Does it seem like we’ve been here before?
A barrel of Brent Crude (the truest indicator of worldwide oil scarcity) sits at $118, up from $75 per barrel in July 2010 – a 57% increase in eleven months. In the U.S., the average price of gasoline is $3.69 per gallon this week, up 37% in the last year and up 100% in the last 30 months.
The pundits and politicians are responding predictably. They blame the Libyan revolution, the dreaded speculators and that old fallback – Big Oil. When the Middle East turmoil began in earnest in January, gas prices had already risen 15% in three months, spurred by increased worldwide demand and by Ben Bernanke’s printing press. Congressmen have reacted in their usual kneejerk politically motivated fashion by demanding that supplies be released from the Strategic Oil Reserve.
Congress has a little trouble with the concept of “strategic.” They also have difficulty dealing with a reality that has been staring them in the face for decades. Politicians will always disregard prudent, long-term planning for vote-generating talk and gestures.
The Long Term
Peak oil has been a mathematically predictable occurrence since American geophysicist M. King Hubbert figured out the process in 1956. His model predicted that oil production in the United States would peak in 1970. He wasn’t far off. In 1971, when the U.S. was producing 88% of its oil needs, domestic production approached 10 million barrels per day and has been in decline ever since.
(Source: http://www.eia.doe.gov/energy_in_brief/images/charts/
Consumption_production_import_trends-large.gif)
The Department of Energy was established in 1977 with a mandate to lessen our dependence on foreign oil. At the time, the U.S. was importing 6.5 million barrels per day. In 1985 the country was still able to produce enough to cover 75% of its needs. Today, 34 years later, the U.S. imports 10 million barrels per day, almost half of what it uses.
President Obama’s 2011 Budget proposal included priorities for the DOE:
- Positions the United States to be the global leader in the new energy economy by developing new ways to produce and use clean and renewable energy.
- Expands the use of clean, renewable energy sources such as solar, wind and geothermal while supporting the Administration’s goal to develop a smart, strong and secure electricity grid.
- Promotes innovation in the renewable energy sectors through the use of expanded loan guarantee authority.
That’s what goes on in talk space.
Back on planet Earth, not a single U.S. oil refinery or nuclear power plant has been built since 1977. Decades of inaction and denial have left our energy infrastructure obsolescent and decaying. Pipelines, tanks, drilling rigs, refineries and tankers have passed their original design lives. The oil industry is manned by an aging workforce of geologists, engineers and refinery hands. Many are nearing retirement, and there are few skilled personnel to replace them.
Denial of peak oil becomes more dangerous by the day. The Obama administration prattles about clean energy, solar, wind and ethanol, when petroleum powers 96% of the transportation sector and 44% of the industrial sector. Coal provides 51% of the country’s electricity, and nuclear accounts for another 21%. Renewable energy contributes only 6.7% of the country’s energy needs, mostly from hydroelectric facilities.
Ethanol works nicely as a slogan but poorly as a solution. The ethanol boondoggle diverts 40% of the U.S. corn crop to fuel production. The real cost to produce a gallon of ethanol (tariffs, lost energy, higher food costs) exceeds $7 and has contributed to the price of corn rising 112% in the last year. The 107 million tons of grain that went to U.S. ethanol distilleries in 2009 would have been enough to feed 330 million people for one year.
(Source: http://perotcharts.com/category/challenges/energy/)
The most worrisome aspect of peak oil is that our government leaders have known of it and have chosen to do nothing. The Department of Energy requested a report from widely respected energy expert Robert Hirsch in 2005. The report clearly laid out the dire situation:
The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking.
Some of his conclusions:
- World oil peaking is going to happen, and will likely be abrupt. World production of conventional oil will reach a maximum and decline thereafter.
- Oil peaking will adversely affect global economies, particularly the U.S. Over the past century, the U.S. economy has been shaped by the availability of low-cost oil. The economic loss to the United States could be measured on a trillion-dollar scale.
- The problem is liquid fuels for transportation. The lifetimes of transportation equipment are measured in decades. Rapid changeover in transportation equipment is inherently impossible. Motor vehicles, aircraft, trains and ships have no ready alternative to liquid fuels.
- Mitigation efforts will require substantial time. Waiting until production peaks would leave the world with a liquid fuel deficit for 20 years. Initiating a crash program 10 years before peaking leaves a liquid fuels shortfall of a decade. Initiating a crash program 20 years before peaking could avoid a world liquid fuels shortfall.
World liquid oil production has never exceeded the level reached in 2005. It becomes more evident by the day that worldwide production has peaked. Robert Hirsch was correct. The world will have a liquid fuel deficit for decades.
The Short Term
The International Energy Agency has been increasing its estimates for world oil consumption to over 90 million barrels per day by the 4th quarter of 2011, led by strong demand from China, India and the rest of the emerging world. World supply was already straining to keep up with this demand before the recent tumult in the Middle East. The mayhem in Tunisia, Egypt, Libya, Bahrain, Yemen and Iran has already taken 1.5 million barrels per day off the market, according to the IEA.
(Source: http://omrpublic.iea.org/)
The Obama administration and mainstream media continue to downplay the economic impact of the conflagration spreading around the world. The risk that oil prices gush toward the 2008 highs is much greater than the likelihood that this turmoil will subside and oil prices fall back to $80 per barrel. As the following chart shows, the daily oil supply coming from countries already experiencing revolution or in danger of uprisings is nearly 8 million barrels per day, or 9% of world supply. No country can ramp up production to make up for that shortfall.
| Proven Oil | Oil | |
|
Country
|
Reserves (billion barrels) | Production Per Day |
| Saudi Arabia |
265
|
9,000,000
|
| Iran |
137
|
3,700,000
|
| Iraq |
115
|
2,700,000
|
| UAE |
98
|
2,300,000
|
| Kuwait |
102
|
2,300,000
|
| Libya |
46
|
1,600,000
|
| Algeria |
12
|
1,300,000
|
| Qatar |
25
|
820,000
|
| Oman |
6
|
810,000
|
| Egypt |
4
|
742,000
|
| Syria |
3
|
376,000
|
| Yemen |
3
|
298,000
|
The Washington DC spin doctors are now assuring the American people that Saudi Arabia can make up for any oil shortfall. Saudi Arabia has declared it has already turned the spigot on and will produce 10.0 million bpd, up from 8.5 million bpd.
