And so it begins. Just yesterday, we here at the TFN offices got into a late-day discussion about the fate of the nation’s natural gas markets.

With prices remaining low and entirely removed from the recent commodities bonanza, the nation’s expanding natural gas drilling industry is headed for trouble.

Today we got the news that proves our theory.

ConocoPhillips (NYSE:COP), the third largest of the nation’s Big Oil players, announced it is cutting its capital spending budget by nearly 10% and is selling some $10 billion worth of assets.

Why the drastic moves? Thanks in part to stubbornly low natural gas prices, the company needs to make the cuts to shore up a leveraged balance sheet.

If you recall, just last week the company warned Wall Street to expect reduced earnings figures thanks to a 67% reduction in natural gas prices.

There was similar news yesterday from nation’s second-largest producer, Chevron (NYSE:CVX). The California-based company quietly announced all drilling has stopped at its Piceance Basin facilities in Colorado.

I bet you can guess why they plugged the well. Yep, you betcha, low natural gas prices.

Drill, baby, drill

So if the natural gas price conundrum is having this effect on the nation’s largest companies and their multi-billion dollar cash flows, what is it doing to the tiny, marginal players?

Early last month, Trident Resources gave us a glimpse of what is likely to come. Citing liabilities of nearly a billion bucks and assets worth just $10 million, the Canadian gas driller was forced to walk into bankruptcy court and ask for protection from its creditors.

Indeed, the same companies investors were pumping their money into when gas was soaring to record highs are now failing under the weight of massive debt.

Here’s the kicker that is really going to tear the gas industry apart.

That massive debt that was picked up over the past few years doesn’t simply go away now that prices have plummeted. Drillers still have to pay their bills. That means any bit of cash flow available is direly needed.

That is how we got to where we are today, with natural gas inventories across the country at record high levels and growing by the minute.

With bills to pay, drillers simply refuse to close the valves on their producing wells. If they do, they’ll go bankrupt. But until they slow the flow, the price they get for that gas will sink lower and lower.

Eventually, prices will get so low the weak will be shaken out of the market whether they like it or not. They won’t be able to produce enough gas even to make their weekly payroll.

One of many

I could pick on dozens of small drillers that are facing gale-force headwinds, but since Rex Energy Corp. (NASDAQ:REXX) recently expanded its drilling in the Marcellus Shale formation, which is the chief cause of the current market glut, I will put their issues in the spotlight.

With $70 million in liabilities, the $330 million company is one of the better positioned drillers in its category. But much of that debt is focused on bringing the company to the Marcellus Shale region. If the move does not pay off, Rex could be forced to pay on a dud for quite some time.

Common estimates put the break-even price for Marcellus Shale drilling somewhere around $3.70 per 1,000 cubic feet of gas. Right now, drillers are able to get that price from the futures market, but the overfilled spot market is not willing to spend so much.

With nearly $1.50 difference between spot and future prices, something has got to give. With inventories about to overflow, the spot price won’t budge an inch.

The common argument throughout the market is that typical winter demand will reduce supplies and bring the markets back in equilibrium. But remember, the markets rarely go with the crowd.

The speculators have gas prices going higher over the next two months, but the facts and economic laws show prices will be going lower.

If it happens, it won’t be good for drillers. ConocoPhillips knows it. Now so do you.

Source: Natural Gas Industry Braces for Impact

Good day… And a Terrific Tuesday to you! A Tuesday morning that is seeing a HUGE currency rally VS the dollar on the news that the Reserve Bank of Australia (RBA) opted to go ahead and hike rates now, and not wait for November’s meeting, as I had thought they would do! WOW!

The first hike… It has opened Pandora’s Box of interest rate hikes around the world… For, if the RBA went this soon, then we can expect Norway’s Norges Bank to push their rate hike earlier on the calendar, maybe even later this month! And they won’t be the only ones! Look for New Zealand to hike rates this year, and who knows what other country (Brazil?) will follow after that… But I see them coming, and they’re marching the death march of the dollar!

OK, that was a little dramatic, while I don’t believe, although I have more doubts every day, that the dollar would collapse to nothing, I do believe it has a long way to go when it comes to weakening. How else will the U.S. pay pack their debts in the future? It sure won’t be because of a cut in Gov’t Spending! That is… Unless all this deficit spending can be reversed and Gov’t is cut (in size) to resemble something from 50 years ago! But, that’s like asking for the moon and sky, eh?

Let’s get back to the Aussie rate hike, that’s more exciting and upbeat than talking about what’s going to be needed in the future here in the U.S! The statement that followed the RBA rate hike, was very upbeat… So… I totally expect another rate hike next month from the RBA!

OK… The dollar’s weakness this morning isn’t all due to the Aussie rate hike, and prospects for other rate hikes around the world… In 2001 I wrote a white paper called, “The Demise of the Dollar”… This was the thesis for all the things I talk about almost daily regarding the reasons the dollar would got into a secular bear market… And this was one year, let me repeat that, one year, BEFORE the dollar entered into a weak dollar trend in Feb of 2002!

The reason I bring this up here in 2009, is that there is an article in the U.K. Independent that’s making the rounds, that’s called… “The Demise of the dollar”! This report though is about secret meetings with the Gulf Arabs along with China, Russia, Japan and France, and they are planning to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

Uh-Oh… That’s serious stuff folks… And that death march I talked about above? Well, if this story is true, that death march just became much louder!

Right now, however, the markets are not taking the story hook, line and sinker, just yet… Yes, the dollar has been sold, but not like you would think, if traders had taken the story to heart… I think some digestion time needs to be had first… I mean the currency traders had the first rate hike and then this story on their plates all at one meal… That’s a lot to digest! And Besides.. The Saudi Bank Gov. is denying that any of these meetings took place… Of course to conspiracy buffs like me, that’s akin to saying, “These meetings DID take place, and we’re just covering up the evidence” HA!

Now… Some might be cursing these countries right now, for dealing this rumored blow to the dollar… But, it’s not like the dollar didn’t have it coming! The Deficit Spending… For instance, is one thing that people that “know better” realize that the U.S. will not be able to climb out from under the deficit rock… And those knuckleheads who said “Deficits don’t matter”? Well… I’ve said this many times before, but I can’t talk about the Deficits don’t matter crowd without talking about how these people remind me of a guy… He’s standing on top of the Empire State Building, and decides to jump off… As he passes the 56th floor, he says… “So far… So good!”

