Currency

Instability, Here We Come

Posted by John Rubino - DollarCollapse.com

on Monday, 1 December 2014 5:41

imagesLast week saw the global financial system tip from delusion — where it had happily drifted for several years — into chaos. Consider the following more-or-less randomly chosen data points:

French unemployment hits record high

Italian unemployment hits record high 

Oil’s price falls by $10.36/bbl, or 13.5%, in a single day, to its lowest price since 2010. 

Copper falls by 6% to $2.86/lb, 25% below its 2013 high. 

European bond yields fall to record lows. Even Italy, with government debt exceeding 130% of GDP, can now borrow for around 2%. Japan, meanwhile, issues bonds with negative interest rates. 

European inflation approaches zero, with several member states apparently already in deflation. 

Emerging markets see the opposite trend, as a soaring dollar causes their currencies to fall and inflation to spike. The Russian ruble falls by 7.3% to a record low, while the currencies of Brazil, Colombia, Mexico and Chile drop by at least 1.9%. See Brazil’s Rousseff vows immense effort to slow inflation.

Chinese malinvestment, a topic of conversation ever since those ghost city pictures started circulating, is pegged at $6.8 trillion, or about 70% of China’s entire economy. 

As Prudent Bear’s Doug Noland put it his November 28 Credit Bubble Bulletin, “Collapse of the ‘global reflation trade’ runs unabated. Where might contagion strike next?” 

The answer is in one final set of stats: Last week the S&P 500 and Dow Jones Transports hit record highs, while the Nasdaq 100 index of tech stocks rose to its highest level since March 2000, just before its epic crash.

If everything but equities is being sucked into a 2008-style deflationary vortex, how much longer can US stocks hold out? Probably not long.

Beware – Fraudulent EPA Regs Enriches Politicians & Costs Citizens $284 Billion/Year

Posted by CFact.org

on Monday, 1 December 2014 4:52

Obama-new-energy-podium
“An exhaustive study found that EPA rules and energy markets will inflict $284 billion per year in extra electricity and natural gas costs in 2020, compared to its 2012 baseline year.” 

…..more from the The Gruberization of environmental policies

Former White House medical consultant Jonathan Gruber pocketed millions of taxpayer dollars before infamously explaining how ObamaCare was enacted. “Lack of transparency is a huge political advantage,” he said. “It was really, really critical to getting the bill passed.” At least one key provision was a “very clever basic exploitation of the lack of economic understanding of the American voter.”

The Barack Obama/Gina McCarthy Environmental Protection Agency is likewise exploiting its lack of transparency and most Americans’ lack of scientific understanding. EPA bureaucrats and their hired scientists, pressure groups and PR flacks are getting rich and powerful by implementing costly, punitive, dictatorial regulations “for our own good,” and pretending to be honest and publicly spirited.”

EPA’s latest regulatory onslaught is its “Clean Power Plan

The typical household’s annual electricity and natural gas bills will rise 35% or $680 by 2020, compared to 2012, and will climb every year after that, as EPA regulations get more and more stringent. Median family incomes are already $2,000 lower since President Obama took office, and electricity prices have soared 14-33% in states with the most wind power – so these extra costs will exact a heavy additional toll.

Manufacturing and other businesses will be hit even harder, the study concluded. Their electricity and natural gas costs will almost double between 2012 and 2020, increasing by nearly $200 billion annually over this short period. Energy-intensive industries like aluminum, steel and chemical manufacturing will find it increasingly hard to compete in global markets, but all businesses (and their employees) will suffer.

The EVA analysis calculates that industrial electricity rates will soar by 34% in West Virginia, 59% in Maryland and New York, and a whopping 74% in Ohio. Just imagine running a factory, school district or hospital – and having to factor skyrocketing costs like that into your budget. Where do you find that extra money? How many workers or teachers do you lay off, or patients do you turn away? Can you stay open?

