Subj : Market Action
To   : PAUL ROGERS
From : MARTIN ATKINS
Date : Sat May 14 2005 02:24 am

-=> PAUL ROGERS wrote to ALL <=-

PR> Content-type: text/plain

PR> In an effort to assuage the oil-pit's free-running angst more typical
PR> of talk-radio, the Int'l Energy Agency released a statement that not
PR> only were supplies now sufficient, but best projections for the coming
PR> winter showed supplies would also be sufficient albeit with little to
PR> spare.

It is no good being parochial. The domestic supply refined petroleum to
the USA market is a local problem and does not reflect global commodity
prices. It is the global crude output that dictates the price of oil
products. 

PR> The Street wasn't buying it.  Market prices were down until after the
PR> 2PM close of oil trading, down over a buck, after which they recovered
PR> some.  That was enough for my formula to reverse itself and pop a Buy
PR> signal.  

I'm a fan of charting but fundamentals eventually override sentiment.

PR>I'm not buying that!  My simple formula is only based on price
PR> action, and is an exercise to show that these sorts of signals are
PR> sometimes modestly useful, but ultimately can't do what we want them
PR> to--predict the future direction of the market.  Volume sank, to close
PR> -11% below average.  So there was little enthusiasm in the market.  The
PR> chart shows "top below tops" (1225, 1191, 1179) and "bottoms below
PR> bottoms" (1165, 1138), which is Bearish.

The USA is losing ground to China but how long will that last? Many Asian
countries have done the same in the past only to collapse due to internal
weakness in the financial system. Far from worrying about the upward valuation
of the Yuan(?) what would be the result devaluation?  

PR> I went to the market today and bought some frozen peas and some wine.
PR> But I wasn't speculating on the future price of the commodities, I
PR> brought them home with me.  Maybe we should change futures contracts so
PR> they're only sold once--the buyer is forced to take delivery.  That
PR> might run these speculators out of that market and leave it to the
PR> businesses who are legitimate suppliers and users of the commodities.

Precisely. :) Commodities are sold on forward contracts. Revaluing the Yuan
will only put of for a short time the inevitable collapse of the Chines 
financial system.

PR> Spare me the talk-radio dogma about free markets.  

I don't believe it is dogma. The free market can only function if it is fully
informed. Do you have the figures on monetary growth in China? I don't. If the
figures came out via the present Chines government would you trust them? 

PR> The theory is that
PR> when prices get irrational others will have incentive to enter the
PR> market and rationalize things.  That simplistic theory only works when
PR> the real commodity is widely available to many traders.  Oil isn't.

Yes it is. Crude oil is traded globally and supply may only be controlled
short term (OPEC). OPEC shot it self in the foot in the 1970s? The high
prices during those times set off a massive investment in exploration.

The result was oil prices of USA$14 a barrel which stubbornly stayed until
recent times.

PR> No, I don't want to hear the talk-radio excuses why those crazy
PR> Californian NIMBY's and the government are impeding the working of a
PR> real free market.  

Nobody gives a stuff about Californians accept Californians.

PR> Why are there no refineries at all in Oregon?  

Who cares. ;)

PR>The good citizens of Hermiston are equally concerned what goes on in their
PR> back yard.  When talk-radio gets outrageous it gets better ratings,
PR> meaning more profits for the half-dozen mega-companies that control
PR> broadcasting.

What has this got to do with the global economy? :-}

PR> Not only is exploration hugely expensive, hugely time-consuming, and
PR> hugely risky, refineries are "one off", designed and built in place,
PR> hugely expensive, hugely time-consuming, and not without their own
PR> risks.  Oil is not a free market, never has been, and can't be.  Oil
PR> sources are limited, consumption is "inelastic".

Yes and no. Refined product is only one aspect of the energy market.
Gas and other forms are available including nuclear

PR> Where is the incentive for the integrated oil companies to increase
PR> production when they have a product that the consumer MUST buy, no
PR> matter what they charge?  

Must buy? Why not open up the US market to foreign companies and let them
compete with your local market. The golden rule of free markets is unfettered 
competition. It only works if government interference is kept to the absolute
minimum.

PR> It's prime for market abuse.  I'm thinking of
PR> adding an energy fund to my retirement choices to get on the right side
PR> of the trend.

I would consider your move to be somewhat belated. It is possible we may be 
seeing the toping of the commodity market. Perhaps as a responsible investor
you may look at local infrastructure.
 
L8r. :)
 
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