Dan's End of Year 2008 Report on Oil

Ok, given that I don't work on Wall Street but nevertheless have been boldly pontificating about my oil prognostications, I thought it only fair to present an "Annual Report". (check my previous posts for corroboration) - July 13, 2008 - I advised short-selling oil. short at the Oil Per Barrel Price: $145 instead of shorting oil directly you could have bought an "Exchange Traded Fund" (that shorts oil):  DUG (ETF) Price:$30.02 http://finance.yahoo.com/echarts?s=DUG - August 10, 2008 - I reminded you that oil would keep falling.  Per Barrel Price: $115  DUG (ETF) Price:$38.40 - September 8, 2008 - I advised you to "lock in your profits" and get out of that position Per Barrel Price: $105 DUG (ETF) Price:$40.72 YOUR ROI (had you taken my advice on this transaction): short oil 27.58% / buy DUG 35.64% - September 22, 2008 - I advised you to again take a short position on oil. short - Per Barrel Price: $120 or buy - DUG (ETF) Price:$35.74 - September 29, 2008 - I advised you to lock in your profits. Per Barrel Price: $99 DUG (ETF) Price:$42.58 YOUR ROI (had you taken my advice on this transaction): 17.50% / 19.14% Note: To be fair, I was foolishly conservative to lock in profits here. Who knew oil would drop from $99 to $38? (Certainly not me. That seemed like crazy panic unsupported by most fundamentals. It was as absurd as the run up to $147, at least to my eyes.) - December 2, 2008 - Despite the bad karma, I reluctantly advised you to BUY oil. Per Barrel Price: $47 alternatively you could have bought the opposite ETF "DIG" (which is long oil) Price: 27.91 http://finance.yahoo.com/echarts?s=DIG - December 31, 2008 - CLOSING PRICE FOR 2008 (as I check it at 5pm on http://bloomberg.com/energy/ ) Oil Per Barrel Price: $44.60 DIG (ETF): 28.89 YOUR ROI (had you taken my advice on this short oil transaction): -5.11% (LOSS) but it would have earned a positive ROI with the DIG (ETF) of 3.51% OVERALL ROI (had you taken my advice every time, compounded)... on oil: 42.25% (i.e. $10,000 invested would be worth $14,225 now) on the DUG/DIG (ETF) trades: 67.27% (i.e. $10,000 invested would be worth $16,727 now) By comparison: S&P 500...  on July 14, 2008 = 1228.30  on December 31, 2008 = 903.25 for a 26.46% LOSS CONCLUSION: if you had taken all of your money out of the S&P500 and wildly bet it all on my advice then you would have about twice as much money today (than if you had left it in the S&P500). "Gloat.Gloat." said the eccentric man who only bet his credibility since he had no money. <script type="text/javascript"     src="http://www.oil-price.net/TABLE2/gen.php?lang=en"> </script> <noscript> <a href="http://www.oil-price.net/dashboard.php?lang=en">To get the oil price, please enable Javascript.</a> </noscript> Summary: Ceteris Paribus (absent a global recession) I still think oil should be in the $70 - $90 range (in a "normal" economy) until the next big technological breakthroughs in solar/alternative energy/batteries. Reasons: 1) India & China are indeed increasing their oil consumption (not systemically going to slow that increase let alone curb consumption unless alternatives are viably priced - which will only happen with breakthroughs). 2) The same is true (albeit to a lesser extent) for the rest of the world. 3) Outside of the Middle East the cost of oil to extract & bring to market can be as high as $30 to $40 per barrel. Which means if prices drop any more, or stay this low for long, extraction will be reduced worldwide which will limit supply which will drive up prices. 4) Oil/Tar sands and other expensive extraction techniques are viable at oil prices of  $70-$90 per barrel (which is where I get my prognostication numbers). Any higher than that and supply will increase substantially which will drive down prices. 5) On the conspiracy-theory angle: Oil companies do not want "windfall profits taxes" nor do they want a massive federal investment in alternative energy R&D that will lead to the breakthroughs I mentioned. I can imagine Big Oil temporarily dropping prices to inoculate against those possibilities. (Before you say such market manipulation is impossible I encourage you to read about Enron just a few years ago or BP being fined numerous times worldwide for price-fixing over the years). Once the public is sufficiently distracted or if Big Oil companies see the federal R&D as unavoidable then I think they will scramble to earn as much profit as possible ASAP. Side note: I think BP's response was really interesting around the end of November (when oil was around $50) when Saudi Arabia's King Abdullah and oil ministers from OPEC members Venezuela, Algeria, Nigeria and Iraq said that an oil price of $75 a barrel would be a "fair" level that supports investment in new capacity. Get this -  BP's chief economist Christof Ruehl disagreed with their views, saying: "There is no fair price. There is a price, which balances demand and supply." WHY WOULD HE SAY THIS TO THE PRESS (even if he thinks it)? Why would an oil man say $75 is wrong when the current price is $50? I posit that he is setting up to rationalize prices well above $75 (maybe hundreds of dollars - where agreeing to $75 now would really haunt him and hurt his credibility). http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aLSKH4zJGsj8 6) As I previously mentioned, the Middle East war "risk premium" is a giant factor in oil prices. If you think there will be more war in the region then prices will likely be higher. Less war and they will tend to be lower. I optimistically think Obama will have a lot of credibility in the region and thus there will be much less war. (which is why I don't think oil should ever be crazy high like $150). Obama's expected behavior is why I think the Israelis are doing such a major offensive now in the waning days of Bush. They want to take out their biggest obvious threats and look as scary as possible now. Israel knows that such a bellicose strategy will not be welcomed/endorsed by Obama (or at least not nearly embraced as much as the Bush administration has). Then Israel believes its recent strikes will enable more leverage in the upcoming negotiations with its neighbors. 7) Given that oil is so low right now, I would think there would be increased incentive (for airlines, other big transportation and industry) to buy long term contracts to lock-in these historically low prices. Such a buying spree will push up prices. 8) In light of the economic meltdown, however, everything has to be discounted. I think oil prices are hurt by $20 to $30 per barrel for this reason alone. The faster the recovery, the faster oil prices will rise. The slower the recovery the slower oil prices will rise. Ok, that's way too much to ask you to read given that I'm not a billionaire based on a multi-decade track record of consistently effective prognostications. But maybe this will be the first year of such a record. ;-) We should all be so lucky. Be well and good karma to you. - Dan p.s. I still want to develop my "cost of everything" economic theory in harmony with an "ecosystm/biosphere" metaphor should any of you big brains want to help me.

