Month: May 2013

By The Sizemore Letter

I’ve been a big believer in vice investing—and particularly tobacco stock investing—for a long time.  I turned bearish on tobacco stocks late last year, but this was based purely on price.  In my view, tobacco stocks had simply gotten too expensive relative to other dividend-paying options—and I would reiterate that view today.

But if ol’ tobacky stocks are unattractive at current prices, what about wacky tobacky stocks?

With marijuana slowly becoming legalized in the United States (at least on a state-by-state basis), manufacturers and vendors of cannabis are evolving from enterprises of dubious legality into mainstream and regulated purveyors of vice.

So, if Big Tobacco has been a profitable investment despite its social stigma, might Big Weed get a haircut and get to work for investors?

Maybe, but I wouldn’t count on it.

To start with, there is no “Big Weed.”  All of the players are small companies with names that few investors have ever heard of.  Tobacco and marijuana are also vastly different industries with vastly different competitive dynamics.  Yes, both could be lumped into the category of “sin stocks,” but not all sin stocks are created equal.  This requires a little explaining.

I recently wrote that Coca-Cola and Pepsi were the “New Big Tobacco.” By this I meant that sugary drinks were evolving into a stigmatized industry that is regulated in the interests of public health in the same way that cigarettes are.  But I also noted that the stocks of companies operating under that kind of scrutiny can still be wildly profitable to own under the right set of conditions:

1. There should be substantial barriers to entry for new competitors (what Warren Buffett likes to call “moats.”)
2. The company should be financially healthy (strong balance sheet, manageable debt, etc.)
3. Management should be committed to rewarding shareholders with rising cash dividends and, to a lesser extent, share repurchases.
4. The stock must be cheap.

Big Tobacco names like Altria (NYSE:MO), Philip Morris International (NYSE:PM), and Reynolds American (NYSE:RAI) easily pass the first three criteria. They just happen to bomb the fourth.

So, how do marijuana stocks look in comparison?

The first point is in a state of limbo.  There were arguably barriers to entry under the old medical marijuana regime due to the legal hoops that growers and vendors had to jump through.  But none of the existing players were big enough to crush new competition, and none had any real name recognition.

Virtually every human being alive today is familiar with Altria’s Marlboro brand or Anheuser-Busch InBev’s  (NYSE:BUD) Bud Light, regardless of whether they smoke tobacco or drink alcohol.  But how many have heard of Medical Marijuana Inc (Pink sheets: MJNA), one of the largest suppliers of medical marijuana? Or Cannabis Science (Pink sheets: CBIS), one of its biggest competitors? Or for that matter, how many have heard of Growlife (Pink sheets: PHOT), a leading seller of hydroponic equipment?

I’m betting the answer is not too many.  At this stage in the game, there is no real brand recognition to speak of.

What about the other criteria?  Are these companies at least financially sound, and do they reward shareholders via dividends and share buybacks?

Not exactly.  All three companies are high-risk penny stocks, and none pay a dividend.  Of the three, Medical Marijuana, Inc., the “blue chip” of the group, has the healthiest balance sheet, but you’re talking about a company that generated only $5 million in revenue last quarter.

And price?  Medical Marijuana, Inc. trades for 14 times book value and 24 times sales.  To pay those prices for any stock…well, let’s just say you’d have to be heavily under the influence of the company’s products.

At time of writing, Medical Marijuana, Inc., Cannabis Science, and Growlife trade for $0.17, $0.05 and $0.04 per share, respectively.  But a young analyst I interviewed on the matter told me he had a price target of $4.20 on all three.

I think there was a joke in there somewhere at my expense.

Bottom line: while marijuana stocks may indeed be vice investments, they have none of the qualities that have helped tobacco generate such fantastic returns over the past 50 years.  Treat them as a risky speculation and nothing more.

Sizemore Capital has no positions in any stock mentioned. This article first appeared on InvestorPlace. 

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By www.CentralBankNews.info Here’s today’s Central Bank News’ link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.

