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Bubble Pricker

What A Day On The Markets

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I don't normally comment and engage in discusion on the daily abberations of the financial markets, but today is an exception. A truly remarkable day, in many respects, and bear with me, there is a significance to house prices:

- BP reports record profits, but share price is down. Same pattern as with Shell last week. Reason? Whilst posting record profits, they still weren't as high as expected, disappointing the market. My point? Is there a wider pattern emerging here in the stock market? Have we had a one-off period of strongly rising profits on the back of efficiency gains. Now the rises are no longer sustainable and with biting higher energy prices, and companies unable to pass rises to the consumer, corporate profits may well be on the way down. Is the stock market headed the same way? Anyway, my FTSE short call position is looking good.

- A lukewarm treasury bond auction sends yields up . Is this the beginning of the downfall of the dollar? Have investors reached the end of the line and lost trust in the greenback after all? Have Asian governments finally stopped buying treasury bonds?

- Back in the UK, latest retail figures show the "Christmas pick up" was a flash in the pan and consumer spending has slowed sharply after Christmas. Kingfisher is rumoured to be issuing a profit warning soon. Next and other retailers sharply down. Was Christmass 2005 the last gasp and is this finally the beginning of the end of the UK retail sector?

- US housing stocks dropping like stones "In the latest sign that the US housing market was cooling, Toll Brothers said its first-quarter sales had plunged 29 per cent and cut its sales guidance for the full year. Its shares tumbled more than 5.5 per cent to $29.47 while rivals DR Horton and Pulte Homes fell 3.7 per cent to $33.67 and2.3 per cent to $37.07 respectively."

- Oil down sharply to just over $61 Brent Crude. Oil probably has been overvalued recently, but the interesting bit is that normally stock markets react positively to a fall in oil prices. Not today. If markets no longer react to good news they may be toppy. Thank god I quit that long position last week after turning a profit at $68.

- Gold down 20 dollars within a few hours. I reckon a lot of people got burnt today. Thank god I quit that long position last week. A buying opportunity? If you have the stomach buy now.

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The drop in oil is particularly odd with Bush setting up for a war with Iran... or do the oil traders know something we don't?

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No, my guess is, the Iran crisis had long been priced in, and when it actually realised itself, selling started.

"It is better to travel than to arrive"

Also, the traders' opinion is probably that with the referral to the security council, we will just get a a few meaningless resolutions which Iran will proceed to ignore and then nothing further will happen.

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Guest muttley

I really didn't see anything unusual about the market today.BP fell 3% but is still up on a month ago.Share prices sometimes fall on good news,just as they can rise on bad news.I think the fall in BP is due to investors seeking opportunities elsewhere now that the results are out.

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I really didn't see anything unusual about the market today.

That's the point. There was no single remarkable event (except for the gold correction), but they nicely fit together into a picture (or at least some of them). The year started on a lot of optimism for consumer spending, the stock market and house prices. The bullish mood seems to be fading rapidly. That is the message I take away today.

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I said the optimism that is fading away was for consumer spending, the stock market and the housing market.

Anyway, no need for me to get into property. I am well invested in UK commercial property funds (invested in 2003 after STR and up 25% since, plus 7.75% annual yield on top. Don't think you can show for that with your measly returns on Wandsworth crammed housing. I also own a BTl property in Germany where yields are still attractive. I just diversify into different assets rather than hinging my financial future on highly geared exposure on a toppy UK residential property market.

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Could this be the start of a move back into property?

:P

ooohhh! A conspiracy inside a conspiracy!

Where will it end?

Sun Tzu said; The apperance of randomness, the numbers, the comings and goings they are all the affect of control.

Succinct.

What does "SP" stand for, I wonder?

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I'm sure many of the boys and girls would have appreciated it more had you told them all last week. :lol:

Oh well, we all have our own ways of tending to our flocks... :lol:

Like the chap who closed his gold positions at $510 in anticipation of falls, and told everyone else to, people would have slaughtered Bubble Pricker if he made a bad call.

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The drop in oil is particularly odd with Bush setting up for a war with Iran... or do the oil traders know something we don't?

It may have something to do with the fact that Canada is sitting on the world's 2nd largest oil reserves. Bush has been pushing for more exploration in Alaska, NW Territories and Artic Circle which are thought to contain more oil than the entire Middle East. Until recently the environmentalists have said this is a virtual no-go area due to endanagered species etc. Then there are the Falkland IS. which are said to have huge reserves. With Russia towing the line on Iran it could mean that there is a consensus that they will get greased if any oil supplies are disrupted.

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Oooh it's murder on them markets this morning isn't it.....

Yes indeed. Might see a melt down as confidence in houses prices is dropping like a stone encased in lead:

News Story

Stocks drop on oil, Google, homes; Cisco climbs

5:33 p.m. 02/07/2006 Provided by REUTERS

The Dow Jones U.S. Home Construction Index, made up of home builders' stocks, fell 3.1 percent.
A Realtors group said home sales in 2006 will fall as house prices rise at rates far below those of 2005.
Analysts said the deteriorating forecasts may indicate housing, a main driver of the U.S. economy, is slowing faster than previously thought.

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It may have something to do with the fact that Canada is sitting on the world's 2nd largest oil reserves. Bush has been pushing for more exploration in Alaska, NW Territories and Artic Circle which are thought to contain more oil than the entire Middle East. Until recently the environmentalists have said this is a virtual no-go area due to endanagered species etc. Then there are the Falkland IS. which are said to have huge reserves. With Russia towing the line on Iran it could mean that there is a consensus that they will get greased if any oil supplies are disrupted.

