Author: Petros

Bernanke the almighty and What are oil stocks worth anyway?

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Andrew at City of God has posted that the Watcher called into question Sue Richard’s calling the Silver Surfer all powerful:  “‘all-powerful? There is only one who deserves that name! And his only weapon… is love’ (Fantastic Four #72; Mar. 1968).”  Well for us investors, we worship at the feet of one and only one, his high and mightiness, Benjamin Bernanke, the chairman of the Federal Reserve Bank.  He is the one who determines what our assets are worth and he wields a weapon called “QE” and another called interest rates  with which he increases our power, our net worth, and we become mighty warriors of investing–but when he refrains from wielding them, suddenly we are all grovelling in the dirt like worms eating skubala (a.k.a., the margin call).

So I wrote to my good friend Mich at Beating the Index, who is fretting about running out of powder for his battle on the investment front:

Bernanke is the first cause of everything in the market today. He is exercising his omnipotent power as head of the Federal chair to influence risk appetite. Well, there will be either more monetization soon or watch hundreds of thousands of government workers in Washington not get their pay cheques and be sent home crying. My Schadenfreude would be so high at that point, it would almost be worth a 50% cut in my portfolio to see it. But it ain’t never gonna happen! Believe me, by August or September, the pols in Washington are going to lose nerve and there will be new debt ceiling (and QE3), based upon a compromise between the left-wing republicans and the democrats in the House.

Meanwhile, fear is palpable.  The companies  in which I am invested have increased their asset values through the development of oil fields but their share prices are way down because the lack of QE3 has diminished risk appetite.  People are rightly afraid to be caught with their margin pants down, like what happened to silver investors when the margin requirements were magically increased.

Devon Shire chides Petrobank (last $14.30)/Petrobakken (last $13.63) for not having a share buyback at these low prices, which puts their market capital at serious multiples below the Net Present Value.  Shire wants them to reward shareholders with a buyback of shares, but of course the management spent that cash on PBN shares starting at $21 and who knew that the price would plummet to these levels? These prices  are not only at multiples below NPV but well below book value (=shareholder’s equity).  I wrote to Mr. Shire the following response:

Net Present Value for other junior and intermediate companies is also currently at extremely high ratios to market value. Midway Energy is reporting NPV10 of 1.7 billion while its market capital is 274.9 million.

Some are angry with Petrobakken for continuing what they consider to be an ill-advised dividend program. Evidently, the buy back of shares is an equivalent use of cash as a dividend–I suppose that the real need is to spend money on developing their resources in order to deliver growth. The sad part is that PBN started the repurchase program at $21 while the price was so high vis-a-vis the current price.

At some point either you and I are going to be considered really stupid for thinking we had found value in the Canadian oil sector, or there is going to be a major correction drastically decreasing the NPV/market capital ratio.

Yet Mich warned me about taking the NPV10 that Midway had presented as a serious indicator of their value and I reproduce here our dialogue:

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Bernanke or China? Who is right about a US Federal Government default?

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According to Bernanke, Congress better lift the debt ceiling or the US will default.  Yet if the only way you can make payments on your debt is by borrowing more money, you are already in default.  So far, the US government, thanks to Mr. Ben and his QE1 and QE2 and his seemingly endless loans to the US treasury, has staved off “default”.  In China, the largest foreign creditor to the United States, financial experts are saying that the US is already in default because of intentional dollar devaluation which erodes the wealth of creditors.  Apparently, China reduced its net ownership of US treasury notes over the last quarter.  Expect that it will be harder to find lenders, and Ben will be the only one left in the treasury auction room.  That’s when QE3 will start.  Or riots in the streets, take your pick, Congress.  Eventually, the pressure to raise the debt ceiling will be too much for the politicians in Congress, and it will be business as usual–money creation ex nihilo, and the Bernanke put will save the stock market.

Why I won’t buy another Apple product

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I’ve used the impressive iPhone 4 for some months now and I have to admit that I truly enjoy the integrative features.  But because it was an Apple product, there was only one reason, however, that I bought the iPhone 4 over other products and that is because Logos Software has an “App” that works with it, and that gives me access to an extensive theological library.  But here are my beefs with Apple, things that make the beefs that people had with Microsoft pale by comparison, at least at the retail level where I live.

