90 seconds at 9 am

90 seconds at 9 am: ABARE warns of lower iron ore prices as China slows; Britain hikes stamp duty for rich property buyers; Bank of England members eye more money printing

22nd Mar 12, 9:00am by Bernard Hickey

ABARE warns of lower iron ore prices as China slows; Britain hikes stamp duty for rich property buyers; Bank of England members eye more money printing

Here's my summary of the key news overnight in 90 seconds at 9 am, including news from the Australian Bureau of Resource and Energy Economics (ABARE) that it has forecast an 8.5% fall in iron prices this year as supply increases and demand from China starts to cool.

Markets are watching closely for signs China's economic slowdown may turn into a hard landing rather than a soft landing. Australia and New Zealand are particularly vulnerable to a hard landing, which is seen as growth of around 5%. See more here at SMH.com

The New Zealand dollar fell slightly overnight to be around 81.5 USc from 81.8 USc yesterday as markets continue to watch suggestions of a Chinese slide closely.

Meanwhile, the British government announced its budget overnight, including a cut in the top tax rate to 45% from 50% for incomes over 150,000 pounds. However, it also increased its stamp duty on property sales worth more than 2 million pounds to 7% from 5%.

It is also cutting Britain's corporate tax rate by 1% to 24%.

However, the figures also revealed a fresh blowout in British government borrowing to 15 billion pounds in February, more than double market expectations.

The Bank of England may end up buying the bonds.

Overnight minutes from the Bank of England's Monetary Policy Committee showed two members wanted to print another 25 billion pounds more.

This drove the pound down sharply vs the US dollar.

No chart with that title exists.

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93 Comments

by powerdownkiwi | 22nd Mar 12, 9:10am 1332360622

I'm told that there are individual English banks levered more than 100% of GDP. Who manufactures printing=presses? I might just buy the first share of my life - it'd have to be a winner.

Relatively speaking.

by skudiv | 22nd Mar 12, 9:31am 1332361891

The UK has gross debt around 1000% of GDP. So 1$ of debt = 10c of GDP, to achieve growth of 3% will require debt of 30% of GDP. This is a great example of financial engineered growth, diminishing returns. Where are the limits to debt?

by powerdownkiwi | 22nd Mar 12, 9:42am 1332362521

When it can't be repaid.

A point we are well past.

Maybe the pounds of flesh will quantify as cumulative weight-loss, this time around.

by skudiv | 22nd Mar 12, 9:54am 1332363294

Debt has never been able to be repaid, thats the maths behind interest bearing debt. The job of Nobel Economic Scientists is to ensure that debt is able to exponentially increase. It takes increasing amounts of debt for the system to stay afloat. This is the logic behind solving a debt crisis with more debt, anything less is an admission of failure. To achieve this you need a lender of last resort - Reserve Banks, and a borrower of last resort - Governments. Deficits forever. Since the M.A.D of the circular reference provides no alternative, the players are trapped in a game that cannot end. Since the input is available in unlimited supply, and at little or no cost, there seems to be no limit.

by Christov | 22nd Mar 12, 10:11am 1332364298

Long time since Venice PDK....Shylock will be thinking in human tonnage on scale.

by powerdownkiwi | 22nd Mar 12, 10:15am 1332364531

Cakes of soap?

Been done. Bit later and not with so much class, but done.

Perchance we will all end up with smaller Portia'ns apiece.

Exits,

by Christov | 22nd Mar 12, 10:24am 1332365054

Love it...!!

Although dieting in not on the agenda for those who percieve a reduction in their gluttony as a backward step.

Methinks an inversion of your Portia'ns theory may be more apt.

by Christov | 22nd Mar 12, 9:18am 1332361118

Well I marvel at how BHP and Rio Tinto wrangled a super tax cut be fore the super tax is installed...!!

Hm,mmm...Julia will be a little put out by this news I'm sure.

by Augusta Funds Mgt | 22nd Mar 12, 9:44am 1332362672

Resources/commodities looking very shaky, and that includes Gold.

by skudiv | 22nd Mar 12, 10:14am 1332364447

Mine looks fine, not shaking at all. Of course the real economy actually needs resources and commodities to function. So a lack of demand for resources is not a very healthy picture of the economy. The only way to stimulate demand, is to devalue the money, or credibly threaten to do so.

by Christov | 22nd Mar 12, 10:17am 1332364621

Well Skud...The RBA won't be using Bolly's Book of Credible Threats for Dummies....now will they...

by skudiv | 22nd Mar 12, 10:40am 1332366034

Bollard has more In-credible threats.

by powerdownkiwi | 22nd Mar 12, 10:21am 1332364872

Chuckle. AFM wouldn't be here if all was well. Same can be said of most of the pusher types and spindoctor types hereabouts.

I've got a new job count the number of bicycles going past.

I'm known as a - wait for it - Counter Cyclical.

by goNZ | 22nd Mar 12, 2:50pm 1332381028

pdk - an expert in theories based on assumptions...

by Augusta Funds Mgt | 22nd Mar 12, 10:22am 1332364933

I agree with you, its not a positive picture at all. China is showing very real signs of a significant slowdown, and there has been a huge increase in supply from the mining companies over the last few years. BHP and Rio will have doubled their iron-ore output by 2015. I would expect this in conjunction with a slowdown in China to have a dramaitc effect on commodity prices. This will mainly effect the Australian economy, and I would expect the AUD to weaken substantially over the coming year. The positive for the global economy will be cheaper oil.

by economist | 22nd Mar 12, 10:31am 1332365486

Ho hum BH

http://www.tullettprebon.com/announcements/strategyinsights/notes/2010/SIN20110526.pdf

by skudiv | 22nd Mar 12, 10:58am 1332367117

Page 10 shows how ridiculous the CPI is when it comes to the actual cost of being part of the economy. Much higher inflation then most people would believe.