Well, unfortunately for our “Deficits don’t matter” guy falling to the ground, the sidewalk is coming at him very quickly now…

And here’s another thing that should just tick you off to no end, but you have to think that the people that have loaned us money, are wondering if they’ll ever get paid back… What I’m talking about here is the story from yesterday, regarding the TARP funds… You might want to sit down for this one folks…

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (TARP), says that despite multiple statements on Oct. 14 of last year that these nine banks were healthy and only receiving government funds for the good of the country’s economy, federal officials knew otherwise. He went on to say that “the Treasury Dept. and the Federal Reserve lied to the American public last fall when they said the first nine banks to receive government bailout funds were healthy.”

That’s right… They LIED TO US! Now, doesn’t that just tick you off? It sure ticks me off!

So… You can see some of the reasons the countries mentioned above might be thinking about removing the dollar as the pricing mechanism when it comes to oil…

OK… We started up beat, then got brought down, let’s get back to upbeat! Hey! How about Gold? When I turned on the screen this morning, Gold was $1,020! You would think that even if the U.K. Independent story is just a rumor, that Gold would gain on the rumors…

I read a story last night, while waiting for the so-called “Epic Battle” between the Vikings and Packers on Monday Night Football, that one analyst was of the belief that Gold was about to return to its link to the price of Oil… Hmmm… Well, I personally hope that’s not the case, as I certainly don’t want to see the price of Oil rise to the levels I think Gold is going to rise to!

Yesterday, I did a presentation on the DTI network… (I had given you all the link to it last week) My power point presentation didn’t work, so I had to just “wing it” (yeah, like talking for 30 minutes on how we got here, what’s going on, and why one needs the power of portfolio diversification was difficult for me! HA!) I think they want me to come back next week… DTI educates investors / traders/ and people that just want to know how the markets work, so it’s all for a good cause, because… An educated investor, is a good investor!

OK… Let’s see… OH! I wanted to talk about this yesterday and totally forgot, but it’s not too late today to talk about it…

One thing that we’ll begin to see this month is the earnings season…
You might recall that in previous quarter ends I thought that stocks would get taken to the woodshed, because of lousy earnings, only to be surprised at the earnings that were posted… But trying not to be the boy who cried wolf, I’ll once again say that I just don’t see the earnings to support stock prices. This time I think we’ll see that the method used in previous quarters by Corporations to produce the earnings was cost cutting… One would have to think that the Corporations have cut to the bone… And now, we’ll get to the cheese that binds for earnings… A lack of revenue…

I really liked the reaction of the non-dollar currencies, led by the Aussie dollar, after the RBA rate hike… It was like “old days”… Uh-Oh, I have a song in my head… “Old days Good times I remember, Fun days, Filled with simple pleasures, Drive-in movies, Comic books and blue jeans, Howdy doody, Baseball cards and birthdays, Take me back, To a world gone away,
Memories, Seem like yesterday….

Yes, the “old days”… Well, in this case I was talking about currencies trading on “Fundamentals” not stupid trading themes, not flights to safety, not deleveraging, but plain and simple fundamentals, things that ordinary people, like me, can understand, and place a value on a currency based on the fundamentals!

But… We’ve not really seen a fundamental trend since July of 2008… However, if we begin to see the rate hikes that I think we’ll begin to see, it could be the harbinger of a return to fundamentals… And that, my friends, and dear readers would be like manna from heaven for your Pfennig writer!

Well… Since I came in this morning, Gold has gained $5 more, to $1,025! Looks like the all-time high of $1,033.90 that came in March of 2008, could be in jeopardy… My love’s in jeopardy, baby… Oooh, ooh, ooh, ooh…

Maybe Gold moving higher can get Silver going too! My friend, the Mogambo Guru, reported yesterday that silver analyst, Ted Butler, reports that in the last 10 months, “some 150 million ounces of silver can easily be documented to have been bought by investors.
Undocumented purchases would add tens of millions more ounces.”

In fact, when you add it all up, “Investment demand for silver this year is running at a full 25% of world mine production and over 20% of total production (including recycling). This is a remarkable historical turnabout.”

Chuck here… Back from a trip to the Mogambo’s letter… I just love the way the Mogambo ends his letter each week… He talks about how people should be buying Gold, Silver, and Oil, and then says… “Hey! This investing stuff is easy! Whee!”

OK… To recap… The RBA did raise rates 25 BPS last night, and sounded quite upbeat in their after rate hike statement. Look for other countries to follow now that Pandora’s Box of rate hikes has been opened. There’s a story going around about countries banding together to remove the dollar as the pricing mechanism for Oil trades… It’s being denied, but there’s smoke… And you know what I say when there’s smoke… And Gold is pushing the envelope on its all-time high of $1,033.90…

Currencies today 10/6/09: A$ .8875, kiwi .7355, C$ .9395, euro 1.4730, sterling 1.59, Swiss .9745, rand 7.4230, krone 5.6920, SEK 6.97, forint 181.15, zloty 2.8370, koruna 17.3360, RUB 29.81, yen 89, sing 1.4025, HKD 7.75, INR 46.99, China 6.8263, pesos 13.56, BRL 1.7593, dollar index 76.35, Oil $71.13, 10-year 3.22%, Silver $16.99, and Gold… $1,025.45

That’s it for today… Hope your Tuesday is Terrific!

Chuck Butler

Source: RBA Raises Rates!

The team at Casey’s Energy Opportunities believe that planned government buying or selling of crude oil for SPRs actually have very little impact in the overall market. However, an overall drawdown of worldwide inventory could put downward pressure on the price of oil. The various countries also have their particular reasons and influences in decisions to tap their reserves.

So which countries are executing preparedness plans to fill their strategic reserves with $70 oil now (as opposed to $140+)? Below are the 10 countries that consume the most oil in the world, as of 2008, the latest figures available from the BP Statistical Review of World Energy:

Russia, Canada, and Saudi Arabia can leave the list, as they are net exporters of oil and thus do not actually require a strategic reserve, at least in the short term. We’ll also bump Brazil, because its balance of imports is dwindling every year, and it should become a exporter before it requires a reserve. That leaves six countries to examine:

The United States

Not surprisingly, America has the largest strategic reserve in the world in an absolute sense. Its 727 million barrels are stored in four hollowed-out salt domes (and one pending) along the coastline of the Gulf of Mexico. These add up to some 62 days’ worth of imports, according to government sources. The United States government currently has plans to push this to 1 billion barrels, or about 85 days’ worth of imports, which would make the reserves equivalent to those of Japan and Korea.