"Cost of Everything" / "Ecosystem-Biosphere Metaphor"

I still want to develop my "cost of everything" economic theory in harmony with an "ecosystm/biosphere" metaphor. Hope you big brains want to help me. In short the basis is pretty basic: Think of each country as a biosphere that trades with other biospheres. First you have to understand people's priorities (e.g. on their own biosphere or all biospheres). Then get a systemic view of how many of a particular species (e.g. humans) you want to survive over time in that biosphere. Then you can solve for how many other items must exist in the biosphere to sustain that species. There's a lot more to it but I want to debate it verbally more before I write it all out.

"Dan's Spicy Tomato Bisque" recipe...

Here's my recipe for what I'd like to call "Dan's Spicy Tomato Bisque" - Ingredients: - One Can Campbell's Condensed Tomato Bisque Soup - Whole Milk - Half Cup of Diced Onions - 1/3 of one fresh orange Habanero chili pepper (that is no longer than a chapstick tube) - little pat of butter Directions: 1) Be very careful as you finely dice the 1/3 of a habanero into very tiny pieces (right after that thoroughly wash your hands and all surfaces because that stuff is almost a weapon!) If you don't like spicy consider using only 1/6th of a habanero (or just make something else). Lunatics can use 1/2 a habanero. I will not be held responsible for people who use more than that. ;-) 2) Saute the onions in a pot with a little pat of butter. Toss in the habanero pieces and saute for 1 minute. 3) Add in the contents of the can of Campbell's Condensed Tomato Bisque. 4) Refill that can with whole milk (not water as its regular directions note) and add that to the pot. 5) Stir thoroughly over a medium-low heat. 6) Serves 2. Enjoy! BTW - Let me know if/when you've seen this recipe elsewhere. If someone else came up with it first I want to give credit where it's due. Good karma to you.

There's gotta be a price at which you would buy or sell anything...

At $47 per barrel, Oil just seems too cheap considering China's & India's ever increasing demand.
Never thought I'd ever recommend anyone to "buy oil" given my ideological opinions about renewable energy.
But there's gotta be a price at which you would buy or sell anything.
I picked the peak at $145 and told you to sell.
Now at $47 I'm advising you to make a modest investment to buy oil.
Fellow pinko-commie, hippie liberals - please forgive me.  ;-)

NOTE - Oil needs to be more expensive to make renewable energy more economically viable (until the next technological breakthroughs happen).

For My Friends Who Are Legal Scholars

HERE'S MY FRIDAY NIGHT NERD MEGARANT...

"Legal Scholars Continued"

Okay, so you too are interested in my lifeguard
analogy (see the bottom of this essay)
or you're at least interested in correcting my
theoretically flawed reasoning:

Those of you who already agree just follow along
reading my response to those who don't.

Among those who at least partially defended GWB,
your thoughtful responses can generally be
grouped as follows:

1) There is some consensus that in my lifeguard
analogy the "Chief Lifeguard" would indeed be
guilty of a crime but that it is moot/irrelevant.

2) Some of you lawyers think there is a
constitutional problem in the judicial branch
prosecuting the executive (even once GWB is out
of office) for actions that, at least ostensibly,
are specifically within the purview of the
presidency.

3) Some of you lawyers think the lesson in the
analogy is not applicable to GWB because the
President has specific legal protections
("affirmative defenses") against such a
prosecution.

4) Some of you think that congress' authorization
to use force "legalizes" any related action by
the president.

5) Some of you think there are troubling
practical considerations for "opening the door"
to prosecutions with 20/20 hindsight
second-guessing.

6) Some of you mentioned a potential lack of
"specific/criminal intent" if GWB truly believed
there was any sort of threat.

7) Some of you mentioned the issue of
jurisdiction.

Okay, here is my response...
(largely based on my reading of Vincent
Bugliosi's book "The Prosecution of George W.
Bush for Murder")

1) The new Congress assumes office before GWB
leaves office. There is a window where they can
impeach on principle and also to castrate any
possibility of pardons. If you agree with the
following arguments this step is crucial.

2) Surely the president is not above the law.
According to the "Soldiers and Sailors Civil
Relief Act of 1940" every soldier is entitled to
a postponement of any civil action until the end
of his active duty. And yet the Supreme Court
unanimously denied President Clinton's request
for a postponement of Paula Jones' lawsuit until
after he left office precisely because no one is
above the law.

Let me be provocative, if a president strangled
your child for purely perversely sadistic
enjoyment surely he could tried for murder. So
being president mustn't enjoin the judicial
branch from doing its solemn duty of
administering justice when crimes occur.

"Aha!" you think, "What if this crime didn't
occur or there was an affirmative defense?"

3) Of course a president can be wrong & make
mistakes. A president can legitimately make a
foolish decision that results in terrible losses.
But any "affirmative defense" is predicated upon
lack of fraud or criminal behavior. Surely a
president who took us to war with China because
he didn't like his fortune cookie at Panda
Express could be prosecuted for "reckless
disregard for human life".

