Comments for Sapient

Comment on Is this the Final Capitulation? by Gustaf Rounick

Gustaf Rounick — Mon, 22 Sep 2008 17:06:10 +0000

Thank you Bo for the comments and linking that article! It has been a surreal week since I posted this commentary.

It seems to be more of the same except this time it is worse. We now see that the U.S. govt has absolutely no restraint whatsoever with a $700billion bailout plan concocted overnight speed tracked for implementation. What they are doing will have devastating long term implications on the U.S. economy because it has only upped the ante on reckless spending. Granted, this plan would not be a pure expenditure because they would be buying “assets” i would be willing to bet that it will not be a money gaining operation and the cost to tax payers will be significant. The timing of this certainty is a little less clear because much like the U.S. believes that AIG was too big to fail, the world seems to believe that the U.S. is too big to fail and therefore is willing to continue to buy US treasuries in fear.

However, this will not last. What will most likely happen now is that severe inflation will become a global problem. With inflation comes political unrest. With enough politcal unrest, the whole pyramid scheme of the U.S. dollar will be turned upside down.

The near term remains very unpredictable but I think the one thing that is for certain now is that inflation is on its way in a big way.

Comment on Is this the Final Capitulation? by Bo Basic

Bo Basic — Mon, 22 Sep 2008 16:18:51 +0000

Gus. You couldn’t have been more right and I only wish I had immediately jumped onto your past 2 recommendations. In this last Commentary, you expressed your positive outlook on gold. The very next day, gold had the biggest single day gain EVER!!! WHAT!!! that is insane.

This link shows the record jump the day after this commentary…
http://money.cnn.com/2008/09/17/markets/gold/index.htm?postversion=2008091716

This comes after you expressed your outlook on a positive move in Airlines, when the price of oil was at it’s record highs. Within a week of our conversation, Airlines rallied, as the price of oil came down… The only thing more incredible than these moves, where your thoughts about them just days before each happened.

What’s next buddy… i wannna make some moves !!!!

Comment on $135 Oil: Who is the Culprit? by Gustaf Rounick

Gustaf Rounick — Fri, 20 Jun 2008 10:42:48 +0000

China has just indicated that they will be raising price of fuel by between 17% and 25% depending on the grade. This is a welcome step but is unlikely to lower the amount of subsidies (just keep it from increasing). As a result of this, I see an increased chance of more rapid yuan appreciation as a measure to combat the immediate inflation that will occur.

Comment on $135 Oil: Who is the Culprit? by Mats Hultnes

Mats Hultnes — Fri, 13 Jun 2008 23:02:15 +0000

I think that whatever is going on driving the price of oil, if it is short supply, peak oil, speculators buying futures etc. the interesting thing is how quick the western world now is developing alternative sources of fuel. It is not a question of if but when they are succesful in doing that. Studies have shown that when crude goes over $30 a barrel other energy sources and inventions are come in to play. Friends of mine are building a refinery in India at the cost of $1.2 billion USD that will be ready in 2010. Will that be worth what they expect in 2010? Maybe, maybe not. During the crisis in the early 1970’s, we in Sweden were told that oil and gas recuorces were almost exhausted, so at times I cant help but wonder if the “peak oil” fear is being overblown. Today in the US people are starting to pay the real prices of gas and adjusting their consumption by selling their gas guzzlers for nothing and driving less.

Comment on $135 Oil: Who is the Culprit? by Gustaf Rounick

Gustaf Rounick — Tue, 10 Jun 2008 21:45:10 +0000

Thank you! I agree that there are many avenues that the government could be taking to improve the energy situation or, ideally, not be such a hindrance to the free market. Nuclear power would be much more effective than the alternative energy sources being promoted by the government such as ethanol. Finding and drilling for more oil might help some but it is time to allow the markets to discover and establish alternatives since we are running out of oil anyway. If governments would just stay out of the picture we might just use the most efficient one instead of wasting a valuable food resource. That’s a big if.

Comment on $135 Oil: Who is the Culprit? by Bill Butos

Bill Butos — Tue, 10 Jun 2008 20:57:39 +0000

Very much enjoyed your comments, Gus. Your consistently free market stance allows you to cast considerable light on events that seem to confound most commentators and certainly the politicians. I agree that high energy prices are here to stay and that the sorts of government policies you describe have fomented or exacerbated the situation. Do you think, though, that anti-energy supply-side policies and the regulations that give them effect should are also be more directly highlighted in your analysis? When was the last nuclear-generating plant brought online in the U.S.? Offshore drilling? ANWAR?

Cheers, Bill

Comment on $135 Oil: Who is the Culprit? by Gustaf Rounick

Gustaf Rounick — Tue, 10 Jun 2008 19:16:28 +0000

That is difficult to say. I would not be making any new long bets on oil right now considering it has come so far so fast and could be adversely effected by a global slowdown but that is not to say it cant go much higher. Its just that the risk/reward is no longer appealing. I cannot see the dollar going much lower against the Euro but I do see it potentially losing a lot of ground against the Asian currencies. Any major gains by the dollar would be seen as a selling opportunity in my mind.

Comment on $135 Oil: Who is the Culprit? by Brian Anderson

Brian Anderson — Tue, 10 Jun 2008 19:02:10 +0000

How much further do you think oil can go? Can the dollar get any lower? Don’t you think we are getting close to the bottom? I hope so.

Comment on The Commodities Bull Continues its Charge by Gustaf Rounick

Gustaf Rounick — Fri, 07 Mar 2008 22:57:03 +0000

I agree that gold will do well in this environment. It will get at least close to its inflation adjusted price record which would be more than double where it is now. However, I think there is too much focus on it now (compared to some of the other commodities) and its practical uses are limited, especially as the price increases. Another reason why I like agriculture is because its perishable. That said, gold has always had a mystical value and will continue to have one but is more subject to our emotions.

Comment on The Commodities Bull Continues its Charge by Ken

Ken — Thu, 06 Mar 2008 19:45:55 +0000

My focus is on safety and preservation of purchasing power…not only ROI. gold is a proven store of value and a safe haven in times of political uncertainty and market volitility. Gold price is not correlated to stocks and bonds so it can provide valuable diversification with high liquidity. Gold is historically strong when dollar is weak. US fiscal and monetary policy - combined with existing trade and budget deficit, demographics, etc. virtually guarantee continued dollar weakness over time. China, Russia, Saudi Arabia, Japan and other central banks will predictably sell dollar reserves and buy gold. This could turn the dollar slide into a dollar rout and price of gold will accelerate to upside. I am bullish on base metals, agriculture, oil and metals with industrial applications (esp. silver and moly) as well, but they are more sensitive to any economic slowdown and any operational issues with mining and processing. In the end, these are all inflation plays and “anti-dollar” plays and the chances are strong that they are very good investment opportunities for 2008.