By www.CentralBankNews.info     Serbia’s central bank cut its policy rate by 50 basis points to 11.25 percent due to “significant lower inflationary pressure,” and said the inflation rate is expected to return to its target range in the last quarter of this year.
    The National Bank of Serbia, which raised interest rates eight times in a row from June 2012 but then paused in March and April, said monthly inflation rates confirmed a weakening of inflationary pressures and future policy decisions would be determined by “international developments, fiscal movements and the impact of the new agricultural season on food prices.”
    Serbia’s annual inflation rate rose to 11.4 percent in April from 11.2 percent in March, but inflation is
slowly coming down after hitting a 2012-high of 12.9 percent in October due to lower pressure on food prices and inflationary expectations.
    The central bank targets inflation of 4.0 percent, plus/minus 1.5 percentage points.
    “Low aggregate demand, stable developments in the foreign exchange market and a falling risk premium of the country, together with the expected full-blown effect of past monetary policy measures, will contribute to a further fall in year-on-year inflation,” the central bank said.

   Serbia’s Gross Domestic Product contracted by 0.3 percent in the fourth quarter of 2012 after a fall of 0.8 percent in the third. But on an annual basis, GDP rose by 1.9 percent, the first time the economy expanded on an annual basis since the third quarter of 2011.
    The central bank expects economic growth of 2 percent this year, mainly driven by exports. In 2012 Serbia’s economy contracted by 1.8 percent

    www.CentralBankNews.info

London Gold Market Report
from Ben Traynor, BullionVault
Tuesday 14 May 2013, 07:30 EDT

SPOT GOLD fell towards three-week lows Tuesday, dropping as low as $1423 per ounce, as the Euro also fell against the Dollar after comments from those attending today’s Eurozone finance ministers’ meeting appeared to show disagreement over the creation of a banking union.

Days after Germany’s DAX index set a new record high, European stock markets extended yesterday’s losses this morning.

“Due to US Dollar strength and record levels in European shares, gold has been losing its ‘safe haven’ appeal in recent days,” says a note from German-based refinery group Heraeus.

Gold in Euros meantime dipped briefly below €1100 an ounce, while gold in Sterling fell below £935 an ounce.

Silver meantime fell to the lower end of its range for the past three weeks, dropping below $23.50 an ounce, as other commodities also dipped lower.

US Treasuries gained while German Bund prices fell.

The Eurogroup of single currency finance ministers were expected to discuss the creation of a banking union – which would include deposit guarantees and supranational supervision of financial institutions – as part of their meeting today in Brussels.

“We want a single European resolution regime,” European Central Bank executive board member Joerg Asmussen said, “together with a single resolution agency and a single resolution fund that is financed by a levy from the banking industry. This should come into place in parallel with the single supervisory mechanism hopefully by the summer of next year.”

Shortly after Asmussen’s comments were reported the Euro gave up today’s gains against the Dollar, dropping back below $1.30.

In contrast with Asmussen’s comments, German finance minister Wolfgang Schaeuble told reporters a day earlier that existing European treaties “don’t give enough foundation for a European [banking] restructuring authority”.

“You can do the same thing very well with a network of national authorities,” Schaeuble added.

“We should go as far as possible within the current treaties,” countered French finance minister Pierre Moscovici, “and then think about what could require a change in treaty. Our belief is that we can go very far.”

“The Germans are putting forward understandable questions which will have to be dealt with,” added Eurogroup president and Dutch finance minister Jeroen Dijsselbloem.

“But I don’t see why that would stop us making progress on the banking union.”

Ireland meantime may seek to use the ECB’s Outright Monetary Transactions program – whereby the ECB pledges to buy government bonds on the secondary market to prevent a sharp rise in borrowing costs – as it exits its bailout, the country’s finance minister said Monday.

“We haven’t decided in government yet whether we will apply or not,” said Michael Noonan, “but it is something that seems to be a mechanism that is working very well.”

The supply of scrap gold sent to refineries is expected to drop 4% this year compared to 2012, according TD Securities. The Toronto-based brokerage says around 1550 tonnes of scrap gold will be recycled during 2013, the lowest total since 2008, Bloomberg reports.

Last month saw gold’s biggest two-day drop in three decades.

“A lot of people were shocked,” says Arthur Abramov, owner of cash-for-gold business Manhattan Buyers Inc., which saw its monthly volume of gold recycled fall by 40% to 300 ounces.

Over in India, yesterday’s Akshaya Tritiya festival, viewed as an auspicious day to buy gold, saw an increase in gold jewelry sales compared to last year, according to local press reports.

“Sentiment of gold buying has turned positive,” says Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation, adding that he expects gold sales for yesterday to show a 20-25% increase on last year’s festival.

