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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (26291)	10/11/2003 2:07:22 PM
From: John Carragher	Respond to of 206099

PKN was company mentioned this morning on one of the financial talk shows... everyone was rating it a buy... comments.

To: Dennis Roth who wrote (26291)	10/11/2003 8:25:27 PM
From: Archie Meeties	Respond to of 206099

You are grossly mistaken to think that a shift in pricing oil in dollars to euros is merely a symbolic move. Unless by symbolic you mean that it symbolizes the same thing that it did in 1945 when oil switched from pounds to dollars. I've never even considered your argument - that the $'s needed to service opec's debt would be enough to counterbalance the effect of all oil consuming nations exchanging their dollars for euros and then continuing to buy euros and exchange them for oil. Think about it. That could only be possible if 100% of all oil revenues of OPEC were used solely to service nothing but debt owed to the US! Implausible as it seemed, just out of curiousity, and because I sensed that you don't want to believe it, I looked at some numbers. SA, the most indebted of all OPEC countries needs about $20billion/year to service debt (I'm assuming all of their debt is US debt). The annual flow of dollar exchanged for oil is $120bill/year in SA alone. 120 - 20 = 100billion year of net dollars exchanged for oil in saudi arabia. If oil is sold in euros, then that's 100billion more dollars for sale/year. Let me put it another way, if this represented short sales of a stock, the short ratio would be something like 50:1. (market avg 5:1) Or another way, it would require something like 2 months of non stop dollar buying on the forex markets (as in, every dollar cross, every hour, every second, everywhere, would be a buy, and not a single dollar would be sold) to balance this problem. Remember, this is just Saudi Arabia. Plus the saudis own about 50 billion in forex dollars that they may or may not sell (it would make sense to sell now, wouldn't it?) Plus what they own in the US capital markets (which will be worth less as the dollar devalues). OK, that's hald of the equation. The other half is the oil consumers, who will no longer sell their currencies and buy dollars. They will now need euro reserves, not dollar ones. This change is a one time hit, however. You also forget that holders of dollar debt (US consumer, foreign debtors, opec, etc.) would prefer dollar devaluation, as this makes debt less pricey. I hope this is beoming clear. A world in which oil is priced in euros is a world suddenly awash in dollars looking for someplace to call home. Anticipation of this event alone is enough to cause dollar selling (it's already happening). Although I disagree that it means the end of the world for the US economy it does mean dollar deflation problem for a while. And it will hurt the economy in ways I don't know and I don't want to think about. I agree that the EURO economy is, according to the numbers we are supplied with, in terms of unemployment and growth, weak vs even a weakened US economy. But nevertheless, the world's investors have sold dollars and bought euros for the past year+. Global delusion? I think not. Currency flows are determined by the attractiveness of return on capital more than anything, so for the moment, the strength of the euro signifies the optimism of the world's investors to invest in europe. Moribund, perhaps, but apparently more attactive than the alternatives (although the loonie has done well). Here's what OPEC thinks about euros. opec.org Aside: I do not believe the official Russian line, not as articulated by Putin or his energy minister. I believe that at every turn Russia will work to undermine US influence, be it from the strategic treaty they signed with China (ever heard of it?), to their co-development of a nuclear reactor with Iran, to their intransigence about Iraq. In short, when I look at Putins actions I found him to be Napoleonic, right down to the gushing affection he has for Bush.