tag:blogger.com,1999:blog-38370961542819068772024-03-14T03:55:28.966-07:00Merrill over MatterAttempting to make sense of the financial worldGreg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.comBlogger306125tag:blogger.com,1999:blog-3837096154281906877.post-28785283047851403572023-11-20T09:00:00.000-08:002023-11-20T13:14:15.532-08:00Money, Bonds, and a Mea Culpa<p>[<i>Executive summary/TL;DR : A huge amount of cash was dumped into the economy with the 2020 COVID relief bill, which caused the burst in inflation. We have not yet returned to equilibrium (and lower inflation) but may by the end of 2024]</i></p><p>An interesting recession we are having, isn't it?</p><p>Earlier this year I stated a recession is coming, fortunately ignoring to tell you <i>when</i> it would happen. More than six months later there is no recession.</p><p>The Treasury bond market is not signaling a recession either as the entire yield curve continues marching higher. Thirty year mortgage rates continue rising, now over 7.5%, with no let up. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxTOqsCxIFGmufZspmDuRUDqolHz7JJL6khmXAIPZbGE-Z_nsFl3Gu8Q_nTDVEaNVpSVEyIvifeXC5epsbn3XWiwJMozvkVHFhadwMgY6jD0EA6SvWp6Hg93-ISm4FSRhv2gxp_rEy-f516AX0ops5on99grjOWhzi_yqfhyphenhyphenZ0c2_lhHDrNKq7NuacJiQ/s1306/30%20year%20mortgage%20rates%202023%2010.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="407" data-original-width="1306" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxTOqsCxIFGmufZspmDuRUDqolHz7JJL6khmXAIPZbGE-Z_nsFl3Gu8Q_nTDVEaNVpSVEyIvifeXC5epsbn3XWiwJMozvkVHFhadwMgY6jD0EA6SvWp6Hg93-ISm4FSRhv2gxp_rEy-f516AX0ops5on99grjOWhzi_yqfhyphenhyphenZ0c2_lhHDrNKq7NuacJiQ/w640-h200/30%20year%20mortgage%20rates%202023%2010.png" width="640" /></a></div><div style="text-align: center;"><br /></div><div style="text-align: center;">Source: <a href="https://fred.stlouisfed.org/graph/?g=1ajT4" target="_blank">Federal Reserve</a></div><p>The most recent GDP numbers came out and still no recession, with a real growth GDP above 2.5%</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhWa35HxuHLzaIY3R7lamAZ6qzpQ-GZHr6_p0aYGAYc-MQy5ImDML3N8RHvxMx_74y5w0Vi86CSJMX7_qhqP0nE4lojEASxzS9awm7BBpg3tptLWIflfjxmT7SRDiK8ni-fRokqXYZsf9yvJEakL17_-AAtJlHdrkhVwzWoB1RGT8lzF9-e_xUcve1Bpk/s1893/real%20gdp%202023%2010.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="855" data-original-width="1893" height="290" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjhWa35HxuHLzaIY3R7lamAZ6qzpQ-GZHr6_p0aYGAYc-MQy5ImDML3N8RHvxMx_74y5w0Vi86CSJMX7_qhqP0nE4lojEASxzS9awm7BBpg3tptLWIflfjxmT7SRDiK8ni-fRokqXYZsf9yvJEakL17_-AAtJlHdrkhVwzWoB1RGT8lzF9-e_xUcve1Bpk/w640-h290/real%20gdp%202023%2010.jpg" width="640" /></a></div><br /><p style="text-align: center;">Source: <a href="https://fred.stlouisfed.org/graph/?g=1aFXS" target="_blank">Federal Reserve</a></p><p>So what happened? <br /><br />I think I found the reason, or perhaps, <i>a reason</i>. The US economy is an incredibly complex entity and there is not just <i>one</i> factor which pushes it around. I will be discussing just a few parts of it, so please keep that in mind. Now, take yourself back to the early parts of the COVID lockdown and hysteria. I know, a bad place to visit but sometimes finance blogging can be a scary place. In order to mitigate the lockdown, the<a href="https://en.wikipedia.org/wiki/CARES_Act" target="_blank"> COVID relief bill</a> passed in early 2020 which dumped a massive amount of money into the economy, and when I mean massive, I mean unprecedented. Just look at this graph. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLF7CpNC34NMCoWL7c_A9R0I-98U7m8SakalwPGxiOYBIKrZWIIp1B49IwpwpCobuRNCef-GW9K4goensYAYyKEDeerC71KbxuhpAU77sMUVj-alTzAShwxTQxivB6EIZ_Nrwx_Qz2pr-1ko1WnKOs5eOH3mkt-MZyW9JPdyDDrq5BUSb6s9xVmFa5n2c/s1317/m2%20spike%202023%2010.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="400" data-original-width="1317" height="194" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLF7CpNC34NMCoWL7c_A9R0I-98U7m8SakalwPGxiOYBIKrZWIIp1B49IwpwpCobuRNCef-GW9K4goensYAYyKEDeerC71KbxuhpAU77sMUVj-alTzAShwxTQxivB6EIZ_Nrwx_Qz2pr-1ko1WnKOs5eOH3mkt-MZyW9JPdyDDrq5BUSb6s9xVmFa5n2c/w640-h194/m2%20spike%202023%2010.png" width="640" /></a></div><div style="text-align: center;">Source: <a href="https://fred.stlouisfed.org/graph/?g=1aG18" target="_blank">Federal Reserve</a></div><p></p><p>On a year over year basis M2 expanded around 17%, the largest spike in the entire data series.</p><p>To define for those who may not know, M2 is cash you have access to immediately.</p><p style="text-align: left;">Quoting the federal reserve:<br /></p><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px;"><p style="text-align: left;"><span style="background-color: white; font-family: "IBM Plex Serif";"><i>M2 is a measure of the U.S. money stock that includes M1 (currency and coins held by the non-bank public, checkable deposits, and travelers' checks) plus savings deposits (including money market deposit accounts), small time deposits under $100,000, and shares in retail money market mutual funds. </i></span></p></blockquote><p>Source: <a href="https://www.stlouisfed.org/financial-crisis/data/m2-monetary-aggregate#:~:text=M2%20is%20a%20measure%20of,retail%20money%20market%20mutual%20funds." target="_blank">Federal Reserve</a></p><p><i>[Addendum added 11/20/23 - I should have included the massive increase in the Federal Reserve's balance sheet as another possible reason for the jump in M2. The relative importance of each (Federal Government or Federal Reserve) is not important for for the scope of this post, just that both had a factor in the spike. Looking at the graph below one can see just how massive the Federal Reserve expanded its balance sheet, roughly triple their response to the financial crisis of 2008/09. Currently the Federal Reserve is contracting their balance sheet and this is most likely the cause of the current reduction in M2.</i></p><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiqTJ60zNk2alap6AWPvneTyAuSYuuLWSPDRNpSp-7g4YBeFhowYleFu7vwwglUYv9pROa7kIYG_A-34j8yqsrwyxbLcJU9Dfzzr9qsepMPLhFRNvC413cDMZ6EVeTkqEGPWRfLwTaSmO0Yw6bfdt3g0x1XcRDTxVNOaeFRI6xULWiPj2LmMJcKk44-Ss/s1311/Fed%20balance%20sheet%202023%2011.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="346" data-original-width="1311" height="168" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhiqTJ60zNk2alap6AWPvneTyAuSYuuLWSPDRNpSp-7g4YBeFhowYleFu7vwwglUYv9pROa7kIYG_A-34j8yqsrwyxbLcJU9Dfzzr9qsepMPLhFRNvC413cDMZ6EVeTkqEGPWRfLwTaSmO0Yw6bfdt3g0x1XcRDTxVNOaeFRI6xULWiPj2LmMJcKk44-Ss/w640-h168/Fed%20balance%20sheet%202023%2011.png" width="640" /></a></div><div style="text-align: center;">Source: <a href="https://fred.stlouisfed.org/graph/?g=1bCsu" target="_blank">Federal Reserve</a></div><i><br /></i><p></p><p><i>Someone with more specialized knowledge regarding Federal Reserve balance sheet expansion and M2 wrote a <a href="https://fedguy.com/the-mechanics-of-quantitative-easing-and-m2/" target="_blank">detailed article</a> regarding the interplay. --End Addenum]</i></p><p>Now let us look at M2 as it compares to the US economy as a whole, expressed as GDP. As the real economy grows over time a slow increase in M2 is also needed, as it is how one facilitates the transactions which make up our economy. Observe the ratio of M2 to GDP (Gross Domestic Product, the sum of goods and services consumed domestically) Economist call the inverse of this 'monetary velocity'<br /><br />Notice the massive spike in this fraction? Again, unprecedented.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEibmJyHq-oyHFj_AKzVdpq5MaMkEb8LqDZA0Xfle5Di5Nh_fpZvKb_odACPcrP9a1ASQWaHrbzendd23AdwUc0oz84B8spy-iZJWqAN2WMVEDjQs9vmDtajlV1OKNjrdrHqABdPoHGEltKRuqmpUWCwKxVoc5JFL_ZqEeV5CBs0gOcr9_hMK_4jb-SPq58/s1306/m2%20gdp%20ratio%202023.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="350" data-original-width="1306" height="172" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEibmJyHq-oyHFj_AKzVdpq5MaMkEb8LqDZA0Xfle5Di5Nh_fpZvKb_odACPcrP9a1ASQWaHrbzendd23AdwUc0oz84B8spy-iZJWqAN2WMVEDjQs9vmDtajlV1OKNjrdrHqABdPoHGEltKRuqmpUWCwKxVoc5JFL_ZqEeV5CBs0gOcr9_hMK_4jb-SPq58/w640-h172/m2%20gdp%20ratio%202023.png" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;">Source: <a href="https://fred.stlouisfed.org/graph/?g=1aQ5w" target="_blank">Federal Reserve</a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;">The increase in M2/GDP is even more dramatic when looking at the annual change in this fraction.</div><div style="text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigjVRDBRBT_nLZIAbPNKkeaUFxo4FlDyLIjxYrIxf0kmEdYuBIf_b-aNdDV2h2h2IMhbHp63TZp4G6dfTfW7svyy6TwNfF2CBVB6HB443o51hiuF0INP_NhyGSs_0w8-vxaWLqSPuHj2kVCwjVIaCCJDFRm9lO9x7PkbDMa7lhJEz6nGeMSaZ1luQFKNk/s1057/m2%20gdp%20change%202023%2010.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="752" data-original-width="1057" height="456" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigjVRDBRBT_nLZIAbPNKkeaUFxo4FlDyLIjxYrIxf0kmEdYuBIf_b-aNdDV2h2h2IMhbHp63TZp4G6dfTfW7svyy6TwNfF2CBVB6HB443o51hiuF0INP_NhyGSs_0w8-vxaWLqSPuHj2kVCwjVIaCCJDFRm9lO9x7PkbDMa7lhJEz6nGeMSaZ1luQFKNk/w640-h456/m2%20gdp%20change%202023%2010.png" width="640" /></a></div><br /><p>Yes, that is a greater than 7 standard deviation move. Something that hasn't ever happened in modern US history.</p><p>So where did all that excess money go? Everywhere. Remember the AMC and Gamestop rip higher? Money from the sky, and bored people at home created that frenzy. <a href="https://watchcharts.com/watches/brand_index/rolex" target="_blank">Rolex </a>prices? Yeah, that too. </p><p>Inflation hit soon after, the highest in decades.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHAmlRp2KDBvyBqtydJPzEfNeExCjhHD_N7ovevkbvOFLP0fHlGpnbDT9e7zvz8TZRhDaR-2Kahe5WFmNv6KO-uQxFVSmJY-K8KztdrDbFT7yKnPIQI4jSfdAu2EwsWKEB_DZGKkRmHtxkkRzcYqLAm-3ZcMR4Rj_5dGaSM9XyY-A52lY3ScVxYsTfyzU/s1306/inflation%202023.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="404" data-original-width="1306" height="198" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHAmlRp2KDBvyBqtydJPzEfNeExCjhHD_N7ovevkbvOFLP0fHlGpnbDT9e7zvz8TZRhDaR-2Kahe5WFmNv6KO-uQxFVSmJY-K8KztdrDbFT7yKnPIQI4jSfdAu2EwsWKEB_DZGKkRmHtxkkRzcYqLAm-3ZcMR4Rj_5dGaSM9XyY-A52lY3ScVxYsTfyzU/w640-h198/inflation%202023.png" width="640" /></a></div><br /><p style="text-align: center;">Source: <a href="https://fred.stlouisfed.org/graph/?g=1aSdT" target="_blank">Federal Reserve</a></p><p style="text-align: left;">What gives me confidence to claim the rapid rise in M2 facilitated a rapid rise in inflation? Well, The Federal Reserve looked at this 30 years ago and noticed the causation.</p><p style="text-align: left;"><a href="https://www.richmondfed.org/-/media/RichmondFedOrg/publications/research/economic_review/1992/pdf/er780502.pdf" target="_blank">https://www.richmondfed.org/-/media/RichmondFedOrg/publications/research/economic_review/1992/pdf/er780502.pdf</a></p><p style="text-align: left;">Quoting from the above paper:</p><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;"><p style="text-align: left;"><i> Over the three periods shown</i> [30 years]<i>, the
trend rate of growth of nominal GDP matches fairly
closely the trend rate of growth of M2. </i></p><p style="text-align: left;"><i>If velocity is stable, the rate of inflation will
correspond over long periods of time to the excess
of the rate of growth of money over output. To
illustrate, over the three decades from 1960 through
1990, the excess of the annualized rate of growth
of M2 (8.1 percent) over the annualized rate of
growth of real GDP (3.0 percent) was 5.1 percent,
while annualized inflation (measured by the implicit
GDP price deflator) was 4.9 percent.</i></p></blockquote><p>In short, the helicopter money shower in early 2020 resulted in a lot of the inflation we are seeing today. </p><p style="text-align: left;">Long term interest rates responded; gradually and then suddenly.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJzyYKDV-VJmkLWGceRVh5dHguU6XB5KiTHCtwUa7URBNy2N5CUGgvvfe8m55JaXWvvrLWSE3mKZHyHJqE8rrX9nWI87IGGR5BpksX-ExgEgguOMnSrdx75DMRJ7_Cb8POsQRDwmVQyjMpIFzdmBEhK_7zuR7AkW2uCmQP_7lLiEnjcSpo44nLdz-7Cig/s864/tlt%202023%2010.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="675" data-original-width="864" height="501" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJzyYKDV-VJmkLWGceRVh5dHguU6XB5KiTHCtwUa7URBNy2N5CUGgvvfe8m55JaXWvvrLWSE3mKZHyHJqE8rrX9nWI87IGGR5BpksX-ExgEgguOMnSrdx75DMRJ7_Cb8POsQRDwmVQyjMpIFzdmBEhK_7zuR7AkW2uCmQP_7lLiEnjcSpo44nLdz-7Cig/w640-h501/tlt%202023%2010.png" width="640" /></a></div><br /><p style="text-align: center;">Source: <a href="https://stockcharts.com/h-sc/ui?s=TLT&p=W&yr=5&mn=0&dy=0&id=p52802372241" target="_blank">Stockcharts</a></p><p style="text-align: left;">This is where I plead Mea Culpa to my clients. The standard signs where there; inverted yield curve, rising continuing claims, prices appeared to have bottomed (in late 2022), etc. so I started buying long duration Treasuries. I didn't think to look at the M2 growth, because it never changes too much. Until 2020. Whoops. Fortunately I only started nibbling on long term treasuries in late 2022, so the pain does not compare to someone who held them as a permanent part of their portfolio. Even now I am underweight my target bond allocation.</p><p>So what now? Considering my irrational desire to predict the future I posit the following; we are almost through this M2 money spike, we just don't know it yet.</p><p>Before the helicopter money drop the M2/GDP ratio was at ~0.70 and as of Q32023 ratio is at 0.75. The median absolute annual change in the ratio is 0.012 so as of today we are <i>close (0.736 vs 0.75) </i> to being back within the range of a 'normal' ratio. (<a href="https://fred.stlouisfed.org/graph/?g=1b94A" target="_blank">Source at Federal Reserve</a>) A combination of M2 reduction, economic growth, and inflation will most likely bring the ratio to within the normal range of variation by year end 2024. </p><p>So, we are mostly through the money storm now? Right? Well, <i>maybe</i>. Markets and economies have a tendency to swing well past their equilibrium points as they veer from one extreme to another. Considering just how much else is going on with the world I'm hesitant to make too many predictions with confidence. For now I've been building up my position in 90 day treasury bills instead of the long part of the bond market. When to buy more, well I don't quite know yet.</p><p>Ours is still a highly leveraged economy and the massive rise in funding costs for everyone in America as well as the inverted yield curve will eventually bite into economic growth. <b> Right now we have two powerful forces pulling us in opposite directions; an excessive amount of money (M2) still sloshing around the economy versus a decelerating economy due to a massive increase in funding costs.</b></p><p>Additionally I believe this spike in M2/ GDP may have caused multiple active allocation strategies to fail as well. Some of these switch between equity market and Treasury bonds, but with the relentless inflation and subsequent bond market thrashing they have performed poorly. The M2 spike we've recently experienced hasn't ever happened before, so how do you model it? This is a facet of current finance, the impossible seems to keep happening with disturbing regularity.</p><p>additional reading:</p><p><a href="https://www.stlouisfed.org/publications/regional-economist/2022/jul/was-paycheck-protection-program-effective" target="_blank">https://www.stlouisfed.org/publications/regional-economist/2022/jul/was-paycheck-protection-program-effective</a></p><p><a href="https://twitter.com/steveanastasiou/status/1651059292089499649" target="_blank">https://twitter.com/steveanastasiou/status/1651059292089499649</a></p>Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com1tag:blogger.com,1999:blog-3837096154281906877.post-889818510667721252023-09-28T13:42:00.005-07:002023-09-28T13:45:04.730-07:00So when will the Chinese debt bubble burst?<p>So when <i>will </i>the Chinese debt bubble burst?</p><p>I've yammered on about this for a long long time. Highlighting empty cities to nowhere, excessive debt buildup, etc. Obviously the Chinese government's ability to extend this bubble is greater than my FinTwit credibility.</p><p>Are we hitting another decision point? Will the next US recession finally detonate the bubble? Honestly I don't know, but now ever Peter Zeihan is commenting on this.</p><p><br /></p><div class="separator" style="clear: both; text-align: center;"><iframe allowfullscreen="" class="BLOG_video_class" height="369" src="https://www.youtube.com/embed/PVMlEiewyT4" width="614" youtube-src-id="PVMlEiewyT4"></iframe></div><p style="text-align: center;"><a href="https://www.youtube.com/watch?v=PVMlEiewyT4" target="_blank">https://www.youtube.com/watch?v=PVMlEiewyT4</a></p><p style="text-align: center;"><br /></p><p style="text-align: left;">The more China blows the debt bubble the larger the explosion when it pops and right now they are working on exceeding the Japanese bubble from decades ago.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEharx1Bn6TNJKSzkvuZW7_5Cm47X-efPdzLcNGbbB_YaAVImyOIJGAzON2G1mGiTvcP41R2dIjrOVjzfC401HXn3pRZxWRQ-q7a_QymYvcd0urW66dZFEz9bgAja7J8iYtczOhZslPF32Ym0bp6OPymY9TJRcM-6CyqtmrBcjCVU5tGArw3v-ddAVtKSTc/s1307/2023%20china%20debt%20bubble.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="625" data-original-width="1307" height="294" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEharx1Bn6TNJKSzkvuZW7_5Cm47X-efPdzLcNGbbB_YaAVImyOIJGAzON2G1mGiTvcP41R2dIjrOVjzfC401HXn3pRZxWRQ-q7a_QymYvcd0urW66dZFEz9bgAja7J8iYtczOhZslPF32Ym0bp6OPymY9TJRcM-6CyqtmrBcjCVU5tGArw3v-ddAVtKSTc/w615-h294/2023%20china%20debt%20bubble.png" width="615" /></a></div><p style="text-align: center;">Source: <a href="https://fred.stlouisfed.org/graph/?g=19p1k" target="_blank">Federal Reserve</a></p><p style="text-align: left;"><br />No one wants to be blamed for ending the party but eventually it does. I can't tell you when it will go off, but be careful when it does.</p>Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-25550186613242846532023-04-26T15:46:00.000-07:002023-04-26T15:46:13.815-07:00Recession is Coming<p> </p><div align="center">
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<p><span style="color: #575757; font-family: Arial, sans-serif; font-size: 9pt;">Recession is coming.</span></p>
<p><span style="color: #575757; font-family: Arial, sans-serif; font-size: 9pt;">No one likes to hear it but a storm is brewing. The
Federal Reserve wants inflation below 2% and it's going to get it by
forcing the US economy into a recession. (How we got here? That's for
another email.)</span></p>
<p><span style="color: #575757; font-family: Arial, sans-serif; font-size: 9pt;">By consistently raising short term interest rates in an
attempt to bring down inflation the Fed has inverted the yield curve.
