Outlook Dims for Crude Prices

[Jack]

A return to $100 oil may not be in the cards for at least the next three years, after industry observers sharply lowered their short-term oil and gas price forecasts. But Calgary-based AJM Petroleum Consultants on Tuesday said the longer-term outlook remains intact after it reduced its 2009 oil price forecast to US$55 a barrel. However, the petroleum engineering firm sees oil rising to $75 in 2010 and $100 in 2013. After hitting an all-time high of $147 in July, benchmark US crude prices fell to a five-year low below $34 prior to the holidays. After rebounding near $50 on Tuesday, New York-traded futures dropped about 25 cents to $48.58. "While our revised forecast is now less positive in the short term than our previous one, we are still anticipating higher oil prices in the longer term," said Ralph Glass, AJM`s chief economist and VP of operations. "AJM is of the opinion that we saw the bottom for hydrocarbon prices in October. We anticipate prices will move into a slow recovery, dependent, of course, on the world recession and the time it takes to come out of that recession." Likewise, GLJ Petroleum Consultants slashed its full-year outlook to $57.50, or more than 40% from the $100 prediction made on Oct. 1 of last year. It doesn`t see $100 oil returning in today`s adjusted dollars until 2018.

Patricia Mohr, a commodities analyst with Scotia Capital in Toronto, said she remains bullish for higher oil prices as OPEC cuts take hold and geopolitical tensions remain high--although the optimism is tempered by global economic realities. After averaging about $99 in 2008,Mohr sees crude flattening off at $55 in `09 and $70 in 2010. "I haven`t really changed my views," she said. "You`ve got a global economy that`s barely just ticking over, but I think prices below $50 are oversold and I`m confident prices will tick up over time." Likewise, AJM`s Glass said lower energy prices will play a key role in pulling the world out of recession. "Americans are being lured back to the roads with gasoline sitting at $1.70 or lower per gallon (45 cents per litre)," he observed. "If president-elect (Barack) Obama`s plans to put America back to work through infrastructure revitalization begin to materialize, fossil fuels will be the engine driving the Americans to prosperity. Factors like these suggest that crude oil is currently at its bottom aver-age price, and a climb is soon to begin."

(Calgary Herald 090107)

 

[CargrenInvestments]

Is there anyone else out there like me? Sometimes I just get tired of what the "experts" say. I`m beginning to believe they went to the same school as weather reporters!

Just a few months ago they were predicting $200 plus oil, and now that they`ve looked out the window they`re all predicting something else. What will it be in another two months?

 

[GarthChapman]

QUOTE (CargrenInvestments @ Jan 7 2009, 03:42 PM) Is there anyone else out there like me? Sometimes I just get tired of what the "experts" say. I`m beginning to believe they went to the same school as weather reporters!

Just a few months ago they were predicting $200 plus oil, and now that they`ve looked out the window they`re all predicting something else. What will it be in another two months?
I agree completely. The pundits take what is and has been happening and then project more of it, sometimes modified a bit, going forward. Look for the ones who have a history of accuracy and follow their prognostications. Hey, let`s start a list. I`ll go first-

Harry S Dent

 

[RogerPanchuk]

QUOTE (CargrenInvestments @ Jan 7 2009, 03:42 PM) Is there anyone else out there like me? Sometimes I just get tired of what the "experts" say. I`m beginning to believe they went to the same school as weather reporters!

Just a few months ago they were predicting $200 plus oil, and now that they`ve looked out the window they`re all predicting something else. What will it be in another two months?

Garth

If you think that Harry S Dent is correct in his prediction`s for whats coming, Why are you not selling all your realestate holdings and heading for the hills with your cash.
Or do you think that Harry is only partialy correct in his predictions.

From what I`ve seen from Mr Dent his outlook for our realestate investments is dismal to say the least.


Roger Panchuk
RTA Ventures Ltd

 

[GarthChapman]

QUOTE (RogerPanchuk @ Jan 7 2009, 09:36 PM) Garth

If you think that Harry S Dent is correct in his prediction`s for whats coming, Why are you not selling all your realestate holdings and heading for the hills with your cash.
Or do you think that Harry is only partialy correct in his predictions.