The CPP will also force utility companies to spend billions building new generators (mostly gas-fired, plus wind turbines), and new transmission lines, gas lines and other infrastructure. But EPA does not factor those costs into its calculations; nor does it consider the many years it will take to design, permit, engineer, finance and build those systems – and battle Big Green lawsuits over them.

How “science-based” are EPA’s regulations, really? Its mercury rule is based on computer-generated risks to hypothetical American women who eat 296 pounds of fish a year that they catch themselves, a claim that its rule will prevent a theoretical reduction in IQ test scores by an undetectable “0.00209 points,” and similar absurdities. Its PM2.5 soot standard is equivalent to having one ounce of super-fine dust spread equally in a volume of air one-half mile long, one-half mile wide and one story tall.

….read it all HERE

Smart Oil is Cheap Oil – Plunge & 8 Stocks Hit Target Zones

Posted by Rudolf Hokanson - The Energy Report

on Sunday, 30 November 2014 15:58

pumpjack580Even a global economic growth slowdown will not seriously impact the future of the shale oil patch, Rudolf “Rudy” Hokanson tells The Energy Report. The Barrington Research analyst’s job is to think long and hard about the target prices he assigns to the best and brightest junior firms playing in the Bakken and other shales. He likes smart managers—the ones who know how to reduce costs at the wellhead while improving the flow of oil, gas, and liquids—and provides the names of companies with such managers at the helm.

The Energy Report: Is the energy sector undervalued?

Rudolf Hokanson: Energy is very undervalued. The market is not sure how to interpret what is going on in the world, and it runs scared of its own shadow. The market has a tendency to overreact to “The News,” and then to discount current pricing trends by focusing on near-term commodity valuations.

TER: What world news is implicated in the market’s overreaction?

RH: There have been significant interruptions to energy production in Africa, and to energy delivery capabilities in Eastern Europe. Libya is increasing production. The Saudis are selling into Asia, while positioning themselves to be competitive into the U.S. market. Supply issues are driving the markets, as U.S. production grows and Organization of the Petroleum Exporting Countries (OPEC) production finds new markets.

TER: Is there an oversupply of oil and gas in the U.S market?

RH: We are not oversupplied here. Our refiners are happy to take U.S. crude; it is light, sweet, inexpensive and easy to refine. We can keep our refiners busy servicing the domestic market. Our production influences the international markets. Of course, demand could fall, rather than just slow, if global growth rates decline or slow too much. The Brent and WTI differential should even out over time, and there is always a need for energy for growth.

TER: What role are new technological advances playing in developing energy resources?

RH: The oil patch does not like to adopt new technology just for the sake of new technology. High tech is costly, and nobody wants to be the guinea pig for testing new techniques. But we do keep making common sense technical improvements in hydraulic fracturing and methods of completions. One of America’s most important resources is human intelligence. For example, smart petroleum engineers have recognized that a smaller-size sand will penetrate fracked sediments more thoroughly, allowing more oil to flow in the patch. 

TER: How do oil patch service firms handle new technologies? 

RH: It is not necessary to have a brand-new widget to bring into the patch. Drillers are always looking to reduce costs by improving efficiency. For example, some of the more technologically advanced service firms are using seismic-linked computer programs to visualize the geometry of fracks. But the key to success in the oil well servicing sector is reducing costs, not spending precious capital on unproven technologies.

TER: What service firms do you like from an investment point of view?

RH: One of my favorite small-cap service companies is ENSERVCO Corp. (ENSV:NYSE.MKT). Its forte is heating up oil to improve flow. The company works with hot oil trucks, frack water heating units and acidizing. These technologies are not particularly new or complex, but ENSERVCO is very good at what it does, and it performs to customers’ timetables. I have listed ENSERVCO as a Speculative Buy, because a lot of small service companies have to fight hard to make their way in a competitive arena. But ENSERVCO’s trucks are servicing a lot of basins, and the company is building itself a good reputation, well by well. I have put a $4/share price target on it.

