme Disease in yesterday's
column. We are now entering prime Lyme Disease season. Please be careful.
difference between men and women.
If Laura, Kate and Sarah go out for lunch, they will call each other Laura,
Kate and Sarah .
If Mike, Dave and John go out, they will affectionately refer to each other
as Fat Boy, Godzilla and Four-eyes.
When the bill arrives, Mike, Dave and John will each throw in $20, even though
it's only for $32.50.
When the girls get their bill, out come the pocket calculators.
A man has six items in his bathroom: toothbrush and toothpaste, shaving cream,
razor, a bar of soap, and a towel.
The average number of items in the typical woman's bathroom is 337.
A man cannot identify more than 20 of these items.
A woman has the last word in any argument.
Anything a man says after that is the beginning of a new argument.
A woman worries about the future until she gets a husband.
A man never worries about the future until he gets a wife.
A successful man is one who makes more money than his wife can spend.
A successful woman is one who can find such a man.
A woman marries a man expecting he will change, but he doesn't.
A man marries a woman expecting that she won't change, but she does.
A woman will dress up to go shopping, water the plants, empty the bins, answer
the phone, read a book, and get the post.
A man will dress up for weddings and funerals.
A woman knows all about her children. She knows about dentist appointments and
romances, best friends, favorite foods, secret fears and hopes and dreams.
A man is vaguely aware of some short people living in the house.
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
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