This morning, our editor Henry Blodget wrote a post on Warren Buffett’s brilliant explanation of the absurdity of gold.
The gist is this: If you had $10 trillion, you could buy a cube of all the gold in the world, or you could buy boatloads of productive assets
By Rich Miller, Asjylyn Loder and Jim Polson
The U.S. is the closest it has been in almost 20 years to achieving energy self-sufficiency, a goal the nation has been pursuing since the 1973 Arab oil embargo triggered a recession and led to lines at gasoline stations.
Domestic oil output is the highest in eight years. The U.S. is producing so much natural gas that, where the government warned four years ago of a critical need to boost imports, it now may approve an export terminal. Methanex Corp., the world’s biggest methanol maker, said it will dismantle a factory in Chile and reassemble it in Louisiana to take advantage of low natural gas prices. And higher mileage standards and federally mandated ethanol use, along with slow economic growth, have curbed demand.
The result: The U.S. has reversed a two-decade-long decline in energy independence, increasing the proportion of demand met from domestic sources over the last six years to an estimated 81 percent through the first 10 months of 2011, according to data compiled by Bloomberg from the U.S. Department of Energy. That would be the highest level since 1992.
“For 40 years, only politicians and the occasional author in Popular Mechanics magazine talked about achieving energy independence,” said Adam Sieminski, who has been nominated by President Barack Obama to head the U.S. Energy Information Administration. “Now it doesn’t seem such an outlandish idea.”
The transformation, which could see the country become the world’s top energy producer by 2020, has implications for the economy and national security — boosting household incomes, jobs and government revenue; cutting the trade deficit; enhancing manufacturers’ competitiveness; and allowing greater flexibility in dealing with unrest in the Middle East.
Read the rest here.
Comments »By Natsuko Waki
LONDON | Tue Feb 7, 2012 10:00am EST
(Reuters) – Gold prices have been too volatile to play a reliable role as a hedge against inflation, a study of financial assets over the past 112 years showed on Tuesday.
While inflation does not reduce gold’s real value, it has no yield or income flow and the precious metal has given a far lower long-term return than equities.
In the period since 1900, gold gave a real return of 1.1 percent in sterling terms and its value fluctuated widely, the study published by Credit Suisse and London Business School’s Elroy Dimson, Paul Marsh and Mike Staunton.
“Gold is the only asset that does not have its real value reduced by inflation. It has a potential role in the portfolio of a risk-averse investor concerned about inflation,” it said.
“However, this asset does not provide an income flow and has generated low real returns over the long term. Gold can fail to provide a positive real return over extended periods.”
The report said global equities, the best performers among different assets since the start of the 20th century with a 5.4 percent annualized return, beat inflation in the long run.
However, their returns may be more the result of equity risk premium, the reward for holding risky assets instead of risk-free government securities, than rising inflation.
Looking at the relationship between real return and inflation, the research found that equities were not that sensitive to inflation, compared with inflation linked bonds.
For example, a rate of inflation that is 10 percent higher is associated with a real equity return that is lower by 5.2 percent.
When the inflation rate was at least 18 percent, equities suffered a loss of 12 percent on a real basis. Bonds were worse, suffering a loss of over 23 percent.
“Equities are at best a partial hedge against inflation; their nominal returns tend to be higher during inflation, but not by a large enough margin to ensure that real returns completely resist inflation,” the research said.
“Although equities are thought to provide a hedge against inflation, their capacity to do so is limited. While inflation clearly harms the real value of bonds and cash, equities are not immune.”
Inflation-linked bonds have the highest sensitivity to inflation but their yields have fallen in the past few years, providing little contribution to investors wanting to achieve a positive return over the period from investment to maturity.
Equities by far provided the best real return in the 1900-2011 period. Bonds returned 1.7 percent, while bills gave 0.9 percent on an annualized basis.
Read the rest here.
Comments »“We can use our leverage, our excess capacity to be sure to pump more [oil] if needed so it will not impact the consumer countries while they’re getting out of their recessions slowly but surely,” the prince said.
Here is another interview he did a few years ago.
And here is the satire.
Comments »PORTLAND, Maine (AP) — A shipwreck hunter says he has found the wreck of a World War II merchant ship that was torpedoed by a German U-boat off Cape Cod with a load of platinum now valued at $3 billion — perhaps the richest hoard ever discovered at the bottom of the sea.
Greg Brooks of Sub Sea Research, in Gorham, Maine, said a wreck in 700 feet of water 50 miles offshore is that of the Port Nicholson, a British vessel sunk in 1942. He said he and his crew positively identified the hull number using an underwater camera.
Salvage operations should begin this month or in early March aboard a 220-foot vessel called Sea Hunter with the assistance of a remotely operated underwater vessel, he said.
Brooks said the Port Nicholson was going from Nova Scotia to New York and carrying 71 tons of platinum when it was torpedoed. The platinum was intended as payment from the Soviet Union to the United States, he said.
A federal court judge has granted him the salvage rights, he said.
Read the rest here.
Comments »Now above $18 spread premium to Brent.
Comments »+4.5% to $28.5
Comments »A Time magazine blogger reported Thursday that the Sierra Club, America’s oldest and most august environmental organization, accepted millions of dollars in donations from one of the nation’s biggest natural gas-drilling companies for a program lambasting coal-fired power plants as environmental evildoers.
The total take for John Muir’s conservation group? A whopping $26 million over four years from Chesapeake Energy and its subsidiaries, mostly through Chesapeake CEO Aubrey McClendon.
The news rocked the environmental movement, sent the Sierra Club headlong into explanation mode, angered coal companies that the organization targeted with natural gas money, and had free-market advocates shaking their heads.
The episode “raises concerns about influence industry may have had on the Sierra Club’s independence and its support of natural gas in the past,” wrote Time’s Bryan Walsh.
The Daily Caller asked Chesapeake Energy spokesman Jim Gipson whether his company’s donations were made with the expectation that the Sierra Club would attack the coal industry, and whether the company has subsidized other green groups that oppose generating electricity by burning coal. Gipson did not respond to the email.
The Sierra Club launched its “Beyond Coal” campaign in 2001 on a shoestring budget, aiming to shut down as many coal-fired power plants as it could. McClendon’s money appears to have helped that campaign during a critical time when it was firing on all cylinders, lobbying against new power plant construction and working to close existing facilities, all the while hammering clean-coal advocates and blaming “big coal” for mercury pollution, asthma and assorted unforgivable ecological sins.
In 2007, the natural gas industry was also engaged in trying to persuade the federal government that its product was a more environmentally benign alternative to coal. Having the Sierra Club as a compatriot didn’t hurt.