Screen Shot 2014-11-30 at 7.43.31 AMI am experiencing contrarian inclinations at the moment. I do believe that the seismic industry is critical to the energy program. To that end, I like ION Geophysical Corp. (IO:NYSE) and Dawson GeoPhysical Co. (DWSN:NASDAQ). Their stocks have been beaten up a bit of late, because many operators that need seismic are watching their budgets and going without. But, really, seismic technology is key to understanding where to drill, how to drill, and when to drill. It is an increasingly essential tool.

TER: Do you have target prices on those two seismic companies? 

RH: For 2015E, I have a $5/share target price for ION, and a $25/share target price for Dawson.

TER: Who do you like in the exploration and production (E&P) space?

RH: I recommend four high-quality companies in the E&P space. Each has a slightly different niche. 

On Whiting Petroleum Corp. (WLL:NYSE), I have a $122/share price target by 2015E. That target assumes that Whiting will acquire Kodiak Oil & Gas Corp. (KOG:NYSE.MKT). Its shareholders will vote on that acquisition in early December. Whiting’s managers are extremely sharp guys. They are focused on the Bakken, as is Kodiak. Acquiring Kodiak will strengthen Whiting’s overall position going forward. The company also has an important focus on the Redtail Niobrara Field. Focus is everything.

I recommend Continental Resources Inc. (CLR:NYSE), which is a large, independent E&P company. It is focused not only in the Bakken, but also in the SCOOP (South-Central Oklahoma Oil Province). I have an $85/share price target on Continental. Its managers really understand the energy market. Continental just sold its oil hedges, after the managers decided that oil is not going to drop any further. Some people have reacted negatively to that bold move. It is a gamble, but I trust the experience and instincts of the Continental managers. My own view is that oil is not going to stay below $80/barrel ($80/bbl) for long.

TER: What kind of experience does the Continental management team have?

RH: Harold Hamm started the company back in the 1960s as a small service company in a pickup truck. He gets very good results out of his wells, and he attracts good people. His managers are very smart people. 

Screen Shot 2014-11-30 at 7.43.49 AMContinental was among the first to start shipping its Bakken crude by rail to refiners that were closing on the East Coast. Those refiners could not process heavy overseas crude without investing many millions of dollars into new equipment. Now they are busy and profitable, using their older plants.

TER: Who else do you like in the oil patch?

RH: SM Energy Co. (SM:NYSE) has some Bakken properties, but its greatest exposure is to the Eagle Ford. It has a nice mix of oil and gas and liquids. The oil percentage is growing. It has a relatively short reserve-to-production life compared to the other companies I follow. Some of its Eagle Ford properties are viewed as three-year wells. Management is working on extending those profiles with different methods of completions. The company’s stock is going to react when prices fall, but when prices go up, SM Energy stock will rise faster because of the impact on its present value from its production capabilities. SM Energy has very smart, well-disciplined managers. The CEO is retiring in January, and the new, designated CEO came up through the company ranks. The firm is ramping up growth to 20% next year. I have listed a $102/share price target on SM Energy. 

Newfield Exploration Co. (NFX:NYSE) is very focused on its domestic oil and liquids holdings. It is selling off property in China and Malaysia. It is in the Bakken, and it has a play not far from Continental’s SCOOP called the STACK. Everybody gets into naming their plays, and if they can name it first, everybody else has to use it. I have a $47/share price target on Newfield.

None of the stocks I have mentioned are appreciated by the market at the moment. But the companies’ balance sheets are in good shape. The capital programs are disciplined. Growth is not projected at the expense of the companies’ health and balance sheets. Less well-capitalized companies will be stressed in a volatile commodity market, and their lenders may put pressure on them. Those poorly capitalized companies could then become acquisition candidates for companies like those that I am recommending.

TER: Thanks for talking with us today, Rudy.

RH: You’re welcome.