Note that "felony-murder" laws state that any
death that results from the commission of an
underlying felony is first degree murder. The
getaway driver gets the chair for her
accomplice's ricocheted bullet that killed
someone when he was only trying to fire a
"warning shot". In fact, Bugliosi cites an
example where a proprietor shot at a robber and
accidentally killed an innocent customer and the
ROBBER was convicted of first degree murder.
"Felony-murder" was instituted to discourage the
felonies that are inherently dangerous.

If president Obama directs all the bank recovery
billions into his personally owned green-energy
startup venture that doesn't make or do anything
then we should prosecute him for theft. Just
because a president says he's acting in the best
interests of the people doesn't make it so.
All actions can be viewed on their own.
Defrauding the public to go to war is (I would
argue) the greatest crime a president can commit
even if he had altruistic goals (which I don't
concede GWB did).
The president is not a king. There are actions he
can do that are illegal regardless if he claims
they are just.
We can debate what those actions are but the
concept of an imperial presidency that can do no
wrong is simply bogus.

"But congress consented!" you claim.

4) An absolutely fundamental principle in the law
is that "Fraud Vitiates Consent".

Explore this hypothetical example: congress
declares a storm a federal disaster and
authorizes compensation to victims. Then a
government official disburses funds, in
accordance with congress' instructions, to a
victim of that storm who coincidentally happens
to be a family member. That's ok. If congress
didn't declare it a federal disaster because it
was just a light storm with one lightning bolt
that did damage to the uninsured family member's
house then the government official would be
breaking the law to give money to that family
member. Now, if the government official deceived
the congress and tricked them into thinking the
light storm was a giant national disaster, in
order to enrich his family member, then congress'
subsequent "consent" based on that fraud would
NOT make that government official's actions
legal.

Consequently, if it can be proven that GWB
deliberately deceived congress then any resulting
"consent" or purported legitimacy is worthless in
a defense.

"Aha!" you counter, "What proof is there that GWB
deliberately deceived and didn't have earnest
belief of a threat?"

Check out Bugliosi's book. There is an ocean of
evidence.
But my personal favorites, due to their absence
in the zeitgeist, are:

a) Multiple American intelligence agencies
repeatedly called claims of Baghdad's likelihood
of having functional WMD "dubious" and yet all
such dissents & skepticism were entirely stripped
of the "white paper" that was declassified for
the public (and in fact much of the language was
definitively heightened to scare more).

b) On October 7th 2002 Bush told the nation that
Saddam was a "great danger to our nation...on any
given day". Yet that very day Tenet sent a
letter to Senator Bob Graham signed by his number
one deputy director McLaughlin - which stated
Saddam would not use Chemical & Biological
Weapons unless attacked. And yet Bush was looking
to provoke Saddam and ultimately invaded anyway.
If Saddam would surely use purported WMD when
attacked then why attack?

c) Assorted administration officials (Bush,
Cheney, Rice, etc.) repeatedly used words that
communicate "imminent" when describing Iraq as a
threat ("unique urgency","could launch...in as
little as 45 minutes" etc. etc.) but never, in
countless quotes, used the actual word "imminent"
(which connotes a "legal defense"). So the fact
that they didn't use the most likely word is
circumstantially compatible evidence of conscious
guilt.

"But congress and the public were misled. So
maybe Bush was too" you plead.

The Bush administration wasn't misled because
they were the originators of the disinformation
(remember the indisputable facts that no WMD were
found and Iraq had nothing to do with 9/11). They
said the opposite. Where did that claim start? In
the beginning, no one other than the Bush
administration was saying Iraq had WMD and Iraq
was involved in 9/11. The Bush administration
were precisely the ones doing the misleading!

5) Hindsight - I agree that you can't expect
leaders to govern when every mistake (with the
benefit of hindsight) can be prosecuted. But
there's a crucial difference here.

Why did the Bush administration spread its
coordinated disinformation campaign? Obviously
because they wanted the support of the people.
Absent that deception citizens might have
protested sufficiently enough to prevent or stop
the war. If the Bush administration didn't fear
the will of the people then why would they
deceive? If they truly believed they had the
right to unchecked war by presidential whim/fiat
then they wouldn't have tried so hard to trick
us. They could have let the dissents & contrary
evidence come to light and they could have not
repeatedly conflated Saddam and 9/11 in countless
television appearances.

This fundamental deception is where the crime
occurs.

"What's wrong with deceiving the American
people?" you wonder.

I contend that it depends on the circumstances.
(not to mention the laws that specifically make
it illegal for the government to deceive
Americans on American soil whereas bogus
propaganda elsewhere is in fact legal).

What would be so bad about chilling our leaders
into a less bellicose foreign policy?

"Well we have all those Muslim enemies who want
to kill us!" you scream.

What if I told you that that threat is bogus?
(See my blog and scroll down to my argument that
"There is no existential threat to America"
http://corpania.blogspot.com/2008_01_01_archive.html
)
In not-so-short: There are 1,300,000,000+ Muslims
on earth.
Psychiatric studies show that as much as 1% the
human population is schizophrenic.
http://www.schizophrenia.com/szfacts.htm
And more than 1/10,000 commit suicide.
So it stands to reason there should be at the
very least 1,300 schizo Muslims with a deathwish
to be worried about.
What if only 50 of them simultaneously shot up
churches or malls around America? That would
surely incite full-on WorldWar3.
Clearly, if the threat was so great our enemies
could coordinate some of them entering the US to
wreak havoc (on our infinite vulnerabilities:
like our non-hardened chemical plants, thousands
of miles of Alaskan oil pipeline, water supplies,
etc.).
But they haven't.
You know why?
Because the number of people who may
superficially hate us may be in the millions or
billions (hopefully not after Obama's victory)
but they ain't gonna do a thing about it because
they're busy with their own lives (feeding their
kids etc.).
The number of people in the world who hate us so
much that they're willing to leave their family
and journey to our shores to kill us IS REALLY
MINISCULE!