The politicians believe that a collapse is the worst possible event, therefore will do everything they can to prevent it. QE, deficits forever, and manipulate the facts so they can pretend they are achieving the desired results. This works because the players are stuck in a game of MAD.

by economist | 22nd Mar 12, 1:24pm 1332375897

Greenspan "... for inflation can destablise an economy even if faulty price indexes fail to reveal it.... central bankers need to err on the side of caution. Working in the context of our individual political environments, we are the ultimate protectors and preservers of the value of our currencies.... A central banker cannot be exempted from one very basic fact:In the long run inflation is essentially a monetary phenomenon. Accordingly, the best approach is to maintain a steady course with an appropriate level of restraint..."

'appropriate restraint' indeed.

by the_dc | 22nd Mar 12, 5:47pm 1332391620

Thanks mate. Great bit of research. I especially like this line...

The first point that was generally misunderstood was that property prices, whilst realisable on an individual basis, are not realisable in the aggregate.

by andyh | 22nd Mar 12, 10:53am 1332366813

Former head of Shell sounds distinctly 'peakoilish', doesnt believe Saudi BS about meaningful reserve capacity:

http://www.bloomberg.com/video/88714670/

He wont spit out the word peakoil but that sure as hell is what he is dancing around. He does however explain the peakoil situation we find ourselves in extremely well.

A must watch if you want to understand the history of the next 10 years.

by steven | 22nd Mar 12, 11:00am 1332367207

Thanks please keep this up for ppl like him, this is becase sometimes he opens his mouth and says things that are unknowns publically.

ie My jaw dropped at 3mins 10secs when he said we have to make up 7mbpd.....that is a drop of 10% per annum on crude oil......I assume that is a NET figure, ie when you take into account things like Saudi using more domestically every year......so its going to get worse....clearly a suggestion of hubbards graph being asymetrical on the downside.

The second thing is at some stage we drop off the production plateau and that means we drop to trend...that 10% suggests the possibility of a very big drop.

regards

by andyh | 22nd Mar 12, 11:09am 1332367784

Yes I think that 7mbpd figures includes the loss of available 'export oil' as nations like Saudi Arabia increase the amount of oil they use at home (as predicted in Geoffrey Brown's Exportland model) meaning that less and less oil is available to the global market. Generally its held that we need an extra 4-5mbd of new production added each year just to replace the declines in existing production from old fields that are passed their peak in order just to stand still. He may well be adding an extra 2 mbpd to account for the loss of exported oil on the market.

by Augusta Funds Mgt | 22nd Mar 12, 11:06am 1332367560

AndyH, there is plenty of oil. It just comes down to the cost of getting it out of the ground. The current oil price doesnt reflect a shortage, it just reflects the economic cost of drilling for oil. Every other commodity price has surged in price over the last decade, but we dont talk about peak-gold or peak-ironore or peak-copper. Have a look at whats happening in the US, the shale beds have so much potential oil that the US is now on track to be a net exporter of oil. The peak-oil theory is just plain wrong.

by andyh | 22nd Mar 12, 11:22am 1332368552

Just keep taking the blue pills buddy.

Why dont you actually do some research instead of parroting stuff. Re; the shale beds - even the mega bulls of the EIA in the US reckon shale bed oil might at best add 1.5m-2mbd extra to US production 5 years down the line. In that 5 year period global oil production will have lost at least another 20mbd through cumulative loss by depletion of existing fields. Think about that.

And are you aware that shale oil wells deplete at over 30% a year (and by as much as 65% in the first year)

http://www.energybulletin.net/stories/2012-03-21/peak-oil-crisis-parsin…

by Augusta Funds Mgt | 22nd Mar 12, 11:23am 1332368588

Andy,

I'm aware of what I read. And what is clear is that "Peak-oil" has absolutely no credibility anymore. Wake-up buddy, where have you been? Peak-oil is so old its almost a 1990's theory. Have you ever wondered why the only people that still talk about peak oil are existing producers who have a vested interest in keeping the price well supported? This is the only website where Peak-oil is still even mentioned. The real world forgot about it years ago. Its hilarious the crazy talk that you hear on this site.

by andyh | 22nd Mar 12, 11:28am 1332368890

Just as I thought Augusta - you have no facts, just an opinion.

by powerdownkiwi | 22nd Mar 12, 11:45am 1332369938

AFM - peak oil actually goes back beyond Hubbert, first surfaced about 1936. Hubbert formalised it aroung 1956, and it was proven big scale in 1970 (USA/lower40).

Just because something has been known for a long time, doesn't make it untrue. As far as I know, that's your argument, right?

Price doesn't matter beyond a certail EROEI. That would be the case if money was underwritten 1:1, but when it's levered (fiat, derivative, profit, usury) then the levered part in not underwritten at the cross-over point.