The SPR build-up will be accomplished by expanding two of the current facilities, for an additional 113 million barrels, and (probably) building a new one in Richton, Missouri, for 160 million barrels. The Richton project has met local opposition, because it would require pumping 50 million gallons of freshwater per day from the Pascagoula River to dissolve enough salt to open up another subterranean cavern. The total cost of the program is estimated at US$3.7 billion, not including the cost to fill the reserves. Oil purchases are likely to be slow, at around 100,000 bpd (barrels per day) before 2014 and 150,000 bpd thereafter.

In a real emergency, the combined American strategic and commercial reserves (the latter held by private corporations, especially refiners) may seem unnervingly thin from the perspective of energy security. Add to that the fact that the government can release them at a rate of only 4.4 million barrels per day, or about half its imports.

Still, the 108 or so days’ reserve it has between government and commercial sources are considered adequate by international standards. The United States has used this reserve twice in the past 20 years (Desert Storm and Hurricane Katrina) to combat severe demand or supply disruptions. It also has the luxury of importing more oil from Canada in an emergency.

Scenarios that could force a sustained drawdown of reserves:

• Sustained hyperinflation in the United States due to actions by the Federal Reserve that causes oil-producing countries to look for better markets to sell oil.

• A prolonged general embargo by OPEC on the United States, forcing America to look to traditional partners such as Canada and Mexico, though they might not have sufficient oil.

• Another war, potentially in North Korea or Iran, requiring a large amount of oil input from America that it simply does not have.

• A particularly active hurricane season that knocks out a large amount of production capacity in the Gulf of Mexico, and the United States releases from the SPR to help.

China

China’s strategic reserves began being built in 2004, when leaders in China began to realize that the country had no adequate government-controlled reserves to combat any disruptions in the supply of oil. China is a large importer and is dependent on the same sources of foreign oil as the United States. China is even more anxious to build such a reserve, as two of its neighbors, Korea and Japan, both have large strategic reserves.

China currently has four government reserves with a total reserve potential of 272 million barrels, which translates to about 30 days’ consumption. Two of the four have been confirmed full, and there are rumors that all four are and that China has taken advantage of the recent precipitous drop in the price of oil to buy up. According to Chinese government sources, however, the reserves are likely not to be completely full until 2010, and 2009 buying of oil will be at around 42 million barrels.

The government has also announced plans to increase the country’s reserve from 30 to 100 days of consumption. The next stage of the development will call for an additional 170 million barrels in eight storage facilities. The locations of the facilities are as yet secret.

In an emergency, China would likely turn to Russia to buy oil, though only the naive would be surprised if Russia added a premium for the privilege.

Scenarios that could force a sustained drawdown of reserves in China:

• Worldwide embargo on China due to a Chinese invasion of Taiwan.

• High oil prices force Chinese industries out of business, pressuring the government to keep oil prices low domestically by selling some of the reserves to domestic companies.

• North Korea asks for oil from China to support military action on the Korean Peninsula, and China ships it to them on the black market.

• Russia slows or stops its exports as part of the Russian “dominance via energy” strategy, leaving Chinese pipelines trickling and Chinese industries disrupted.

Japan/South Korea

We have placed Japan and South Korea’s reserves together, as the two countries have a treaty that allows them to share their strategic reserves.

Resource-poor Japan has one of the world’s largest strategic oil reserves, enough for 82 days of imports. State-controlled reserves are run by the state-owned Japan Oil, Gas, and Metals National Corporation. The reserves consist of 320 million barrels in 10 different locations, which makes them second only to the United States in absolute volume. Japan’s island geography means that having an emergency supply of crude oil is crucial, and the Japanese government obviously has not ignored this aspect.

South Korea is in one of the global “hotspots” in the world, right beside North Korea. As the country is under an almost constant threat of war, the government has stocked up some 76 million barrels, with capacity for an additional 40 million barrels.

Scenarios that could force a drawdown of reserves:

• Just one at this time, from two possible sources: political instability in the region caused by either the Taiwan or the Korea conundrums disrupts tanker transport, perhaps even forces them to port.

India

India has a small reserve it began to build in 2004. This stockpile is sufficient for perhaps only two weeks of consumption. The country eventually wants to raise this level to 45 days, though the first phase has not even been completed yet. The projects are estimated to come online in 2012, which means it has taken eight years from planning to completion. These figures imply that India will not even have a somewhat sufficient strategic reserve until 2016, given that the expansion project was approved in 2008.

Germany

Germany has the largest reserve in Europe and is among the top in the world as well. Its government has satisfied a federal law that regulates storage be at least 90 days’ worth of net imports. More than half of the storage is in Southern Germany, where large salt caverns exist. Germany is well prepared in its strategic oil reserves, and there are no glaring factors that would force a drawdown of reserves, barring a global catastrophe. Furthermore, the reserves of Germany, France, and Italy are pooled and can be used by any of the three countries in an emergency.

So How Much Do the Reserves Matter?

According to the US Energy Information Administration (EIA) estimates, some 2 billion barrels are held in government-owned strategic reserves around the world. Though this seems like plenty of oil, does it really impact the spot price of oil? Collectively, the answer is yes, as this volume corresponds to 23 days’ worth of global consumption. If drawn down together over a short period of time, the effect on spot price could be substantial.

For illustration’s sake, suppose that countries collectively draw down their entire reserves over the period of a year. This rate would make up for 10% of the daily worldwide trade of crude oil, which could certainly impact price (imagine ConocoPhillips and ExxonMobil both going under at the same time).

Individually, however, even China and the United States have a limited impact on the spot price of oil over a single year. If the United States’ inventory were drawn over an entire year, it would only make for a 4% increase in supply. Under normal buying patterns of each country’s strategic reserves, the impact is even smaller. Since China’s 42-million-barrel purchase is over one year, their purchase would not even make a dent in the daily trade of oil.