But every time we bomb someplace and there is any
"collateral damage" (and there always is) then
that victim's relatives become exponentially more
likely to want to make that havoc-wreaking
journey to our shores. War begets war. Revenge is
a vicious cycle.

Chilling our government into not waring is
exactly what we need now. Until the geo-politics
substantially changes we should be actively
discouraging war (even more so than usual).

Okay, back to the last of the 7 concerns with
prosecuting GWB...

6) Intent: The pro-active, deliberate deception
proves intent. Remember that "reckless disregard
for life" (drunk driving etc.) is a felony.
Soberly deciding to get drunk so that you can
commit "vehicular manslaughter" is premeditated
"first degree" murder.

7) Jurisdiction - Any District Attorney, Federal
Prosecutor or Attorney General who had a resident
of his/her jurisdiction who subsequently was
ordered to war and died there can prosecute
George W. Bush for murder.

Ok, how many of you actually read all of that?
Good for you. ;-)

Please tell me where I'm wrong.

Thanks and good karma to you.

Regards,
Dan
________________________________

> > Tell me if this is specious reasoning...
> > Here's my newest legal question:
> >
> > Suppose a Chief Lifeguard on a beach says
> > "there's a thousand downing kids in the
stormy
> > ocean right now" and orders a hundred of his
> > subordinate lifeguards in to the turbulent
> > riptide to save them.
> >
> > A few of those lifeguards drown and it turns
> > out that the Chief Lifeguard knew there
wasn't
> > ever any legitimate evidence of any drowning
kids
> > but he still definitively claimed that there
were.
> >
> > Is that Chief Lifeguard legally responsible
>> for the drowned lifeguards' deaths?
> > Is that Chief Lifeguard guilty of a crime?
> >
> > If so, then isn't George W. Bush guilty of an
> > analogous situation in Iraq?
> >
> > Check out legendary prosecutor Vincent
> > Bugliosi's book and upcoming documentary -
> > "Mad as Hell: The Prosecution of George W.
Bush for Murder"

A Question for Legal Scholars

Here's a legal question:

Suppose a Chief Lifeguard on a beach says
"there's a thousand downing kids in the stormy
ocean right now" and orders a hundred of his
subordinate lifeguards in to the turbulent
riptide to save them.

A few of those lifeguards drown and it turns out
that the Chief Lifeguard knew there wasn't ever
any evidence of any drowning kids but he still
definitively claimed that there were.

Is that chief lifeguard legally responsible for
the drowned lifeguards' deaths?
Is that Chief Lifeguard guilty of a crime?
If so then isn't George W. Bush guilty of an
analogous situation in Iraq?

Check out legendary prosecutor Vincent Bugliosi's
book and upcoming documentary "Mad as Hell: The
Prosecution of George W. Bush for Murder".

All Contracts Should Be Videotaped / Profit Without Productivity is the Cause of Every Crash!

After watching the documentary "Maxed Out" and thinking about the current credit crisis I have come up with a unique solution...

MANDATE: "ALL CONTRACTS MUST BE VIDEOTAPED"

Why will this help?

I conclude that the common but addressable problem is the fact that the person who takes out the loan often simply doesn't understand the ramifications of the agreement.
Videotaping contracts requires the following to beneficial effect:

1) All parties have to at least hear ALL the terms of the contract (as opposed to the normal problem of people not reading the contract).

2) It prevents any party from making false verbal claims at the time of signing.

3) If the person looks oblivious and is obviously pressured to "just sign" then the deal can be vitiated on the legal grounds that there wasn't a "meeting of the minds".

Critics of my proposal may argue "caveat emptor (let the buyer beware)" but they are living in the outdated mindset of libertarianism. (See my previous blog post about Libertarianism being a quaint anachronism).

Profiting by means of tricking someone does not "grow the pie".
Profit without productivity is the cause of every crash!
(See my previous blog post about Productive Wealth aka P*Wealth).

Regulations are Crucial / Libertarianism is a Quaint Anachronism

Libertarianism is a quaint anachronism.

It's most applicable time was hundreds of years ago.

If you only interact with a dozen possible transactions (butcher, cobbler, farmer, soldier etc.) every individual can be expected to be expert enough to be vigilant of all the ways you can get screwed and thus inoculate and counter them.

But in the modern age there is such an exponentially more complicated division of labor that you can't expect "the free market" to work without regulation.

Take a guess how many companies (let alone individuals) your very life depends on every day? There are so many vendors and subcontractors in every car manufactured and any one of them could cut a corner and risk your life. If there weren't any regulations we wouldn't have seat belts or crash test safety features. There are so many ways you can die from tall buildings and poisoned medicine or spoiled food. No one person can remotely keep track of everything in modern America. We need to have faith in the safety of life just to function in such close proximity, vulnerable to literally millions of decisions every day.

This isn't the 17th century where you can know not to buy meat from Joseph because his shop is unsanitary and consequently Joseph goes out of business.

Let's use my favorite analogy - POKER. In the old times the players dealt the cards and while most were honest there were plenty of cheats. Now the casino has a dealer, pitboss and security cameras to ensure it's a fair and honest game. Consequently the number of cheats is a tiny fraction of what it used to be.

Good regulations only punish the bad guys. Good guys want to run an honest business that doesn't hurt others. Bad guys are always looking for a way to profit by screwing someone else. Good guys want to grow the pie and profit. Bad guys want to profit and don't care about the pie (but maybe even have a sadistic streak that predisposes them to shrinking the pie). All bad guys/criminals hate regulations.

That doesn't mean that everyone who hates regulation is a bad guy/criminal.
Well-meaning Libertarians hate regulations because they see the burden and don't appreciate the benefits (or the downside to not having regulations).
So lets focus our energy on crafting regulations that efficiently prevent bad actions.