(Where short term rates are above longer term rates.) If you notice below,
a 2 year rate higher than the 10 year has preceded every recession
throughout the entire data series.</span></p>
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<p align="center" style="text-align: center;"><span style="color: #575757; font-family: "Arial",sans-serif; font-size: 9.0pt;">Source: <a href="https://r20.rs6.net/tn.jsp?f=0013xlYtf_Uet3HgAKmYUEZTal9RJ6czj54_r0N9o86yvheKgELlvuxomiKMlx5JtCm3OjKdHWgoK0aRF0CLpVp8bKVszbNu2rH6-6YCMhdx2fTJp6hgMRYK6-MTRSHCmYI3PLCpMnAlr_EvW9koqd1DA==&c=aTnmTGHDKV3MOUkjEtfHlyjHhu5LBE32tO5Nt0jTZlU2PAoeKtRZVQ==&ch=7-x0BXcx_3lMbRK1Xw_mcZl_fdNdOvdzLHLy_jAs1Z_4kUWjtXS7xg==" target="_blank"><span style="color: #ff7200;">Federal Reserve</span></a><o:p></o:p></span></p>
<p align="center" style="text-align: center;"><br /></p>
<p><span style="color: #575757; font-family: "Arial",sans-serif; font-size: 9.0pt;">It can take a while for pressure from an inverted yield
curve to work its way through the economy but there are already a few
signs.<o:p></o:p></span></p>
<p><span style="color: #575757; font-family: Arial, sans-serif; font-size: 9pt;">Temporary help is already negative on a year over year
basis and it leads full time employment.</span></p>
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<p align="center" style="text-align: center;"><span style="color: #575757; font-family: "Arial",sans-serif; font-size: 9.0pt;">Source: <a href="https://r20.rs6.net/tn.jsp?f=0013xlYtf_Uet3HgAKmYUEZTal9RJ6czj54_r0N9o86yvheKgELlvuxomiKMlx5JtCm3OjKdHWgoK0aRF0CLpVp8bKVszbNu2rH6-6YCMhdx2fTJp6hgMRYK6-MTRSHCmYI3PLCpMnAlr_EvW9koqd1DA==&c=aTnmTGHDKV3MOUkjEtfHlyjHhu5LBE32tO5Nt0jTZlU2PAoeKtRZVQ==&ch=7-x0BXcx_3lMbRK1Xw_mcZl_fdNdOvdzLHLy_jAs1Z_4kUWjtXS7xg==" target="_blank"><span style="color: #ff7200;">Federal Reserve</span></a><o:p></o:p></span></p>
<p><span style="color: #575757; font-family: Arial, sans-serif; font-size: 9pt;">Continuing claims for unemployment have also turned up on
a year over year basis. Like the employment data it's not screaming </span><i style="color: #575757; font-family: Arial, sans-serif; font-size: 9pt;">R<b>ecession
</b></i><span style="color: #575757; font-family: Arial, sans-serif; font-size: 9pt;">just yet, but the direction higher coupled with continued yield
inversion will send more people to the unemployment office. The COVID
lockdowns broke the graph, so here is the data before, after, and with
COVID.</span></p>
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<p align="center" style="text-align: center;"><span style="color: #575757; font-family: "Arial",sans-serif; font-size: 9.0pt;">Source: <a href="https://r20.rs6.net/tn.jsp?f=0013xlYtf_Uet3HgAKmYUEZTal9RJ6czj54_r0N9o86yvheKgELlvuxomiKMlx5JtCm3OjKdHWgoK0aRF0CLpVp8bKVszbNu2rH6-6YCMhdx2fTJp6hgMRYK6-MTRSHCmYI3PLCpMnAlr_EvW9koqd1DA==&c=aTnmTGHDKV3MOUkjEtfHlyjHhu5LBE32tO5Nt0jTZlU2PAoeKtRZVQ==&ch=7-x0BXcx_3lMbRK1Xw_mcZl_fdNdOvdzLHLy_jAs1Z_4kUWjtXS7xg==" target="_blank"><span style="color: #ff7200;">Federal Reserve</span></a><o:p></o:p></span></p>
<p><span style="color: #575757; font-family: "Arial",sans-serif; font-size: 9.0pt;"><o:p> </o:p></span></p>
<p><span style="color: #575757; font-family: "Arial",sans-serif; font-size: 9.0pt;">So, how can you prepare yourself for the upcoming
financial storm?</span></p>
<p><span style="color: #575757; font-family: "Arial",sans-serif; font-size: 9.0pt;">Raise Cash: I've been slowly reducing the risk of client
portfolios. I suggest you do the same in both your investment accounts
and personal financial profile.</span></p>
<p><span style="color: #575757; font-family: "Arial",sans-serif; font-size: 9.0pt;">Liquidity: This is not the same as cash; do you have
excess buying power on your credit cards, lines of credit, etc.? Untapped
debt you can access during a recession can help one get through the rough
patches or capitalize on the dislocation.</span></p>
<p><span style="color: #575757; font-family: "Arial",sans-serif; font-size: 9.0pt;">Shopping list: I'm already building one for assets to
purchase during the upcoming financial storm. This doesn't have to be
stocks, bonds or market related items. Are you planning on a vacation?
Consider deferring the decision until prices drop.</span></p>
<p><span style="color: #575757; font-family: "Arial",sans-serif; font-size: 9.0pt;">Counterparty Risk: How will a recession affect those you
do business with? This could be an employer or a business partner. Do you
have any loans or financial commitments coming up in the next two years?
Now would be the time to consider how a recession would affect those
relationships.</span></p>
<p><span style="color: #575757; font-family: "Arial",sans-serif; font-size: 9.0pt;">Opportunities arise during the chaos of a recession, which
can counterbalance the inevitable disruption which occurs during an
economic downdraft. Don your metaphorical financial rain coat and get
ready.<o:p></o:p></span></p>
<p><span style="color: #575757; font-family: "Arial",sans-serif; font-size: 9.0pt;"><o:p> </o:p></span></p>
<p></p></td></tr></tbody></table></div></td></tr></tbody></table></div><div align="center"><table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="mso-cellspacing: 0in; mso-padding-alt: 0in 0in 0in 0in; mso-yfti-tbllook: 1184; width: 100%;"><tbody>
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</div>Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-7399067076961586782022-09-28T13:57:00.001-07:002022-10-06T17:45:31.354-07:00I'm buying TIPS again<p>In my <a href="http://merrillovermatter.blogspot.com/2022/02/the-lament-of-low-risk-investor.html" target="_blank">last post</a> lamenting the paucity of options available to low risk investors I highlighted the guaranteed negative return one would receive investing in Inflation Protected Bonds from the US Treasury.<br /><br />Oh my, how the world can change in a few short months.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQfFYkxw74otq0c3sOpHxXCvKxe5sVj9fuZDO5VsF3KIMKIRZHu97rx8EamkMSgNlL3e60JuqNYkApHhK9jLyZ815XjjXVkPNiUlB6gE5A2a6XTDzVHI_CZa-rQfFWL6kAwcA8WxkPsR6OL5Rd-t208xImm_t6XDaYNv2pUwZGw3LoPtWKGRMjDyah/s1162/Screenshot%202022-09-28%2013.39.44.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="615" data-original-width="1162" height="272" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQfFYkxw74otq0c3sOpHxXCvKxe5sVj9fuZDO5VsF3KIMKIRZHu97rx8EamkMSgNlL3e60JuqNYkApHhK9jLyZ815XjjXVkPNiUlB6gE5A2a6XTDzVHI_CZa-rQfFWL6kAwcA8WxkPsR6OL5Rd-t208xImm_t6XDaYNv2pUwZGw3LoPtWKGRMjDyah/w628-h272/Screenshot%202022-09-28%2013.39.44.png" width="628" /></a></div><br /><div class="separator" style="clear: both; text-align: center;">Source: <a href="https://fred.stlouisfed.org/graph/?g=UgKc" target="_blank">Federal Reserve</a></div><p style="text-align: left;">What was once guaranteed punishment has flipped dramatically. My mental buy price was a real 1% on the 10 year TIP rate. We recently passed that and thus I will started buying these once again at <a href="https://www.treasurydirect.gov/instit/instit.htm?upcoming" target="_blank">auction</a> for my clients in certain situations. For those of you who don't wish to purchase individual bonds or deal with the tax headaches (I do this for some clients as well) you can mimic the return by buying the etf <a href="https://www.ishares.com/us/products/239467/ishares-tips-bond-etf" target="_blank">TIPS</a></p><p style="text-align: left;">Considering the parabolic move in yield (and converse decline in price) be careful. Remember I'm holding these individual bonds to maturity so I would prefer it (at least for this part of the portfolio mix) if the yield continues to rise. How high the yield may rise is something I cannot answer but at least one is no longer punished for saving right now.<br /></p>Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-9624174495094921862022-02-08T13:44:00.004-08:002022-02-11T12:46:26.339-08:00The Lament of a low risk investor<p style="text-align: center;"> The Lament of a low risk investor</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEiBoL3U3oxdOIS8PyAG8f0Fp8GjTjQzGWwzZ1ZFLFwfTOiHjXZwoN_F1mxpq1fpNN2a7fnB-qeGkpo8lxmNUZdXYZEWgNZv4bc9UzQ8jxjgR65wu4CozcpIlPSUApVuZGhNDVBavXM0i4siBLZYTH-xw-jXPxlRWI3I3uIPThH-WlH3QbzeG7Lf8Meb=s1167" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="410" data-original-width="1167" height="223" src="https://blogger.googleusercontent.com/img/a/AVvXsEiBoL3U3oxdOIS8PyAG8f0Fp8GjTjQzGWwzZ1ZFLFwfTOiHjXZwoN_F1mxpq1fpNN2a7fnB-qeGkpo8lxmNUZdXYZEWgNZv4bc9UzQ8jxjgR65wu4CozcpIlPSUApVuZGhNDVBavXM0i4siBLZYTH-xw-jXPxlRWI3I3uIPThH-WlH3QbzeG7Lf8Meb=w640-h223" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;">10 year TIPS rate</div><p style="text-align: center;">source:<a href="https://fred.stlouisfed.org/graph/?g=Jfcf" target="_blank"> Federal Reserve</a></p><p style="text-align: left;">One of the challenges in managing a portfolio during the distribution phase is balancing the conflicting desires of certainty and return. This is the classic risk versus return debate. Higher risk should be rewarded by higher return, with the opposite also true. When you accept a lower risk your return will be lower as well. </p><p style="text-align: left;">When a portfolio shifts to one providing income for the owner, return <i>of </i>principal becomes more important than return <i>on </i>principal. One of the ways I used to provide certainty was the purchase of inflation protected securities from the US government. They provide a guaranteed return over the inflation rate. Well they used to, but please read on.</p><p style="text-align: left;">Some of you are already considering not reading further. I'm a stock jockey Greg! I only care and invest in stocks, equities, risky stuff. Why should I care about the ramblings of a manager trying to eke out a return for some grandma? Please endure for a little while, my dilemma affects you as well.</p><p style="text-align: left;">As the chart above shows, nearly two decades ago one was rewarded for giving your funds to the US Treasury for 10 years with a low return of around two percent above inflation. That's not much, but remember, we are looking for the money to be there when it matures; security first, return second.</p><p class="MsoNormal"><i>Some of you may reply the official inflation numbers are incorrect, and I would say you may be correct in this assertion. Inflation for a person in their 20's is very different than one in their 80's. The mix of products and services required of a retiree are very different from that of a young adult. Furthermore there is debate if the basket of products is properly measured at all. I don't wish to make this article a discussion about the accuracy of government statistics so for those disagreeing please concede to me that this is the measurement I have, and these securities' returns are based upon that measurement. It's the best we have right now.</i></p><p class="MsoNormal">Around the great recession of 2008 I started purchasing these 10 year securities at auction, slowly building up a small laddered position for those in the distribution phase of life. The goal was to have a laddered portfolio of these maturing every six months. I grumbled at the returns but knew their utility, a safe but low return security that would form the foundation of a clients' portfolio. (There is an ETF doing effectively the same. The symbol is <a href="https://www.ssga.com/us/en/institutional/etfs/funds/spdr-bloomberg-1-10-year-tips-etf-tipx" target="_blank">TIPX</a>)</p><p class="MsoNormal">Notice on the graph above how real yields dropped to<b> b<i>elow zero</i></b><i style="font-weight: bold;"> </i>around 2012. While I was willing to accept a low real return, a negative real return was not acceptable. </p><p class="MsoNormal">Now consider this please, dear reader. Why would you voluntarily hand the US government your funds for 10 years with the guarantee of a loss after inflation? (and taxes if you don't place them in a Roth IRA) Yes, traders may want to buy them in order to profit from the price changing day to day, but I am holding these to maturity. </p><p class="MsoNormal">I paused the purchases during this negative period and restarted when rates were again positive.</p><p class="MsoNormal">Which brings us up to today. 10 year TIPS rates are quite negative and have been so since the COVID scare of early 2020. As you may guess, I have stopped buying TIPS of any sort. </p><p class="MsoNormal">I doubt the US government has noticed the lack of my purchases, but I'm not the only one who has noticed you are handing your money away for 10 years of punishment.</p><p class="MsoNormal">Why
do I bring this up? Because other purchasers with a low risk mandate will have come
to the same conclusion.<span style="mso-spacerun: yes;"> </span>Why should I buy
something that guarantees me a loss? Those buyers, like myself, will start to
look elsewhere for returns.<span style="mso-spacerun: yes;"> </span></p><p class="MsoNormal"><span face=""Verdana",sans-serif" style="mso-bidi-font-size: 11.0pt;"><span style="mso-spacerun: yes;">Are there alternatives for the low risk investor? Well not really.</span></span></p><p class="MsoNormal"><a href="https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm" target="_blank">There are I Bond savings bonds from the US Treasury</a>. The purchase of which is somewhat involved and are currently offered at a rate of 0, which means you will receive the inflation rate. It's not a positive return, but at least it's not negative like the current 10 year tip rate. There are exit fees if you redeem them early however. Please read up and consider the negatives before you purchase them.</p><p class="MsoNormal">How about longer term US Treasury bonds? Well, same problem. Negative real return, on top of adding quite a bit of duration risk</p><p class="MsoNormal"><br /></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEg3_dGoA4quB4zcaUpeueTs8fUFgGEE5yJ0lfSt6kXPYv5qoVVxpe-KdLfJCErDHKn8XUOgHN7qyRlm6RBgcPSm3r6_4WHB6m1T1tss7Kk0bFkisvDfbj3Gx_B04VXjlmBK_6CBZ5B98eu65uUG84xUO6VK1Fq6ME7SGJaPlYIJxYisKhvvn2HtGXO8=s1171" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="430" data-original-width="1171" height="188" src="https://blogger.googleusercontent.com/img/a/AVvXsEg3_dGoA4quB4zcaUpeueTs8fUFgGEE5yJ0lfSt6kXPYv5qoVVxpe-KdLfJCErDHKn8XUOgHN7qyRlm6RBgcPSm3r6_4WHB6m1T1tss7Kk0bFkisvDfbj3Gx_B04VXjlmBK_6CBZ5B98eu65uUG84xUO6VK1Fq6ME7SGJaPlYIJxYisKhvvn2HtGXO8=w507-h188" width="507" /></a></div><div class="separator" style="clear: both; text-align: center;">Source: <a href="https://fred.stlouisfed.org/graph/?g=LOxA" target="_blank">Federal Reserve</a></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div><br /></div>Hmm. Perhaps high yield bonds? Switch from duration risk to credit risk? Same issue, return is negative on a real yield basis.<div><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/a/AVvXsEjweCYhs1TosrLiLTAJ1IL5vGiMZlh1P65xGEEzayssxpqfCA85QAXMdrHtpBPFkwl3QZ5IyM9Bdl8bGxY-GYQk9Ndi9uSeHhQVMZeVmoCEZF9ZmWS4m7hTErYeGU6YAB6wt49PtZidBMvsrL0AIDTgYkGlHR3ohkopCwHo6iSUeuXSe0zZQuT0UOjr=s1166" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="400" data-original-width="1166" height="172" src="https://blogger.googleusercontent.com/img/a/AVvXsEjweCYhs1TosrLiLTAJ1IL5vGiMZlh1P65xGEEzayssxpqfCA85QAXMdrHtpBPFkwl3QZ5IyM9Bdl8bGxY-GYQk9Ndi9uSeHhQVMZeVmoCEZF9ZmWS4m7hTErYeGU6YAB6wt49PtZidBMvsrL0AIDTgYkGlHR3ohkopCwHo6iSUeuXSe0zZQuT0UOjr=w501-h172" width="501" /></a></div><div class="separator" style="clear: both; text-align: center;">Source: <a href="https://fred.stlouisfed.org/graph/?g=Jfe7" target="_blank">Federal Reserve</a></div><div><br /></div><div><br /></div>So you can hopefully see the quandary. There is no place to squirrel money away and not get punished for it. This should violate the risk / return idea I highlighted at the beginning. I am willing to part with some funds for 10 years but right now I'm punished if I do so. So what to do....<div><br /></div><div>That comes later, but for now realize the situation we are in and realize individuals and institutions are responding.</div><div><br /></div><div>As for the stock jockeys who managed to continue reading, realize the negative real rates affects your stock returns. As the discount rate falls to a negative number this naturally inflates the value of stocks. Why is the <a href="https://www.multpl.com/shiller-pe" target="_blank">CAPE ratio</a> in the stratosphere? Earnings are being discounted by a much lower number, raising their present value. The movement of US Treasury interest rates affect the value of your assets as well so it behooves you to watch them.