My OPEC Strategy

I was rereading Steve Levitt’s blog entitled Peak Oil:” Welcome to the media’s new version of shark attacks” in preparation for the OPEC meeting (I’ll be the one wearing a Kaffiyeh) and I started doing a little math of my own. In previous columns we’ve discussed the oversupply issues, the underlying reasons for oil’s rapid price increase and supply and demand issues - so here we will concentrate on price control options. Using very round numbers so as not to annoy people I think it boils down to this: The world uses 85M barrels of oil a day. OPEC produces 30M barrels, Non-OPEC 55M At $60 a barrel, OPEC makes $1.8Bn a day. A 10% production cut (assuming it does hold the price) costs them $180M a day. A $5 dollar a barrel drop in prices cost them $150M a day. They have to be reasonably certain then, that the benefit of cutting 10% of their production is greater than $5 a day or it’s a double loss. Already it is 20% more profitable to let oil drop $5 in price than to cut production. Now, what if someone cheats within your group? They will put pressure on prices and take it directly out of your share. How much does Saudi Arabia trust Iran? Nigeria? Chavez? Even if they all get along and sing Koom-Bi-Ya and cut production by 10% then what about their competitors? OPEC only supplies 40% of the world’s oil, the rest is supplied by FOREIGNERS! You know we can’t trust them…. It’s just not fair for OPEC to take a $180M per day hit in order to support prices so that their competitors can just swoop in and start supplying their customers. And speaking of customers, those ingrates aren’t keeping up their end of the bargain! Not only are SUV sales off 40% in the US but the airlines have spent billions switching to lighter, more fuel efficient jets that can save over a billion barrels of jet fuel a year. On the whole, demand is off 3.5% since oil first broke $50 in October of 2004. The US expects to produce 10Bn barrels of ethanol a year by 2010, that’s $600Bn less demand! Not only does 3.5% less demand cost OPEC $65M a day but if part of that $100M/day finds it’s ways into the hands of energy competitors (wind, solar, geothermal, coal, nuclear…) it could spur those industries on to grow and do better. If we were to assume that this 3.5% drop in demand persists every 2 years that oil is over $50, then the first thing OPEC needs to do is get oil under $50 asap to stop the bleeding. Once you lose a customer, it is very hard to get them back! So OPEC needs to come out of this meeting with a statement that they will cut back production quotas but not actual production and let us know they consider $50 to be a fair price for oil. Rather than playing the villain, they could accept the inevitable and calm their customers, letting them know its OK to buy that SUV for the holidays. Instead we can expect the usual greed and chaos to dominate the meeting which will leave the market on an uneven keel that will ultimately lead to OPEC, like Lucy and Ethyl, choking on thier own production.
 
 
 

ValueWalk

GameStop's Dead Cat Bounce; Munger's Annual Meeting

By Jacob Wolinsky. Originally published at ValueWalk.

Whitney Tilson’s email to investors discussing GameStop’s dead cat bounce; stop the speculative and manipulative madness; and Munger’s Daily Journal annual meeting.

Q4 2020 hedge fund letters, conferences and more

GameStop's Dead Cat Bounce

1) The behavior of speculators these days boggles my mind...

Only a few weeks after losing more than 90% of their money as shares of GameStop (GME) – or "GameStink," as I've been calling it – col...



more from ValueWalk

Phil's Favorites

Wall Street Sends a Message to the Fed: We Have Run Out of Places to Stuff Your Treasuries

Courtesy of Pam Martens

By Pam Martens and Russ Martens: February 26, 2021 ~

The action in the U.S. Treasury market yesterday reminded us of the classic “I Love Lucy” episode at the chocolate factory. As the conveyor belt churns out chocolate balls faster than Lucy and Ethel can handle them, they resort to stuffing them in their mouths, their hats, and their shirts. Lucy remarks: “I think we’re fighting a losing game.” (See video clip below.)

That was the scene in the Treasury market yesterday – ...



more from Ilene

Zero Hedge

Bond Bloodbath Blows Up Stocks As Redditors-Revenge Hammers Hedgies (Again)

Courtesy of ZeroHedge View original post here.

Bonds and stocks were both battered today...

Source: Bloomberg

Which is why we wheeled out the deer!

Today was the worst day for equity/bond investors since March 2020...

...



more from Tyler

Politics

What is fascism?

 

What is fascism?

A Donald Trump supporter wears a gas mask and holds a bust of him after he and hundreds of others stormed the Capitol building on Jan. 6, 2021. Roberto Schmidt/AFP via Getty Images

Courtesy of John Broich, Case Western Reserve University

Since before Donald Trump took office, historians have debated whether he is a fascist.

As a teacher of World War II history...



more from Politics

Biotech/COVID-19

How does the Johnson & Johnson vaccine compare to other coronavirus vaccines? 4 questions answered

 

How does the Johnson & Johnson vaccine compare to other coronavirus vaccines? 4 questions answered

The Johnson & Johnson vaccine only requires one dose. Phill Magoke/AFP via Getty Images

Courtesy of Maureen Ferran, Rochester Institute of Technology

Editor’s note: On Tuesday, Feb. 24, the U.S. Food and Drug Administration released the results of its trial of the Johnson & Johnson coronavirus vaccine. The FDA found the vaccine to be safe...



more from Biotech/COVID-19

Chart School

The Fastest Money

Courtesy of Read the Ticker

The fast money happens near the end of the long trend.

Securities which attract a popular following by both the public and professionals investors tend to repeat the same sentiment over their bull phase. The chart below is the map of said sentiment.







Video on the subject.







Charts in the video


Click for popup. Clear your browser cache if image is not showing.





Click for popup. Clear your b...



more from Chart School

Digital Currencies

Bridgewater Explains When It Will Invest In Bitcoin

Courtesy of ZeroHedge

Two weeks ago, Bridgewater founder Ray Dalio called Bitcoin "one hell of an invention" adding that:

"I expect Bridgewater to soon offer an alt-cash fund and a storehold of wealth fund in order to better deal with the devaluation of money and credit that we consider to be a major risk and opportunity, and Bitcoin won’t escape our scrutiny.”

And now, after significant attention that his comments received, Senior Portfolio Strategist Jim Haskel sits dow...



more from Bitcoin

Kimble Charting Solutions

Is Rising Inflation About To Hit U.S. Economy In Big Way?

Courtesy of Chris Kimble

Inflation seems to be a thing of the past… but current trading in bond and commodity markets tell us that it could become a thing of the future!

Inflation hasn’t been an issue, or even on our radar, since the 1980s. Sure, the 2007 surge in oil prices offered some concern but the financial crisis killed any thoughts of inflation.

So what’s got us concerned about inflation in 2021?

Today we take a look at long-term charts of two potential inflation indicators: Crude Oil ...



more from Kimble C.S.

Mapping The Market

The Countries With The Most COVID-19 Cases

 

The Countries With The Most COVID-19 Cases

By Martin Armstrong, Statista, Jan 12, 2021

This regularly updated infographic keeps track of the countries with the most confirmed Covid-19 cases. The United States is still at the top of the list, with a total now exceeding the 22 million mark, according to Johns Hopkins University figures. The total global figure is now over 85 million, while there have been more than 1.9 million deaths.

You will find more infographics at ...



more from M.T.M.

The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



more from Tech. Traders

Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



more from Lee

Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

http://www.insidercow.com/ more from Insider

Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

...

more from Promotions





About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.