Oil

Price

Direction?

Oil price as of 10/21/18

$69.25

Gary Shilling

Gary Shilling thinks oil prices may have peaked.

Crude oil prices, both Brent and West Texas Intermediate, are at four-year highs. Traders are talking about a return to $100 per barrel, and even higher. 

But if you’re a long-term investor, look for oil demand to peak and more subdued prices in the years ahead. 

Not the supply shortages and soaring petroleum costs as some observers fear. Royal Dutch Shell Plc and Norway’s Statoil ASA expect the peak in demand as soon as the mid-2020s, while BP Plc sees it happening between 2035 and 2040 and the International Energy Agency is forecasting 2040. 

What a switch from the days of M. King Hubbert, the geophysicist at Shell Oil in the late 1940s who believed that oil field production followed the classical bell curve or normal distribution. He predicted that production in the lower 48 U.S. states would top out in the early 1970s with dire economic consequences. Few agreed at the time, but Hubbert proved largely correct, and his adherents subsequently extended his concepts globally and believed that worldwide production would top out in 2010 or 2012 at the latest.  

Nevertheless, oil supplies have proved plentiful in recent years as output surged from Russia, Canadian oil sands and, especially, U.S. frackers. This troubles OPEC, which, like any cartel, exists only to keep prices above equilibrium. That encourages producers in and outside the cartel to strive for more market share. So OPEC, led by Saudi Arabia, has tended to curb its own production to accommodate these “cheaters.” 

DYI:  No doubt the efficiency of extracting oil has improved dramatically over multiple decades.  However the days of sticking a straw in the ground and out come’s the bubbling crude has long since vanished.  Also major game changing discoveries has ceased since North Sea and Alaskan oil.  Today what is called a major find is large but nothing to the degree of finds decades past.     

In 2014, OPEC was frustrated that all the growth in global output in the previous decade was going to non-OPEC producers. To teach the “cheaters” a lesson, it hyped its output from 30 million barrels per day to 33.8 million barrels daily. Prices fell to $27 per barrel, but that didn’t chase out American’s increasingly efficient fracker's that now dominate U.S. production. As of August, American shale output was 7.7 million barrels per day, versus 3.3 million barrels from conventional oil. 

America is now the largest producer of crude oil, topping Russia and Saudi Arabia, 

and production may only rise as temporary pipeline shortages are overcome, allowing U.S. exports to increase.

 

 DYI:  This provides a clue as to why the American Dollar has been on the rise despite the fact that our overall trade imbalance has remained stagnant.  Energy is what powers the world’s economies.  The U.S. is now pumping out more crude than Saudi Arabia or Russia individually; along with the world’s strongest military [for better or worse] translates into a stronger dollar.        

Elsewhere, Mexico privatized its deep-water oil reserves in 2015, and output should climb. Brazil has liberalized its oil market, opening its colossal deep-water potential to foreign oil companies. North Sea output is reviving. Fracking for oil is being developed in the Persian Gulf, Argentina, Canada, Russia and China. 

Oil will be in surplus in future years not only due to increasing output potential, but also because of rising supplies of natural gas, which has also been made abundant by fracking. American gas, after being cooled and converted to liquefied natural gas, has huge export potential along with LNG from Oman, Australia and elsewhere. Then there’s renewable sources such as wind, solar and biofuel to consider. These accounted for only 12 percent of electricity generation last year but the IEA believes they will make up 56 percent of net generating added capacity through 2025. 

The cost of renewables is declining. A U.S. residential solar energy installation now costs $2.93 per watt on average, down from $6.61 in 2010.

DYI:  Once the cost for residential solar installation breaks the buck – under $1.00 per watt – the U.S. will have a renaissance in home electrical production.  The implication is more than just residential as this will leave excess energy capacity at reasonable costs for manufacturing.  Add on additional energy efficiencies and automation America’s manufacturing rebirth will expand at a faster clip.          