Is this replacement production real? A leading industry expert revealed that the Saudis were already producing 8.9 million bpd in January. Hype and misinformation won’t fill your SUV with cheap gas. Saudi production peaked at 9.8 million bpd in 2005. When prices spiked to $147 per barrel in early 2008, their production grew only to 9.5 million bpd. Saudi oil fields are 40 years old and are in terminal decline. Their “spare capacity” doesn’t exist.
And the media ignore the quality difference between Libyan crude and Saudi crude. Libya’s oil is a perfect feedstock for ultra-low-sulfur diesel. The oil Saudi Arabia will supply to replace it is not. It takes three barrels of Saudi crude to yield the same quantity of diesel fuel as one Libyan barrel of crude, and only specially designed refineries can process high-sulfur Saudi oil.
The problem isn’t just turmoil in the Middle East. The Persian Gulf provides 17% of U.S. imports; 22% comes from Africa, 10% from Venezuela and 15% from Mexico. Many of these countries hate us. Mexico, although a relatively friendly country, will become a net importer of oil in the next five years, as its Cantarell oil field is in rapid decline. They’ll have nothing to sell to us.
The long and the short of it is that sunshine, corn and wind will not keep Americans from paying $5 per gallon or more for gas in the near future. The financial implications are that oil and energy investments will produce solid returns over the coming years.
This article was originally published in the Casey Report.
they don’t do anything because they know it won’t matter by the end of 2012
When I googled to see which websites were picking this article up, I stumbled across this interview that I must have done back in January 2010. I do not remember doing this interview, but it looks like my oil call was pretty good. Oil was $66 per barrel then.
James Quinn: Ivy League’s Sr. Strategic Planning Director on Peak Oil
BTS | Jan 03, 2010 | Comments 4
James Quinn is a senior director of strategic planning for a major university and the founder of TheBurningPlatform. Equipped with his accounting degree, an MBA, CPA, and a CCM (certified cash manager), James has held financial positions with a retailer, homebuilder and university in his 20+ year career.
As a very active writer in the financial world, he delivers his thoughts and views to us through Seeking Alpha contribution and his website, TheBurningPlatform.
“My goal is to provide my readers with a wide eyed view of the world. I will concentrate on social and economic issues that I feel are important to the country. My commentary will be blunt and pointed. The country needs people to see things as they are, not as they wish them to be.”
In our recent interview, he shared his thoughts on Peak Oil, which is a popular topic even now after the fall of oil prices in the past year.
“Jim, can you tell us how your career transformed from the early days to now?”
My background was originally accounting. I graduated from Drexel University with a degree in Accounting and did the two years in an accounting firm while getting my CPA. I worked as a controller and eventually ended up with IKEA in 1989 as Manager of Reporting. I went to Villanova University at night to get my MBA and by 1993 was the Treasurer for IKEA North America. This is where my interest in economic markets and retail markets really took off. I wrote many reports regarding the economy and competitive landscape for IKEA. From 1999 through 2004 I was responsible for strategic planning and placement of new stores in the US and Canada. Today, I’m responsible for strategic planning at an Ivy League University. My writing is a side interest that keeps me busy on weekends and nights.
“What were some of the valuable lessons learned throughout your growth?”
I’ve learned that there is no substitute for hard work, research, and a realistic view of the world. The biggest mistakes I’ve seen made were when people ignored the facts, used pie in the sky assumptions, and wasted millions of their corporation’s dollars on projects that were destined to fail. Huge egos and agendas that don’t match the facts are a devastating combination. I learned finances from the ground up. I understand balance sheets, income statements, and cash flow statements. This knowledge is essential when judging the stability of corporations. A skeptical nature also comes in handy.
“In the recent years, universities saw an increased number of applicants as unemployment rose. Has this impacted your planning in any way as a senior strategic director of a major university?”
What we’ve found is that in many ways a major university is countercyclical. This past year we received the largest number of applications in our history. Many people are attempting to ride out two years in an MBA program rather than enter the job market. We had the largest MBA class in history. This has helped offset serious reductions in our Executive Education program, as corporations have dramatically cut back on training budgets. Our alumni giving has also seen a large decline. We have proactively reduced costs and scaled back capital projects in order to weather these difficult times.
“You’ve recently published an article summarizing the opportunities in oil. Now in your mind, when do you see as the right timing to start investing in commodities again? Would other factors like the dollar movements start to play a role here?”
I think there is more danger in the oil story than opportunity. I believe we reached peak oil production in 2005. The current worldwide recession has masked this fact as demand has declined. Recently, demand has begun to pick up. The world will be shocked in the next two years when production begins to lag behind demand. The initial result will be higher prices, topping $100 a barrel again. When shortages begin to materialize, panic and turmoil are likely to be the result. Our society cannot function without cheap oil. The US suburban sprawl way of life will be shattered by oil shortages. Food prices will also soar.
From an investment perspective, the prices of all commodities will be much higher in the next few years. The dollar will continue to fall as US budget deficits run out of control. The next 10 years will be seriously challenging and fraught with danger.
When it comes to oil, Jim is not the only one sharing the same concern. If you’re looking for the next investment opportunities, do some homework and learn about what the experts are seeing. Thanks Jim for sharing your story.
Peak oil is fact of life. Like my biology teacher once said, while dumping a glass of water on the carpet, this is all there is, once it’s gone, it’s gone. Most people have been conned, fooled into thinking ethanol is not the answer, when in, it could very well be the answer.
