The ongoing financial turmoil and financial discussion thread

[missdpuck]

Bank of America is going to own the world soon. There is one on every corner here...actually that's not TOO much of an exaggeration.

[Flames89]

Originally Posted by Flames in 07

hilarious. So ... just hanging out in a shell board room?

All existing oilsands projects work at 45 dollar oil. How did we get to a point that people are worried about 85 freaking dollar oil?

This is the number I have heard as well.

Give this guy more skill - valuable posts as of late.

[I-Hate-Hulse]

Bleeding seems to have stopped somewhat, but oil sinks to $92, asspunching many a Calgary stock today.

The AB govt used $78 WTI for their budget, so there's still a fair bit to go.

Newfoundland used $87. Sweating bullets yet Danny?

[burn_this_city]

Originally Posted by I-Hate-Hulse

Bleeding seems to have stopped somewhat, but oil sinks to $92, asspunching many a Calgary stock today.

The AB govt used $78 WTI for their budget, so there's still a fair bit to go.

Newfoundland used $87. Sweating bullets yet Danny?

I'm getting worried if oil sinks below $70 a lot of oilsands projects in the planning stages will be cancelled.

[Cowboy89]

Originally Posted by burn_this_city

I'm getting worried if oil sinks below $70 a lot of oilsands projects in the planning stages will be cancelled.

I think you'll see a lot of stuff post-poned as opposed to cancelled. The funny thing about oil prices is that as they sag so does the Canadian dollar. It somewhat protects producers as a bit of a natural hedge. Also there's going to be a glut of construction workers and laid off workers from completed project phases (Ie Long Lake, Horizon) who will need employment and will work for less than a millionaire's salary. In a low commodity price/US recession environment you'll find a lot of the inputs whose increasing costs pushed break-even economics to $70/bbl in the first place will start to come down and push down the required oil price to make them economic. I'm not too worried about $70 oil.

[RougeUnderoos]

Originally Posted by Flames in 07

hilarious. So ... just hanging out in a shell board room?

All existing oilsands projects work at 45 dollar oil. How did we get to a point that people are worried about 85 freaking dollar oil?

That's what I'm wondering. Weren't we in an "oil boom" when it got to like 60 or 70 bucks?

[burn_this_city]

Originally Posted by Flames in 07

hilarious. So ... just hanging out in a shell board room?

All existing oilsands projects work at 45 dollar oil. How did we get to a point that people are worried about 85 freaking dollar oil?

Costs have risen so rapidly in the last 2 years that the financials are no longer in the $45-55 range, they are now close to $70. Same thing with offshore drilling, those projects need $70 to be economical now. I agree with Cowboy that as projects are cancelled costs will decline back into affordability. But thats after projects have been postponed and people have already lost jobs.

[missdpuck]

Another Bank of America under construction. That means three in a 2 mile radius.http://www.businessweek.com/investor...n_id=rss_daily

[Flames89]

Looks like I was wrong...
http://www.theglobeandmail.com/servl...ry/energy/home

A new steam injection project now requires oil at $70 a barrel to make money. For a mine, which includes an upgrader to turn the bitumen into synthetic oil, $85 a barrel is needed for a project to make money, National Bank Financial said earlier this month.

[burn_this_city]

Originally Posted by fotze

Is what the media is told by the companies really 'honest'? I know our economics have all sorts of buffers built into the price files so a 12% rate of return rarely turns out to be just a 12% rate of return and I know we are not as conservative as the guys in the oil sands. That beoing said, I have heard from many sources, Suncor's cost controls are absolutely atrocious and the oil price is disguising rampant mismanagement.

The technical labour pool is stretched so thin we have people doing jobs that are way above their capabilities. Plus the construction contractors make a killing by charging a massive fee on every dollar they spend. Combine that with out of control material costs, and craft workers who don't do anything but smoke and hang out in tool sheds its tough to get much done on the cheap. It takes about $40,000/ barrel of production to build a SAGD facility.