Ben Traynor

BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

By www.CentralBankNews.info     Indonesia’s central bank held its benchmark BI rate steady at 5.75 percent, as expected, but said it would not hesitate to adjust its policy stance and was closely monitoring inflationary pressures from rising inflation expectations linked to a possible government decision on oil-based fuels.
    Bank Indonesia (BI), which last cut its rate by 25 basis points in 2012, said it would continue to absorb excess liquidity through longer-term instruments and would shortly publish a reference exchange rate for the rupiah in the domestic spot market to help stabilize the exchange rate.
    Indonesia’s government is considering cutting popular fuel subsidies that is helping widen its budget deficit. The government, which spends more on fuel subsidies than education or health care, will compensate some the poorest people in an attempt to soften the blow of higher fuel prices.
   Indonesia’s headline inflation rate eased in April to 5.57 percent from 5.9 percent, along with core inflation that fell to 4.12 percent in line with lower global commodity food prices, but added that “inflation expectations begin to rise driven by the uncertainty in fuel subsidy policy.”
    Bank Indonesia targets inflation of 4.5 percent, plus/minus one percentage point.
     The central bank, whose governor is leaving later this month to be replaced by former finance minister Agus Martowardojo, said the pressure on the rupiah eased this month in line with higher capital inflows and there was only temporary pressure on the exchange rate following a revision earlier this month of the country’s ratings outlook to stable from positive by Standard and Poor’s.
    The issue of fuel subsidies has made international investors jittery and put pressure on the rupiah’s exchange rate. However, a global bond issue improved capital inflows with international reserves rising to 107.3 billion at the end of April, the equivalent of 5.8 months of imports and external debt service.
     In the first quarter of 2013, Indonesia’s Gross Domestic Product expanded by an annual 6.02 percent, lower than the central bank’s forecast of 6.2 percent, and down from 6.11 percent in the fourth quarter of 2012.
    Bank Indonesia said the slower growth rate was due to declining domestic demand while the recovery in export was still limited.
    “Household consumption growth slowed in line with weakened purchasing power due to higher volatile foods inflation and rising inflation expectations related to uncertainty in fuel subsidy policy,” the central bank said.
    Growth in the second quarter is expected to be lower than previous forecast and around the first quarter rate, BI said, forecasting growth for 2013 in the lower range of 6.2-6.6 percent.
    In 2012 Indonesia’s economy expanded by 6.2 percent.
 
  www.CentralBankNews.info

By HY Markets Forex Blog

Retail sales in April rose unexpectedly after falling back in the previous month which proves the continuous improvement in the economy.

The retail sales is believed to be the highest increase in sales in the past nine after a 0.5 percent fall back in March and edged up 0.1 percent according to the commerce department.

The Economy shows a huge room of improvement with the growth sturdy jobs provided in the past three months and the unexpected rise in retail sales.

The core sales review for February and March show signs and led economists to believe that the government might increase the initial 2.5 percent estimate for the first- quarter GDP growth.

The cut in gasoline prices which dropped in April to 14 cents are also helping the economy by freeing some money to spend in necessary areas needed.

According to economists the campaign for the Federal Reserve is also keeping the interest rates low by increasing the share and home values.

Consumer spending accounts for two-thirds of US economic activity.

The drop in   gasoline prices pushed down receipts at gasoline stations, sales excluding gasoline recorded their largest increase since December.

Stripping out gasoline and autos, sales rose 0.6 percent while sales also made improvements with building materials, garden supply stores, electronics and appliance stores.

The post Unexpected increase in US retail sales appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

Cyprus received 2billion euros ($2.6bn) on Monday as the first installment of its international billion dollar bailout package which will be expected to follow by another 1billion euros before 30^th June according to the European Stability Mechanism.

Continue reading “Cyprus receives first installment of bailout package”

By WallStreetDaily.com

Let this be yet another reminder to trust, but verify, every bit of information on Wall Street.

For months, we’ve heard that a “Great Rotation” is underway. That is, investors are dumping bonds and promptly putting the money back to work in equities. And this uptick in buying activity is precisely why the stock market keeps hitting new all-time highs.

Sounds perfectly logical. And Wall Street appears to be corroborating the theory.

“You have this huge migration moving from grossly overweight fixed income back into equities,” says John Stoltzfus, Chief Market Strategist at Oppenheimer.

The only problem? The data tells an entirely different story.

Here’s the proof in a single chart – and, more importantly, why Wall Street’s latest deception ironically bodes well for us…

Stocks Back En Vogue

I’ll be the first to admit that a transition is afoot.

