Woops! Weak dollar doesn't mean lower trade deficit

[GRG55]

Re: Woops! Weak dollar doesn't mean lower trade deficit

I basically agree with you that the upward trend on energy is not finished, and that oil is headed to some outrageous figure: like $400/barrel in ten years. :eek:

Rather than gold, I would want to own OIL in this trend, especially oil income trusts. But gold--- not gold mines, GOLD--- would qualify for my second choice as a hedge against this disaster. (And $400 oil would be a disaster.)

My broker in Victoria told me to sell my oil and gas trusts during the last week of May. He said that the markets are over-due for a correction of some magnitude, so I sold out and took my profits.

But as I observe this situation, all I see around me are West Coast eco-morons, solar energy idiots, windmill idiots, government zoning idiots, Sierra Club law suits against development, plus on roads the usual: Hummers, vans, trucks, and SUVs.... So, I am thinking that we might not even see much of correction in the oil price. Why would oil correct when there is no cheap oil around to correct in price?

Still, I have made some piggy-profits in oil and gas trusts, and there is an old saying on Wall Street: "Bears make money, and bulls make money, but pigs get slaughtered." Nevertheless, I am looking for a dip to buy back into oil and gas trusts.

I don't see any end to this crisis until nuclear power plants are opening everywhere, and that day is at least ten years off--- probably twenty years off, or more. So here comes $400 oil and one hell of a depression, worldwide.

I hope your broker gave you good advice Steve. Most of the trusts are paying out less than 50% of their free cash flows in distributions. The chances of distribution increases is quite likely even if oil and gas prices decline somewhat (and we are seeing some already, such as Baytex).

On the other hand, the market could take quite a slice out of the entire energy complex [including the trusts] on any prolonged decline in crude oil price, just because the market is so "knee-jerk" reactionary these days.

Also, the trusts are viewed as yield instruments, and the danger of rising interest rates (note the change in the 2 year T-bonds this past week :eek is another reason the trusts may get sold off.

[Starving Steve]

Re: Woops! Weak dollar doesn't mean lower trade deficit

I basically agree with you that the upward trend on energy is not finished, and that oil is headed to some outrageous figure: like $400/barrel in ten years. :eek:

Rather than gold, I would want to own OIL in this trend, especially oil income trusts. But gold--- not gold mines, GOLD--- would qualify for my second choice as a hedge against this disaster. (And $400 oil would be a disaster.)

My broker in Victoria told me to sell my oil and gas trusts during the last week of May. He said that the markets are over-due for a correction of some magnitude, so I sold out and took my profits.

But as I observe this situation, all I see around me are West Coast eco-morons, solar energy idiots, windmill idiots, government zoning idiots, Sierra Club law suits against development, plus on roads the usual: Hummers, vans, trucks, and SUVs.... So, I am thinking that we might not even see much of correction in the oil price. Why would oil correct when there is no cheap oil around to correct in price?

Still, I have made some piggy-profits in oil and gas trusts, and there is an old saying on Wall Street: "Bears make money, and bulls make money, but pigs get slaughtered." Nevertheless, I am looking for a dip to buy back into oil and gas trusts.

I don't see any end to this crisis until nuclear power plants are opening everywhere, and that day is at least ten years off--- probably twenty years off, or more. So here comes $400 oil and one hell of a depression, worldwide.

Re: Woops! Weak dollar doesn't mean lower trade deficit

You guys have income; I don't. So, I would have to substitute teach forever, which I can't do because of my age and health. The point of this discussion is that life in retirement would be one hell of a lot easier with cheap energy, higher interest rates on savings, or both..... Class dismissed.

Steve - here is a serious, engaged answer.