That's now. Foss reckons the lever is all-in about 99% of expected equity. You ain't seen nuthin' yet.

by Augusta Funds Mgt | 22nd Mar 12, 12:18pm 1332371933

No, my argument is that there is not a physical shortage of oil. It costs more to extract it these days, which is why the price of oil has increased. But with an oil price at around $100 pb there are vast reserves of untapped oil. If you look at the inflation adjusted price of oil, it has actually been a lagard. The oil price has to increase with general inflation becasue it needs to reflect the cost of exploring, surveying, drilling, refining etc. The price of an oil rig today is many times what it was in the 1970's...thats just general inflation. If peak oil truly was a real issue, the price of oil would have far outpaced the rate of inflation. There are also significant new reserves that are being discovered and brought into production. Have a read about the Alberta tar sands in the US as a starting point. Peak Oil aint no issue.

by powerdownkiwi | 22nd Mar 12, 12:37pm 1332373075

Tar sands have an EROEI so low, they don't support BAU.

If money is underwritten by goods and/or services purchasable, and they in turn require energy to be produced, why are you 'valuing the energy' in money terms? It's not a case of 'more costly', it's a case of 'not enough energy returned to justify the effort.

The pace of inflation? Well, doesn't that track the increase in valuations of existing houses and artworks? Who cares if that outpaces the 'price of oil'?

The price of il rigs isn't just 'general inflation', it's to do with the needed complexity (horizontal and deep come to mind) being required as the cherry-picking comes to an end.

by steven | 22nd Mar 12, 11:42am 1332369776

LOL, actually 1950s etc.

regards

by steven | 22nd Mar 12, 11:54am 1332370492

http://www.bloomberg.com/video/86847202/

Also his comments on sour were interesting...so shares in Marsden point anyone?

and this,

http://www.bloomberg.com/video/84211580/

regards

by steven | 22nd Mar 12, 11:41am 1332369692

Nice troll....

Actually there is a lot of "talk" on peak; gold, oil, copper, coal, iron and other essential commodities, it is even in places like the FT and WSJ.

The rest of your comments are so unfounded, incorrect, illogical, ignorant and even crazy that, well oh dear...

regards

by Neven911 | 22nd Mar 12, 1:08pm 1332374901

Steven

I agree, what i enjoyed was the mixed measures "there is not a physical shortage of oil. It costs more to extract it these days", i.e anything can be extracted we just need more abstract pieces of paper with dead people printed on them to do it with,

Of course this logical position becomes a little unwound when you appreciate that the only basis for the 'value' of said pieces of paper is the said resources one is extracting.

Maybe they should research the origin of the term "to boot up your computer"

Neven

by Andrewj | 22nd Mar 12, 10:51am 1332366684

Hyperttiger on Gold

Posted Yesterday, 08:34 PM

The cause of the bubbles is the credit system itself.

Gold is a bottleneck.

Lets say you have enough of everything to sustain economic growth...Except Gold to use as a backing for the growth...Under the gold standard system..the economy according to the rules has to stop expanding and begin contracting.

silver has been used as money for 1000's of years...but even teh silver standard is a bottleneck.

The Gold standard was invented by the city of London...london basically became master of the global gold market and then began installing pro gold standard governments all over the world...to switch from teh silver standard to the gold standard or what is known as the london fix.

Once the world basically switched to teh gold standard...london basically obtained control of the global money supply.

McKinley or the Gold republicans were financed by the city of London to ultimately put the USA on a de jure gold standard in 1900

That then allowed the city of London/bank of England to take control of the US Dollar....and every other currency...prior to the city of London gold standard scheme brianwashing program...

The world had been on a silver standard going back to 3000 B.C.

The proponents of the Gold standard back then were basically useful idiots...Now over 100 years later after implementation of the city of London plan and the greatest technological advancment in all history...Just malfunctioning idiots.

Yes Ron Paul calling for a Gold standard is basically like the Japanese soldiers in hiding on remote islands that thought WW2 was still going on. The absolute capitalist power amassing begins before money is created by decree...

The top has to amass enough power to create a monetary system.

It starts out with accounting...Money is an accounting tool that makes the accounting for and distrubution of power within the absolute capitalist hierarchical food powered make work enterprise easier.

Money started out as a food substitute.

The medium of exchange is power.

by Mike B | 22nd Mar 12, 1:09pm 1332374974

Andrew you have put forward a most interesting argument. In fact this whole page is full of interesting debate.

As i see it the fiat money system is hopless because it is far to easy to abuse. Also because it is just paper and has no value of itself it can be expanded to infinity. This in turn necessatates the economy to grow and grow and grow. In order to grow at such exteme rates it becomes nessesary to mass produce lots of very low quality product so that the wheels of progress can keep rolling.

You say

"Under the gold standard system..the economy according to the rules has to stop expanding and begin contracting"

That is true but at least we are not in a race to oblivion and a better quality of life becomes possible.

Of course changing just the money system will leed to more manipulation and corruption. So a whole package deal is needed.

Still you make so really good points. The most unfortunate thing is nothing will ever change.

All rebelions come from the working classes and we live in times when they are too preocupied with their own lives. Eventually they loose their jobs and drop into the poor classes who never rebel. When we have the oportunity to make a difference we don't take it.

by Christov | 22nd Mar 12, 1:18pm 1332375520

Mike B...." nothing will ever change"....the very path of our expansion or indeed prolification will lead to change...end in change.

The discussion in numbers, should begin with our kind...our numbers incrementaly make all before us unsustainable.

by economist | 22nd Mar 12, 1:48pm 1332377306

yes, interesting. 'gold and silver are bottlenecks' - it stops credit bubbles and runaway government spending masquerading as 'real' economic growth. Yes, bottlenecks to theft and deception.