From what I`ve seen from Mr Dent his outlook for our realestate investments is dismal to say the least.

Roger Panchuk
RTA Ventures Ltd
[list type=decimal][*]I think Dent is partially right.[*]I think Alberta will be much stronger than the ROC and the US.[*]My properties cashflow so value is less important.[*]If I sold what would I invest in to provide decent returns? I don`t trust or properly understand the stock markets and the industry that markets those products is too self-serving for me.Renters gotta live somewhere.I think recreational properties will be hit harder (I know, we just built one of those...)I ran the numbers like a poker player would, and the table odds weren`t good enough to justify making the bet.[/list type=decimal]

 

[LeighF]

QUOTE (GarthChapman @ Jan 7 2009, 10:56 PM) [list type=decimal][*]I think Dent is partially right.[*]I think Alberta will be much stronger than the ROC and the US.[*]My properties cashflow so value is less important.[*]If I sold what would I invest in to provide decent returns? I don`t trust or properly understand the stock markets and the industry that markets those products is too self-serving for me.Renters gotta live somewhere.I think recreational properties will be hit harder (I know, we just built one of those...)I ran the numbers like a poker player would, and the table odds weren`t good enough to justify making the bet.[/list type=decimal]
I`ve learned along time ago, to take media coverage at face value. The so called experts change their predictions about things like the wind changes. Oil prices are down, which brings many great opportunities of other kinds. Cheaper living, cheaper fuel etc. It`s all good. It doesn`t matter how low the price of oil gets, the world demand is still there.
I agree with Garth about the stock markets. I would much rather invest in real estate. At least you can control what you buy and sell. The stock markets are controlled by a whole lot of other people and the only thing that you can do is watch your RRSP`s either rise or fall and helpless to do anything about it.
I`d really like to find a tax shelter, other than RRSP`s to invest my money in.......anyone have any suggestions on that?

 

[kboughen]

QUOTE (LeighF @ Jan 8 2009, 08:01 AM) I would much rather invest in real estate.
I`d really like to find a tax shelter, other than RRSP`s to invest my money in.......anyone have any suggestions on that? Why not provide self directed RRSP second mortgages for arms length investment properties owned by REIN members who carefully choose cash flowing properties in fundamentally sound areas.

 

[EdRenkema]

QUOTE (kboughen @ Jan 8 2009, 06:20 AM) Why not provide self directed RRSP second mortgages for arms length investment properties owned by REIN members who carefully choose cash flowing properties in fundamentally sound areas.

Why could investors like us not create our own independant fund to invest RSP funds into that would provide a return.
Other investors (REIN members) could then draw on the funds for funding investment properties and pay back the fund from the cashflow and share the capital on sale.

could this work???

 

[CargrenInvestments]

QUOTE (EdRenkema @ Jan 8 2009, 09:18 AM) Why could investors like us not create our own independant fund to invest RSP funds into that would provide a return.
Other investors (REIN members) could then draw on the funds for funding investment properties and pay back the fund from the cashflow and share the capital on sale.

could this work???
Fantastic idea! We`re involved with a MIC that was set up for developing multi-family properties, and this thought has been percolating for a while. I like it...

 

[CargrenInvestments]

QUOTE (GarthChapman @ Jan 7 2009, 09:56 PM)
I think Dent is partially right.
[list type=decimal]
[*]I think Alberta will be much stronger than the ROC and the US.
[*]My properties cashflow so value is less important.
[*]If I sold what would I invest in to provide decent returns? I don't trust or properly understand the stock markets and the industry that markets those products is too self-serving for me.
Renters gotta live somewhere.
I think recreational properties will be hit harder (I know, we just built one of those...)
I ran the numbers like a poker player would, and the table odds weren't good enough to justify making the bet.
[/list type=decimal]



Like you, I believe that RE is one of the best investments one can make, as long as its cash flowing and you have some reserve. I know the "experts" think RE prices have plateaued, but Dave responds to this with his excellent port:



http://myreinspace.com/public_forums/Real_Estate_Discussion/62-9024-House_Prices_Have_Reached_Their_Peak.html

 

[gwasser]

QUOTE (CargrenInvestments @ Jan 8 2009, 03:05 PM) Fantastic idea! We`re involved with a MIC that was set up for developing multi-family properties, and this thought has been percolating for a while. I like it...
Why would you want to invest in mortgages for REIN members rather than doing a JV? Would your return from a JV not be higher?

