July 22, 2014
- Flipping pizzas for $56k a year… and other shale wealth oddities
- The “assembly-line model” for modern U.S. oil production
- Fed starts to get the inflation it wants
- The flood of money just waiting to pour into precious metals stocks
- An ingenious new gold miner ETF
- Progress report from the SS Central America… another reason Americans pay less for food than others… the return of the “long-winded presentation” complaint… and more!
Behold what an oil boom can do to a place…
That’s a Craigslist want ad posted by a pizza joint in Stanley, North Dakota. Not bad, considering the typical U.S. college graduate is earning $45,473. Well, assuming he or she can find a job.
Meanwhile, 70 miles away in Williston, the nation’s busiest Wal-Mart is also hiring…
True, the cost of living is also steep. Housing is scarce… but the ad for the pizza joint says rooms are available for rent. For $900 a month. The ad does not disclose whether you’d contend with a shared bathroom down the hall… so it’s a fair bet you would. Heh…
“The hottest job market in the country is now in western North Dakota,” sums up the American Enterprise Institute’s Mark Perry, “thanks to the oceans of shale oil that are now being accessed with advanced drilling technologies.”
“Since 2008, U.S. oil output has soared,” our resident oil field geologist Byron King reminds us.
Byron is settling in for the start of the Sprott Vancouver Natural Resource Symposium later today… and energy is top of mind. “In the past six years,” he says, “the U.S. has added over 3 million barrels per day of new production to national energy output.
“As you can see, pre-2005, U.S. conventional oil output was heading down. The overall trend was seemingly irreversible decline. But then, by 2007, U.S. oil output flattened as the energy industry adopted new, developmental tech at a strong clip.
“Since 2008, as the chart shows, U.S. oil output is up by over 3 million barrels per day, and output in the rest of the world — especially — has been flat or declining. In essence, U.S. fracking has added significant, new daily oil output. It’s just in time to counter a drop-off from Libya and Iraq.”
One other thing, says Byron: “In most other oil-producing nations of the world, internal oil demand is increasing. That means that amount of oil available for export is falling.
“But with the North American fracking boom, there’s more oil available to meet demand and make up for less and less oil available from other nations on world markets. We’re dodging a huge ‘energy bullet,’ so to speak, and I mean every day.”
What used to be known as “oil drilling” is now something more akin to manufacturing.
“Operators have turned the process of drilling new wells and fracking holes into an assembly-line process,” Byron explains: “Build a drill pad, and then use the same site, machinery, drilling rig, etc., to drive multiple holes out into the hydrocarbon-bearing resource.
“The fracking boom showed up after decades’ worth of technological improvements in the energy biz. Pressuring rock with fluids — classical ‘fracking’ — has been around for nearly 70 years. But horizontal drilling now makes it possible to expose many thousands of feet of hydrocarbon-bearing rock to the magic of super-high pressure.”
Behind it all is a staggering array of high-tech, Byron sums up: “Better computers, software and algorithms. Better math, physics and geophysics. Better directional control. Better drill bits. Better drilling fluids. New power technology, such as ‘top drive’ drilling systems. Better metallurgy for drill pipe, and even ‘coiled tube’ drilling with metal that bends more easily than you might suspect. Better valves and pressure control.
“It’s complex technology, and not all that many companies can make it work.” But the ones that do make it work are building new fortunes in North Dakota — and making it possible for a humble pizza driver to pull down $56k.
Thing is, you don’t have to deliver pizzas on the prairie to make that kind of coin off America’s new oil boom. In fact, if you follow Byron’s six-step “road map,” you can turn a modest stake of $500 into far more than $56,000. See how much when you follow this link.
Stocks are recovering some of yesterday’s losses… and small caps are looking the strongest. The Dow is up less than half a percent, to 17,120. The Russell 2000 is up more than 1% ,to 1,160.
Earnings season is in full swing: Lockheed and Coca-Cola beat expectations, but McDonald’s missed.
Economic numbers are also pouring in: Existing home sales picked up 2.6% in June — more than the “expert consensus” was counting on. And consumer prices jumped 0.3% last month; the year-over-year increase remains within the Federal Reserve’s 2% sweet spot.
As always, any resemblance to your own cost of living is purely coincidental.
“Inflation is not going away,” says the aforementioned Byron King — turning his thoughts now to gold, another hot topic in Vancouver.
“I think that the central banks of the world, and the people who run university economic departments and train the leaders of the future, really do believe that we ought to have long-term inflation. If that is indeed where they’re coming from, you need to own gold and silver.
“There’s significant retail and institutional cash on the sidelines waiting to find the right moment to jump back into precious metals, both the commodities and mining equities. Indeed, there’s an immense amount of money waiting for the next step. In the last few years, the big indexes have done incredibly well; everything has gone up, from airlines to consumer electronics, Silicon Valley, aerospace. A lot of people have made a lot of money in the big markets and in traditional investments.
“Now, where does it all go? That recently minted money needs a new home.
“And I’m looking at companies that are positioning themselves to come out strong in the next two years.”