For a large utility-scale system, the cost has dropped from $3.58 to $1.11 — a plunge of almost 70 percent. Costs are falling for batteries and other methods of storing solar energy at night and wind energy on calm days. Nevertheless, necessary government subsidies for renewables are still substantial. 

Continuing energy conservation will also reduce crude oil demand. Since 1970, energy consumption per U.S. dollar of economic activity has dropped 61 percent in the U.S., 48 percent in Japan, 70 percent in the U.K. and 43 percent in Canada. California just enacted a mandate for carbon-free — fossil fuel-free — electricity by 2045. 

While the Trump administration is capping fuel-efficiency standards for autos at 37 miles per gallon, down from the Obama administration’s 54.5 miles per gallon by 2025, electric vehicle sales are surging and will further curb gasoline demand. Transportation fuel accounts for half of crude oil use and autos consume half of that, or 25 percent of total oil demand. 

Then there are the millennials who eschew driver’s licenses in favor of bikes. And aging postwar babies are being forced to give up driving. In addition, emerging-market economies that binged on borrowing in dollars after the financial crisis to finance growth and oil demand now find themselves strained as the robust dollar makes it much more expensive to service those debts in local currency terms. Since most commodities trade in dollars, their local currency costs of commodity imports, especially oil, are rising as well, and curbing oil demand. 

As economies grow, be they developed like the U.S. or developing such as China, services gain a bigger share of spending while spending on goods fall. That’s another long-term deterrent to oil demand and the energy needed to produce goods.

DYI:  If Gary Shilling is correct that we are to expect lower oil and gas prices NOT due to recession we can expect the U.S. stock market despite being MASSIVELY overvalued to continue its upward trajectory.  Beware at such market levels higher we go this house of cards could very easily tumble without a recession to push it over! 

 DYI

American

Propaganda 

No, Facebook is NOT “Private,” Their Censorship Arm is Government Funded

In May, after Americans were successfully whipped into a tizzy of Russian hacking and meddling, along with the fake news hysteria, the Americans begging for censorship craze came to a head when Facebook partnered with the Atlantic Council. 

Facebook partnered with the Atlantic Council, so what, right? They can do whatever they want and hire outside third parties to help them police the platform they own, right? 

Yes, this is correct. However, the Atlantic Council is funded by government. 

The Atlantic Council is the group that NATO uses to whitewash wars and foster hatred toward Russia, which in turn allows them to continue to justify themselves. 

It’s funded by arms manufacturers like Raytheon, Lockheed Martin, and Boeing. It is also funded by billionaire oligarchs like the Ukraine’s Victor Pinchuk and Saudi billionaire Bahaa Hariri. 

The list goes on. The highly unethical HSBC group — who has been caught numerous times laundering money for cartels and terrorists — is listed as one of their top donors. 

They are also funded by the pharmaceutical industry, Google, the United States, the US Army, and the Airforce. 

The “think tank” Facebook partnered with to make decisions on who they censor is directly funded by multiple state actors — including the United States — which voids any and all claims that Facebook is a wholly “private actor.” 

The Atlantic Council wields massive influence over mainstream media too, which is why when this partnership was announced, no one in the mainstream press pointed it out as the Orwellian idea that it is. Instead, headlines such as “US think tank’s tiny lab helps Facebook battle fake social media(Reuters)” and “Facebook partners with Atlantic Council to improve election security (The Hill)” were put out to spin the fact that a NATO propaganda arm is now censoring the information Americans see on Facebook. 

This is the group Facebook is now taking direction from in regard to who is allowed to post information on their platform. 

The Atlantic Council has been proven to create fake news to slander people who have an antiwar stance in an effort to keep their pro-war weapons companies in the black. It is utter insanity. However, in today’s information war, it is to be expected.

