Tuesday, September 2, 2008

Gustav Stage Left, Palin Stage Right, Energy Prices Plummet

Good Trend Setting Tuesday to one & all! The weakness of Gustav is welcome news for all consumers, but perhaps the entrance of Alaska Governor Sarah Palin for Vice President has spooked the energy market more, causing crude oil and natural gas to fall more than 6% in a single trading session. Whether you subscribed to the notion of supply/demand driving up prices, or favor the idea that speculators are responsible, we know Gustav did not increase supply or demand, yet energy prices are plummeting beyond where they were when Gustav wasn't even a single storm cloud. Perhaps it is simple market/economic psychology of discounting future prices based on Alaska's huge energy supply as Palin made her beautiful stage right entrance? There are still those convinced oil is down and stocks are rallying because Gustav missed: http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=AP&date=20080902&id=4160165 Yet there are others who respect and may credit Palinomics with today's market reaction: http://robots.cnnfn.com/2008/08/29/news/newsmakers/palin_oil.fortune/index.htm With respect for your personal opinion, a majority of Americans do agree that drilling should be part of a comprehensive energy policy. The fact we now have a Governor from the energy rich state of Alaska on the elephant ticket is a breath of fresh air, much fresher than any hurricane Miss. A beauty to put it in supply/demand terms ~ We hope you enjoyed the Psychology of this Call.


Anonymous said...

I don't like Palin, but did like your spin.

Mtn Goat said...

Hi -- Enjoy your newsletter, but I have a question for you. You claim to emphasize global geopolitics and an independent, non-partisan perspective. So I'm a bit amazed that you ascribe the collapse in oil prices to the selection of Sarah Palin as Republican VP. Are you partisan Republicans, rooting for a McCain victory? That's fine, but you should make that clear up front. A few points, any of which l would like to see you address in a future issue:

1. Palin's beliefs on oil drilling are exactly the same as those of all of the other Republican VP possibilities and John McCain himself, so how could her selection have changed the oil market? Were you thinking that McCain might select Al Gore as VP?

2. How can plans for drilling in Alaska, and the prospect of a tiny resulting increase in global oil production five or ten years from now, be causing the current huge drop in oil prices? Yes I know markets are forward looking (sometimes with great inaccuracy, as in the Fall 2007 stock market), but most oil futures contracts go out less than a year into the future.

3. In focusing on Palin, aren't you focusing on a tiny tree and ignoring a huge forest -- namely that oil is plunging because of a huge, interconnected, and global economic slowdown?

4. The coming drop in oil below $100 is exactly what OPEC (and oil companies) want to see, because these periodic drops knock the feet out from under alternative energy investments. At some point, which you can forecast a lot better than I can, we will see oil over $120 and gas over $4 again, and we will probably be in the exactly same place we are today regarding dependence on oil imports. Instead of seeing the current oil price drop as a "victory" for the US economy, you might consider that we are getting played for fools by OPEC, which seems to have a much longer term strategic view than we do.

And not related to oil, would love to hear your interpretation of the Dow climbing 250 points, then dropping 275, all in one day. Thanks.

Anonymous said...

After listening to Sarah Palin speak tonight, I admit she is one formidable opponent. I hope the media treats her with kid gloves, like they have the "community organizer". Our entire family vote goes for MCCain/Palin 110%!

The Call Team said...
This comment has been removed by the author.
The Call Team said...

mtn goat,

Thanks for the constructive criticism/comments, muchly appreciated.

Not sure when you began visiting the Island blog, but we try to emphasize balanced psychological fusion in every piece. When we do come off like we favor donkeys over elephants or visa versa, it's only because there are distinct/real differences in how the individual party ideologies affect your asset allocation, agree?

We did not state Palin was solely responsible for the fall in oil today, but we do stand by the argument that a Governor from Alaska carries a lot more clout than a Romney or Huckabee or Lieberman would. After all, she is a trail blazer that has crossed party lines and had very prominent Republicans fired and jailed. So we feel you are wrong about lumping her in with all/any Republican. As for Al Gore, we'll refrain from commenting.

Regardless, IF we came off partisan, that's fine, because we'll probably offend the other side in our next piece, as we feel 90% of politicians are crooked. Look no further than Ted Kennedy, who didn't report his personal secretary’s drowning for a full day.
We’re not blogging to pick the next President/administration, our goal is to bring you forward looking psychology that mixes in politics, as we strongly believe legislation moves stocks. IF we step on some toes along the way, so be it, because we are not monolithic thinkers in relation to market direction, party affiliation, or anything else. So if we failed to strike any chords, then we wouldn't be doing good work.

As for economic slowdown, agree, but we called that months ago when we wrote about the Beijing Olympics/Asia/Buffet/Munsch/Scream. Remember? The reason oil imploded today is mainly due to the Ospraie hedge fund blow up, as well as the Dow whipsaw.

As for your views on OPEC, we believe OPEC is given far too much credit and blame. If you want to place blame, maybe start with the late 1980 shipyard strikes in Poland and Ronald Reagan for ending the Cold War. Perhaps oil would still be at $20/barrel if these new pseudo democracies like China and Russia were left to soak in socialism? So IF you think oil fell 6% in a single trading session due to an economic meltdown, that's fine, but we don't buy it. We believe a pro-drilling Palin and hedge fund blow up caused the move lower, and probably 70% hedge fund, 30% Palin. There is NO doubt in our minds that a lifting of the moratorium on U.S. drilling and oil shale would send oil below $80/barrel. Consider Brazil's independence from relying on OPEC, avoiding a lot of terrorist regimes, no?

Do you not believe drilling makes sense? Do you not understand OPEC is over rated? We do.

You make valid points, but we never claim wizardry or pledge partisanship, only attempt to offer multi-faceted reasons why markets misbehave...

Lastly, Governor Sarah Palin is a breath of fresh air. We stand by our argument she is a true beauty from a state that has the supply we demand, and she is willing to negotiate with donkeys in her wake of dead elephants (Murkowski is just one) ...

Anonymous said...

Palin is more qualified than the community organizer from the south side slums of Chicago folks, wake up.

Anonymous said...

Palin energized me to vote Republican.