The USDA and agribusiness lobby keep corn for ethanol production locked in. Sugar and especially sugar beets produce almost 45% more ethanol per unit, and cost less to process. As usual, other countries are way ahead of us on the curve, especially Brazil.
“More than half of world ethanol production is produced from sugar and sugar byproducts, with Brazil being by far the world leader. Currently, there is no commercial production of ethanol from sugarcane or sugar beets in the United States, where 97 percent of ethanol is produced from corn.
Technologically, the process of producing ethanol from sugar is simpler than converting corn into ethanol. Converting corn into ethanol requires additional cooking and the application of enzymes, whereas the conversion of sugar requires only a yeast fermentation process. The energy requirement for converting sugar into ethanol is about half that for corn.
Total U.S. sugar production fell by more than 20 percent from 2000 to 2006 due to low prices and structural changes in the industry. Production declined significantly or ceased altogether in five states.”
The answer is staring us in the face, but, as usual, the government and lobbyists are preventing and hindering a viable energy source. Don’t be suckin’ the government/MSM tit about ethanol. It’s a lie, like so many lies. If we went full on into sugar/beet production for ethanol based fuel, we would be much better off on many levels, but better to believe the government/MSM right?
AwholeDR – while ethanol from sugar cane is far better than ethanol from corn, it can only go so far. Brazil has probably the world’s best climate and soils for sugar cane, and they have a lot of dirt cheap labor for harvesting and processing it. For Brazil, it works reasonably well. Elsewhere, you don’t have the same natural benefits, and you won’t get the same result.
There is some promise in fuel alcohols from sources other than corn – cellulosic ethanol, biobutanol, etc…but it is extremely unlikely that production of those fuels could be scaled up to anywhere near the level of current oil consumption.
The world started c. 1850 with burning oil representing a fraction of a percent of the earth’s total insolation for hundreds of millions of years. An energy bonanza that is incredible, and won’t be repeated unless we can control fusion or vacuum energy or something else currently far beyond us. We had better start figuring out how to live with less energy consumption.
snicky:
I’d figured on some blow-back after that comment. Yours was nice and respectful. We do, however, have to start somewhere. Big oil and big agriculture block and thwart every attempt or good idea that comes along. Cheap ethanol could reduce oil consumption by more than 50%. It’s a start.
Ive always wondered if just getting rid of all vehicles that suck a lot of gas,unless used in an trade where its needed,i see a lot of full sized pickups used as dail transportation, do people really need a one ton four wheel drive to drive across town to work?Im just saying it would cut down on consumption and the resulting emissions.We have so much natural gas i think it needs to be developed and fueling stations built or added to gas stations.
Awhole – we agree on the problem. There is ongoing research on various sources of ethanol, and there has been for decades. I think a trial cellulosic plant started within the last 1-2 years but didn’t do well from the start.
Ron – the supposed abundance of natural gas is temporary. There’s a lot of gas that could be developed and extracted quickly, but in 10-20 years, probably even less, it’s all gone and we’re worse off than we are now.
Anyone – efficiency is where we should be focusing. Common cars/trucks are guzzlers compared to what they could be, most homes are barely insulated, we waste tons of fuel on trucking items that could be sent by rail, etc. etc. I’ll bet the US could halve its oil consumption in 10 years without any reduction in our standard of living, if we made intelligent choices. And because of the crux of Jim’s article, we’re going to halving our oil consumption in roughly that timeline, like it or not. It’s just a question of whether we have a nice life more efficiently, or go full third-world.
Admin – Watts bar 1 here in TN was completed in 1995 but it has been the only one since 1977. So we have built one. Watts bar 2 is to be completed in 2012 if the self-immolating, nihilistic environmental/ anti-nuclear/subhuman groups don’t have their way.
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RE
cracked oil back up to 3.55, from 3.41+-, in the last week
The gas pump doth suck more than it discharges.
JUNE 15, 2011, 3:01 P.M. ET.OIL FUTURES: Crude Tumbles As Global Economic Fears Spread
By Jerry A. DiColo
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–Crude-oil futures settled at a four-month low Wednesday, tumbling toward levels last seen during the early stages of Libya’s rebellion, on fears that Greece’s debt crisis and a slowing global economy will reduce fuel demand.
Light, sweet crude oil for July delivery settled $4.56, or 4.6%, lower at $94.81 a barrel on the New York Mercantile Exchange, after falling as low as $94.01 earlier in the session. Brent crude oil on the ICE futures exchange settled $2.95 lower at $117.21 a barrel. The Brent contract expired at settlement Wednesday.
Oil’s decline, which came along with a drop in equities and a soaring dollar, began after a report from the U.S. Energy Information Administration showed a drop in implied demand for oil and fuel products.
Average demand over the past four weeks has fallen by 3.2% compared with the same period last year. Refinery runs fell to 86.1% of capacity from 87.2% last week, signaling that refiners are cutting back on their production of gasoline and other fuels.
“The total product demand took a pretty big hit,” said Carl Larry, director of derivatives and research at Blue Ocean Brokerage. “Diesel demand is down, jet-fuel demand is down. That just doesn’t paint a rosy picture on the economy right now.”
Futures fell through the level hit on the deep May 6 commodities selloff, breaking below the recent trading range between $95 and $105 a barrel. Wednesday’s decline to $94.01 a barrel was the lowest level since Feb. 22, when escalating violence in Libya forced oil producers in the country to shut down operations.
Traders pegged the broad commodities and equities selloff to the dollar’s surge against the euro. The euro fell below $1.42 for the first time since May 27. A higher dollar typically puts pressure on oil prices, by making crude more expensive for buyers in other currencies.
The euro’s fall comes as Europe’s leaders appear far from agreeing on a rescue package for Greece. Ratings agencies have also warned that banks across Europe could be stung by a Greek debt default.
Separately, the expiration of the July Brent contract forced traders to quickly switch their oil positions, extending declines.
