July 25, 2014
- Who says you need a crisis in the Middle East to get $200 oil?
- How the next round of anti-Russian sanctions could tank the world economy
- The miracle of U.S. shale energy… and why it’s even bigger than you know: Highlights from the Sprott Vancouver Natural Resource Symposium
- Finance your retirement by renting out a spare room? We think we have a better idea
- The reader who hates us for giving him so much of what he wants…
Buried within this little headline change at The Associated Press lies the potential for $200-a-barrel oil.
This was on Tuesday. Same story. Same facts. Same photo. Vastly different spin.
Indeed, U.S. intelligence finds no link between the Russian government and the downing of MH17 in Ukraine. But you can rely on conveniently anonymous “senior U.S. intelligence officials” to say it’s the Russian government’s fault anyway.
The evidence? A hapless spokeswoman at the State Department cited YouTube videos and Twitter photos supposedly posted by the pro-Russian Ukrainian separatists. It was on the Internet, so it must be true, right?
Yesterday, the same hapless State Department flunky upped the ante and accused the Russkies of firing artillery into Ukrainian territory.
The assembled reporters asked what evidence she had. It’s a secret, she said, gleaned from “intelligence information.”
That’s all? Anything more specific? Bueller?
One reporter asked if there was “a YouTube video or something that you can point us to.”
There was not. “Marie,” another report shot back, “I think that it would be best for all concerned here if when you make an allegation like that, you’re able to back it up with something more than just ‘because I said so.'”
Heh… The State Department press briefings are one of the few outposts in Washington where the elite consensus is regularly questioned. CNN could raise its miserable ratings by running them live. But then ordinary Americans might start wondering why they’re supposed to hate that horse-riding, shirtless Putin guy so much anyway.
“Passing over the obvious objection — that it’s none of our business — we take up a defense of Russia and of Vladimir Putin,” writes Agora Inc. founder Bill Bonner at his Diary of a Rogue Economist.
“Despite the assurances given by President H.W. Bush and subsequent U.S. presidents and secretaries of state, the new Russian Federation’s periphery states have been drawn toward NATO… the EU… and its potential enemies.
“Also, the EU and the U.S. meddled in Ukraine, helping to unseat its democratically elected president, Viktor Yanukovych, so that he might be replaced by someone more agreeable.
“Why shouldn’t Putin meddle back?”
But what about MH17? “A bunch of trigger-happy rebels are on the ground shooting at Ukrainian military airplanes. One of them is bound to do something stupid sooner or later. None of the people on the ground had an interest in shooting down the airliner… except those who wanted to pin it on Putin.”
Which brings us back to the possibility of $200 oil.
If the United States and European Union amp up the sanctions, how does Russia respond?
“Russia’s next moves remain uncertain,” Adam Slater of Oxford Economics tells the Guardian, “but an escalation of the conflict is still a significant risk which would have potentially negative global spillovers in particular via the impact on global energy markets.”
Russian energy exports might be cut by as much as 80%, says Slater. OPEC could make up only half that shortfall. “In such a scenario, world oil prices could soar above $200 per barrel and gas prices would also rise steeply.”
Slater reminds us a spike in oil prices has helped to fuel every recession of the last 40 years…
Such a hypothetical is far from the minds of traders this morning. Crude is down slightly as we write, to $102.
Stock traders are more concerned about losses at Amazon (more than expected) and the revenue outlook at Visa (less than expected). At last check, all the major indexes are down at least a half percent; the Dow is taking it the worst, down nearly 150 points, to 16,935.
Gold sits $4 below $1,300.
While we have crude on the brain this morning…
“His personality is so magnetic he can’t carry credit cards,” master of ceremonies Eric Fry quipped. Which brought to the stage Byron King.
“A lot can happen in 10 years,” says our in-house rockhound.
A mix between geopolitics and geology has brought us to today’s oil market.
The U.S. (not Russia or Saudi) is producing a lot more oil. More horizontal wells. “This stuff is not easy,” King says.
In fact, this gets back to something we were talking about a good 10 years ago — the idea of Peak Oil. Back then, there were only four ways to fix the impending problem: systemic change, adaptation, mitigation or a miracle.
With America’s tight oil boom “We got the miracle!” Byron exclaims. “It’s great to be alive right now” in this new age of oil.
The rest of the world output is flat while the U.S. is continuing to ramp up production. “U.S. imports fell… off… a… cliff.”
So what’s at the heart of this opportunity? The oil service companies — the technology plays that made America’s tight oil boom a reality. Schlumberger, Baker Hughes, Halliburton (all household names if you’re one of Byron’s Outstanding Investments readers). “Without these guys, shale wouldn’t work,” he says.
But looking ahead, there may be even more miracles on the way…
Right now we’re seeing 10-15% oil recovery from tight oil wells. “What if that doubles?” Byron asks. Simply put, there could be another miracle up America’s sleeve — stay tuned to this one!
“This is really, really important,” said S&A Resource Report editor Matt Badiali. “And not enough attention has been given…”
I sat forward in my chair. The title of his talk drove home the point: The Shale Boom Is Far Bigger Than You Know.
“It’s the single biggest event in energy since we shifted from whale oil to coal. There’s a lot of money to be made.”
I’m talking about revenue and earnings — cash flow — something many metal miners don’t know much about!