Exactly the same argument can be said about paper money actually - I have everything necessary to sustain economic growth - labour, time, land but no cash - same thing applies, then you will get deflation until it balances out. The quantity of money doesn't matter in the long run, its the value in terms of goods and services that matter so there is plenty of gold to back economic growth in the world - the price of it just moves up as it is remonetarised. Gold was money long before the City of London got hold of it... and still is money today... and will be money long after the USD, EURO, GBP, AUD, JPY, NZD are history... Hyperttiger has it wrong... Wall street and the city of London control the fiat system - by creating more and more debt - especially to governments they can and are taking over the world and using the taxpayers to finance it...

The medium of exchange is not power - power is not divisable - you'll never be able to buy a bottle of milk with it or pay off debt, or take a holiday by exchanging your 'power' for real goods and services... its just not practical or workable...

by Mike B | 22nd Mar 12, 11:17pm 1332411473

Very good economist. I like the bit - it's not the quantity of money that matters it's the value of the money that matters.

As the volume increases it's purchasing power diminishes. And that is inflation. People wrongly think that prices go up first and that is inflation but it is not.

by economist | 23rd Mar 12, 3:22pm 1332469358

Well Turkish housewives seem to get it Andrewj.

http://online.wsj.com/article/SB10001424052702304636404577295582725596106.html?mod=googlenews_wsj

they know how to take their savings out of the banking system. So the reverse is actually true - hyperttigher has it exactly the opposite way around - gold takes the power out of the hands of theiving governments and big banks - that's why they hate gold and silver - it's a lot harder for them to just steal it... if its outside their banking system and its debt free money....

by Roger Witherspoon | 22nd Mar 12, 11:19am 1332368365

Stunning article. How the central planners created structural unemployment.

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/201…

This is a really really fundamental article. If what he says is correct then the current monetary central planning mess is a direct consequence of the destruction of the monetary system that had evolved in the nineteenth century. This was done by France, the United States and Britain to limit German competitiveness following World War 1.

By destroying the real bill market they prevented firms from accessing credit for the production of real goods they had orders for. This is how manufacturing had been financed prior to World War 1. Effectively it allowed a manufacturer to finance his wage bill to bring goods to market.

As anyone who has actually been in manufacturing knows, it is a real problem financing the working capital for expansion of production. You have to find 95% of the value of the future sales in advance if your profit margin on sales is 5% of turnover. This is a major, major problem. The Real Bill Market evolved to overcome this problem.

The central planners destroyed it. The bastards.

by Augusta Funds Mgt | 22nd Mar 12, 2:44pm 1332380676

Peak Oil?.....Get with the program guys.

http://www.bloomberg.com/news/2012-02-01/fracking-boom-could-finally-cap-myth-of-peak-oil-peter-orszag.html

by Gummy Bear Hero | 22nd Mar 12, 4:47pm 1332388056

As I mentioned a week ago ( courtesy of Alan Kohler at Business Spectator ) ..... there is no energy shortage ! ....... the reserves of oil and gas known , will last us 200 years or more ......

...... and that assumes we still need it ....... the incredible quantities of solar energy available to us are only minutely utilised , currently .

Even the Saudis understand , that the day will come when we tell them to leave the rest of their oil in the ground , we won't need it anymore ......

by powerdownkiwi | 22nd Mar 12, 5:01pm 1332388888

Sorry GBH.

But if you don't do the homework, or rebut the info, you lose cred.

Ignoring questions doesn't make them go away (and you've been told about the 'x years supply' claims being horsepoo, before).. That's a static supply expectation, and your investment requires an increase to fund your dividend. Total horsepoo to think you can have both.

Cognitive dissonance, it is, and It's been discussed in Otago Uni Physics circles, as the only possible explanation for comments such as yours. (There's another - a DNA link to Homer Simpson, re brain size, but they're too polite to put that one up).

by goNZ | 22nd Mar 12, 5:03pm 1332389038

POP !!

The Oil Scarcity Myth

By Bob Beauprez

Mar 19, 2012

TownHall.Com

Rapidly rising gas prices at the pump have turned up the heat on Barack Obama. Interestingly, the Administration that just three years ago said it was committed to policies that would cause energy prices to “skyrocket” and get our gas prices “to the levels in Europe,” now says there isn’t much they can do about rising costs to consumers.

One of the many falsehoods that the President and his anti-fossil fuel allies like to perpetuate is that the U.S. is about run out of reserves. “But you and I both know that with only 2% of the world’s oil reserve, we can’t just drill our way to lower gas prices – not when we consume 20% of the world’s oil,” Obama said yet again in his weekly radio address last Saturday. He repeatedly makes this less-than-truthful claim to obsessively press his anti-oil and gas agenda and justify wasting billions on green energy fantasies.

Obama's basis for his 2%-of-the-world's-oil-reserves claim is the narrow definition of “proven reserves” – a measure based on currently producing fields only, rather than identified but undeveloped known reserves which are far more vast. The 22 billion barrels of “proved” reserves, according to the federal government’s Energy Information Administration “are a small subset of recoverable resources.” Obama conveniently forgets to mention that part. That he knowingly repeats the less than truthful claim for the purpose of perpetuating a misconception is shameless.

