Wednesday, November 16, 2005


The crude production lost as a result of the hurricanes has been hyped to the max. The following is reality.

The cumulative loss of crude production in the Gulf as a result of the hurricanes is one day! The world uses 81 million barrels of oil per day. The IEA coordinated the release of approximately 60 million barrels of emergency reserves after the hurricanes hit. The net loss of available crude is one fourth of one day!

In the meantime, China has reduced its crude demand growth rate from 15% in 2004 to ZERO. The reported numbers do not show ZERO but again do you believe the hype or do you believe what is real?

Take the reported numbers in the linked article and you can see that the current growth rate is approximately ZERO. The IEA reports that through March, the projection on growth in usage was 7.9%. The past 4 months in a row, the IEA has reduced world wide demand figures and in particular the demand from China. They now project the annual growth in China to be 3.3% for this year. To get from 7.9% annual growth to 3.3% growth during the same year, the last few months of the year will have to be about ZERO.

The bottom line is that those who think the world is going to run out of energy are as off course as the Malthusian who thought the world was going to run out of food. Sticking with china as the example, China has approximately 104 million hectares of arable land available. Technology exist to grow beans for fuel.

For better than 20 years, Ken Fisherhas written solid common sense articles. A month or so ago, he suggested that to do well as an investor you should discover what is believed by the majority that is not true. The majority believes that oil will never come back down below $50 per barrel. The reality is that it will. The reality is that inflation is not as bad as commonly believed. The reality is that stocks do very well during periods of low inflation.

Tomorrow the CPI for October will be announced. I can not tell you that the number will be large or small. These monthly numbers are very volatile. They are mathematically seasonally adjusted. They are often revised time and again after they are reported. The trend since July is that the numbers are down.

Oil reserves will also be announced tomorrow. Will the size of the reserves continue to be dramatically out of whack with the current price? Again, the numbers for any one day do not prove much. However, the potential for a bond market and stock market break-out is present. For those of you who are riding Ken Fisher's bucking bronco hold onto your hat. Wednesday November 16 could be an exciting day!