BUSTING the China Story Myths......................
Most Energy Bulls do not have even an elementary understanding of the China Story...nor it's Boom to Bust risks, or implications.
If you are Bullish on Oilpatch Stocks...you'd better get to know the realities of the China Story, the fragility of their banking system, their economy, their political climate and the near impossible task that lies ahead.
Once again; Oil CEO's like Lee Raymond are reminding investors of the inevitable Boom to Bust Nature of these Environments.
We laughed at Longtime Investing Legends like Warren Buffett and Julian Robertson when they warned us of the NASDAQ Bubble just 5 years ago...
- they were old, out of touch and not in tune with the New Paradigm and how this time it was going to be different.
Here's what Ichan just had to say about this new paradigm:
[""A great opportunity exists today for stockholders of Kerr - McGee," Icahn and venture partner Barry Rosenstein wrote in a March 3 letter to Kerr-McGee management, filed with regulators.
"Never before has there been such a disconnect between the stock market valuation of publicly traded exploration and production companies such as Kerr-McGee on a per barrel of oil equivalent of proved reserves basis and the value at which oil and gas futures are trading in the commodity markets."]
"never before...such a disconnect"
...hello people ?
Buffet & Robertson yesterday...
Lee Raymond & Carl Ichan today...
Still think Lee Raymond & Ichan are part of the vast right-wing conspiracy of Oilpatch Short Sellers...?
Okay; how about a little "CHINA" reality not spun by the American Press, a Big Oil CEO , or legendary Corporate Raider.
Here's an Interview from a Chinese Minister with the German Magazine Der Spiegel.
It might be the single most important article on China you ever read if you're an Energy PermaBull:
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"The Chinese Miracle Will End Soon"
DER SPIEGEL Interview with China's Deputy Minister of the Environment
Interview conducted by Andreas Lorenz
Translated from the German by Patrick Kessler
DER SPIEGEL 10/2005 - March 7, 2005
spiegel.de
SPIEGEL: China is dazzling the world with its booming economy, which grew by 9.5 percent. Aren't you pleased with this speed of growth?
Pan: Of course I am pleased with the success of China's economy. But at the same time I am worried.
** We are using too many raw materials to sustain this growth.**
<read that again...Energy Bulls - tattoo it on your foreheads so you see it everytime you look into the mirror>
To produce goods worth $10,000, for example, we need seven times more resources than Japan, nearly six times more than the United States and, perhaps most embarrassing, nearly three times more than India. Things can't, nor should they be allowed to go on like that.
< read that again...if you think China's Expansion is without the risk of collapse >
SPIEGEL: Such a viewpoint is not exactly widespread in your country.
< not widespread among Oilstock Bulls either >
Pan: Many factors are coming together here: Our raw materials are scarce, we don't have enough land, and our population is constantly growing. Currently, there are 1.3 billion people living in China, that's twice as many as 50 years ago. In 2020, there will be 1.5 billion people in China. Cities are growing but desert areas are expanding at the same time; habitable and usable land has been halved over the past 50 years.
SPIEGEL: Still, each year China is strengthening its reputation as an economic Wunderland.
Pan: This miracle will end soon because the environment can no longer keep pace.
Acid rain is falling on one third of the Chinese territory, half of the water in our seven largest rivers is completely useless, while one fourth of our citizens does not have access to clean drinking water.
One third of the urban population is breathing polluted air, and less than 20 percent of the trash in cities is treated and processed in an environmentally sustainable manner. Finally, five of the ten most polluted cities worldwide are in China.
SPIEGEL: How great are the effects of this environmental degradation on the economy?
Pan: It's massive. Because air and water are polluted, we are losing between 8 and 15 percent of our gross domestic product. And that doesn't include the costs for health.
SPIEGEL: But the economic growth fanatics in Beijing will still likely carry on just as before.
Pan: They're still playing the lead role -- for now. For them, the gross domestic product is the only yardstick by which to gauge the government's performance.
***But we are also making another mistake: We are convinced that a prospering economy automatically goes hand in hand with political stability. And I think that's a major blunder.***
** The faster the economy grows, the more quickly we will run the risk of a political crisis if the political reforms cannot keep pace.**
** If the gap between the poor and the rich widens, then regions within China and the society as a whole will become unstable.**
If our democracy and our legal system lag behind the overall economic development, various groups in the population won't be able to protect their own interests. And there's yet another mistake in this thinking.....
SPIEGEL: Which one?
Pan: It's the assumption that the economic growth will give us the financial resources to cope with the crises surrounding the environment, raw materials, and population growth.
SPIEGEL: Why can't that work?
Pan:
** There won't be enough money, and we are simply running out of time. Developed countries with a per capita gross national product of $8,000 to $10,000 can afford that, but we cannot. Before we reach $4,000 per person, different crises in all shapes and forms will hit us. Economically we won't be strong enough to overcome them.**
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PS:
re: Refining Capacity Fundamentals.
One of the single most important concepts that anyone bullish on Oilpatch Stocks needs to not only understand, but needs to understand thoroughly... are the fundamentals of Refining Capacity as related to inventory build ups, or draw downs....how it relates to gasoline prices/supply etc.
Vis a vie - Refining Capacity:
- the vast majority of Bulls on this thread earned an "F".
And they deserved to be beaten rapidly about the head with the fact.
- better from me; here and now...than Mr. Market blindsiding them - later.
...not that it matters; because 75-90% of them got blindsided by the last 3 Oilpatch cycles and nothing will change when this one rolls over.
Now; we can blow $moke up each others A$$ and BS each other "after the fact" about how much money we made by going 2000% max margin on a week when the OSX is still down -8 points, the XOI down - 30 points, the XNG down - 13 points from 2 weeks prior... or someone can point out the absolute complete mathematical & fundamentally incorrect myths - that the CNBC pundits are making and repeating - that many here are basing their investment idea's upon ...or we can challenge people to "LEARN" the facts, to do the math and to know the reality that CEO's like Lee Raymond are trying to tell us about...and at least be "armed" with some basic fundamental knowledge to go forth into the land of Mad-Max Margin New Paradigm Bliss ~
- just my .02 |
