Trader Jock

Just you keep believing that Hamish..... ;-)

Speaking of Newbuilds, I was flying over Portlethen yesterday and noticed that there aint exactly much going on with the new housing development to the west side of the dual carriageway ??? There are a number of houses built and a lot half built but no more than than there were a few months ago, also no sign of any activity at all?? Has the plug been pulled ?

Live trading today:- UK Crude Sell 43.40 Buy 43.50 US Crude Sell 37.03 Buy 37.13 Looks like its heading lower to me.....and oh look Inflation isnt actaully falling anything like as fast as the Govt predicted due to inflationary pressures from imported items. Now then, what will happen when they open up the printing press and and the £ collapses further meaning imported goods cost even more ?

By jove Hamish, I do think we might be agreeing on a few points there !! I'm sick fed up of having 40% of my earnings handed out to several lazy workshy chav monkies who have realised its easier to pretend they have a sore back and claim benefits than it is to work for a living. Poor old government are however just starting to realise that with increasing jobless numbers and falling tax revenues, there will come a point that there simply wont be enough left to support the benefits system, hence the reforms they announced. Don't even get me started on council tax, nearly £3K per annum to get 1 wheelie bin emptied per fortnight. There are no street lights out here, our track to the main road is our own responsibility, our water is drawn from a well / stream and we have a septic tank and run-off for our sewage. Where does my £3k go? Bloomin hate black jelly beans too.....and coffee flavour Revels.... As for a short selling ban, don't believe everything you read int the media. They put a short selling restriction on the majority of banking stocks several months ago and it made no difference at all to the share prices of most stocks, they still tanked. The ban was then lifted a few months later and again it made not a bit of difference, just gives the media and government another scapegoat. Shorting increases volatility in stocks more than anything rather than just simply forcing the share price down.

Shouldnt that read, 'they just flood the banks with liquidity who use it to shore up their balance sheets in light of the massive losses they are suffering, too scared to lend to any Tom, Dick or Harry after they got burned so badly the last time around. They might consider lending to Dick who has £50k of savings, earns £100k a year and no Mortgage left but Dick doesnt actually want to borrow anything as he's a sensible chap. Tom is a student with £30k of credit card debt to pay back and no job after he graduated, and Harry has £30k on credit cards, a £400k mortgage, a house now worth circa £300k and no job having just been made redundant!' This I think you'll find is the crux of the matter, lending criteria has been tightened and those who are now considered credit worthy are the sensible ones who live within their means and dont want to borrow, the rest are lumbered with so much debt it'll take them a decade to pay it back. Havent you missed something else? Inflation rises, as do interest rates making the cost of servicing debts more expensive....? Oh yeah, and the food we buy and clothes we wear, cars we drive, goods we buy (most of which are imported since the UK has virtually no industry left) go up in cost leaving us with less to spend each month ? People will indeed pile their money somewhere if they open up the priting press, gold, foreign currencies etc anywhere but the UK! Oddly enough the goverment was expecting foreign money to start flooding into the UK given the dramatic drop in the value of the £ already, quite the opposite has happened however and they got a bit of a shock as sales of exported goods dropped even further. Seems they forgot that we dont actually produce goods that anyone wants to buy and cant be produced cheaper and usually better elsewhere in the world.

A decade of irresponsible lending without proper consideration as to whether the punter can actaully service the debt at the end of the day.....oh hang on, havent we just had that ;-) Thats the business model that generated the exstension to the last property boom and forced Avg prices Vs Earning multiples into the 7's, 8's, 9's and even higher..., wont be seeing that again for a very long time methinks...

I cant for one minute imagine a bailout for the O&G sector but I would agree job losses will continue, especially in Aberdeen. Nymex is trading at $35 per barrel today, might get $25 sooner than I thought, I'm short from the upper $40's though so quite happy !!! Expect some M&A news soon though as there is a new player in town with a lot of money to spend and I know of 2 companies they have made approaches to already.