“It was all about the dollar, then you had a technical breakdown of the market, and you had positions being liquidated ahead of the crude-oil expiration tomorrow. When you get close to expiration like this, and you get a strengthening dollar, it creates a perfect storm,” said Mark Waggoner, president of Excel Futures.
The Dow Jones Industrial Average was recently down 186 points to 11889.
The weak oil-demand data added to a set of economic reports earlier Wednesday that pointed to the fragility of the U.S. economy. Conditions for manufacturers in the New York region deteriorated in June, according to the Federal Reserve Bank of New York’s Empire State Manufacturing Survey. The index of general business conditions plunged by 20 points to -7.8, falling below zero for the first time since November.
Meanwhile, data showed U.S. core inflation posted its biggest gain in more than three years, according to the Labor Department.
The reports initially sent crude-oil prices lower, along with the stock market. And after a brief rebound, crude oil piled on losses. If equities remain weak, analysts said, oil futures would likely follow.
“By the end of the day, if the stock market remains weak, then that will continue to put pressure on petroleum as well,” said Kyle Cooper, managing partner of IAF Energy Advisors. “The equities seem to be one of the driving factors.”
Oil prices have taken cues from the stock market and economic indicators in recent weeks after tumbling from nearly $115 a barrel earlier this year. A slowdown in the U.S. economy has risen to become one of the major concerns among oil traders.
Front-month July reformulated gasoline blendstock, or RBOB, settled 14.11 cents, or 4.6%, lower at $2.9235 a gallon. July heating oil settled 14.10 cents lower at $2.9848 a gallon.
Admin,
“The 107 million tons of grain that went to U.S. ethanol distilleries in 2009 would have been enough to feed 330 million people for one year.”
Could you explain this, because people do not eat the corn that is used for ethanol. In addition, the byproduct of corn ethanol has 80% of the value of those 5 million bushels as a high protein livestock feed.
Thanks, EF
efarmer
The land used to grow feed corn couldn’t be used to grow corn that can be eaten?
Admin,
I get the peak oil thing, but if China is “toast” as RE says, they won’t be consuming anywhere near the levels of oil they did in the last decade, shouldn’t that change the supply/demand scenario? What I don’t understand is especially in the SW of the country, why aren’t solar panels bolted to anything that faces up?
matt
As long as the world population continues to grow, demand will rise. Supply has peaked and will gradually decline. At a high enough price, our economy does not work. That is when we are forced into living locally as Kunstler predicts.
One thing that has not been discussed or analyzed – at least on TBP is this: What are the priorities of the use of conventional fuels (from LNG, oil, gas, et all) when things run short.
I’ll put together a piece on it this weekend and see what kind of discussion we can get going on those priorities.
The initial list I came up with is not what immediately comes to mind so this might be interesting.
MA
Muck
The military will get priority on all fuel, as they will need it to mow us down.
Muck,
1. Military, for resource conquest and supply line protection…
2. Police, to keep people in line. The gas line, that is…
3. Food distribution…
4. Monster Truck rallies…
Bread and circuses, yah know…
NEW YORK (Dow Jones)–Crude-oil futures settled at a four-month low Wednesday, tumbling toward levels last seen during the early stages of Libya’s rebellion
~~
WITFH.
“WITFH.”-KB
Every time you get a big drop in the Stock Market, Dollars become more precious, which forces down the price of Oil. The Dollar serves a a proxy for Oil. When the Dow drops down to 6000 again, the price of Oil will go back with it to probably around $60/barrel this go round. Not as low as last time, but significantly lower than it is now.
How Da Fed behaves when the next crash in the markets starts really rolling will determine how fast the price of Oil will creep upward again. If they go on another big printing spree, it could happen quickly, but it doesn’t at the moment look like Da Fed will do that.
The interesting thing now is how short the half-life is of a Fed intervention. After 6 weeks of steady losses, Da Fed finally stepped in yesterday and ballooned up the prices on low volume HFT trading. The very next day, today, on high volume the Market gave it all back and then some. How many more rounds of this Da Fed will undertake remains unclear, but what is clear is that they cannot stop the deleveraging even with massive printing.
The current big Black Swan flying at very low altitude is the Euro. Its also the currency equivalent of an Ultra Light Aircraft, which is only safe to fly in a very light breeze. Any decent gust of wind will send it crashing to the ground, and wind speeds are picking up rapidly in Greece. When (not if) Greece defaults there will be a mass scramble out of the Euro, which will drive up the Dollar and drive down the price of Oil.
This will also cause mass havoc among the TBTF banks and lock up liquidity, which will kill demand for Oil among speculators who buy it on margin. The credit won’t be available to speculate with. This will eventually lead to shortages at the gas pumps.
Its possible we could see $200 Oil before we get a full on crash, but no way that price lasts long. it crushes the economy when the energy input costs are so high.
RE
Admin,
I suppose. Look, we grow potatoes where they grow best, veggies in Calif and other areas of the south where they do good.
The midwest is corn and soy country. Pigs, cattle and chickens. We are in this for profit, this isn’t a charity. To grow something else would take central planning. Yuck.
Kind of like your nice peak oil article, no easy answers.
EF
efarmer
The concerning part of corn for ethanol is that we will have a record crop of corn this year and it still won’t be enough to satisfy worldwide demand. Meantime, ethanol plants are declaring bankruptcy in record numbers as they can’t make money if corn is above $7. If we want ethanol, we should import it from Brazil.
“At a high enough price, our economy does not work. That is when we are forced into living locally as Kunstler predicts.”-Admin
Agreed.
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RE
Gotta love this article. Check out the closing paragraphs. Everything sucks, but you should still buy Stocks. Right.
RE
Stock market resumes slide as fears intensify
By Adam Shell, USA TODAYUpdated 6m ago |
NEW YORK — The stock swoon intensified Wednesday amid fresh fears that Greece’s worsening debt woes might infect the rest of Europe and more signs of an economic soft patch in the U.S.
