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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Cogito Ergo Sum who wrote (10692)	8/13/2004 10:46:58 PM
From: mishedlo	Respond to of 116555

maybe it's a like a giant protection racket and then one day your bluff is called In fact I am sure that is it. The more disasters like Iraq we have, the less outside influence we have. How many Roman troops did it take to capture Masada? Was it worth the final price? Is the US to Iraq Like... The Romans To Masada? How much relative force did it take for the Romans to take Masada? They eventually succeeded but at what cost? Was it worth it? How long did they even hold it? Roman Madness At Masada foigm.org US Madness In Iraq [link to be published soon] Picture of Masada jewishvirtuallibrary.org Picture of Baghdad asterweb.jpl.nasa.gov Mish

To: Cogito Ergo Sum who wrote (10692)	8/14/2004 1:53:56 AM
From: mishedlo	Respond to of 116555

How do we fix it? Dailt Reckoning How are we going to 'fix' a half-a-trillion trade deficit? How are we going to 'fix' another half-a-trillion federal deficit? How are we going to 'fix' a debt to GDP ratio at the highest level in history? How are we going to 'fix' a real estate market where the typical house is so expensive the typical house buyer can't afford it? How are we going to 'fix' an oil market... when nearly half the world's oil - formed over billions of years - is used up by two or three generations? What's the 'fix' for the American consumer - who earns less and less each year... but goes further and further into debt... while approximately 5,000 Asians stand ready to do his job at 1/10th the price? Some problems - like old age - can't be fixed. The best you can do is to reckon with them... to endure them... to face up to them... and live through them. Other problems, such as a debt problem, can be fixed, temporarily - by providing more credit at lower rates. It will appear to work, for a while. Later, the real problem will be worse than ever. Alan Greenspan has tried to fix America's economy by making it easier for people to borrow. Time after time, he's faced up to crises by providing more credit and lower interest rates. Now, the U.S. economy has gotten used to it... and lives on the savings of the rest of the world. That problem can't be fixed because no one in the Federal Reserve or the U.S. government has the courage to fix it. The system would not tolerate a real fixer. What politician is going to cut services and raise taxes? What Fed governor is going to stiffen up interest rates enough to cause a recession? No... some problems cannot be fixed. Instead, they fix themselves. Painfully.

To: Cogito Ergo Sum who wrote (10692)	8/14/2004 2:05:35 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Is the world really running out of oil? Byron King for the Daily Reckoning answers: "Yes, we have been "running out of oil" since about 1859, shortly after Col. Drake dug his first well near Titusville, Pennsylvania. It has all been downhill since then. The battlefields of predictive geology are littered with the corpses of wise men who reviewed the discovery rates and the production data, and determined with empirical certainty that, by such-and-such date, we all would be up the creek without a paddle and freezing in the dark. Wrong, wrong, wrong. Wrong some more. And wrong again." "Until a geologist from Shell Oil Company, named M. King Hubbert, predicted in 1958 that by 1971 the production of oil in the U.S. would "peak," and then commence an irreversible decline. Which is exactly what happened in 1971 and thereafter. Hubbert lived long enough to be vindicated, although it took about 20 years of hindsight clearly to see the "peak" in the rear-view mirror. Was he lucky? Or was he good? Or was he both lucky and good? Whatever he was, he was correct. You can't beat being correct, especially when you predict an event and a time frame. That is the kind of thing that people want to take to the bank. "In the past few years, the Hubbert analytical methodology has been applied to a world-wide data base. It is problematic, because the world is a very big place and the data is not always all that good. "But we know enough about planetary geology, the arrangement of sedimentary basins within the crust, and the formation and entrapment and preservation of oil to know a few things. "We (that is, the very smart people who work in the geology biz and the petroleum industry) know where the sedimentary basins are. The rest of the crust is basalt or other "hard" stuff with zero petroleum potential. "We (id.) are pretty sure we understand what it takes to form and entrap petroleum, not the least of which is many millions of years of a very specific type of geologic activity. (Forgive me for not going into detail just now. That is a lunchtime discussion.) "We (id.) are pretty sure that we know how much petroleum we have found, and we know how much has been produced over the past 145 years. "We (id.) are pretty sure we know where to look for more petroleum, and about how much there is to find. "We (id.) have identified about 90% of all the recoverable oil that we will ever find, and about half of that has been produced and consumed. "The world is presently at or near the "peak point" of oil production, currently about 81 million barrels per day, all of which are being consumed. About 20+ million of those daily barrels are consumed by the U.S.; a lot of it up in smoke as people are idle in traffic jams (another lunchtime discussion). It is highly unlikely that the total world production will ever exceed that number of 81 million. Using Hubbert methodology (lucky and good, recall), total world oil production is about to enter a phase of irreversible decline. Demand will have to decline as well, in the face of reduced availability. "The price of oil will rise (noticed anything lately?). The biggest demand growth has been in China, which has tripled its oil consumption in the past 15 years. China is now a significant oil importer, sucking up essentially "all" of the incremental increase that comes onto the market. And demand for oil in China is growing. "'What if we can sell a gallon of oil to every man in China,' asked John Rockefeller of Standard Oil Company, over 100 years ago. 'What if they all buy one?' is the question for today. The trends are not out friends. "Some day you will tell your grandchildren, 'Yes, I remember a time when we would burn oil to power ships and to drive cars.'" "They will say, 'Wow, grandpa, you mean you burned that precious resource as just plain old boiler or motive fuel?' "And you will say, 'Yep. I remember one time, a bunch of my friends and I jumped into a car and drove 150 miles just to go to a restaurant to eat steak.' "And they will say, 'Wow, grandpa. What's a steak?'"