(1) The iTunes store is monopolistic.  It is a real time monopoly on the sale of applications and no other retailers are allowed to sell.   I shudder to think of what I would do if I wanted to resell an app.  I’ve only ever purchased a single app at $2.99 and iTunes so bungled the sale that I would never ever buy an app from them again.  Here is what happened.  They quoted a US price.  So I used my TD US Visa.  Then, iTunes charged my card in Canadian $$ and my credit card charged me in US dollars. So I was charged three times for the exchange rate (once by iTunes, by Visa, and by my bank when I went to pay).  I WILL NEVER PURCHASE ANY THING EVER AGAIN FROM THE ITUNES STORE.  A $2.99 app cost me $3.49 CDN.  I don’t know how many laws they break every day at the iTunes store, but I will not allow myself to be treated like this ever again.

(2) The people who make the iPhone must be democrats.  You know the kind that don’t believe that want to ban the incandenscent light bulb.  I cannot delete a song from the iPhone itself.  I cannot delete it from iTunes on my computer either.  Why?  Because a few weeks ago I gave away my old computer to which the iPhone was “synced”.  I’ve become physically ill trying to get this damn thing just to delete a song from the iPhone.  I never had a problem like this with an MP3 player, and I’ve own several.  You can change things on MP3 players from any computer–most store the songs as a universal USB storage device.  Even the Creative Zen allowed you to sync with more than one computer.  I don’t know what kind of sick Nazi control-freak mentality goes into restricting clients from deleting songs from the iPhone, but this is something that I just can’t live with.

When this iPhone dies, I won’t be buying another unless Apple fixes these problems.  But then I don’t hold out any hope at all.  But by the time this phone dies, Logos software will be available on other smart phones.  I honestly don’t understand the Apple craze.  Sure the product itself is nice and reliable.  But I can’t be treated this way.  Yet millions of people who are repeat customers are like lemmings walking into the sea, compliant customers who allow a company to mistreat them.

Au revoir Apple.

Bin Laden dead

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For a few years now I’ve thought that Osama bin Laden has probably been pushing up daisies.  But today Obama has announced that he has slain Obama.  If this is so, I congratulate the American military for killing the greatest enemy of America.

Yet I remain skeptical, for the body was immediately buried at sea.  Where now is the proof of his death, and if there are doubts expressed, who will be able to prove that this was the true bin Laden?  The media has not challenged the Obama narrative–but don’t expect them too.  It comes at a time while Obama’s ratings are plummeting and it looks like he will be a one-termer.  Obama needs to kill Osama to boost his ratings.

Well, there is no way now to prove that Obama is not the great slayer of terrorists and other enemies of freedom.  The only way to challenge it is to find the Osama alive and well, retired in Nashville alongside Elvis.  Problem is that bin Laden may have been dead for quite some time now, and his demise in the news today is a ruse.

Didn’t these people in the media ever see “Wag the dog?”.  They just accept like lap dogs whatever this president tell us.  And yet the quick disposal of the cadaver of the most notorious terrorist of our times has permanently erased any further possibility of verification.  How convenient!

Stuck on stupid: celebrating $1500 gold and the East Coast geniuses that made it possible

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Earlier Posts:  I. More education bubble stuff

Just after Barack Hussein Obama was elected in November, 2008, I was at an academic conference in Boston.  There was a Festschrift celebration for one my profs, at which I met a childhood friend of his–my prof grew up in the Boston area.  Once this elderly “gentleman” learned that I grew up in the state of Alaska, he became red-faced and angry, “What’s wrong with you people in Alaska?  Has the cold weather frozen your brains?”  Well, one could have asked the same thing of Boston residents that year–it was a distinctly cold November.  He continued, “That Sarah Palin is such an idiot!”  Well, I wonder whether Miss Manners would think it proper to talk in this manner with a new acquaintance.  I mean Sarah Palin enjoyed a very high approval rating in the State of Alaska and if I shared the view of the majority, then this East Coast snob was insulting me as stupid along with my fellow Alaskans.  Most of the people in that room held PhDs–so the gratuitous insults were uncalled for.  Well, I couldn’t really think of anything to say, but by this time I was pretty hot under the collar:  “Sir,” I said, “The our problem in Alaska is that when we are hungry and need to eat, we have to go outside and kill something.”