When there’s a bull market like this, you “take it,” Badiali urged the crowd.
Put into perspective, Matt says, “If we get 5% of America’s ‘source rock’ oil [see: oil from shale], we will have more than we produced in the past 150 years.”
That’s a big target — “There’s a lot of money to be made,” he reiterated.
“Small changes in the industry are making huge differences,” Matt went on.
EOG Resources is up 316% since 2009. That’s all due to increasingly good economics (cost savings along with higher efficiency and production).
Best of all, “This is still happening!”
Smaller companies are still able to make an EOG-style run-up — one of which Matt gave away to the packed general session crowd.
And not to give away too much, again in respect to paid attendees, but Badiali also had an impressive breakout session where he gave away no less than five “junior miners” in the shale boom.
How does a junior miner get involved in energy? It’ll be something we highlight in our wrap-up report.
You can get a comprehensive summary of the breakout sessions and audio recordings of the talks in the main hall… and you can get them for a substantial discount while the symposium is still on this week. Today’s our final day in Vancouver, so you’ll want to hop on this right away.
“Airbnb Might Finance Retirement,” reads the headline at the San Francisco Business Times.
Seriously? your editor wondered. What a shameless pump. Granted, the website that links up frugal travelers with people willing to rent a spare room is a brilliant idea that’s become a $10 billion company. But is it really going to “finance retirement” once it goes public later this year and the share price goes to the moon?
Then I read more closely: “Retired boomers might be hosting house guests to make ends meet in retirement,” said the story.
Bummer.
Anyway, that’s the forecast of Ken Dychtwald, author of 16 books on aging and demographics. Two years ago, he figured on a wave of reverse mortgages. But many of the big banks are getting out of that business, and many seniors are realizing reverse mortgages aren’t all they’re cracked up to be.
“I think Airbnb is what’s going to happen,” he says now. “You have millions of adults living alone.”
Airbnb might bring seniors more opportunities to socialize and feel less isolated, Dychtwald suggests: “The Airbnb host might ask their guest, who could be a college student, what type of music they like or join them for dinner at a cafe.”
[If that’s NOT what your idea of retirement looks like: We kindly direct your attention to the Gamma-nMC project — the next step in an undertaking that’s been evolving for nearly a year. It’s a catch-up plan that can quickly bring about not a “comfortable” retirement — but the retirement of your dreams.
The project is not appropriate for everyone. But if retirement’s on your mind and you’re interested in a retirement strategy that’s both aggressive and achievable… you’d do well to follow this link.]
“Regarding long-winded and boring presentations,” a reader writes…
[Here it comes…]
“I don’t find them boring at all.
[Oh, this is more of the backlash-against-the-backlash from yesterday. Do go on…]
“Admittedly, I don’t always buy the product being sold (wait for it, here it comes!) But I do like reading them when I have the time.
“BTW, thank you for providing transcripts, as I just can’t stand the long, slow videos. I downloaded one once just to see how long it was — 50 minutes! With judicious skimming, I can get the interesting bits out of a transcript in five-10 minutes.
“I can see the logic behind it. First, credibility needs to be established — why should I listen to what this person has to say? Next, hints to some catastrophic/wonderful event that we absolutely have to take action on. Then establish the background to clue people in on why you think the way you do. And finally, offer a solution or opportunity. If this takes enough time and goes over the same points often enough, the person watching will believe through the power of repetition and not want to waste the time that they have already invested in the presentation.
“To those who hate it, tough! Learn to read faster or futilely rail against the nature of humanity!
Love The 5!”
“Not long ago,” writes our final correspondent, “y’all sent out a request asking about conspiracies that we thought were important enough to share.
“It seems that I have had my head in the sand on one for far too long, and I am grateful to your other readers for pointing it out to me. Under the cover of ‘NEWS,’ it appears that you folks at Agora Financial have conspired to sell me something, and the most surprising thing is that you all expect me to use my own discernment when confronted with the unending stream of offers.
“The fact that I have to actually click on a link before being confronted with the latest video from your overeager sales force is simply astonishing. Why, don’t you know that I am simply not capable of seeing a link and then NOT clicking it? Haven’t you guys been at this long enough to have figured out that my inability to randomly click links is completely your doing? I mean, come on, surely my expectation that ‘your’ publication should cater to my needs and whims is not too much to ask.
“Can’t you provide something that tickles my ears, makes me feel good about myself and shows me how to turn my complete aversion to risk into a billion dollars before I wake up tomorrow? So if you wouldn’t mind, could you please stop conspiring to share your insights, opinions and sales offers in a way that causes my panties to get all twisted and bunched up?
“Oh, I almost forgot, I REALLY LOVE YOU GUYS, but…….. I sometimes learn something when I actually do watch your videos or read your transcripts, which is simply outrageous! PLEASE, PLEASE, stop, cuz I completely forgot how to ‘unsubscribe’ from your drivel, and now I have to torture myself and read through it all cuz I just can’t bring myself to hit the delete key.”
The 5: Yeah, it’s terrible how much value we deliver to both current and prospective customers. How will you ever forgive us?
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. Speaking of new and interesting things you can learn… how about the 77 censored health cures exposed by the Laissez Faire Club?
Tell you what — we won’t even make you watch the presentation version of this one. You can read at a pace of your choosing right here.