Oil Bubble?

[Deang]

You think the way I think, which can be summarized as: If the market can manipulated, why wouldn't it be manipulated? Which is better for Exxxon, oil at $20 or oil at $150? What is the one key event which allowed this current price manipulation? DUH.

The process of manipulation isnt complete yet, and I think the pricing is a small part of it. Right now, the message is "drill here drill now" which has most Americans thinking the price at the pumps will start dropping a week later, which is absurd. It would be 10 years or more before we'd get any real production from those sites. My personal belief is that we are being manipulated into accepting seizure of Iraqi oil fields.

http://www.alternet.org/waroniraq/66076/

Another, less conspiritorial view is that big oil needs extra money to fund their new venture.

http://english.aljazeera.net/archive/2004/06/2008410113557117501.html

http://english.aljazeera.net/news/middleeast/2008/06/2008630164110408579.html

[Colin]

there is a 3-stage cycle to the markets, the final blow-off stage is ridiculous, prices can jump 50 to 300%, from $90 shoulders, crude can easily blow off to 180 or 270 a barrel from here, all it takes is a weekend scare about somethingLooking on a July 08 NYMEX crude monthly chart, we are indeed in a blow-off stage, the crack in prices will almost certainly test the major support just below $90, meaning crude will crash and drive through $90 before heading lower or finding support. I expect one or two months more of this topping action at the most! BTW, stocks and crude are almost always lowest in December. One of my favorite trades was buying Unleaded in the winter and selling it by spring, same as buying Heat and OJ in the summer and selling them by fall. They almost always work.

[InnerTuber]

OJ in the summer and selling them by fall. They almost always work.

That would seem to me to be a bet on two things. A summer hurricane and the following FL crop. Can't ignore those fundamentals forever! You would have won 22 times and lost 19 over the past 41 years! (Buy in June sell Oct analysis). Guess you would get creamed coming out of a freeze (historically). Wierd thing is there are few suprises anymore in weather which has hurt the FL gang. You can monitor a Florida freeze from your computer, anywhere in the world now. So, on average it would be a winning trade (slightly) over 40+ years, but you could lose your butt in any given year couldn't you?

[Jeff Matthews]

[:$] ... well, look at his avatar! Go figure!

[Colin]

I was thinking outright options, not timing the trades so much as giving a window, but yes the June/Oct spreads probably work, in fact, sounds like you might have the tools and the time to figure which calender spreads work best on Crude, Heat and Nolead futures and often they do work, I know Jack Bernstein used to be big on seasonal trades, but the NFA doesn't like such publicity, strange, becuase it helps bring speculators to market...

[Duke Spinner]

My personal belief is that we are being manipulated into accepting seizure of Iraqi oil fields.

Which is the one key event I referred to earlier. Yup.

C'mon guys ..

there is Absolutely NO WAY the US Government will seize territory belong to some other National State

[oldtimer]

FULL MOON AT 8:36AM TUE JAN 22! Less than one hour before the US markets Open, the Full Moon could maximize emotionality and produce a temporary low TODAY! There was a similar incident in the 2002 decline where, on July 24, a Full Moon coincided with the NY Open. We were on CNBC later that day and mentioned to Bill Griffeth that we thought the low was in place for now, but that it would be lower in October '02. Our markets rallied for one month, followed by drifting lower into October 9!

Once more, the Full Moon close to the NYSE Open may indeed maximize selling pressure early in the day. HOWEVER, there are more negatives in the SKY Charts for Thursday, Jan. 24th. Look for news of worldwide import to further exacerbate and/or accelerate these negative emotions.

We are also concerned about market reactions to the Eclipse Series on the evenings of Feb 6 & 20.

Although the Mars/Uranus Crash Cycle is NOT active during this frame, that does not protect against a serious decline, as long as it is not one of the 8 or 9 worst of the last century! That will be reserved for the period Aug '08 thru March '09.

If THIS one does compete with these larger historical negatives, then the above dates will witness a greater Crash than has yet been experienced!

Re Metals:

We called for a HIGH in Oil, Gold and CRB Index as of the weekend of Jan. 11-14 and it seems that commodity inflation has maximized very close to our expectations. Neptune semi-square to Jupiter that Sunday put in a top of intermediate significance, that will probably hold for at least several weeks!

-------------

Using astrology seems about as good as any other method.

Holy crap! Only an idiot would take this stuff seriously. But there are lots of idiots. Everywhere. If your job is day to day trading then fine, do what you need to do. If it is not your job, then a report such as this is distortion, major undeniable anyone can hear distortion, even OB could hear it.

[Jeff Matthews]

Oldie, Mark was obviously using wit and sarcasm to exaggerate a somewhat valid general statement.

[Fish]

The 5 or 10 years till oil comes up case against drilling always makes me think.....I wonder if 5 or 10 years from now they'll still be saying,it would take 5 to 10 years to even start pumping blah blah blah.......

The US take over another nations oil field with the military,that's beyond comedy.The funniest part is if they were us they'd just take our oil and turn us into slaves or kill us.The US can't really do much anywhere because this country is divided right down the middle,united we stand divided we fall...........you know history..........