Then my new East Coast friend started to talk about Barack Hussein Obama:  “He’s so smart.  He talks so well.  I just know he’s going to be a better president than that idiot Bush.”

Then one morning in Grand Cayman at Christmas there was a “lady” sitting with me under the veranda at the pool of the hotel.  We began to discuss where she was from:  Washington D.C.  I told her about growing up in Alaska but that I now live in Canada.  “I am going to move to Canada,” she said, “If Sarah Palin ever becomes president.”  Wow.  Miss Manners where are you?  But this brilliant woman doesn’t understand the first thing about Canada Immigration or moving to another country.  It sometimes takes years to get your paperwork.  I know people married to Canadians who have taken over two years to get landed status, and this lady thinks she can just walk up here and live in Canada.  I hate to tell you this, but this is not the Viet Nam War era, and Pierre Trudeau is not the president of Canada anymore.

Well, to all you brilliant people on the East Coast who think you are smarter than us Alaskans who kill animals to put food on the table, I dedicate this post.  I love what your President and your Federal Reserve Chair have done to the value of my gold portfolio.  In the words of Mogambo Guru, “Whee!  This investing stuff is easy!”

In an earlier post I listed the East Coast schools of some the people responsible for $1300 gold.  I repeat that list here (Harvard, by the way, is in Boston):

Barack Obama, Columbia, Harvard

Ben Bernanke, Harvard, MIT

Alan Greenspan, Columbia, NYU

Hank Paulson, Harvard (MBA)

Paul Krugman, Yale, MIT

Tim Geitner, Dartmouth, John Hopkins

Larry Summer, MIT, Harvard

But some of us people who don’t enjoy PhDs from these schools where the genius go, don’t believe it is advanced economic theory that is going to help the economy, but common sense.  Yesterday, in a seminal article, Monty Pelerin summarized our main problems under five points:

  1. An Incompetent President – The President is inexperienced and incompetent. He is likely a fraud, as evidenced by his guarded and unknown past. He is incapable of leadership, honesty or management. Virtually every one of his policy initiatives has been harmful to the economy and country. His intentions are clear, the degree to which he will be able to drive us further down the Road to Serfdom is not.
  2. An Incompetent Political Class – The political class attained power via Santa Claus economics, providing gifts to constituents in return for votes. Both parties are guilty. Politicians have conditioned themselves and their constituents to “free-lunch” governance. Few know how to govern in any other fashion. Most are indistinguishable from prostitutes — vote for me and I will do “that” for you. Both parties want to preserve the welfare-warfare State, disagreeing merely on the means of doing so.
  3. An Incorrect Paradigm – The Keynesian model of spend and spend has been good for politicians but disastrous for the economy. Over time, it has encouraged loose credit, overspending and living beyond our means. The failures are obvious to all but Statists and so-called Keynesian economists.  The political class cannot stop “free lunches” without suffering severe political consequences. Hence, the abuses will continue until resources are exhausted. Like Rome of old, we will soon run out of bread and circuses.
  4. An Unhappy Ending – Current economic problems cannot be mitigated or solved without incurring another Great Depression. Whether it is preceded by a deflationary collapse or a hyperinflationary blow-off is moot. The ending is inevitable and as more people understand this ending, they take more extreme steps to protect themselves — spending ratchets back, savings increases and businesses refuse to engage in new investment or hiring.
  5. A Dangerous Prelude to the Ending – Government is insolvent. It would be bankrupt without Federal Reserve Quantitative Easing. As a cornered, wounded animal will do anything to survive, so will Government. Does that mean confiscatory tax rates, capital controls, IRA investments forced into Treasury Bonds, “excess profits” taxes, a national sales tax, etc. etc.? It could mean any or all of these and more. Government will not roll over. It will do whatever it can to continue, regardless of how illegal, immoral, unethical or harmful it may be for the country.