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From the current issue of the Weekend Update at Iacono Research comes this graphic that goes a long way in explaining how the model portfolio has produced a year-to-date gain of more than 11 percent. (Note that ETFs with asterisks are currently in the model portfolio.)
Of course, an all long-bond portfolio would have produced even bigger gains for those who dare lend that much of their money to Uncle Sam. For links to all of the ETFs, see below.
Sadly, Matt Simmons, peak oil theorist, energy industry investment banker, and author of “Twilight in the Desert” died at his home in Maine yesterday in an accidental drowning. Some news organizations are reporting the cause of death as a heart attack, but, according to this Bloomberg story, “heart disease” was simply noted as a condition on the death certificate.
In recent months, Simmons was best known for a number of rather wild claims about the Gulf oil spill and the future of BP (which may still turn out to be true), however, it is his ground-breaking study of peak oil and more recent work in founding the Ocean Energy Institute (OEI), a group that set out to develop the technology needed to generate energy from the ocean, that he will be remembered for over time.
One of his last interviews was with Jim Puplava at Financial Sense Online a week ago.
The now-plunging U.S. dollar has certainly been an important factor in the recent rise in oil prices, but one of the other funnier explanations over the last few weeks has been the odd logic that stocks are rising, so the economy must be improving, so there will be higher demand for energy sometime down the road. On CNBC a short time ago, Jessica Hoverson of IMF Global talks about some other reasons for crude oil now approaching $83 a barrel.
What’s really funny here in 2010 is that, after a gain of almost 80 percent last year, the oil price is still anywhere near $80 a barrel given the now-incessant talk of deflation, a weak U.S. job market, slowing growth in China, and overflowing crude oil stockpiles.
Everybody’s favorite investment bank, Goldman Sachs, just doesn’t seem to be dispensing the same kind of sure-fire, money-making advice that they used to. After urging bets on a resurgent euro as it continued to plumb new lows in the spring (did they stick with that one long enough to be benefit from the June turnaround?), they’ve consistently called for higher oil prices, the latest recommendation coming yesterday in this story at Bloomberg.
Oil Near 11-Week High; Goldman Says Crude Too Cheap
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Oil traded near an 11-week high in New York as equities rallied around the world and Goldman Sachs Group Inc. said crude prices are too cheap.
Oil was at about $79 a barrel before a government report due tomorrow that may show U.S. fuel supplies increased last week. Goldman Sachs said futures prices are “significantly” below the level warranted by “fundamentals,” offering buying opportunities for this year and next.
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Goldman Sachs said in a report yesterday that the balance between supply and demand will continue to tighten in the second half of this year as global economic growth boosts demand, returning inventories to “more normal” levels.
Crude oil looks to be a one-way bet this week – down – and it’s not clear how that’s going to change in the near-term given all the economic data now piling up that all points to a dramatic slowdown in U.S. growth if not a double-dip recession. Of course, anything could happen in China (and probably will), but, it’s hard to imagine how we’ll see substantively higher oil prices without some signs that growth is increasing, not decreasing.
China was quick to dispute findings by the IEA (International Energy Agency) that concluded they have surpassed the United States and are now the world’s biggest consumer of energy.
Most people probably look at the 9 million bpd (barrels per day) of oil consumed in China versus the 19 million bpd day in the U.S. and stop there. Apparently, they’re much closer to the U.S. when coal, nuclear energy, natural gas, and other energy sources are included.
Since my “Predictions for 2010″ were exactly 13 days late in January, it seems only fitting that the mid-year review should occur with the same lag, and that’s the subject of this quick look back to what was going through my head six months ago.
As is clear to see below, there is great danger in making predictions that are too specific – they’re much more likely to be wrong. Anyway, off we go…
1. Maybe the Last Really Bad Year for Housing
It’s hard to understand how anyone can really think that the nation’s housing market managed to “stabilize” in 2009 when prices continued to decline on a year-over-year basis even after government support to this sector on a scale never before seen by Mankind.
Homebuyer tax credits, central bank purchases of mortgage-backed-securities, a sharp increase in FHA lending, and a host of other factors have merely “kicked the can down the road” and that road will be “uphill” in 2010. Mounting foreclosures, loan resets, and an increasing number of homeowners who simply “walk away” from underwater mortgages will cause a relapse in housing this year and month-to-month gains will turn back to losses.
As measured by the 20-city S&P Case-Shiller Home Price Index for October 2010 (to be released in late-December), home values will decline by another 8 percent. The U.S. government will extend the homebuyer tax credit again in the summer and late-2010 will be a good time to start looking to buy property in most parts of the country.
The homebuyer tax credits have come and gone and home sales appear to be plunging off a cliff with price declines looking like they’ll accelerate over the summer.
By Tim Iacono, Since 2005
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