If it makes you feel any better, I don't have a boat, I drive an economy car (bought used), rarely take vacations, live in modestly priced rental digs, take all the freelance work I can get on the side (if we put our minds to it, we can ALL find things to do supplementally), and I don't have any pension other than what I construct for myself. I don't go to restaurants, and am skilled at cooking lots of tasty meals with very economical ingredients (grew up in Italy so I know how to cook lots of stuff). I do get a social security statement every quarter telling me how much pension I qualify for, which I find unutterably depressing as that income will be vaporized when I can collect it. You know this as well as I do. All I have set aside is what I've built out of about 150K I gained as a single windfall profit on the resale of a home here in San Diego back in late 2004. As San Diego real estate windfall stories go, it's a quite modest one. I know one or two (hotheaded gamblers) who were "serial flippers" who made five times as much and actually walked away intact. My mother and father passed away and left me precisely zip, although they left a three quarter million dollar home in San Francisco to my sister. Don't ask me why, as I don't know, and I stopped caring.

I did a lot of careful homework, especially about what was breaking on the energy front, which comes about as close to an assured two decade trend as anything we've seen in investment themes for the past 100 years. I put two and two together and understood you can't have soaring real energy prices without sharply ramping inflation. And that this trend was permanent going forward. So I took all that money and put it into gold, silver and energy stocks (lots of uranium stocks but also stocks like Petrobras, Statoil, Petrochina and Schlumberger). Then I sold every last stock I owned last summer, and doubled down on metals. With these simple moves, I've doubled that windfall. I figure in the course of the next four to five years, it'll at least double again. It may not be a fancy retirement, and maybe it's only a double - in what will be a highly inflationary world by then - but I'm glad for whatever I can accomplish.

But this buy and hold investment in leveraged inflation plays, with 80%-90%+ of ones assets requires someone who firmly believes that we will have inflation as far as the eye can see, and that "deflation" is a load of baby-poop for Mishian credulous ninnies in the early 21st Century. You don't seem to believe that the PM's are headed where I think they are going, so you aren't going to take the same "risks" I am. At the other end of the spectrum, there are people who've maybe only just bought a bunch of precious metals in the past year and get all impatient when it "stops going up", and ask "why isn't gold going up?". Or maybe they are worried sick thinking "is it going to go down really hard this year, and if so I better sell first, because I only want to own it when it's going up?". :rolleyes:

Maybe they don't (yet) understand, that there will be a lot of times ahead of them when everyone around them is selling gold as though it had the plague, because the everyone will be "convinced" that it's going to collapse hugely after the FED or Central Banks have trumpeted to all the world some claim that they are about to embark on draconian new tight money policies. To credulously believe this is possible in the 2000's is not evidencing much clarity of thought - because the one defining characteristic of the next 15 ++ years is that the world will have to maintain easy money policies while it frantically figures out what to replace hydrocarbons with. Such investors in this gold market will never make a dime from this trend, because they will be running away from gold like scalded cats every time any new bit of news pops up reiterating some dreck about why gold's bubble is about to collapse..

As you well know, virtually no-one rode the 1970's bull market in precious metals up properly, because the vast majority of them got faked out at one scary correction or another. Or they just got bored, skeptical or impatient and sold it figuring to "buy it back when it started going up again". :p If I had a cabin or home in Canada today, I'd sell it, and put that money into gold, for at very least a double in the next five years, and more likely a quadruple. But that takes a bit of vision that this thing is really going somewhere meaningful. I've read your comments and you seem more skeptical than that, finding some reward in skepticism which I personally don't see. There is no bonanza for skeptics and besides, the events occurring in energy are so irrevocable that anyone who can't put two and two together and understand how this puts a lock on massive inflation is nearsighted, in my view. I was dumbfounded to see how the vast majority of iTulipers were solemnly swearing that "inflation belongs to the banks to issue" in discussions here six months ago. Apparently the idea that critical petroleum shortages could trigger epic inflation is a novel idea around here, so people have not had the benefit of this very significant investment signpost.

