Wednesday, February 16, 2005


Japan's economy is dependent on the price of oil. The high price of oil is giving Japan a bad case of gas. The Japan GDP is down the third month in a row--another recession.

Today, Greenspan was grilled because half of all US Bonds are now owned by foreigners. Greenspan basically said, so what! There is no reason for the treasury to sell bonds to anyone but the highest bidder.

Again, folks get worked up about "problems" that are really solutions. Japan's purchase of our bonds helps the US keep our interest rates low. Japan's recession is a sign that OPEC has to pump oil. OPEC does not win by putting killing the Japanese economy. Greenspan spoke about a world wide bond market conundrum. Japan is not the only economy in the world that has slowed.

Businesses are still more focused on cutting cost than on expanding. Free trade is the culprit here. A business does not want to expand only to hear that a competitor is expanding at low cost in a third world country.

The above is not a change of my position on energy. There is still no doubt that it will take time to increase production and to enhance conservation of energy. Prices have been above $40 for maybe a year or so now. T Boone Pickens (my nickname T-Bond is a metaphor) expects oil to hit $60 per barrel before it hits $40. I would not bet against him.

Today, which sectors continued the run up in prices, energy, oil services, gas and related industry. The trend is your friend. My oil servicing holdings continue to do well and are up around 18% so far this year.

Never-the-less, it is good in a sad way to see that a major oil importer like Japan is suffering at today's prices. The rise in oil prices is affecting the world economy. COP announced a new deal with Venezuela last week and other supplies are coming on line. Conservation measures are being pursued around the globe. Oil prices are high but record numbers of drills are drilling and pumps are pumping.

Oil prices are high but not enough to kill the world wide expansion. Oil and Gas prices will peak this year. Stock prices will be substantially higher by 2006 when new supplies begin to take oil prices down.