Thus, a concerted effort by the worldwide reserves can definitely keep prices down in the short term (within a year, two at best), but cannot make for a paradigm shift in the supply/demand model of oil or the Peak Oil argument. And from the buying side, if governments plan the filling of their strategic reserves, the impact on the spot price of oil is likely to be minimal.

Perception is a tricky horse to ride, however, as we all know. Given a worldwide panic for oil à la the 1973 oil embargo, oil prices could spike in the short term, because government reserves would likely raise purchases 10% or so in a real emergency. This effect would be short lived for the foreseeable future, though, as worldwide reserves are already reaching their limits.

In short, if everything goes according to “plan” by the governments, even filling a large reserve such as the Chinese SPR would have little impact on the price of oil. For SPRs to truly impact the spot price of oil, it would have to be a global situation, with war and embargo the two most likely scenarios. Even then, the impact would be mellowed by limitations on how quickly governments can either release or purchase the oil.

Regards,

Marin Katusa

Source: Who’s Buying Oil?

We said we were doing some serious thinking this week. Maybe it is the season. But more and more, our thoughts become grayer. Less black. Less white. Less hard. Less soft.

A few years ago, it looked to us as though the world financial system had gone to war. We cheerfully awaited the victory parade. We figured Mr. Market would whup the feds good and hard. It hasn’t happened so far.

On one side, are the forces of a natural market correction… following a long, long period of expansion. The easier money gets, the more people tend to mis-spend and mis-invest it. Then, inevitably, their mistakes must be corrected. That’s what bear markets and recessions are for.

But the feds don’t like bear markets or recessions. And at least since Keynes outlined his general theory back in the early 20 th century, they’ve believed that they don’t have to put up with them. Keynes took a page from the Old Testament. Government should act like an enlightened Egyptian Pharaoh, he didn’t say, but should have. It should run surpluses in the fat years and deficits in the lean years… thus flattening out the pattern of boom and bust.

Pharaoh was no dope. He stored up grain for 7 years, when the harvests were bountiful. Then, when the 7 lean years came, he released the grain to the people. Problem solved.

Keynes believed that modern government could do the same thing. But Pharaoh was not running a democracy. He had no voters to answer to. So, if he wanted to store grain in the fat years, he could do so.

In theory, the US government could do the same. But in fact it never runs significant surpluses. There are too many people who want too much bread and too many circuses. And you don’t win votes by denying the voters what they want. So, in practice, the feds run deficits even in the fat years! Last year, before the downturn really started to bite, the US federal government ran the biggest deficit in history – nearly half a trillion dollars.

Now, let’s imagine how that would work for a bad Pharaoh. He would give out grain in the fat years. This would encourage farmers to produce less grain. Then, when the lean years came, Pharaoh would have no grain to give out… and the farmers would have less grain stored up themselves, since they grew less during the boom years. The famine would be worse than ever.

Then, if we can imagine that Egypt was trading with China at the time, perhaps Pharaoh could borrow grain from the Zhou dynasty to help ease the peoples’ pain. Perhaps he could mortgage the pyramids. Whatever, he – and the Egyptian people – would have been in much better position if he had done as Joseph told him in the first place… lay up stores in good times, draw then down in bad times. How difficult is that?

But Bernanke didn’t see the famine coming. Neither did Geithner. Or Greenspan. Or any of the other savants Pharaoh interpret his dreams . None of them expected hard times. None of them warned the public. None of them encouraged the government to save money for the recession. Nassim Taleb asks why Bernanke was reappointed after he clearly failed the most critical test. But heck… the federal government is an equal opportunity employer. Employees aren’t let go just become they’re incompetent.

Anyway, getting back to our thoughts…

… it looked like a battle to us – between the forces of inflation (the feds)… and the forces of deflation (the market). But battles usually have clear winners. One side is master of the field; the other retreats. One side is victorious; the other is defeated.

Alas, some wars produce no hozannahs of success… and no wailing widows of failure. Some end in draws… or in confusion… or in disgrace and bankruptcy for both sides.

Like the bad Pharaoh, the feds saved nothing. Now, they have to try to work their Keynesian magic on credit. This puts them in a weak position; like a government that wages war on borrowed money. They can continue their campaign only as long as lenders allow them. They can’t wage the war as effectively as they’d like. Then again, maybe they can’t lose it as spectacularly as they might.

For the moment, their credit is still good. The bond market foresees an inflation rate of less than 2%. Bankers, taking money from the government, are happy to lend it back to them.

But the forces of the correction are giving up little ground. While stocks rally, the real economy remains in a funk.

“Sharp drop in start-ups,” is a news headline from yesterday. New business start-ups are a major source of new jobs. Bad omen.

Even glamour publisher Conde Nast is forced to make cut-backs. It has told employees that they may not spend more than $1,000 a night when they are travelling.

A Pimco economist says savings rates are still going up… and may exceed 8%. This represents hundreds of billions of dollars taken out of the consumer economy. Oddly, while it makes the slump worse, it also helps finance the government’s battle against it. Savers buy US debt (albeit indirectly).

So, the battle is still going on… and the outcome is still in doubt.

*** Racehorse prices are in freefall, says a report out yesterday. But collectible cars are still doing well.

Yesterday, we saw someone drive by in a huge, gaudy pink Cadillac from the 1960s. It had magnificent fins and enough chrome to stagger a blind man. In it were a middle-aged man and woman, looking very comfortable and proud. They were travelling in style… in a rolling sculpture.

Old cars are not only holding their values, they’re still going up. But not all old cars. Detroit’s muscle cars have been falling in price for the last three years. Not very green?

*** And here’s a report we received over the internet, from Aaron Trask:

“Everyone is right to fret about inflation but the “deflation scare” isn’t over yet, says Charles Nenner, founder of the Charles Nenner Research Center.

“Renowned for his cycle work, Nenner sees deflation remaining dominant until year-end and inflation not picking up for another 18 months. But that will be the start of a 30-year (yes, year) upcycle for inflation says Nenner, who spent 12 years as a market-timing consultant for Goldman Sachs.

“The investing implications of this scenario are clear: Nenner is bullish on gold for the long-term and even more bullish on gold mining stocks, which he says are currently cheap relative to bullion. After a secular decline, Treasury yields are set to rise, with Nenner predicting the 10-year yield will reach 5.50% by Spring 2013, a 45% rise from Friday’s close of 3.78%.

