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Rebel forces have apparently taken more of the country's oil refining (Zawiya) and processing infrastructure (Brega). Most observers give the Qaddafi regime limited time before a full regime change takes place in Libya. ...
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Rebel forces have apparently taken more of the country?s oil refining (Zawiya) and processing infrastructure (Brega). Most observers give the Qaddafi regime limited time before a full regime change takes place in Libya.
In short order, Libyan oil production will ramp up. As it does, oil prices in world markets will fall and oil futures markets will reflect the expected increase in production of oil from Libya. The key prices to watch are those trading in Europe, like Brent. US oil prices (WTI) are no longer the leading indicator of world prices intersecting with world supply/demand. Excess inventory at Cushing, OK is complicating the pricing structure.
We expect oil prices to fall when highly desirable, sweet Libyan crude production is fully resumed and enters the pipeline. Maybe, they are going to fall by a lot. This will come as a much-needed boost to the US economy and to others in the world.
Remember: the oil price acts like a sales tax on consumption. To clarify this relationship we convert crude oil prices to gasoline prices and then estimate what a change in gas price will mean for the American consumer. Roughly, a penny drop in the gas price per gallon gives Americans 1.4 billion more dollars a year to spend on other than gasoline. That is a huge stimulant to the economy. The ratio is different in Europe because the gas taxes are so much higher there. Nevertheless, it is still significant.
Lower gas prices could not come at a more needed time. With weakening economies around the developed world, the lowering of the consumption ?tax? from high oil prices will be a welcome boost. In the US, it is possible we will see gas prices with a $2 handle, instead of the $4 handle of a few months ago. This is a large positive change for the US economy, and it is not being incorporated in the gloomy forecasts that we see.
Lower oil prices also mean a lessening of inflation pressures in the energy sector. We expect to see that appear as well. ?Gasoline prices moved up 4.7% in July and accounted for half the increase of the CPI. The energy price index has risen 19% in the twelve months ended in July. The core CPI, which excludes food and energy, increased 0.2% in July, which works out to a 1.8% increase during the past year. The year-to-year change in the core CPI bottomed out in October at 0.6% and has climbed steadily each month.? (Source Asha Bangalore, Northern Trust)
At 1.8%, the core CPI is still below the Fed?s informal target. Future inflation may be a serious concern for the three dissenting presidents on the FOMC. Real growth and risk are clearly the dominant and majority view. Bernanke fears a softening of the economy and a resumption of deflation risk. He is trying to get some growth and a little more inflation. Oil price declines may get him the growth. There seems to be a long way to go before the inflation side becomes the serous threat.
In May of this year, we took our then overweighted energy position to an underweight in our US stock portfolios. We were at 18% against an S&P weight of 13%. We are still underweight today. The S&P energy sector is 12.6% now; we are at 6%. Energy is the third largest sector weight in the S&P 500 index.
Exxon and Chevron are large capital weights in the Dow-Jones average. Both Dow and S&P averages are in steep downtrends and both are influenced by the energy component?s relative weakness.
We intend to remain underweight energy for some time and will wait out the Libyan regime change and subsequent rebalancing of the world oil price and world oil markets. Meanwhile we are more optimistic than most about the US.
We believe there is a large difference between a full recession vs. a period of very slow growth and low inflation. We think about this in terms of 1-2% real growth and 1-2% inflation. Taking the center points in each, one sees a 3% nominal rate of GDP expansion in the US. That will keep the employment situation weakly improving, and it will mean a continued slow recovery. It will also mean higher profits for business.
The stock market correction since the April 29 high has been vicious. We sold in early May. That was a good call. We entered in July. That was a bad call. We continue to rebalance and have recently raised our stock allocation and lowered our bond allocation in balanced accounts.
Our sector weighting, like the change in energy, has helped mitigate the damage. However, there is still damage. Volatility in markets remains very high. Fear and panic are seen in investor behavior and sentiment. These are usually the signs of buying opportunities and stock market bottoms. We think that is true today.
We have written about the valuation metrics we use and how they indicate that stocks are strategically cheap. We are looking at some of the financials for the first time in four years. I know, everyone thinks the world is ending, and the financials are decimated. That is the old news. Tell me some new news.
This is one of the most washed-out sectors one can imagine. After fours years, after many adjustments, after ongoing consolidation, after the mortgage fiasco, after Lehman-AIG?after all this, we now see banks and other financials selling well below their book values, and with substantial reserves for losses.
