Letters From Southlake, Texas -- February 21, 2015

This post will have nothing to do with the Bakken, so if you came here looking for the Bakken, scroll down or click on one of the 1,267 links at the sidebar at the right, most of which concern the Bakken.

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Apple

I'm looking at and working on a brand new MacBrook Pro. Actually, it's the same one I've had since about 2010 but it's got a new battery and it's been cleaned professionally by the Apple store folks. It's so clean, it honestly looks like a new computer.

I mentioned the other day that my hard drive crashed Friday morning. I took it to the local Apple store in Southlake and ... wow, what a great experience .... Plan B was to buy a new laptop, but unfortunately they were able to diagnose the problem and fix the problem on site. It turned out that the hard drive was fine: the cable to the hard drive had "gone bad." It's hard to explain, but apparently the 13-inch MacBook Air is so small, that things get a bit hot, and the cable to the hard drive is one of those things that might deteriorate over time.

Diagnostically the battery was about ready for replacement, so I had that done also.

For those who have never experienced an Apple Store, it's quite remarkable. Even I find it quite remarkable every time I go, and I visit fairly regularly. When I walked in yesterday morning, I was greeted and asked what I needed. I was referred to "Michael" who was in the middle of the store in front of a "virtual counter" where three real human beings were in line, waiting to be seen at the Genius Bar. I didn't have an appointment (I was there at 10:00 a.m. and the next available appointment was 5:45 p.m. that evening. Michael was surprised that I wouldn't mind "waiting stand-by" -- and 35 minutes later a man walked up to me, and said, "Bruce, welcome to the Apple Store. I'm Randy. Let me introduce you to Daniel at the Genius Bar." (The concierge, Michael, who had checked me in, identified me to the Apple manager by text as "old white man, black leather jacket, green back pack, wandering around the store" -- that's how Randy knew who I was. -- Note: some of the names have been changed because I couldn't remember them all.)

Long story short, while I went to Barnes and Noble, Apple fixed my computer, phoned me and I returned a couple hours later to pick it up. My computer had never looked so good; as good as the day I unpacked it for the first time. It does look like I'm on a new computer except I notice the two keys that are losing their color, and I recognize it as mine.

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Trader Joe's

The Kennedy cold front is supposed to hit Grapevine / Dallas / Southlake tomorrow night, and it was supposed to be a bit cooler today, but it turned out to be a wonderful afternoon, so I biked to Trader Joe's, exactly 6.0 miles from the Grapevine apartment. It's 5.5 miles to Starbucks and another half-mile to Trader Joe's. The Southlake Trader Joe's opened yesterday; the parking lot was full; traffic control provided by uniformed police. Today the same but I was able to bike to the front door.

The store was very, very crowded -- shoulder-to-shoulder -- but not as bad as a typical day at Disneyland. I assume it was about as crowded as Disneyland on Tuesday morning the week they revealed there was a measles epidemic in the park.

Surprisingly the shelves were all full; it appeared they had not run out of anything. Obviously very, very well prepared.

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Swim Suit Sale

I didn't buy anything at Trader Joe's; I was only in the store for about five minutes. It's a typical Trader Joe's. I will return when I need something. Then a bike ride to Starbucks to write this.

Passed "Everything But Water" which was having a swimming suit sale. I did not stop. Men are from Mars, women are from Venus; women buy their swimming suits from boutique stores like "Everything But Water"; men buy their swimming suits from Walmart or JCP.

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Soccer

Our middle granddaughter, 8.5 years old, played two soccer games today. The first game this morning was "recreational." Our team won, 3 - 0; our granddaughter scored all three goals.

This afternoon's game was "Premier League" -- invitational only -- for all the marbles -- trophy competition at the end of the season -- every game counts towards "seeding." This is the "big league.' Our team won 2 - 0, and almost 3 - 0. Soccer is an interesting game. The "better" team doesn't always win. Our team was clearly the better team but we easily could have lost. I'm sure soccer mom knows what I mean.