“What’s less clear is the timing of this trade. Nenner believes the “deflation trade” is about to reassert itself in the short-term, meaning strength in the dollar and Treasuries, and weakness in commodities and equities, as we’ll discuss in more detail in a forthcoming segment.

“For those who believe the dollar is doomed, Nenner notes “all currencies are bad.” In other words, currency trading will be a game of relative bets vs. a one-way trade against the greenback, as so many expect.”

Until tomorrow,

Bill Bonner

Source: The Battle Continues

It’s odd, that in his otherwise excellent blow-by-blow account (”Eight Days,” in the Sept 21 New Yorker Magazine) of the September 2008 Wall Street meltdown that left Lehman dead, and AIG croaking in a ditch, and the banking system in general functionally crippled, reporter James B. Stewart never got around to really describing the cause of it all — namely, the on-the-ground material catastrophe of American suburbia.

It was the worthlessness of the tradable securitized debt associated with all those overpriced (and overvalued) chipboard and vinyl houses, smeared recklessly over the American landscape, that started all the trouble in the first place. And it is our inability to come to grips with that underlying catastrophe that prolongs the resolution of the still-florid banking crisis — since the federal government is doing everything possible to prop up the failed capital equation of terminal suburbia, and to deny the obsolescence of that version of the American Dream and all the mechanisms for delivering it.

The suburban project was not a conspiracy by the likes of Robert Moses, Walt Disney, Frank Lloyd Wright, and President Eisenhower to produce a living arrangement with no future. It was the emergent, self-organizing result of special circumstances in a particular time and place: post World War Two America, with an immense supply of cheap oil, cheap land, and the industrial capacity to churn out all the necessary components for a car-dependent development pattern. Suburbia was spawned out of a couple of persistent themes in American cultural history: 1.) that cities and city life were no good; 2.) and that the romance of settling the wilderness could be reenacted, at great profit, in all that space beyond the towns and cities. It would be silly to deny the appeal of this arrangement at its inception. By the end of WW II, city life in the popular imagination was reduced to one potently awful image: Ralph Kramden’s apartment in “The Honeymooners” TV show.

There had to be something better than that. Suburbia was engineered as the antidote to the Kramden’s apartment: country-living-for-everybody. The evacuation of the cities to the new outlands proceeded as relentlessly as the landings at Normandy. It wasn’t until the program was well underway that the self-destructive essence of it became obvious — that every new housing subdivision killed the original rural character of the land, with the result that suburban life quickly became a cartoon of country living in a cartoon of a country house in a cartoon of the country. With additional layer-on-layer of, first, the shopping in the form of highway strips, then malls, along with the office “parks,” these places elaborated themselves into a kind of cancer-of-the-landscape, a chronic and expensive condition that Americans had no choice but to live with, because of the monumental investments they had already made in it. The discontents it produced lent it to psychological depression and dark humor, just as chronic illness does. But we were stuck with it.

Meanwhile, all the machinery of culture and politics made it impossible to construct anything differently. The exquisitely fine-tuned planning-and-zoning codes generated by the thousands of town boards mandated a suburban outcome everywhere — with plenty of help from the DOT traffic engineers, the fire marshals, and the even the mandarins of academia who trained all these professionals. As a natural consequence of all this, the disinvestment in cities — especially the older cities of the industrial heartland — continued remorselessly until it seemed as if the Second World War had taken place in St. Louis and Cleveland.

This mode of behavior persisted through the first, short-lived oil scarcity tremors of the 1970s. It was so completely embedded in the popular imagination that it had become the baseline American identity. The suburban project caught a second wind in the 1990s, when the last great non-OPEC oil fields of the North Sea, Alaska, and Siberia nullified the grip of the Islamic cartel for while, and sent the price of oil down to $11-a-barrel. Ironically, it was during those years that the warnings of “peak oil” first circulated beyond the geology offices, and it was clear to anyone who reflected on the connections that the project of suburbia was doomed.

It was also ironic, tragically so, that during this same period Wall Street began to seek some new way to make real money beyond stock and bond markets, which didn’t seem to produce wealth at all for more than a decade when inflation was factored in. By a fortuitous coincidence, the revolution in computers enabled Wall Street bankers to concoct abstruse new species of tradable paper securities based on bundles of debt that seemed to produce miraculous earnings. It had the added advantage of being inscrutable to both investors and financial regulators. Due diligence became impossible and moral hazard spread like ringworm in a dormitory. The bulk of the securitized debt originated in home mortgages and the larger result was a gigantic racket ramped up between Wall Street and the US government to conceal all the structural weaknesses of a de-industrialized US economy behind a hyperbolic commerce in the very thing that the American public cherished most: their houses, which, understandably, everybody had come to call “homes.” Wall Street might as easily have commoditized mother and apple pie – if you could sell each one for half a million dollars.

The banking fiasco still underway is at once a proxy for the larger failure of the American economy and the greatest fissure in it. Put as simply possible: we can’t service our debt, we can’t generate more debt, and the notional “capital” we thought we possessed is dissolving into nothingness. The federal government and Wall Street remain committed to supporting all the rackets associated with a suburban sprawl economy that has entered its own zone of remorseless failure. It is failing as a capital investment first, and is secondarily failing as a practical living arrangement. The two failures will continue in a close race toward terminal entropy.

The dirty secret all along was that by 2005 there was no economy left in the USA beyond the suburban sprawl economy with its so-called “consumer” nexus — largely devoted to the outfitting of suburbia. More mortgage debt (and credit card and car loan debt) will go bad and the investment paper that represents it will go bad and it will eventually destroy our current system for accumulating, valuing, and deploying wealth. It will not destroy the function of capital — no matter how many angry intellectuals inveigh against the straw man of capital-ism, as if it were merely a belief system – but it will be a long long time before anything sturdy or credible in the way of banking will be reconstructed out of the wreckage.

Regards,
James Howard Kunstler

Source: Ruinous Debt to Create Futureless Suburbia

Good day… And a Happy Friday to one and all! It’s still raining here in St. Louis this morning, but I won’t that get me down, as it is a Friday! G-20 has gotten a bit ugly, folks… Seems everyone just can’t seem to get along! Imagine that! 20 different countries, and now they want to be able to watch another country’s finances and comment on them! Oh, I can see that working out real well! NOT!

