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Global Economy Bursting?

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Terrel L. Shields said:
The "denial" is our President who apparently is in denial. I heard another talking head (liberal) on the TV this weekend arguing against investment in oil and gas claiming that ALL that money needs to be spent on the next generation fuel supply which he conveniently did not name because it doesn't exist yet.
Supplying a few Kva of wind energy or solar energy that is equivalent to a few hundred thousand GALLONS of fuel is no substitute for the loss of millions of BARRELS (42 gal.) of petroleum products.
And natural gas is the cheap alternative...on a BTU content basis it costs < 50% that of a barrel of oil and requires virtually no "refining" [preparation] before being used.
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You're right Terrel!

The mining and use of natural gas is a no-brainer ! T Boone Picken's plans for doing just that go largely ignored.
He had a good proposal in 2009 but nothing ever evolved.
http://media.pickensplan.com/pdf/20090930NATGAStalkingpoints.pdf

We could tell the Saudi's to take a walk if we would just use what is so abundantly plentiful right here in Amercia !
:shrug:
 
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The correlation of FED action and the markets

The FED injects money into the Primary Dealers, to the stock market and the economy. Or, the FED takes money out through the Primary Dealers, from the stock market and from the economy.

It does appear that the FED is getting less bang for the buck injected through quantitative easing. But the stock market, the industrial production index and GDP are still responding. Only the employment level is not responding, if anything, it is on a slow decline.

What's missing from the graph is the backup in the yield on U.S. Treasury paper and the decline in the housing index. Has the FED run its course? Out of bullets?
 
Corporate profits are up. Stock prices are up. So why isn't anyone hiring?
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If your profits are coming from overseas hiring, then why not be building plants overseas? GM? Why build in Detroit and export to China when you can build Buicks in China for a fraction the expense and much less in property taxes, income taxes, etc.
 
As the EPA, OSHA, etc pile on the regs, look for companies to move jobs and production overseas. If I was a major company, I would be looking at Singapore or Hong Kong in terms of a business-friendly market. I know the oil companies are looking overseas as the EPA shuts down oil/gas drilling and refineries.
 
Chevron's Richmond, CA refinery wanted to process heavier crude (Alaska crude is thick as well as Kern Co oil) and the city has refused to let them expand. It is the largest employer in the town and is typical of the pressures these companies come under.

They have to make a decision to keep the refinery which is critical to supplying their distribution network, but the cost is getting out of hand. At some point, the issue has to come to a head. They will close the plant eventually.

Five refineries closed down in 2009. There are roughly 165 in the U. S. Ironically, most refineries now being built or refurbished here are doing so to process Canadian or other foreign oil. And India and China are building mega refineries from which they intend to export processed gasoline. The MidEast is also exporting gasoline. We buy about 10% of our gasoline already refined and are likely to buy a much higher percentage in the future.

All that money is showing up in our trade deficeit and oil accounts for roughly 50% of our trade deficeit. The remaining 50% is basically Chinese imports. 60% of our crude oil comes from overseas or Mexico and Canada. A large portion (10% of so) of imports comes from Venezuela which is totally unstable under crazed dictator Chavez who was just given complete police powers by his congress. Inflation is rampant and gasoline in that country, which was 30¢ a gallon a few years ago is now about $1 a gallon. All tax revenue for the state comes from oil sales. There are not other taxes. A huge supply disruption would occur if Chavez wants to try it and/or there is a Civil war. Bolivia is another country on the verge of "blowing up". They also raised gasoline prices largely due to inept governance from a "populist" socialist president
There is a ton of risk out there to oil supplies and any lurch drives costs up.
I have 7 oil stocks in my IRA and a non-IRA account. I sold off 3 oil stocks last year as they were bought out or nearly doubled - Smith International, Anadarko (before Macondo) and Superior Wireline. All made 30% money under a year.
Of the 7 stocks I still own they have went up by the following from when I bought them. The oldest is about 16 months.
Bingham Expl - 47%
Denbury Resourc - 14%
Great Plains - 7% (its a utility with wind, gas, and ethanol)
Questar - 28%
Questar Explor - 31%
Weatherford - 35%
Pason Systems - 38%

I've invested in stocks for 25 years. This is the first year that 100% of my portfolio has made money. All but one stock (Casey Stores) was an oil related stock. Casey has a buy out offer and I made 30% on it.

I may look like a genius with such a bunch of winners but it is simply because I am weighted in the industry that I know...and commodities are simply hot. If oil prices go to $130 a bbl (seems likely) and natural gas prices come back...I don't see how I can lose by staying long in energy related companies and I am looking to buy 2 new stocks this week for my IRA. I am sticking with energy.
 
What happens when interest rates start increasing?

At the end of 2006, total debt held by the public was $4.9 trillion. According to the Treasury Department, the average interest rate paid on that debt was 4.9%. Therefore, the annualized interest payment at that time was $240 billion. At the end of 2010, our publicly traded debt has increased to $9.3 trillion, but the average interest rate on that debt has plummeted to just 2.3%. So, despite an 87% increase in debt in just a 4-year time span, the annualized debt service payment actually fell 11% to $213 billion. The average maturity on our debt has declined to 5.5 years.

Falling interest rates and reduced durations have merely given the illusion of solvency to the U.S.

By 2015, our publicly traded debt is projected to be at least $15 trillion. The debt service expense could easily reach over $1 trillion if interest rates revert back to their average level at that time. That's 50% of all federal revenue collected today.

We have reached the magic of not being able to pay down the debt. GDP growth is being retarded by debt service and therefore so is tax revenue retarded. That means the FED has to increase the amount of buying U.S. Treasury paper that it does. We will have a QE 3 and 4 and 5 and so on and so forth.

This going to get really nasty. The only way out is to inflate our way out or ... default our way out.
 
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