Richard Drew, AP
Traders Edward McCarthy, left, and William McInerney, right, work on the floor of the New York Stock Exchange Wednesday.
Like last spring, when the stock market suffered its only double-digit percentage drop in the 27-month-old bull market, investors are dumping risky assets such as stocks and commodities, and plowing their cash into safer U.S. government bonds.
Wednesday, the Dow Jones industrial average fell 178.84 points to 11,897.27, extending its loss since its 2011 peak on April 29 to 7.1%. Oil prices were crushed, too, with a barrel falling more than 4%. The big winner: 10-year U.S. Treasury notes, which rose in price and saw yields plunge to 2.97%, from 3.10% Tuesday.
Driving the recent stock pullbacks are the same issues that caused last spring’s sell-off: fears of a double-dip recession at home and concern that a default by Greece would cause a negative ripple effect. Weak readings Wednesday on New York-area manufacturing, housing and industrial production, coupled with a jump in inflation, was a reminder that the economy is struggling.
MORE: Greek government turmoil
Stocks are on track for a seventh-straight week of losses for the first time since 2001.
Investors have been rattled by the inability of global policymakers to solve economic problems, says Joseph Quinlan, chief market strategist at U.S. Trust. “Policy uncertainties are weighing on the markets,” he says.
Congress has yet to agree on a deal to extend the U.S. debt ceiling. The eurozone can’t agree on a deal to avoid a Greek default. And there’s uncertainty about China’s policy to slow down its overheated economy.
“There will be more downside for stocks until the policy fog lifts,” Quinlan says, adding that the market is oversold and is likely to rally this summer as it becomes clear the economic rebound has not been derailed.
Analysts say an important floor for the market is 1250 on the S&P 500 index. It closed Wednesday at 1265.42.
With stocks selling at below-average valuations, any investor who sells now is basically betting on a double dip, says Jack Ablin, chief investment strategist at Harris Private Bank. But given the reasonable prices, investing in stocks “is worth taking the risk.”
Why do we want to grow food for another 330 million people? We are populated enough, the jobs are already taken, 330 million more would, for the most part, be added to the fsa.
Food and weapons are essentially our only exports.
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RE
We are gonna need the food and weapons one day so we really should stop exporting them.
Can U Spell PANIC SELL?
KATY BAR THE DOOR!
RE
—————
U.S. Stock-Fund Investors Pull Most Money in Six Months as Markets Decline
By Charles Stein – Jun 15, 2011 1:14 PM GMT-0800 .
inShare.19
More
Business ExchangeBuzz up!DiggPrint Email …U.S. investors last week pulled the most money from domestic stock funds in six months after equities fell on concerns that the economic recovery may be faltering.
Funds that invest in U.S. stocks lost $5.46 billion in the week ended June 8, the biggest redemptions since the week ended Dec. 8, when investors withdrew $7.6 billion, according to the Washington-based Investment Company Institute. Funds that invest in international equities had $291 million in withdrawals last week, the ICI said today in an e-mail.
U.S. manufacturing grew at its slowest pace in more than a year in May, consumer spending rose less than forecast in April and the unemployment rate unexpectedly climbed to 9.1 percent last month. The Standard & Poor’s 500 Index has tumbled 7.2 percent from an almost three-year high at the end of April as investors prepare for the end of the Federal Reserve’s $600 billion bond-purchase program known as quantitative easing.
Taxable-bond funds attracted $5.09 billion last week and municipal-bond funds drew $298 million, the most since November.
Still more IPO BULLSHIT. ANOTHER company that runs in the red selling worthless stock. Add this to the list of IPOs being churned out by Goldman Sacks-the-Taxpayer and JPM as a good place to fleece Pension Funds of whatevr they still have left.
I cannot WAIT for Facebook to pitch out $100B in Stock offerings. Can I Sell U some Swampland in NJ with that Stock?
RE PREDICTS! Within 1 month of Facebook pitching out its IPO, its down at least 10% from the IPO price. What a fucking JOKE!
RE
——————
I.P.O. Fever Calms Down for Pandora
By EVELYN M. RUSLI
Ramin Talaie/Bloomberg News
Pandora Media’s chief executive, Joseph Kennedy, left, and its founder, Tim Westergren, on hand at the New York Stock Exchange on Wednesday for their company’s market debut.8:31 p.m. | Updated
Sobriety has returned to the market for new Internet companies — at least for one day.
Shares of Pandora Media, a popular but unprofitable online music service, made their New York Stock Exchange debut on Wednesday, ending the day up 8.9 percent, at $17.42, after rising as high as $26.
It was a solid performance — all the more so because it came on a day of a broad slump in the overall stock market. Yet the Pandora initial public offering paled in comparison to recent incandescent Internet I.P.O.’s.
Last month, shares of LinkedIn, the social network for professionals, more than doubled on their first day of trading. And just a few days later, Yandex — often described as the Google of Russia — climbed 55 percent on its market debut. Both stocks have since pulled back, but remain well above their offer prices.
.In Pandora’s case, “underwriters were better able to match investor demand with the I.P.O. pricing, but probably more likely it demonstrated that some of the euphoria that drove LinkedIn to $100-plus has subsided,” said Paul Bard, vice president for research at Renaissance Capital, an I.P.O. advisory firm. “It shows that there is at least some price discipline in the marketplace and that is a good thing.”
(Morgan Stanley and JPMorgan Chase were among the underwriters for both Pandora and LinkedIn.)
Still, Pandora’s ability to go public at $16 a share — roughly double its initial target range of $7 to $9 — reflects a robust demand for Internet stocks, particularly those with a large base of users. Pandora is not yet profitable, like many of its peers, but the company has more than 90 million subscribers and is adding a new user about every second.
Demand for Pandora’s initial public offering was also amplified because of limited supply. There is not a flood of Internet companies rushing to market as there was more than a decade ago during the dot-com boom. And those that are going public, are showing restraint. Both Pandora and LinkedIn offered less than 10 percent of their total shares.