Yawn.

We've done this to death.

Canada has vast reserves of tar bound up with sand. To get it out is hugely energy-intensive and usually involves destroying the landscape.

Who says the Falkland Islands have huge reserves - the Falklanders? Why are oil companies not rushing to get acreage down there? At present the islanders are forced to shoot their own seismic to try to tempt investors to take a look.

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Yawn.

We've done this to death.

Canada has vast reserves of tar bound up with sand. To get it out is hugely energy-intensive and usually involves destroying the landscape.

Who says the Falkland Islands have huge reserves - the Falklanders? Why are oil companies not rushing to get acreage down there? At present the islanders are forced to shoot their own seismic to try to tempt investors to take a look.

Doncha just hate it when facts ruin a good story :)

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Yawn.

We've done this to death.

Canada has vast reserves of tar bound up with sand. To get it out is hugely energy-intensive and usually involves destroying the landscape.

Who says the Falkland Islands have huge reserves - the Falklanders? Why are oil companies not rushing to get acreage down there? At present the islanders are forced to shoot their own seismic to try to tempt investors to take a look.

http://service.spiegel.de/cache/internatio...,334165,00.html

Experts
from the renowned, Edinburgh-based British Geological Survey have long believed that enormous oil reserves, possibly up to 60 billion barrels, lie beneath the deep waters surrounding the Falklands. If this estimate is correct, the islands' oil reserves would almost
equal those of Libya and Nigeria combined,
and even amount to half the Iraqi reserves. The astronomical estimate is the result of a study conducted by geologist Phil Richards, who has been researching the Falklands' potential oil reserves for the past 15 years. "I am convinced that these figures are correct," he says.

http://www.rense.com/general37/petrol.htm

Current oil sands projects are economically
viable at crude oil prices of $18-$20 a barrel
, though the quality of oil produced can vary according to whether production comes from "in situ" reserves that require drilling assisted by steam-injection pressure or from simple mining, Stringham said.
CAPP's own estimate of Canada's recoverable oil sands is 315 billion bbls - 20% from mining and the rest from steam-assisted drilling.
Edited by Realistbear

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BP,

Expecting a lot more seismic movements in markets - all round. The financial leverage game has been ratcheted up many more notches than ever before. I don't believe anybody in the world really knows how and under what conditions derivative products will conspire to create some truly unbelieveable circumstances or indeed how much stress is needed to create those circumstances.

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The British Geological Survey, technically competent though they are, is acting for the British Govt, which desperately wants to see exploration in the Falklands in the hope of major oilfields being found so that they can boost their tax income from what is at present a fairly large drain on the Exchequer.

I would tend to 'follow the money', which in the case of the oil companies, is not going to the Falklands.

It is similar to the West Greenland shelf - the Danish Geological Survey have been hyping it for years, but the only company that has taken the bait was Statoil, who bailed out after the first dry well.

While it is true that Canada has larger reserves than Saudi Arabia, and that above $20/bbl those reserves are viable, that doesn't been that they are particularly profitable. The extraction cost of Canadian oil, in energy terms, is something like "burn 1.5 barrels to extract 1 barrel". The Saudi extraction cost in energy terms is negligible, and expressed as cost, is down around $0.50/bbl, so they are viable at $1/bbl market prices.

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The extraction cost of Canadian oil, in energy terms, is something like "burn 1.5 barrels to extract 1 barrel". The Saudi extraction cost in energy terms is negligible, and expressed as cost, is down around $0.50/bbl, so they are viable at $1/bbl market prices.

Is that correct? The EROEI (energy return on energy investment) for Canadian oil is less than 1 (or 2/3 from your figures)?

Peter.

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Is that correct? The EROEI (energy return on energy investment) for Canadian oil is less than 1 (or 2/3 from your figures)?

Peter.

Here is a definitive article on the extraction cost of Canadian Oil--it appears to be less than we may think as a result of the growth of technological breakthroughs:

http://www.worldenergy.org/wec-geis/public...ress/2_1_03.asp

SUMMARY

In the twenty-first century, as the world's conventional oil production declines, there will be an increasing reliance on production from heavy oil and bitumen resources. Western Canada has limited heavy oil resources but holds the bulk of the world's bitumen resources. The oil sands deposits occur from the surface to a depth of around 750 metres. During the last thirty years, a number of novel strip-mining and in situ technologies have been developed to extract bitumen from these deposits. These have been high-cost, thermal technologies, which have through practical experience, become more efficient and paved the way for novel low-thermal, cost-effective technologies.

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Here is a definitive article on the extraction cost of Canadian Oil--it appears to be less than we may think as a result of the growth of technological breakthroughs:

http://www.worldenergy.org/wec-geis/public...ress/2_1_03.asp

SUMMARY

In the twenty-first century, as the world's conventional oil production declines, there will be an increasing reliance on production from heavy oil and bitumen resources. Western Canada has limited heavy oil resources but holds the bulk of the world's bitumen resources. The oil sands deposits occur from the surface to a depth of around 750 metres. During the last thirty years, a number of novel strip-mining and in situ technologies have been developed to extract bitumen from these deposits. These have been high-cost, thermal technologies, which have through practical experience, become more efficient and paved the way for novel low-thermal, cost-effective technologies.

I believe that Rockdoctor's company is involved in technology in this area,

Peter.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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