We're talking about "where do you draw the line?" and "what's the best use of resources to achieve a given objective?"

If you explore the putative conservative Republican administration you'll see that their objectives, by nearly every verifiable measure, are contrary to the very foundation of American democracy.
And their strategies & tactics reveal their true priorities.

Don't talk about the so-called "Bradley Effect"

All talk about the so-called "Bradley Effect" only emboldens those who want to steal the election. That theory is complete garbage anyway. Check out Princeton Professor Melissa Harris-Lacewell's research.

Lock in profits from shorting oil (again)

So far I'm batting virtually 1000 about my predictions on oil.
Check my dates & times of recommendations (on my blog & via email) and then see what happened to the price of oil.

I can't be right every time (as evidenced by the profit I "left on the table" the last time I told you to take profits on your shorting of oil).

But I did say on 9/22 to short oil at $120 and now I'm saying you should lock in your profits at $99.

Being in cash (with a reputable bank) doesn't sound like a bad idea now.

BTW - Make sure you don't have more than $100k in any one (FDIC-insured account) bank for FDIC insurance to work. I think it might have to be a joint account for the $200k to be protected (please double check on that).

Just my opinion.
Good luck to us all.

Start Shorting Oil Again (at $120 or higher)

With oil's absurd, record leap today I have to once again say it's time to short oil. http://www.bloomberg.com/markets/commodities/energyprices.html From $91 to $128+ in less than a week with no fundamental change in oil production or geo-politics? The market is in flux and needs to be exploited by the intelligently moral to help balance things out. Last I checked, oil was at $128 which is still way too high (for all the reasons I state in my previous posts). There is obviously a lot of money fleeing the stock market and it has to go somewhere. Which is why gold & oil have been bid-up so much. Clearer heads will prevail over the long term and oil will be depressed by the "solar ceiling". Damn, I'm a friggin genius. If y'all exited your short oil positions at $105 (like I advised) you'd be doing great right now. But I concede that if you had ignored my conservative profit-taking advice at $105 you could have made a bundle more by exiting at $91 at one point last week. Of course, I could be wrong about all of this (I don't have magic powers). But so far, I'm looking pretty good. We'll see what happens.

Take your "short oil" profits now (at $105 from $145)

Take your "short oil" profits now Ok, when oil was $145 (on July 13, 2008) I told you sell oil short. Then it fell to $116 and (on August 10, 2008) I said oil had further to fall. Now it is $105 and I want to lock in my credibility by saying take your profits now (that you made from shorting oil or buying etfs & options/futures/puts). $145 to $105 is a giant drop in two months. While long term I wouldn't buy oil (because I think the "solar ceiling" will continue to depress oil prices), in the short term I don't see how it could drop massively (other than Obama opening up a giant lead in the polls). Since the election appears to be polling close (and GOP convention goers were chanting "drill, drill, drill") and Palin is so pro-drilling, I think American politics will keep oil prices buoyant. Also note that Thomas Friedman was on Meet the Press and had some interesting comments about energy policy (e.g. Saudis & Iranians would be celebrating the "pro drilling" stance of GOP - the implication being that drilling takes years to see an effect and "pro drilling" means not fundamentally shifting away from oil). Finally, T.Boone Pickens' ubiquitous ads are promoting natural gas (not as heavily slamming oil) and he's claimed that OPEC will reduce supply to keep oil above $100 per barrel. But I still think oil "should" be around $70 to $90 per barrel until the next major advancement in solar or other alternative energies. However, McCain/Palin's strength in the polls leads me to believe that shorting oil and especially buying options ( betting oil prices will fall ) may not be the best investment right now - due to the premium on oil's "beta". Just my opinion. I could be wrong (as I was predicting Tim Kaine as Obama's VP). Let's see how long my brilliant prognostication streak lasts. ;-) Be well and good karma to you. Regards, Dan

Tim Kaine will be Obama's VP (quickly disprovable)

Though I would prefer Wesley Clark, it's pretty clear to me that Tim Kaine will be Obama's choice. And I'm quite comfortable with that because: - Kaine is a true progressive. - Kaine was a missionary so he will appeal to blue-leaning Christians. - Kaine speaks Spanish fluently (from his missionary work) so he will appeal to Hispanics. - Forbes ranked his state "#1 place for business" so he will appeal to pro-business types. "Obama/Kaine '08!" I'm finally writing this and at quite possibly the worst time. My claim can quickly be disproved and I won't get credit for predicting this well in advance. Nevertheless, I'm on the record as of 3:50pm (PST) August 22, 2008.

I think Oil Prices will Drop Further (from $115 price per barrel down to...?)

Check my July 13th post for proof of my prognosticating genius (I said $145 was the peak and then oil prices tumbled down to $115 today) and my reasoning. I think oil prices will drop further (assuming no war with Iran) for the same reasons plus a few more: 1) The very fact that oil prices tumbled has become a news story. So the traders have to assess that there's less hype to "scare up" prices. That means less upside potential and therefore more reason to exit their positions. If oil prices dropped from $85 to $55 then you might think that it would be a buying opportunity but at $115 the price of oil is still way above what I think it's "intrinsic" value should be (check out my July 13th post). 2) The Bush administration and the McCain campaign have shifted away from bellicose talk about Iran. The more "Middle East War Talk" the more of a risk premium, the higher the prices. The less of such talk reduces the upward pressure on prices. 3) There has been news of Iraq running an $80 BILLION budget SURPLUS because of high oil prices. That draws international & U.S. scrutiny that the big oil players don't want. 4) The proponents of alternative energy want oil prices to be high to motivate the shift to renewable energy. Big Oil is fearful of a "windfall profits" tax. The major players in Big Oil recognize that being a bit less greedy for the short term (especially before the election) may give another issue a better opportunity to take the attention away from them. Remember that Big Oil is in the absurd position of simultaneously arguing that "oil is in such short supply relative to demand that it should have a high price" AND ALSO that "oil is in such abundant supply relative to demand that we shouldn't switch away from it". It's ridiculous that any informed, righteous, Republicans would be their defenders. 5) Apparently, high oil prices really have reduced oil usage among Americans. Less demand equals lower prices. 6) Pickens is still advertising about alternative energy and the more people know about it compared to oil the lower the "solar ceiling" that can depress oil prices. Personally, I want oil prices to be higher so we do a giant shift to renewable energy. But my prediction is based on the facts and my understanding of human behavior. I could be proven wrong. I post to this blog to put myself on the record. I hope I have the integrity to not delete this post if I'm proven wrong. I'm specifically giving myself the test to potentially look like a fool in the hopes that if I'm proven right I will be seen as all the more righteous. Silly & grandiose? Sure. I'm at least self-aware. ;-) P.S. If I had to put a number on it, I'd guess that oil's "true price" should be $70 - $90 per barrel until the next big breakthroughs in solar & battery technology.

