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Finding the Bottom in Commodities
Re-Running the Bulls
In just the last couple of months, commodity stock prices have melted like ice cream on a hot summer day. I’ve been burning the phone line and firing off e-mail to people in the field about what they see.
Over the years, I’ve developed quite a network of contacts. If I have a question about natural gas in Kentucky, I know someone who can tell me what I need to know. He’ll know exactly what property I’m talking about and who the operators are. If I want to know about Barnett Shale, I know a guy who’s spent many…
11Sep2008 | Whiskey and Gunpowder | Comments Off | ContinuedInternational Gold Trade
Operation Meltdown, Part III: Only Three Weeks and 170 Tons to Go
Once upon a time money meant gold (and ever less silver), freely exchanged between private individuals looking to buy and sell, invest and spend.
But then came the 20th century.
It’s worth bearing in mind — now that the 20th century’s ended, if not quite shuffled off — that the dollar only became the world’s No.1 money because the United States owned pretty much all of the gold. As the radioactive dust cleared at the end of the Second World War, Washington controlled well over two-thirds of the world’s entire monetary…
10Sep2008 | Whiskey and Gunpowder | Comments Off | ContinuedGovernment Gold Control
Operation Meltdown, Part II:
Hoarding for War, Vaulting for Victory
It seems an odd quirk of history that Washington’s post-War obsession with its nationalized gold reserves — an obsession which Ian Fleming neatly tapped into with Goldfinger in 1959 — came so long after what historians call the “classical†Gold Standard ended.
Indeed, central bank gold reserves worldwide rose almost five-fold over the 50 years following the start of WWI in 1914 — the date traditionally given as the death of the international Gold Standard.
That system, running roughly between Bismarck’s defeat of France in 1871 and the bloody stand-off at Ypres a half-century…
9Sep2008 | Whiskey and Gunpowder | Comments Off | ContinuedRemoving the Gold Standard
Operation Meltdown, Part I
“Fear, Mr. Bond, takes gold out of circulation and hoards it against the evil day. In a period of history when every tomorrow may be the evil day, it is fair to say that a fat proportion of the gold dug out of one corner of the earth is at once buried again in another corner…â€
— Ian Fleming’s Goldfinger (1959)
Fifty years ago — just as the fictional 007 was thwarting Auric Goldfinger’s plan to empty Fort Knox and take America’s gold to Soviet Moscow — the U.S. Treasury feared a very genuine loss of its real gold…
8Sep2008 | Whiskey and Gunpowder | Comments Off | ContinuedPresidential Energy Policy
The Energy President
In the world of energy and scarcity, the name of the next president will matter to us quite a bit. “People are policy,†as Ronald Reagan used to say.
But then again, a lot of energy and scarcity facts defy party labels. The energy resources are out there.
They are what they are and where they are. We can exploit the resources or not. But it’s not like in Star Trek. There’s no “dilithium†power source out there to keep the economy running.
So for the next president and his administration, it’s a question of doing something. The U.S. can always…
5Sep2008 | Whiskey and Gunpowder | Comments Off | ContinuedThe Gold Market
Bulls and Bears Still Fighting Over Trend
The charts are playing tricks. A bear trap in April stopped short of turning into an all-out bearish failure with a bull trap in July.
In English, please? The bulls got suckered.
Gold prices fell through their $850 May low now, which means that I was wrong to think that the market had discounted a reversal in oil and the dollar, both of which we fully expected.
But could the market be setting up the bears here?
The last time that we saw two false signals in a row was in 2004, when a marginal new high reversed…
3Sep2008 | Whiskey and Gunpowder | Comments Off | ContinuedThe Western World Running on “Eâ€
Western nations — the U.S., in particular — are now experiencing the bow wave of a profound change in the current and future availability of oil. According to recently published data, oil output from all major Western oil companies is on an ominous decline trend. Exxon Mobil, for example, announced that its average oil output has fallen by 614,000 barrels per day in 2008.
Western oil majors like Exxon are finding it harder than ever to identify new prospects and successfully complete new oil projects. This comes despite the fact that the oil industry is flush with profits from upstream operations,…
2Sep2008 | Whiskey and Gunpowder | Comments Off | ContinuedInvesting in Innovators
Looking for the Innovators
While in Vienna last month, I grabbed hold of the international edition of The Wall Street Journal. Over a classic Viennese breakfast of coffee, a boiled egg and pastry, I stumbled across an interview with Ted Forstmann, titled, “The Credit Crisis Is Going to Get Worse.â€
I hadn’t seen Forstmann’s name in years. He once lorded over one of the world’s most famous private equity firms, Forstmann Little. For a time, it was, as the Journal notes, “the most successful private equity firm in the world, renowned for both its outsized returns and its caution.†When things got…
29Aug2008 | Whiskey and Gunpowder | Comments Off | ContinuedResources Hit the Dog Days
Oil is selling in the range of $113 per barrel, down from its recent high of $146. Gold is selling below $800 per ounce, down significantly from its springtime high of over $1,000. With a drop in excess of 20 percent for each item, it’s fair to say that we are in a bear market for both oil and gold.
Prices for other items, like natural gas, coal, silver, platinum, copper, zinc — and even a ubiquitous food commodity like corn — are all down sharply from much higher levels in recent months. So what’s going on with the pricing for…
27Aug2008 | Whiskey and Gunpowder | Comments Off | ContinuedThe Next Land Rush
“All a man has to do to get rich in America is find out where people are going, get there first and buy land.â€
— Gen. Douglas MacArthur
Bob Hope, the great American comedian and Hollywood star, was actually born in England. He once quipped, “I left England at the age of 4 when I found out I couldn’t be king.â€
He struggled early to make it in showbiz. “Before long, I was in debt. I had holes in my shoes, and I was eating doughnuts and coffee,†Hope recalled. “And when I met a friend who bought me a meal, I had…
26Aug2008 | Whiskey and Gunpowder | Comments Off | Continued
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