Chart of the Day: Oil Half-Price Sale

This is an update of the chart I posted back in July. In only three, short months the price of oil has been halved. This is not surprising to those of us who have studied history.

Smart Money Bets On An Oil Peak (Not Peak Oil)

Bloomberg reports today that the “smart money” is now betting heavily on an oil peak (not peak oil):

Refinery executives are buying more of their own stock than at any time since 2000, prompting investors to bet that a retreat in oil will boost profits and reverse the biggest share decline in a decade.

Executives at 10 refining companies snapped up $2 million of their shares last month, twice what they sold, according to data from the Washington Service, which analyzes insider patterns for 500 institutional clients. That helped raise the average level of purchases to the highest in eight years…

Caxton Associates LLC, Citadel Investment Group LLC and Renaissance Technologies Corp., which oversee $64 billion in hedge-fund assets, also boosted bets that the shares will rebound, according to data compiled by Bloomberg.

Insider activity has been one of the most successful indicators I’ve tracked over the past decade. And money just don’t get much smarter than Bruce Kovner and Ken Griffin.

Source:
Refiner Insiders Buy Most Stock Since 2000 on Oil Bet
Michael Tsang and Eric Martin
Bloomberg
June 23, 2008

"Trillionaire bleeding-heart liberals"

I’m a huge fan of Paul McCartney but this is just not cool. The Telegraph reports on Sir Paul and his new hybrid car:

The Lexus LS600H, which costs £84,000, was a gift from Lexus to the 65-year-old former Beatle, who helped promote the hybrid vehicle.

But instead of arriving by boat as expected, the car was flown to Britain on a Korean Air flight, creating a carbon footprint almost 100 times bigger than if it had come by sea.

Wow. Even Lloyd Christmas couldn’t screw up that bad.

Carbon offsetting firm CO2balance.com said the plane journey would have caused a carbon footprint of 38,050kg, compared to 397kg for a three-week boat journey.

A carbon footprint is the measure of the impact that human activity has on the environment and is measured in units of carbon dioxide.

Co2balance.com Director Mike Rigby said: “That is the equivalent of driving the car around the world six times.”

The difference between doing good for the environment and trying to give the appearance of being an environmentalist is just huge.

Richard Jeni nailed it on the head:

(Click the preview for video.)

Sources:
Paul McCartney ‘horrified’ as his eco car is flown 7,000 miles from Japan
Rob Davies
Telegraph

The Next Commodity Bubble: Dirt?

From the AP:

The cause of the current global food crisis is mostly based on market forces, speculation and hoarding, experts say. But beyond the economics lie droughts and floods, plant diseases and pests, and all too often, poor soil.

A generation ago, through better types of plants, Earth’s food production exploded in what was then called the “green revolution.” Some people thought the problem of feeding the world was solved and moved on. However, developing these new “magic seeds” was the easy part. The crucial element, fertile soil, was missing.

I’m bidding for dirt, in size.

Source:
World’s Dirt Deteriorates
AP

Crude Bubbles

From Bloomberg:

The U.S. trade deficit narrowed more than forecast in March as imports dropped by the most in more than six years, reflecting the economic slowdown.

The gap shrank to $58.2 billion, the lowest this year, from a revised $61.7 billion in February, the Commerce Department said today in Washington. The shortfall with China was the smallest in two years.

Americans bought fewer automobiles and less crude oil, furniture and communications equipment from overseas as the economy grew at the slowest pace since 2001.

So the far-and-away largest buyer of crude has curtailed demand and still the price is making new, record-highs:

Crude oil for June delivery rose $2.09, or 1.7 percent, to $125.78 a barrel at 9:28 a.m. on the New York Mercantile Exchange. The contract surged to a record $126.20 today. Prices are up 8.4 percent this week, the biggest weekly gain in more than a year. Futures are more than double from a year ago.

What happened to supply and demand?