Various reports from Obama’s own government including the Energy Department, the Congressional Research Service, and the Energy Information Agency as well as a plethora of private analyses tell a dramatically different story. To be sure, technological challenges, cost of extraction, and political barriers will prohibit some part of the oil buried deep beneath the earth from being harvested, but Obama's representation is pure baloney and he knows it. For a detailed summary of a more accurate assessment of our reserves click here for a feature story from today’s Investor’s Business Daily. If you want the condensed version in graphic form, see below. Please take note that Obama would have you believe all we have left is depicted by the tiny red triangle at the top of the pyramid.

by Gummy Bear Hero | 22nd Mar 12, 5:10pm 1332389408

Good onya , mate ! ........ me hour's up . See youse guys termorrow .......

......... stay cool & groovey !

GBH

by powerdownkiwi | 22nd Mar 12, 5:17pm 1332389858

Hello little spinny muppet.

a. consider the source.

b. see a.

by robby217 | 22nd Mar 12, 5:34pm 1332390843

pdk, is there anyway of hooking up a generator to your blood pressure, you seem to be reaching a tipping point today, and it would be a good idea to harvest that energy rather than have a coronary?

by Augusta Funds Mgt | 22nd Mar 12, 2:45pm 1332380752

This one sums it up even better. You're welcome.

http://www.bloomberg.com/news/2012-02-06/peak-oil-scare-fades-as-shale-deepwater-wells-gush-crude.html

by powerdownkiwi | 22nd Mar 12, 3:26pm 1332383191

Well. Well Well.

Shale gushes crude, eh? Just like that. The Beverly Hillbillies, and an EROEI of 100/1, just like timbertop, Drake, Reynolds et al.

You have to be careful, here, with what you put up in the way of links. Some of us are able to read. Firstly, the bio - and therefore the reason for the hype - of the writer. But better than that:

"In 2010, oil companies produced 5.5 million barrels per day of domestic crude. The Energy Information Administration estimates that figure will rise to 6.7 million barrels per day by 2020, mostly because of “continued development of tight oil, in combination with the ongoing development of offshore resources in the Gulf of Mexico.” The U.S. has not produced as much as 6.7 million barrels per day since 1994".

So when you get down to the nitty-gritty - the Us may be back to producing as much as it did in 1994, by 2020. Via a much more energy-consuming process, ie a lesser EROEI, so less resultant (think of it as 'profit') energy actually available.

What it fails to mention, is that oil peaked in 1970, AT 9.6 MILLION BARRELS PER DAY.

en.wikipedia.org/wiki/Oil_reserves_in_the_United_States

Classic spin.

The second is Yergin, and we've listened to him for years. 'nuff said, he's been well discussed here. I smell someone with his pants down. Why else so much effort finding such lightweight pieces?

by skudiv | 22nd Mar 12, 3:28pm 1332383314

What? The most bullish scenario gives 70 years at current rates? This disproves peak oil how?

by skudiv | 22nd Mar 12, 4:06pm 1332385574

2Trillion barrels over 70 years only gives 78 mbpd which is 12% less then current rates. So it's already down to 60 years, assuming demand and supply both remain constant untill the very day it runs out. Supply diminishes, demand isn't going to drop. I'd like to be skeptical of peak oil, but it would take far more then 2 trillion barrels, in fact for peak oil to be false, there would have to be an infinite amount of oil, with infinite capacity for production.

by Plutocracy | 22nd Mar 12, 4:48pm 1332388126

Agreed. If you accept that oil is a finite resource then you must accept that one day it's production will reach a maximum before declining. The only point of contention is the exact date at which the peak will occur.

Interestingly we will soon see if Saudi can step up to the plate and deliver on their promised of 2.5mb 'spare capacity'. Watch this space!

Saudi Net exports vs Brent (2002 - 2011)

http://i1095.photobucket.com/albums/i475/westexas/Slide1-21.jpg

by skudiv | 22nd Mar 12, 5:43pm 1332391394

Comparing that chart to this one Saudi is producing 9.7mbpd and consumption is 1.8mbpd.

No conclusions here, just a simple chart showing monthly Saudi Arabia crude oil production based on OPEC data, which has been rangebound in a tight 8,000 - 9750 tb/d range, superimposed with Brent prices over the past decade. The last time Brent soared to record highs back in the summer of 2008, Saudi production peaked at 9,522 tb/d (despite similar promises for spikes in crude production and exports). During last spring's spike, Saudi produced around 9,000 tb/d. In the past two months, production has been at record highs, even as oil keeps setting new highs, entirely due to liquidity, but not because speculators are evil incarnate as Nancy Pelosi will want her brainwashed fans to believe, but simply because for the most part they are Primary Dealers, and other entities attached at the hip to the Fed, who serve as Ben Bernanke's transmission mechanism of record liquidity being dumped into the system. Our advice: if anyone is hoping that Saudi Arabia can pump the 12,500 tb/d needed if Iran truly goes offline, buy a bike, as failure from Saudi to satisfy lofty demands will promptly send unleaded to new all time highs. Couple that with the Treasury debt ceiling fiasco in 5-6 months, and those Obama InTrade reelection contracts may seem a tad rich.

by Augusta Funds Mgt | 22nd Mar 12, 4:13pm 1332385982

Guys,

You've been predicting a house price crash.....didnt happen. You are embarrased about that which i can understand. Now you have moved your focus onto peak oil. If you want to believe the world is running out of oil thats your business. There is no point arguing about it. Agree to disagree. Unfortunately wall street disagrees with you also.

by powerdownkiwi | 22nd Mar 12, 4:27pm 1332386856

You need to get your facts straight. There will be folk reading here, who will be put off.

