Really Useful Oil Thread

(Imagnative comment from Financial Sense's Joe Duarte):

Today’s Analysis: Chavez: Venezuela's Investment Guru And Hedge Fund Manager
Venezuela's president, Hugo Chavez, is running a hedge fund and dispensing investing advice on his weekly radio show.

Flush with petrodollars, Chavez is setting Venezuela up as an alternative to the International Monetary Fund, telling an audience in Uruguay "building alternatives to the excessive dependence on the international financial system that has badly hurt our countries."

According to Bloomberg: "Venezuela's reserves have more than doubled to $28.8 billion from $11 billion in January 2003."

And Chavez has put the money to work, buying $25 million of bonds from Ecuador in early December and amassing nearly a billion dollars worth of Argentine bonds.

Some are brushing Chavez' latest moves off as intended to buy influence. As reported by Bloomberg: "These operations appear to be motivated mainly by President Chavez's attempt to be supportive of some regional countries and in the process, gain greater regional standing,'' said Mohamed El-Erian, a managing director at Newport Beach, California-based Pacific Investment Management Co. since 1999 named in October to take over as head of Harvard University's endowment next year. "They're mainly an attempted political investment, and not primarily a financial investment.'' ]

Wall Street pros are concerned about Chavez' latest venture: ["A Hugo Chavez hedge fund; it's terrifically ironic,'' said James Barrineau, senior vice president responsible for Latin American economic analysis at Alliance Capital Management LP in New York, which manages $163 billion in fixed income securities and had $8 billion in emerging market debt as of Dec. 1. "The dangers are when the market heads south and they want to dump the bonds.'' ]

Stay Away From America

According to Bloomberg, Chavez is now giving investment advice. The wire service reported: ["I do not recommend you invest in the U.S.,'' Chavez said on his weekly radio show "Alo, Presidente'' Nov. 27. "Be careful -- that economy is reeling. This has nothing to do with my relationship with Mr. Danger's government. It's an objective opinion.'' ]

Chavez added: " that the U.S. budget deficit is out of control. The U.S. had a $319 billion deficit in the fiscal year ended Sept. 30, four years after recording a surplus of $127 billion."

Putting their money where their mouth is "Venezuela's central bank sold $10 billion of U.S. bonds and other U.S. assets in the first half of 2005."

Risky Policies At Home

Meanwhile, Venezuela's economy is in danger of slowing to a crawl as government policies threaten to choke off private investment.

While Venezuela's Hugo Chavez is investing billions of petrodollars in Argentinian bonds, companies in his own country are spending the bare minimum required by the government in order to keep production at current levels.

According to the Wall Street Journal: "Local business leaders, aware of Mr. Chávez's antibusiness tendencies, are steering clear of making heavy investments," while many "have kept investment low for more than three years, and 82% of them plan to invest the minimum needed to keep production at the same level during the coming year, according to a third-quarter survey of the manufacturing trade group Conindustria."

This seems to be the response to Chavez' latest installment on the road to socialism in Venezuela, the world's fifth largest oil producer, and a key provider of energy to the U.S.

Chavez' strategy, dubbed "co-management," is based on "turning some expropriated companies into government-financed operations, jointly run by the state and worker cooperatives."

But, few are buying it, fearing that although Mr. Chávez says he is "democratizing capital" -- some investors are saying that the new system attempted to be put in place "threatens to undermine the country's economy." Indeed "business leaders fear the corporate initiative is a backdoor attempt to lead the country down the path followed by Cuba's Fidel Castro, Mr. Chávez's friend and mentor."

According to the Journal: "Co-management draws inspiration from the so-called self management that was popular in Eastern Europe in the 1970s and 1980s. The method, first imposed by Communist Yugoslavian leader Josip Broz Tito, eventually fostered subsidy-dependent industries and left Yugoslavia saddled with debts."