patrick.net

Oil is a tough one. I know that there is a magic number where it no longer is profitable to pull oil out of the ground. As oil gets cheaper fewer will be in the business. I believe its around 20-30 dollars a barrel in some places so I would say that would be an absolute bottom where there was no profit.

The price of oil can easily go below $10 per barrel before production costs would interfere.

Finding oil and establishing the well is the big cost these days. Once the well is operational the cost of pulling the oil from the ground is only $4 to $8 per barrel. The Saudis can make money at $6 per barrel.

The recent oil price bubble stimulated the development of new wells when people thought oil would stay above $100. Next year many new wells will come on line - and they will pump it.

In addition, the Saudis and many other sovereign producers (ie Venezuela) need the cash for their government operations. As the oil price declines they will need to sell MORE oil.

Demand is fading and supply is growing. A massive surplus is developing. The price must fall.

Of course, at $10 or $20 per barrel nobody would invest in new supply. Thus setting the stage for the next price runup, after demand recovers sufficiently to exceed the new level of the supply capacity. That will take many years.

I doubt that we will ever see $10 or even $20 per barrel prices in nominal terms again. However, adjusted for inflation I think a low of around $20 is very likely.

That story is pretty funny Permarenter. Parents in Cupertino are putting their kids in private school because the public schools are too good!

I was just tallying up the annual performance of Peter Schiff’s recommended investment products over at Euro Pacific Capital:

Why anyone still listens to this clown is beyond me.

I still like the guy.

If anything, he proves my rule that when two people are arguing, its most likely that they both are wrong.

>> That story is pretty funny Permarenter.

Yeah ... shows that Crapertino is a Chindian mecca ...

I just watched 60 minutes and saw an interesting story about the asset bubble that is now correcting itself. One of the guests on the show is saying that we are only about 1/3 through the correction. We still have CC, commercial RE, Alt-A, Auto, and Option ARMS to get through.

Zephyr,
Yeah, I have heard the $6 a barrel number before. I doubt it would ever go that low. I have a family member in oil and he says some people say $8 a barrel others say around $30. So it really depends on who and where you are talking about. We can take somewhere in between to be a absolute low where it no longer would be profitable.

Oil prices bottomed at about $10 about 10 years ago. On an inflation-adjusted basis that would be about $15 today. I could see that happening again if the world economy weakens enough.

At $15 most wells would keep pumping. They would still be able to cover their current marginal costs and have good positive cash flow.

Of course, the total cost of finding and lifting the oil is much higher. Onshore costs have recently been in the $20 to $30 per barrel range, and offshore costs are multiples of that. So in the long run, I think pricing below $30 is not sustainable, and prices above $60 are unavoidable.

If I were to pick a number for reversion to the mean it would be $60 per barrel. However, since we are correcting from an oil price bubble with a slowing global economy, I would expect a substantial overshoot to the downside in the next few years.

Also, to see $10 that means a continued bull run for the USD and I can’t buy into that.

OPEC said to be planning more production cuts and Saudis stated target of $75.

Seems there continues to be worry by those at the spigot that oil can keep dropping.

Neutron,

Ha ha, you guys in the Eastern time zone often get a jump on the TV news. I'm watching 60 Minutes right now and was about to say what you wrote 2.5 hours ago.

The significance of the TV program: The words Alt-A and option-ARM will now be household words.

There was also a great interview with Barney Frank, where he punched back at those trying to blame him.

Duke,

Towards the end of the article, Michael Moore was not pulling any punches, I'll concede that, but why should he?

As far as the content goes, don't you think he was spot on in his analysis of the facts, and of the Republican attitude towards an automaker bailout?

Demand for oil is fading, and the economies of the world are slowing further. Demand will fall more.

New wells are scheduled to come into production next year. Supply is growing.

There is a glut of undelivered oil waiting for buyers. It is sitting in full tank farms and in tankers on route to nowhere. It costs money to hold/store oil.

OPEC will most likely agree to production cuts at their next meeting. But will they actually implement these cuts? History suggests that oil prices will continue to fall long after the cartel actually implements their production cuts.

Where is the bottom? I don’t know. But it is not close yet.

With enough inflation the nominal price decline may appear less severe.

Barney Frank and the rest of the buffoons in Washington screwed up badly. But the crisis is not their fault.

We are suffering the consequences of a Federal Reserve fueled bubble that has burst.

Alan Greenspan is the villain in this debacle. Everyone else was a bit player in what has already transpired. His easy money policies were like gasoline on a fire, causing the excessive real estate bubble and its mortgage crisis. He then compounded the gravity of the situation by rapidly raising rates as the bubble reached epic proportions, thus guaranteeing an epic bust. The rest came inevitably from the disastrous policy.