American Foreign Policy: Russell Crowe vs. Tom Hanks

Here's an analogy: Republicans want America to be Russell Crowe, beating up insane paparazzi (Al Queda) who are dangerous and constantly swarming around him. Democrats want America to be Tom Hanks, loved by most and not even attracting the insane paparazzi. But even when they do show up he doesn't encourage their insane attention.

Melanie Sloan for Attorney General

Anybody want to give me 1000 to 1 odds on my hundred bucks that says Melanie Sloan will be Obama's Attorney General? I know those odds will drop once he gets elected and I want to make a lot of money. I really think she would be the best possible person for the job. http://en.wikipedia.org/wiki/Melanie_Sloan

"Solar Ceiling" : Why Oil Prices Must Drop

My thoughts on Oil Prices... (but I'd be shocked if I were the first to think of it): CONCLUSION: Oil must massively drop in price in the coming year (from $145/equivalent to 91euros per barrel on July 11, 2008). 1) Energy is energy. As long as it reliably comes out of the wall to power our TVs or reliably propels our transportation even the most ardent anti-hippie won't complain. 2) The argument for fossil fuels has always been price. From what I read a good rule of thumb is that fossil fuels can cost around 4 cents per kilowatt-hour (at best) and modern solar (in sunny areas) costs around 12 cents per kilowatt-hour (in worse conditions it can be as expensive as 30+ cents / kW-h though). So currently modern Solar (at best) is three times more expensive than fossil fuels. 3) Therefore, I conclude, that oil "can't" go above $450 per barrel (3 times the current oil price). If it did then solar would be comparably priced and all the incontrovertible arguments against fossil fuels (Middle East instability, Pollution, Global Climate Change) would necessitate virtually everyone to switch. Ceteris Paribus, who prefers oil? This is the de facto ceiling on oil prices. 4) So now that we know oil's ceiling price. Let's look at what factors could "lower the ceiling" (i.e. drop the price of solar). - "Economies of Scale": If modern solar is currently 12 cents per kilowatt-hour, how much of a price drop would there be if suddenly production increased 10 times, 20 times? Remember that solar power accounts for less than 1% of global energy. There is so much room for growth that I think economies of scale should significantly drop the price of solar. - "Technological Advancement": Technology always improves. Is it really conceivable that solar won't get twice as efficient? Three times? I read that the cost of solar will be 3.5 cents per kilowatt hour in the near future. http://peswiki.com/index.php/Directory:Cents_Per_Kilowatt-Hour 5) Now let's look at what is driving up the price of oil (rising floor): - China has 1/4 the energy needs of the USA per capita. As their standard of living increases there is a predictable tsunami of energy demand coming on the horizon. - India has a comparable situation. - Almost the rest of the world is not terribly far behind. But those factors have been known for a long time and the actual consumption trends have generally followed the consensus predictions. So why has the price shot up so far and so fast? - the Iraq war was supposed to increase oil supply but the opposite happened. Investors dealt with the dashed expectations predictably by driving up prices. - Bush & Cheney's "saber-rattling" about a possible war with Iran increased the "risk premium" because investors feared that such a war would further jeopardize production which would further depress supply which would increase prices. - the dollar has dropped in value (but that is really a separate currency problem and relates to nearly all goods outside the US increasing in price). 6) Now I will conclude with my falsifiable theory why the floor will fall (i.e. many reasons why oil prices must eventually fall from $145 / equivalent to 91euros per barrel on July 11, 2008): a) Obama will win the election and, at a minimum, stop the saber-rattling with Iran (at least less than the Bush/Cheney regime). Therefore the risk-premium of a possible war will drastically be reduced. b) Obama will begin to withdraw from Iraq (albeit slower than we liberals would like) and so the "insurgents" will have less incentive to hurt oil production as a way to get back at Americans. Iraqis, now less worried that oil profits would be going to Americans, will massively increase production of oil in order to get out of debt (get their economy going). The Iraqi factions will also each want to get the oil money as fast as possible (to try to screw the other guys). They will also ignore OPEC because their country is in such bad shape. This increased supply of oil will further lower prices. There may even be a bit of "panic selling" as the other OPEC nations will want to cash in on high prices before prices plummet. c) Obama & the democrats will stop subsidizing the oil industry and focus resources on alternative energies (lowering the ceiling further). Even McCain wants to work on this! d) As it becomes more apparent to investors that Obama will indeed win the election and do as we predict, they will factor in the above arguments and thus be less likely to bid-up oil prices. e) Oil Sands / Tar sands become economically viable at $80 per barrel but they take years to get up and running. Even though oil prices have skyrocketed the oil companies were previously reluctant to make the investments in extracting oil by those methods for fear that the price of oil would fall (and thus make such techniques & efforts poor investments). Only recently are companies beginning to make legitimate attempts (that will come online in the coming years). f) T. Boone Pickens (the hardcore oil man & legendary investor) is not only working on alternative energies but he is ALSO PROMOTING THE HECK OUT OF IT!!! (This past Sunday, July 13,2008 - he had pro-alternative energy advertisements on Meet The Press AND This Week w/George S.) Consequently, even the oil men and investor community will soon begin to get more familiar with the factors I have outlined above (e.g. the "solar ceiling"). Wouldn't any speculator, aware that oil "can't" go above $450, think that as prices rise their potential profit would shrink? CONCLUSION: While oil prices may potentially continue to go up in the very short term (until November) as the Bush/Cheney regime continues to scare up prices by exacerbating the risk-premium, the price of oil "must" come down in the coming years due to the lowering of the "solar ceiling" (and "wind ceiling" et al.) and the predictable coming absence of the factors for the previously rising floor. But I could be wrong. We'll see.