[octothorp]

I came across Stiglitz's take on the crisis this morning; obviously a very reactionary article from a biased sourced (which doesn't necessarily make it wrong), but I thought others here might find it interesting.

http://www.cnn.com/2008/POLITICS/09/...sis/index.html

I'm not a fan of the rampant regulation that he proposes, but what's the deregulation alternative perspective? Accept that what happened this week was a necessary correction? Put the blame on the companies that failed to self-regulate?

[Claeren]

Numer 6 is the most important in my mind. (Breaking up super-sized companies)

The funny part is that breaking up really large companies is usually good for shareholders/owners too! Smaller and more focused companies grow faster and smarter and are more competitive. They generally are able to offer more value to customers and to work through crisis with more ease.

There only real value is to CEOs who look good (in the short term) assembling such behemoths because it looks like they are doing something to earn their bloated salaries and to hide the poor growth prospects inside the company due to lack of innovation.


Encana has gone this route, splitting themselves into two, and I commend them for it (as should their shareholders).


The sad part is that CEOs/companies that do go this route are then bought up by those over-sized monsters and all of the innovative talent is squeezed out....


I even have a way to do this! Apply a tax rate to companies based on size that cannot be written off/reduced. So (just an example) a $10B company pays 3%/yr, a $100B pays 6%/yr, a $500B+ pays 12%/yr. So they can pay the tax if they want but most likely they will come to a point where it offers much much higher value to split the company up.

You could also offer controls on who (by market size) can buy who (by market size), but I am not sure that would be even necessary?


Claeren.

[Canada 02]

S&P 500 down 27% from its high
TSX down 22% from its high

Bear market?

[Slava]

Originally Posted by Canada 02

S&P 500 down 27% from its high
TSX down 22% from its high

Bear market?

Its officially a bear once you break the 20% barrier, so I suppose this qualifies.

[I-Hate-Hulse]

Yeesh... share price of Morgan Stanley and Goldman Sachs are taking a pounding (down 19 or so %) Not because they're performing that bad, but that people don't believe independant investment bank shops are viable in this day and age. Morgan is fighting for it's survival.

Some icons of industry about to go (or have gone) under here.... amazing.

[Bobblehead]

Central Banks to the rescue!

The Toronto stock market jumped almost 500 points at midmorning Thursday as financials were lifted by moves by central banks including the Bank of Canada to inject huge amounts of money into global money markets to encourage lending and a shift in sentiment by investors towards commodity stocks.

http://money.canoe.ca/News/Economy/2...521768-cp.html

[Canada 02]

^an actual rally or dead-cat-bounce?

(I don't really care, just wanted to say dead-cat-bounce)

[Ronald Pagan]

I find it funny how people get so shocked by down-cycles but take growth-cycles for granted.

[Cowboy89]

Originally Posted by I-Hate-Hulse

Yeesh... share price of Morgan Stanley and Goldman Sachs are taking a pounding (down 19 or so %) Not because they're performing that bad, but that people don't believe independant investment bank shops are viable in this day and age. Morgan is fighting for it's survival.

Some icons of industry about to go (or have gone) under here.... amazing.

Yeah this article explains this thought a bit:

http://www.reportonbusiness.com/serv.../Business/home

Personally I think that the legislators will come down with harsh new rules and regulations that will be rather heavyhanded on the investment banking model, however these things are cyclical. Some of the small boutiques that will start up once things shift back onto stable ground the next few years will grow into large firms overtime as we'll see a deregulation period again in reaction to these new overreative laws and then generations from now will crumble in similar fashion. Thus is the cycle of life.

[Ronald Pagan]

I don't necessarily take that view.

I think that very few people took willing and knowingly criminal steps to improve their wealth. Everyone was just greedy and they were completely myopic about creating financial instruments to improve yields and minimize risk. The writing was all over the wall from the get-go yet millions of investors chose to disregard it in the attempt for returns.

I also am highly skeptical of regulations and would posit that lack of or faulty regulations were the problem. Loose monetary policy was the problem with artificially low interest rates. You cannot hope to regulate financial actors because the system is so fluid. All you can hope to do is maintain that investors incur the risk of their investments and that the economic environment represents its current reality. Neither of these two situations are/were present in the wake of this meltdown.