Of course, the current bailout insanity is entirely the doing of our DC buffoons. They are a bunch of morons and isodopes busily creating critical morass.

isodopes == persons exhibiting exactly the same lack of intellect ??

:-)

A major research institution recently announced the discovery of the heaviest element yet known to science. The new element has been named "Governmentium."

Governmentium (Gv) has one neutron, 25 assistant neutrons, 88 deputy neutrons, and 198 assistant deputy neutrons, giving it an atomic mass of 312. These 312 particles are held together by forces called 'morons' which are surrounded by vast quantities of lepton-like particles called 'peons.'

Since Gv has no electrons, it is inert. However, it can be detected, ecause it impedes every reaction with which it comes into contact. A minute amount of Gv causes one reaction to take over four days to complete, when it would normally take less than a second!

Gv has a normal half-life of 4 years; it does not decay; but instead undergoes a reorganization in which a portion of the assistant neutrons and deputy neutrons exchange places. In fact, Governmentium's mass will actually increase over time, since each reorganization will cause
more morons to become neutrons, forming 'isodopes.' This characteristic of moron promotion leads most scientists to believe that Gv is formed whenever morons reach a certain quantity in concentration. This hypothetical quantity is referred to as 'Critical Morass.'

When catalyzed with money, Gv becomes "Administratium' (Am) - an element which radiates just as much energy as Gv, since it has half as many peons but twice as many morons.

I would have called it Republic(r)anium, but that is Just Me.

Neither party has any sustainable advantage in the buffoonery competition. Whichever one is in power is the one that "shines"...

We get tired of the incompetence, and vote the bastards out (once we have forgotten how bad the other bastards were).

Regardless of who is in power Governmentium thrives.

The longer one party is in power the more morons and isodopes it attracts.

What about Corporatium, then?

A samilar disease afflicting larger business organizations.

It seems that any large entity becomes bogged down by its own bureaucracy and internal politics. I am somtimes amazed that government entities and large businesses do not blunder more than they do. Of course, some do blunder spectacularly.

The significance of the TV program: The words Alt-A and option-ARM will now be household words.
I still carry an Ivy Zelman reset chart in my wallet... Does this mean I will get a spark of recognition when I bring it out and start talking about ARMaggedon?
Condo towers in SF are about to go critical. Looks like prices are sliding and hitting "developer pricing" of a couple of years ago. Not good for the specUvestors.

I think if Moore were to be correct on economics - it is either
a) accidenal - like a broken clock that is right twice a day
b) someone else's thought - as in someone told him, "say this"

I was suprised to see Yahoo people let go before the Holidays and before they chose a new CEO. The best I can tell, this signals an impending acquisition by Microsoft. It just does not make sense otherwise. . .

I am somtimes amazed that government entities and large businesses do not blunder more than they do. Of course, some do blunder spectacularly.

In my experience working in the public & private sector I've encountered three fundamental type of employees.

A. The Rock Star.

Worth their weight in gold. Innovates and motivates. Is genetically wired for quality. Workaholic. Makes everyone else look bad.

B. The Dead Wood.

Doesn't provide much value, yet is unobtrusive enough to not impede progress. Will do a few hours of good work a week if sufficiently motivated/prodded.

C. The Douche Bag.

Totally incompetent. A broken clock is right more often. Suffers from delusions of grandeur. Destroys all they come in contact with. Insecure at heart, so they will actively try and rid their organization of Rock Stars in order to replace them with fellow Douche Bags or Dead Wood. The Dunning-Krueger effect made flesh.

What I've found is that all organizations are basically a battleground between the 'A' and 'C' employee types. And ultimately their success/failure is predicated on which group is dominant.

Something I've always admired about Google is that they have filters in place to actually prevent hiring Douche Bags (they call them 'bozos') while also actively expunging ones that slip through the process. I attribute their success almost entirely to this practice. Preventing bad employees from sabotaging your core business is just as important as hiring great ones to build it.

Kewp,

lol, agree on your observation.

Yahoo is a place full of douche bags, that I know pretty well. I have had quite a few dead wood acquaintances who churned through the revolving door, claiming that even the rock star wannabe cannot stand it.

It is such a shame because I think Yahoo still offers some of the best products in the market, Yahoo finance rocks, Yahoo IM rocks, just that the whole Yahoo sucks.

It only takes time for Douche Bags to emerge in any organization. Complacency breeds incompetency.

