Crunch Time     Time for Natural Gas         Current Oil Outlook             It IS the dollar! First the April numbers. The EIS portfolio was up 11% for the month, about the same amount as the oil and services indexes, a bit better than the S&P. Year to date being up 8% is good relative performance. About 3% of it was due to the options on futures strategy. I added an option on some late 2011 natural gas futures contracts. I also disposed of most …

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Much of this letter is about the economy and the stock market because both were front page news for much of the past month. Oil is not much in focus for the investing public. Oil has tended to rise in price when the focus is elsewhere.

Macro Economy

There is little question that the U.S. economy is falling into the pooper. It is going down with the consumer and with the price of her home. It won’t be saved by any bailout that has or will be passed …

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2008 Thus Far: A Preview of Coming Attractions

My concern has been that at some point shortages of oil will cause a falling-stocks, rising-oil phenomenon that will crush my oil related stocks along with the whole market. 2008 has started like that. Oil was up 6.34% as of 2/29 (per the ETF symbol OIL) but stocks were down 8.5% (in terms of the S&P 500 ETF symbol SPY). For oil-related stocks, the falling stock market trumped the rising oil market, as I have expected. IYE, a broad-based oil-stock ETF, was down …

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Time to Get Back in the Water

I hate market timing. It’s expensive, it’s disruptive to fundamental investment practices, and it often does not work. But in early January I felt that exceptional circumstances required action. So I stepped aside for a few weeks, as I described at the time. I’m glad I did. While the EIS portfolio declined 4.4% for the month, that compares favorably with energy indexes (OIH down 16.7%) and the broad market (SPY down 6%).

The exceptional circumstances, as you know, were the interrelated problems of a …

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Transition to the Electric Economy

New year’s day is a good time for long term thinking and planning. Today I want to relate some fairly visible long term prospects for global energy changes to a few of their more obscure short term investment implications that are actionable.

The great game of the next era in human use of energy is going to be the transition from a petro/electric economy to a fully electric one, motivated by the end of affordable fossil fuels. Transportation is the name of this game because it uses …

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Standard Wisdom: Declining Oil Prices….

    The New Energy Bill’s Impact….

         New Data Point for the Decline Rate……

            What the Fundamentals Say about Future Oil Prices…

                My Prediction for Oil Prices for the Next Five Years

A lot of observers are looking for lower oil prices in the short term. They cite:

   - a looming recession,

   - 2003 - 2007 higher prices resulting in demand reductions and supply  increases,

   - the end of dollar weakness,

   - the end of Chinese preparations for the 2008 Olympics, and

   - reduced geopolitical tensions, especially …

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Oil Price Trends… Portfolio Strategy Review… New Strategy Initiated I recently added a new strategy to the more traditional EIS portfolio mix. Before discussing that, let me comment on oil. The Price of Oil Prices move and people want to know why. The only certain answer is that either there were more buyers than sellers or vice versa. In the case of oil’s sudden reversal from a frontal attack on $100 to slipping below “support” at $90, the apparent reasons are that …

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The Oil Market: A Mid-Month Reality Check…

The media is focused on oil as never before. Will it breach $100? Will it decouple from the dollar? Will it cause a recession? What does the giant Brazilian discovery mean? And of primary interest, how much oil could the world really produce if it tried its hardest? Oil is becoming the media’s new Paris Hilton and it’s getting a little hard to decipher the noise from the news. But let’s try.

The most interesting thing to me is how oil moved in the past …

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ASPO Recap: Oil Supply to Fall Off a Cliff…
Strategy Adjustment to a Changed Market

October was a satisfying month for the E.I.S. portfolio. Not so much because it gained over 7%, and is up over 39% YTD. Rather because it outperformed the energy and general market averages which indicates that the E.I.S. strategy is adding value. The strategy was adjusted last month in response to the changing energy markets. Those adjustments and the reasoning behind them are discussed at the end of this letter. First, let’s see what October brought in …

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Developments in Energy World…

What Is the Price of Oil…Now?…

Mid-Term Exam for Global Oil Supply…

Portfolio Report Card
What’s Going On Lately?
Have you ever looked at the “Information” area of this web site? It’s turning out to be quite useful to me and it’s growing rapidly. Brief summaries of published articles organized both by topic and then in chronological order indicate vectors and trends for each topic. If more detail is desired just click on the posting to read the article. Say, for example, the oil sands of Canada are of interest. Simply …

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$80 Oil: What’s Different This Time?

As the price of oil in dollars hit a record on September 12, breaking $80 for the first time, the question occurs: Is the breakout a harbinger of consistent and significantly higher prices or just the Pit Boys on testosterone? For perspective let’s note the environment surrounding this news.
A. The price of oil in Euro’s is far from a record. Clearly, $80 has something to do with the drop in the dollar.  In fact, oil is becoming like gold, something of a hedge …

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Alberta, the New Venezuela. Not.

On Wednesday September 19th, a study commission released a report to the government of Alberta saying that oil and gas companies operating in the province should be taxed about 20% more than currently is the case. The reactions were interesting:
  — Dennis Gartman, a well-followed, commodity sensitive commentator and investor excoriated the announcement in extreme terms and said he was selling all Canadian equities, never to look back (unless, one presumes, the Province rejects the recommended tax increases).
  — Marathon Oil, which has proposed …

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A Noteworthy Month…

A Change in Strategy…

The Impact on Energy
The Month Just Past
In August the market became frenetic. The Dow moved up or down by more than 1% on 12 out of 23 days of trading, a truly unusual performance. A spike in volatility sometimes presages a change in market direction as Floyd Norris of the Times discussed in detail in his piece on 9/1.

It seems that a new fear began to grip the market last month. I think it may be a fear of the unknown, a sense that …

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July: Backwardization and Manic Depression…
Drilling Down on Higher Oil Prices…

Why Even Republicans Should Want a Carbon Tax
Oil and natural gas price trends were extended in July - oil higher and gas lower - and it seems that valid fundamentals are driving both trends. The gas situation is well known - a surge in U.S. supply combined with non-event weather has resulted in huge gas storage numbers. What else can be said? Oil is more interesting.

Backwardization has come to oil. The market says the price of oil …

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Contagions: Sub-Prime is Hard to Figure…

But Mexico Is a Clear and Present Danger

Nobody can know the impact that sub-prime mortgage defaults will have on the broader stock market and the economy. It’s clearly a negative vector for U.S. economic growth, but the question is whether it is a strong enough vector to outweigh such positive vectors such as excellent foreign growth, especially for Chindia. I doubt that and I also think any U.S. recessionary evidence (of which we have seen none thus …

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