It seems many people buy into GLD (which is a flim-flam way to commit oneself to owning some of that metal anyway) and then sell it at the mere appearance of ambivalent headlines in the news. That's not investing, that's merely a series of nervous twitches. Anyone here who caves in to such buying and selling rather than committing to a full decade of fiat money destruction as oil prices climb inexorably to $400 a barrel, will not reap the rewards - oil prices in a runaway uptrend cannot be deflationary in a fiat world. Quite the contrary - this combination of factors assures the opposite. People buying and selling "paper metals" for "safety", like a stock. Eh, whatever. Others seem to conclude fearfully and irrationally that we'll have peak cheap oil (because iTulip vetted the idea and told them it was true) and yet we may at any time also slide into a terrible global deflation. The biggest resource squeeze of them all in 200 years, as the global pool of consumers expands to 8 billion, and it'll be "deflationary"? :rolleyes:

The overarching theme (energy running out) is one which I notice you've already firmly subscribed to. But you stop short of extrapolating where it must inevitably lead, which is that currencies must be employed to act as a shock absorber for that event. Currencies will be trashed by this, regardless of what Central Banks are coerced to do by unfunded other liabilities. Factor in all the rest of those horrific social cost liabilities, and anyone falling prey to fears that the net of all of this will be deflation because "at a certain point central banks will really crack down and "whip inflation" must have a head full of cotton wool. The central banks will be locked into a permanent position of lagging behind developments occurring in the petroleum markets. We've all been handed an investment theme on a platter - like a long slow fat pitch down the middle of the field. Anyone that does not want to "take a flyer" on catching that long, slow, fat pitch should not feel that they are taking the more conservative route. In this coming environment, not playing this trend with real conviction constitutes the greater ultimate risk.

[sadsack]

Re: Woops! Weak dollar doesn't mean lower trade deficit

SS, don't mind the ribbing.

Just remember, the one thing valued above all, at least as far as EJ and Fred are concerned, is information "on the ground." A literate account of the fate of J6P as it occurs is as valuable as the proverbial "canary in a coalmine" was to 19th century miners.

Lukester's just peeved that GRG55 defeated his sarcasm meter . . .

[Starving Steve]

Re: Woops! Weak dollar doesn't mean lower trade deficit

You guys have income; I don't. So, I would have to substitute teach forever, which I can't do because of my age and health.

Somehow, I see myself riding the loser-cruiser into Victoria from East Sooke each day, and taking the last bus home before sunset.

Perhaps a cup of coffee or tea during the day in Victoria, and that would be the high-point of the trip.

A bag of groceries to pick-up on the way home, to carry on the bus; that would be the day..... Lots of lugging, assuming that the plastic bag wouldn't split open on the way home.

Now tell us about your sailboat in San Diego, Luke. You do have one, don't you?

With a sailboat, you could just sail-off and tell the Americans to go suck-off when TSHTF.

The point of this discussion is that life in retirement would be one hell of a lot easier with cheap energy, higher interest rates on savings, or both..... Class dismissed.

Re: Woops! Weak dollar doesn't mean lower trade deficit

But what do I know? I am just Starving Steve, a Joe Six-pack.:confused:

Starving Steve - our resident bilious, jaundiced and savagely cynical Northern Californian (don't get him started on global warming or he'll talk your ear off) - with a nice Canadian dacha tucked away, to escape to when TSHTF. The ragged pack of American hapless broke, mangy mongrels may be starving and reduced to scavenging trash heaps when TSHTF, but Steve will sashay and glide up to his pristine pied-a-terre in the great white north and he'll laughing (at all the rest of us). Up there in the misty Vancouvergoinupland, where the streets are paved with glistening obblestones of pure gold (and people have to wear sunglasses due to the glare off the streets). Who knows what else SS has "tucked away" up there?

[touchring]

Re: Woops! Weak dollar doesn't mean lower trade deficit

This is common sense to me: Money goes to where the money is rewarded, and money flees nations where central bank policies destroy capital..... Dahhhhhhhh.

But what do I know? I am just Starving Steve, a Joe Six-pack.:confused:

This is what happens when the Fed tries to save itself using its own tools.

[Starving Steve]

Re: Woops! Weak dollar doesn't mean lower trade deficit

I think a weaker dollar means bigger trade deficits, more inflation, more unemployment, more jobs moving over-seas, lower asset prices, and more devaluation. But you can not explain this logic to the morons in the economics departments of the major universities.

