What the heck is a target price?

You often hear analysts say that they have a particular target price for a stock or a commodity. That means that in their heads they expect the value of that thing to hit that price over a certain period of time. But now we have OPEC saying that they have a target price of $75 per barrel of oil.

YEAH RIGHT.

One of two things is the case here. Either OPEC has no price control, or they are simply lying, and they really just want the price as high as it will go, as it did go in the summer. I tend to think both. For one thing, the statement may be a sap to Iran and Venezuela, who have been publicly pushing for a cut in order to get prices back up to stabilize their own oil-based economies.

What seems to have happened with oil is that the speculators had their day both ways. First they drove the price up, and then they drove it down. They were helped a little bit by demand having first climbed, and then fallen. Once prices were clearly dropping, they piled on and just drove them down further.

So where is OPEC’s role in setting the price? How many millions of barrels will they have to cut in order to have a significant impact on prices? The general economic answer would be that they would have to stop supplying the world with enough oil to meet current demand, a shrinking target, as we speak.

So why have prices stablized at $50 or so? Who can say? Perhaps traders believe that demand has leveled off and is now stable. Perhaps there is simply a consensus view as to what production and the econony will be 90 days from now, and it is reflected in that price.

Two things have happened this weekend that should make Monday trading very interesting. First, Black Friday has come and gone. This will give some indication as to the state of U.S. retail, and hence a good portion of the economy. Second, OPEC has said that they will not cut current production levels.

If Black Friday turns out to have run red, then we may well see yet a larger drop in demand, based on lower production. Butt his depends on whether or not producers have already anticipated a miserable Christmas season. Even so, Monday will be very interesting. When you see reports about this weekend’s retail sales, think of oil.

A Parental Moment: 3 Points!

People might think that Wilt Chamberlain or Michael Jordan were the best basketball players of all time, and maybe they were. But here’s a little secret. Any parent whose had just a little practice can sink one from the foul line. All it requires is that you replace the basketball with a small bag containing a used diaper. Parents don’t miss. The consequences of doing so would be, well, messy.

A (Brief) Letter from Singapore

This week I find myself in one of the chief Asian powerhouses: Singapore. I visited this tiny but hugely influential country fifteen years ago, just after having read another Letter From Singapore in the New Yorker magazine. Back then, the community seemed smaller and the businesses were lots more cozier. Today, the community seems larger, and businesses are still pretty cozy.

Singapore is a nation state of paradoxes. Its small size would not lead one to believe that it is one of the chief trading centers in the region, with container ships constantly waiting to unload. That, by the way, really does seem to be one of the lone constants between now and 1993. The hotel I stayed in then, the Pan Pacific, was one of the taller buildings. Today it is in the shadow of many others.

The city itself is difficult to evaluate this week because of an extraordinary event. They are hosting their first Grand Prix on the weekend, which will be held on the streets at night. It’s a first for Formula 1 and somewhat controversial. What is not in dispute is that when F1 comes to town to do a street race, everything gets turned upside down. Tonight, returning from dinner, with many street closures in order to form the racing circuit, my taxi took me through the connected substructure of many buildings to get me back to the Mandarin Oriental. We needed a residence pass just to do that.

The hotel prices on Thursday night will increase from a seasonal norm of $300SGD to $1800SGD. This means I will be out of here on Thursday.

Singapore sports a cross of many cultures, including Chinese, Malaysian, Bengal Indian, Japanese, British, and yes, some Americans. This intersection leads to a wealth of cuisine entertainment and education options. There is a disparity amongst some of the groups, and to be sure, not everyone here is wealthy, but for a tourist it represents an interesting stop in the middle of the Pacific rim, with Indonesia, Malaysia, Thailand, Vietnam, and Hong Kong, not far off at all, and Australia, an almost reasonable distance.

The people here are extremely gracious and the service has been nothing short of remarkable. More on Singapore in a future note.

Gustav Update

While it is too early to tell the political ramifications, it’s not too early to donate money to relief efforts. The American Red Cross has always served the world well in this regard. Here is the link.

Spinning a Hurricane

In general it is considered to be in extremely poor taste to talk about the politics of other peoples’ suffering, especially while they are suffering. And so I will do so. This week both the Democrats and Republicans have the opportunity to make hay of the trek of, and losses by many thousands of people fleeing New Orleans, again. The Republicans are in interesting position. On the one hand they can’t be seen as making hay, and so they have postponed the beginning of their national convention. Moreover, if things go wrong, like they did with Katrina, it will leave a clear impression that they cannot govern. And so things won’t go that wrong. This is also the perfect opportunity to keep President Bush and Vice President away. They’re already wildly unpopular, but it is a very difficult thing to not have the elected heads of the party speak. Gustav provided the perfect excuse.

The Democrats have fewer options. The best they can do is stay quiet, because anything else will seem like making hay. They can also hope for the storm to dissipate quickly without much damage, as can we all. Aside from the human relief that would bring, the Republicans would have lost the spotlight to a non-event. Sadly that seems unlikely.

And so in this case human suffering will serve Republicans – to a point.