A Bourse Diary

Thoughts on stocks, speculation and ... life

Wednesday, January 24, 2007

Nice point on oil

In the blog capmarketline I read a good point on the oil development:

In short, the market has begun to return to balance, and because new supply comes on in size and not in drips and drabs, there may be a moderate build up in spare capacity over the next few years, even as demand grows. These developments have led to a groundswell of comments by industry observers about how low the price of oil could go over the next year or so. I'll have none of that. With demand now over 85 million bd worlwide, the industry needs a higher margin of excess capacity to provide

assurance to economic growth. Moreover, I could be on the low side with my cost estimates, as new supply will come on with

higher finding, development and lifting costs embedded. So, oil at $45 bl. is fine by me as a working assumption.

Source: Oil Market

With a price correction of ca. 40% (with a quite favourable background for global growth actually), the price of oil should have seen the worst. I have been sceptical during all that oil-bull-time because of very similar position as capmarketline. Now, seeing the market go that rapidly down - hey, some will call it a pure bear market! - its supposedly time to be more balanced: Oil is down, thats good news for all of us, who are bullish on stocks. The economy has shown, it can manage huge price increase without major problems; inflation pressures are to calm, production costs sink. World is better...

Monday, January 15, 2007

Real estate worries

The real Estate market outlook plays an important role for assessing the general financial markets trend in 2007. There appears to be a large chorus of worried voices. For example:

A Dozen Reasons To Worry (Forbes, Jan.10th): "Unlike earlier U.S. housing booms and busts that were driven by local business cycles, such as the rise and fall of the oil patch along with oil prices in the 70s-80s, this [housing bust] is national and, indeed, global. And since houses are much more widely owned than stocks, the bubble’s likely demise will shake the economy more than the earlier bear market in stocks. A major housing prices decline will precipitate a full-blown U.S. recession, sending corporate profits down… China will suffer a hard landing due to domestic cooling measures and U.S. recession."

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