What can Kill the Oil and Gold Bull?

Discussion in 'Commodity Futures' started by chewbacca, Jul 13, 2006.

  1. Please name one other easily transportable currency which is not at the mercy of politicians, and has roughly kept up with inflation since biblical times.
    #21     Jul 14, 2006
  2. spinn


    #22     Jul 14, 2006
  3. SteveD - thank you for advancing my education with your well-written and enlightening response.

    A question: How does a 6% CD yield equate to a PE of 15? If I'm not asking the question correctly, pretend that I am. :)
    #23     Jul 14, 2006
  4. SteveD


    Going back to the old days: Interest rates were "fixed" at the bank/sl etc etc.

    A $1,000,000 CD would earn 6% so divide 100 by 6 and you get 16.6. Remember I said "about". This is a benchmark measure to compare different investment vehicles to see where your money is going to be treated the best, (earn the most).

    I think the SP 500 is priced at about a 16/17 PE?

    In order to earn more I had to take some risk by putting my $1M in the stock market. Maybe buy some dividend paying stocks which are not bad. There is an argument that once a company starts paying a dividend that is an admission the company has no or very little growth prospects beyond basic GDP rate.

    But then came "growth stocks" which did not pay a dividend but had big time potential growth.

    Now the CD has no risk but it also does not have any "upside".

    So the "15/16 PE" of a 6% CD rate is a basic way to measure it against any other investment. Factor in time, growth and risk and one can make a more intelligent decision as where to invest one's money. Able to compare apples to apples or to HPQ, Dell, LOL

    You will hear people talk about not paying more than 2 times growth rate. This means if growth rate is 20% a year then a PE of 40 is OK.

    #24     Jul 15, 2006
  5. Oil is being propped up by those in power who benefit from terrorizing the American people with abseenly absurd suprious "at the pump prices" as we have.

    This Oil Terrorism has already been the undoing of so many Municipalities, City and County governments across this country as they just can not admit it publically, but will when their budgetary process comes to light to their citizenry. They too have this Oil Administration to thank for blowing their FY'06 & FY'07 and FY'08 budgets and we aren't finished with calendar year '06 yet.

    What will cause it to collapse back to its true $24.85 - $32.85 bbl price? Simply put the electorate of the US. Nothing else.

    Have you noticed the CNBC and other business channel reports talking up the price per barrel (bbl) to/over $80, just because of the middle east events?

    Have you noticed the trot out the almost constant problems in Nigeria as justification for speculative price hikes in the prices? Nigeria and those problems there are and have never previously mattered that much (during the Clinton years) as under this Oil Administration.

    There's a huge reckoning due the American people, and a huge refund of these immoral excesses.

    One thing is being fed the American people continues to be all these notions that we some how have consumed our way to these rediculous prices. No, this has been engineered to cause these prices and will be undone when they are no longer in power.
    #25     Jul 15, 2006
  6. SteveD


    I saw a statistic that, inflation adjusted, gold would have to go to $2300 an ounce to get even from the high of $800/ounce some 25 years ago.

    Some inflation hedge.

    And where do we keep $1,000,000 worth of gold? In the bad old bank? Or under the bed where the guy robs us?

    Since in bank why not just have a interest paying CD instead of dead gold?

    Steve D
    #26     Jul 15, 2006
  7. sorry, but this american-centric right to oil and belief that oil is a birth right is part of the problem, and I disagree. further, there is nothing immoral about a market (even if price discovery is partially broken) doing what it does.

    I could say human consumption of all meat, insisted continuing burning of fossil fuels contributing to global warming, ecological results of almost all economic and industrial 'progress' etc. etc. is all immoral - but the difference is that it doesn't hurt the pocketbook (at least in the short term). you're just griping because a sense of american entitlement to a bull stock market, a good economy, and cheap and easy ways to consume what you want.

    Your arguments are weak and unsubstantiated at best. they wreak of emotionalism and entitlement.

    blame the press, the speculators, etc. but a substantial part of this price increase is from legitimate supply worries. and our consumption isn't declining. look at the latest EIA reports (storage down 6 mil barrels from previous week).

    i repeat, two ways out of this one: global recession, or aggressive policy changes forcing reduced consumption.

    likely it'll take the first to stimulate the second to occur, and that means nothing will change for a few years.
    #27     Jul 15, 2006
  8. ================
    Exactly right;
    last OCTOBER however [strange month , OCT] had some pretty good downspikes in oil-gas stock sector.
    Uptrend resurrected again ,NOV, now

    Actually have made a long list on elite trader several times why oil-gas stock secter could downtrend; problem is market just doesnt seem to agree with much of it

    If high prices get high enough, enough could consider them immoral, like eating meat.However big energy & nurtitional & $$$ difference between grain fed animals & grass fed animals

    Hover it seems most peole prefer a bull or bear or venison steak;
    rather than eating grass that literal bulls & bears , deer eat:cool: Seems more enjoy meat like turtle soup, eather than bottom feeding on pond bottom, which literal turtles do :p
    #28     Jul 15, 2006
  9. cam0940


    Higher margin requirements for energies futures would immediately affect prices. The small traders would obviously be affected, but then CTAs and hedge funds would as well. Most CTAs are only committing about 30% of available equity to maintain positions due to risk management and basic prudence. Therefore a typical CTA account with $25,000 in equity is only holding 2 crude oil contracts (w/ current margins about $4725). Double the requirement and the CTA reduces his holdings for that account to 1 contract. The price would plummet as portfolios were restructured. In fact, the right to change margin requirements as necessary is specifcally reserved by SROs like the NYMEX for exactly these situations (among others).

    Someone mentioned that commercial hedgers (both those that produce oil and those who buy oil as a core component of their products... e.g. plastics manufacturers) aren't moving 1000 contract hedges around tick by tick and that is true. It is the speculator (individuals, CTAs, and hedge funds) that are providing the liquidity, and they are almost universally net long. They are the ones building a "war premium" into oil and gold. They are the disconnect in price discovery. Therefore if you limit their ability to sustain their positions, the price will plummet. It wouldn't build a base or support until some level that became "too tempting". We have no way of knowing what that price would be. But as long as specs can afford to bid prices higher (indeed, adding positions as the price rises with tight stops behind them), you're going to have oil and gold in the stratosphere.

    Last thing I wanted to say was that someone mocked Gold as an inflation hedge because $800 Gold in the early 80s would be equivalent to $2300 Gold today. First, Gold futures actually topped out at $1010 or so in February of 1981 if memory serves. Even at $800 we saw those prices as a spillover effect of the Hunt Brothers cornering the Silver market 30 feet away in the Silver pit. All precious metals rallied in unison based on what was happening in Silver. My point is, the 1981 price spike was itself a disconnect in Gold prices and--if we're going to measure with integrity--we can't use the artificial price peak as the base price from which to calcuate inflation rates or hedges.

    Finally, around 80% of the Gold that changes hands for retail purposes is indeed jewelry. But this quantity is dwarfed by the Gold that changes ownership through central banks and depository institutions. A store of value doesn't have to pay a dividend... it is a STORE, not an income producing asset. Your home doesn't have to pay you a dividend either. But its a real asset and one that tends to increase in value with inflation, thereby hedging against it.
    #29     Jul 15, 2006
  10. You've obviously never had the misfortune of living in a country that decides to slam the exit door shut when too many people decide that things are so bad that they need to take the money and run. History books are full of examples. Having all the money stashed in the bank is no use when the authorities decide to impose restrictions on how much of "your money" you can withdraw.
    #30     Jul 15, 2006