Monday, June 30, 2014

Random Comment On The Sleeping Giant; Idle Chatter On The Market

I've added a few more links with regard to the Strata-X story in the "Sleeping Giant."

These posts on Strata-X and the "Sleeping Giant" have nothing to do with investing. I am simply trying to learn more about the potential (or non-potential) of this play. I think it's rather interesting. If folks remember, I also thought "Oil for America and the Lodgepole" was interesting, but that story came to nothing.

So, again, not only do these posts have nothing to do with investing, the entire blog has nothing to with investment advice per se. Do not make any investment decisions based on what you read here or what you think you may have read here.

For Investors Only
Idle Chatter
Just Because

However, having said that, my thoughts on the market. Again, this is not an investment site. Do not many any investment decisions based on anything you read here or think you may have read here.

I find the market extremely interesting. The economy collapsed (their word, not mine) in 1Q14, and the market continues/continued to melt up, breaking new records. The market melts up despite hints that 2Q14 may not be as good as once hoped. At one time, full year GDP was forecast to be around 3% but with the first quarter cratering it's going to take quite a second, third, and fourth quarter to get it back to 3%.

Every day I see headlines (and if I watched television, I suppose "talking heads") predicting the crash is coming. And it doesn't. High-priced oil is supposed to put a drag on the market. I think it was six months ago, maybe a year ago, when it was said that this was the longest stretch of "high-priced oil" ever. And yet, here we are again, not only is it higher than it was then, it is "very high." But yet, considering what might be going on in the Mideast, the price has barely risen (from $103 exactly two days before the "surprise") to barely $106 today. [Remember, up until recently, the talk that oil should be at $60/bbl; we haven't heard that talk in a long time, and yet there is more oil than ever.]

Meanwhile here in the US, it is hard to find any really good news, and yet the market melts up. I don't know what the other sectors are doing because I don't follow them but the oil and gas sector has done quite well: names in the oil and gas industry that are quite familiar to all of us are hitting new highs every day. Take a look at EOG vs AAPL over the past two years: AAPL, after two years -- 0% change; EOG, after two years -- 140%.

I am reminded of all this, again, because tonight futures are up, and up nicely. The DOW is up and even WTI oil is up slightly (futures). Earlier this evening WTI oil futures were down slightly and with everything so "hunky dory" in the world, I really thought oil would continue its imperceptible melt-down back to ... say $102. Which, of course, would scare every oil and gas bull, and shares of companies primarily in the Bakken would tank. [By the way, these high prices could affect some Bakken companies adversely if they did not hedge correctly.]

Futures, of course, mean squat, and this week, the market may be even more difficult to decipher for two reasons: a) a shorter week with relatively little economic news scheduled (earning season doesn't start until next week -- Alcoa, July 8); and, b) small trading volume, I would assume, with traders starting their long weekend early.

Speaking of earnings: I am also excited by the fact that I have not heard any "earnings warnings," although it's possible I've missed them. I'm not very good at details.

So much hinges, it seems on China's economy. If the US economy starts to go sour, it simply tends to get Wall Street irritated and anxious; the US economy has been in such doldrums for so long now that if the economy collapsed (their word, not mine) again 2Q14, Main Street would hardly notice.

But if the Chinese economy goes sour, there are a half-billion (or a quarter billion or a 100,000 or whatever) young Chinese men who will be out of work; that many young unemployed men is not a pretty picture. The Chinese central government will do whatever it takes, if they're smart, to keep those young men dutifully employed. Think of the "LA RIOTS" times a thousand. Or a million.

I don't know what the pundits have been saying about China's economy the past few weeks, but think about it. But this story supports my thesis, is reporting:
China’s National Bureau of Statistics (NBS) has released new figures that point to the expansion of the country’s industrial production output in May, marking an economic comeback following a slowdown earlier in the year.
The NBS stated in a Friday report that the country’s industrial output accelerated to 8.8 percent year-on-year in May 2014, which is higher by 0.1 percent recorded a month earlier.
The newly released data further indicates that retail sales in the country climbed for a second consecutive month, reaching the 12.5 percent mark. That reflects the highest level of retail sales since last December.
The signs of economic growth in the world’s second largest economy come as Beijing has stepped up what economists describe as the mini-stimulus to avert a slowdown earlier this year.
Unlike the US, which is broke (his words, not mine), the Chinese have lots of American dollars to spend if necessary to stimulate their economy.

All of which puts me in a great mood this evening.

And A Bit More

Don't you just love this Rigzone headline? Brent and US crude reach 18-day low on easing Iraq supply fears. The first paragraph:
Brent crude fell toward $112 a barrel on Monday, hitting an 18-day low as did U.S. crude near $105, as investors grew less worried about potential supply disruptions from Iraq.
Now, we're doing "18-day lows"? This is going to be a long war.

This is a "low?" Brent trending toward $112 and WTI toward $105?

And it "fell?"
Brent is still up about 3 percent in June, its biggest monthly gain since August. But the North Sea benchmark has come off the nine-month high of $115.71 hit two weeks ago, as the Sunni advance in Iraq appears to have stalled.
Brent lost 94 cents to settle at $112.36 a barrel, its lowest settlement since the rally spurred by the Iraqi crisis started on June 12. U.S. crude lost 37 cents to settle at $105.37 a barrel, also its lowest since June 12.


  1. With Strata-X I suspect it will be a waiting game. They could easily be scammers or legit. The only interesting thing I read in their presentation is that the new well had a gas show of 300 with minor oil shows. To put things in perspective almost every oil/gas bearing layer that gets drilled tends to show a minor gas showing of 70-200. Some area's like the bakken itself, and the top of lodgepole have much larger immense spikes like in the 1000-5000 range. The spike shown here is good but is it good enough.

    Another interesting thing is if this does come to fruit will it change the political landscape with the addition of a few more counties having oil and gas?

    The other interesting thing will be economics and fracking. Economics because these are much shallower wells, easily drilled with even smaller rigs than are used in the bakken, will they even be horizontals? With fracking they will be much closer to some water bearing aquifiers that are used to get water so I do not think this can be a safe fracking play unless there is a hard lodgepole type layer between the two. However they are saying it is 40% porosity which is very high.

    I am hoping someone takes a road trip to get more information, and thank them in advance if they do.


    1. Agree completely. I think it all comes down to economics -- whether the price of natural gas can justify the costs of infrastructure. The natural gas is there, the drilling is inexpensive, but there has to be a market for all this new natural gas coming on line to make it work. It's not as if there is not enough natural gas coming out of the Bakken to provide the natural gas needed for fertilizer plants in North Dakota.