Self-Censorship: Where The Real Damage Is Being Done

I’ve been self-censoring more and more lately, especially since the latest round of coordinated cross-platform silencing of multiple alternative media outlets the other day. Back in August I had my Twitter account temporarily deleted when I said the world will be better off without John McCain and a bunch of #Resistance accounts mass reported me; Twitter cited “abusive behavior” as its justification. The only reason my account was restored was because there was a large objection from many high-profile journalists and activists who understand the dangers of internet censorship, and I’m not willing to gamble that I’d get that lucky should something similar happen again. Being able to disrupt establishment narratives on a high-traffic website like Twitter outweighs the benefits of speaking in an unmitigated way. 

And that ultimately is precisely the point. 

If the social engineers can make an example of a few dissident voices in the public eye, everyone else will rein in their own speech and behavior to avoid the same fate. 

The overall effect of this phenomenon is actually far more effective in suppressing dissident speech than the overt censorship is by itself, because self-censorship actually silences exponentially more anti-establishment opinions. For every one voice you crack down on overtly, a thousand more silence themselves out of self-preservation, not saying things they would otherwise say and not doing things they would otherwise do. 

DYI

Symptoms

Of a Market Top!

• Junk bonds trading near their most expensive prices ever

• Covenant lite loans out the wazoo

• The highest levels of corporate debt ever

• The most expensive stock markets ever, by several measures

• The highest margin debt on record

• Real estate bubbles across the globe

• Pensions highly exposed to the stock and junk bond market

DYI

National

Corruption!

Entire Federal Budget Now National Security Secret – Dr. Mark Skidmore

Michigan State Economics Professor Mark Skidmore made a stunning discovery late last year. Using publicly available government accounting reports; 

he revealed there was $21 trillion in what he calls “missing money” from the Department of Defense (DOD) and Housing and Urban Development (HUD). 

The data he used has been scrubbed, all accounting records are heavily redacted and now the federal government has declared its accounting falls under “national security.” 

Dr. Skidmore can no longer get the government to respond. Dr. Skidmore explains, “At this point, they are no longer responding to any of my inquiries. 

They are just not answering, and that is very astounding . . . and you can go on and look at the report yourself and see all of it blacked out. I actually lost sleep over that. That really bothered me. . . . Now, they are not even using standard accounting financial reporting rules. They are just moving things around and not telling anybody. So, first, all of this stuff is hidden because it is a national security issue, and now they are just changing the accounting standards. I would ask is that constitutional? I don’t think so. Does it match any of our financial reporting laws? I don’t think so. I am not sure what gives the government the authority to make that decision, and, yet, it’s happening.” 

The revelation that there is an additional $21 trillion dollars that cannot be accounted for on top of the more than $21 trillion officially in federal debt is an astounding number. 

It is probably the most important data point since the Federal Reserve was founded in 1913. Dr. Skidmore says, “It’s a huge amount of money to not be able to explain, and they are not explaining it.” 

Dr. Skidmore says there is a limit to money printing even when all the global central banks are doing it. Skidmore says, “What does it mean when a central bank is buying equities, or buying debt with printed money in order to suppress interest rates and keep this game going? 

I think, overall, the whole world is awash in debt, and it’s expanding at a rate that is unsustainable. The only way it has been sustained is that interest rates have been falling for 30 years. Now, interest rates are no longer falling, and we are running up against a constraint. 

Now, if this $21 trillion in ‘missing’ federal money really represents spending above and beyond what the official records indicate; 

then that has huge financial implications and huge implications for confidence in the dollar as the reserve currency. 

This is an enormous priority to address and not just cover up and say we are all good.”

DYI:  When the crash comes it will be devastating and spectacular at the same time.  Political and economic historians – if they are honest – will place the blame at the feet of a tyrannical corrupt government running amuck. 

I’m still sticking with the premise of deflationary smash first then the government will have the Federal Reserve print like madmen inflating our currency at will.  My suspicion the elites will gin up a world war by placing the blame on the Russians or the Chinese [possibly both] to distract the populous as they systematically loot the already besieged middle class to stem off all of the losses they have created in the first place.