For the record, I'm a physics afficionado, my field is efficiencies. I came to finance, and here, because I realised that the shortage of energy (flow rate, not 'running out') had to have an effect.

I learned that economists, by and large, are living in cloud-cuckoo-land. I learned that those who have vested interests in things being not so, will lie to themselves and/or others in an attempt to deny.

40 years of energy study, says you're wrong. House prices will drop - it's a matter of not enough incomes coming to pay the owed - and so will the DOW. Nothing surer.

Good luck.

by Gummy Bear Hero | 22nd Mar 12, 4:51pm 1332388280

DOW to 15 000 this year , 17 000 next year ! ..

... be thankful you read it here first , .... bail on bonds , equities are the place to be ........

Nothing surer .

by iconoclast | 22nd Mar 12, 5:00pm 1332388844

GBH: Unfortunately, I agree with you on 15000. Probability. High.

by Gummy Bear Hero | 22nd Mar 12, 5:06pm 1332389193

Unfortunately ? ........ do you dislike equities , or just me .......

........ spread the love , my friend ! ..... ....

by iconoclast | 22nd Mar 12, 5:20pm 1332390047

Remember, we had this conversation before. You are a natural bull, I'm a natural bear. The NY market will be ramped up, the FED will jawbone the market up, O'Bama will jawbone the market up, Benyamin will continue to depreciate the USD and everything will be rosy, until the presidential elections. Unfortunately.

by steven | 22nd Mar 12, 5:25pm 1332390305

The P/E s are insane even before all the neg effects coming at them like a train.

I bailed out of shares 21months ago, I saved 15% of my equity.

...enjoy.

regards

by Mike B | 22nd Mar 12, 11:27pm 1332412066

All the billions of dollars being pumped into super funds each week (globaly) has to go somewhere.

by steven | 23rd Mar 12, 7:01am 1332439269

Yes, and look at the govns wanting compulsory schemes where you have to save as they dictate....which means you cant have cash......so you will be the cannon fodder, these pension funds will be wiped out. At least most NZers have money in deposit accounts, most Americans have theirs in shares......there will be a lot of broke americans me thinks.

My own schemes are locked in, I lost 22% in 2008...that was nothing like whats coming....I cant move it to an ultra safe fund....so i expect I will lose most of it, 30+ years of saving, makes me puke.

But I decided a while back that the entire pension industry was a con so bought my own shares, great thing of course is I could bail 21months ago...Ive saved 15% losses since then....

regards

by powerdownkiwi | 23rd Mar 12, 7:25am 1332440700

Both good comments - the problem is that if the retirement fund 'money'can be traced back to fiat issue, it is not guaranteed to have a home, purchasing-wise.

When the music stops, the last to the chairs don't get to sit down. That ws the finance companies last round, but that didn't solve anything - they were just the most vulnerable end of a vulnerable system.

Presumably, the investment is so you can buy things in the future. Rather than let administrators clip the ticket - or close their doors along with your account - why not buy the stuff now?

by Plutocracy | 22nd Mar 12, 4:40pm 1332387605

Haha you're a tad naive if you think Wall Street will ever want to acknowledge any kind of natural limit - Doesn't a lot of stock value depend on the expectation of ever increasing growth and profit!?? I'm sure the Stock markets and businesses would do 'very well' if Wall Street acknowledged Peak Oil!

Secondly, Peak Oil isn't about 'running out of oil', it's about the maximum rate of oil production, in simple terms the oil supply failing to keep up with the demand. I have no doubt that the earth is teeming in fossil fuels, however I'm sure we all agree that they are likely to be more expensive to produce and harder to extract as time goes on. Sadly, high fuel costs are at the detriment to our whole current economic model and there in lies our predicament.

Time to do some more reading Augusta?

by skudiv | 22nd Mar 12, 4:52pm 1332388334

Unless you believe oil is infinite or renewable, then a simple step of logic will show that we started running out the day we burnt the first drop. Following through on that, one day it will be all gone, where are we on the timeline? Understand how compounding growth in consumption rates very quickly reduces the 70 year forcast, which was wrong mathmatically, and failed to account for any growth in consumption. Wall st, or the media shills, crhist nobody ever made money by listening to BBG. The only people who listen to Wall St. are muppets.

by steven | 22nd Mar 12, 5:27pm 1332390452

As Paul Krugman says if you has listened to him and not say the WSJ you would have saved yourself a lot of money....

By all means carry on....Im on the other side of your bets....

ie short on properties and equities all in cash...let the firesales commence.

regards

by Augusta Funds Mgt | 22nd Mar 12, 4:53pm 1332388382

Exactly, the planet is teeming with fossil fuels. Say no more.

Re Wall Street, you are absolutely incorrect. The market will reflect any kind of imbalance such as peak oil. For example, when the US housinmg crisis hit, Wall Street destroyed the equity values of banks and financial institutions. Was that good for "stock markets and businesses" as you say? Of course not, but those were the market forces at the time. If peak oil were truly a relevant issue, the oil price would be a hell of lot higher, and companies that command huge oil reserves would be trading at massive premiums. Currently they are trading at discounts which reflect the markets opinion that there is absolutely no shortage of oil. I do more than enough reading unfortunately. Maybe you should broaden your approach.

by powerdownkiwi | 22nd Mar 12, 5:07pm 1332389239

Nobody claiming the planet is teeming with fossil (think about the significance of that word) fuels, has the right to tell others to broaden their approach.