Sorry I've missed the fun as I've been somewhat busy, anyway I'll give you my take on why the oil price aint going to rocket, lack of demand plain and simple. If you look at the demand factors, 1. AUTO -You've got crumbling auto sales for starters, less people buying cars, granted they may be keeping older cars longer but there are also a lot of people ditching second cars as they start to feel the pinch. - US & UK switching from gas guzzling V8's & 4x4's to more economic vehicles after the cost of fuel rose sharply. - More people out of work, less people commuting = less fuel required - Less cars being made, factories being closed = less power required to run these factories 2. Aviation - Air Travel is falling off, less fuel required. 3. Shipping - Half the world wide dry bulk fleet is laying idle, half the Tanker fleet are anchored up full of speculators oil, considering some of these vessels burn 100's of tonnes of Gasoil per day when stemaing, thats a lot of fuel not getting burned! Offshore fleet going the same way and Singapore harbour is chocka today as is Aberdeen. 4. World Trade - Factories closing all over China as people have no more money to buy the goods they dont really need that were made in China and then shipped across via bulkers above. Closing factories = less oil needed. 5 Construction & Housing - Construction grinding to a halt = no fuel required to power the diggers, or indeed the factories that make the raw materials used in construction. 6. Climate - Well its winter time just now and stocks are still rising, Granted many places need to run aircon in the summer but in general demand is greater over winter. 7 Speculators - Lots of people got burned with oil, as the cash came out of indicies punters were looking for a new home for it, Oil was the thing for a while which is why we got to $147. Now we're down in the $40 region, many have been burned and wont forget that lesson, where will they go next ? Gold ? Currencies ? looks that way to me. As we know, there is also one heck of a lot of oil floating around our shores waiting for the price to go up, that will all add to availability of stocks. There are a number of other factors but I'm flat out just now and that will have to do for starters...... Interestingly enough I was reading an article the other day stating that world wide oil demand had actually peaked during late 2007 & early 2008 during the height of the economic boom. Makes sense if you think about it, booming economy needs lots of oil to fuel expansion with the opposite also the case, less economic activity = less demand for oil. It is therefore unlikly that OPEC will be able to cut output fast enough to counteract the rapidly falling demand, I'm personally expecting to see $25 per barrel and possibly lower at some point.

Did I miss something? Is the £ not taking a spanking against every other currency ? Are we not a massive importer of goods, therefore meaning anything we buy from the continent is now far more expensive? Was this not reflected in the rise in manufacturing costs by 14% at the end of last year? Are the UK interest rates not 1% thus offering virtually zero return for investors and therefore no incentive to buy into the £ ? Even with the £ falling so dramatically you would expect to see an increase in exported goods as the goods we produce become cheaper to the continent, however dd we not just see a sizeable fall in exports ? Is the Govt not about to open up the printing press now they are just about out of options thus devaluating the £ even further ? Did the 'actual' (if you factor out the VAT cut) rate of inflation not just rise from 3.9% to 4.1% ? Is that not DOUBLE the UK Govt inflation target yet they are telling us we are still heading for deflation so that they have an excuse to cut the interest rates ? Oh dear, do you not look at the rest of the World ?? Look at Ireland ? Was it not the darling of the property boom ? Where is it now ? Have you not learned that the fastest risers (as speculators jump in) quickly become the fastest fallers (as speculators get burned). Fair enough, I shall not continue down the Banana Republic thread as it is indeed a little off topic. I could go on for hours about how our shunning of the manufacturing industry (actually making stuff people want) in favour of the Financial sector on the back of the property market (pumping money into a giant Ponzi scheme) has left this country as one of the most exposed in the world. I beg to differ, no credit, falling FTB demand as none have any 'real' money for the 25% deposit and massive piles of credit card debt to pay back first, less disposable income as prices of imported goods rise sharply, rising unemployment, higher taxes.....I could go on all day....!