This blog is not a doom and gloom site.  However, when 9/11 happened which was clearly an inside job between factions of our government and the Israeli government it was off to the races for government corruption on a massive scale.  On top of that we have Department of Homeland Security DRILLS at public schools for mass casualty events; no one shot; no one killed or wounded yet being promoted [with the full blessing of the Federal government] AS REAL all acted out by a bevy of CRISES ACTORS with many committing CHARITY FRAUD using Go Fund Me accounts.  Thus TERRORIZING and RIPPING OFF the unsuspecting and gullible citizens while at the same time consultants [salespersons] are besieging school districts selling CCTV Networks, metal detectors, scanners, and an assorted security services all based upon LIES!  Of course these companies will get the THRILL of expanded revenues/profits while the middle class gets the BILL!

How all of this will end up I wish I had those answers.  What I do know is the tried and true.  If you are debt get out of debt as fast as possible.  If you are already out of debt invest in only the highest quality assets such as U.S. government paper/high grade corporate debt, same with stocks, and precious metals such as gold and silver coins.  Also have monies outside of the U.S. as another way to decentralize your hard earned dollars.  Basically is to plan for the worst and hope for the best.  Sorry for being such a doomer; it is how I see it.

 DYI

  

American

Propaganda!

Fear Porn from Sandy Hook Promise: Gun violence warning signs

(Video)

DYI:  As I have written many times in the past these highly publicized mass casualty events are Department of Homeland Security [DHS] Federal Emergency Management Agency [FEMA] DRILLS; no one was shot; no one was killed or wounded they are promoted as real by the main stream press as PROPAGANDA.  The Smith-Mundt Act was modernized [repealed] allowing government made news along with outsourcing to news organization such as the main stream press all for agendas that governing economic and political elite’s desire.

U.S. Repeals Propaganda Ban, Spreads Government-Made News to Americans

For decades, a so-called anti-propaganda law prevented the U.S. government’s mammoth broadcasting arm from delivering programming to American audiences. But on July 2, 2012 that came silently to an end with the implementation of a new reform passed in January. The result: an unleashing of thousands of hours per week of government-funded radio and TV programs ...

'Anti-Propaganda' Ban Repealed, Freeing State Dept. To Direct Its Broadcasting Arm At American Citizens

Now, the Smith-Mundt Modernization Act of 2012 (part of the National Defense Authorization Act) has repealed the domestic prohibition, allowing the government's broadcasting to be directed at/created for Americans for the first time in over 40 years. 

Nobody Died At Sandy Hook

It was a FEMA Drill to Promote Gun Control:

• Proof it was a drill was right before our eyes: the sign, “Everyone must check in!”
• Boxes of bottled water and pizza cartons
• Port-a-potties present from scratch
• Many wearing name tags on lanyards
• Parents bringing children to the scene

Proof it wasn’t a massacre was also there:

• No surge of EMTs into the building
• No Med-Evac helicopter was called
• No string of ambulances to the school
• No evacuation of 469 other students
• No bodies placed on the triage tarps 

Wolfgang Halbig the HERO

(Video)

There are many agendas for all of this propaganda [LIES] foisted upon the America public.  Besides the obvious for gun control this version is also for corporate propaganda as school districts all over America are being besieged by an army of consultants [salespeople] advising superintendents and their boards they need to purchase CCTV Networks, metal detectors, scanners, and an assorted security services or they too could be the next Sandy Hook!  Of course this is based upon a huge LIE.  The companies that provide these devices [such as OSI Systems, Inc. and many others] will have the thrill of outsized revenues/profits for years to come.  The taxpayers; YOU & ME get the BILL!  That’s right; they get the THRILL and we get the BILL!

DYI

Overweight

Nation?

America’s obesity is threatening national security, according to this study

It’s well known at this point that just under 30 percent of Americans ages 17 to 24 ― the prime age to join the Army ― aren’t eligible to join. 

But beyond that, almost a third of those who sit down with a recruiter to take the first steps are immediately disqualified. 

Why? Because of their weight. 

