Economic, Mining and Oil & Gas Commentary

The Baltic Dry Index!

The Baltic Dry Index tracks the cost of shipping major raw materials, and arguably is an important early measure of Global Trade. A recent article shows a chart of that index for the year 2011, and says that the index is down by approximately 40% in December from November and is down approximately 54% in Q4 2011. The author blames the European sovereign debt issues as the underlying consideration.

I am not sure the reason for the recent Index decline is just an escalation of the sovereign debt issues in Europe – in fact such a conclusion intuitively seems itself to be simplistic to me. I don’t profess to be able to pinpoint specific reasons for the Q4 2011 drop in the Index, but think those reasons have to number more than one. I was also not satisfied that to look only at 2011 in isolation as a basis for a conclusion as to whether this Index drop was an abnormality, or simply a repetitive fourth-quarter drop. Subsequent to finding and commenting on that first article, I found a second article that attributes these recent drops in the index to a normal seasonal drop in Chinese manufacturing which in turn the article attributes to Chinese New Year celebrations.  I don’t find that explanation compelling either.

Accordingly, I found (on Bloomberg) the one-year and five-year Baltic Dry Index charts.

One Year Chart

Five Year Chart

 I cannot easily do a one-year regression analysis trend line for either chart, but think such a trend line:

• for the one-year chart would in any event not be conclusive of much of anything; and, 
• over the past 5 years almost certainly is continuously downward.

This is something that strikes me as consistent with my view that all the talk over the past 2 years or more of technical economic recovery in most developed countries is just that – technical economic recovery and not important real economic recovery. It is then not surprising to me that in the last 2 weeks there has been talk in both the UK and Spain of double-dip recession in 2012. It will be interesting to see whether those concerns will extend to other countries in the next few months. It strikes me that if that happens it will be an indicator that the Baltic Dry Index is indeed the important early measure of economic activity that many seem to think it is.

The first article referenced in this commentary is titled ‘The Most Alarming Chart I’ve Seen All Week’.  It was published January 20 in the Wall St. Daily Blog (no association as best I can tell with the Wall Street Journal) – reading time 3 minutes.

The second article that speaks to Chinese Manufacturing is titled ‘Baltic Dry Index – sell-off overdone?’.  That article is was published on January 23 on the InvestmentPostcards Blog – reading time 3 minutes.

Country Risk Issue!

A January 23 article reports that in 2012 “the citizens of 59 countries – one third of the world’s countries – will have gone to the polls to choose national, state and local leaders”. Interestingly, the article also says that in 1945 there were only 12 democracies in the world, and there are now …..continue reading.

Commentary reading time 2 minutes.  Referenced article(s) reading time 4 minutes.

2012 Recession Expectation!

John Mauldin is a U.S. newsletter writer whose commentaries I read and reference from time to time in these e-mails. I generally agree with a good part of what Mauldin says.  This may, of course, bias my views as to the efficacy of his opinions.

In an article last Thursday, he referenced the ‘Quarterly Review and Outlook’ generated by …..continue reading.                                     

Commentary reading time 2 minutes, thinking time much longer.  Referenced article(s) reading time 5 minutes.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• Ray Dalio – October 20, 2011 Interview!
• The State of The Union!
• Consequence of Iranian Oil Embargo?
• Follow-up On Greece!
• Cambridge House Booth & Presentations!, November U.S. Net Trade Deficit!

Ray Dalio – October 20, 2011 Interview!

July 21, 2011 I wrote a commentary titled ‘Neat Article – Interesting Man’ – reading time for minutes. That commentary discussed referenced a lengthy article and video interview of Ray Dalio.  Dalio is the U.S. billionaire founder of Bridgewater Associates, one of the largest hedge funds in the world. At the time I wrote that commentary I said Dalio was someone I thought well worth listening to, and that it would behoove any investor, trader, or human being to listen to, and think hard about his philosophy and views.  Ray Dalio is a calm, deliberate, articulate and thoughtful speaker.

I have just found an interview by Charlie Rose of Ray Dalio that took place on October 20, 2011. I consider what Dalio says in that interview to be as relevant today as it was then, and importantly, consider what Dalio says between minutes 20 – 24 of that interview timeless and ‘must listen to’ by investor, traders, and all human beings.  The October 20 interview lasts 37 minutes, and I strongly suggest that if you have not already watched this interview you take 37 minutes out of your life at your earliest possible convenience, listen carefully to what Dalio says, and then think very hard about it.