</div><div><div><div><p></p></div></div></div>Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com3tag:blogger.com,1999:blog-3837096154281906877.post-82874944068582417262020-09-10T12:11:00.000-07:002020-09-10T12:11:44.868-07:00Get ready to refinance. Again.<p>Get ready to refinance. Again.<br /><br />At least there is <i>one</i> positive aspect to the COVID-19 crisis, the drop in interest rates. And notice I said <i>get ready. </i>It appears it would be better to wait to refinance. If you can.</p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsJo4ky0X-mDqHfJj0-2xgGWbKKavlL5im6Lt4sd0aMYXp7-8K_rr9Qatj6g4BcipGqn9NIm6LUZanEUDDNWEMRF2WdJl0EWw78LqwHzkO6hFM6oqjgN66H6Kv1PNmIHiCYmZ2tBJZcvI/s1168/10+year+and+mortgag+rates+fredgraph.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="470" data-original-width="1168" height="258" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsJo4ky0X-mDqHfJj0-2xgGWbKKavlL5im6Lt4sd0aMYXp7-8K_rr9Qatj6g4BcipGqn9NIm6LUZanEUDDNWEMRF2WdJl0EWw78LqwHzkO6hFM6oqjgN66H6Kv1PNmIHiCYmZ2tBJZcvI/w640-h258/10+year+and+mortgag+rates+fredgraph.png" width="640" /></a></div><div style="text-align: center;">Source: <a href="https://fred.stlouisfed.org/graph/?graph_id=133945&rn=783#" target="_blank">Federal Reserve</a></div><p>The Green line in the image above is the difference between the 10 year Treasury bond rate and 30 year mortgage rates. If you notice, during the 2008 and current recessions the difference between those two rates expanded dramatically before eventually closing.</p><p>I downloaded the data from the graph above. The average difference is 1.76% with a standard deviation of 0.29%. Right now we are at a ~1.65 standard deviation event, which is very unusual. To put it another way, if mortgage rates were 'average', right now they would be 2.44%<br /><br />Yes, a sub 2.5% 30 year mortgage.</p><p>Now, we may not get there. 10 year Treasury rates could rise before the mortgage market normalizes, or they could go down. I'm not going to make a prediction on interest rate movements in this post. But if nothing happens with longer term Treasury rates we could see a sub 2.5% 30 year mortgage rate in the future.</p><p>Refinancing your house is only an option if you can, and for quite a bit of America this unfortunately is impossible due to business or job dislocation. But if you are able, go to the link above and watch it weekly. I sure am. </p>Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com1tag:blogger.com,1999:blog-3837096154281906877.post-30442556019370252362020-07-07T11:49:00.001-07:002020-07-07T11:49:24.130-07:00Predictions are hard, especially about the FutureOne of my favorite books ever is the book Dune by Frank Herbert. He built a universe with a complex religious, economic and political framework that transports you to a completely different world. It is not a dry technical read about an alternate reality but a compelling and rich story with an amazing tapestry behind it. <br />
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I will stop gushing over the man, but I want you to watch this video and remember the respect I have for this man and his capabilities. It's short at around 4 minutes. He explains his natural curiosity and his broad skill set that created the situation for him to write the book series. However even Mr. Herbert gets the end of fossil fuel prediction VERY wrong. <br />
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When you extrapolate out the current state too far into the future one will come up with very wrong results. The world is extremely dynamic. Humans are very clever. New technologies and innovations which were too expensive drop in price enough to totally transform the dynamics of a system, rendering your prediction invalid.<br />
<br />In this 1977 interview he states we will run out of fossil fuels in 40 years. We are 3 years past that deadline. Even brilliant people can be wrong on occasion.<br />
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Another attempt at a Dune movie is near release. I hope it's better than the last one.<br />
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<br />Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-38918739370284258702019-11-27T12:56:00.001-08:002019-11-27T12:56:58.901-08:00Keeping your packages and mail safe<div _mce_style="font-family: Arial, Helvetica, sans-serif; margin: 0px; font-size: 10pt;" style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 10pt; margin: 0px;">
The holiday season bring much cheer, and shopping. In today's modern economy much of that shopping ends up being online with packages delivered to your door. Very convenient, unless they are stolen...</div>
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While my primary mission is managing assets for clients I have realized keeping those assets safe, while ancillary, is also something I should assist with as well. With the Great American Shopping Frenzy underway I thought this would be a good time to remind you to keep those packages and letters safe! Here's a few ways to do so:</div>
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<em><strong><span _mce_style="color: #000000; font-family: Arial, " Helvetica", " sans-serif"; font-size: 10pt;" style="font-family: Arial, " Helvetica", " sans-serif"; font-size: 10pt;">Amazon lockers</span></strong></em><br /><span _mce_style="font-family: Arial, Helvetica, sans-serif;" face="Arial, Helvetica, sans-serif"><span _mce_style="font-size: 10pt;" style="font-size: 10pt;">I use Amazon, too much most </span><span _mce_style="font-size: 13.3333px;" style="font-size: 13.3333px;">likely</span><span _mce_style="font-size: 10pt;" style="font-size: 10pt;">, for business as well as personal purchases. It's incredibly easy and very competitive on pricing. </span></span><span _mce_style="font-family: 'Arial',' Helvetica',' sans-serif';" style="font-family: Arial, " Helvetica", " sans-serif";"><i>Bulk dog food is cheaper from Amazon than my local pet store! </i></span></div>
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Shopping via Amazon unfortunately creates an target for porch thieves unless you are careful. Fortunately there are alternatives; Amazon allows one to have your orders delivered to a 'locker' in a nearby store of your choosing. </div>
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Here's a link to find a locker near you:</div>
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<img _mce_src="https://mlsvc01-prod.s3.amazonaws.com/70cc7cf8001/dcb3d9fd-25d2-41c9-80c1-448ebed0e2bc.jpg" alt="Amazon Locker" border="0" height="274" hspace="5" name="ACCOUNT.IMAGE.6" src="https://mlsvc01-prod.s3.amazonaws.com/70cc7cf8001/dcb3d9fd-25d2-41c9-80c1-448ebed0e2bc.jpg" vspace="5" width="365" /> </div>
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<em><strong>Physical security of mail</strong></em></div>
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<span _mce_style="font-family: Arial, Helvetica, sans-serif;" style="font-family: Arial, Helvetica, sans-serif;">If you don't have a secure mailbox, you'll get your mail stolen. It's not a question of when but if. Even something which </span><span _mce_style="font-family: Arial, Helvetica, sans-serif;" style="font-family: Arial, Helvetica, sans-serif;"><em>looks </em></span><span _mce_style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;" style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">secure may not necessarily be so. Preventing your packages from being stolen may be topical, but getting your mail stolen a year round concern.</span></div>
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<span _mce_style="font-family: Arial, Helvetica, sans-serif;" face="Arial, Helvetica, sans-serif" style="font-family: Arial, Helvetica, sans-serif;">Mail theft happened to me several years ago and my solution has prevented any mail theft since. It's a severe response, but look at what a crowbar does to some other options out there</span></div>
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<span _mce_style="font-family: Arial, Helvetica, sans-serif;" face="Arial, Helvetica, sans-serif" style="font-family: Arial, Helvetica, sans-serif;">The solution, cold hard steel and lots of it, a quarter inch to be exact. It's probably bullet proof as well, but I'm not going to test it for you.<br /><br /><a _mce_href="https://www.fortknoxmailbox.com/product-category/mailboxes/" _mce_shape="rect" _mce_style="color: blue; text-decoration: underline;" href="https://www.fortknoxmailbox.com/product-category/mailboxes/" shape="rect" style="color: blue !important;">https://www.fortknoxmailbox.com/product-category/mailboxes/</a></span></div>
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<em><strong>Shred</strong></em></div>
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Once you've received your documents, make sure they don't leave the house intact. My shredder gets a workout almost every day. All financial and health documents no longer needed get shredded. </div>
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It is frustrating to have to alter one's behaviour to prevent crime but it's an unfortunate fact of life. I ask you to learn from my own and other's negative events to keep yourself safe.</div>
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Happy Thanksgiving.</div>
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Now go eat some Turkey.</div>
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Additional links:</div>
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Porch pirates stealing your online orders:</div>
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<a _mce_href="https://mynorthwest.com/1187242/porch-pirates-poll-washington-residents/" _mce_shape="rect" _mce_style="color: blue; text-decoration: underline;" href="https://mynorthwest.com/1187242/porch-pirates-poll-washington-residents/" shape="rect" style="color: blue !important;">https://mynorthwest.com/1187242/porch-pirates-poll-washington-residents/</a></div>
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Health care fraud: <span _mce_style="font-size: 10pt;" style="font-size: 10pt;">Unfortunately people will imitate you for medical care or for identity theft.</span><br /><a _mce_href="https://www.fbi.gov/investigate/white-collar-crime/health-care-fraud" _mce_shape="rect" _mce_style="font-size: 10pt; color: blue;" href="https://www.fbi.gov/investigate/white-collar-crime/health-care-fraud" shape="rect" style="color: blue !important; font-size: 10pt;">https://www.fbi.gov/investigate/white-collar-crime/health-care-fraud</a></div>
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Physical security of the home</div>
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<a _mce_href="https://www.seattletimes.com/pacific-nw-magazine/want-to-keep-your-home-burglar-proof-here-are-some-tips-from-a-burglar/" _mce_shape="rect" _mce_style="color: blue; text-decoration: underline;" href="https://www.seattletimes.com/pacific-nw-magazine/want-to-keep-your-home-burglar-proof-here-are-some-tips-from-a-burglar/" shape="rect" style="color: blue !important;">https://www.seattletimes.com/pacific-nw-magazine/want-to-keep-your-home-burglar-proof-here-are-some-tips-from-a-burglar/</a></div>
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Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-6738813752338932122017-07-10T19:10:00.003-07:002017-07-10T19:58:46.602-07:00Chasing the next credit bubble. It feels best right before it pops.A<a href="https://twitter.com/crescatkevin/status/883728669688053760" target="_blank"> recent tweet </a>by Kevin Smith of Crescat Capital <span style="background-color: white; font-family: "arial" , "helvetica" , sans-serif; font-size: 13.3333px;"> </span><em style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 13.3333px;">(someone I've had the pleasure of meeting in person)</em><span style="background-color: white; font-family: "arial" , "helvetica" , sans-serif; font-size: 13.3333px;"> </span>reminded me of just how far we've come since 2008 and the Great Recession.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjYODVAyNe_9nIaUWp39zs5xvYz2pmv98_IYSXKA4RV8HoZBT4niSoJbGJHgx8ejQWM4jbisxwJs1zhLvQJ8CtJBTM_Rbl_UPqSUDKefAgNr9H055Cc5VflhIp4je0nHZmE8RjYGtcK3Js/s1600/credit+bubbles+go+boom.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="686" data-original-width="1055" height="260" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjYODVAyNe_9nIaUWp39zs5xvYz2pmv98_IYSXKA4RV8HoZBT4niSoJbGJHgx8ejQWM4jbisxwJs1zhLvQJ8CtJBTM_Rbl_UPqSUDKefAgNr9H055Cc5VflhIp4je0nHZmE8RjYGtcK3Js/s400/credit+bubbles+go+boom.jpg" width="400" /></a></div>
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By how far we've come I'm not meaning in a positive sense. If you look at the selected ratios of debt to GDP for Canada, China, and Australia they've each grown tremendously since 2008/09. While this has helped goose growth in each of their respective economies (and spilled out into the greater world as well) it does not bode well for the future. The thing about debt is it need to be paid off. Somehow, someway (by default, payment or inflation) the ratios will drop when they reach such lofty heights. </div>
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Crescat capital annotated the above chart rather nicely showing you the negative events which coincided with either a rapid rise in debt to GDP (like Thailand) OR a high ratio overall (Japan, USA, Spain) Their implication is Canada, China, and Australia are heading toward a likely credit crises and I'm inclined to agree with them. </div>
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These are not the only shimmering spheres on the horizon however. Look below and you can see all three of the Scandinavian countries are above US levels before our little economic problem in 2008.</div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidnEmCNUGkbvqao1CbBECAsWO7hytS2KOXa2wvL9rzYP-pKEh8HBBFzGjwIpnSAKnFLlMTJKfJg4uxLOdMHNJYfk1PSW9rhAKfyIQek1c23xencWcbyxTTXxbsfCofFbij8d-WqvyPoeU/s1600/2017+07+scandanavian+debt+gdp.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="924" data-original-width="1600" height="230" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidnEmCNUGkbvqao1CbBECAsWO7hytS2KOXa2wvL9rzYP-pKEh8HBBFzGjwIpnSAKnFLlMTJKfJg4uxLOdMHNJYfk1PSW9rhAKfyIQek1c23xencWcbyxTTXxbsfCofFbij8d-WqvyPoeU/s400/2017+07+scandanavian+debt+gdp.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Source: Federal Reserve (<a href="https://fred.stlouisfed.org/graph/?g=el6z" target="_blank">link</a>)</td></tr>
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The challenge with calling the tops in a bubble is you are battling central bankers and their willingness to keep the debt flowing. Who wants to say no when the money is flowing? Even central bankers can exhibit human tendencies on occasion, they don't want to be derided for being the Grinch that stole Christmas... As such it's very hard to know when they will finally start to restrict the lending and tighten liquidity. While the US is not at the top of this rarified list it is entirely possible our current series of recent (and future?) rate hikes will be enough to tip one of these countries over the edge which could then get the dominos falling. When is unknown, but that it will happen appears quite likely.<br />
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Update: <a href="https://blog.pimco.com/en/2017/05/A%20Less%20Impulsive%20China%20Bracing%20for%20Lower%20Growth" target="_blank"> https://blog.pimco.com/en/2017/05/A%20Less%20Impulsive%20China%20Bracing%20for%20Lower%20Growth</a><br />
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Looks like the Chinese credit impulse may have turned negative recently. As the data presented above is nearly 6 months old this is very interesting. While it ripple through to the US markets? We shall see shortly.<br />
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<br />Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-23794367588958423242016-06-22T11:07:00.003-07:002016-06-22T11:08:23.425-07:00Jim Chanos - Easier to Find Short Ideas as Bull Market Goes OnI've mentioned Jim Chanos before in this blog, and he's out again with some telling examples of late stage 'exuberance'<br />
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While Mr. Chanos is almost never perfectly timed with the market's current mood, he is rarely wrong longer term.<br />
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<a href="http://www.bloomberg.com/news/videos/2016-06-15/chanos-easier-to-find-short-ideas-as-bull-market-goes-on" target="_blank">http://www.bloomberg.com/news/videos/2016-06-15/chanos-easier-to-find-short-ideas-as-bull-market-goes-on</a><br />
