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Week in Review 11/17 – Oil Taken to the Woodshed

A good week for the broad market as the DOW closed at an all-time high with the NASDAQ and S&P 500 hitting 6 year highs.  The Semiconductors finally decided to join the party.  That’s good news as a rotation out of defensive stocks into semis could be a sign that this rally has more legs.  The semis closed up almost 5% for the week.

On the commodity front, a report released by the Cambridge Energy Research Associates casted doubt on the peak oil theory.  That  was enough to convince traders to sell – sending oil down nearly 4.5% for the week.  Oil appeared to trying to find bottom on Friday, but I thought that two weeks ago also.  Oil’s downdraft carried over to the other commodity markets as the metals fell in sympathy. Gold stocks were down 4.3% for the week.

Looks like I chose a fine time to introduce my fab four to you in “The Commodities Bull Market is Back”.  The market continued their pounding that started last Friday.  However, the bleeding may be stopping for BHP and PBR as both closed up on above average volume. Continue reading “Week in Review 11/17 – Oil Taken to the Woodshed”

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The Next Big Thing – Alternative Energy

I live in Massachusetts and formerly worked for a high-tech company, so I witnessed first hand the benefits of the dot com boom.  It was unbelievable as start-ups with nothing more than Power Point slides and a recognized technologist on staff were receiving multi-million dollar investments from the venture capital community.  It would have been a great time to be invested in limousines as the parking lots of these companies were filled with deal makers.  Towards the end of 2000 the excitement disappeared and the Venture Capitalist (VC) where nowhere to be found.  Over the next 6 years, start-ups were few and far between.  Power Point was no longer good enough, the companies needed proven technology with real customer commitments in hand.  Continue reading “The Next Big Thing – Alternative Energy”

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Cheap Gas Is On Its Way

The Peak Oil theory is based on the fundamental observation that the amount of oil under the ground is finite.  Oil in the US peaked in 1971.  This is a well-documented fact.   So, it seems reasonable that other countries will also peak at some time in the future.  The ramifications of this would be extremely high oil prices and would be devastating to any industrialized country dependent on inexpensive oil.  The US being a prime casualty.

A report released this week by Cambridge Energy Research Associates (CERA) stated that the peak oil theory is faulty.  According CERA’s Chairman Daniel Yergin:

 “Each time — whether it was the ‘gasoline famine’ at the end of WWI or the ‘permanent shortage’ of the 1970s — technology and the opening of new frontier areas has banished the specter of decline.  There’s no reason to think that technology is finished this time.”

If technology is going to be our savior – we better get in high gear.  I say we hedge our bet and start getting serious about alternative energy sources.

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Housing Free Fall Turning into Meltdown

Another person refusing to smoke the good stuff making its way around Wall Street. More warning signs – this time from Nouriel Roubini.rasta.gif

“For the last few weeks and months I have been writing dozens of detailed notes and blogs rebutting the utter nonsense that has been spewed – based on little or no data – on the alleged bottoming out of the housing recession. Even Alan Greenspan – the allegedly careful reader of  macro data – had joined this cheerleading clown show and the National Association of Realtors spin of half-lies that “we are near the bottom of the housing recession”. The actual data that  were coming out of the housing market in the last few weeks were clearly inconsistent with this cheerleading non-sense and spin. So, maybe these delusional optimists will now shut up for a while and listen to the numbers after today’s announcement that housing starts fell over 14% last month and that they are now at their six year low. Even worse, building permits, that are THE leading indicator of future housing activity, fell further by 6.3% and they are now at their lowest level since 1997.

Continue reading “Housing Free Fall Turning into Meltdown”

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Impact of the Current Glut in Homes

Here is a quote from Peter Schiff’s latest commentary.

“Furthermore, more so than during any other period of American history, consumer spending is now largely dependent home equity extractions and temporarily low mortgage payments. As a result, predictions as to how the real estate slowdown will impact the economy should be made by comparisons to the deflation of prior asset bubbles. However, fallout from the bursting of this bubble may be more damaging than virtually any financial correction that we have experienced since the Great Depression.”

I don’t know if I was open to this kind of commentary back in the internet bubble days or there weren’t many giving warning signs.  However, after experiencing a bubble melt-down my sensors are wide open now. I don’t like what I am seeing in the real estate market and I don’t care what the bubble heads are saying.  Some people have already been hurt by the housing slowdown and many more will be before this is over.

Click here for Peter Schiff’s latest commentary