Read what other experts are saying about:

 

 

Rudolf “Rudy” Hokanson joined Barrington Research in 2011 as managing director, research and senior investment analyst within the Equity Research group. His research focus is within the industrial and energy sectors, specializing in niches that primarily include exploration & production, oil equipment & services and other energy-related technologies. He was with UBS from 2005 to 2010 as a buyside analyst, covering energy companies. He served as an energy buyside analyst with US Bank from 2002 to 2005. He has also served as a sellside analyst with CIBC World Markets Corp., Deutsche Bank Securities, R.W. Baird, The Milwaukee Co. and Kemper Securities, providing research for both the energy and publishing/print & media industries, from 1981 to 2001. Other experience includes private consulting. Hokanson has over 30 years of experience within the investment industry, and is a former winner of The Wall Street Journal’s “Best on the Street” analyst survey. Additional accolades also include two 2013 Starmine Analyst Awards: “No. 5 Overall Earnings Estimator” and “No. 1 Earnings Estimator in Oil, Gas & Consumable Fuels.” Hokanson holds both an master’s degree in business administration and a master of divinity from Yale University, and dual bachelor’s degrees in philosophy and religion from DePauw University. He has also completed other business management certificate programs at Oxford University and the University of St. Thomas. He also holds the Chartered Financial Analyst (CFA) designation.

Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

DISCLOSURE: 
1) Peter Byrne conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: ENSERVCO Corp. Streetwise Reports does not accept stock in exchange for its services. 
3) Rudolf Hokanson: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview. 
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent. 
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

Black Friday for Precious Metals

Posted by Jordan Roy-Byrne - The Daily Gold

on Saturday, 29 November 2014 15:32

Black Friday has a few meanings. It has the retail connotation and interestingly also marks a Friday in September 1869 when the Gold price plummeted after two speculators attempted to corner the market. Today wasn’t that bad for precious metals but it was a Black Friday given the severe selloff and the particular day and time of year. Gold declined over 2% and Silver lost nearly 7% while gold miners slipped 8% (GDX) and nearly 12% (GDXJ). Oil drove the decline but showed how vulnerable precious metals still are. Black Friday marked the end of the current rebound while raising the probability that Gold has yet to bottom.

For the miners the significance of the decline is best illustrated on the weekly candle chart. Below are GDXJ and GDX. Simply put, the miners rallied back to previous support and retested the recent breakdown. After rallying for three straight weeks the miners tested resistance in each of the past two weeks. New resistance held and has ushered in the next decline in violent fashion.

nov28edminers

Click for Larger View

While the miners often lead the metals, we recently realized that Gold has been the better barometer. It’s weakness (and not the miners’ relative strength in 2014) was correct. As we penn this, Gold is trading below $1170/oz and essentially at a new weekly low. The bear analog chart puts this bear in proper context. It appears likely to end up worse than a normal bear (excluding the crash) and that could be the result of the preceding 10 years without a significant bear market.

nov28goldbears

Click for much Larger View

Almost every metric or indicator we look at makes a strong case for buying near $1000/oz Gold. Gold has tried but has been unable to bottom at $1200/oz. It ($1000/oz) is the next strong support and major target. The above bear analog makes the case that the current bear has more to go but not too much more. Furthermore, we’ve noted how a decline below $1100 should push various sentiment and volatility indicators to the kind of extremes that can induce a major trend change.

Gold has appeared very close to bottoming multiple times in the past 18 months yet its always rebounded before it could make its last plunge. Gold is once again trading at a new weekly low and in the coming weeks figures to inch closer and closer to major support. I am working hard to prepare subscribers to take advantage of what could be a lifetime buying opportunity. Consider learning more about our premium service including a report on our top 5 junior mining stocks to buy at the coming bottom.

 

Good Luck!

