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Something nobody is talking about: Debt levels of shale oil

October 14, 2014

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18 Comments
    Oct 14, 2014 14:42 AM

    Chris i tell you SAUDI ARABIA REVOLUTION ! COMING !

    Oct 14, 2014 14:59 AM

    For your info Al re Harvey Organ, if you’ve not already heard, A
    http://www.silverdoctors.com/harvey-organ-updates-his-readers-will-continue-posting-on-silverdoctors/

      Oct 14, 2014 14:21 PM

      Andrew……nice to see you back…..Good health to you & yours.

        Oct 15, 2014 15:33 AM

        Thanks Irish – in fact I said earlier we are in the throes of buying a house any moment now (hopefully) and I’ve got to try finish my book….been saying that for sometime. lol. Anyway very best to you and yours, A

    The NATIONAL BOARD OF REALTORS……….was part of the problem also…..do not forget this………The REAL ESTATE COMMUNITY under a license law, was to educate and protect the PUBLIC which did not happen in the 2007-08 bubble…..PROTECTION OF THE PUBLIC.. …..that was the number one goal in the 1960-1970’s…….TODAY, that is no longer true….IT IS FEES back to the NATIONAL, which is tied to the GOVT.( every tom dick and harry, mary , sue, has a license , that the state, and national collect a fee ).
    Check out the arrangement the NATIONAL Board of REALTORS has with the POLITICAL groups in WASHINGTON.
    IF, the REAL ESTATE COMMUNITY would have done it’s DD…the number of unqualified individual would not have qualified for the JUMBO MORTGAGES. They LOOKED THE OTHER WAY….for the COMMISSION DOLLARS.

      Oct 14, 2014 14:57 AM

      Also a part of the picture, J — you’re right. Reckless, tyrannical finance drives everything.

      Oct 14, 2014 14:50 AM

      Jerry….TRUE?…no say it isnt so…ha!

        Here is a NEW ONE……………….THE MORTGAGE COMPANIES ….are going after the people who walked away, could not pay, …….under the Default Judgement provision.
        The FAT LADY has not sung yet!…..More on the way for the SCAM of the century….

          All those who thought they had the nightmare behind them from short sales, and just walking away scot free……… …….are going to be hounded by the collection companies for years to come………….

      Oct 14, 2014 14:19 PM

      Yep, that’s the story Peter.

    Oct 14, 2014 14:24 PM

    Thank you Chris. I have been wondering why they have been doing so much production when the need isn’t even there. I know there is always a method to the Wall Street/Intelligence(‘sic) communities madness. I still don’t know why Wall Street/intelligence wants an overproduction of shale but now I see how the funding is happening. Trying to go after Russia is a probable call but I don’t know how you get that gas across the ocean in tankers in a way that you can hurt Russia’s bottom line.? There has to go be more that we don’t know.

    Oct 14, 2014 14:29 PM

    OK, OK, Ok….I have capitulatied. Jason Hartman in an interview on the Financial Survival Network said that the USA has the capacity to kick the can down the road for years and years and years IF NOT decades to come….The dollar will be backed up by the military because they control all the major waterway and ports necessary for global trade.
    The BRICS are NON-FACTORS and will continually bow to the almightly dollar – when push comes to shove….OK, OK…..who wants to buy G and S at the lowest price point in years……I have a question for you first – though..who in the HELL is Jason Hartman and what does he know that most of us dont!!

      GOOD QUESTION…………..WHO IN THE HELL IS JASON?………since, it is getting close to Halloween……….,wasn’t the scary guy with the HOCKEY MASK CALLED JASON in “Halloween One, Two?……I say Jason is a side distraction and he should go and BOOB apples……..

    Oct 15, 2014 15:22 AM

    I don’t disagree that debt defaults are coming but this isn’t an excessive greed on Wall Street story. Capital (both debt and equity) flows to where it is best treated and where the highest potential returns are expected. For the last few years that appeared to be in the build-out of the shale production infrastructure. Excessive speculation in a particular industry happens during every business cycle in a capital intensive industry that gives the illusion of above average returns. Last cycle we saw this happen in real estate and the cycle before that it was in the telecommunication infrastructure.

    Capital intensive businesses like these are characterized by supply/demand imbalances. A typical cycle starts with rising demand for a product which outpaces the existing supply. Prices of that product or commodity then follow the rising demand higher. As prices rise, producers look to raise capital and increase capex to bring more supply online. Eventually supply rises to meet and then exceed demand causing an excess supply of that commodity. When supply ultimately exceeds demand, prices then start to fall to reflect the new supply/demand imbalance. Eventually producers will take supply offline by closing projects, shuttering capex projects or going bankrupt because they can’t operate above their cost of capital.

    To blame the banks for this is misguided in my opinion. Banks are nothing more than intermediaries that facilitate the capital raising process. They simply connect companies that are looking to raise additional capital with investors that are searching for higher returns. This paper was being sold to sophisticated institutional investors who understood the risks associated with investing in such speculative ventures. The banks have no fiduciary responsibility to these investors other than presenting the facts as they are. In my opinion, more blame should be placed on the Federal Reserve who has kept interest rates at ridiculously low levels for too long and who has forced investors further out on the risk spectrum in search of yield.

    Oct 15, 2014 15:46 PM

    Al, I like hearing Chris on your show. He speaks more about these kind of topics in contrast to Rick and Doc who have their very specific targets on the markets. Chris has a nice overview and some words of wisdom.
    It’s fascinating that oil has really dived lately, gold: oil ratio has broken out somewhat, gold: silver ratio has really broken out above 70, last time that happened was a manjor predictor of the 2008 credit crisis.
    Gold is well up today, copper down , silver up a touch, so this trend continues. It’s a fascinating time.
    The strength ingold despite US dollar strength the last week or so and the weakness in silver, copper and oil is more than a hint of credit woes accelerating somethere and perhaps recession/depression to come, who knows?
    Gold did well in 2001-2003 even despite kind of deflationary dynamics in that time. Gold also did well in 2009 inthe credit crisis, although of course it did a swan dive in 2008 for a while with just about everything else.
    We seem to be in a dollar bull market though, which is maybe negartive for gold and other commodities as well as credit.
    When you are indebted up to your eyeballs, it is not good to have the purchasing power of your indebtedness increasing as the USD rallies!
    I was listeneing to Daniela Cambone, Jim Wyckoff and Peter Hug on Kitco News’ 5th anniversary interview. Jim does not see a 1980s-1990s style extended bear marke for gold. I don’t think it will last that long but it might go on for a little while.
    I was looking for a bear market rally in gold to happen fairly soon, what happene s later, who knows? However, the triple bottom near 1180 kins of echos the bear market bottom in 1999-2011 when gold hit the 250s a few times while the dollar was still rising into its top.