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Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-57904652835506659392016-05-02T09:00:00.000-07:002016-05-02T10:56:17.431-07:00Cool tool - IBorrow shows you short stock availability and borrow ratesWhile reading one of the many blogs I follow I ran across this cool tool which I'd like to share with you:<br />
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<a href="https://www.iborrowdesk.com/" target="_blank">https://www.iborrowdesk.com/</a><br />
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Interactive Brokers provides data showing borrow availability and the rate you'll pay to borrow the stock. Using this data however is a bit clunky. Fortunately IBorrow has come along allowing one to quickly pull up and visualize the data.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjm7jpEBUaJ2vurd5xajmrBFItUbPOpfoWOcGnCfZcp9FtG1mlxtQp5CSeyjElPOJW6Z-j_6Ryaujd4azeXQ4EuktZdzOLeOi-HMiK6D87py9opEesmZ6w2QkLY18hPTvpmifx8XGKVnZc/s1600/Iborrow.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="287" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjm7jpEBUaJ2vurd5xajmrBFItUbPOpfoWOcGnCfZcp9FtG1mlxtQp5CSeyjElPOJW6Z-j_6Ryaujd4azeXQ4EuktZdzOLeOi-HMiK6D87py9opEesmZ6w2QkLY18hPTvpmifx8XGKVnZc/s400/Iborrow.png" width="400" /></a></div>
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For those looking at option strategies, which broad based etf's to short, or other strategies, knowing the quantity and rate of shares available can be important. I suggest you give it a try.</div>
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ht: <a href="https://glennchan.wordpress.com/2016/03/28/short-interest-versus-borrowing-costs/" target="_blank">Glenn Chan</a>Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-60823674189816211872016-04-29T09:30:00.000-07:002016-04-29T09:30:00.170-07:00Never bet against The Chanos<i>Never bet against The Chanos</i><br />
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That may sound like an odd commandment, but it's a good one. I speak of Jim Chanos, the well known short seller. Speaking highly of a member of such a profession may raise the hackles of some individuals, as well as governments, but I have been following his public pronouncements for quite a while and he may be early, <i>but very rarely wrong. </i> Post the great recession of 2008-2009 he was one of the first to warn about the construction & credit bubbles percolating in China; and while ridiculed for it his warnings have played out.<br />
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I even have a <a href="https://www.google.com/alerts" target="_blank">google alert</a> on "Jim Chanos" (along with quite a few others) so as to catch everything he talks about. Recently I got a hit on a great 90+ minute podcast he did with FT Alphaville. <br />
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<a href="http://ftalphaville.ft.com/2016/04/25/2160002/podcast-jim-chanos-on-the-art-of-short-selling/" target="_blank">Podcast: Jim Chanos on the art of short-selling</a><br />
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I suggest you listen to all of it.Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-29376053324527086872016-04-18T09:03:00.000-07:002016-04-18T09:03:05.977-07:00Hugh Hendry talking macro and ChinaIt's been a while since I've mentioned Hugh Hendry but he's popped back up on YouTube recently. After his positively raucous returns in the depth of the crisis he had a long period of very underwhelming returns and from his manner in this broadcast I'd guess a tough few years. <br />
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<a href="http://www.ft.com/intl/cms/s/0/aa7547a4-5a04-11e4-be86-00144feab7de.html#axzz45w2sBh5Q" target="_blank">ft.com describes the decline in assets under management in 2014</a><br />
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<iframe width="320" height="266" class="YOUTUBE-iframe-video" data-thumbnail-src="https://i.ytimg.com/vi/ZWz_Pln_uuI/0.jpg" src="https://www.youtube.com/embed/ZWz_Pln_uuI?feature=player_embedded" frameborder="0" allowfullscreen></iframe></div>
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As always I find him entertaining to watch. He provides some of the reasons for his reversal of opinion on China as well. Regardless whether you agree with him or not I suggest you listen.<br />
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source:<a href="http://www.macrobusiness.com.au/2016/04/hugh-hendrys-long-dark-night-of-the-soul/" target="_blank"> http://www.macrobusiness.com.au/2016/04/hugh-hendrys-long-dark-night-of-the-soul/</a>Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-90700162782763354152016-03-09T10:00:00.000-08:002016-03-09T10:00:26.960-08:00US Coal - brutal fallout from low natural gas pricesI've recently posted on the drop in natural gas and oil prices, but I haven't commented much on the knock on effects. A brutal example is the destruction of coal companies in the US. Train car loadings of coal have completely fallen off a cliff, caught fire, and remain a smouldering ruin.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-SeKQxquPxLCEJLQ7L_lGArx7M44Snq9OqF2eEXbz8AHy8F8-zGr1Nqe8SIWnLHNbtXhG5UgvlqUL_LbzY4dgZEQoZMgKXAM-rAKLBtiFVdJyjiXR8P7EFceMVIYRLxDquL8jl_GRZTA/s1600/coal+trains.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="465" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-SeKQxquPxLCEJLQ7L_lGArx7M44Snq9OqF2eEXbz8AHy8F8-zGr1Nqe8SIWnLHNbtXhG5UgvlqUL_LbzY4dgZEQoZMgKXAM-rAKLBtiFVdJyjiXR8P7EFceMVIYRLxDquL8jl_GRZTA/s640/coal+trains.png" width="640" /></a></div>
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Look at some of the stock symbols for coal companies and you'll see declines even more severe. Here's BTU (Peabody Energy)<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjo1S07qvvsipaZRD3fB-OpRrgHDxrHIq2lOAaTofgGFuaiEksj_qxJrWQzFcYOyteTMuZ1cRVvYePIU2PxoS5cvlb6dgxlguIi2OuGdtvUKIlr9datdqLvYc85Fwc0dA5tmMti21kcKE/s1600/Screenshot+2016-03-08+13.56.58.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="384" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjo1S07qvvsipaZRD3fB-OpRrgHDxrHIq2lOAaTofgGFuaiEksj_qxJrWQzFcYOyteTMuZ1cRVvYePIU2PxoS5cvlb6dgxlguIi2OuGdtvUKIlr9datdqLvYc85Fwc0dA5tmMti21kcKE/s640/Screenshot+2016-03-08+13.56.58.png" width="640" /></a></div>
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Low natural gas prices are encouraging a switch from coal to natural gas electricity generation<br />
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source:<a href="http://www.eia.gov/electricity/monthly/update/resource_use.cfm#tabs_con-3" target="_blank"> http://www.eia.gov/electricity/monthly/update/resource_use.cfm#tabs_con-3</a></div>
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It is not a good time to be in the coal business</div>
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disclosure: No positions, either long or short.</div>
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<br />Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-80216425638479922162016-03-04T10:00:00.000-08:002016-03-04T10:00:14.341-08:00Free delayed quotes and a plethora of other financial data<div>
If you are looking to import quotes into an excel spreadsheet, I haven't found anything else as convenient or extensive. It can take you a while to get up to speed on the data available but it is worth it. The range of data available, for free, is mind boggling. </div>
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<a href="http://ogres-crypt.com/SMF/" target="_blank">http://ogres-crypt.com/SMF/</a></div>
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<a href="http://ogres-crypt.com/SMF/Tips-and-FAQs/" target="_blank">http://ogres-crypt.com/SMF/Tips-and-FAQs/</a></div>
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Here's just a sample of the data available from the Yahoo feed:</div>
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<table border="1"><tbody>
<tr><td align="center" colspan="2"><b>Basic Quote</b></td><td align="center" colspan="2"><b>Fundamentals</b></td><td align="center" colspan="2"><b>Technicals</b></td><td align="center" colspan="2"><b>Estimates</b></td><td align="center" colspan="2"><b>Real-Time (ECN)</b></td></tr>
<tr><td><b>Code</b></td><td><b>Description</b></td><td><b>Code</b></td><td><b>Description</b></td><td><b>Code</b></td><td><b>Description</b></td><td><b>Code</b></td><td><b>Description</b></td><td><b>Code</b></td><td><b>Description</b></td></tr>
<tr><td align="center">s</td><td>Symbol</td><td align="center">j1</td><td>Market Capitalization</td><td align="center">a2</td><td>Average Daily Volume</td><td align="center">t8</td><td>1yr Target Price</td><td align="center">k1</td><td>Last Trade (ECN with Time)</td></tr>
<tr><td align="center">n</td><td>Name</td><td align="center">f6</td><td>Float Shares</td><td align="center">t7</td><td>Ticker Trend</td><td align="center">e9</td><td>EPS Est. Next Quarter</td><td align="center">b3</td><td>Bid (ECN)</td></tr>
<tr><td align="center">p</td><td>Previous Close</td><td align="center">r5</td><td>PEG Ratio</td><td align="center">j</td><td>52-week Low</td><td align="center">e7</td><td>EPS Est. Current Yr</td><td align="center">b2</td><td>Ask (ECN)</td></tr>
<tr><td align="center">o</td><td>Open</td><td align="center">p5</td><td>Price/Sales</td><td align="center">j5</td><td>Change From 52-week Low</td><td align="center">e8</td><td>EPS Est. Next Year</td><td align="center">c6</td><td>Change (ECN)</td></tr>
<tr><td align="center">h</td><td>High</td><td align="center">p6</td><td>Price/Book</td><td align="center">j6</td><td>Pct Chg From 52-week Low</td><td align="center">r6</td><td>Price/EPS Est. Current Yr</td><td align="center">w4</td><td>Day's Value Change (ECN)</td></tr>
<tr><td align="center">g</td><td>Low</td><td align="center">b4</td><td>Book Value</td><td align="center">k</td><td>52-week High</td><td align="center">r7</td><td>Price/EPS Est. Next Yr</td><td align="center">c8</td><td>After Hours Change (ECN)</td></tr>
<tr><td align="center">x</td><td>Exchange</td><td align="center">r</td><td>P/E Ratio</td><td align="center">k4</td><td>Change From 52-week High</td><td></td><td></td><td align="center">j3</td><td>Market Cap (ECN)</td></tr>
<tr><td align="center">l1</td><td>Last Trade (Price Only)</td><td align="center">e</td><td>Earnings/Share</td><td align="center">k5</td><td>Pct Chg From 52-week High</td><td></td><td></td><td align="center">r2</td><td>P/E (ECN)</td></tr>
<tr><td align="center">l</td><td>Last Trade (With Time)</td><td align="center">j4</td><td>EBITDA</td><td align="center">m3</td><td>50-day Moving Avg</td><td></td><td></td><td align="center">k2</td><td>Change & Percent (ECN)</td></tr>
<tr><td align="center">d1</td><td>Date of Last Trade</td><td align="center">s7</td><td>Short Ratio</td><td align="center">m7</td><td>Change From 50-day Moving Avg</td><td></td><td></td><td align="center">v7</td><td>Holdings Value (ECN)</td></tr>
<tr><td align="center">t1</td><td>Time of Last Trade</td><td align="center">d</td><td>Dividend/Share</td><td align="center">m8</td><td>Pct Chg From 50-day Moving Avg</td><td></td><td></td><td align="center">g5</td><td>Holdings Gain & Percent (ECN)</td></tr>
<tr><td align="center">k3</td><td>Last Trade Size</td><td align="center">y</td><td>Dividend Yield</td><td align="center">m4</td><td>200-day Moving Avg</td><td></td><td></td><td align="center">g6</td><td>Holdings Gain (ECN)</td></tr>
<tr><td align="center">c1</td><td>Change</td><td align="center">r1</td><td>Dividend Pay Date</td><td align="center">m5</td><td>Change From 200-day Moving Avg</td><td></td><td></td><td align="center">m2</td><td>Day's Range (ECN)</td></tr>
<tr><td align="center">p2</td><td>Percent Change</td><td align="center">q</td><td>Ex-Dividend Date</td><td align="center">m6</td><td>Pct Chg From 200-day Moving Avg</td><td></td><td></td><td align="center">i5</td><td>Order Book (ECN)</td></tr>
<tr><td align="center">c</td><td>Change & Percent</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr>
<tr><td align="center">v</td><td>Volume</td><td align="center" colspan="2"><b>Option Quote Additions</b></td><td></td><td></td><td></td><td></td><td></td><td></td></tr>
<tr><td align="center">m</td><td>Day's Range</td><td align="center"><b>Code</b></td><td><b>Description</b></td><td></td><td></td><td></td><td></td><td></td><td></td></tr>
<tr><td align="center">j</td><td>52-week Low</td><td align="center">o1</td><td>Open interest?</td><td></td><td></td><td></td><td></td><td></td><td></td></tr>
<tr><td align="center">k</td><td>52-week High</td><td align="center">p3</td><td>Type of option</td><td></td><td></td><td></td><td></td><td></td><td></td></tr>
<tr><td align="center">w</td><td>52-week Range</td><td align="center">e3</td><td>Expiration date</td><td></td><td></td><td></td><td></td><td></td><td></td></tr>
<tr><td align="center">b</td><td>Bid</td><td align="center">s3</td><td>Strike price</td><td></td><td></td><td></td><td></td><td></td><td></td></tr>
<tr><td align="center">b6</td><td>Bid Size</td><td align="center">n</td><td>Name of option</td><td></td><td></td><td></td><td></td><td></td><td></td></tr>
<tr><td align="center">a</td><td>Ask</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr>
<tr><td align="center">a5</td><td>Ask Size</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr>
</tbody></table>
</div>
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<i>note, the last trade quote is l1 (lowercase 'L' then the number '1') (that drove me nuts for a while)</i></div>
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<i>here's how it looks in my spreadsheet </i> <b>=RCHGetYahooQuotes(+Z2,"l1")</b></div>
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This is only one small segment of the data, The full excel list of all the data points available can be found here: <a href="http://ogres-crypt.com/SMF/Elements/" target="_blank">http://ogres-crypt.com/SMF/Elements/</a> and it is a truly phenominal amount of data. Yes, some of it is repetitive but if you are looking for data on a security, start here. </div>
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There's also an active message board if you have any questions on implementation:</div>
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<a href="https://groups.yahoo.com/neo/groups/smf_addin/info" target="_blank">https://groups.yahoo.com/neo/groups/smf_addin/info</a></div>
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Of course you can get one cell to refer to another, so one can populate quite a bit of data in a spreadsheet by just entering the symbol. Best part is it's all free. </div>
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I use the plug-in almost daily and would honestly be lost without it. I suggest you give it a try as well.</div>
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Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com1tag:blogger.com,1999:blog-3837096154281906877.post-14236964889544074302016-03-02T11:04:00.002-08:002016-03-03T17:04:13.211-08:00Oil's eventual recovery, part two<div style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">
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<em>Before continuing with my posts on oil and energy I'd like to call out two excellent sources of information. I've used both in my research and while I attempt to source everything sometimes bits of it slips through into the zeitgeist of my ideas and isn't directly referenced. </em></div>
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<em><a alt="http://soberlook.com/" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSS87j1WYUzGAbCZzVrxo8L5YB8waAADVBz9Z9xZoRaUav81wdXxduNoaBg8c0MUhNfp5AAzzUzqJwl5LUuKO6eR6GETA_PkYcslwToMpw4IOtCedQtgAA2_U=&c=&ch=" shape="rect" style="color: blue;" target="_blank">http://soberlook.com/</a> and more specifically his <a alt="http://dailyshotletter.com/" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEbvTBzOsa8kHz7kIeZZGloeLe6lrf0KDLUHMgsd4Te6z-9E00Hr7HSnc64zSu5kbgAXCND_ec9QUPAw8AP6J9WzvPVzCtcDLTsB7lxqPmNfOCoe3adZJBStw==&c=&ch=" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">Daily shot email list</a> is an excellent publication on the current financial markets. He is also on twitter at <a alt="https://twitter.com/SoberLook" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEb2Oo5rZHRdIvU7ppIHZIZzuHCgWacHjFiEu-KqXq8_rp3t5FoSrLnXmA8dBWuwRtT4FtXIPYXRISEhewMSREZesgoaZo0TV0E6uGKL0DKqPMFUganzbRNqQ==&c=&ch=" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">@SoberLook</a></em></div>