 

Jordan Roy-Byrne, CMT

Jordan@TheDailyGold.com

China’s Nuclear Power Gamble Is Mind-Boggling

Posted by OilPrice.com

on Friday, 28 November 2014 16:46

GraphEngine.ashxWhat we know is Uranium mines only supply 85% of current Utility requirements. The price has dropped 70% since ’07 . Nuclear energy generates no CO2. Whether you agree with Global Warming/Climate Change or not, it is just a huge factor in local, regional, national & international politics/spending/taxation. Rob, Ed for Moneytalks.net

China’s Nuclear Power Gamble Is Mind-Boggling

The numbers that define China’s progress over the last 50 years are staggering. Over 300 million people lifted out of poverty. Over 160 cities with more than 1 million inhabitants. Over 630 million Internet users.. And now, following the recent climate change deal with U.S., China has a massive price tag of $2 trillion to implement climate policy changes. In order to cap carbon emissions and generate 20% of the country’s electricity from renewables by 2030, Bloomberg estimates this would require 1,000 nuclear reactors, 500,000 wind turbines or 50,000 solar farms. “The pledge would require China to produce either 67 times more nuclear energy than the country is forecast to have at the end of 2014, 30 times more solar or nine times more wind power. That almost equals the non-fossil fuel energy of the entire U.S. generating capacity today,” wrote Bloomberg.

With China already being the global number one in wind and solar energy, financing more projects for these in

2013 than all of Europe combined, it would seem logical for it to turn to these two sources for that massive expansion. However, much chatter from Communist officials is putting the attention squarely on nuclear. In early November, Guo Chengzhan, the deputy director of the National Nuclear Safety Administration, stated that “nuclear power is China’s only scalable replacement energy and is a vital choice in China’s energy strategy”, while Tsinghua University expert Teng Fei told Reuters that without nuclear, China’s peak carbon target could “be delayed by as long as a decade.”

 

Nuclear power is also very likely to be firmly etched into China’s 13th Five-Year Plan (2016-2020) amid a massive drive toward clean energy. Such a commitment is the highest that the Communist Party’s Politburo can make, and while not all Five-Year Plan pledges are met, the country’s track record in wind and solar allow for confidence that it will achieve its nuclear targets as well. One distinct advantage is that such an expansion of nuclear reactors would be embraced at the local level, a key factor in getting central policies to be effective. After all, nuclear reactors would provide several of the important elements party bosses like to see: a visible, marquee infrastructure project for their area, large-scale job creation through construction and auxiliary services, and a potential reduction in long-term pollution which would help to quell unrest.

Another advantage will come from the efforts China is making to have nuclear technology be developed inside the country. In recent years, Westinghouse and Areva have both exported their sophisticated nuclear reactor technology to China, but three domestic nuclear firms are working on adapting that technology to future domestic needs. The South China Morning Post reports that China General Nuclear and China National Nuclear are collaborating on the Hualong 1 reactor model, based on Areva’s technology, while State Nuclear Power has issued a model named CAP1400, inspired by Westinghouse ideas. While these may eventually lead to sophisticated reactors, current third-generation Chinese reactors being built from Western technology in Guangdong and Zhejiang have suffered major delays.

Related: China Strengthening Claim To South China Sea Oil And Gas

But China is catching up. With Areva’s shares crashing after major financial difficulties threatened to stop it from meeting its 2015 and 2016 obligations, China is moving into the gap. The country has already inked a $6.5 billion deal to build nuclear reactors in Pakistan. In the UK, China has invested in the planned Hinkley Point nuclear plant. Since June, Chinese companies will have the right to control Chinese-designed nuclear power stations in the UK.

Time will tell to what extent China relies on nuclear to successfully meet its ambitious 2030 plans, or whether it can even do so. The next five years will be telling as China aims to bring six new nuclear plants online every year from 2015 to 2020. If it can do so while navigating numerous obstacles from a lack of domestic expertise to struggling grid capacity, then there is little doubt that nuclear will follow wind and solar as the country’s latest energy success.

By Chris Dalby of OilPrice.com

More Top Reads From Oilprice.com:

 

 

 

test-php-789