To: Cogito Ergo Sum who wrote (10692)	8/14/2004 2:18:21 AM
From: mishedlo	Respond to of 116555

Iraq Shuts Down Main Oil Export Pipeline story.news.yahoo.com BAGHDAD (Reuters) - Authorities in southern Iraq (news - web sites) have shut down the main pipeline carrying oil for export after intelligence showed a rebel militia could strike infrastructure, an oil official said Saturday.

To: Cogito Ergo Sum who wrote (10692)	8/14/2004 11:07:38 AM
From: mishedlo	Respond to of 116555

UK Petroleum Review Chris Skrebowski media.globalpublicmedia.com He speaks about a talk with IEA's Fatih Birol. Interviewer: "Did you find anything that he said surprising in light of some of your previous exchanges?" C.S.: "Well, the IEA, being basically an aggregation of government views, tends to take a very positive view of future prospects, and finds it quite difficult to deal with things like depletion, with individual countries getting to peak production which you can't understand since governments don't wish to admit it very readily. And the IEA can't spend it's days sort of arguing with national governments so I was really rather surprised that he so readily admitted the depth and breadth of the problem and the paucity of upcoming projects and the threat this presented to the economy." ..... Interviewer: "Could you tell us the latest news on oil field megaprojects and why you have some rising concerns?" CS: "Certainly. The megaprojects is simply a tabulation I keep of all the most significant upcoming projects. I define this as ones where they have a claimed peak of 100.000 bpd or reserves of around 500 million boe. By historical standards these aren't that big a project, being a quarter of a size of the Forties field, but these days that appears to be about the appropriate level. So what I do is I monitor these very closely. And because companies don't keep these secret in any sense we can be fairly confident that this is a fairly accurate listing. So the concern is, that although there is a significant number of projects coming on at the end of the year, most of them have been delayed and they may yet be delayed again. Is is also not clear that with the very vigorous growth that they will be sufficient to cover the requirements. 2005 is also a very good year in terms of projects, although there has been this steady tendency for projects to get delayed and for projects to underperform to a greater or lesser extent. And then the last good year we have is 2006 where we have a fair slew of projects around the world but after that it gets thinner and thinner. Now this is serious because these projects don't happen very quickly. So if you begin a project in the morning it probably won't be coming onstream til 2010 and 2011 so what we are seeing is quite a large hole from 2007 onward. Now obviously the economist types will tell you that this is a result of a failure to invest in exploration. The more geologically bent will tend to argue that there is actually a lack of the resource, not a lack of money, it's a lack of the resource, it's more profound. In some sense it doesn't matter as we can already see this hole coming up."