Hamish, your futile belief in 'Stats' really is quite worrying to see, In over 15 years of trading the markets I've pretty much never seen a set of stats in my life that actually reflect reality. Just look at the Government spouting that we are heading for deflation and using it as an excuse to slash and burn interest rates, its utter balls. We are heading for double digit inflation despite the government claims inflation is falling (which it isn't). In fact if you factor out the VAT cut, interest rates actually rose from 3.9% to 4.1%, somewhat above the 2% target. Even at the claimed 3.1%, previously inflation was claimed as being far too high and big Merve had to write a letter explaining himself. Now 3.1% is deemed 'teetering on the brink of deflation'. Ignore the stats and open you eyes to the real world, Aberdeen is teetering on the brink of a plunge in property prices which most punters wont even allow themselves to imagine, I'm personally expecting between 40-50% drop from peak to trough and a decade before prices start to recover. I will be back to remind you of this prediction in a couple of years once its happened, the current stand off is just prolonging the inevitable. In the meantime however I have bigger fears for this country, the way we are headed with 1% interest rates, out of control borrowing, rapidly rising unemployment, falling GDP and exports, collapsing currency and the printing presses being warmed up I really do think we are heading for Banana republic status.

Since you failed to respond to my previous points I'll keep this simple. Aberdeen without the oil is a Fishing village, same as it was before the oil arrived. Now how is the fishing industry doing at the moment I wonder? Take away the oil and Aberdeen will be a ghost town, plain and simple. Actually, Trump might just decide to buy the whole place and turn it into an amusement park, there will certainly be plenty of candidates to work on the ghost train....

-I'm glad to hear it and in that case I'm sure you've positioned yourself to profit accordingly. -Insignificant just now however as I stated before this is the beginning, and should be taken as a sign of things to come. - Not at all, I'm a realist, I've seen a number of these downturns in my time and am quite sure the offshore industry will weather the storm yet again. Not without a detrimental effect to the local economy for the next few years however and a subsequent knock-on effect to the local houseprices. - Nope, I said those that are already committed for 2009 and 2010 are offering rigs for farm out, this means they have a rig to pay for and no work for it to do, thats quite a financial drain. Now you have 2 options, sublet it at a lower rate and take a daily loss of $100k -$200k per day whilst getting nothing in return or cancel the charter and try to negotiate a cancellation fee, again very expensive. Speaking of wriggling out, Talisman walked away from an LOI on a 2 year extension to one of their rigs very recently. Oilexco used administration as a tool to offload rig and vessel contracts, they are a far more attractive proposition to buy without these as there are now far better deals to be had on vessels and rigs right now. All this shows increasing availability and falling demand, this is without even mentioning the newbuild units due for delivery. - I'm well aware of how oil futures work and media stories of companies storing oil in tankers. A couple of days ago from Lloyds list:- "Banks seek to book tankers for oil storage Friday 16 January 2009 THE cost of delivering Middle East crude to Asia, up 62% since January 1, may extend its surge as banks join oil companies in booking vessels to store consignments at sea, Bloomberg reports. Morgan Stanley is seeking a supertanker for storage, joining Citigroup, Royal Dutch Shell and other companies in trying to profit from higher prices later in the year." So, tanker rates are on the rise due to 'speculators' booking tankers to fill with oil and hopefully sell on the market for more at some point in the future. So you've got rapidly rising vessel dayrates which will soon eat into any potential profits and then you have the fact that all this oil will be freely available on the market over the next 12 months. Perhaps Ive got my basic economics wrong but is it not the case that when there is more of something available and less demand for it then prices generally drop ? IE this oil is stored but still adding to worldwide stocks which are INCREASING all the time despite OPEC cuts. Demand is falling off quicker then production, store it, don't pump it, do what you like but until it becomes in demand the prices wont go up. These people who you refer to as 'smarter than you and me' (these are the same bankers that are reeling from their own sub-prime mess) are taking a punt that the global economy will recover in the next 12months and oil demand will start to increase once again, hell of a risk when tanker rates are now $80,000 per day and those charter bills will have to be paid every 30 days, that's $2.4million per month. As for Nymex vs Brent, brent has always been priced higher than Nymex, in fact on my trading platform the live March futures are:- US Crude (March) Sell 40.74 Buy 40.84 UK Crude (March) Sell 43.73 Buy 43.82 Pretty much a normal differential between the two. -I do, I traded Nymex short from the $140's during the summer, and the FTSE as recently as a couple of weeks ago down from 4635 to 4135, ( as you no doubt know the FTSE is heavily influenced by the oil price due to its corporate make-up), was most profitable thanks. -I would agree most of it is tat but ideal fo-r rental if cheap enough, a good friend of mine buys & sells a lot of property, he had to phone around a few developers to get one to desperate enough but that he did. Now it might be just one distressed company at the moment but when one starts dropping their trousers that far, the rest will be forced to follow. Indeed my friend actually got burned quite bad on a 4 newbuilds he bought offplan 12months ago at what he thought was a very good discount. The developer is now selling those homes at £50k less than the price my friend agreed and will have to pay, needless to say he's putting up a fight to get a discount. - Of course most people wont be forced to sell but there will be many who will be as paycuts are becoming more common and lay-offs continue, hence why I was saying Talisman, Conocophilips etc are just the beginning. There are also a number of people with second homes starting to feel the squeeze, these will add to the market as will all the BTL mob who will struggle to cover the mortgages. Lets see now, back to basic economics again, increasing supply (look at ASPC Q3 report to see just how dramatically its increased over 12 months) and falling demand as many FTB cant get mortgages without a large deposit. With most actually owing circa £20k in debt rather than having that as a deposit I wont be holding my breath for a pick-up in FTB numbers. Nah, cant see $10 again, using TA, Elliot Wave Theory and Fib retracement levels that I always trade with I'd think $25-$55 would be a sensible range for the next 12months assuming WWIII doesn't kick off somewhere in the middle east.