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<em>John Kemp is an energy market journalist at Reuters. He also provides frequent emails specifically on the energy markets. Email him at <a href="mailto:john.kemp@thomsonreuters.com" linktype="2" shape="rect" style="color: blue;" target="_blank">john.kemp@thomsonreuters.com </a>and request to be added to his email list. He is also on twitter at <a alt="https://twitter.com/JKempEnergy" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEbPKeIEfCgtQGMjeaZs3HRkplxouP4kqXW0vbeJJQ2-83Ppl9rO_YiTV-Wd9SdNPUTdlKrRqWxM6W5Rx5D1ANCQmqmRLdYDlipSNwKPXD0Qzqof4j0tW2Xrw==&c=&ch=" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">@JKempEnergy</a> </em></div>
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<em>Ok, back to it....</em></div>
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In my earlier communication I discussed some possible reasons why oil prices dropped so dramatically. Now we'll consider why they will rise, eventually. I'll keep this one 'bullish' and save the horrifically bearish counterpoints for the next installment.</div>
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There's a common pithy statement which is the theme of this post -- <em>The solution for low prices is low prices</em></div>
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<strong>Low prices encourages demand</strong></div>
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The economy has not roared back to life in the last 12 months but the pain at the pump sure has gone down. Lower prices are encouraging people to drive more.</div>
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<img border="0" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/vehicle%20miles%20travelled%202015%2011.png" vspace="5" width="678" /></div>
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(thanks to <a alt="https://twitter.com/mbusigin" class="ProfileHeaderCard-screennameLink u-linkComplex js-nav" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEb8njIu68mUc9sb1Vfk4XpBW1ojAgMzSSJ9C4vw-810O5Tp8_rE929VQxm2gjV-ts-QROx53vCdLhxd2pXKpUioYNitxgrHM0eEAD8t_-5xmskNmtwJl25bg==&c=&ch=" shape="rect" style="background: rgb(245, 248, 250); color: #8899a6; line-height: 14px; text-decoration: none;" target="_blank">@<span class="u-linkComplex-target">mbusigin</span></a><span style="background-color: #f5f8fa; color: #8899a6; line-height: 14px;"> - <a alt="https://research.stlouisfed.org/fred2/graph/?g=2O6L" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEb9i96017cdjOHLg8XSJgZs4mV0IZQY7qanUu6BN4eSBNhO5atxlc5DBl3W6eIvXXIYK_5D6l1SLLXcY8A4bRLhIlCi8fhLmL-bsx2Fd8F3th_P-wjA_0IFOz2yYyGRh296f01E5_-OwV6qaav49GkYdqGVa8GbZg_&c=&ch=" linktype="1" shape="rect" style="color: #8899a6;" target="_blank" track="on">link</a>)</span></div>
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<strong style="line-height: 14px;">Low prices destroys investment in new supply</strong></div>
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<span style="background-color: #f5f8fa; line-height: 14px;">Energy extraction is a very capital intensive business and the decline in prices has already reduced investment, either voluntarily or involuntarily</span></div>
<span style="background-color: #f5f8fa; line-height: 14px;">
<strong><br /></strong><div align="left">
This chart is very instructive in showing how investment (like drilling, see below) in the energy business chases the price. </div>
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<span style="background-color: #f5f8fa; color: #8899a6; line-height: 14px;"><img border="0" src="http://www.eia.gov/todayinenergy/images/2015.09.24/main.png" height="287" hspace="5" vspace="5" width="576" /> </span></div>
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<span style="background-color: #f5f8fa; color: #8899a6; line-height: 14px;">source: <a alt="http://www.eia.gov/todayinenergy/detail.cfm?id=23072" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEbJOURIrysOTPjn5gOMabskeoVIrsKmCXGCXXrpIwo3lPcr-m7xMzGxlSTuHHyQ5Q8vxnZujx2pUcR9txl0uQQp0ptkXXZ5ZKaXvZAwt_opIWjdko8mOAzKhA8EuIzUKEAQ2-0hTbJZ18k_FsKlPLcy84Vb2GihzX2&c=&ch=" linktype="1" shape="rect" style="color: #8899a6;" target="_blank" track="on">http://www.eia.gov/todayinenergy/detail.cfm?id=23072</a></span></div>
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<em>As much as 400,000 barrels a day of oil production is at risk as U.S. shale companies like Samson Resources Co. run out of money and are forced to slow drilling.</em></div>
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<i> <a alt="http://www.bloomberg.com/news/articles/2015-09-17/an-oklahoma-of-oil-at-risk-as-debt-shackles-u-s-shale-drillers" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEb3E9qoceKJ182QFVv9YXCgaQ3uOfo8ZceUXK74LzYZ802vM12tUGWv0v7GxVNOXrAb-3OCgeuuaFwej-MK2pukbTFrqq0FNT9R0X3GTUPKWFzlbFbTKWRIbw4GQ29lJXRFJ7DXHx9STA_ZZfGbeC44jSArkL-ZT5cVYeNtq3mxjVpPPr_HUFUgmkcwbKFbUcphmb7s8LrAWX0Z2OL6-3Z36i0E62X6E6MV9FMsNChBto=&c=&ch=" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">U.S. Shale Drillers Are Drowning in Debt - Bloomberg</a></i></div>
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<strong>Natural decline in fields</strong></div>
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Conventional fields decline around <a alt="http://www.reuters.com/article/oil-production-kemp-idUSL5N11L26U20150915" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSS4FPXlysg0gh7VRBGQLILbcwdM_A6HRo_A1aUtEIGjYwOweNBi-HEyW1IF2VpLdlnckhS6QxQyXJkZ9a-0eFExFMYZZAtfnyiX2YysBkdgVaHjNbds0oCKiNNCRoBeWkBf9uBsrgyiVCxTOGn9tOBktLSS69iTPrbmWoEfjROrhjMJpwECcHflr1iNC1a65jag==&c=&ch=" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">5% a year</a>; shale fields drop much faster, <a alt="http://www.eia.gov/todayinenergy/detail.cfm?id=24932#tab_1" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSS4FPXlysg0ghR5eFRnGE3g025hZnILn8UNDWELHqia2ZBW_CwIFg8tQuCJRrCyDgzbpsPIZeO1SnDm8Tr9C6DFZ3YXwGw5qGaJ9_uJKx8bWotdToRSskfRlG9Oxah2fDabaEGJacIgIvxiBM78_Mxla8jak_zegVuQ_6nbllenVFIhvgpwfRVe4=&c=&ch=" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">50%+ the first year</a>, with the rate of decline lower in later years. Assuming just a 5% decline rate in oil production from current oil fields you need to replace the entire oil production of Canada each year. Yes, there is excess capacity now and new projects coming online, but the dropoff in new field investments will eventually overwhelm that spare capacity.</div>
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<strong>Drilling rig count continues to plummet, not only in the US but worldwide</strong></div>
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New wells require new drilling, and new drilling activity is plummeting. As of October 2015, the year over year percentage decline is a stunning 42% Current data as of 02/8/16 shows this trend continues:</div>
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<a alt="http://www.businessinsider.com/baker-hughes-rig-count-february-19-2016-2" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSS4FPXlysg0ghn88JXbLYq9LKWlxADoPyAES38x4vmTUiVYJSwPTExn-duQwqTY0xc9T3Yd5sHV4w3AV-2gECWbTd2bJ69JogE9OV7vb0RpbqZT6JCjXjH0t2So5eWG6FMPKHhPemvhWafJiLdCiakEZOIXgMR2BIEFs9sKCZ6y3MEIDUmr9aQGA=&c=&ch=" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">http://www.businessinsider.com/baker-hughes-rig-count-february-19-2016-2</a></div>
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<img border="0" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/Screenshot%202015-12-03%2017.49.47.png" vspace="5" width="678" /></div>
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<a href="https://www.blogger.com/null" shape="rect">http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother</a></div>
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<a href="https://www.blogger.com/null" shape="rect">http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsintl</a></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Comparing drilling rig activity and oil prices one can see how drilling activity 'chases' the oil price. Higher oil prices increases drilling activity and vice versa.</span></div>
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<span style="font-size: 10pt;"> </span><a alt="http://www.datagraver.com/case/lowest-number-of-active-oil-and-gas-rigs-in-the-united-states-since-october-1999" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEb3Qs6JD5QyPNp42fA_EdMCWK2WYl7dU495t7RteLWBeHy_IHdLXCwOhk1wyYPZDbWOG_ZCiJgDPvTaKp6wEoTMjWThBjsVgKfH8nAYvOfmLIqe38Uh1_DsMaQopTOyRhCqHHnqQS8S_Gsf-V3Tfl4NXJziWJZIbYGcbTeb3J9OxpOG84OdsOzpLK__r7OmO39AEYItmR2tcDF0Kp2BZnvWM0mIVuK8j6T&c=&ch=" shape="rect" style="color: blue; font-size: 10pt;" target="_blank">http://www.datagraver.com/case/lowest-number-of-active-oil-and-gas-rigs-in-the-united-states-since-october-1999</a></div>
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thanks to: <a alt="https://twitter.com/MaxCRoser/status/673297492155367425" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEbZsCK6ACRckSj6u4PA3HrBcN_uZc7E7j-dtUHJmLztJ0FYdvzNnWx1PPWKWEiLNVHZPxMF1dHt7cP7mYaw33369qBLeWSSbS3aNXHwY2sLcuVt6CwKZNmGPtAxpjnecH58I7tbEOXJBu-goZ1qY5Jv-oiJqqSWsKi&c=&ch=" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">@MaxCRoser</a></div>
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One must be careful thinking this means a 42% reduction in wells dug or initial flow rate. Drilling rigs have become frightfully effective over the last few years in US / Canada. A recent email from RBN energy provides examples of this stunning increases in total productivity.</div>
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<a alt="https://rbnenergy.com/if-i-could-turn-back-production-how-increasing-natural-gas-output-defies-price-signals" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEbnzPMWwPhnEFkpVUiKHzgWFPr_sSqDUCfO5wRANaRyORsJm-eVvTxYTHpWfqOhdI5h6svGQidt3RuqnxJExk-3seZWgweK19c_p_TXW9vu0yU3VzHZVhvUJG9mUHWJHwew6EE-YtUtvjXhLcU7TsKEwwrrLTav8JO-4JOXkPkKHMte_bb_Bjmry6rPHjFP-Yyx7BZ8vn1y2NQyU_WhZhvPL1zmDYNK3Da&c=&ch=" shape="rect" style="color: blue;" target="_blank">https://rbnenergy.com/if-i-could-turn-back-production-how-increasing-natural-gas-output-defies-price-signals</a></div>
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<img border="0" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/2015%20rbn%20energy%20drilling%20rig%20efficiency.png" style="text-align: left;" vspace="5" width="678" /></div>
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These improvements are at <a alt="https://en.wikipedia.org/wiki/Moore%27s_law" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSS4FPXlysg0ghekCNBbHjHDhFltXZXtd1wQ-YYgeIo2v-8y-_GJ32F1Ful7put47uCyasnh4rVE65BOztBohkxrTS-m3lhm7bRKDwdh7OMFSQNw8cm1k918AbHo_iGqAh0Zr4DaVJELNKPsNL6ALT7Fc=&c=&ch=" linktype="1" shape="rect" style="color: black;" target="_blank" track="on">Moore's law</a> level of technology gains in the energy sector. A 428% gain in initial production productivity over four years is stunning. <em>This massive increase in efficiency is something I'll come back to in the next missive.</em></div>
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<strong>Political Chaos</strong></div>
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Harder to predict but considering the number of countries derive a high percentage of their GDP or federal budget from oil / natural gas revenues, something is bound to break at these prices.</div>
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<a alt="http://www.cnbc.com/2015/12/03/oil-prices-and-budgetsthe-opec-countries-most-at-risk.html" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEbd7QFZ6o1__zNOraaV1jKtx7AvPthCx_2UrhjfUN5sIEMrBlQAoi5bP43WYeFWnu6qCvgWHHfL6j9yqi5ANKbA8NEJJrAVhSqIRY0uChnDQRCI13MrJ7XQOtfzxrdYJ6IYkZcp7MPd4TolU-v70do-EdkMTsV9l9bXkyuMV4mr2ombZGa1JqzsdnkEn_txewm-acgK8_RgRI=&c=&ch=" linktype="1" shape="rect" style="color: black;" target="_blank" track="on">http://www.cnbc.com/2015/12/03/oil-prices-and-budgetsthe-opec-countries-most-at-risk.html</a></div>
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Please click around on the link above and observe how many countries depend upon petroleum products for a very large portion of their revenue, and right now they are hurting! Some have a massive kitty to draw upon but the rest, not so much.</div>
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Here's a quick rundown of a few countries hit by the drop in oil prices.</div>
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<span style="font-family: "arial" , "helvetica" , sans-serif; font-size: 10pt;"><strong>Venezuela - </strong></span><span style="font-family: "arial" , "helvetica" , sans-serif; font-size: 13.3333px; font-style: italic;">a horrid situation made worse by the drop in petroleum prices. In my opinion it will be the first domino to fall</span></div>
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Econimic basket case - <a alt="http://www.bbc.com/news/world-latin-america-34983467" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSS4FPXlysg0gh5lZM9dvBiYXbKc_OMQe1rrb8TbaoVCBYiWYz0rBdDn30l2i98uBjw9VDEHQjvWFfShxdtiNO1mLLud0ZCcrnKca3Ph6qU64WIu32iVHAuu2p-igrCpJB3bXoScZWG5zAx7u44NordhTZRct6qJFsfQ==&c=&ch=" linktype="1" shape="rect" style="color: black;" target="_blank" track="on">http://www.bbc.com/news/world-latin-america-34983467</a></div>
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Change in government - <a alt="http://www.bbc.com/news/world-latin-america-35043945" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSS4FPXlysg0ghbdr81L3HzcZRSxAIiRJa59TBaa0uiEuAWJkic4xwq8GTHZsD5CPJ9q2DVdsoCwdnLXqJNe6jmYXZOYRYuZ4kRkEOXcOj8G8ILDPMsbn5f2HLmygIScl59Vk_8v3SoaQh31jYPL8zJwdLqCW-099bbQ==&c=&ch=" shape="rect" style="color: black;" target="_blank">http://www.bbc.com/news/world-latin-america-35043945</a></div>
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Economic collapse - <a alt="https://www.washingtonpost.com/news/wonk/wp/2016/01/29/venezuela-is-on-the-brink-of-a-complete-collapse/" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSS4FPXlysg0ghymmMqslpthXXwLYNGNonpU8nF8E1N7KOZ3_4mj1ptCJla5AmhCgba2RXULVy8RaAKsyoR3dJlkDCaxD-zcUvLGdwlbfN_tdsdhymOnI8QytvqIpq6HJnpX4iSe7uErIBIiTDeMWo-pPrilp0GqhWGylmq98WDak2Q8Ey1UIrcjp-BLkfatlnqMg4Ie6_AWXPaxyJLp6rx32_eClhNZSojhPP-DLqLFwJHwU1xx04dpE=&c=&ch=" shape="rect" style="color: black;" target="_blank">https://www.washingtonpost.com/news/wonk/wp/2016/01/29/venezuela-is-on-the-brink-of-a-complete-collapse/</a></div>
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<strong style="font-size: 10pt;">Brazil</strong></div>
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Recession - http://www.economist.com/news/americas/21665038-shrinking-once-vibrant-economy-shocking-ordinary-folk-well</div>
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<strong>Russia</strong></div>
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Recession - http://www.wsj.com/articles/world-bank-downgrades-russias-economic-outlook-1443609118</div>
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<strong>Saudi Arabia</strong></div>
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The Saudi's are running out of money. </div>
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<img border="0" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/saudi%20reserves%202015%2011.png" vspace="5" width="678" /></div>
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At a burn rate approaching 100 billion dollars a year they do have a couple of years breathing room, but what about the other OPEC nations? The House of Saud is considering selling bonds to plug the gap, but this only buys them time.</div>
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<a alt="http://www.ft.com/intl/cms/s/2/e9e197fe-3b5d-11e5-8613-07d16aad2152.html#axzz3i9gFuCtc" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEbTT4XFTK9Pw8Hc4pkUlrbrRILXoY36x2xCAgEOr7uza3jlMcCopKDkwGSmdZ_l6GvwOMe7GpugcDSxHIV1IwC_22OnY1eL5zud6jVR_BDW07rn-2ngqx93GAbGwrCNecA8KwIVF1J9kGhcP_243WDnb_xzFwUygJMbz95T5XdwSwxoSAcqTPTnf57TZ36MRkpVql2eJQmytk=&c=&ch=" shape="rect" style="color: blue;" target="_blank">http://www.ft.com/intl/cms/s/2/e9e197fe-3b5d-11e5-8613-07d16aad2152.html#axzz3i9gFuCtc</a></div>
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<a alt="http://www.telegraph.co.uk/finance/oilprices/11768136/Saudi-Arabia-may-go-broke-before-the-US-oil-industry-buckles.html" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEbmnXO-yRjDKSSBw63Fp0bK_1Z1jmRLOiXwnxR24I1s18KaEsCqdHiI9nhsmSkHt5yHcxADudGieSP8ZrC0KhmlMfJ756yTTkgquxDnl8l5uXBxtvLviMP2gt2ZQC7skd-VSerBcYQNxlLdOC8uJj2SyU3CMSpJbqXJk5duDNjXrtqf3v3u3cFeYlFYkftcIx4b5EX_JYElyTnsgTe8CmnQX6NVjbVrxoC1Xo7dfLK5PMW6ws4Zt0y_g==&c=&ch=" shape="rect" style="color: blue;" target="_blank">http://www.telegraph.co.uk/finance/oilprices/11768136/Saudi-Arabia-may-go-broke-before-the-US-oil-industry-buckles.html</a></div>
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While some of the OPEC nations can handle low oil prices for years the majority cannot</div>
