Tuesday, January 17, 2006

 

Fitch 'Dusts Off' $70 Oil Scenario On Iran Situation

Fitch Ratings has this look at oil prices. "Fitch Ratings said today that near-term global economic prospects remain positive but geopolitical concerns and the potential implications for oil prices are a key risk. A number of downside risks were present including that of sharper-than-expected household sector retrenchment in the US, in a climate of unprecedented highs in net household debt and debt service ratios - and a renewed surge in oil prices."

"'Uncertainties over the situation (in) Iran have led us to dust off our USD70 per barrel oil price scenario,' Brian Coulton added."

And the Guardian looks at the Iran issue. "Iran stepped up its defiance of international pressure over its nuclear programme yesterday by warning of soaring oil prices if it is subjected to economic sanctions. 'Any possible sanctions from the west could possibly, by disturbing Iran's political and economic situation, raise oil prices beyond levels the west expects,' Iran's economy minister, Davoud Danesh-Jafari, said."

Comments:
Looks like the place to be for 2006 is, Energy, Mining and Precious metals. Get out of dollar assets.
 
pchander,

I heard that PIMCO's chief said the dollar was 'doomed' the other day. The Iranian in the article was right when he said 'you need us more than we need you.'

Because of our debt and trade imbalances, more and more of the US' fate is out of our hands.
 
Looks like the place to be for 2006 is, Energy, Mining and Precious metals. Get out of dollar assets.
# posted by pchander100 : 2:44 PM


That's the way I see it also.Longer term I just can not see the dollar heading anywhere but down.Percious metals and mining stocks should pick up steam all year long,IMHO. The general public will only know what hit them after they have been decked...
 
The largest supply of oil in the world after Saudi Arabia is the Canadian Oilsands. (Iran has the 2nd largest "liquid" supply). Now that it seems the Saudi fields are in decline, its quite possible Canada has the largest. The big wakeup call to a lot of Americans will be when the Canadian dollar surpasses the US dollar in value. I've seen estimates that say Canada could be the world's principal oil supplier by the middle of the next decade. We're talking Saudi-levels of wealth up north. Crazy.
 
"The general public will only know what hit them after they have been decked..."

I agree. But I'll wager that a good percentage of them figure it out by the end of the summer. That will be the beginning of a "major wave" of mining/precious metals investment. (and a major wave "out" of dollars). If past bubbles are any experience, it will be a long wave which creates a whole other bubble.

The trick is to be in the market before those guys.
 
PVX, PGH, PFT, FDG are perfect for you guys. They are Canadian energy trusts which pay out 10%+ dividends.

I forget who first recommended these, but a big thanks to them (since I got them in December). (They were in my Dec 9th blog.)
 
Don't forget other high yield currency holdings outside of USD. Take for example Icelandic Krona paying 8.24% on 3mo CDs. Historically, the currency has been strong against USD. Even during the USD bull of 2005, it lost less than 1%. I'm anticipating a total yearly return of 15%-20% with that CD for 2006 if US gloom continues.

I still have about 16% of my worth in plain USD, but I'll be putting some of that down on the new 24K US coins.
 
Fine advice. Oil & Gold are where it's at IMHO. I'd like to add Japaneses equities. (Japan has lost 7% last 3 trading days Wednsday is an excellent entry point) What's funny is all 3 of those were among the strongest pefromers in 2005. I'm not one to chase the previous years big winners, but I just don't see them going down anytime soon (esp. Gold) - even if they do correct slightly I'm way ahead in all three.
 
BTW - I'm finally going to take the plunge and purchase an everbank curreny CD, but I'd like some advice from some of the experienced players on here (I'm a currency rookie and very nervous - I've known people who've been killed) - I'm leaning towards one of their index CD's like the commodity or central bank. The comodity includes the Canadian Dollar, which has been highly recommended to me. Ben already steared me away from the Mex Peso.
 
thejdog: Congrats. The Commodity CD is my biggest CD as of now (25% CAD, 25% AUD, 25% NZD, 25% ZAR). Since USD is doing poorly, everything is up. ZAR (South African Rand) is my biggest winner exchange wise.

By nature, this CD is already diversified, so that lowers your risk. However, there are some things to consider. NZD is basically downgraded to a neutral level right now. It will be downgraded again to a sell level sometime later this year. With this being the case, I'm dumping 75% of my NZD (only keeping it as part of Commodity), and putting proceeds in EUR.
I'm honestly tempted to change the Commodity CD into just two separate CAD and ZAR CDs since I already hold a lot of AUD anyway.

As I suggested in my earlier post, my highest recommendation is the ISK (Icelandic Krona) with 8.24% interest. This will become my biggest CD on the next maturity date.

Anyone who is really nervous about getting returns might just stick to USD CDs or I Bonds... I have some holdings in these as well, and do always suggest diversified funds.
 
Out at the peak said:

Anyone who is really nervous about getting returns might just stick to USD CDs or I Bonds... I have some holdings in these as well, and do always suggest diversified funds.
________________________________

I like most of what you said above, but disagree with your recommendation of I-bonds. They were a great investment a few years back, but they're a poor investment now. Although they currently carry a very good current yield of 6.73%, this is a direct result of the "Katrina effect" on the CPI. The "locked-in" fixed rate is extremely low at 1%.
Two major problems I have with I-bonds: 1) their inflation hedge is dependent on the CPI-U, which many suspect is manipulated by the BLS and will likely continue to under-report "real" inflation.
2) They're relatively illiquid, with a minimum 1 year holding period. If you cash the bond within 5 years, you forfeit 3 month's worth of interest.

I think anyone who desires safety and liquidity (and who lives in a high-tax state), a ladder of 3- to 6-month T-bills in a taxable account is a good choice. Remember, the inflation rate is factored in to the current yield of ALL bonds, the only advantage of I-bonds (and TIPS) is UNFORSEEN inflation as measured by the dubious CPI.
 
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