[Ed. note: As we get ready to hit the “send” button on this episode of The 5, our friend Eric Fry is about to open the Sprott Vancouver Natural Resource Symposium. This event features 23 expert speakers — including Byron, Doug Casey, Adrian Day, Frank Holmes and Rick Rule.
For only a few more hours, you can snag the best available price on audio recordings of all this week’s sessions. With these recordings, you’ll be poised to hop on the best opportunities right now in both mining and energy. Click here to take advantage of our best value.]
Gold is holding its own, by the way. At last check, the bid was $1,308. And silver has climbed above $21 this morning.
Speaking of gold, and our friends at Sprott…
Sprott has launched a new gold miners ETF — logically called the Sprott Gold Miners ETF. It trades under the ticker symbol SGDM.
Its performance is linked to the Sprott Zacks Gold Miners Index. This index is not “market-cap weighted,” so it’s not biased in favor of companies with large market caps. Instead, the weighting of the 25 stocks in the index depends on revenue growth and debt load.
Thus, its top holding is the nimble royalty company Franco-Nevada (FNV) and not the underperforming giant Barrick Gold (ABX) — which seems like the top holding in every gold-miner ETF and mutual fund.
Refreshing, no?
While we have gold on the brain, we see the good folks at Odyssey Marine are making steady progress recovering the precious metal cargo of the SS Central America.
The Central America went down off South Carolina during a hurricane in 1857, laden with a cargo from the California Gold Rush.
A federal judge overseeing the recovery has released a tally from Odyssey’s first two months of effort — 43 gold bars, 1,302 Double Eagles with a $20 face value, 37 Eagles with a $10 face value and 9,053 silver dimes.
The coins alone could sell for $9 million, according to an Associated Press estimate. The bars? Those are harder to ballpark. Could be as much as $250,000 each.
“As always, you get what you pay for,” a reader writes after yesterday’s episode. “Cheap U.S. food is the reason we are so fat and unhealthy.
“A diet consisting of soybean and corn industrialized ‘food’ derivatives along with factory-raised and -fed poultry, livestock and fish is cheaper than fresh produce, free range livestock and wild caught fish.
“However, the food cost savings are more than made up for in medical bills for diabetes, obesity and a host of other assorted ills. We are what we eat, and most Americans have no idea what they are really eating and the effect of their cheap food.”
The 5: Hear, hear. And that’s only part of the story.
As a new expose from the Laissez Faire Club reveals, the feds and the food industry have made all of us guinea pigs in a 20-year experiment. It’s all there in 44,000 pages of government files you and I were never meant to see.
Already, Fox News has had to self-censor its coverage, so we can’t guarantee our expose will remain online for long. Best give it a look right now.
“I would echo the concern about drug costs as expressed by the physician yesterday,” writes a veterinarian. “I have been dismayed by the dramatic rise in cost for generic drugs.
“This not only hurts the people without health insurance but also makes it very difficult for people to care for their pets. I recently diagnosed a patient with Lyme disease. One month’s antibiotics a few years ago would have cost less than $20. Fortunately, she found a pharmacy where it cost only about $90. (Based on the cost for me to stock it in my office, I was expecting $200!)”
“First, do no harm,” reads the subject line of our next email. “I am a huge fan of your insight and investment recommendations…
[We see the “but” coming from miles away…]
“…but you should immediately fire the apparent reject from Ronco who designs your marketing. For God’s sake, get to the damn point.
“You will perhaps mock me for this, but the truth is you have so often held the readers hostage with hours of needlessly long sales pitches that I am sure that I am like most readers when I tell you that more often than not these days, I just delete your emails.
“Has anyone with Agora actually timed how long, after clicking on a link, you attempt to keep a reader listening to your video or reading your transcripts? If there are multiple links in the email, it can, without exaggeration, take hours. I can assure you that no reasonable person is able to finish watching even one link (yes, I have tried repeatedly).
“You have taken an otherwise respectable and credible source of information and transformed it into nothing but the sleaziest form of marketing. I am currently up for renewal, and it is so sleazy that I am considering dropping your publication.
“It is not that I don’t have an interest in your links, I just also have a life. Just tell us what is offered and how much it will cost, and keep your daily version of War and Peace. As a guideline, generally, no link should take more than two minutes to review.”
The 5: Why, it’s a wonder we’re still in business the way we inundate readers with our verbose sleaze!
First of all, we’re flattered that you find our daily missive so compelling that you can’t resist the temptation to click on every link. Usually, we’re happy if it’s just one. That’s the beauty of The 5: If something one minute doesn’t catch your fancy, chances are something the next minute will. But you eat it all up? Impressive.
Fact is, we try out all manner of formats, lengths, etc., to see what the marketplace responds to. In general, the marketplace responds to messages that take, well, “more than two minutes to review.” We’re sorry if your fellow readers have driven you to distraction…
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Final reminder: Maximum savings on audio recordings from the Sprott Vancouver Natural Resource Symposium are available only through midnight tonight.