“Out of all the reasons that we have future soldiers disqualify, the largest – 31 percent ― is obesity,” Maj. Gen. Frank Muth, head of Army Recruiting Command, said Wednesday at AUSA’s annual meeting in Washington, D.C. 

Researchers found that of the 29 percent of young Americans who have a high school diploma, no criminal record and no chronic medical issues, just 17 percent would be qualified and available for active duty, and 13 percent would qualify, be available, and achieve a satisfactory score on the Armed Forces Qualification Test. 

“These numbers are particularly concerning because as the recruitable population has declined, so has interest in serving in the military,” the study found.

 DYI

America

Banana Republic?

With corruption like this, it’s no wonder so many pension funds are insolvent

Last week, the head of a New York state pension fund found herself a new job. 

Vicki Fuller, the former head of New York’s $209 billion fund, now earns $275,000 per year working part time for a natural gas group called The Williams Companies– good work if you can get it. 

It’s noteworthy that when Ms. Fuller ran her state pension fund, she invested $110 million of taxpayer money to buy bonds issued by none other than The Williams Companies. 

Bear in mind that Moody’s, the credit rating agency, downgraded Williams’ financial outlook to “negative” because of the company’s high leverage and risk. 

The fund that Ms. Fuller managed also voted in favor of huge, multi-million dollar pay packages for senior executives of The Williams Companies even though the stock price was dropping. 

So… gee… maybe it’s just a crazy coincidence that Ms. Fuller left her job at the state pension fund and took an extremely lucrative part-time job THE SAME WEEK with The Williams Companies.

While you might not be able to rely on your pension or Social Security in the future, there’s nothing stopping you from setting aside money for your own retirement.

And there’s absolutely ZERO downside to doing this– no one is going to be worse off for having extra money for retirement. 

DYI:  DYI has reported to the point of redundancy that not only are there reoccurring conflicts of interest [and outright fraud] occurring here in the States such as those that happen in banana republics AND these plans are massively underfunded making it impossible to keep the promise of payment stream when Boomer’s arrive for retirement in mass. 

Bottom line even if the U.S. stock and junk bond markets DO NOT CRASH; these old school plans will have tax increases to help with the funding AND participants will end up receiving LESS than promised.  Add on a market crash that DYI envisions to the tune of 60% to 75% decline old folks will come out with pitch forks looking for over promising politician to politically stab.  The point being during the next downturn it will not be the banks getting into trouble on a mass basis, it will be pension plans including 401k’s as well especially those who are in the 50 plus age range.

The author is correct you will need to set aside additional monies for a secure retirement plus those extra dollars for all of those seen and unseen expenses that come along way before retirement.

What the article doesn’t cover is fees, taxes, inflation, and determining risk based upon valuation.  This is exactly the four items that are addressed routinely here at DYI.

DYI

Could Donald Trump be the Last World Emperor? States and Empires After the End of the Fossil Age

Empire

In decline?

Could Donald Trump be the Last World Emperor? States and Empires After the End of the Fossil Age

The 20th century was the age of fossil empires. The British used coal to create the biggest and the most powerful empire ever built -- it faded away with the gradual decline of its coal production. Another ancient empire, Austria-Hungary, the last remnant of the concept of a European Empire, went to pieces during WWI, the only state which didn't survive it. 

The attempt of Italy to re-create the Roman Empire in 1936 with the conquest of Ethiopia had the only effect of generating the shortest-lived empire in the history of the world, just five years but, at least, it could demonstrate that no empire can exist for long without abundant mineral resources available. 

With the end of WWII, only two large empires remained: the Soviet and the American one. Both were based on fossil fuels and, in particular, on the abundant crude oil they could produce. For a while, the Soviet Empire challenged the worldwide supremacy of the American Empire - but it had to give up and fold when its oil resources became too expensive to fuel its military apparatus. 