The investor exuberance for new Internet companies troubles some analysts, who say that the multibillion-dollar valuations do not match the fundamentals of the businesses. That concern could swell in the coming months, as some of the most talked about private Internet companies — Facebook, Groupon and Zynga — take steps toward making market debuts. All three are expected to go public within the next 12 months.
Groupon, which was valued at roughly $1.4 billion last year, may seek a valuation of $30 billion with its I.P.O., according to two people close to the company who were not authorized to speak. The social shopping site posted a loss of $456 million last year on revenue of $713 million.
Pandora, which has never posted an annual profit, recorded a loss of $1.8 million in 2010.
“Pandora is a company where the advertising business is still at a very early stage,” said Richard Greenfield, an analyst at BTIG Research. “This is a two-plus billion dollar valuation, for a company that isn’t making any money yet.”
For Pandora, popularity is something of a double-edged sword. It pays significant royalties to record labels to stream songs, and as users spend more time on the service, the fees mount.
“As the volume of music we stream to listeners increases, our content acquisition expense will also increase, regardless of whether we are able to generate more revenue,” the company warned in its latest securities filing.
According to analysts, Pandora will continue to struggle with profitability until it significantly increases the number of ads it serves and improves the way those ads are focused. Success in that area, however, could alienate some of its users, who use Pandora because of its lack of ads.
And there are competitors. Several technology giants, including Google, Amazon.com and Apple, have recently expanded their digital music services. Upstarts like Spotify, a streaming music service that is popular in Europe, also threaten Pandora’s market share.
Despite the hurdles ahead, Pandora said it still has an enormous opportunity to grow market share. Joseph Kennedy, the company’s chief executive, said that Pandora had room to expand because it has only about 3 percent of the domestic, radio-listening market.
“We’re really focused on just improving the experience we provide to our listeners everyday and giving them that opportunity to listen to Pandora everywhere they’re demanding to listen to it, in the car, in the home, those are the great near-term opportunities,” he said.
The company sold 14.7 million shares on Tuesday evening, raising $234.9 million. Its lead underwriters, Morgan Stanley, JPMorgan Chase and Citigroup, also have the option to sell an additional 2.2 million shares. At Wednesday’s closing stock price, the company is valued at about $2.78 billion.
Mr. Kennedy wanted to look beyond the I.P.O. in an interview on Wednesday. “Many years from now, we’ll look back on this as just one step in the process of building a lasting great company,” he said. “We don’t pay attention to the market, we’re focused on the opportunity.”
Black Thursday already in Asia. KATY BAR THE DOOR!
Helicopter Ben better warm up his Printing Press tonight, or tomorrow will be a MASSACRE on the NYSE.
Looks like the Crash is warming up again. Could be a real doozy this time.
RE
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Asian markets tumble on unrest over Greek crisis
By KELVIN CHAN, AP Business Writer – 24 minutes ago
HONG KONG (AP) — Asian stocks tumbled on Thursday, hammered by violent unrest in Greece amid the country’s deteriorating debt crisis and a disappointing U.S. manufacturing report.
Oil prices tumbled below $96 a barrel amid fears of sputtering U.S. economic growth, which would dampen demand for crude. The dollar sank against the euro and was unchanged against the yen.
Asian markets followed their European and U.S. counterparts lower after rioters clashed with police in Athens over proposed austerity measures and coalition talks between Greece’s government and opposition parties collapsed, renewing fears of a government debt default.
In the U.S., a report on manufacturing in the New York area also came in far below forecasts. That reignited fears that factory production, one of the few bright spots in the U.S. economy, may be weaker than many economists had believed.
Japan’s Nikkei 225 stock fell 1 percent to 9,494.15 by midmorning while South Korea’s Kospi fell 1.7 percent to 2,050.28. Hong Kong’s Hang Seng dropped 1.5 percent to 22,010.61.77, while the Shanghai Composite Index lost 0.8 percent to 2,683.06. Benchmarks in Taiwan, Singapore and New Zealand also dropped.
“In summary, it’s going to be a very weak day locally as deterioration in macro issues offshore weighs on overall sentiment,” said Ben Potter of IG Markets in Melbourne.
The Greek debt crisis sent U.S. stocks tumbling Wednesday while sending the dollar up 2 percent against the euro.
If Greece defaults on its debt, it could cause the dollar to strengthen even further against the euro. That would make products made by U.S. companies more expensive abroad and drag down their profits.
On Wall Street, stocks tumbled after the June Empire State Manufacturing Survey came in well below forecasts. The survey from the New York Federal Reserve found that conditions for New York manufacturers are weakening and orders are falling. A measure of optimism among factory owners in the state fell to its lowest level since early 2009.
The Dow Jones industrial average fell 1.5 percent to close at 11,897.27. The drop erased all of its 123-point gain from Tuesday and put the average on track for a seventh straight week of losses.
The S&P 500 index fell 1.7 percent to 1,265.42. The Nasdaq fell 1.8 percent to 2,631.46.
Benchmark crude for July delivery was down 65 cents to $98.94 in electronic trading on the New York Mercantile Exchange on Wednesday. The contract gained $1.89 to settle at $99.59 a barrel on Tuesday.
In currencies, the euro rose to $1.4192 from $1.4169 in late trading Wednesday in New York. The dollar was little changed at 80.96 Japanese yen.
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RE
JIm…we’re going to have a record corn crop ? I thought with the drought in Texas and most of the South,coupled with the flooding in the midwest that the corn crop et.al was going to be down. The corn in my area and my farm looks like hell….gotta’ bunch of rain tonight though !
Buckhed
The record crop info came from the USDA, so it may lack credibility.