We are on the buy side now and believe that stocks present an unusually good entry point for a strategic investor. For a short-term trader this is much more difficult.
Did we have a selling climax or an interim one on August 8-9? Moreover, how much volatility is due to algorithmic trading? Most investors do not understand this force, which is driving ?vol? higher and thus causing market swings to appear wild.
We expect the rocky period to continue for a few more weeks. Eyes are now focused on Ben Bernanke?s remarks in Jackson Hole this Friday. We agree that the speech is critical. However, we are not taking our eye off the events unfolding in Libya. They may help Bernanke and US policy more than many expect.
We are nearly alone in our contrary market positions. We have witnessed a rapid 20% bear-market correction since April 29, when the S&P 500 hit 1363. Its intraday low was 1100 on August 8-9. It is testing that low now. It may go lower or the interim low may hold.
The question is: where will it be in 5-7 years? By then the US economy is likely to be $20 trillion in nominal GDP. Our view: it will be higher or maybe even very much higher. We have a longer-term target of 2000 or higher on the S&P 500 index. In addition, dividend yields now exceed treasury interest while we wait. 10% of our US ETF model is in Wisdom Tree dividend ex-financial ETF. (Symbol-DTN) It has outperformed the market by 500 basis points on the way down. We are bullish.
The preceding was provided by Cumberland Advisors, Home Office: One Sarasota Tower, 2 N. Tamiami Trail, Suite 303, Sarasota, FL 34236; New Jersey Office: 614 Landis Ave, Vineland, NJ 08360. 1-800-257-7013. This report has been derived from information considered reliable, but it cannot be guaranteed as to accuracy or completeness.
For a list of all equity sales/purchases for the past year, please contact Therese Pantalione at 1-800-257-7013, ext. 315. This report is currently about 600 pages in length. It is not our intention to state or imply in any manner that past results and profitability are an indication of future performance. This does not constitute an offer to sell or the solicitation or recommendation of an offer to buy or sell any securities directly or indirectly herein.
Cumberland Advisors supervises about $1.8 billion in separate account assets for individuals, institutions, retirement plans, government entities, and cash-management portfolios. Cumberland manages portfolios for clients in 47 states, the District of Columbia and in countries outside the U.S. Cumberland Advisors is an SEC registered investment adviser. For further information about Cumberland Advisors, please visit our website at www.cumber.com.
33 8 Flag as Offensive end the wars What are these? Strikes! Earn three of them in a month, and you'll be sent to the Penalty Box for 24 hours. How do you earn strikes? Write comments that our editors kick to the Bleachers. Want to get rid of the strikes and start fresh? Write excellent comments that our editors promote to the Board Room. on Aug 21, 7:56 PM said:
well, everyone knows that is what this war was all about, to relieve quaddifi of his oil, that good light sweet crude oil, the elite bastards that rule the world just think everything belongs to them and they use the u.s. military to take it, the bottom line is that if libya did not have oil, they would never have been attacked by nato ie the u.s. military.
anyone who thinks the u.s. military exists to protect and defend america is quite mistaken, the u.s. military exists to seize the resources of whom ever the elites decided to take over.
9 3 Flag as Offensive end the wars What are these? Strikes! Earn three of them in a month, and you'll be sent to the Penalty Box for 24 hours. How do you earn strikes? Write comments that our editors kick to the Bleachers. Want to get rid of the strikes and start fresh? Write excellent comments that our editors promote to the Board Room. on Aug 21, 9:45 PM said:
0 3 Flag as Offensive end the wars What are these? Strikes! Earn three of them in a month, and you'll be sent to the Penalty Box for 24 hours. How do you earn strikes? Write comments that our editors kick to the Bleachers. Want to get rid of the strikes and start fresh? Write excellent comments that our editors promote to the Board Room. on Aug 21, 10:14 PM said:
the price is already very low. Look at the us dollar problems. It is just more games , so buy on the dips and take the dividends home. The Market factors things in in advance, last week the us crude report for AUG 10 showed many shortfalls in US inventory of crude... How can that change dramatically in 7 days, it cant....
32 3 Flag as Offensive Alan What are these? Strikes! Earn three of them in a month, and you'll be sent to the Penalty Box for 24 hours. How do you earn strikes? Write comments that our editors kick to the Bleachers. Want to get rid of the strikes and start fresh? Write excellent comments that our editors promote to the Board Room. on Aug 21, 7:57 PM said:
Another way to spin the same result: 40% will no longer be produced by state controlled slave labor. Have you seen the live feed? Looks like Mardi Gras ... but Muslim style with requisite AK's.