CLIP "Compulsory Licensing of Intellectual Property"

Proposal for C.L.I.P (“Compulsory Licensing of Intellectual Property”) By Dan Abrams February 10, 2008 My claim: Invention is primarily what makes life better for humanity over time, not business (and increasingly not the legal system). Business is good primarily insofar as it encourages advancement for humanity. The current patent system may be good for business but not for advancement. What is the purpose of intellectual property protection? 1) To encourage advancement by providing inventors of IP with a profit incentive 2) To reward such advancement seems fair. What is the motivation of the current U.S. patent system that provides a temporary monopoly to the first inventor? 1) The inventor should have control over his/her invention 2) Making it incumbent upon the inventor to profit from his own invention motivates not just the advancement but also the commercialization/popularization. What are the negative ramifications of the current system of patent monopoly? 1) A competitor threatened by an invention has a motivation to purchase the patent rights for the purpose of killing its competition by simply preventing the any use of that invention. 2) Businesses predicated upon IP have an incentive to be secretive and non-collaborative (which is antithetical to scientific advancement). 3) Inventors must also be entrepreneurs or else be otherwise beholden to businessmen to commercialize their ideas. This reduces the incentive to invent and further motivates the smart people to become businessmen over inventors. 4) Patent infringement lawsuits are expensive and an unnecessary burden on the courts. The patent lawyers end up getting hourly fees on top of massive percentages of judgments and settlements. There is an incentive to use the patent monopoly as a pure business tactic to hinder the competition or to extort lucrative settlements. What is my solution? C.L.I.P (“Compulsory Licensing of Intellectual Property) The following is one possible implementation of the CLIP concept. Of course, specific terms and aspects would be subject to political and legal wrangling as well as corporate diplomacy. For a 5 year window inventors applying for patents could select a traditional patent or a CLIP patent. After that probationary term only CLIP patents would be possible. What is a CLIP Patent? A CLIP Patent offers the inventor 50 (fifty) years of profit incentive but not necessarily a monopoly. A CLIP Patent confers upon the inventor a monopoly only if no one takes advantage of the “compulsory licensing” system. How does the “compulsory licensing system” work? A company interested in using the compulsory licensing system of a particular CLIP Patent must abide by certain strict rules. 1) They must set aside the greater of 5% of the retail price or 10% of the profit of the good or service that they sell that will employ the CLIP Patent to go into the “inventors’ revenue pool” (IRP). They would have to agree to “open the books” to independent auditors with a “pot-odds disincentive system” that would penalize them at a premium above the likelihood of getting caught multiplied by the amount they attempted to improperly exclude from the IRP. This would encourage fair & honest accounting (not “Hollywood accounting”) for the inventors’ share. 2) The inventors’ pool for that good or service is put in an escrow account (in the safest/most conservative of financial instruments - like US Bonds) that is regulated by a new branch of the USPTO called the “Inventors’ Revenue Pool Service”. The interest on the IRP would be distributed as defined by the inventors’ relative shares in that IRP. If your invention were used for 50 years (like a projection tube TV) you would be handsomely rewarded but not nearly as much for Plasma TVs. 3) Every year, interest from a given IRP are distributed to all the inventors of record. This would be determined initially by the corporation (based on standardized guidelines) but subject to arbitration much like the Writers Guild of America’s screen-credit arbitration process. An independent organization would evaluate the merits of inventors’ contentions that they deserve a greater share than some other inventor. 4) The standardized guidelines would be established by an expert task force for each industry. There would be less incentive to “game” this system (compared to the current monopoly system) because they know they have to pay a set amount into the IRP so they shouldn’t care too much about how it’s split up. The current monopoly system has such vastly varying extremes of outcomes that litigation is unavoidably a huge part of the game. An example of standardized guidelines for a new computer printer might take existing distributions of inventor shares (all publicly available on the web) as precedent balanced against the arbitrator’s assessment of the value to that particular product. So if the printer previously used 24 CLIP Patent inventions but now used a new wireless technology then maybe the floor for the new invention would be 4% and the ceiling would be 20% of that IRP. If one invention replaced another then that would be reflected in the share of the IRP. What are the benefits of the CLIP Patent system? 1) Encourages innovation with a longer profit cycle without encouraging the “killing of progress”. 2) Better inventions are more likely to be effectively brought to market because competition doesn’t bind the inventor to a particular company (a variable which can only hurt the chances of the best product being best implemented commercially). Either the new product is better or worse that what already exists. If it is better and the particular company with the monopoly is anything short of excellent then the chance of the best product prevailing are diminished. On the flip side, if the new product is worse but is superbly marketed then the success of the better product that already existed is therefore diminished. 3) Businesses using the CLIP system have a known, quantifiable cost system for invention. 4) There is also a limit to any damages that could potentially arise from infringement. Their cost of litigation should drop substantially. 5) There would be less incentive to develop “me too” technology that only nominally differentiates itself from a previous invention. More development would go into genuine breakthroughs that would stand the test of time. Think of 50 years of CLIP revenue for an AIDS vaccine as opposed to developing another version of Lipitor. ADDITIONAL IDEAS: - Maybe to address the problems of a first-to-file “winner take all” system would be to set aside some portion of the IRP to “researchers in the field”. That way those who publish foundational research in a field (on which the invention is based) can still profit in some way. The RITF could include anyone who published on the internet. If they could prove that they played a role in an invention then they could apply for arbitration. Maybe with 100 “votes” from recognized members of that industry (in good standing) someone could get a hearing. Every vote that is subsequently validated in arbitration would add credibility to that member of that industry (for subsequent votes). Every vote that is subsequently ruled invalid in arbitration would commensurately tarnish the voter’s record. Maybe with 1000 votes an arbitration ruling could be appealed. - In arbitration there could be limits on presenting your case (as a nuisance lawyer disincentive) like only 2 days to make your case and 1 day to rebut your rival. And if you lose you have to pay a fee to the IRP or arbitration (but not court costs nor rival’s legal fees). OK, that’s my first draft of the CLIP concept. Poke holes in it. Let me know its flaws and game-able aspects. For now it’s only a thought experiment. But in time it could evolve into groundbreaking policy. I appreciate your consideration. Good karma to you. Regards, Dan Abrams