In January, investors (finally) rediscovered stocks. U.S. stock funds reversed 20 consecutive months of outflows by attracting a record $18.4 billion.

And over the course of the first quarter, the enthusiasm for stocks intensified. According to the fund tracker, EPFR Global, investors plowed a total of $53.9 billion into stock funds in the first three months of the year.

Yet none of these purchases were fueled by the sale of bonds.

As you can see, U.S. bond funds actually attracted another $43 billion in fresh capital in the first quarter.

Granted, that’s down about $30 billion from the same period last year. But it’s still a net inflow, which indicates that investors aren’t rotating out of bonds one bit.

So where’s the money coming from to buy stocks? Money market funds.

Based on EPFR data, investors yanked a total of $103.9 billion out of these funds in the first quarter.

The latest numbers from the Federal Reserve support the EPFR data, too. According to the Fed, the $644-billion influx into savings accounts and CDs we witnessed in 2012 slowed to a trickle this year.

As I’m sure someone will point out, I’m basing my conclusion on data for the first quarter of 2013, which ended about six weeks ago. And a lot can happen in that amount of time.

Fair enough. But even if we look at the most recent data, it’s clear that a rotation out of bonds still isn’t underway.

Survey Says? Bonds Over Stocks

The latest weekly report from EPFR reveals that investors still prefer bonds to stocks.

Case in point: For the week ending May 10, global bond inflows totaled $13.07 billion, versus $10.49 billion for stocks.

And if we focus only on U.S. flows, bond funds and stock funds finished the week almost dead even at about $7 billion. So investors certainly aren’t ditching bonds en masse in the United States, either.

Of course, those headline figures don’t tell the whole story.

As Cameron Brandt, EPFR Global’s Director of Research, said, “A single ETF accounted for over $5 billion of the total net [equity] inflows and retail redemptions were the second highest year-to-date.”

Bottom line: Forget all the chatter about the so-called “Great Rotation.” Investors still love bonds more than stocks, which means this bull market has plenty more room to run.

If you’re reluctant to embrace such an optimistic view of reality, tune in tomorrow. Boy, do I have a statistic that’ll zap any bearishness out of you!

Ahead of the tape,

Louis Basenese

Article By WallStreetDaily.com

Original Article: Exposing the “Great Rotation” Exaggeration in One Chart

By MoneyMorning.com.au

Last week the market sounded the latest in a recent series of warning signals for a new bull market in resources.

You probably don’t realise it, but the Australian resource sector just put in its best week in more than four years.

Over the week the Metals and Mining index gained 9.4%.

Major moves like this aren’t common. You have to go back to March 2009 to find a bigger weekly gain. This is important. Moves of this size are often typical of violent changes in trend.

Sure enough, that move in March 2009 was the week that the mining sector began a two-year bull market in earnest.

So with a similar sized move last week, the evidence is now really mounting that investors should plan for the next resource rally…

This chart puts last week’s jump in context:

It’s an impressive move. No two ways about it.

I wouldn’t necessarily expect the resource sector to rally to the moon tomorrow. It can take a few months to confirm a turn. My point is that this may be the first part of that process, and it will pay to be ready for it.

A Breath of Fresh Air for the Resources and Mining Industry

It’s no coincidence that this big move happened in the same week that the Australian dollar finally cracked.

Over the week, the Aussie fell by 3% to hit parity with the US dollar. That’s a huge move in a short time.

Any Aussie business owner that exports goods for a living will be breathing a sigh of relief. In recent years, our strong dollar has made exporters less competitive. That goes for farmers, manufacturers…and miners alike.

When goods trade on the global market, to keep an edge you need lower production costs than your competitor. If you have a low currency, you can set wider margins.

The high Aussie has been as much of a hindrance for miners as it has been for the rest of the economy. So the prospect of a lower dollar is a breath of fresh air for the sector.

The rate cut to 2.75% last week marked the tipping point for the Australian dollar. Suddenly it looks like it’s about to free-fall. Accelerating the process, a line-up of high profile hedge fund managers are now getting excited about short-selling the Aussie. By this I mean they’re making billion dollar bets on it falling.

Stanley Druckenmiller, a hedge fund trader famous for making an average of 30% a year over a few decades for his funds reckons: ‘…the Australian dollar will come down, and will come down hard‘.

A fall in the Aussie could be the catalyst the resource sector has been waiting for to turn around.