Peak Oil means TEOTWAWKI. You think $5 gasoline is a problem? If only the situation were that small…. I’m assuming we will have a 50% dieoff in population and revert back to 1860 or earlier before this is all over…. Our main problem is that we have 7 billion mouths on the planet, probably 4 billion more than our worn-out old Earth can handle. Get ready for a massive dieoff, to include most of us…. And if we have lived well today, done our best to make our little corner of our poor pitiful planet better, then we will have no worries regarding tomorrow….
Ouch. The Hang Seng closed almost another 2% down, and Europe is opening up with futures getting hammered. Dow is going to get clobberred tomorrow unless Helicopter Ben and Brian Sack ride to the rescue in their Hueys.
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The slide is gathering momentum. If we take out the next set of stops, we may have an Avalanche coming. SELL! SELL! SELL!
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RE
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Stock-Index Futures in Europe Decline as Papandreou Calls Confidence Vote
By Julie Cruz – Jun 15, 2011 10:22 PM GMT-0800 .
inShare.1
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Business ExchangeBuzz up!DiggPrint Email …European stock-index futures fell as Greek Prime Minister George Papandreou said he will reshuffle his cabinet and seek a confidence vote. U.S. futures and Asian shares also dropped.
BHP Billiton Ltd. (BHP) and Rio Tinto Group declined in Sydney. Lenzing AG (LNZ) may move as the Austrian maker of textile fibers is raising capital. Carrefour SA (CA) may be active as UBS AG recommended selling shares of the French retailer. Demag Cranes AG (D9C) may move as the company said Terex Corp. (TEX) raised its offer for the company.
Futures on the Euro Stoxx 50 Index expiring in June dropped 1 percent to 2,705 at 7:03 a.m. in London. Contracts on the FTSE 100 Index expiring the same month lost 0.9 percent to 5,696.5. The benchmark Stoxx Europe 600 Index retreated for the first time this week yesterday amid concern that divisions between European officials may delay a second rescue plan for Greece and as a gauge of manufacturing in the New York area unexpectedly sank. Standard & Poor’s 500 Index futures fell 0.2 percent today, while the MSCI Asia Pacific Index slipped 2.1 percent.
“With Greek sovereign debt squarely back on the agenda, risk appetite amongst traders is very much off and equities are coming under sustained pressure as a result,” said Cameron Peacock, a market analyst at IG Markets in Melbourne. “A new government is set to be formed in Athens today against a backdrop of civil unrest and the big concern is that politics gets in the way of the second tranche of the bailout, in turn forcing a debt restructuring in the euro zone.”
Papandreou Address
Papandreou sought to reassert his authority in a televised address last night hours after police used tear gas to break up protests in central Athens and media reported he was in talks to step down in favor of a unity government. Thousands remained outside Parliament late into the evening, with police estimating the crowd at 8,000 people at 10:20 p.m. local time.
The political turmoil came as European Union talks on forging a new bailout to prevent the first euro-area default stalled. The impasse over the aid formula and speculation that a government shakeup would disrupt passage of budget cuts and asset sales sent Greek bonds and the euro plunging yesterday.
European Central Bank Governing Council member Nout Wellink said the emergency fund for euro-zone countries should be doubled if private investors are pressured to contribute to additional refinancing aid for Greece, Het Financieele Dagblad reported, citing an interview.
BHP Billiton, Rio Tinto
BHP, the world’s largest mining company, slid 1.9 percent to $42.07 in Sydney trading, while Rio Tinto, the second- biggest, retreated 2.1 percent to 78.39 euros. Aluminum, copper, lead, nickel, tin and zinc all fell on the London Metal Exchange.
Lenzing sold 825,000 new shares, “generating gross proceeds of 76 million euros,” according to a statement. Shares were sold at 92 euros a share, the bottom end of a 92-euro- to-108-euro range set on May 29. New shares will start trading in Vienna on June 17.
Carrefour may be active as UBS downgraded the world’s second-largest retailer to “sell” from “neutral.” Casino Guichard-Perrachon SA (CO), a French operator of hypermarkets and supermarkets, was cut to “equal-weight” from “overweight” at Morgan Stanley, while Nestle SA (NESN), the world’s largest food company, was cut to “hold” from “buy” at UniCredit SpA. (UCG)
Demag Cranes may move after Terex raised its offer price for the German company to 45.50 euros a share from an earlier 41.75 euros a share.
Porsche SE may be active as Deutsche Bank AG raised its recommendation on the German carmaker to “buy” from “hold.” Separately, Porsche sold $518 million of bonds backed by automobile loans, according to a person familiar with the transaction.
Banksters are Capitulating. They are quitting even filing Foreclosures.
Good time to stop paying your mortgage.
Fuck the Banks
RE
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Foreclosures Plunge as Process Delays Mask Rising Bank Inventory
Bloomberg June 15, 2011 04:00 AM
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June 16 (Bloomberg) — Foreclosure filings in the U.S. tumbled last month to the lowest in almost four years as banks weighed down by an increasing inventory of seized homes delayed processing defaults, according to RealtyTrac Inc.
A total of 214,927 properties received default, auction or repossession notices in May, the fewest since November 2007, the Irvine, California-based data company said today in a statement. Filings dropped 33 percent from a year earlier and 2 percent from April. One in 605 households got a notice.
Foreclosure filings have fallen for eight straight months on a year-over-year basis as banks rework their documentation procedures following claims they improperly repossessed homes. Weak demand from buyers is making it difficult for lenders to sell the properties that they already have on their books, known as real estate owned, or REOs, according to RealtyTrac.
“Foreclosure processing delays continue to mask the true face of the foreclosure situation,” James J. Saccacio, RealtyTrac’s chief executive officer, said in the statement. “Even at a significantly lower level than a year ago, the new supply of REOs exceeds the amount being sold each month.”
Unemployment and falling home values are limiting property sales and have pushed about 28 percent of mortgage holders underwater on their loans, meaning they owe more than the home is worth, according to Zillow Inc. The U.S. jobless rate rose to 9.1 percent in May from 9 percent the previous month, the Labor Department reported June 3.