Re: ERRORS in "U.S. v Microsoft: Who Really Won?" by Thomas Hazlett http://www.ft.com/cms/s/0/a94d92e0-cd99-11dc-9e4e-000077b07658.html Thomas Hazlett got some points objectively, provably wrong. 1. Hazlett wrote: "Meanwhile, Microsoft’s Internet Explorer is coughing up market share to Mozilla, Netscape and Opera, browsers that ride comfortably on Windows." The Netscape browser went out of business. http://blog.netscape.com/2007/12/28/end-of-support-for-netscape-web-browsers/ CURRENTLY: Microsoft IE has a market share of over 75% Firefox has a market share of about 15% Opera has a market share of about 1% Netscape is under 1% http://marketshare.hitslink.com/report.aspx?qprid=0 http://www.thecounter.com/stats/2008/January/browser.php http://en.wikipedia.org/wiki/Usage_share_of_web_browsers Look at the chart over time and you'll notice a solid correlation between the time Microsoft was losing market share to when the DOJ was fighting it's oppressively monopolistic and anti-competitive practices. 2. Hazlett wrote: "(Apple) is crushing Microsoft in media players." But that has nothing to do with Microsoft's operating system monopoly or any of Hazlett's conclusions. "That a software giant proved helpless against competitive forces (iPod & Google) is an important lesson." That doesn't address the point of anti-trust regulations. His point is as absurd as if I wrote that Microsoft "proved helpless" against Starbucks' growth in the coffee business. Sure Microsoft was ineffectual in two businesses it didn't have monopoly power over (Media Players and Search Engines). But in operating systems it has maintained its monopoly. APPLE's market share is at its highest in years with 7.3% versus Microsoft's 91.8% dominance of the operating system market. http://apple20.blogs.fortune.cnn.com/2008/01/01/survey-mac-os-hit-record-73-share-in-december-iphone-up-33/ How can anyone support conclusions based on incorrect facts? When the public is tricked into thinking absurd conclusions based on absolutely, objectively verifiable errors how are we to feel? Is it a coincidence that the errors advance an agenda? Is it not deliberate?

There is no existential threat to America (including Radical Islam)

I am not the first to say that - "There is no existential threat to America, including Radical Islam." Remember the Sherlock Holmes reference - "THE DOG THAT DIDN'T BARK"? Surely, you're aware of how pathetic our security is at airports. The GAO reported November 15th,2007 how easy it is to sneak bombs and bomb parts onto an airplane in the U.S. All 19 out of 19 airports tested had their security completely breached! This is no secret. All our enemies know this. To be overly fair to the counter-argument, let's assume that 99% of attempts to get bombs on planes are intercepted by security (btw - That's a fantastically high number. Various previous reports show 25% or more get through. And given enough attempts all airports have proven terrifyingly beatable.) So if you're an enemy of America and 9/11 proved so damaging, then you would keep attacking the vulnerable spots. To take down 100 planes would require 10,000 people (assuming 99% are caught). Sincere there are over 1 billion Muslims, that would only require 1/1,000 of 1% of their population!!! The planes haven't been blown up. THAT'S THE DOG THAT DIDN'T BARK! What's more 30,000+ Americans commit suicide every year (that's 1/100 of 1%) and 500,000 attempt suicide every year (that's 1/6 of 1%). If Muslims have approximately the same rates of suicide, then recruiting suicide bombers (just among those who already want to kill themselves anyway) should be shockingly easy. CONCLUSION: Sure, a bomb could get through and blow up a city. But the odds are massively, exponentially higher that you'll die of something much more prosaic. So don't fear attacks in the U.S. and stop wasting money on war & defense that create enemies. Remember that most everyone on the planet just wants to live their own lives, feed their kids and survive. Let's say you're the president of the U.S.A. : 1) If you do nothing wrong there's still some chance that the psychos who have messed-up, untreated brain chemistry problems will still try to kill Americans. 2) If you make America appear selfish and immoral then that group gets bigger because the borderline mentally-ill with propensities towards violence will "join their cause". 3) If you attack a sympathetic victim, then that group gets bigger still because then the "righteous" who have little to lose will join their cause. 4) If you attack someone's country then that group gets even bigger because the patriots and standing armies join the fight. 5) If you kill someone's neighbor or friend then even those who tend to be pacifists will be more likely to quit their job & leave their family to "defend their homeland". 6) Finally, if you kill a member of someone's family then the odds that they'll want to kill you skyrocket which is why... "WAR BEGETS WAR."