Today, the sole heir of some four and a half millennia of empire building is the American Empire, a stupendous structure that dominates the world's oceans and a large part of the world's land. But, as for older empires, the American one will last only as long as will be able to produce fossil fuels. And the end starts being in sight: conventional oil production has been declining for decades in the US territory, while the production from shale can only postpone the unavoidable. It may well be that the mighty American Empire will soon follow the path of its predecessors. If this is the case, the collapse will be fast and brutal, the kind of collapse that we call sometimes "Seneca Cliff."

So, the American Empire is destined to go, but what will come after the fall? Most likely, we'll see a situation resembling that of the fall of the Roman Empire, when there were no resources to build another empire of the same size and Europe moved back into an age of independent cities and statelets. 

Nowadays, many people seem to think that the disappearance of fossil fuels would bring a return of the Middle Ages. It might happen: large organizations need a lot of energy to run and, in addition, our civilization will be badly hit by global warming. The result may be the fragmentation of the current political entities, returning to nation-states or even back to city-states. There will not be another World Empire and Donald Trump could be, if not the last emperor, the last who ruled an empire as large as the current American one.

 DYI

Real

Inflation Rate

(Since 1972)

8.77%

DYI:  As we know or we all should know inflationary stats are massage to reflect a far lower number than the real percentage increase.  Budget deficits since they are never payed for just continuously rolled over behaves just the same as printing money thus a debasement of the currency or more commonly called inflation.

When President Richard Nixon removed the last vestige of the Dollar’s convertibility to gold in 1971 any inhibitor to budget deficits – increase in the national debt – was gone with the U.S. left with a 100% fiat currency. 

So…I looked up each year percentage increase from the prior year beginning with the first full year after Tricky Dick (President Nixon) removed the last vestige of a gold standard.  Put the numbers in Excel and clicked on the arithmetic average from 1972 to 2017 the real average annual inflation has been 8.77%!  Here is the problem when attempting to save money and make it grow beyond the inflation rate.  Just to break even on an average basis – some years higher or lower hence the average – you will need to save 8.77% of your income.  Most will want an easy number to remember as in 10% add on the necessary amount to save for retirement would be an additional 15%.  That’s correct you will need to save 25% of your income if you are under the age of 40 to have a secure retirement.  Of course later you start that number will have to rise to reflect less years of compounding.

DYI

Bubble

News!

Pensions Now Depend on Bubbles Never Popping

(ButAll Bubbles Pop)

The nice thing about the "wealth" generated by bubbles is it's so easy: no need to earn wealth the hard way, by scrimping and saving capital and investing it wisely. Just sit back and let central bank stimulus push assets higher. 

The problem with bubble "wealth" is it's like an addictive narcotic: now our entire pension system, public and private, is dependent on the current bubbles in stocks, real estate, junk bonds and other risk assets never popping. 

But a funny thing eventually happens to financial bubbles: they all pop. And when the current bubbles pop, they will gut pension reserves, projections and promises. 

We're living in a fantasy, folks. Bubbles pop, period. The Dow and SPX rose week after week and month after month in the 1999-2000 bubble, and again in the 2007 bubble, and so did junk bonds and housing. Everything rose in lockstep, lending support to the magical-thinking belief that this bubble will never pop because (insert excuse of the moment): housing never drops, the Fed has our back, etc. 

Bubbles pop. To avoid this reality, commentators claim this is not a bubble. Since it's not a bubble, it won't pop. But calling a bubble not-a-bubble doesn't mean it's not a bubble. Wordplay doesn't change reality.

 Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 10/1/18

Active Allocation Bands (excluding cash) 0% to 50%

55% - Cash -Short Term Bond Index - VBIRX

37% -Gold- Global Capital Cycles Fund - VGPMX

 8% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

 This blog site is not a registered financial advisor, broker or securities dealer and The Dividend Yield Investor is not responsible for what you do with your money.

This site strives for the highest standards of accuracy; however ERRORS AND OMISSIONS ARE ACCEPTED!

The Dividend Yield Investor is a blog site for entertainment and educational purposes ONLY.

The Dividend Yield Investor shall not be held liable for any loss and/or damages from the information herein.

Use this site at your own risk.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.

 DYI