So… Yesterday, we had the dollar gaining back the ground that it had lost the previous day, but at the end of the day, we’re looking very much like the currencies hadn’t moved from morning to morning… And overnight, didn’t bring about much movement… So… When you get to the currency round-up below, you’ll see the dollar’s gains were small, and short-lived.

The U.K. and France are a bit upset with the U.S. and the President’s plan to reduce the number of board members to the IMF, and guess who is on the chopping block? That’s right… The U.K. and France! I really don’t care about all this stuff, except to watch the saber rattling, and jockeying for “supreme leader”… I won’t say any more about that here…

I did notice thought that, just as I said months ago, regarding the BRIC countries, that they would have to be reckoned with, due to their HUGE Treasury Chests of reserves, and the fact that they have a good portion of the World’s population… Ok, where was I? Oh!, I noticed that it was going to be announced today that G-20 was going to take over as the main forum for global economic coordination. They will take that over from the G-8…

Well, guess who’s a part of G-20 that wasn’t a part of G-8? The BRIC countries! They will have more say in what goes on economically! Just like I said they would! This is a big deal, in that this shifts the power from the rich countries to the emerging markets… Yes, the rich countries are still in the Group of 20… But, the emerging markets outweigh them now!

And already, we can hear China taking shots at the U.S…. And, now that everyone can comment on other countries’ economies, the U.S. took a shot at Germany, saying that they haven’t done enough to spur Domestic Demand… Germany’s chancellor, Angela Merkel, who is up for election on Sunday, shot back at the U.S., and said… “We should also look at imbalances between currency regions and not pick on specific countries within the Eurozone.”

OK… Let’s talk about something else… I was reading the Financial Times last night, and came across a story that really said something… Here it is… The FT…

“Losses on loans at U.S. banks and other lenders rose to $53 Billion in the first quarter, almost triple the previous high, reached in 2002, said a group of regulators, including the Federal Reserve and the Federal Deposit Insurance Corp. Nonbank lenders, particularly hedge funds, hold $1 of every $3 in troubled loans and 47% of all distressed loans. Loans made to media and telecommunications companies were in the worst state. Lending to the financial-services sector was the next worst, followed by loans to property companies.”

But Hey! According to people in power that should know better, it’s time to sound the all-clear horn!

And that brings me to something I wrote about the other day, regarding the delayed foreclosures… A reader was kind enough to send me this that maybe explains the delays…

A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.

And… As another reader pointed out to me… It sure doesn’t make the holder of the loan any richer to foreclose on it, given the state of the housing market today…

Ok… Enough of that! Yesterday, I talked about how Japanese yen was living right these days, rallying when the dollar is weak, and rallying alongside the dollar when it’s not! Well… One of the reasons this could be happening with regularity, is that it is believed that Japanese exporters are repatriating their profits, as their fiscal first half ends this month…

So, does that mean the rug gets pulled out from beneath yen next week? Hmmm… I don’t think so… I think that the one thing that’s really underpinning yen right now is this new found appreciation by the Bank of Japan for yen strength! Just last night, Japan’s Finance Minister Hirohisa Fujii reiterated his opposition to intervention in foreign- exchange markets.

Now, I don’t know how long the exporters in Japan are going to go along with this new found appreciation for yen strength… But for now… Yen is on the verge of gaining even more ground…

In New Zealand overnight… The string of good data prints ended with a thud! New Zealand’s Trade Deficit widened almost double what was expected! UGH! Remember, New Zealand has to import lots of things, and when the exports of wool, dairy, and lumber aren’t strong, their deficit gets whacked! So, New Zealand would always have a Trade Deficit… But, at times it gets completely out of hand, and this is one of those times… Kiwi, got taken to the woodshed after the report printed, as well it should!

The Swiss National Bank (SNB) had a board member giving an interview last night, and when asked about the SNB’s repeated jawboning to get the franc weaker, he had this to say… “with regards to the Swiss franc this means that we counter an appreciation of the franc against the euro decisively.”

Now, that’s a horse of a different color! All this time we were led to believe that the SNB would intervene to get the franc weaker VS the dollar! No wonder the franc has kicked some dollar tail lately, without a peep from the SNB… The franc was allowed to get stronger VS the dollar, as long as the euro was moving in the same direction, same general percentage move VS the dollar!

Our mortgage production guru, Stacy Blair, was talking the other day in a meeting, and mentioned that mortgage rates had edged down again, and production was picking up once more… Well, that plays well with a story I read last night… The average interest rate for U.S. home mortgages fell to less than 5%, and loan applications surged 13%, the Mortgage Bankers Association said. The nationwide average rate on a 30-year fixed-rate mortgage declined to 4.97%. The application surge amounted to a 50% increase compared with the end of June.

OK… So… I would guess that most of that stuff is re-financing loans, but hey! Like I told everyone on our desk 6 months ago, when the rates were in the 4% region… Go refinance your home loan! And then put the money you save each month in savings!

We get back to some data in the U.S. today, and I think that it could have a lot to do on whether the currencies rally or not VS the dollar. Durable Goods Orders for August prints first, and is expected to really fall back from July’s strong 4.9% print… August is expected to print just a .4% gain for Durable Goods… That won’t get the “strong recovery flag wavers” out, and that won’t be good for the non-dollar currencies…

Then later we get the U. of Michigan Consumer Confidence report, which could turns things around for the non-dollar currencies… As the Consumer Confidence report is expected to be strong… ????? Why? I have no idea… (besides the obvious, stock strength)

We’ll also see New Home Sales data for August…

Have you noticed the collapse of the Oil price? Pretty steep drop in just a couple of days! I told you the other day that the G-20 might put pressure on commodities… Oil is off, and Gold has fallen back below $1,000 wink, wink…

So… To recap, the dollar’s rally was stopped short. The G-20 is the new global economic monitor, and the U.S. is ticking the U.K. and France off, regarding seats on the IMF board. G-20 is getting hot and heavy… Japanese exporters are repatriating their profits thus propping up Yen… And, New Zealand’s Trade Deficit widens again…

Currencies today 9/25/09: A$ .8650, kiwi .7185, C$ .9175, euro 1.4685, sterling 1.6010, Swiss .9720, rand 7.4280, krone 5.7850, SEK 6.9170, forint 184.25, zloty 2.8550, koruna 17.15, RUB 30.09, yen 90.20, sing 1.4160, HKD 7.75, INR 47.98, China 6.8286, pesos 13.48, BRL 1.7995, dollar index 76.73, Oil $66.28, 10-year 3.36%, Silver 16.31, and Gold $997.32

That’s it for today… I hope you have a Fantastico Friday, and Wild and Wacky Weekend!