 

[wealthyboomer]

QUOTE (EdRenkema @ Jan 8 2009, 11:18 AM) Why could investors like us not create our own independant fund to invest RSP funds into that would provide a return.
Other investors (REIN members) could then draw on the funds for funding investment properties and pay back the fund from the cashflow and share the capital on sale.

could this work???
You mean similar to what `Trillium Mortgage` currently does?
They use privately invested monies for mortgages.

 

[CargrenInvestments]

QUOTE (gwasser @ Jan 8 2009, 02:28 PM) Why would you want to invest in mortgages for REIN members rather than doing a JV? Would your return from a JV not be higher?
I agree. I would rather JV my self, but there are a lot of people out there who like the idea of a stable, fixed return, "garanteed" return rather than the apparent "risk" involved in a JV. This could be a vehicle for them to obtain a good return or cash flow, etc.

 

[CargrenInvestments]

QUOTE (gwasser @ Jan 8 2009, 02:28 PM) Why would you want to invest in mortgages for REIN members rather than doing a JV? Would your return from a JV not be higher?
I agree. I would rather JV my self, but there are a lot of people out there who like the idea of a stable, fixed return, "garanteed" return rather than the apparent "risk" involved in a JV. This could be a vehicle for them to obtain a good return or cash flow, etc.

 

[EdRenkema]

QUOTE (gwasser @ Jan 8 2009, 04:28 PM) Why would you want to invest in mortgages for REIN members rather than doing a JV? Would your return from a JV not be higher?

Yes, true statement.
But - my RSPs are in equity mutual funds - so 30% ____kicking in the last 3 months, its just a way to provide the funds for ourselves while meeting the arms length rules, it certainly can be done, just needs to be structured properly.

 

[gwasser]

Regarding prognosticators like H.S. Dent. I read both his books and they are both off. The problem is not the research, the problem is that people such as H.S. Dent only look at one factor (demographics) and projects it based on peoples past behavior. In Dent`s case, he assumed that Baby Boomers 55 years of age and older would retire and spend less. They were also supposed to sell their houses and they were going to live off the sales proceeds from their stock market holdings. Hence the big market crash of 2011.

The new pattern is that Baby Boomers plan to work much longer because they are afraid of getting bored in their retirement which may last another 30 or 40 years. Golfing is great, but only so much. Even Belize can get tiresome after a while. Also, a lot of Boomers never saved enough and may need to work well into their seventies, in the worst case at Wal Mart.

If you want to learn more about the likely behaviour of older baby boomers you can read Sherry Cooper`s book: `The New Retirement`. Or... just look around you.

Finally, in his second book Dent went into absurd detail composing all kinds of portfolios strictly based on his demographic theories. Demographics are important, but there are many other factors that influence the investment climate, such as subprime mortgages and lending practices for example.

A somewhat tedious but interesting book on investing is by Ken Fisher - `The Only Three Questions That Count` - Investing by knowing what others don`t. That helps you better understand the limitations of gurus and other experts.

Finally for those who are lazy but wish to diversify into the stock market, I highly recommend: `The Gone Fishin` Portfolio by Alexander Green. Finally, finally and finally, you may have noticed that I am a great admirer of Warren Buffett- here is a book that has a slightly more critical look at his investment style - a great read: `Even Buffett Isn`t Perfect` by Vahan Janjigian.

Talking about great reads - LOVED Eric van Lustbader`s First Daughter one of his best. Only it does not deal with real estate. I had the slight impression though that Mr. Lustbader felt that George W. was a religious and ideological fanatic and that the next U.S. President would be a progressive Republican. Well he got Obama!

Now I am truly done.