This is common sense to me: Money goes to where the money is rewarded, and money flees nations where central bank policies destroy capital..... Dahhhhhhhh.

But what do I know? I am just Starving Steve, a Joe Six-pack.:confused:

[touchring]

Re: Woops! Weak dollar doesn't mean lower trade deficit

http://biz.yahoo.com/ap/080610/economy.html

Hmm, good for medical stuff and airplanes, but drastically hurt domestic car sales. Consumer goods still coming from abroad as 30% lower dollar doesn't overcome 5x income+tax differential.

Seems like Disco times will be returning soon.

Consumer imports are price inelastic.

By now, it is obvious that the deficit with China is a structural problem, not just a currency issue. Chinese manufacturers are able to pass on higher prices to American consumers. A weakened American dollar only means Americans will need to spend more money to buy the same amount of goods.

By the way, anyone knows how much of the tax credit ended up in more imports?

[phirang]

Re: Woops! Weak dollar doesn't mean lower trade deficit

dunno... if they cared so much about inflation, they'd shaddup and crank up the rates. anything else is jawboning in my book.

you are right, though: they're going after the commodity markets to distract ppl while they launder toxic bank assets.

[metalman]

Re: Woops! Weak dollar doesn't mean lower trade deficit

this jaw-boning by fukface paulson had a 25k mark-market cost on my PA lol.

do people really take this shyte seriously? i added to my gold juniors today...

heh, heh. apparently a lot of folks are falling for this shit.

like he and ben managed to move funds out the yield curve... out of short and into long duration treasuries into the long end...

	1 mo	3 mo	6 mo	1 yr	2 yr	3 yr	5 yr	7 yr	10 yr	20 yr	30 yr
06/02/08	1.94	1.85	1.99	2.17	2.51	2.82	3.28	3.56	3.98	4.69	4.68
06/03/08	1.96	1.85	2.00	2.14	2.45	2.75	3.21	3.50	3.92	4.64	4.63
06/04/08	1.85	1.84	1.99	2.14	2.47	2.78	3.26	3.55	3.98	4.72	4.71
06/05/08	1.79	1.85	2.00	2.15	2.52	2.84	3.34	3.63	4.06	4.77	4.75
06/06/08	1.75	1.85	2.00	2.12	2.40	2.73	3.20	3.50	3.94	4.67	4.65
06/09/08	1.80	1.89	2.12	2.29	2.73	3.03	3.41	3.65	4.02	4.68	4.64

out of gold, too...



the conundrum trade is still in force but maybe a deal was cut to raise oil output and in return we print fewer bonars, and the fed has some other voodoo up its sleeve to preserve the banking system as long rates rise. that said, rising mortgage rates are the last thing the fire economy needs just now.

[phirang]

Re: Woops! Weak dollar doesn't mean lower trade deficit

this jaw-boning by fukface paulson had a 25k mark-market cost on my PA lol.

do people really take this shyte seriously? i added to my gold juniors today...

[c1ue]

http://biz.yahoo.com/ap/080610/economy.html

The trade deficit jumped to the highest level in 13 months in April as America's bill for foreign crude oil soared to an all-time high.

The Commerce Department reported Tuesday that the gap between what the nation imports and what it sells abroad rose by 7.8 percent to $60.9 billion, the largest imbalance since March 2007.

U.S. export sales totaled $155.5 billion in April, up 3.3 percent to an all-time high, reflecting big gains in sales of commercial aircraft, farm machinery, medical equipment and computers.

But this increase was swamped by a 4.5 percent rise in imports, which also set a record at $216.4 billion, reflecting the huge increase in oil as well as big gains in imports of autos and consumer goods.

Hmm, good for medical stuff and airplanes, but drastically hurt domestic car sales. Consumer goods still coming from abroad as 30% lower dollar doesn't overcome 5x income+tax differential.

Seems like Disco times will be returning soon.