Shoe's on the other foot now. If I were a bear, I would feel good about my reasons for being bearish -- after all, those reasons seem compelling to any sane individual. But I would also be scared shitless that nearly every other investor (except this David kotok fellow) agreed with me.
David, whoever you are.....news flash.....QADDAFI isn't that important. Neither is his oil. You're talking your book, which I get. But I would bet good money you're not only wrong, but 180 degrees wrong.
19 1 Flag as Offensive imdwightgooden What are these? Strikes! Earn three of them in a month, and you'll be sent to the Penalty Box for 24 hours. How do you earn strikes? Write comments that our editors kick to the Bleachers. Want to get rid of the strikes and start fresh? Write excellent comments that our editors promote to the Board Room. on Aug 21, 8:01 PM said:
As much as I'd like to believe in the fantasy of lower oil costs, its not going to happen domestically. We might see a slight pull-back in price before speculation drives it up again, but none of the big economic underlie-rs have been addressed. The markets will show a hiccough to the upside before they return to the downside volatility that has characterized the last 4 weeks.
It is a couple million barrels of oil a day....that is going to make oil prices drop significantly? You are clueless, but your investors are even more clueless for giving you their money to invest in this ponzi scheme.
3 0 Flag as Offensive end the wars What are these? Strikes! Earn three of them in a month, and you'll be sent to the Penalty Box for 24 hours. How do you earn strikes? Write comments that our editors kick to the Bleachers. Want to get rid of the strikes and start fresh? Write excellent comments that our editors promote to the Board Room. on Aug 21, 8:34 PM said:
1 0 Flag as Offensive end the wars What are these? Strikes! Earn three of them in a month, and you'll be sent to the Penalty Box for 24 hours. How do you earn strikes? Write comments that our editors kick to the Bleachers. Want to get rid of the strikes and start fresh? Write excellent comments that our editors promote to the Board Room. on Aug 21, 8:35 PM said:
4 0 Flag as Offensive end the wars What are these? Strikes! Earn three of them in a month, and you'll be sent to the Penalty Box for 24 hours. How do you earn strikes? Write comments that our editors kick to the Bleachers. Want to get rid of the strikes and start fresh? Write excellent comments that our editors promote to the Board Room. on Aug 21, 8:40 PM said:
for the elite merchants of death in control of america their business is war and business is good as long as they are willing to spill innocent blood.
You are wrong. Oil prices will not stop the european debt crisis which will send the world into a depression. The depression will cause oil prices to collapse. Libya is a small non-event.
3 1 Flag as Offensive end the wars What are these? Strikes! Earn three of them in a month, and you'll be sent to the Penalty Box for 24 hours. How do you earn strikes? Write comments that our editors kick to the Bleachers. Want to get rid of the strikes and start fresh? Write excellent comments that our editors promote to the Board Room. on Aug 21, 9:35 PM said:
Its interesting that he has a longer term S&P 500 target of 2000. I have the exact same target too. In the year 3000. About the time ZIRP ends.
1 0 Flag as Offensive cat What are these? Strikes! Earn three of them in a month, and you'll be sent to the Penalty Box for 24 hours. How do you earn strikes? Write comments that our editors kick to the Bleachers. Want to get rid of the strikes and start fresh? Write excellent comments that our editors promote to the Board Room. on Aug 21, 9:13 PM said:
0 0 Flag as Offensive shark What are these? Strikes! Earn three of them in a month, and you'll be sent to the Penalty Box for 24 hours. How do you earn strikes? Write comments that our editors kick to the Bleachers. Want to get rid of the strikes and start fresh? Write excellent comments that our editors promote to the Board Room. on Aug 21, 9:50 PM said:
So his downfall will solve the soverign debt crisis, the European banking crisis, the U.S. $40 trillion funding gap, eliminate unemployment, cause housing prices to ncrease and cure the comment cold? NOT!
If people are habituated to paying $1 - 2 for gas, and then it jumps to $4....and then a decline to $3.50 or whatever....don't expect people to start running to the mall....this is nonsense.
People have been cutting from other areas (food, bills) to pay for their gas...and once the price falls they will start using that money for those things....not for luxury items.
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