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Stay Focused

There's suddenly a lot in motion right now
Monday, January 5, 2015, 10:49 PM

There is so much happening across the world right now -- politically, economically, environmentally and especially in the field of oil (energy) -- that it is very hard to stay focused on what really matters.

Compounding the difficulties is the fact that the media, either through sheer ignorance or gross mendacity, is perpetuating obvious political talking points and/or overt propaganda in favor of fact-based reporting. » Read more

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Off the Cuff: The Longer Reality Is Denied, The Bigger The Inevitable Crash

Economics meets Physics
Thursday, January 1, 2015, 1:25 PM

In this week's Off the Cuff podcast, Chris and Mish discuss:

  • Guess The 2nd Best-Performing Currency of 2014
    • Hint: It's yellow. And shiny.
  • China: Due For "A World of Hurt" in 2015
    • Starting the year off with a run on bank deposits
  • Self-Delusion
    • Critical thought is completely absent from western media
  • Oil
    • The further prices go down now, the higher they'll spike later
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The Pruitt-Igoe Myth

The Destruction That Awaits

The ponzi elements of the shale story start to implode
Tuesday, December 23, 2014, 2:31 PM

Executive Summary

  • Predicting when US shale oil production will peak
  • Why these lower oil prices *must* result in substantially lower US shale production
  • How the 'shale miracle' indeed has numerous ponzi elements that are on the brink of collapsing
  • Expect a tsunami of shale bankruptcies to arrive soon

If you have not yet read Part 1:The Dangerous Economics of Shale Oil available free to all readers, please click here to read it first.

Production Workflow, Timelines, National Projections

Now let's zoom out, from one company in the Bakken to the whole Bakken region, which is probably the best shale region in the US. My key source of information about the current trends in the Bakken region is the Department of Mineral Resources in North Dakota, website here: https://www.dmr.nd.gov/oilgas. Every month the Director (Lynn Helms) produces the “Director's Cut”, a just-the-facts summary of oil production in North Dakota. Yes, it really is called the Director's Cut.

So now that we have an idea of when wells are profitable, we can use the Director's Cut stats to track all the stages of producing oil, to see how the region reacts to the change in oil prices. We have, in order of workflow:

  • drilling permits

  • rig counts

  • wells awaiting completion

  • well counts

  • monthly production

The spreadsheet segment below shows each element from the Director's cut. We can see permits, rig counts, wells awaiting completion, total well counts, and total production. From these numbers we can calculate some other interesting details.

But first, look at the production month-over-month change. It went negative in October. That's because... » Read more

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Rex

Off the Cuff: More Fed-Induced Froth

Don't worry stock market, Janet's got your back
Thursday, December 18, 2014, 11:58 AM

In this week's Off the Cuff podcast, Chris and John Rubino discuss:

  • Janet's Joy Juice
    • The Fed speaks and markets soar
  • Currency Crashes
    • Venezuela & Russia are showing us the risks of fiat money
  • Oil's Collateral Damage
    • The 40% price drop is having real consequences
  • What The Next Crash Will Look Like
    • Why past crashes may not be a good guide
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Who Will Dominate This Century?

Which country(ies) are best positioned to exert themselves?
Wednesday, December 17, 2014, 10:14 AM

Executive Summary

  • The key requirements for being a word power
  • Is the "superpower" model sustainable in today's age?
  • The key ability to leverage resources
  • Which country(ies) is most likely to dominate in this century?

If you have not yet read Who Will Be Tomorrow's Superpower? available free to all readers, please click here to read it first.

In Part 1, we surveyed the nature of power to explore the concept of superpowers.  In this Part 2, we look at power as the ability to solve problems.

What Are the Available Resources?

Solving problems in the real world is not an abstract project, though abstract concepts may undergird the solutions. In the real world, we have to use whatever resources are available, with an eye on cost, scale and sustainability.

Alternative energy offers a useful example. Almost everyone agrees that alternatives to fossil fuels would be beneficial, but what is generally overlooked is the tiny scale of alternatives in the current scheme of things.  Depending on what’s being included as alternative (hydropower, etc.), alternative energy sources currently comprise a few percentage points of total energy consumption.

To scale alternatives up to even 50% of current consumption will require not just a monumental amount of capital investment; it also requires the invention and manufacture of new systems of energy storage on an equally vast scale.

As has been noted many times, this capital investment includes an extended period of fossil fuels consumption, as we need huge amounts of energy to construct alternative sources and storage systems. Some have characterized this as building an aircraft in the air while keeping your current aircraft aloft.

As Peak Prosperity members know well, capital has a variety of forms, all of which work together: financial, intellectual, social, human, cultural and symbolic. All these forms of capital must be... » Read more

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Deflation Is Still Winning!

OK, folks: this is it
Monday, December 15, 2014, 8:20 PM

As we've written on and warned about before, deflation is winning.  We're starting to see very serious cracks in the façade, beginning with oil, then various peripheral currencies -- especially from emerging market oil exporters -- and now equities. » Read more

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Oil Armageddon Arrives

It's beginning to look at lot like 2008 all over again
Friday, December 12, 2014, 4:08 PM

Yesterday, WTIC -- that's US oil -- just broke under $60 a barrel on very heavy volume. Canada heavy crude is at $42 a barrel, and Brent is at $61.73.

All of these are multi-year lows not seen since the great oil crash of 2008 that preceded the even greater financial crash that came just a few months later. » Read more

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Off the Cuff: The Buck Stops Nowhere

Market manipulation to torture. Where's the accountability?
Thursday, December 11, 2014, 2:27 PM

In this week's Off the Cuff podcast, Chris and Mish Shedlock discuss:

  • Zig-Zag Markets
    • More evidence the long term trend is reversing
  • When Will Oil Find A Floor?
    • And where will the collateral damage of the current drop be most felt?
  • US Admits To Torture
    • Are we going to hold anyone accountable?
  • Gold Shows A Slight Glitter Again
    • Dare we begin to hope?
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What Deflation Means For Investors

Beware: we're used to investing in an inflationary regime
Wednesday, December 10, 2014, 10:21 AM

Executive Summary

  • The 3 reasons why deflation will continue to haunt the global economy
  • The importance of cash flows in a deflationary environment
  • Understanding the deflationary reasons behind the recent drop in oil prices and the material implications this will have going forward

If you have not yet read Part 1: Deflation Is Winning available free to all readers, please click here to read it first.

So an very important question remains despite the trillions in new currency printed around the world in the past few years: Why are deflationary pressures still present?

  1. The debt overhang from the prior cycle has not vanished by a long shot. In fact today there is significantly more debt outstanding globally than was the case at the highs of 2007, primarily driven by global government borrowings.  The following chart is total US credit market debt relative to GDP.  You can see that very little has been reconciled since the peak.  By the way,

Data Source:  US Federal Reserve       

Additional global debt assumption means additional interest cost burdens, even under an environment of interest rate suppression.  And that means... » Read more

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The Oil Shock Has Arrived

Why today's price collapse will lead to a future price spike
Monday, December 8, 2014, 9:59 PM

The absolutely stunning drop in oil prices, which hit a new recent low, is really important to both track and understand.

There are two issues here, one near term and one long. » Read more