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<img border="0" height="319" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/breakevens%20opec%202015.jpg" vspace="5" width="600" /> </div>
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Source: <a alt="http://us10.campaign-archive2.com/?u=451473e81730c5a3ae680c489&id=81c09ec70e&e=0ecbb70afb" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEbz6D17OSXIIWDOztQEAJCvpicRWyziXiL3k2l5dWowzo5C12y2S65c04sV19pANK69FAiU2GtMI5XFPWltOrui21cjLoNSMvt96mMX97v_ier4KtLXJlPBn4g1tOZ6sh0_5dmHV7kOS7T--x88vGtJY5vJZq9sBhXFlRgwivzqReU42tBAjeIlyEEEEwZfLrVLLcAxzwNPFUzHuDzmMaCfw==&c=&ch=" linktype="1" shape="rect" style="color: black;" target="_blank" track="on">The Daily Shot</a></div>
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<strong>(Future) Loss of Power</strong></div>
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This may be a bit abstract but work with me here for a bit. It may be causing fiscal and political problems at home but right now OPEC, and Saudi Arabia specifically are crushing their competitors and destroying future production prospects in other countries. There just aren't enough projects to make up for the 5+% percent a year decline in the world's oil wells. </div>
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Right now the best <em>estimate</em> is OPEC has ~2 million barrels/day of spare capacity. </div>
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<img border="0" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/OPEC_spare_capacity%202015%2012.png" vspace="5" width="678" /></div>
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source: <a alt="https://www.eia.gov/finance/markets/supply-opec.cfm" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEbhnv0BI8-9ep7StUjjNKHp186AwaNNaNvOSPguAE-0ugHk4-pJSzBIpAlofkgwEqYgUTwqmHxwuWUafNaz5SQUGl1tak0mpuMKOV4dzpGHMHu9uhQbndHTddrv3UAyfTZk_t-SVJQNahLPFhNo2Yx5A==&c=&ch=" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">https://www.eia.gov/finance/markets/supply-opec.cfm</a></div>
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Saudi Arabia is the largest OPEC producer and has historically provided quite a bit of swing capacity to modulate the price of oil (see above link for additional details) What happens if perchance OPEC succeeds and is able to completely demolish the US shale business as well as other non-OPEC production and they are running flat out producing oil?</div>
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Do they now 'control' the price of oil? NO. They are just like every producer out there, maximizing production. So I ask you in my hypothetical situation: How <a alt="http://www.telegraph.co.uk/news/worldnews/barackobama/5128171/Barack-Obama-criticised-for-bowing-to-King-Abdullah-of-Saudi-Arabia.html" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSS4FPXlysg0ghPY1BDfrO4VBoFJ9se7rgyXG7M5S6c2ldfgOKH96Kry9qCtaUT1QL7p5ayKRfJXTgdpd1ejr9dZaUTZiB4yl_l0tgYU7egh779f_bjGfKIWk2vf7JBFaprI2Kppn11GkYWAQYDOD3pcLWHM8CZQdeR2rwX7RVbfArNstGmMpjz7CBhIP3IENF8e5fwJgk_h6ZQfTfZODguqGpOqVX09Nu-NUPcdOA4EUm83xfqQm-HBX7I5Q90b6UNIS-YjsZQXeRfprYOGqf7Sc=&c=&ch=" linktype="1" shape="rect" style="color: black;" target="_blank" track="on">low would the next president of the United States bow</a> to the king of Saudi Arabia? Without spare capacity Saudi Arabia loses a very important lever of power. In some ways this is analogous to a quote from Dune.</div>
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<em><a alt="https://en.wikiquote.org/wiki/Dune" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSS4FPXlysg0ghrJkoGEydRn3W2uboHPOsp66UFJLEL52T3XZ5etibw-fQLa4QSD7ZXMgzeZ1O0pVy2-ka4wCnWJYh9wLqwauGld9Kc28etVmpvBu2GDQ-AP9fHvFuej5PjY_uYdn37zaA&c=&ch=" linktype="1" shape="rect" style="color: black;" target="_blank" track="on">He who can destroy a thing, controls a thing.</a></em></div>
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Will Saudi Arabia declare victory, reduce production, and regain the ability to raise and lower the price at will?</div>
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<strong>War</strong></div>
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<strong><br /></strong></div>
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<strong>Yemen</strong></div>
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<strong>The war in Yemen doesn't get as much attention as it should</strong></div>
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<strong><br /></strong></div>
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<strong><a alt="https://en.wikipedia.org/wiki/Yemeni_Civil_War_(2015)" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSSyL6Pd8dzJEbrr9kyptML7SgD5pjRZn6rTtuVVkfvtZamceVOumZ28RMFpG6f0fp5uj-3AJUtwT9N0hegT11YDCcYLysmymxDY_mu-D1zl6c39z1HkVSRnRMquwrwHpBsGhjh9M_UC5ELZM5X2bkS-Rhil_ALSk4eTWcz8H-ajve&c=&ch=" shape="rect" style="color: black;" target="_blank">https://en.wikipedia.org/wiki/Yemeni_Civil_War_(2015)</a></strong></div>
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<strong>Syria, Isis, Turkey, Russia, the Kurds, etc</strong></div>
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I can't even keep up with all the various sides and their motivations. It's a big fat nasty cruel mess. However, with all the ordnance flying around it could trigger something much much worse and blow up an oil field or two.</div>
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<a alt="https://twitter.com/Charles_Lister/status/698609742155919364/photo/1" class="imgCaptionAnchor" href="http://r20.rs6.net/tn.jsp?f=001cZ6MEPu27qxHAQrtaVA4PVfVITx4XDrsSRDodlmrG3_tn352GYKSS4FPXlysg0ghNxge90yFxnzpdwAZNNBoqY0yhTOQ1xWHtZVTP8SnFN_xJdetqWNBLw1bRNQA1Bk4n5EIiB7YQblqwng4dVAUSy3qWnojrnsdiERKgDI1o0AP98ZzNZgNN4S-xPlMppZeUfimJfl2Bh1awpNYuebbdJrIuI8dF4BYle29dupK-K9b0qltfCpafQ==&c=&ch=" shape="rect" target="_blank" track="on"><img border="0" height="415" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/syria%20fighting%202016%2002.png" vspace="5" width="600" /></a> </div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The geopolitical struggles of Russia, Iran, and Saudi Arabia are being played out in the energy markets as well on the battlefield. How, when, or </span><span style="font-family: Arial, Helvetica, sans-serif;"><i>if</i></span><span style="font-size: 10pt;"> they will eventually set aside enough of their differences to agree to a cut in production is something I cannot predict, but the inevitable decline in current production will inexorably reduce the excess supply in the markets</span><span style="font-size: 10pt;">. </span></div>
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<span style="font-size: 10pt;"><br /></span></div>
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<span style="font-size: 10pt;"><br /></span></div>
<div>
<span style="font-size: 10pt;">Next I'll try to list some of the factors as to why there's so much bearishness in the oil markets today; add it all up and there's not a pleasant looking horizon for oil producers.</span></div>
</div>
</div>
Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-17644364596025151752015-11-16T09:30:00.000-08:002015-11-16T09:30:01.190-08:00Oil's eventual recovery, part one<table bgcolor="#ffffff" border="0" cellpadding="5" cellspacing="0" class="BlockMargin" id="content_LETTER.BLOCK6" style="background-color: white; margin-bottom: 6px; width: 100%px;"><tbody>
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Right
now we are experiencing something which has only happened twice in nearly 30
years, a greater than 50% year over year drop in the price of oil. The previous
event happened during the great financial panic of 2008 - 2009. Today the US,
China, or Western Europe aren't experiencing a severe recession, so what
triggered this dramatic fall? At it's simplest, supply exceeded demand. The
how and why is fascinating. </div>
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<br /></div>
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<span style="font-size: 10pt;">Some quick charts describing the
extent of the decline</span></div>
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Year over year percentage change in the price of oil.</div>
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<img border="0" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/oil%20price%20chance%202015%2010%2023.png" vspace="5" width="678" /></div>
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Absolute price - <span style="font-size: 13px;">Beside
the dip to 40 during the great financial crisis, the last time US oil prices
flirted with 40 dollars was in 2004.</span></div>
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<img border="0" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/oil%20price%202015%2010%2023.png" vspace="5" width="678" /> </div>
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So
what caused the fall? <span style="font-size: 10pt;">Note the graph below,
showing oil production levels of the largest five producers up to 2014.
</span><span style="font-size: 10pt;">US oil production grew 15.9% from 2014 to
2013 (Source: </span><a alt="http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html" href="http://r20.rs6.net/tn.jsp?e=001MaO_ieG4qWAg_Dbj1Vfh-jn9M2PQuZAo_yLkHG87wVH49-UT_C-PY3xrPz4pFqslYRBWJiRz1bAKcD6jFDsVF2mBklH75R7BIiGMOff7R3IcHZO4D0-XZM1_AfvwpNVd3iFe7TmIgCOwtlNUbWp7BJ2KIq2v7xTyJnt7cs-mczy2h6oaK-8Lv39lfIlmPOUAtYvnwaKxPXIHijk8DDU02Q==" linktype="1" shape="rect" style="color: blue; font-size: 10pt;" target="_blank" track="on">BP statistical review</a><span style="font-size: 10pt;">) and not
only was this the largest percentage increase in the world, it was also from one
of the largest suppliers in the world. In fact in 2014 the United States pumped
more oil than any other country in the entire world. <span style="font-size: 13px;">From a nadir in 2005, US production rose nearly 70% by
2014 -- a increase of more than 4.7 million barrels </span><em style="font-size: 13px;">a day. </em></span><span style="font-size: 10pt;">Additionally total world oil production increased by
~2.3% in 2014.</span></div>
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<img border="0" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/world%20oil%20production.png" vspace="5" width="678" /> </div>
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<span style="font-size: 10pt;"><em style="font-size: 13px;"> </em><span style="font-size: 13px;"><br /></span></span>
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<span style="font-size: 13px;"><br /></span></div>
Demand did not keep pace
with supply however. </div>
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<img border="0" height="352" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/crude%20oil%20demand%20yardeni%202015%2011.gif" vspace="5" width="631" /> </div>
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Source:<a alt="http://blog.yardeni.com/2015/09/lower-oil-prices-boosting-oil-demand.html" href="http://r20.rs6.net/tn.jsp?e=001MaO_ieG4qWAg_Dbj1Vfh-jn9M2PQuZAo_yLkHG87wVH49-UT_C-PY3xrPz4pFqslYRBWJiRz1bAfxDsFvZfYGY--X4ed_HEvtzaXBs2yCjNMSdYLcAK62t5Du9n8bZm-ZMzbPPLwq8aiCJFZQnxQgyx1FTEKu7V1WyVX2-HdhAG2XsGYcMjaDA==" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on"> yardeni.com</a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Note
the graph above hasn't shown a decline in world crude oil demand since the great
recession; instead supply outstripped demand and prices fell. </span><span style="font-size: 13px;"><span face="Arial, Helvetica, sans-serif" style="font-family: Arial, Helvetica, sans-serif;">Saudi Arabia exacerbated the situation by
pumping even more oil. </span><em>(I'll speculate as to WHY
later)</em></span></div>
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<span style="font-size: 13px;">Saudi
Oil Production</span></div>
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<span style="font-size: 13px;"><img border="0" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/saudi%20oil%20pumping%202015%2011.png" vspace="5" width="678" /> </span></div>
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source: <a alt="http://moslereconomics.com/2015/10/06/saudi-oil-production-us-trade-gallup-index-redbook-retail-sales-german-manufacturers-orders/" href="http://r20.rs6.net/tn.jsp?e=001MaO_ieG4qWAg_Dbj1Vfh-jn9M2PQuZAo_yLkHG87wVH49-UT_C-PY3xrPz4pFqslYRBWJiRz1bCRz6hrhLn_n4Ls8ocCkjym9kw0rFlUtilASU5hpnSZUzAoK1Rx1EGYdfnb0EhBQfvuQ9OgPs_Nsz09Q4W62vpCS0YVjm6D0lqKYpZ6UtrsXILvvpLRfoCZjgV3ACFighwX0LKfrOFBmZCYVdpbMI-7r2AiE8ggfOPzzrZkzToZrLPsz0M6bcJt" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">moslereconomics.com</a></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: 13px;">Remember all
that talk about Peak Oil so many years ago? American oil companies evidently
didn't read the articles calling for the death of oil production. </span></div>
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<img border="0" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/peak%20oil%20google%20trends%202015%2011.png" vspace="5" width="678" /></div>
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Source: <a alt="https://www.google.com/trends/explore#q=peak%20oil" href="http://r20.rs6.net/tn.jsp?e=001MaO_ieG4qWAg_Dbj1Vfh-jn9M2PQuZAo_yLkHG87wVH49-UT_C-PY3xrPz4pFqslYRAzgfQPU_-wqotUEqtUKRanVfGNwIv1wW8caMu5xDzbKgcbEEPtozJObV5qSQr5PYwmvt-7qnGIJjWxTpqMlw==" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">Google
Trends</a></div>
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The internet keeps track of almost everything now, so make your
predictions carefully.</div>
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<a alt="https://www.youtube.com/watch?v=4IwtAQzrfiw" class="imgCaptionAnchor" href="http://r20.rs6.net/tn.jsp?e=001MaO_ieG4qWAg_Dbj1Vfh-jn9M2PQuZAo_yLkHG87wVH49-UT_C-PY3xrPz4pFqslYRAzgfQPU_9vt8eC3gbKaCpiH6xJuJJc9_GZg56fjBMcl0QUU1eXC9exKoxIBLmOhkHijK_HHNw=" shape="rect" target="_blank" track="on"><img border="0" height="317" hspace="0" src="https://thumbnail.constantcontact.com/remoting/v1/vthumb/YOUTUBE/6fa961c04679491da6c284bd763e64da" width="423" /></a></div>
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Even the New York Times
piled onto this theme; stating Malthus was eventually right and we'd better get
used to it (Peak Oil)</div>
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<a alt="http://www.nytimes.com/2006/11/29/opinion/29homerdixon.html?pagewanted=all" href="http://r20.rs6.net/tn.jsp?e=001MaO_ieG4qWAg_Dbj1Vfh-jn9M2PQuZAo_yLkHG87wVH49-UT_C-PY3xrPz4pFqslYRBWJiRz1bCDnOsf-jiU26uGvvZrFnEpxW9YhkSEdXvi0Qn6NW87M4wVOCw5Z5BQYh2iD3vFhurAVi-4dhR3yM_a2XR1-7lJZ9y1ilOub2aE8e5W78glVZRNwjUYJqMl" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">http://www.nytimes.com/2006/11/29/opinion/29homerdixon.html?pagewanted=all</a><br /></div>
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<em>While
I may appear to be picking on these predictions, and I am (a little) I would
rather highlight how hard it is to make predictions, especially long term
forecasts. I will make a few in later missives. Be careful with
those. </em></div>
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So how did the US reverse the <em style="font-size: 10pt;">inevitable</em><span style="font-size: 10pt;"> decline in
oil production? A technique called fracking (aka shale oil or tight oil)
altered the cost structure and timing of extracting oil and natural gas from
locations previously thought to be uneconomic. </span></div>
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<div style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt; margin: 0px;">
Below
is a quick video <span style="font-size: 13px;">and
some additional links </span>describing the technique:</div>
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<a alt="http://www.eia.gov/todayinenergy/detail.cfm?id=15571" href="http://r20.rs6.net/tn.jsp?e=001MaO_ieG4qWAg_Dbj1Vfh-jn9M2PQuZAo_yLkHG87wVH49-UT_C-PY3xrPz4pFqslYRBWJiRz1bBfnmcb4PGVromnamzeHen4US6MvhE4DoJZZyHPYpp-57GDrRMBnI3pLixUO3k9HZYmfbhNq_FhZA==" shape="rect" style="color: blue;" target="_blank">http://www.eia.gov/todayinenergy/detail.cfm?id=15571</a></div>
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<a alt="https://en.wikipedia.org/wiki/Tight_oil" href="http://r20.rs6.net/tn.jsp?e=001MaO_ieG4qWAg_Dbj1Vfh-jn9M2PQuZAo_yLkHG87wVH49-UT_C-PY3xrPz4pFqslYRAzgfQPU_9JxU8LFfFEnlhxZ0Dp9MHKuIXe3g3hVVgrC572gThuUHDHS4_ywntj" shape="rect" style="color: blue;" target="_blank">https://en.wikipedia.org/wiki/Tight_oil</a></div>
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<br /></div>
