Month: January 2009

$200 oil, Fingers, Landing

– A convincing case

– Weird

– US Air flight

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This is interesting…

Hyper Inflation Book

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Interview from 1/19/2009

Part: 1…. The shoe to drop in 2009 will be the doubt in investors eyes for governments to meet bulging obligations.

Part 2:….. Policy intervention will make current downturn longer..

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As he said he would…

Privately held, clean bank and done in order to allow Wilbur to participate in the FDIC acions that are anticipated..

Bloomberg:

Fox Biz:

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More evidence global oil production is being shuttered…..

ConocoPhillips (COP), the third-largest U.S. oil company, said Friday it’s cutting 4 percent of its overall work force, reducing the number of contractors it works with, cutting capital spending by 18 percent and writing off $34 billion in noncash assets because of plummeting energy prices. These are the first announced job cuts by an oil major, about 1,300 in this case. ConocoPhillips said it has approved a capital spending program of $12.5 billion for 2009, down from the $15.3 billion it projected to spend in 2008.

Just last week, Schlumberger (SLB), the world’s largest oilfield services company, said it would eliminate up to 1,000 jobs in North America, or about 5 percent of its work force, and is looking at cuts elsewhere globally. Halliburton (HAL). also said it would begin laying off workers but didn’t say how many or when.

“We are positioning ourselves in the current business environment to live within our means in order to maintain financial strength,” ConocoPhillips Chairman and Chief Executive Jim Mulva said in the statement. “We’re doing this by reducing our cost structure, addressing our balance sheet and continuing to manage the company through prudent capital discipline.” Translation, “we aren’t drilling anywhere near what we were before.”

In November, ConocoPhillips and the state-run Saudi Arabian Oil Co. postponed construction of a multibillion-dollar refinery in Saudi Arabia because of the deteriorating global economic situation, which has eaten away at energy demand.

Oppenheimer & Co. analyst Fadel Gheit has said he expects spending cuts to average 10 percent for large producers and 30 percent for smaller companies.

Chevron (CVX) spokesman Don Campbell said Friday the company had no plans to cut its work force. Exxon Mobil (XOM) hasn’t announced any work force changes either.

In addition, ConocoPhillips said it likely would replace only about 25 percent to 30 percent of its 2008 production with new reserves. Reserve replacements represent the ratio of reserves found over production for a given period. Analysts typically say a company’s reserves replacement should average more than 100 percent over a three- to five-year period to indicate growth.

This is very bullish for oil prices longer term. When demand returns (you have to believe we are in a global depression for it not to) prices will spike as excess supply dries up and this shuttered production lags the upturn.

If you want to play oil other than the individual companies, the ETF symbols are (DBO), (USO) and (DXO)

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By Murray Rothbard, founder of the Mises Institute

America’s Great Depression – Rothbard

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Read it and weep…

GAO TARP December 2008

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This reader idea has real merit for Microsoft (MSFT)

Reader submits:

“I have avoided MSFT for some time as too expensive. If you do the math, owner’s earnings have been 2-4% even though revenues have grown since 1997 and the stock was very flat. However, since 2006, they have been buying back stock and Net Income has risen so that 2009 is forecasted to be ~$2.20. With the stock under $20shr I began looking about for information and found that Ray Ozzie wants to remake MSFT into a start-up mode.

Ozzie looks like a man on a mission. The issue will be if Ballmer lets Ozzie have his way. Will Ballmer even be there? If I were a Board member I would be seriously concerned with Ballmer’s actions re: Yahoo. Offer $40Bill then back away with what appear to be immature negotiations.”

Just who is Ray Ozzie and what is the deal?

From Wired in November 2008

At Microsoft, he says, there must be a shift from the traditional model of software to what he calls software plus services. As slogans go, it’s not particularly catchy. But the sentiment is clear: Just packaging software, collecting the money, and then producing a new version a few years later (whether people want one or not) is no longer a sustainable business plan.

The relationship with customers must be constant and continuous. Instead of discrete onetime transactions, the money—whether from subscription fees or advertising—will flow constantly. For the user, everything will happen when it’s needed, as if pulled down from a cloud. The metaphor has been around for years, along with the more recent spinoff, cloud computing. But the phenomenon is anything but ethereal. Billions of dollars are at stake.

According to Microsoft, one example of a successful service is Windows Update, which automatically installs patches and bug fixes on users’ operating systems. Hotmail, like all Web-based mail applications, is also a service. Virtual Earth? A service. Software, but not from a box. Still, Ozzie draws the line at the idea that you can do anything and everything in the cloud, that every application can become Web-based, that the desktop is dead. Some things, he says, still require local computation, offline persistence, and the control that only one’s own desktop processor offers.

This defense of the desktop dovetails nicely with Microsoft’s historic strengths. So, while Ozzie actively evangelizes for the disruptive move to services, he’s also saying that for many purposes the ideal software model is a hybrid: a heavy-duty application (known as client software) combined with an ongoing Internet service. A great example is Apple’s iTunes, which you install on your computer and use as an offline media organizer but which also serves as an Internet app that lets you buy songs, stream music, and get recommendations.

In Ozzie’s view, Microsoft must make this model the centerpiece of all its future efforts. The company must transform itself from a manufacturer that dumps out a big product every couple of years to a customer-obsessed enterprise devoted to continually producing, updating, and supporting a full panoply of services. In his speech, Ozzie puts it this way: “When packaged software ships, services go live. What was our end is now the beginning. The gold disk”—from which all retail copies of a new piece of software are made—”is now the grand opening.”

