Saturday, August 20, 2011

A Rush to Pipe Oil to Gulf

Glut or no Glut make up your minds how can you swing from shortages to gluts so quickly. You dont! 

Aivars Lode


A Rush to Pipe Oil to Gulf

The race is on to build pipelines to relieve a glut of crude oil in the U.S. heartland, but not all of the four plans will make it to the finish line.
It is a competition that is being closely watched in oil markets. The amount of pipeline capacity that eventually comes on line and the pace at which it is built will determine how fast U.S. and European benchmark oil prices will come together again, analysts say.
On Thursday, crude futures on the New York Mercantile Exchange settled at a record $26.49-a-barrel discount to Brent crude, now widely seen as a more accurate indicator of world oil prices.
Nymex crude lost 3.7% this week to close Friday at $82.26 a barrel, while Brent on the ICE futures exchange finished in positive territory, up 0.8% to $108.62 a barrel.
The difference between Nymex and Brent oil prices should narrow once an outlet for this glut is created, said Sander Cohan, an analyst with energy consultancy ESAI Inc.
"These pipeline projects are coming in part because of the conditions" causing the Brent-Nymex divergence, Cohan said.
Enbridge Energy Partners LP, Enterprise Products Partners LP and TransCanada Corp. are all in various steps of planning for new pipelines.
In addition to the new pipeline proposals, Magellan Midstream Partners said it is considering expanding its Longhorn pipeline and reversing its flow to bring crude from revived oil fields in West Texas to Houston instead of shipping the oil to Oklahoma.
The pipeline companies, which charge tolls on every barrel shipped along their lines, stand to profit from giving Gulf Coast refiners direct access to the bounty trapped in Cushing, Okla., an oil storage hub that acts as the delivery point for Nymex futures.
But the four proposals have a total capacity of 1.4 million barrels a day—about twice the amount that analysts have said is needed.
"The issue here is not all these projects will go through," Cohan said. "First movers will have the advantage."
Currently, there is no pipeline that takes oil south from Cushing, to the main U.S. refining hub on the Gulf Coast.
Crude is piling up at Cushing due to the oil boom in western Canada and in onshore producing regions in the U.S. That is what is keeping Nymex prices suppressed.

Monday, August 15, 2011

Wall Street’s New Lie to Main Street – Asset Allocation/Diversification

From Mark Cubans blog pretty much spot on!

Aivars Lode


Wall Street’s New Lie to Main Street – Asset Allocation/Diversification

Another re-post that I thought was timely:

   Wall Street’s new lie to Main Street – Asset Allocation

Jan 24th 2011 4:18PM
The greatest lie ever told used to be Wall Street telling main street to “buy and hold”.  Of course thats what they told you every chance they got. It’s not what they did.  The holding period for stocks dropped from 8 years in 1960s to 2 years in the 1990s and 8 months in the 2000s.   Today, stocks are bought and sold in milliseconds.  Which is one of the big reasons you don’t hear much about buy and hold any more. That and the fact it didn’t work.  I think individual owners of stocks  finally came to understand that old saying “Fool me once, shame on you. Fool me for 50 years, shame on me. “
But Wall Street needs a marketing slogan doesn’t it ? How else are they going to get all the suckers back into the market ? (Great article on the Stock market is for Suckers from So what’s the new mantra that all those brokers, mutual funds and ETFs want you to buy in to ?
Asset Allocation (Aka diversification) is the best approach to investing.  Everyone is talking about asset allocation.  It’s not a surprise given all the new funds, REITs and ETFs that have popped up in the last couple years. The more diversification sold to individuals, the more money to buy them all.  Wall Street has to sell what it has doesn’t it   ? It’s just good business for them. But not for you.
No longer does Wall Street  even want you to consider buying what you know. Remember Peter Lynch describing how buyers of stocks should pay attention to what they see in the mall and elsewhere and use that as a source  of ideas and information ? Or Warren Buffet suggesting that we should actually invest in things we know and look for the value there ?  Well you can forget about that kind of investing.
Today, your investment advisors want you invest in things you have absolutely no fricking clue about and have pretty much absolutely no fricking ability to learn about.
They want you to diversify into Emerging Markets, Commodities, International Bonds, Munis, Real Estate Investment Trusts, ….and.. well, a lot of different “stuff”. Here is an excerpt from an article from a Sarasota  paper today:
“For context, I will provide the performance of my “moderate investor’s asset allocation” for both 2010 and with its predecessors for the period since 2000. For the previous 10 years, its predecessors were up about a cumulative 104 percent.
Last year’s version of the allocation was:
Fifteen percent in an S&P 500 index fund (IVV).
Five percent in a small-capitalization value fund (VBR).
Twenty percent in a diversified international stock fund (VEU).
Five percent in an emerging markets international fund (VWO).
Five percent in Real Estate Investment Trusts (VNQ).
Ten percent in large and mid-capitalization stocks with a history of paying competitive and increasing dividends (VIG).
Ten percent in a diversified portfolio of convertible securities (ACHIX).
Five percent in a U.S. Treasury inflation-indexed bonds and notes (VIPSX).
Fifteen percent in an international bond fund with traditional fixed coupon bonds (GIM).
Five percent in an international bond fund for inflation-indexed bonds (WIP).
Five percent in cash equivalents.”

That is a suggestion for a “moderate investor” . Let me translate this all for you. “I want you to invest 5pct in cash and the rest in 10 different funds about which you know absolutely nothing. I want you to make this investment knowing that even if there were 128 hours in a day and you had a year long vacation, you could not possibly begin to understand all of these products. In fact, I don’t understand them either, but because I know it sounds good and everyone is making the same kind of recommendations, we all can pretend we are smart and going to make a lot of money. Until we don’t
Asset allocation is about making you a sucker.  Do you seriously want to put a significant percentage of the money you will need for your future in funds that put your money into things you have absolutely no idea about? Will you have any clue about when to change your asset allocation ?  Will you change it based on changes in the dollar ? Changes in domestic inflation ? Changes in European inflation ? Inflation in China ? Changes in tax laws in Italy and Greece ? Changes in interest rates ? Trade balances ?
It comes down to this. Do you want to invest in something you know, or in something Wall Street wants you to believe ?
Do you really think your broker, his boss and the analysts at their firm really are being completely honest with you about how much they know about these investments they want you to make ?  Ask them if they are making the exact same investment with their money. Ask them if they would make the same investment if they were not allowed to look at a quote screen all day long like you aren’t able to – which tells you if they trust the investment or want to watch it second by second knowing they may have to pull the trigger and get out on a moments notice.
Ask your broker for the names of people they have had to call or get a call from and let them know that their investment has  been wiped out. Talk to those people to understand what the ramifications of making in an investment in something you know nothing about might be.
Don’t be a sucker. Remember this. It’s better to make less, or next to nothing than to lose everything. Don’t get greedy.  Don;t get desperate. The stock market can’t save your financial future, but it can end it .