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<a alt="https://www.youtube.com/watch?v=VY34PQUiwOQ" href="http://r20.rs6.net/tn.jsp?e=001MaO_ieG4qWAg_Dbj1Vfh-jn9M2PQuZAo_yLkHG87wVH49-UT_C-PY3xrPz4pFqslYRAzgfQPU_9vt8eC3gbKaCpiH6xJuJJc9_GZg56fjBMcl0QUU1eXC4eEOCWHRafUEg3IZCv5x-A=" shape="rect" style="color: blue;" target="_blank">https://www.youtube.com/watch?v=VY34PQUiwOQ</a></div>
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<a alt="https://www.youtube.com/watch?v=VY34PQUiwOQ" class="imgCaptionAnchor" href="http://r20.rs6.net/tn.jsp?e=001MaO_ieG4qWAg_Dbj1Vfh-jn9M2PQuZAo_yLkHG87wVH49-UT_C-PY3xrPz4pFqslYRAzgfQPU_9vt8eC3gbKaCpiH6xJuJJc9_GZg56fjBMcl0QUU1eXC4eEOCWHRafUEg3IZCv5x-A=" shape="rect" target="_blank" track="on"><img border="0" height="255" hspace="0" src="https://thumbnail.constantcontact.com/remoting/v1/vthumb/YOUTUBE/bb406e1e2ee0469e823d91e6f084ecc4" width="340" /></a></div>
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<div align="justify" style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt; margin: 0px 0px 0px 30px; text-align: justify;">
<span style="font-size: 10pt;"><em>Fracking can resonate for some
of my readers as an especially dangerous form of petroleum extraction. The
linked video is from an oil company, so they will show the process in a positive
light without discussing any of the possible downsides. (Such as waste fluids
intruding into water aquifers) Google any of the terms and you'll find a
strident debate regarding the safety of this new technique. </em></span></div>
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<br /></div>
<div align="justify" style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt; margin: 0px 0px 0px 30px; text-align: justify;">
<em>Regardless of the safety of the process or whether it should
be employed at all, fracking and tight oil extraction techniques are currently
legal in America and from my reading of the current regulatory climate will
remain so. Even a recent EPA report on fracking provides fodder for both sides:
<a alt="https://rbnenergy.com/cmon-gimme-good-water-epa-draft-report-on-hydraulic-fracturing" href="http://r20.rs6.net/tn.jsp?e=001MaO_ieG4qWAg_Dbj1Vfh-jn9M2PQuZAo_yLkHG87wVH49-UT_C-PY3xrPz4pFqslYRAzgfQPU_8K6M1j6RF1IqUksZfZDOB_Leu8uWKkJXvYunemxvNTFQ0XxIKVHnVcZdGHB6mfNihtCcwMz_9qZumW8MKwgQp-AUDM_KjDVGf9tLmvtu0O6wmldsY3eQuy" linktype="1" shape="rect" style="color: blue;" target="_blank" track="on">https://rbnenergy.com/cmon-gimme-good-water-epa-draft-report-on-hydraulic-fracturing </a></em></div>
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<td align="left" class="MainText" height="15" style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Fracking allows for the extraction of oil and natural gas
from areas previously thought uneconomic. New wells are drilled very quickly
and productivity in drilling speed and initial flow rates continue to rise.
Specific examples are always illustrative. (source: <a alt="http://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf" href="http://r20.rs6.net/tn.jsp?e=001MaO_ieG4qWAg_Dbj1Vfh-jn9M2PQuZAo_yLkHG87wVH49-UT_C-PY3xrPz4pFqslYRBWJiRz1bBfnmcb4PGVromnamzeHen4lCo-f3sQU1JQocmYJFG4hxe9CSuWGhes_-aR5DYdGJkp6IJ4R6K25rG2Tx64yiz0" linktype="1" shape="rect" style="color: black;" target="_blank" track="on">http://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf</a> )<br /><br /><img border="0" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/drilling%20productivity%202015%2011.png" vspace="5" width="678" /> <br /><br /><img border="0" hspace="5" src="https://dl.dropboxusercontent.com/u/35174641/public%20sasm/drilling%20production%202015%2011.png" vspace="5" width="678" /> <br /><br />Notice on the upper left image how initial oil flows
increased from less than 100 barrels a day to ~800 barrels in the Eagle Ford
region (Texas), a greater than x8 increase in productivity! This has catapulted
Eagle Ford production to more than 1.2 million barrels a DAY. On its own the
Eagle Ford today would be considered one of the top 20 countries in the world
for oil production from nearly nothing in 2010. Scroll through the linked
report above and you'll see comparable increases in both natural gas and oil for
other regions of the country.<br /><br />One can also see the quick drop off in
production for both oil and natural gas since the collapse in energy prices.
The rapid decline rate (more on that later) from these new techniques is both a
blessing and a curse The game has changed, and OPEC knows it. <br /><br />This new
technology (fracking) has disrupted the oil production regime, creating a new
potential avenue of supply not only in America, but the rest of the world.
How this new technology changes energy pricing as well as geopolitics is too
much for just one post. I'll try to dissect the situation later.</td></tr>
</tbody></table>
Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-12378205713971826302015-02-12T09:00:00.000-08:002015-02-12T09:00:02.320-08:00More energy posts<br />
Another dump of energy articles, questions, etc.<br />
<br />
Will big oil charge ahead while smaller E&P's face liquidity issues?<br />
<a href="http://on.wsj.com/1KsPoya">http://on.wsj.com/1KsPoya</a> via @liamdenning<br />
The huge energy companies may be able to power through this downfall assuming prices start rising and they can swoop in and gobble up some low priced assets in the wake of the collapse.<br />
<br />
Productivity improvements in oil and nat gas production have been very impressive over the last few years so looking at rig counts over a <i>long </i>time period have lost their efficacy.<br />
<br />
<a href="https://rbnenergy.com/getting-better-all-the-time-productivity-improvements-crude-production-and-moores-law%C2%A0" target="_blank">https://rbnenergy.com/getting-better-all-the-time-productivity-improvements-crude-production-and-moores-law </a><br />
<br />
Great post on the recent improvements<br />
<br />
World versus US oil prices<br />
<a href="http://research.stlouisfed.org/fred2/graph/?g=10uD">http://research.stlouisfed.org/fred2/graph/?g=10uD</a><br />
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<a href="http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=10uD" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=10uD" height="240" width="400" /></a></div>
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For a while US (WTI) prices separated quite dramatically from world prices (BRENT) Will this recur in the future? The spread helped US refiners earn outsized profits. <br />
<br />
Will the Keystone pipeline ever get built? <br />
<a href="http://seattletimes.com/html/nationworld/2025244144_pipelineeconomicsxml.html">http://seattletimes.com/html/nationworld/2025244144_pipelineeconomicsxml.html</a><br />
<br />
We may see instead a pipeline going east / west in Canada. The oil must flow!<br />
<a href="http://bigstory.ap.org/article/canada-oks-oil-pipeline-pacific-coast">http://bigstory.ap.org/article/canada-oks-oil-pipeline-pacific-coast</a><br />
<br />
Crude oil shipped via rail has exploded over the last few years. Will this trend continue?<br />
<a href="https://www.aar.org/data-center/rail-traffic-data">https://www.aar.org/data-center/rail-traffic-data</a><br />
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Did oil shipments crowd out coal shipments? And will the coal finally get to the power plants?</div>
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<a href="http://www.npr.org/2014/09/23/350946899/stockpiling-coal-for-winter-proves-problematic-for-power-plants?ft=3&f=1003,1004,1007,1013,1014,1017,1019,1128">http://www.npr.org/2014/09/23/350946899/stockpiling-coal-for-winter-proves-problematic-for-power-plants?ft=3&f=1003,1004,1007,1013,1014,1017,1019,1128</a></div>
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Another article on floating storage</div>
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<a href="http://ftalphaville.ft.com/2015/01/09/2083862/the-return-of-floating-storage-a-k-a-the-sharks-are-back/">http://ftalphaville.ft.com/2015/01/09/2083862/the-return-of-floating-storage-a-k-a-the-sharks-are-back/</a></div>
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<span id="goog_1137374256"></span><span id="goog_1137374257"></span><br />Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-80735329652376492022015-02-05T09:00:00.000-08:002015-02-05T09:00:00.364-08:00Some Questions regarding oil, nat gas, and energy in general<br />
Some questions have been floating about in my head after the great fall in oil prices and their rippling through all the other various forms of energy. The predictions are few, if any, just a lot of thinking out loud and links. I've been collecting all this in too many separate nooks and crannies and it is time to collate and collect my thoughts and links. <br />
<br />
It's not pretty but it gets the data posted an in one spot. Questions are just questions, don't look for subtext. Hopefully there will be more than one post.<br />
<br />
Will re fracking now become more of a thing? With lower rigs costs and already built in infrastructure will the older fracked fields get a makeover?<br />
<br />
<a href="http://climateerinvest.blogspot.com/2015/01/oil-its-cheaper-to-refrack-slb-hal-wft.html">http://climateerinvest.blogspot.com/2015/01/oil-its-cheaper-to-refrack-slb-hal-wft.html</a><br />
<br />
Consumers will gain from lower oil prices yet industries related to oil production, distribution, transportation will suffer. Which will adjust faster? Concentrated pain versus diffused benefit and over what timeframe?<br />
<br />
Jim Chanos has some interesting commentary regarding the tension between big oil's economics versus the frackers.<br />
<br />
<a href="http://www.cnbc.com/id/102343976">http://www.cnbc.com/id/102343976</a><br />
<br />
<br />
Major trading houses are taking advantage of the contango in oil to store it now in supertankers and sell it forward, or perhaps just speculate? Either way inventories are going up<br />
<br />
<a href="http://www.wsj.com/articles/worlds-largest-traders-use-offshore-supertankers-to-store-oil-1421689744">http://www.wsj.com/articles/worlds-largest-traders-use-offshore-supertankers-to-store-oil-1421689744</a><br />
<br />
<blockquote class="tr_bq">
<span style="background-color: white; color: #333333; font-family: 'Chronicle SSm', serif; font-size: 16px; line-height: 28px;"><i>According to shipbrokers and analysts, major traders including Vitol SA, Gunvor SA, Trafigura Beheer BV and Koch Supply & Trading Co. Ltd have chartered supertankers capable of storing a combined total of more than 30 million barrels of oil—many of them in the past few weeks.</i></span></blockquote>
RBN Energy runs some numbers on the contango trade (02/02/15)<br />
<a href="https://rbnenergy.com/skipping-the-crude-contango-the-floating-crude-storage-trade">https://rbnenergy.com/skipping-the-crude-contango-the-floating-crude-storage-trade</a><br />
<br />
eia.gov provides some production decline graphs to see what would happen if new production just stopped in the lower 48. My eyes say a falloff from 7 million / year to ~ 5 million by 2016<br />
<a href="http://www.eia.gov/todayinenergy/detail.cfm?id=19711">http://www.eia.gov/todayinenergy/detail.cfm?id=19711</a><br />
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<a href="http://www.eia.gov/todayinenergy/images/2015.01.26/main.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://www.eia.gov/todayinenergy/images/2015.01.26/main.png" /></a></div>
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Also discusses backlogs in production. Would hate to have paid up for a well that's going to be cash flow negative right now ! :(<br />
<br />
Global LNG prices converge, upper band crushed by drop in oil prices<br />
<a href="http://www.reuters.com/article/2015/01/27/lng-prices-global-idUSL6N0V603620150127">http://www.reuters.com/article/2015/01/27/lng-prices-global-idUSL6N0V603620150127</a><br />
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<span style="background-color: white; color: #292f33; font-family: Arial, sans-serif; font-size: 28px; letter-spacing: 0.280000001192093px; line-height: 34px; white-space: pre-wrap;"> </span><a href="https://pbs.twimg.com/media/B8iHOjPIQAA-N0J.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em; text-align: center;"><img border="0" src="https://pbs.twimg.com/media/B8iHOjPIQAA-N0J.jpg" /></a><br />
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<br />Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-50207346420232179042014-11-24T09:00:00.000-08:002014-11-24T09:00:04.303-08:00Yet another empty Chinese city - New York versionStumbled across another empty Chinese city, this one thanks to<a href="https://twitter.com/TheCreditBubble" target="_blank"> <span style="color: #8899a6; font-family: Arial, sans-serif;"><span style="background: rgb(245, 248, 250); font-size: 14px; line-height: 14px;">@</span></span><span class="u-linkComplex-target">TheCreditBubble</span></a> and <a href="http://www.creditbubblestocks.com/2014/11/yujiapu-financial-district-estimation.html" target="_blank">his blog post</a><br />
<br />
He so kindly provided a video link showing the full scale of the project. While some may claim there is <i>progress</i> and construction still going on, please compare the level of activity to the massive size of the project. <br />
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<iframe allowfullscreen='allowfullscreen' webkitallowfullscreen='webkitallowfullscreen' mozallowfullscreen='mozallowfullscreen' width='320' height='266' src='https://www.youtube.com/embed/WkkFidVJRMI?feature=player_embedded' frameborder='0'></iframe></div>
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Here's a <a href="https://www.google.com/maps/@38.9969565,117.6668709,1703m/data=!3m1!1e3" target="_blank">Google Maps screenshot</a> of the place. Just look at all those skyscrapers that need to be filled.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiv9vhLsXd5cStBRfYNVgo7BoBp7g6UoJcVl7fBdSjtZw2xXQ4jzXVVVfIAclInuJkwAvp4RET8SyQNYfxim4mkAX5Do8gdFXJPNJ8zCaAjPBA26sSHFqL0ZqmA0FQS68qZB3fNrW7vdvg/s1600/Screenshot+2014-11-21+14.01.51.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiv9vhLsXd5cStBRfYNVgo7BoBp7g6UoJcVl7fBdSjtZw2xXQ4jzXVVVfIAclInuJkwAvp4RET8SyQNYfxim4mkAX5Do8gdFXJPNJ8zCaAjPBA26sSHFqL0ZqmA0FQS68qZB3fNrW7vdvg/s1600/Screenshot+2014-11-21+14.01.51.png" height="236" width="400" /></a></div>
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So what happens when all those skyscrapers go up, no one fills them, and the 'need' for more slows down? Iron ore prices fall back into the earth<br />
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<tr><td style="text-align: center;"><a href="https://pbs.twimg.com/media/B22diahIEAAQrx5.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="225" src="https://pbs.twimg.com/media/B22diahIEAAQrx5.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">ht <a href="https://twitter.com/SoberLook/status/535257150319509504" target="_blank">@soberlook</a></td></tr>
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<br />Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-79119408213109100822014-11-20T11:44:00.003-08:002014-11-20T11:45:26.571-08:00Weather and Energy - Hurricane free for another year<a href="http://www.aoml.noaa.gov/hrd/tcfaq/Atlyearly.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://www.aoml.noaa.gov/hrd/tcfaq/Atlyearly.jpg" height="200" width="400" /></a>The continental US made it another year without a hurricane making landfall. (Winter snow storms are another matter!)<br />
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How many more years will the US extend this streak before we get slammed by another one? I have no idea, but it will eventually happen. <br />
<br />
A lack of past volatility can lull people into a false sense of security and that's when one can lose quite a bit of money (and lives as well as property in this case)<br />
<br />
Some are even opining (<a href="http://www.washingtonpost.com/blogs/capital-weather-gang/wp/2014/10/07/why-floridas-record-setting-hurricane-drought-portends-danger/" target="_blank">Washington Post, 2014 October 7</a>) the recent lack of hurricanes creates a dangerous future situation, and there's some credence to that. <br />
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The catastrophic bond market is something I've examined over the years as an alternative asset class but haven't invested any capital in this area yet. We've been in a relatively benign environment and pricing for risk has dropped in this area (sound familiar?) I'd rather wait for a some 'volatility' to re-enter the system before dipping my toe into this area.<br />
<br />
<a href="http://www.preferredconcepts.com/when-worlds-collide/" target="_blank">http://www.preferredconcepts.com/when-worlds-collide/</a> examines this a little more<br />