At that point, Ozzie unveils the new products that he’s been laboring over for more than two years: a top-secret set of initiatives designed to make Microsoft as dominant in the cloud era as it was in the days of the desktop. First up is a new operating system for Web-based applications, codenamed Red Dog—it’s Windows for the cloud. (See Editor’s update below.) Then comes a demonstration of Live Mesh, which will allow people to seamlessly synchronize all their information with as many people and places as they want, across as many devices (computer, phone, camera) as they want. Finally, another engineer demonstrates how Microsoft will make even its legacy apps accessible via the cloud. It’s a shocker. After years of Microsoft insisting that the desktop is the only proper place for its crown-jewel applications—the venerable Office suite—it appears that Word, Excel, and PowerPoint will levitate from the desktop and become services as well. In this demo, an Excel spreadsheet is running in the cloud with almost all its functionality intact, including features like auto-complete and auto-formatting as well as built-in collaboration and a way to link the spreadsheet results to emails and Web pages.

Now Balmer has been in charge at Microsoft for a while now and the time has come to take a real close look at things. The Yahoo (YHOO) deal was a fiasco for Yahoo but had the deal been accepted, it would have meant Microsoft paid $40 billion for a company worth $15 billion today. Not good..

The desktop software model is dying thank to Google (GOOG) and Balmer is being dragged into. Ozzie is already there, why not let him run the show?

It is a question the Board must begin to consider…

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Highlights of the latest OMR
dated: 16 January 2009

**Forecast global oil demand in 2009 is revised down by 1.0 mb/d, following a halving of assumed GDP growth to 1.2%, given the worsening outlook. Global oil demand is now projected at 85.3 mb/d in 2009 (‑0.6% or -0.5 mb/d year-on-year). The 2008 estimate is revised down 70 kb/d to 85.8 mb/d (-0.3% or -0.3 mb/d versus 2007). The expected two-year contraction in oil demand would be the first since 1982 and 1983.

**Global oil supply was flat in December at 86.2 mb/d, with curbed OPEC output offset by gains elsewhere. Non-OPEC supply for 2008 and 2009 is forecast at 49.5 mb/d and 50.0 mb/d, lowered by 60 kb/d and 30 kb/d versus last month’s report. 2008 output declined by 150 kb/d, partly due to the first fall in Russian supply since 1996. 2009 growth is forecast at 0.5 mb/d, in addition to a 0.6 mb/d increment in OPEC NGLs.

**December OPEC crude supply was 30.9 mb/d, down 330 kb/d versus November. This was 1 mb/d below September 2008 levels, and nearly 2 mb/d below mid-2008 highs. OPEC agreed a new target of 24.8 mb/d from January, equivalent to OPEC-13 output of 28.2 mb/d versus a reduced 2009 ‘call’ of 29.5-30.0 mb/d.

**1Q09 global refinery throughput is forecast at 72.3 mb/d, 1.2 mb/d lower than last month’s report. Weaker global demand and poor economics continue to hamper crude runs. Evidence of more structural changes to the refining industry is emerging in addition to reduced plant operation rates.

**OECD industry stocks fell by 2.0 mb to 2,658 mb in November, as a US build was offset by lower European crude and Pacific distillates. Despite a downward revision to October data, end-November forward demand cover remains high at 56.4 days on lower OECD demand. Preliminary December data indicate an OECD draw of 8.0 mb.

**Crude oil prices rose to nearly $50/bbl in early January, supported by cold weather, the Russian/Ukrainian gas crisis and fighting in Gaza. Subsequently, weak global refinery demand and an increasing crude overhang have pressured Brent futures to currently around $45/bbl, while WTI was at $35/bbl, distorted by record-high Cushing stocks.

So, the key here is that despite the global recession currently underway, supply demand is still about equal. That means any increase in economic (particularly manufacturing or infrastructure work) activity will tilt the balance and any geopolitical event could cause a run on oil (DBO), (USO), (DXO).

Is oil going back to $147, not without a major event (but, is that so far out of the question?). But to think it could double from here this year is within the realm of reasonableness. Global gov’t stimulus is going to be tilted towards “shovel in the ground” projects and that means oil demand rises. Supply is down and both OPEC and Non-OPEC production has been curtailed also. Production increases will lag and demand increase so price pressure will be upwards.

Regarding production the report says:
“Forecast non‐OPEC production is trimmed by 290 kb/d for 4Q08 and 345 kb/d for 1Q09, then by
around 150 kb/d for the remainder of 2009. Longer‐than‐expected outages affecting the GOM and
Azerbaijan curb early 2009 supply, as do weaker expectations for the North Sea and Australasia.
Forecast 2009 production from Russia and Canada is trimmed on fiscal and investment barriers and
field underperformance, while weaker expectations also now prevail for Malaysia and Vietnam.”

“OPEC‐11 production, excluding Iraq and Indonesia, fell by 825 kb/d in November, representing apparent compliance with the 1.5 mb/d cuts in target output agreed on 24 October of around 55%. However, as noted above, further reductions are also scheduled for December supply. OPEC Ministers gathered in Cairo on 29 November, ahead of their next scheduled meeting in Algeria on 17 December. In the end, no further decision on output policy was taken, due apparently to uncertainties over upcoming winter weather and the fact that it was too early to judge the impact of production curbs only put in place from 1 November.”

The December meeting resulted in further production cuts..

FULL REPORT:
1/16/2009 IEA Report

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New Mac, Bin Laden, Geithner,

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Apple Introduces Revolutionary New Laptop With No Keyboard

– Boosts sales of cassette players

– Bootleg Turbo Tax

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The blog has just been added to the kindle store at Amazon (AMZN). Follow this link to get it

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