In the aforementioned four minute interview segment Dalio says he believes and attributes a good part of his success to knowing what he doesn’t know, and continuously worrying about being wrong.  Philosophically, Dalio says:

• that if a person successfully can attack what he himself says, then he will learn from that experience;
• he would far rather be told he was wrong then be told he was right;
• “don’t believe anything – think for yourself”;
• importantly, or so I believe, he says, “the cost of being wrong is a terrible thing – therefore worry about (and continually revisit) your decisions”; and,
• the greatest gift he believes a parent can give a child is self-sufficiency – because if a person is self-sufficient they are then free to make their own choices.

While I have not remotely had the financial success Ray Dalio has had, those of you who have been reading these e-mails ought to see commonality between the views I express in these commentaries, and the advice given by Dalio.  I believe that thinking for oneself has never been more important than it is today, both with respect to the way one conducts their own day-to-day activity, and the way in which one conducts their investment and trading anticipation participation.

Please do yourself a favour.  Watch and listen to the Ray Dalio interview titled simply ‘Ray Dalio’ – again, watching/listening time 37 minutes.  It strikes me that the title of the interview is simply ‘Ray Dalio’ speaks volumes in a very positive way.

Venezuela Nationalization – Exxon?

A recent article reports that in one of the major Venezuela nationalization cases – this one involving what is said to be the world’s largest heavy oil deposit – that Exxon has will receive only 10% of what it demanded in compensation for its expropriation by Venezuela.

The article reports that Petroleos de Venezuela, the State Oil Company, said January 2 it would pay Exxon Mobil …..continue reading.

Commentary reading time 3 minutes.  Referenced article(s) reading time 4 minutes.

Experts v. The Canadian Public?

On Friday, January 6 the lead headline on the front page of Toronto’s Globe and Mail proclaimed “experts, public at odds over economy”. The article itself reported that based on a annual December survey of between 2,000 and 3,000 Canadians, almost 70% of them believe Canada is in recession. Needless to say, economists …..continue reading.

Commentary reading time 3 minutes, thinking time much longer.  Referenced article(s) reading time 4 minutes.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• The Baltic Dry Index!
• The State of The Union!
• Consequence of Iranian Oil Embargo?
• Follow-up On Greece!
• Cambridge House Booth & Presentations!, November U.S. Net Trade Deficit!

The State of The Union!

At a personal level, I feel rather sorry for President Obama.  That said, as someone who participates in the equity markets I found last night’s State of the Union address to be little more than a political speech made by a U.S. President who for reasons best known to him wants to be re-elected in November.  His consistent message as I heard it repeated over and over was “Here are the right things to do.  If the Congress, controlled by Republicans as it currently is, sends me the legislation to sign that will enact these ‘right things to happen’ I will sign them without hesitation and immediately”.  What I really heard him say was “American people, I know what is right, you know what is right, and if the Republican’s don’t get their act together and give me some legislation to sign in the next few months, re-elect me”.

I continue to think President Obama is a very good orator.  At one point you may have noticed he went so far as to borrow President John F. Kennedy’s ‘Ask not …’ phraseology when making a point.  At another point, he borrowed on Abraham Lincoln’s view of what government ‘ought to be, and what it ought not to be’.  That said, as I see things President Obama began his Presidency bound in the chains of U.S. economic chaos that Republican President George W. Bush left behind, under his watch has seen America’s Cumulative National Debt increase by over 50% since he took Office, and as the incumbent U.S. President he is faced (until at least next January) with U.S. Federal Deficits and Unemployment Rates that are unsustainable.

Do I agree with much of what President Obama last night said needs to be done?  I do.  Am I a believer that last night’s State of the Union address will somehow breath ‘new life’ and ‘political change’ into the U.S. Senate and Congressional Chambers?  Unfortunately I don’t.

If you want to read but one more article on President Obama’s address, you might consider ‘In State of the Union, Obama warns economic disparity threatens middle class’ published last night by The Washington Post – reading time 4 minutes.

Greece On The Precipice?