Eight-Year Low
Home prices slid 3.6 percent in the first quarter to the lowest level since 2003 in the S&P/Case-Shiller index of values in 20 U.S. cities. Confidence among builders in June was at the weakest in nine months, as executives expressed pessimism about the prospect of higher sales, the National Association of Home Builders/Wells Fargo sentiment index showed yesterday.
The inventory of distressed homes nationwide stands at 1.8 million, which would take about three years to sell at the current pace, Daren Blomquist, RealtyTrac’s communications manager, said in a telephone interview.
Default notices were filed on 58,797 U.S. properties last month, the lowest in more than four years and a 39 percent decline from a year earlier, according to RealtyTrac.
Auctions were scheduled for 89,251 properties, down 33 percent from May 2010. Lenders seized 66,879 homes, a 29 percent decrease from a year earlier.
States where courts oversee foreclosures showed a 45 percent decrease in filings from a year earlier, while non- judicial states had a 25 percent decline and accounted for almost two-thirds of the national total, RealtyTrac said.
Nevada, Arizona
Nevada had the highest rate of foreclosure filings per household for the 53rd straight month, with one in 103 getting a notice. Arizona had the second-highest rate at one in 210 and California was third at one in 259. Michigan, Utah, Georgia, Idaho, Florida, Illinois and Colorado also ranked in top 10.
Five states accounted for more than half of the U.S. filing total, led by California’s 51,906. Florida was second at 19,192 and Michigan third at 14,614. Arizona, Nevada, Illinois, Georgia, Texas, Ohio and Wisconsin rounded out the top 10.
RealtyTrac sells default data from more than 2,200 counties representing 90 percent of the U.S. population.
On the International Front, the Greek Politiians are Capitulating as well. Forget the IMF. Greek Politicians are now in fear of their LIVES. Aybody who votes for a Bailout has a very short life expectancy, t the very least on a Political level, if not the corporeal one..
Looks like TSIHTF here pretty good now. A OT of 5 Quakes here going on. A 6 Quake is not far off. 7…8….9…BLOOOOOEY!!!!
Count Down to Armageddon. Strap on your seatbelts Sportsfans, its getting good now.
RE
Oops, forgot to paste the article. LOL.
RE
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Greece: Leading Socialist quits ahead of reshuffle
Associated Press, 06.16.11, 05:15 AM EDT
ATHENS, Greece — A prominent Greek Socialist lawmaker resigned his seat in parliament Thursday, hours before Prime Minister George Papandreou was to announce a cabinet reshuffle.
Former public order minister Giorgos Floridis announced his resignation a day after the government and the opposition conservatives failed to create a coalition government designed to broaden support for vital austerity measures.
The resignation was the latest setback for Papandreou, who is facing harsh criticism from within his party before a crucial vote this month on a new round of austerity measures considered crucial to avoid a summer default.
The 55-year-old Floridis, who has fiercely criticized the slow pace of reforms in Greece, had been tipped to join the new government. His resignation does not affect the government majority in parliament as his seat will now go to another member of the Socialist party.
Surprise coalition talks between the government and rival conservatives collapsed Wednesday, despite weeks of pressure from the European Union on the two parties to reach cross-party consensus on cost-cutting measures.
“Unfortunately, the leaderships of the two main political parties have once again failed to rise to national circumstances, in a politically unforgivable way,” Floridis wrote in his letter of resignation.
OK, I am convinced here now. S&P 500 will go down around .5% today. I will bet on it. Wish me luck. The Picasso is on the line.
RE
RE – you are predicting 1/2 a percent. Wow. You have balls the size of BB’s. Predict 5 percent and then we would have something to talk about.
I am not predicting a 5 percent drop but it wouldn’t surprise me at the moment. The sharks are smelling blood and anything could happen. I don’t see any good news on the horizon and if Germany really gets pissed and gives Greece and the rest of the PIIGS the finger it will really get interesting. I think your half percent is extremely likely. I think 2 percent is pretty likely. And I think 4 or 5 percent isn’t real farfetched.
Glad I am cashed out of stocks.
we all need to take lessons from the amish–they will survive .the 19th century wasn’t that bad.
RE
You didn’t like that lousy painting anyway.
Texas is the 12th largest corn grower, less than Michigan, a little more than Colorado or Kentucky. Plus they irrigate the heck out of things.
If we don’t have a midwest drought and don’t have an early freeze, we’ll have corn coming out of our ears. With the coming deflation, that is extremely possible.
BTW, corn has plummeted this week, down over 16%. FWIW
EF
Admin,
“The concerning part of corn for ethanol is that we will have a record crop of corn this year and it still won’t be enough to satisfy worldwide demand. Meantime, ethanol plants are declaring bankruptcy in record numbers as they can’t make money if corn is above $7. If we want ethanol, we should import it from Brazil”
Brazillian ethanol is made from sugar, a food. Corn ethanol is made from livestock feed.
Corn down sharply again today.
EF
RE – I will buy when there is blood in the streets.
Regarding Reverse Engineer’s Cave Man to Astronaut to Cave man image.
I’ve seen that image, while researching this topic on the web. At first, I thought it was depressing. Then, I thought it was cruely optimistic. Our curren global climate is in the process of being destabilized. Extreme weather is expected to become more common. An unstable climate for the next hundred years or so until the new global climate stabilizes, will make a stable source of food impossible. If vegetation is unable to adapt quickly enough to an unstable climate or much warmer climate, I doubt animals higher on the food chain, such as medium sized to large sized mammals, will be able to.
I think humans and most mammals are most likely headed for extinction. The hunter-gathering lifestyle just won’t be possible. The reason why most humans stopped persuing the hunter-gathering lifestyle in large parts of the world was because humans had managed to eliminate, either directly or indirectly, many of the the megafauna that made the hunter-gathering lifestyle possible to begin with.
A decline in oil production will cause more short-term casualties than climate change but climate will be a huge variable on human population size, after the die-off.