Dan on December 21st, 2014

Thinking more about this recent drop in oil prices caused me to do a little more poking around the internet, and I came across the December 2014 OPEC Oil Report.  I must admit I haven’t read any of these reports before, but it is full of interesting economic graphs and worldwide economic data  (Click here to download the pdf).

In case you don’t want to read the whole report, below I have pulled out my favorite graphs which do a pretty good job of summarizing the whole oil situation:

oildemand

 

worldoilsupply

nonopecproduction

Note that from the charts above, the world is awash in oil thanks largely to increased US Production.   Demand for oil is expected to increase by 1+% in 2014 and in 2015, but supply is outpacing the demand.  OPEC is doing the rational economic response to this;  lowering production to increase prices will only sell more US Oil.  The OPEC cartel is broken – after all these years there are now too many other players.

Business Insider showed this great chart about break-even prices by oilfield.  This again shows it’s in OPEC’s best interest to squeeze the higher cost producers out.

 


World Oil Field Break-Even Prices (click image to expand)

So it looks like low oil prices might be around for awhile –  looking at the chart above one would think the floor would be in the $50 – $60 a barrel range.  Or assuming technological advances, maybe lower – throwing a huge curve ball to the worldwide fight against deflation and the assumption of constantly rising energy prices.

Dan on December 17th, 2014

I just posted an updated report on eMagin on Seeking Alpha.

Summary

  • eMagin is moving forward on the great consumer OLED opportunity.
  • Can eMagin execute, or will it be another disappointing year?
  • Financials improving, but still too early to be bullish.

Check it out at  http://seekingalpha.com/article/2757795-will-emagin-turnaround-in-2015.

Dan on December 12th, 2014

I have been vacillating on whether or not to post anything on the torture report – after reading all the articles and opinions I hadn’t really been able to solidify my thoughts into a post, and I didn’t want to write something that was just an enraged outburst against our government.  I finally decided to break down and do this post after reading this article:

http://www.thedailybeast.com/articles/2014/12/11/after-torture-report-our-moral-authority-as-a-nation-is-gone.html

The author makes a number of points that resonated with me.  However, there is another thing that keeps bugging me.  I was surprised to see the  large number of politicians and media commentators are willing to overlook the atrocities because they may have gathered information that saved the homeland.  Plus, John Brennen, director of the CIA, refused to rule out future use of these techniques.

Fine.  If this argument is to be used to justify possible future use of these actions, then we need to expand these programs.  Why should we limit these effective(?) techniques to foreign terrorists?  Shouldn’t we expand Enhanced Interrogation Techniques for use by the FBI and State and local police departments?  When or why is it not appropriate to torture domestic terrorism suspects, or radicalized associates of domestic murder suspects if it could lead to gaining information to prevent future crimes against the State?  The same argument should be made for the drone program.  Any domestic resident suspected of conspiring to commit murder should be subject to the same death-by-drone guidelines used to suppress foreign terrorism.

I would argue that the similar techniques used by the NSA and exposed by Edward Snowden should be enacted on domestic soil, but I think most Americans would agree that it is likely already the case.  But we should formally disclose it.

If this great nation wants  to repair the damage to our alledged moral authority to the rest of the world,  I see it as we have two options.  Prosecute the leaders (at the highest levels) of these programs as enemies of the state, or formally adopt these policies for domestic use.  At least then America would be morally consistent.

Dan on December 6th, 2014

For you political junkies, a couple amusing looks Washington press briefings.

This article on Business Insider reveals the political theatre at the State Department. The State Department spokesperson had a prepared line when asked about the Egyptian government’s decision to clear Hosni Mubarak of murder.

While the White House press gets a lot of flak for just being the mouthpiece for the government, in this case it was interesting to see some real pushback on the  prepared response the State Department had.  It is also curious that the State Department refused to condemn or defend this – its likely something in the US’s interest, but  not defendable.

Alas, at the end of the clip, when the lights go down, the actors speak the truth and you hear the spokesperson joke with a press member that ‘that Egypt line is ridiculous’.

 

 

The other humorous White House press story of the week was the White House spokesman trying to defend the appointments of new ambassadors to Argentina and Hungary – courtesy of the Daily Show:

 

When asked why these apparently unqualified candidates were appointed ambassadors, the spokesman had a tough time responding. Finally rather than admitting it was because the Argentinian ambassador had raised $500,000+ for re-election, and the Hungarian ambassador $1.4 million, his response was basically ‘it wasn’t my decision’.

Given the current quality of shows on cable TV – I may have to start watching more press briefings.  Reality TV at its best.

