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

To: Salt'n'Peppa who wrote (120825)	5/18/2009 6:11:28 AM
From: axial	2 Recommendations Read Replies (1) \| Respond to of 206200

Hi S&P - Like you, I'm interested in playing devil's advocate. Especially since these days, I view the market as a place designed to take (not make) money. No matter what the would-be bulls think, the global economy has been hammered. There are major obstacles to rebuilding including a legacy of toxic assets that must be paid off, huge deficits, unprecedented debt, the potential for hyperinflation as a consequence of monetary policy, and its evil twin, deflation. "Sentiment has carried WTI from $50 to $60 in the last month, not fundamentals. " Think so; sentiment, misjudgement about the strength of the contraction, and misjudgement about the strength and timing of the comeback. Also, big players forced to sell last October have been buying back in. I've got a half-dozen guesses and a few suspicions but don't know what to believe. The supply line from wellhead to refineries is a big slinky - it bunches up in places, gets stretched in others. Petroleum reserves are an enormous safety valve for the US and China, so basically, they're down to just-in-time deliveries and that's another factor in the supply slinky. I see reports that crude will hit $70-$75 before it drops to $35-$40, and they don't make any sense to me. I see Saudis and Iranians in open conflict on supply, and doubt that OPEC can maintain discipline. Can't say what will happen, but sold out of oils last Monday. So far it's looking like the right move. We've got reduced demand, and that's for sure. We have high inventories, and OPEC can't maintain supply discipline - also a certainty. The only realistic weapon the Saudis have is to open the taps and depress the price so Iran makes negligible gains. The futures still look overpriced. Even a modest recovery is months away at best. Discounting seasonal changes I don't see crude going up at all. Can't say what the time horizon is for those buying oils; if recent big players bought with a 2 or 3-year outlook, then oils should hold up better than crude prices themselves - but oils have been moving with futures pretty closely lately. Don't know what will happen: I'm out and waiting to buy back when fundamentals and prices are more in line. If that means losing some profit, fine with me. Regards, Jim