Chuck Butler

Source: G-20 Heats Up…

Oil peaked at $147 per barrel in July 2008 — right before the house of cards came crashing down on the global economy. Once banks started to fail and credit dried up, other businesses slowed production and laid off workers. This created a massive trickle effect on the overall economy.

Big corporations and individual consumers alike were using less energy. That meant the prices of every energy-related commodity plummeted.

This spring, things started to turn around… The unemployment rate quit falling at such a rapid rate. Inventories were too low in many industries, creating a ramp up in production again. Energy prices climbed…

Since the start of this year, the price of crude oil has nearly doubled. In just the last six months, heating oil jumped as much as 90%. These two commodities are still cheap as far as we can tell. But they aren’t the real story…

Two other commodities are still low, but won’t be for long…

Coal and Natural Gas Are Commodity Buddies

Back in June, Greg Guenthner told you about coal’s recent history. Coal, being the most widely used fossil fuel in the U.S., took an extra-hard hit during the past several months. It’s down nearly 70% and hasn’t recovered in the slightest.

Demand will flood back into the system. In fact, that’s already happening. We have no doubt that the coal play we let our Penny Stock Fortunes readers in on is the best way to take advantage of the coming coal boom. But there’s another energy commodity about to shoot even higher, even faster…

Natural gas prices have utterly collapsed. After trading above $13 in June 2008, natural gas fell the whole way down to $2.70 today. Its decline happened as gradually as can be. Most of the financial world has been trying to time the bottom for months. But it keeps falling.

We don’t know if this is the bottom, but it can’t be far from it. It doesn’t matter to us even if it’s not. You see, we found the best natural gas seasonal laborer in the world, and we can just wait it out… no matter how long it takes.

Before we get into any specific natural gas play, we need to know how big natural gas’s recovery will be…

Why We’ll See Natural Gas 209% Higher By Year-End

Natural gas and coal go hand in hand. They are oftentimes found together in the same place. Natural gas hides beneath and between coal beds. It’s not uncommon for a coal company to come in and mine the same site an oil and natural gas driller just left.

When one of these two is no longer in demand, it usually spells trouble for the other. That’s one of the main reasons natural gas has taken such a hit. But just as they fall together, they rise together.

We already laid out the reason coal will see a price spike in coming months and years. Natural gas is just as lucrative, if not more…

Natural gas demand is continuing to increase around the world at an unprecedented pace. Many nations are starting to choose NG over traditional coal and oil in power plants. It burns about 29% cleaner than petroleum and 44% cleaner than coal.

And because of its recent price collapse, it’s now the cheapest choice for customers. Why pay more for coal or oil when you can get natural gas for $2.50 per thousand cubic feet?

The supply side of the coin is even more compelling…

The U.S. imports around 17% of its natural gas — almost all of which comes from Canada. Unfortunately, Canada’s natural gas reserves are drying up. Daily Canadian natural gas production peaked in 2001. We’re already back down to 1995 production levels, and falling.

Natural gas production here in the U.S. has also fallen off a cliff. Most drillers can’t drill for a profit at these prices. So they aren’t. We have almost no production right now. We’ll eventually burn through stored natural gas reserves. When they go too low, it will spur a panic.

This panic will be enormous. Natural gas is simply too cheap. It hasn’t been this cheap for decades. The average oil-to-natural gas price ratio is about 9.3. Now it’s at about 29.

It wouldn’t take much for prices to shoot upward from here. To reach the 20-year average natural gas-to-oil ratio, NG prices would have to climb 209%.

That doesn’t take into account the future boom in demand. It won’t take long for it to correct itself…certainly before the end of this year.

This panic is inevitable, and there are a number of penny stock plays that could take advantage of it… Union Drilling (NASDAQ: UDRL) and Pioneer Drilling (AMEX: PDC) are two that could be worth looking at right now.

Sincerely,
Jim Nelson

Source: Natural Gas’ Triple Could Give Us a 416% Gain by Year-End

Back in the 1960s and 1970s, a few major companies took out oil exploration concessions there from the government of South Africa. In 1974, Shell (NYSE: RDS.A / RDS.B) discovered a gas field off the southwest coast with the Kudu project. Early estimates were 1 trillion cubic feet of reserves, but current estimates range up to 10 trillion. Kudu was big, but nobody much cared about natural gas back then. Gas was too cheap, and southern Africa was too far away.

There was hardly any development around Kudu for the next 20 years. South Africa was under international sanctions due to its apartheid regime, so oil companies and other outside investment stayed away. Almost nothing happened with energy development until Namibia became independent in 1990.

By the early 1990s, the gas field at Kudu intrigued foreign oil companies. Kudu showed a large hydrocarbon resource. Clearly, there was significant potential. But nobody really understood the offshore geology. Plus, back then, it was tough to drill in water more than about 1,500 feet deep. Namibia didn’t make for an investment magnet.

But with the recent success of offshore Brazil, the energy exploration expectations of the world have been fundamentally altered. The same brilliant researchers and scientists that discovered the potential of Brazil’s Tupi field are now doing extensive research in offshore West Africa, in particular offshore Namibia. One researcher I’ve been following very closely believes the offshore areas of Namibia are ‘geologic analogues’ to Brazil.

Source: The Next Great Oil Frontier

Supply has outrun demand this year as a global recovery has yet to accelerate. Yet, oil prices more than doubled from February to August and are up about 50% from where they started the year.

Now, many traders are positioning themselves to profit from a pullback. The gap between prices of options betting on a decline in prices and those that would profit as a result of a rise in oil has widened to a record 10 percentage points, according to five years of data compiled by Banc of America Securities-Merrill Lynch.

