Thursday, June 05, 2008


One of the most important differences in the Google, Android, phone software is in its cost. Google offers the software to the manufacturers for zero dollars. What is new? Google continues to play by its own rules. It gives away its software in exchange for future advertising space. In the case of Android, you might guess that the home page is the Google search page. The neat thing is that manufacturers have been given the freedom to come up with the best designs. The beta models include neat stuff. For example, click on the map link and the display shows your exact location in map view or street view, click on the compass button and you can easily orient the map. High speed mobile Internet access will change the way we live and it is coming soon. Yesterday, the energy sector was down 1.89% while NASDAQ was up .91%.


A sea change is underway. Tuesday, the citizens of South Dakota voted yes to the construction of the first oil refinery to be built in the USA in 30 years. This refinery will cost $10 billion, it will process heavy tar sand crude from Canada and it will process 400,000 barrels per day. The attitude of the public is becoming drill or build now and pay less at the pump.

A sea change is underway. Last week, when Obama was running for the democratic nomination, he spoke in favor of sitting down to talk with Iranian leaders. After becoming the presumptive nominee, he has talked about how he will not let Iran build a nuclear bomb, no matter what. As expected, Obama is moving toward the center. He still has a long way to go, especially in regard to his tax and spend ideas.

A sea change is underway. About 59 trading days ago the stock market made a significant bottom. Since then, the S&P 500 Index is up better than 5%, the S&P Small Cap Index is up 11% and the S&P Mid Cap Index is up 14%. The US dollar bottomed a couple of days after the stock market bottom and is up 2% (a big number on trillions of dollars). The foreign investor has made 7%, 13% and 16% respectively. Over the same period, the commodity index is up 0% and the 10-year bond is down 5%, another turn of the worm? One of the obvious see-saws has moved; gold and silver stocks went down 12% and semi-conductor stocks went up 19%. The flip-flop for tech and energy was delayed a little but, over the past 10 trading days, the energy sector went down 4.3% while technology stocks went up 2.6%.

Yes, I am the boy who cried wolf the last time this flip-flop was under way. The last time, we did not have a massive demand destruction event underway.

The best news is that this flip-flop is not dependent on the new refinery or the congress. The Citizens Against Air Pollution Organization has taken out a law suit to try to prevent the refinery from being built. What a joke? The citizens voted 58% to 42% in favor and the government is behind the project. The US congress has told an even bigger joke. The house voted to sue OPEC! The congress is sitting on more oil in the USA than is in Saudi Arabia but we are going to sue them? For what? What do we want to do? Make them mad? The Saudi response was to reduce their discount to West Texas by a couple of bucks per barrel. So far this law suit against OPEC is working out really well!

We sometimes forget that the USA is the third largest oil producer in the world even with 85% of our potential reserves off limits. The congress wants to limit supply, add taxes onto the price of oil and reduce the price all at the same time! Oil is already taxed at every turn. In addition, the congress is debating massive tax increases and massive tax credits to "friendly businesses" (read as campaign contributors) in the form of "Cap and Trade" legislation. Should the bill before congress pass, the average family will pay about $6,000 more in taxes every year. There is no way that 61 senators will go along with this travesty now. After a democratic sweep maybe, but even then doubtful.

Don't let the weight of this foolishness get you down. The whole world is going to look very different when Iran is forced to come to terms. The list of deals that are being discussed is very long. For example, few Americans know or care that the UAE has asked Russia to mediate its dispute with Iran over ownership of three islands in the Straight of Hormuz. When the British pulled out in 1971, Iran seized control of these islands. The strategic value of these islands has fallen each time another pipeline around Iran is announced. The resolution of this dispute is minor relative to others. The IPI or IPIC "peace pipeline" is a big deal. The settlement of the Golan Heights is a big deal. The refinery in Syria is a big deal. Each of the pipelines to be built by Saudi Arabia is a big deal. The access to nuclear fuel by all willing to abide by the rules is a big deal. A year ago, when I wrote about the potential for a deal with Iran, I had no idea that the USA would be so successful in getting the rest of the world to put forth so much effort. Countries all around the globe will benefit when a deal is done. Russia, Australia, Canada and others will sell billions of dollars worth of uranium ore. The price of stocks will go up very much before the average person even knows there is a good chance of a deal.

I am confident in saying that the majority of my readers are skeptical at best. Peace in the Middle East seems impossible to most people. There were fewer US deaths in Iraq in May than in any other month of the war. What if there are fewer still in June (there were 19 in May and 3 so far in June). We all know that 3 are far too many but I believe those 3 will save thousands of others. What if there are fewer still in July? At what point in time will the AP, CNN, ABC, CBS, NBC, etc report that the war is being won? What if the price of gasoline falls to $2.90 in August while the number of US deaths fall to 2? What if Thunder Horse, an oil field in the Gulf of Mexico, produces 300,000 barrels in September? What if Iraq increases production by 400,000 barrels per day by year end, as has been projected? What if Brazil keeps on discovering multi-billion barrel fields? What if the 473 billion barrels in the Bakken formation of North Dakota and Montana proves to be recoverable? What if the Canadian side of this formation turns out to be as big?