[oldtimer]

Exactly mark. Superstition reigns until everyone loses their shirt. The last time I looked, Shanghai was down something near 50% year on year. The Chinese have their own irrational beliefs, just as we and/or the rest of the world do.

[oldtimer]

My favorite---

"

It is sad to report that the monkeys have thrown their last darts in the long-running competition that has graced the pages of The Wall Street Journal for the past 14 years and which set out to establish, admittedly unscientifically, whether there was any truth in the theory that stock markets are so "efficient" none of us can hope to beat them over time.

Every month since 1988 four professional investors have pitted their stock-picking skills against four darts thrown at the share price pages by members of the Journal staff. The objective has been to see which group recorded the highest share price gains over the subsequent six monthstarted as a bit of fun, prompted by the success of one of the great classic books about stock market investing, A Random Walk Down Wall Street (published in 1973, now into its ninth much-revised edition and still well worth reading).

The author of the book, Professor Burton Malkiel, of Princeton University, was one of the first academics to popularise the notion that it is near- impossible to predict accurately and consistently in advance which shares will outperform in the future. The argument behind efficient market theory, as it is known, is that all available information is quickly absorbed and reflected in current share prices.

As a result, you can argue - and Professor Malkiel does - that shares chosen at random are just as likely to perform well as those selected by professionals. "Taken to its logical extreme", he wrote, it means "a blindfolded monkey throwing darts at a newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by the experts".

ta da.........

And just what the hey have I been saying all these years? Although four darts are not enough for statistical validity.

[Colin]

The random walk argument Mark, is that a rising tide lifts all boats. It is not an argument against tides or boating. The fact that professionals have a hard time beating the tide, especially with their extremely high turnover ratio, does not mean that people should not buy stocks or that investing is a sheer gamble. It only means that humans are poor at specific predictions.

[Coytee]

Here's my disclaimer: Read your prospectus carefully! I hope everyone hits the jackpot!

For the record, your generic stock (be it IBM, Microsoft, Walmart...) will NOT have a prospectus that you can look at today. A prospectus is an offering document for new issues (and stocks that have been trading for say...90 days or more, aren't 'new' anymore)

You can get a prospectus on mutual funds (open ended) because they're continuesly being offered... Many other types of things have a prospectus, REITS, LP's....

But... you will not find a (current) prospectus on any given stock that has been trading for a while. I always got a chuckle when I'd be talking to someone about a stock idea and they ask me to send them a prospectus....

Because of this... many years ago, probably 1988/1989?? There was a company that was trying to go public. The Mustang Ranch. The Mustang Ranch turned out to be a brothel located in Nevada I think?

Oh...let me digress.... What IS a prospectus? In my mind, to boil it down to several sentences... it is nothing more than a disclaimer, telling you that the security you're looking at (especially if a new issue stock), has no trading history, might not maintain being a viable company, has tons of competitors, has lost money and has no future of making any money.... in short..... anything that can go wrong, WILL go wrong and you are an idiot for buying this stock.

That is the basic premise of any prospectus.

Back to the Mustang Ranch... I had a gut feeling that this might be an interesting prospectus to read since they also get into the business practices of said company.

I called one of the firms in the selling group (those who were selling the new IPO shares) and asked for one to be sent to me. I received it and in fact, I THINK I still have it today, buried somewhere at home.

It was kind of fun reading it as it talked about the "associates" of the company (prostitutes), and how the 'associates' get various medical exams on a regular basis... that the 'associates' might engage in activities to 'entertain' guests.....

The double speak of this booklet was really rather comical.

Anyways....Once a company actually goes public and starts to trade, the prospectus is essentially trash.

[Jeff Matthews]

The random walk argument Mark, is that a rising tide lifts all boats. It is not an argument against tides or boating. The fact that professionals have a hard time beating the tide, especially with their extremely high turnover ratio, does not mean that people should not buy stocks or that investing is a sheer gamble. It only means that humans are poor at specific predictions.

... which reinforces my "fad theory" on investment. If you happen to get in before the fad hits, you can ride the wave. But be careful not to get caught up in the failed "suede shoes will be in style forever" approach that tends to wipe out gains.

There are certain basic principles to achieving possible success under the fad theory.

Principle 1: See if you can spot something illogical that drives a spending frenzy. It is rare to achieve abnormally high gains unless there exists an illogical driving force. The converse of this principle is, if the investment sounds logical to the skeptical, it is probably not a high return investment.

Principle 2: When the skeptics start thinking seriously about joining the lunatics in the frenzy, the fad is near the end of its course. Get out.

This is a very general set of concepts that I believe to be very true. I would like to refine the general statements to a more statistical approach to try to spot the next fad.

Right now, there is no lunatic drive going on. One might argue oil, but the market is more or less reacting to oil under duress. This leads to the third principle.

Principle 3: Market reactions which occur under duress do not equate to a true fad because the actors do not pay higher prices on their own volition. That is not to say abnormal profits cannot be attained in the absence of fad; however, fad is not present and thus, not the driving force.

