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Markets are constantly in a state of uncertainty and flux and money is make by discounting the obvious and betting on the unexpected. - George Soros

“Buying is going where the prices are the lowest”

Jul.25, 2008 in Investment Opinions, U.S Hot Stocks

Not a very plausible scenario for the very simple reason of “buying is going where the prices are the lowest”…and most other sellers of the stuff are not nations or governments headed by lunatics.Thus Iran would instantly lose all customers, throwing his own country into a depression,and it is known that his country’s population is ALREADY quite fed up with the poor economy and slow or non-existent GDP growth(all this besides endless abuses of human rights…)WE should also remember that MOST importers of oil maintain a supply reserve, whether known, as our SPR, or unknown, as in China, N.Korea, etc. which affords them to function until an alternate provider is decided upon.So basically, one unstable supplier,-being it Iran or anyone else- can yell “I want $1000 per barrel”but they won’t sell a teapot of it if everyone else in the market is at say $145 or $60…As for the oil producers not willing to sell for less than $100, you don’t have to go far to find the truth…between 1998 and 2002, OPEC was on the news quite a lot with threats to cut supply, manage supply, talk down supply,all to no avail as prices only fluctuated between $11 and $21…And at the time, China was growing, India was growing, and even the western world(Europe and USA) saw decent growth rates instead of the recession which is rapidly descending now,shrinking demand quite rapidly…Not only has the world enough supply for the shrinking demand-by the day- of tighter and tighter consumers, but important and vital industrial nations like Germany, France, Spain, China, Thailand, Canada, Mexico and even United States have already started the long overdue move to alternative fuels and sources of power…If you didn’t look lately, there are over $25Billion contracts already signed for solar photovoltaics panels, $45billion already signed for wind-power plants, and geothermal is coming, and wave-motion turbines are coming, and natgas and coal-fired powerplants are growing like mushrooms,and even nuclear power plants are being contracted again…All this of course is not enough,we need to do much more, but the tide has turned, and the worst nightmare for a merchant of only one commodity, oil, is to see a future where there will be no market for what you’re selling!….So you could make a case for the prohibitive prices actually killing the goose that layed the golden egg…

Anyway, please all remember that the Leveraged commodities game if just “the latest” action casino, after the leveraged real estate game burst, after the leveraged subprime mortgages and derivatives games burst, and as such it will also burst when the big players attracted by its Leverage will either see margins of 100%, or prices breaking down on the reality-bites fundamentals…

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