To: Cogito Ergo Sum who wrote (10692)	8/14/2004 11:48:02 AM
From: mishedlo	Respond to of 116555

The following question came up on my FOOL board about the LSS short sterling play I mentioned. Am I right in assuming that the primary returns are in sterling? What, if any, are the implications for your "play" of a drop in the value of the pound? My reply: Good question. Yes there is a currency factor as I am paying in british pounds now when I expect them to drop. But drop by how much? I also think the US$ is about the most overvalued currency out there. Those are conflicting ideas and I did a post about that just a bit ago. Let's look at the play again here: futuresource.com I bought the 95.75's June 06 for 11 points. Assuming I am correct that hiking is done and there are no more hikes or that if there is another hike it will be taken away, then those will be worth at least 25 points sometime in the future. That is more than a 100% gain and should dwarf any currency loss of the pound vs the US$. It would take a 50% decline of the pound to the US$ to roughly break even points if my other assumptions are correct. Obviously if I am dead wrong and the UK just hikes and keeps hiking for another 2 years, then my calls just go to zero and currency is not a factor at all as 100% loss is 100% loss no matter what the currency. Now if the UK does no further hikes and manages to do a cut or two by June 2006 what happens? On two cuts the value of the calls goes from 11 to 75. I will say flat out there would be no likely exchange rate difference that would come close to taking away a 600% gain on the options. Let's consider one more thing. Q. What would cause the pound to drop significantly vs the US$? A. Rate Cuts! The more they cut the greater the currency loss but the bigger the overall gain IMO. If they cut 1 full point from here (not sure how likely that is but it is possible), those calls go from 11 to 125. BTW I think the 95.50's for 16 if you can get them there are a better play. As of now there is no OI at that strike. Finally, note that they do not even have to cut that to necessarily make that much. If the curve inverts and a cutting cycle is priced in: lets say thet skip the next hike, and in 6 months do a cut, it is possible that the futures start pricing in further cuts. Perhaps 1 or two more. I am not holding the play to June 2006, I am probably taking 3/4 of them off the table right then and there. The latter is my dream scenario but I am not really expecting that. If the calls slowly drift up with rate expectations chopping all around, I may attempt to write some higher strike against my calls in an attempt to lock in a no loss position for free with a chance to make 25-50 BPs against that. These calls even at 11 points are not really cheap. Eurodollar type futures and options are 25 units of the base currency. 25 * 11 would be $275 If we were talking about US$ and Eurodollars, but we are talking British pounds so we need to multiply that by the conversion rate of 1.83 or whatever, so... that is roughly $500 each for these things. Not cheap by any means but I am going to guess that at some point in the future those will be worth $2500 each but even if I am wrong about that and the UK just sits tight for 2 years (no hikes or cuts) one would expect to make $500 each plus or minus the currency fluctuation. Mish

To: Cogito Ergo Sum who wrote (10692)	8/14/2004 11:50:08 AM
From: mishedlo	Respond to of 116555

Some people might be interested in these audios. netcastdaily.com

To: Cogito Ergo Sum who wrote (10692)	8/14/2004 11:58:38 AM
From: mishedlo	Respond to of 116555

The Gold Report theaureport.com

To: Cogito Ergo Sum who wrote (10692)	8/14/2004 12:46:54 PM
From: mishedlo	Respond to of 116555

$450 Billion Pension Fund Shortfall August 13, 2004 By John Mauldin $450 Billion Pension Fund Shortfall Getting an "A" in College San Diego, Texas and Other Wonderful Climes The Bottom Looking Up, or the Top Looking Down? A Hundred Billion here, a Hundred Billion There frontlinethoughts.com ================================================================ Pensions will be the death of GM Mish

To: Cogito Ergo Sum who wrote (10692)	8/14/2004 8:52:07 PM
From: mishedlo	Respond to of 116555

russell 321gold.com So the game goes on. It will go on until the US sinks under an ocean of liabilities and debts and our foreign "partners" will no longer accept dollars. But no one knows exactly when that time will come. Next month, next year, three years from now? The signal for the fall could be a collapsing dollar. Or maybe we're getting the first hints of the fall now -- with the stock market heading down along with the dollar (the dollar got whacked big time today). The smart boys like Warren Buffett see the writing on the wall, and they have taken a multi-billion dollar position in foreign currencies. But foreign currencies are still junk paper, they're just better-quality junk than the dollar. In the end, the only time-tested, intrinsic money is gold. But as I said, when you hold gold or gold shares you're going to be right in the end -- but you're also playing "the waiting game." And waiting can be difficult, it can on occasions be scary, and it can certainly try your patience. This is what the central banking system has done to us. This is what the Federal Reserve is all about. This is the potential disaster that the paper money system has inflicted on all of us. My wise old father used to tell me during the Great Depression, "Dick," he'd say, "the only thing you can depend on in this world is a good education and what's between your ears." I've told my own kids the same thing. It's the God's honest truth.