Dan on December 3rd, 2014

A lot was written in 2008 about the moral hazard of the federal bailout of the banks and financial institutions during the great recession.  Then Treasury Secretary Henry Paulson was quoted  as saying 

the Fed made “the right decision” and expressed “great confidence” in its chairman, Ben Bernanke.  Paulson said that in the case of Bear Stearns, the risk to financial stability outweighed his concern about so-called moral hazard, in which investors come to expect government rescues.

I was reminded of this when I read this interview with hedge fund manager Hugh Hendry.  A self confessed bear who capitulated in the wake of central bank intervention.  The full interview can be read here, but this was what I thought was his most important point:

I have concluded that my risk tolerances were too taut and it was creating too much of my own intervention, in the portfolio, and it was damaging to the client’s performance. So I’ve pulled back or I’ve widened the tolerance of the portfolio.

Merryn (Interviewer): So your basic point here is that if the central banks have your back, there’s no need to have the same kind of risk controls that you used to have.

Hugh: There is less need. Less need. I tell you, I was at a conference with some of the great and the good global macro managers in September in New York and I asked them all the question, “If the S&P is down 12% what do you do? Are you selling more or are you buying?” Guess what? They’re all buying. So the central banks have created a behavioral tic which is becoming self-reinforcing and I believe we saw another manifestation of that behavior in October.

We have seen government/central bank intervention in the US, we are seeing government intervention in Japan, and we are about to see it in Europe.  Yet nobody is talking about the moral hazard this presents and, according to Hugh Hendry, is leading to a widespread increase in risk taking in the financial community.

Dan on November 16th, 2014

Speaking of Russia (in my last post),  it was interesting to see Jim Rogers view on Russia in this interview on Business Insider.  Jim Rogers has been a long time staple of the financial news channels, and he is the first one I have heard state an alternative view of Russian Relations.

As a long time commodities trader and Asia investor,its interesting to see his take on whats going on in Russia.  He also is one of the few to link the suddenly falling oil prices to geopolitical pressure on Russia:

It’s [The recent drop in Oil Prices] a fundamental positive for anybody who uses oil, who uses energy. It’s not a positive for places like Canada, Russia, or Australia. It seems to me that this is a bit of an artificial move. The Saudis, from what I can gather, are dumping oil because the US has told them to in order to put pressure on Russia and Iran. 

Interestingly, another recent article discusses the effect of this drop in oil prices on various governments over a 4 quarter to 12 quarter time period.  This chart:

shows Jim Rogers analysis of the oil movement does not seem too far fetched.  Conventional Market wisdom would have you think oil prices should be strong given worldwide economic strength – so maybe something else is going on here to put the squeeze on Russia.

Dan on November 14th, 2014

It will be interesting to see who wins  in the battle between sanctions against Russia and the the worldwide military industrialists.  It looks like France will be first up to face this quandary, as they have two warships built and paid for by the Russians that are scheduled for delivery but being held up due to political conflicts.

An interesting echo back to World War I, when Britain seized two warships paid for by the Ottoman Empire,the HMS Erin and the HMS Agincourt.  From the Wikipedia entry for the HMS Agincourt:

The ship was nearly complete when World War I broke out, and British Admiralty fears of a German–Ottoman alliance led to her seizure for use by the Royal Navy (together with another Ottoman battleship which was being constructed in Britain). This act was a significant contributor to the decision of the Ottoman government to join the Central Powers, as the payments for both ships were complete, and distrust of Britain increased.

Germany later used this to their advantage to entice the Ottoman Empire to join the Central powers, when they had two warships trapped in the Mediterranean by the British that they then gave to the Ottoman Empire:

 Germany′s gift of the two modern warships had an enormous positive impact on the Turkish population. At the outbreak of the war, Churchill had caused outrage when he “requisitioned” two almost completed Turkish battleships in British shipyards, the Sultan Osman I and the Reshadieh, which had been financed by public subscription at a cost of £6,000,000. Turkey was offered compensation of £1,000 per day for so long as the war might last, provided she remained neutral. (These ships were commissioned into the Royal Navy as HMS Agincourt and HMS Erin respectively.) The Turks had been neutral, though the navy had been pro-British (having purchased 40 warships from British shipyards) while the army was in favour of Germany, so the two incidents helped resolve the deadlock and the Ottoman Empire would join the Central Powers.

 (Source:  The Pursuit of Goeben and Breslau)

So it will be interesting to see how this French thing plays out. If they mess with the Russians and further sour the West’s relations with Russia, it seems like there would be plenty of other foreign powers happy to gain favor with Russia and provide warships. Granted these Russian ships are only helicopter carriers and not battleships, but the historical similarities are interesting.