Two articles, one Sunday and one Monday, reported that the Private Creditor Croup negotiating with the Greek government over the “Greek debt haircut” that they are prepared to take have reached their limit in those negotiations as to the amount of losses …..continue reading.

Commentary reading time 1 minutes.  Referenced article(s) reading time 4 minutes.

Eurozone Humpty-Dumpty Crack?

A January 23 article reports that the Bank of Spain has said that Spain will fall back into recession in 2012, with GDP contracting by 1.5%. Spain is reported as having come out of an 18 month recession in early 2010. The article also reports that Spain’s recently elected government has announced 2012 spending cuts of €8.9 and that it expects …..continue reading.                                      

Commentary reading time 2 minutes.  Referenced article(s) reading time 1 minute.

China Acquisitions! 

A Mining Weekly article dated January 13 reports that China’s overseas acquisitions reached a record at 207 transactions in 2011, being up 10% in numbers of deals, and 12% in aggregate transaction prices – the latter being some $43 billion – from 2010. The article also reports …..continue reading.

Commentary reading time 3 minutes.  Referenced article(s) reading time 3 minutes.

U.S. Change In Tax Depreciation Rules! 

In 2009 the US tax code was changed to enable businesses to write off 100% of certain capital expenditures in the year of purchase, instead of spreading that write-off for US income tax purposes …..continue reading.

Commentary reading time 1 minute.  Referenced article(s) reading time 4 minutes.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• The Baltic Dry Index!
• Ray Dalio – October 20, 2011 Interview!
• Consequence of Iranian Oil Embargo?
• Follow-up On Greece!
• Cambridge House Booth & Presentations!, November U.S. Net Trade Deficit!

Consequence of Iranian Oil Embargo?

A January 15 article written by James Hamilton, Professor of Economics at the University of California, summarizes what he thinks the consequences might be of an Iranian oil embargo.  He compares results of prior what he calls ‘episodes in which geopolitical events led to production shortfalls from key producing areas”.  The article includes charts and statistics related to these ‘episodes’, which he says occurred in 1973-74, 1978-79, 1980-81, and 1990-91. I you were born before 1950 I suggest it does not take a great memory to recall that each of those periods either preceded, or were incorporated in, periods of developed country recession.  As I read the article that is the first message the Hamilton is working to convey, the second being that it is “unreasonable to assume that Iran would not try to retaliate in some way” if a current embargo is successful.

I think this article, which is short and well written, is worth taking the time to read for a general understanding of the importance of the ongoing threats and counter-threats around an Iranian oil embargo – and I think particularly worth that time if one participates directly or indirectly in the financial markets.

See ‘Iranian oil embargo’ published in the Econobrowser Blog – reading time 5 minutes.

IMF Cuts 2012 Global Forecast!

An article in the UK Telegraph published last Thursday reports that a ‘leaked draft’ of the International Monetary Funds 2012 World Economic Outlook has Global GDP growth now forecast at 3.3%, down from 4% forecast last September. The IMF is apparently, and I think not surprisingly, downgrading its forecasts for …..continue reading.

Commentary reading time 2 minutes.  Referenced article(s) reading time 5 minutes.

SEC ‘Settlement Language’ Change – Ridiculous?

In a move that I consider to be little more than window dressing, on Friday, January 7, the US Securities and Exchange Commission said that defendants can no longer settle civil cases using “neither admit nor deny” language if they have already admitted to wrongdoing in parallel criminal cases. This is said to follow from …..continue reading.

Commentary reading time 3 minutes, thinking time much longer.  Referenced article(s) reading time 4 minutes.

Gold’s Industrial Uses!

It is broadly known that silver is widely used in industrial applications. A recent article discusses the expanding application of physical gold in a number of scientific and technology applications. From my reading of the article, many of these applications relate to the use of gold in nanotechnology developments. The article lists the following physical gold applications …..continue reading.

Commentary reading time 3 minutes.  Referenced article(s) reading time 4 minutes.

Visit Stock Research Portal for stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• The Baltic Dry Index!
• Ray Dalio – October 20, 2011 Interview!
• The State of The Union!
• Follow-up On Greece!
• Cambridge House Booth & Presentations!, November U.S. Net Trade Deficit!