Good god, that last time I saw a bull this blinkered was on the FTSE & NYMEX futures forums right before we took a dive from the 6800's & $147's. You might wish to check out the redundancies at Talisman, Conocophilips, Woodgroup and also the majority of contractors being given a 10% pay cut. This is just the begining and its going to be painful. Anyone who cant see whats coming in the North Sea / Aberdeen is either in complete denial or plain stupid!! Rig demand is probably one of the best indicators of health in the North Sea and its falling very rapidly. Operators are postponing or cancelling requirements for 2009 and 2010 left, right and centre, I suggest you read Rigzone, Petrodata, Tradewinds or Lloyds list. Operators already comitted to rigs already are now either trying to wriggle out of the comittments or are offering up sublet slots. Difficult to know what Semi rates now are as there have been no fixtures recently but after discussions a couple of days ago with a rig owner they are now talking $300,000 instead of the $400,000 they were a couple of months ago, and thats before any sort of counter. As for hoping an oil price rebound will help, dream on, demand in China is down as people stop buying luxury goods and their factories close. US demand is down as people ditch gas guzzling cars and sales of such fall off a cliff. Fleets of bulkers (used to ship good from China etc) are laying idle and rates on the Baltic exchange have dropped off by 90%. I dont suppose you were in the oil a decade or so ago and found yourself attending seminars as I did on such topics as "surviving in the $10 per barrel enviroment ?" OPEC can cut production as much as they want but there is p*ss all they can do to increase demand. Real house prices in Aberdeen are falling, you can buy a newbuild today at £200k that 6 months ago would have been £300k, just go and make a serious cash offer to a developer and watch them take your arm off. There is still however very much a stand-off between sellers expecting prices from 12months ago and buyers demanding some discount, one will give soon and I doubt very much it will be down to 'distressed' buyers!