Kewp,

Where in this spectrum does President Bush rank?

TOB,

I would call that a Douche Star. In other words, a Douche Bag that tries to masquerade as a Rock Star, mostly by stealing the product of the real Rock Stars.

Those are also quite common. In fact, most outwardly successful Douche Bags are really Douche Stars.

Neutron,

Bush doesn't even fit in this Trichotomy. The classifications only work well in organizations in which the outward goals are generally agreed upon, I think.

But if I was going to give it a try, I would say Cheney is the Rock Douche. and Bush is the Deadwood Douche.

Note to self: One of these days I'll have to find out why douche bag is such a big put down in American culture.

TOB,

Cr*p, I did not see that before I posted, and I 'm not just saying that, or being a Douche Bag :-). Anyway, some minds do think alike.

Re: Google

Someone would have to tell me, but at a distance, especially Sergey seems like a rather big douche to me, but of course I could be wrong.

There is no way that company the size of Google does not have a large collection of douche bags, and I am not just talking about the shower rack at the Marissa Mayer penthouse here.

A bit off topic, but I could not resist. I wonder how many Latinos are going to choking their purple headed Bishops when they see this.

From the Pluck It Like a Money Chicken files comes 2608 McGee Avenue, Berkeley, CA.
Sold in 1988 for $50,000.
Refinanced in 2003 for $320,000.
Refinanced in 2006 for $630,000 ($560k first, $70k second, both variable interest).
Taken back by the bank for $395,250. Currently for sale at $389,900.

TOB,

I wish that would always work. What if there were no women in the first place?

What's now happening in the best neighborhoods of the city-

http://tinyurl.com/58tno6

TOB,

As has been mentioned in further comments; the hallmark of a douchebag is indeed that they they *think* they are a rockstar! This is the essence of the douche. It has even been studied, as I've alluded previously:

http://en.wikipedia.org/wiki/Dunning-Kruger_effect

In fact, if you want to determine who's who in an org, just show them my list and ask where they fit in.

If they immediately self-identify as a rock star; consider that the flag o'bag. They get a bonus point for negatively labeling their peers without being asked.

If they schedule a meeting to discuss it further or ask you to put the list in a spreadsheet, print it and fax it to their secretary; dead wood.

If they are either two busy to talk to you; or dismiss the list as a crass oversimplification and then sketch out an optimized version in UML on their whiteboard with personality traits weighted by the relevant DSM-IV... well there is your star.

I'll add that many highly successful people are an amalgam of douchebag/rockstar. Steve Jobs, Bill Gates, Larry Ellison, the list goes on.

Frank,

I would say Dubya is a pretty good mix of Dead Wood/Douche Bag and a Rock Star at dodging flying shoes. Seriously, the boy is pretty 'effin quick and I would definitely pick him over Cheney in a good ole' fashion shoe fight.

*Delurking*

Hey all, glad to see everyone still kicking and in overall decent spirits.

Justme,

RE Microsoft acquisition of yahoo search.

On the whole, a very valuable asset. On the business side, what they are after is search market share. They are getting that through yahoo's "installed" base of users, all the eyeballs that they drive through their various online properties. This market share is probably what is really coveted, as significant barriers exist to grabbing share through alternative channels in current environment. Indeed, most of their expensive efforts have fallen flat in this regard.

Greater market share means possible critical mass and greater pricing power and market control. Their sales team will also have an easier time pulling greater share of major agency ad monies.

My guess other assets are likely secondary, including intellectual property associated with search algorithms and back end processes.

On technology side, I suspect they will forklift out yahoo's analytics and back end eventually, replacing with their superior solution in that area. Migration to occur at all deliberate speed but possibly taking significant time. Probably much of their iron will be redundant and handled as such.

I cannot imagine that they would actually just redirect that traffic to their own search infrastructure. Many risks associated with user change. But doing so would be relatively trivial.

Many scenarios are possible on how to handle the overall migration, much analysis will take place. All problems that are solvable technically, what microsoft is really buying is the market share and real estate.

NVR,

I think you're right that it does not make sense to redirect from the yahoo home page, at least not at first. Users are fickle and would quickly switch to google or elsewhere if the yahoo home page stops being an integrated one-stop-shopping site.

But I would bet that MSFT would try, eventually and gradually, to lure people across to their own site. They would have to be VERY careful not to drop eyeballs in the process.

Personally I dislike MSN because it is much too gaudy + transient, and the content too bubble-gum fluffy for my taste. I would not be surprised that is the main reasons people prefer Google and Yahoo overall.