Put options, which give traders the right to sell oil in December below current prices have an implied volatility of 54.3%, compared to 43.3% for options to call, Bloomberg News reported. Implied volatility is estimated volatility of a security’s price. Implied volatility generally increases when the market is bearish and decreases when the market is bullish.

Implied volatility is used in calculating an option’s premium and right now the premium for December and other put options shows “the market is worried,” Harry Tchilinguirian, a senior oil analyst at BNP Paribas SA (NYSE ADR: BNPQY) told Bloomberg.

“If puts are pricing higher than calls, we are looking at a situation where the market is more averse to the downside and is looking for more compensation” for the option, he said.

Perhaps the biggest reason the market is worried is that a generous supply of oil remains on the market, some of it piled up in offshore tankers. Meanwhile, the global economy is healing at a considerably slow pace with many analysts forecasting a so-called U-shaped recession for the United States – the world’s largest petroleum consumer.

U.S. stockpiles of crude are 14% higher than they were a year ago, according to the International Energy Agency (IEA). U.S. distillate fuel inventories – which include heating oil and jet fuel – stood at 167.8 million barrels as of Sept. 11 of this year, according to the Energy Information Administration (EIA). That’s the highest level since 1983.

As of Sept. 11, U.S. gasoline supplies are at 207.7 million barrels – 2.2% higher than they were in late May at the start of peak summer driving season, according to the EIA.

The story is much the same overseas where gasoil stockpiles – the European equivalent of heating oil -reached a record 23 million barrels on Sept. 10, according to PJK International BV, Bloomberg reported.

At the end of July, oil inventories in the 30 nations of the Organization for Economic Cooperation and Development (OECD) totaled about 2.8 billion barrels – 4.6% more than the same time last year, according to the IEA. More than 60 million barrels of oil are being held in tankers offshore.

The Centre for Global Energy Studies (CGES) in a monthly report that it expects high crude stockpiles will continue to constrain the market.

“The CGES expects little sustained upward pressure on oil prices over the remainder of this year and even next year prices are unlikely to rise much unless clear signals emerge that world is pulling out of recession in a sustainable fashion,” the CGES said. “High inventories, particularly of middle distillates, are putting a ceiling on oil prices at the moment … and this will only lift once those inventories start to be drawn down.”

The report also noted the Organization of Petroleum Exporting Countries (OPEC), which controls 40% of the world’s oil supply, sees promoting economic growth as being more important than the short-term pursuit of higher prices.

“OPEC signaled its broad satisfaction with the current level of oil prices when it met in Vienna earlier this month,” CGES said. “It recognized that sustainable upward price pressure will only come with economic recovery and rising oil demand.

Saudi Arabia’s oil minister, Ali al-Naimi weeks ago told reporters that the cartel is more concerned with reinvigorating the global economy than raising oil prices.

“Economic growth is the name of the game, that’s what’s going to drive the price,” said al-Naimi. “As long as economic growth is there, the price is going to go up.”

OPEC has last year lowered its production quotas by 4.2 million barrels per day (bpd) – about 5% of global demand – hoping to put a floor under prices that plunged more than 80% from their record high above $147 a barrel last summer. The reduction was effective in halting the fall in prices, but even with the cuts supplies continue to grow.

Additionally, some OPEC nations have not strictly adhered to the mandate. The cartel’s production exceeded its quotas by 1.2 million barrels a day in August, according to Bloomberg estimates.

The glut of oil on the market has some analysts wondering whether or not spooked speculators will hasten their retreat from the market.

“If ever there was going to be a retreat below $60 a barrel, it is now,” Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pa., told Bloomberg in a telephone interview.

Light, sweet crude for December delivery yesterday tumbled $2.33 a barrel, or 3.24% to settle at $69.71.

Source: Traders Anticipate a Drop in Oil Prices as Supply Outruns Demand

Even a first grader can look at this market and know anything but fundamentals are driving the action. Fortunately for guys like me, few grade-school can figure out why.

These days, it is all about the macro-economy. More specifically, the only thing anybody cares about is the value of the dollar. When the greenback is up, the market is down (like today). When the dollar is weak, the market rallies – like last week.

There are several reasons for the trend: flight to safety, inflation, political risk… you name it.

What matters for us as traders is the pattern is unwaveringly true for the crude markets. With oil settlement denominated in dollars, the ever-important energy source is tied directly to the greenback.

The correlation makes oil a great hedge against the dollar, even better than the politically critical gold markets (few entities can dump billions of dollars of oil reserves into the market like the IMF may do).

Unfortunately, today’s strength in the dollar has sent crude prices back below the critical $70 level. As I write, a barrel is trading at $69.14, down $2.90 on the day.

That is not good news for industry giants like Exxon Mobil (NYSE:XOM), BP (NYSE:BP) and Chevron (NYSE:CVX), which all gapped down at the day’s opening bell.

Could be worse

While a small drop in Big Oil valuations erases billions in paper wealth, their shareholders are not feeling nearly the level of pain as the folks unlucky enough to be long on Delta Petroleum (NYSE:DPTR).

The stock is down 43% on news its Columbia River Basin test well performed far below expectations. While some gas was pumped, the company has deemed the level s “uneconomic.”

While the action has little to do with the value of the dollar or even commodity prices, the nasty decline goes a long way in showing the increasing levels of volatility in the nation’s energy industry.

As political, currency and economic risk swirl into a virtual perfect storm fueled by speculation, we are going to see larger and larger swings in the oil and natural gas industry. For some investors, it is exactly what they were hoping for. But for others, it will be a costly trap.

The folks with the most to win are options traders. Over at TFN Strategic Trader, we have used the increased volatility to our great advantage. Last Thursday, we locked in gains of 40% on a set of Chesapeake Energy call options.

Even better, the portfolio currently boasts a Big Oil short position and a dandy covered call already worth double-digit gains. Increased volatility will be a boon for options traders.

But for speculative investors looking to play the global economic rebound by grabbing shares of small-cap producers on the cheap, I have just three words… do your homework. If the dollar gets much weaker, the industry is going to start looking very different.

I am a huge fan of the commodities market, especially with China on a buying spree, but oil industry investors have a few more risk factors to handle.

Fail to understand how they all work together and you could have serious trouble on your hands. But get it right and make the smart moves, well, the rest of this year is going to treat you very well.

Keep your eye on that dollar.

Source: Oil Investors: Keep Your Eye on That Dollar