Dan on November 6th, 2014

Over the last few years I have had many discussions with friends and co-workers regarding what happened to Obama:  Why did his foreign and terrorism policy morph from candidate Obama’s anti-war / Nobel peace prize vision to the continuation of the Bush foreign policy?  My question has been was Obama a liar, did he change, or is he not in control?

The Boston Globe just recently published an interview with the author of a book that I think best explains this. The book, National Security and the Double Government, claims this shadow goveernment rose during the Truman Administration’s attempt to deal with the growing national security infrastructure.

If this author is correct, I suppose the good news is this has been going on for over 60 years, and the internet is allowing this to finally shedding some light on this.  Perhaps this proves Charles Bukowski was right – “The difference between a democracy and a dictatorship is that in a democracy you vote first and take orders later; in a dictatorship you don’t have to waste your time voting.”

Dan on October 30th, 2014

At first glance, the new HP Sprout PC didn’t really catch my eye, until I say a this new feature HP is including in its latest high end PC.  As stated in this article on TechTimes:

Key to Sprout’s game-changing new computer is the combination of an Illuminator equipped with a 14-megapixel camera and an array of sensors equipped with Intel’s RealSense 3D tracking technology and a 20-inch flexible Touch Mat that works as a capacitive, multi-touch projecting screen with 20 touch points….HP is making a big leap into blending the physical and digital into what it calls “blended reality” by allowing users to place real, physical objects, such as a ball, a mug or anything that could fit into the mat, and have them transferred into the screen.

While I am sure the technology here is pretty immature, it seems like in the near future this could really transform 3D printing.  Much of the effort to get something 3D printed is to get a CAD drawing of a 3 dimensional object that a computer can then use to render an object on a 3D printer.  Once this technology matures, if you seen some part or component replaced, all you would have to do it have it 3D scanned and sent to a fabricator.  Over the last few years, I had been thinking that if I was in college today, I would take CAD classes just to ensure I had a job once I left college – as the demand for CAD would have to be growing with the rise in 3D printing. Now, maybe CAD will be going the way of punch cards.

Maybe this has applications in the gaming space also. What better way to personalize your virtual world than to scan in personal objects or include with your avatar items from the physical world.

All this for a PC that costs $1899 for the first version.  It will be interesting to see where this technology leads, as how quickly it gains widespread adoption as the price of the technology falls.

 

Dan on October 22nd, 2014

Its been a year since I reduced my work schedule in order to pursue stuff I never get around to doing.  Over the years I have been falling behind on just about everything – from house projects to learning about new technologies.  When I first made the decision to reduce my weekly work commitments, I had a rough list of goals I wanted to achieve in my first year.  So I thought I would take this opportunity to give myself a performance review in regards to how well I have spent my extra time away from work in pursuit of personal enlightenment.

Not too surprisingly, I didn’t make nearly the progress I had hoped to on my goals.  A year ago, I would of stated  I had three primary goals to achieve in my first year:  Investigate/initiate robotics programming and other technologies, increase my writing, and focus on improving how I manage investments.

I didn’t make much progress on robotics, however I think I have a valid excuse.  Right now there is no clear leader in what platform will be the leading platform in robotics.  I am thinking Google will come out with the defacto standard, so I am holding off and delving into that until I see a more clear market leader.  So I am altering that goal to focus on developing something for the ‘internet of things’ most likely delve into home automation.  I just need to find something I want to automate.

I did not achieve my goal in increasing my writing.  The more I think and research it, I realize the first thing I really need to establish is a writing regimen.  I need to dedicate some time every week to focus on what I want to write.  So my goal for my next year is to really build out a time ‘budget’ for writing, then build the rigor it takes to be a productive writer.

I did do pretty well in the investment goal area.  Even though my stock picks are lagging the market this year (though I am blaming that on the poor performance of small stocks overall), I did do some work I feel good about in the area of asset allocation.  I have become much more immersed in various investing categories, which is leading to reduced risk (hopefully).  There is more to be done in this area, but I feel like I have met or exceeded my goal in this area.

So where else has all my spare time gone?   As I sit here at my desk, I notice the piles of papers and todo items have shrunk considerably.  I have taken care of personal and client projects that had been outstanding for many months, and enjoyed more work-free weekends.  I also feel good about my level of fitness.  Rather than spending my spare time browsing the refrigerator, I have actually increased my exercise and am probably eating better.   I am confident I will continue to make strides in this area next year.

So now that I consider myself officially ‘decompressed’, I am hoping to make additional progress on the same goals as I had last year, and if a few more goals creep in that would be OK to.

As for a performance review grade,  I give myself an ‘exceeds expectations’  grade.  Maybe I am an easy grader – but even though I didn’t hit all my goals, I have kept productive, learned a lot about a lot of things, and  have really enjoyed this last year.