I really am in the dark about what will be the next fad. If I just had to pick "something," I will say real estate again. Inventories of foreclosures are at highs and rapidly growing. Mortgage companies seem to have added "short-sale questions and procedures" as one of their automated "press 3 to...." telephone features. Interest rates remain low. Credit is tight, but again, if I have to pick something, I will surmise credit will loosen in order to relieve foreclosure inventory levels. This leads to the fourth principle.

Principle 4: Everything I just said in the preceding paragraph is based on logical reasoning and therefore, my prediction is likely wrong. One must be very careful not to violate the first principle. []

[billybob]

Did the Mustang Ranch actually go public, and what was it's symbol...MSRH....that would be a little confusing at first...." You say what?" "I thought you were talking about horses..."

[Jeff Matthews]

Coytee, your discussion of the contents of a prospectus rings true and reminds me much of a limited partnership agreement entered into by various doctors who were convinced to roll their practices into a single LP and get rich off of an IPO. Of course, the mastermind was a non-doctor, financial whiz who convinced doctors making good money that if they would part with their practices in the manner indicated, they would make silly money from the IPO. Of course, greed set in.

The funniest part of the whole deal was that the financial whiz was the general partner (which for those who do not know, is the partner with the sole managing authority of the limited partnership), and he was to receive something like 30-40% of the LP for his brilliance.

You can tell by my word choice that the thing never got off the ground, and there were some very disappointed docs who were essentially employees of this partnership they created, sending control to the financial whiz that got them into and parting with 30-40% of their money. But.... whiz kid retained a fairly esteemed firm to package the deal with all the disclaimers you mentioned. It essentially gave any warning you could think of. The basic gist of the documents were to the effect of "If you do this deal, you certainly must know, and admit you know, you are merely gambling. You can count on nothing to happen other than the agreement, as written, will be binding."

[Coytee]

Did the Mustang Ranch actually go public, and what was it's symbol...MSRH....that would be a little confusing at first...." You say what?" "I thought you were talking about horses..."

I'm foggy on my memory but I don't think they did go public. I seem to recall at the time that there was (yet another) issue/problem with something and there was either a delay or they simply killed the deal. I don't think I actually had a final prospectus, but rather a "red herring" which is really a preliminary prospectus.

Not having been one to pay any entertainment dues there, I don't really know much about the place [A] but I seem to recall hearing some chit chat on the news where they might have even at one point, gone out of business??

For what ever did or didn't happen, I think there were some issues with them, be it policitcal or maybe securities related. It still made for a very intersting read. Funny enough that I specifically took the prospectus home to keep it for future giggles.

[Coytee]

The basic gist of the documents were to the effect of "If you do this deal, you certainly must know, and admit you know, you are merely gambling. You can count on nothing to happen other than the agreement, as written, will be binding."

Yep, you hit it on the head. This next comment might sound wrong on several levels to someone and I'm not going to go into much detail explaining my thoughts any deeper but...

I don't really put much of ANY creedence into a prospectus nor do I care/bother to read one anymore (does anyone ACTUALLY read one??)!!

They are nothing more than a huge disclaimer telling you that you are an idiot for making this investment and they don't really tell you much about what is going on. Their entire purpose (in my opinion) is to cover the hiney of the underwriters and to try to dissuade you from making the purchase, this way they have a defensable position if/when something does go wrong... "after all Mr. Judge, we DID say in the prospectus that there was no market for this security, so where is the surprise after we took it public that there WAS no market and it's now worthlelss???"

Yeah.... they're really junk in my book.

[Jeff Matthews]

The basic gist of the documents were to the effect of "If you do this deal, you certainly must know, and admit you know, you are merely gambling. You can count on nothing to happen other than the agreement, as written, will be binding."

Yep, you hit it on the head. This next comment might sound wrong on several levels to someone and I'm not going to go into much detail explaining my thoughts any deeper but...

I don't really put much of ANY creedence into a prospectus nor do I care/bother to read one anymore (does anyone ACTUALLY read one??)!!

They are nothing more than a huge disclaimer telling you that you are an idiot for making this investment and they don't really tell you much about what is going on. Their entire purpose (in my opinion) is to cover the hiney of the underwriters and to try to dissuade you from making the purchase, this way they have a defensable position if/when something does go wrong... "after all Mr. Judge, we DID say in the prospectus that there was no market for this security, so where is the surprise after we took it public that there WAS no market and it's now worthlelss???"

Yeah.... they're really junk in my book.

Yep. I've always been torn between the two competing principles. You have all sorts of graphs and favorable-looking financial projections. But then, you have language that says "don't count on any of this to happen." Well if you can't count on it, then why make the representation in the first place? Obviously, the graphs and projections were there for you to rely on, or they would not have been there. They are there for you to rely on more than you would rely on the disclaimer.

Still, the current legal philosophy is as long as there was a disclaimer, reliance was not proper. Odd, but maybe necessary.

[Fish]

I just heard a great new term for this session,THE DRILL NOTHIN' CONGRESS.I find it hard to believe more people don't see this for what it is,a few kooks keeping us from developing all the energy we need to suppliment supplies.They intend to run this country into the ground for their interest.Harry??????