Now that oil is a long way from the $145 per barrel peak it hit in July 2008 and nobody on Wall Street is predicting, as Goldman Sachs did in 2008, that oil is headed to $250 a barrel, we’re not hearing much about peak oil anymore.

The peak oil model, initially developed by oil geologist King Hubbert and which accurately predicted a peak in U.S. oil production between 1965 and 1970, says that the production from an oil field grows exponentially over time, then peaks, and finally declines. The model has been applied to individual oil fields, national oil industries, and global oil production. Back in 2008, the fiercest proponents of peak oil as a global model were predicting that the world would start running out of oil sometime around 2020.

Now that the world is awash in oil, the only people talking about peak oil are its opponents, who are dancing on what they depict as the grave of what they call a “theory” that was never worth the graph paper it was plotted on.

Well, I still think that the peak oil model is the most useful description of what we see happening in the oil industry today—even if West Texas Intermediate, the U.S. benchmark, closed at a twitch under $100 a barrel on Friday, February 3. (Brent crude, the European benchmark closed at $114.58.)

And, I’d go on to say that the peak oil model is the best way to understand what’s happening to the prices of other commodities, especially copper.  (Full disclosure: I predicted that oil would go to $180 a barrel shortly before it began its collapse from the $145 a barrel high in 2008. And full, full disclosure: The only one predicting $250 a barrel oil right now is Iran, which is threatening that prices will reach that level if developed economies impose tougher sanctions on the Iranian economy in an attempt to slow or stop that country’s development of a nuclear bomb.)

And I think it’s even useful for thinking about how to invest in commodities such zs iron ore that, currently, don’t fit the peak oil model at all.

Let me explain why I still find so much value in this “discredited” theory. Read more

On Wednesday, January 25, the U.S. Federal Reserve said it would keep interest rates at their current exceptionally low level until the end of 2014. Forget about the middle of 2013, which seemed extremely far away when the Fed made that “guarantee” in August. And forget about the beginning or middle of 2014. Now the Fed is talking about the end of 2014.

Almost three years from now. Three years with short-term interest rates near 0%.

Let’s cut straight to the chase for investors: Who wins and who loses from this extraordinary statement of policy by the U.S. central bank? Read more

Sell Titan International (TWI)

On December 9 Titan International (TWI) told Wall Street to expect sales for 2011 to be around $1.4 billion (that’s slightly below the Wall Street consensus of $1.48 billion) and 2012 sales of $1.7 billion to $1.9 billion (the Wall Street consensus for 2012 stood at $1.82 billion)

Nothing wrong with those numbers—or with Wall Street’s estimates of a whopping 194% increase in earnings for 2011 from 2010 or with the 59% earnings growth rate projected for 2012.

But as anyone who bought this stock when I recommended it in my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ on July 1, 2011 knows, Titan International is an extremely volatile stock that rises and falls with fear and hope about growth and earnings in the commodities sector. Since that purchase date the stock has traded as low as $13.83 on October 3 and as high as $24.81 on January 24. That’s not unexpected of a company that sells tires to the makers and users of giant earth moving equipment used in mining (as well as tires for farm equipment and construction), but it does give me pause. Read more

An early Lunar New Year holiday will make figuring out China’s markets and economy especially tough this week

The markets are going to be even tougher to read this week than they’ve been lately.

You can blame some of that (although the Greek debt crisis will certainly help) on the Lunar New Year holiday that started on January 21 and stretches until January 29. The Shanghai stock market is closed for those dates. The Hong Kong stock market is closed from January 23 through January 25.

There’s a good chance that the Luna New Year already distorted data last week, especially in the commodities markets. Companies in China, for example, always stock up on raw materials and on inventory in the weeks before the holiday. For example, China cut gasoline exports to a three-year low in December as companies stockpiled fuel for the big surge in travel during the Lunar New Year festival. The month also saw a big surge in diesel imports for the same reason.

If looking at those figures, you drew any conclusions about the direction of the Chinese economy, the likelihood is that you would have been wrong. Read more

Now that’s more like it. When I dropped Kinross Gold (KGC) from my long-term Jubak Picks 50 portfolio http://jubakpicks.com/jubak-picks-50/ on January 13 I said that what I wanted in a gold mining stock was a company with low production costs and rising production. Kinross, I opined, didn’t fit that bill any longer. (See my January 17 post http://jubakpicks.com/2012/01/17/sell-kinross-gold-kgc-in-my-long-term-jubak-picks-50-portfolio/ )

But my replacement for Kinross, Yamana Gold (AUY) does. The company’s cost of production is at the low end for the industry—at $450 a gold equivalent ounce in 2010–and it has one of the best profiles for increasing gold production among gold miners. That’s why I added it to the Jubak Picks 50 portfolio on January 13. (See my post http://jubakpicks.com/2012/01/13/10-stocks-for-10-years-2012-edition-my-annual-update-of-my-long-term-jubak-picks-50-portfolio/ for all the changes to the portfolio.)

Low production costs for a gold mining company largely hinge on the richness of the ore grades in its mines. Read more