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Pick-Up Trucks

I don't know if folks have noticed -- it's hard not to notice: pick-ups are getting bigger and bigger. In Texas they are really getting big. I never understood it; with the CAFE standards I thought automobile and light truck manufacturers would have been forced out of the "big pick-up" business. It turns out that, in fact, things changed. The change must have been seen by no one except the light truck manufacturers. BloombergBusinessweek has a huge story on why pickup trucks are getting bigger and bigger. The fact that BBW did a story on this suggests to me that a lot of folks were caught unaware. The link to the story is here. 

Many, many story lines. It has to do with CAFE standards which some doctorate student figured out in 2011:

Kate Whitefoot, a researcher at the National Academy of Engineering, came to believe that the new CAFE rules were tilted in favor of large pickup trucks while working on her doctorate in design science at the University of Michigan. In a 2011 article in the journal Energy Policy, Whitefoot and a mechanical engineering professor, Steven Skerlos, concluded on the basis of computer simulations that it would be cheaper to meet the new standards for big pickups than for small pickups, SUVs, or cars. “The goal of the policy was that vehicle size wouldn’t change at all,” Whitefoot says. Instead, “We’re seeing that it clearly is going up for trucks.”

Light truck manufacturers are reaping huge benefits from the new CAFE standards and their goal is to put every American in a pickup truck (although that's a bridge too far in Boston).

If you're read this far, then consider this, some dots to connect. Regular readers know that there will be a relative shortage of oil in 2017, possibly as early as 2016, as the majors shut down / delay / cancel "big cap" projects in 2014/2015 due to the slump in the price of oil.

Now, add that to the fact that auto and light truck manufacturers are out to put every American in a big pick-up truck. Those big pick-up trucks are gas guzzlers.

So, a perfect storm for some folks in 2017, maybe in 2016, certainly by 2018.

But it gets even better for oil and gas investors (see disclaimer): the CAFE standards that favor big pickup trucks (and possible bigger SUVs) do not change until 2022.

The NHTSA says it will look at the rise of big pickup trucks as part of a review of the CAFE rules that will apply to model years 2022 to 2025. That review doesn’t have to be finished until 2018, but the skirmishing has already begun.

But regardless of the new rules, they don't come into effect until model years 2022. That's seven years from now. Seven more years during which light truck manufacturers will try to get every American into a pickup truck. With an Apple dashboard.

For those who survive the current slump in the oil and gas industry, 2017 - 2022 should be awesome. That's still within my investing lifetime.

Again: see disclaimer.

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Rocky Week

Wow, talk about a rocky week for investors -- maybe "rocky" is the wrong word, but certainly a strange week. I don't think I've seen such negative news in such a long time (at least not since November, 2008): the Dubai Torch lives up to its name; Iran is one week closer to going nuclear; Greece all but defaults; the Russian separatists take more ground from the Ukrainians; ISIS is declared a non-Islamic terrorist group; the entire west coast port system shuts down for four days; a Texas judge stands up to the President on amnesty; Health and Human Services sends out 800,000 botched ObamaCare forms; the ObamaCare website wimps out; we learn that the Founding Fathers were Muslims; we also learn that the civil war was all about ending Muslim slavery; another Bakken crude oil unit train explodes when it goes off the tracks; the Great Lakes froze over; new cold-temperature records all along the East Coast; and, the Boston light rail system is shut down.

And that was just the top headlines from Drudge and Savage Nation.

And at the end of the week, how was Wall Street doing? First time unemployment claims plunge (bad news for the market; makes it easier for Janet Yellen to raise rates) and the market hits new records. Warren Buffett dumps XOM and buys DE.

But wow! The market hits new records. It appears, for those new to investing, the only thing young investors have to fear is ... Greece.

Greece: whose GDP is less than that of Williston's.