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We've been recently lucky with hurricanes. This will eventually end.<br />
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<br />Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-30220663504618976322014-09-16T09:02:00.000-07:002014-09-16T10:32:51.518-07:00ValueX Vail - A most excellent adventure<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMy10P8C5WXQyIVMg4lp-nuNOTBhI1CyRObBZ8Vk2xamVPdqTIfXhABxhyAsfru_577yaE33iQmCe76_lBxv_xhEyUY7KGb0E8RaXkL0VXC7uvDhwFetyKSMtqcCYd2Lkayhs8D7Ave7M/s1600/bill_ted_excellentadventure.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMy10P8C5WXQyIVMg4lp-nuNOTBhI1CyRObBZ8Vk2xamVPdqTIfXhABxhyAsfru_577yaE33iQmCe76_lBxv_xhEyUY7KGb0E8RaXkL0VXC7uvDhwFetyKSMtqcCYd2Lkayhs8D7Ave7M/s400/bill_ted_excellentadventure.jpg" height="303" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">How I felt at times during the conference:<br />
"Dude did he just tell us value guys to buy that expensive subscription based technology stock?<br />
Yeah. It kinda made sense."</td></tr>
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This last June I had the pleasure of reconnecting with a most excellent group of people at the <a href="http://contrarianedge.com/valuex-vail/" target="_blank">ValueX Vail</a> conference hosted by <a href="https://twitter.com/vitaliyk" target="_blank">Vitaliy Katsenelson</a><br />
<br />
The conference does not consist of large rooms with speakers presenting their case to attendees who then shuffle off to another seminar. Instead the members present and later discuss their ideas amongst a much smaller audience and it is this interaction, defense, and intimacy (only 40 people) that initially drew me to attend last June and in 2012.<br />
<br />
Presenting and defending your idea to a small crowd provides an opportunity for feedback and insight as to how others view the markets. While the ideas are always interesting and varied I find it as valuable to try to discern how people think about the markets; short term flippers, deep value buyers, GARP, growth, distressed investors (and more) all have their own perspective and even within a value stock themed conference there are varied techniques and perspectives. <br />
<br />
The profession of security analysis and selection can be something of a lonely, boring one. Staring at a computer screen for the majority of the day becomes tiresome -- getting the opportunity to actually chat with others who share the same passion is a rare pleasant opportunity for me. I made it a point to spend time with newer attendees as well as some returning friends. Trying to balance the goal of being a social butterfly with a desire to really converse in depth with folks was a challenge.<br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="http://wikibon.org/w/images/f/f5/Ecosystem_machine1.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://wikibon.org/w/images/f/f5/Ecosystem_machine1.jpg" height="258" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Skynet is becoming self aware, buy the right stocks!</td></tr>
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While not all the presentations were released for public consumption you can find quite a few of them here:<br />
<a href="http://www.scribd.com/VitaliyKatsenelson/documents" target="_blank">http://www.scribd.com/VitaliyKatsenelson/documents</a><br />
In both instances it was an excellent crowd with everyone having something to offer. The 2012 conference gave me a new respect for Southerners. As they are quiet, speak slowly and and with a funny accent (just kidding guys) they tend to be underestimated by us <i>Northerners. </i> If a Southern investor comes up and says <i>he just wants to leeaarrrn from you</i>, Run, run fast. (thanks <a href="https://twitter.com/AlexRubalcava/status/216535284148477952?uid=158146927&iid=am-70781558913404610095906895&nid=27+234" target="_blank">Alex Rubalcava</a><br />
<br />
In 2014 I learned what to buy <i>before</i> Skynet becomes self aware and what to buy <i>after</i> China's infrastructure binge goes <i>pop. </i>2014's session also included a very cordial opposing pair of presentations on why you should be long and short the same stock. Showing both the bullish and bearish case for the same stock was a nice addition that I hope continues at Vail and is an excellent idea for other conferences. <br />
<br />
<b>Get Real</b><br />
<br />
While this post praises the ValueX Vail conference it also is a suggestion to you - find others who share a passion to invest and actually talk, present, kibbitz, challenge each other. Not everyone can or would want to attend next years' conference (actually, please don't, you may bump me out!) but if you have an opportunity to join or create a group / conference nearby I would suggest you do so. <br />
<br />
While today's technology allows for various methods of communication they don't <i>yet</i> completely replace the advantages of real human interaction. At ValueX Vail I learned just as much during casual conversation as during the organized presentations. Until Sheldon dramatically improves his Virtual Presence Device, getting together in the same room is a lot more fun and productive.<br />
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<iframe allowfullscreen="" frameborder="0" height="270" src="//www.youtube.com/embed/tOqeLoYEcTk" width="480"></iframe><br />
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Fortunately there are some opportunities.<br />
<br />
A ValueX in Lennox, MA hosted by Vail attendee Ethan Berg is coming this fall. More information can be found here:<br />
<a href="http://www.winthropestate.com/#!valuex-berkshires/c1r9z" target="_blank">http://www.winthropestate.com/#!valuex-berkshires/c1r9z</a><br />
The window for applications is closing soon so please apply if interested. Unfortunately my to-do list overextended enough already (it took 2+ months to finally post this entry!) otherwise I'd go.<br />
<br />
<a href="https://twitter.com/AlexRubalcava">@AlexRubalcava</a> in Los Angeles hosts a monthly 10K 'book club' where people get together and dig into the financial documents of various companies. I'm also gently prodding Alex to start up a ValueX LA, so if you are interested in attending one in LA please <i>gently</i> prod him to get that rolling. Thanks.<br />
<br />
Finally, I myself am starting up a '10K book club' / value investing discussion group for the Seattle / Tacoma area. If you are interested please leave a comment below or email me at:<br />
<a href="mailto:merrillovermatter@gmail.com">merrillovermatter@gmail.com</a><br />
<br />
While today's hyper connected world allows us the opportunity to virtually connect in a manner not even conceived of a generation ago, very low tech human conversations should still be a part of your continual discovery of the financial markets. I suggest you give it a try.Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-23722832040344488522014-06-04T08:34:00.000-07:002014-06-04T08:34:00.066-07:00Natural gas has a very big hole to fill this summerThe Polar Vortex winter dramatically drew down natural gas stocks as the numerous cold fronts worked their way through America. While a decline is natural gas inventories is expected each year, this year America ended the winter with dramatically less natural gas in inventory.<br />
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US Natural Gas inventories - via the US EIA <a href="http://ir.eia.gov/ngs/ngs.html" target="_blank">http://ir.eia.gov/ngs/ngs.html</a><br />
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As of the most recent report, inventories are 40.1% below their 5 year average. To graphically show what this means going forward, here's an estimation of how much needs to be injected into storage every day until the maximum fill date date of November 11th. <br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj3LoeYTgoeGa97SBdELzhOMtRKemsByhzkgRfi353Sps4xKDLCC9tXTg4ACby7wcB1mO07lqlJFfP-fWnWd5lSB8Pz8RKdHjthf-Cy1WRs7H8O5p0wh2KtUPjuaj4HwOGLoA5wA4-eaUQ/w1231-h846-no/nat+gas+fill+2014.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj3LoeYTgoeGa97SBdELzhOMtRKemsByhzkgRfi353Sps4xKDLCC9tXTg4ACby7wcB1mO07lqlJFfP-fWnWd5lSB8Pz8RKdHjthf-Cy1WRs7H8O5p0wh2KtUPjuaj4HwOGLoA5wA4-eaUQ/w1231-h846-no/nat+gas+fill+2014.png" height="435" width="640" /></a></div>
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The 2014 line is the one much higher than the rest. Note how the 2012 line was the lowest, when we experienced extremely low prices.</div>
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While it's always a guess as to when we'll hit the maximum in storage each year, (going back 19 years the average date was November 11th with a standard deviation of 9.5 days) it is quite apparent this year is unlike many others in recent history. Injecting ~40% more each day looks like a challenge which will not be overcome. Injection rates depend upon the increased production, weather, industrial activity, hurricanes, and I'm sure a few other factors I have forgotten.</div>
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IF we get a nasty hurricane barreling through the gulf, a hot summer, or an early cold winter we could have some serious inventory problems in early 2015.</div>
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I am not attempting to estimate how much natural gas will be in the ground for this coming winter but it is something to watch this summer. </div>
Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-36516839237352181102013-09-12T08:48:00.000-07:002013-09-12T10:03:32.656-07:00Peak Hurricane?<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="http://www.aoml.noaa.gov/hrd/tcfaq/Atlyearly.jpg" imageanchor="1" style="clear: right; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="200" src="http://www.aoml.noaa.gov/hrd/tcfaq/Atlyearly.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Atlantic hurricane frequency - source: <a href="http://www.aoml.noaa.gov/hrd/tcfaq/G1.html" target="_blank">NOAA</a></td></tr>
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So far this year we have been blessed by a lack of hurricanes on the East Coast. As the accompanying graphic shows, we are past peak hurricane season this year without any major storms. Of course statistics only work with a large sample size. <a href="http://en.wikipedia.org/wiki/Hurricane_Sandy" target="_blank">Hurricane Sandy</a> from last year is an unfortunate contrary example. She struck in the last few days of October and as you can see from the accompanying graph this is supposed to be rather uncommon. This doesn't matter to someone whose home that was demolished by Sandy.<br />
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As of right now the coast does look rather clear except for one storm named Humberto near Africa. The current forecast is for it to rise to hurricane force winds and then fall back to a tropical storm. One can keep an eye on any storms forming at <a href="http://www.nhc.noaa.gov/">http://www.nhc.noaa.gov/</a> During hurricane season I open this window every day to see if anything is forming on the horizon.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1Ed0uoarUT2bFUIvg4h_sNJxKlN1gROvlzgOdd5I5BoaBicTpJNKXUSqhRTgfDN8A7COyIg7GSqLIw2YvhI6nQlpkLO_tvj5VcnBmi2vvsn89BjTPKsesYM0nq_mXnsQnACEZicZ7yQ8/s1600/2013+09+hurricane.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="290" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj1Ed0uoarUT2bFUIvg4h_sNJxKlN1gROvlzgOdd5I5BoaBicTpJNKXUSqhRTgfDN8A7COyIg7GSqLIw2YvhI6nQlpkLO_tvj5VcnBmi2vvsn89BjTPKsesYM0nq_mXnsQnACEZicZ7yQ8/s400/2013+09+hurricane.png" width="400" /></a></div>
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Beyond the horrible damage, death and destruction a hurricane inflicts upon society they also play havoc with a portfolio. Reinsurance firms, oil service companies, oil and natural gas exploration firms, and even utility companies are but a few of the sectors which can be adversely affected by one slamming into America. Keep an eye out for upcoming storms and also consider stress testing your portfolio. If a major hurricane hit the East Coast how would it affect your portfolio? Do all your energy stocks have Gulf of Mexico fields? What's the risk with your insurance firms, reinsurance firms? </div>
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<i>Disclosure: Own stock in pipeline companies, reinsurance, oil service, and major oil & nat gas companies</i></div>
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<i>Edit: Reuters also notices the lack of meteorological violence this year </i></div>
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<a href="http://www.reuters.com/article/2013/09/07/us-weather-hurricanes-idUSBRE9860AY20130907">http://www.reuters.com/article/2013/09/07/us-weather-hurricanes-idUSBRE9860AY20130907</a></div>
Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0tag:blogger.com,1999:blog-3837096154281906877.post-89491241516684723022013-09-11T11:28:00.000-07:002013-09-11T11:28:39.029-07:00The rising oil choke collar<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYMvK6Uw_QPEr2M88tHAJQBtw_lycEETw0vDrVdQ3T6PXjQXWlvQwmzIO3BcLord8FPbsb3zCa3PbG8m6ZOAN-YQmjX3Vf2ET3N0OxPPalMa11JtWshkwP6SOyXfVrjgZqA33xOFtSoQ8/s1600/vader_choke.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYMvK6Uw_QPEr2M88tHAJQBtw_lycEETw0vDrVdQ3T6PXjQXWlvQwmzIO3BcLord8FPbsb3zCa3PbG8m6ZOAN-YQmjX3Vf2ET3N0OxPPalMa11JtWshkwP6SOyXfVrjgZqA33xOFtSoQ8/s200/vader_choke.jpg" width="193" /></a></div>
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Oil prices are on the upper end of the post 2008 financial crisis range. So far each time prices rose to the 110+ region they have backed down again.<br />
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<tr><td style="text-align: center;"><a href="http://research.stlouisfed.org/fred2/graph/fredgraph.png?height=600&width=1000&id=WCOILWTICO,GASREGCOVW&scale=Left,Right&range=Custom,Custom&cosd=2006-01-01,2006-01-01&coed=2013-08-30,2013-08-30&line_color=%230000ff,%23ff0000&link_values=false,false&line_style=Solid,Dashed&mark_type=NONE,NONE&mw=4,4&lw=2,1&ost=-99999,-99999&oet=99999,99999&mma=0,0&fml=a,a&fq=Weekly%2C+Ending+Friday,Weekly&fam=avg,avg&fgst=lin,lin&transformation=lin,lin&vintage_date=2013-09-11,2013-09-11&revision_date=2013-09-11,2013-09-11" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="http://research.stlouisfed.org/fred2/graph/fredgraph.png?height=600&width=1000&id=WCOILWTICO,GASREGCOVW&scale=Left,Right&range=Custom,Custom&cosd=2006-01-01,2006-01-01&coed=2013-08-30,2013-08-30&line_color=%230000ff,%23ff0000&link_values=false,false&line_style=Solid,Dashed&mark_type=NONE,NONE&mw=4,4&lw=2,1&ost=-99999,-99999&oet=99999,99999&mma=0,0&fml=a,a&fq=Weekly%2C+Ending+Friday,Weekly&fam=avg,avg&fgst=lin,lin&transformation=lin,lin&vintage_date=2013-09-11,2013-09-11&revision_date=2013-09-11,2013-09-11" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Gasoline and Oil prices - source: <a href="http://research.stlouisfed.org/fred2/graph/?g=mjl" target="_blank">Federal Reserve</a></td></tr>
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<a href="http://si.wsj.net/public/resources/images/WO-AP351_OPEC_NS_20130910141504.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="320" src="http://si.wsj.net/public/resources/images/WO-AP351_OPEC_NS_20130910141504.jpg" width="148" /></a></div>
While Syria has been getting all the news, Libya's declining oil production may be another reason for firm oil prices. A recent <a href="http://online.wsj.com/article/SB10001424127887323864604579067001901766512.html" target="_blank">WSJ article (September 10, 2013) </a>highlights the situation. Considering the vast majority of Libya's GDP is derived from the energy sector (<a href="https://www.cia.gov/library/publications/the-world-factbook/geos/ly.html" target="_blank">CIA Factbook</a>) this does not bode well for the new post Gaddafi Libya.<br />
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I suggest keeping an eye on the price of oil. If it gets much higher it may temper the recent positive economic news.<br />
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Additional reading:<br />
<a href="http://en.wikipedia.org/wiki/Economy_of_Libya">http://en.wikipedia.org/wiki/Economy_of_Libya</a><br />
<a href="http://en.wikipedia.org/wiki/Libyan_civil_war">http://en.wikipedia.org/wiki/Libyan_civil_war</a><br />
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<i>Disclosure: Own oil service, energy, and pipeline stocks</i><br />
<i><br /></i>Greg Merrillhttp://www.blogger.com/profile/01479219930098544266noreply@blogger.com0