Small matter of pots and kettles and darkness.

by Plutocracy | 22nd Mar 12, 5:30pm 1332390631

Did you even listen to what was said? Saturn is teeming with methane, shall we add that to our reserves too?

Hmmm... Wasn't the dow rising up until the point where the housing crisis became apparent and undeniable? Could it be that 'when/once' Wall street acknowledges that there are fundamental oil supply issues you will see much the same type of crash? I don't think there are too many people who still believe that Wall Street is an accurate reflection of the current economical climate or the direction things are heading.

Secondly, I don't doubt that you do a lot of reading and you know your markets. However, there are a lot of intelligent people here who have been closely following oil production/world energy use/production. The consensus among these people is that the current way of life - barring a technological miracle, will have to fundamentally change due to thermodynamic limits.

In the end we can agree to disagree. The picture will undoubtly become much clearer over this decade. However, it is interesting to see so many countries currently complaining of increasing energy costs. Regardless of the current driver of these price rises, I'm curious how long you believe that our growth-based economic model will be able to withstand the increasing energy costs.

by steven | 22nd Mar 12, 5:43pm 1332391411

"growth-based economic model will be able to withstand the increasing energy costs"

I suspect that the only way it could past about 2003 or 2004 (as the energy supply flattened) was to go crazy on debt which is a future call on energy/work. So I would say for at least a decade or more the present economic model has no longer been able withstand the energy cost without a massive forward call on energy via IOUs......

Therefore the debt wont be repaid....the only Q is how will the default(s) go....will the rich be left owning everything, or will ppl vote for their leveling...........

regards

by steven | 22nd Mar 12, 5:22pm 1332390149

Says Augusta funds who do commercail property, hardly independant...all your valuations and returns are based on business as usual are they not? things like a guaranteed rent increase of 3% for some years built in, except when Carters etc go out of business because of a finance or energy event causing a multi-decade depression bye bye incomes. Probably highly leverages to boot, interest only mortgages?

Markets dont reflect anything until they trip over it.....they dont even look 20 weeks into the future let alone 20months or 20 years.

All I can say is thanks for posting, clearly you would not be a company I would consider investing with....

regards

by iconoclast | 22nd Mar 12, 5:26pm 1332390419

Augusta Funds Management featured in a number of unflattering articles here on interest.co.nz in 2010 and 2011. It is noticed their secondary market is gone, no longer on their web-site. Not a good look.

by steven | 22nd Mar 12, 5:31pm 1332390702

Well considering what he/she is writing its hardly surprising they were unflattering....I think the term digging your own grave applies to the quality of the posts...

regards

by Augusta Funds Mgt | 22nd Mar 12, 5:48pm 1332391738

Its very interesting debating with you guys, such an angry bunch of individuals. I see you have moved away from the topic and into personal attacks, which is a pretty clear indication that you have run out of salient points. Knock Augusta all you like, we arent trying to hide anything, we are proud of our investment performance and we have a very loyal investor base because of that. We thought it would be interesting to debate certain issues on this site but it is a shame it is such a hostile environment.

And to rebutt some of the ill-informed slander:

Our secondary market is not gone, it is extremely active but is operated on our behalf by our registered selling agents.

by steven | 22nd Mar 12, 5:59pm 1332392392

Not angry, gob smacked at your stupidity.

regards

by powerdownkiwi | 22nd Mar 12, 6:00pm 1332392413

That wasn't debating.

Debating requires intelllect, rebuttal, sequential argument, logic paths,....... we had the debate 30-40 years ago. Perhaps that explains the short/sharp nature of our posts.

"In an hour, two at the most, all this will be at the bottom of the ocean".

"It hasn't happened yet".

so?

by Augusta Funds Mgt | 22nd Mar 12, 6:11pm 1332393091

Fighting words for two people whose views are not shared by any credible parties. I guess thats the thing about crazy people, they dont realise that theyve got it completely wrong.

by dollar_bill | 22nd Mar 12, 9:22pm 1332404535

Normally I wouldn't rise to a level of debate reminiscent of early nineties chat rooms but I have to say there's more than two of them out here.

I guess that's the crazy thing about crazy people. When they're surrounding you, you still believe they're the crazy ones.

by steven | 22nd Mar 12, 5:58pm 1332392320

When it finally dawns on the so short sighted they are almost blind markets the downside Peak Oil is now their future all hell will break loose.....

Will an oil company be worth more is a big Q, you are in effect once you admit it buying company that holds a quantity of oil that once used up makes them worthless...Sure in the short term that bucket is worth a lot and as its gets smaller and smaller still worth a lot....maybe......On the other hand after 2008 the oil price collapsed to $35 from $147, the quantity of oil didnt significantly change....

And then when you are poor/broke from a depression it doesnt matter if the oil is $100 or $50.........

Yes lets consider a depression.....oil would follow the 2008 trajectory to $35.....new fields need $60 to $90 oil to even bother expoliting so at $35 they wont be. The result no new investment, a perfectly rational business decision, disasterous National / global one however.

regards

by Augusta Funds Mgt | 22nd Mar 12, 6:02pm 1332392546

Yes but the point you miss Genius is this: if the world realises that it is running out of oil, oil will become like gold, and be priced accordingly. This must be terribly embarrassing for you.

by powerdownkiwi | 22nd Mar 12, 6:22pm 1332393773

There we go. An OFFICIALLY RECOGNISED SILLY STATYEMENT.

There are two problems with it, not bad in such a short missive.