Goldman Sachs analyst Arjun N. Murti wrote in a report on May 6 that “the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.” Murti first wrote of a “super spike” in March 2005, predicting crude may trade between $50 and $105 a barrel through 2009.

“There’s been a paradox, prices have surged over the last week while we’ve had bearish headlines,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “Clearly there’s been a lot of fund buying on the back of Goldman’s super-spike repot. They were right on the nose last time.”

There’s the truth, right there. The price runup is due to nothing more than the “fear of missing” the next rally, essentially the definition of a “speculative bubble.”

Sources:
U.S. March Trade Deficit Narrowed More Than Forecast
Bob Willis
Bloomberg

Oil Climbs Above $126 to Record as Dollar Weakens Against Euro
Mark Shenk
Bloomberg

Tortillas or Tainted Gas Tanks?

From Reuters:

The United States should consider spiraling food prices that hurt the world’s poor when it sets policies that are funneling much of its corn crop into biofuel production, the World Bank said on Wednesday.

Global food prices for staples like wheat and rice have surged in recent years, causing hunger, riots and hoarding in poor countries. The trend is typically blamed on a combination of factors like higher food consumption in fast growing economies like China, and on bad weather that has hit crops.

But a global push to ramp up ethanol production is also seen pushing prices higher, and World Bank President Robert Zoellick said the United States should take this into account.

“The country has to assess the effect of that on the overall set of humanitarian issues in terms of the price of food products,” Zoellick told a news conference in Mexico City.

The U.S. government says corn-based ethanol, which can be used as a substitute for gasoline, can help reduce U.S. dependence on oil from unstable countries.

The U.S. Congress last year passed legislation that would require the country’s gasoline supply to include 36 billion gallons of renewable fuels by 2022. At the moment, more than a quarter of the U.S. corn crop is turned into biofuel.

I wonder how many people a “quarter of the U.S. corn crop” could feed…

Source:
U.S. urged to consider effect of ethanol on the poor
Noel Randewich
Reuters

Chart of the Day: CRB

The chart above shows the recent performance of the CRB Index, the major commodities index. It represents Oil, Gold, Metals, etc. – all the stuff that’s been going through the roof lately.

However, it looks like it may be putting in a double top.

The Soaring Cost of Poo

Everyone’s been “pinched” by rising gas prices. Maybe you’ve even heard about recent rice rationing. Bloomberg reports today on the lastest inflation scare:

The poop hit the fan when the last manure mulcher in Los Angeles closed shop.

The price of poop disposal is breaking the budgets of Los Angeles horse owners, as stable owners pass along the expense of taking horse droppings to landfills.

“The cost to get rid of this stuff has just skyrocketed,” said Royan Herman, 65, who runs the Peacock Hill and J-Bar Ranch stables in the San Fernando Valley with her husband, Mark. “A lot of young families aren’t able to afford a horse anymore.”

Can’t even take a worry free dump these days…

Source:
Poop Predicament Has Los Angeles Horse Owners Raising a Stink
Nadja Brandt
Bloomberg

Chart of the Day: CRB

The chart above shows the recent performance of the CRB Index, the major commodities index. It represents Oil, Gold, Metals, etc. – all the stuff that’s been going through the roof lately.

However, it looks like it may be putting in a double top.

The Soaring Cost of Poo

Everyone’s been “pinched” by rising gas prices. Maybe you’ve even heard about recent rice rationing. Bloomberg reports today on the lastest inflation scare:

The poop hit the fan when the last manure mulcher in Los Angeles closed shop.

The price of poop disposal is breaking the budgets of Los Angeles horse owners, as stable owners pass along the expense of taking horse droppings to landfills.

“The cost to get rid of this stuff has just skyrocketed,” said Royan Herman, 65, who runs the Peacock Hill and J-Bar Ranch stables in the San Fernando Valley with her husband, Mark. “A lot of young families aren’t able to afford a horse anymore.”

Can’t even take a worry free dump these days…

Source:
Poop Predicament Has Los Angeles Horse Owners Raising a Stink
Nadja Brandt
Bloomberg