Even after the 9.4% jump in resources last week, the sector is still painfully cheap. It’s still priced as though the world is in the grips of the GFC, when this isn’t the case. There is a fundamental disconnect between the valuation of the resource sector, and the economies of its main customers.

To me, this reeks of opportunity.

It’s a big old sector though…

So What to Buy?

Last Friday I wrote to you about why small-caps can be FAR more profitable than large-caps.

But don’t go too small! Out of 1,000 or so ASX-listed mining companies, about half of them are under $20 million in size, and are very low on cash. So approach with caution.

The less risky bet, while still getting some leverage, is to go for mid-cap producers.

These are the up-and-coming stocks that have done all the hard yards of exploring, getting funding, and building the mine; and are now in the initial stages of production – and cash flow. Pick the right one, and your risks are low, and the potential gain high.

There are a few stocks like this, tucked away amongst the flotsam and jetsam. And after 25 months of falling resource stock prices, these have been sold off with the market indiscriminately. They are quality goods going on the cheap.

That makes NOW a good time to look at these stocks. With the resource market turning up, and looking set to continue rising on the falling Aussie, these will be the stocks to rise fastest.

For example, a cashed up oil producer I’ve tipped has rallied 15% already in a week, to put it up by 75% overall. A highly profitable, early-stage copper tip has soared 28.9% in the same period.

It’s not just the conventional commodities I like. Lithium is used for lithium ion batteries, and is a strategic mineral that has a very bright future. Often these niche areas of the market offer the best rewards. For example my lithium stock-tip has bounced 55% in just a few weeks.

Another commodity I still really like is graphite. This is another strategic commodity that I think investors can make some big profits from in a resource rally. Graphite is one of the most interesting commodities in the sector too. The growth area for graphite is in the lithium ion battery market. But the really cool applications are in cutting edge use in graphene tech.

In the last week alone, the graphite stock I’ve tipped has rebounded by 20%, to put it back to a 100% gain.

It’s a big sector. But hidden between the boring large-caps and the sketchy small-caps there are some that I like to call ‘better-stocks’. And after a two-year selloff, from the current smashed up prices these stand to make investors some great returns.

We’ve been waiting for the right market conditions to be able to do this…and that time has now arrived.

Dr Alex Cowie
Editor, Diggers & Drillers
Join me on Google+

Ed Note: Aussie resource stocks have had their best week in four years. Doc Cowie says that now is the time to buy as the rally takes off. In today’s Money Morning Premium, Kris reveals the eight-point checklist that helps the Doc determine which stocks are good and which stocks are better. Click here to upgrade now.

From the Port Phillip Publishing Library

Special Report: IT’S A TRAP

Daily Reckoning: What Happens When Everyone in the World has Zero Interest Rates?

Money Morning: Why You Won’t See Me on ABC or CNBC Discussing Financial Markets…

Pursuit of Happiness: Don’t Take Financial Advice from a Lawyer

By MoneyMorning.com.au

John Wooden – the late, great UCLA basketball coach – once said, ‘Things turn out best for the people who make the best of the way things turn out.‘

With coach Wooden’s advice in mind, let’s think positive. Let’s review the upside of the resource news flow.

Hey, oil prices are stable. The Brent crude oil price is hovering in the low $100 range, while North American oil prices – embodied in the price for West Texas Intermediate (WTI) – are $10 less, give or take.

Of course, OPEC oil exporters hate $100 oil…

That’s because most of the OPEC producers need much higher prices to balance their national books. That addiction to oil income is part and parcel of leaders allowing their respective countries to evolve into petro welfare states. The usual Middle Eastern names come to mind, although even Russia has an oil problem.

Russia is entering a recession after two years of stagnant or declining economic growth. Some of this is blowback from the overall chronic weakness in Europe.

Still, on the best of days, Russia’s economy is overly dependent on income from exporting oil, natural gas and mineral commodities, without much in the way of value-added manufactures (aside from weapons, which is not entirely a good thing, either).

Meanwhile, inflation in Russia has doubled, and its stock market has lost nearly 15% in value so far this year.

Can energy exporters just turn the valves, lower output and ship out less oil in order to goose up the price? Not likely. For the most part, you lose more by not exporting a $100 barrel than you gain from any increase by a couple of dollars for the rest of the tanker load. Plus, it’s hard to rig the oil game anymore, for reasons I’ll detail in a moment.