One is that we are not - and we here have never claimed we are - 'running out of oil'. Ghawar will still be pumping in 50 years time, if there are folk around to man the pumps. What we are saying is that we are pumping at maximum rate, and that therefore the amount of goods/services production has maxed out, give or take efficiencies.

Two is related to those goods and /or services - you can't 'price' the thing that underwrites your only tangible equity, the underwrite is the only true value in the arena. Bidding there will be, but there won't be backed by borrowing - who would lend? On what collateral? You can forget trust, and letters of 'credit'; so it will be bidding in real time - otherwise known as bartering.

by Augusta Funds Mgt | 22nd Mar 12, 6:25pm 1332393924

PDK.........your pills.

by Ms de Meanour | 22nd Mar 12, 6:29pm 1332394190

If I understand your first para correctly - you are saying that goods/services production is a linear function of oil production.

Your basis for that please?

by powerdownkiwi | 22nd Mar 12, 6:55pm 1332395707

No, of energy production. Oil has been the major part, but two or three years from now, coal will once again be the major.

Note carefully my comment re efficiencies.

Name me one good, or service, not requiring energy?

Be careful; you're an energy equation yourself, is a clue. Every calorie you eat - and you have to eat - took 10 calories of oil to produce - more if you're a carnivore.

Offices, lights, computers, driving to work.....

Your list?

by Vera Fayed | 23rd Mar 12, 8:34am 1332444844

"Every calorie you eat - and you have to eat - took 10 calories of oil to produce"

Ahhh...that must explain all those fossilised oil rigs paleaontologists keep finding.

by powerdownkiwi | 23rd Mar 12, 8:45am 1332445547

Foolish - or is that scared? - comment of the day.

Agriculture was labour-only, then animal-assist, then coal assist, then oil. The latter two are fossil resources, millions of years in the making, 200 years in the consuming. Sustainable, they are not. Solar is the only long-term answer (we can run on it totally here, though I use secondary solar - rain-water running downhill - as a second-string) but it won't drive big mono-culture Ag as we know it.

Bon appe

by Augusta Funds Mgt | 23rd Mar 12, 9:45am 1332449104

Everyone knows oil is not a sustainable resource. Solar absolutely has the best long term potential. The key point however is there is more than enough oil to keep us going until technology enables alternative fuels to take over.

by goNZ | 23rd Mar 12, 8:57am 1332446264

Chew this over then -

Auckland

More concern over dogs than rates

Friday, 23, Mar, 2012 5:59AM

It seems Aucklanders are more concerned about the soaring costs of registering their dogs than rates increases.

A large proportion of the nearly three thousand submissions on the draft Long Term Plan for the city have been from disgruntled dog owners.

Just ten percent of feedback has been about rates increases.

Last ditch effort have been made this week to encourage people to make a submission on rates.

The council prefers the combined option, which would see rates increases for farmers and home-owners capped at ten percent a year.

Increases for businesses would be phased in over three years, with no cap.

Submissions close at 4 this afternoon.

Time to ban dogs eh Pdk ? carbon footprint and all that jazz

by skudiv | 22nd Mar 12, 6:53pm 1332395634

It was not untill after the fact that Lehman collapsed, that wall st admitted there was a problem. Even then it wasn't immediatly after. Friggin Jim Crammer was telling the muppets "don't sell Lehman, thats just silly!" a week before they went bankrupt. Dick Bove was saying buy financial stocks, like a stuck record and still is.

Peak Oil is more of a scientific issue, and economists/media shills have NFI what science even means. Ironic how you don't need to convince physicists about peak oil.

by Plutocracy | 22nd Mar 12, 7:44pm 1332398667

And there in lies the problem! Funnily enough, it happens to be the people from scientific backgrounds who are actually very concerned about this. You just have to read some of the above posts from Augusta to appreciate how scientifically illiterate some people are, and how difficult is is to explain a scientific concept to them.

For those who haven't already seen this here is a blog from a physics Professor in which he looks at the energy options we have available, his posts are well written and based on 'doing the math', not mere opinion. There is some great stuff there for anyone interested in learning about energy, and our current predicament.

http://physics.ucsd.edu/do-the-math/2012/02/the-way-is-shut/

by Gummy Bear Hero | 22nd Mar 12, 5:03pm 1332389006

Hey Bernard : I note that the UK is to drop it's corporate tax rate to 24 % ........ how does this compare to other nations in the EU ?

..... we're having a debate here in Oz about the need to get corporate taxes down to 25 % , from the current 30 % ....... Wayne Swan promises to drop the rate to 29 % if the super profits mining tax on coal & iron ore goes ahead .........

....... why coal & iron ore , not tin , copper , or gold ......... or milk !

by steven | 22nd Mar 12, 5:47pm 1332391646

GBH have you ever considered that the FED by running 0.25% OCR is in effect forcing ppl out into the share market?

Or that the US banks can borrow huge amounts for essentially free, so do so, thus pouring money into "everything" because the returns dont have to be much for them to make money?

What happens when the ppl who have the ultra-fast trading connections switch to fear from greed and bail?

DOW could be worth a lot less...who knows what but it wont be much....

regards

by Andrewj | 22nd Mar 12, 7:19pm 1332397164

Ben Bernanke tells EU to clean up banks Federal Reserve chairman Ben Bernanke has exhorted Europe’s leaders to take further action to beef up banks and help southern Europe claw its way back to health, warning that the world financial system is not yet on a sound footing.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/91594…