Absent one-off, supply-killing events like war (think Iran) and/or big natural disasters (think hurricanes in the Gulf of Mexico), oil prices don’t appear to have upward spikes built in, or nasty tumbles ahead, either.

On the demand side, the global economy is growing slowly, where it isn’t stalled or shrinking. To the extent that oil supply balances nicely with overall demand, we can thank the North American fracking revolution. Hold that thought.

Overhauling the World Oil Patch

From the 1960s to about the early 2000s, the developed world – North America, Western Europe, Japan and Australia – adopted a historically novel approach to obtaining oil.

That was to dabble in limited local and regional energy production (the traditional US-Canadian oil patch, or the North Sea in Europe), but import the bulk of energy needs from distant, unstable lands – you know the names.

Compounding the problem, those distant, unstable lands are inhabited by people we don’t truly understand. So the developed West wound up paying lots of money to far-off strangers, and on many occasions (some say ‘too many’) became deeply engaged in ancient tribal hostilities. It’s part of the ‘oil war’ scenario that I’ve covered before.

Within the last decade, though, the modern model of letting others do the dirty work in supplying oil, simply broke down. Part of it was the rise of China as a competitor for the same energy supplies. With China buying oil, the substance became far more valuable in real terms.

Another part of the breakdown was the general decline of Western economies and currencies due to fiscal and monetary mismanagement. Weak currencies fed the nominal price rise for oil – starting with the original OPEC price shock of 1973, which I’m old enough to recall vividly. Then, over the next 40 years or so, energy got very expensive (with ups and downs along the way, to be sure). And along came fracking.

Now we’re about five years into a total overhaul of the global oil patch, starting with the US and Canada, and eventually extending overseas. Fracking has unlocked immense volumes of heretofore ‘tight’ oil and natural gas, much to the chagrin of Western politicians and Eastern OPEC potentates (see above).

I’ve discussed fracking many times in these pages, and it’s an ongoing theme. Fracking is how the oil industry has responded to the back side of the classical Peak Oil curve. It involves applying high levels of capital and technology – a ‘manufacturing’ model, actually – to liberate tightly bound hydrocarbon molecules from rocks.

Fracking is industrially complex, but it’s here to stay. You need to understand it, if not to love it. That, or freeze to death in the dark. (Your choice, of course.)

Environmentally, fracking is not nearly as bad as its most vicious opponents claim. That is, much opposition to fracking is based on a bizarre, faux-environmentalist (think Marxist redux) ethic of greed and envy, because fracking goes against their ‘world-improving’ goal of controlling people and events by limiting access to energy and capital.

Indeed, many fracking opponents are utterly shameless in their lies, although in fairness, I should add that large numbers of fracking opponents are just horribly misinformed by raw propaganda.

But fracking is not all wine and roses, either, because operators need to do it right.

In the ‘do it right’ department, the usual suspects are big oil service companies that are critical to keeping the barrels coming out of directional, multistaged, fracked wells.

And don’t forget offshore.

Fracking aside, the offshore arena also contributes a critical component of global oil production. There’s more and more development offshore (and far from OPEC), and there’s really only one way to do it – which is ultra-safely. As we learned three years ago with the BP blowout, failure is a company-busting event.

This discussion of fracking and offshore support companies doesn’t begin to get into the array of large- and intermediate-sized oil operating companies that are pushing an eye-popping number of new projects. Collectively, operators are moving the edges of many an envelope for new technology in both the fracking and offshore world.

The Oil Barrels Are Coming

The bottom line is that for the foreseeable future, more and more barrels are coming from more and more wells, albeit many wells have distressing decline curves. Yes, it means that we’re on a drilling treadmill, but at least it’s ‘our’ treadmill and under local political control.

Looking ahead, North American oil will add more and more to our continental-scale energy security – which is NOT the same thing as so-called ‘energy independence’, a silly and confusing term.

That is, the US is still importing oil and will do so for a long time to come. But every new barrel from, say, Texas or North Dakota displaces a barrel from Angola, Nigeria or Venezuela. The OPEC guys just have to deal with it.

Oil traders might hate energy price stability, but I like this period of predictable supply and price. So do motorists like you, I suspect, as well as truckers, railway managers, airline executives, ocean shippers, refiners, chemical plant operators, utilities, manufacturers and more. The bottom line is that the energy world is looking good, at least for now.

Byron King
Contributing Editor, Money Morning

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