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Tuesday, July 7, 2015

Off The Net For Awhile -- July 7, 2015

I'm going to call it a day -- at least until later this evening. I got started a bit later this morning, about 7:00 a.m. instead of 6:30, posted some great links sent in by readers, updated the initial production numbers, and lived long enough to see the market fall 200 points and for oil to close in on $50. All great news: the correction we've been waiting for may finally be here, providing incredible buying opportunities for long-term investors.

Note: for those new to the site or who may have accidentally arrived here looking for Willie Nelson songs, be advised that there are a lot of factual and typographical errors on this blog. There is also a lot of opinion disguised as fact. Sort of like what we get from the Los Angeles Times. There is also a lot of irrational exuberance with regard to the oil and gas industry. For example, I still opine that US gasoline demand will hit an all-time record this August.

Whatever this site is, it is not an investment site. Do not make any investment or financial decisions based on what you read here or what you think you may have read here.

Also, this is not a travel site. Just because I said parking was $5/day at the Blue Hole in Santa Rosa, California, does not mean it is $5/day every day. That was just the price for parking the day we visited.

This is also not a food and drink site, though, except for the Bakken, the posts on food and drink on this site -- sent in by readers -- are probably as good as any.

I am not paid by Starbucks or McDonald's to push their products. In fact, I may minimize my Starbucks visits if indeed prices have gone up on my "tall" coffee. Two bucks for a cup of coffee is what one can pay for a relatively good bottle of wine at Trader Joe's.

I'm in a great mood.

The Greek tragedy is coming to a head. I've never seen a modern (using that term loosely) country whose banks have completely failed. The big question is why creditors waited so long to finally say "enough is enough." I don't wish bad things to happen to anyone (okay, I do wish bad things for ISIS), but I think a lot of folks have wondered what it will look like when a country runs out of other people's money.

As of May 25, 2015, the scorecard -- amount of money Greece needs to pay the IMF in June, rounded:
  • June 5: 300 million
  • June 12: 300 million
  • June 16: 550 million
  • June 19: 300 million
  • June 19: 100 million 
Or in graphic form:

Creditors allowed Greece to move all the deadlines to June 30, 2015, which they did. Greece telegraphed on/about June 25, 2015, they had no intention of paying back the IMF and they did not pay back the IMF, the first loan that was due.

In case folks forget, Greece is still part of the EU. Free, unfettered travel is allowed between and among all EU countries. We won't see streams of Greeks storming the barriers trying to flee to Germany, they will simply drive up the road. It is all agreed that regardless of how this plays out, Greece will not exit the EU in less than two years; it will take that long for the process to play out. A lot can happen in two years.

There is no question the politicians in Greece must have been incredibly corrupt, squirreling away all the money they must have squirreled away. But why wasn't there more oversight? Why do we send money? Why not send energy? Food? It appears more and more Greece will play the Putin card. "Restructure the debt or we become the new Cuba."

With regard to oil, for newbies, important dates and prognostications;
With the slump in oil prices, my hunch is that some crafty CEOs are waiting to pounce -- will buy some highly undervalued property. My timeline:
  • October, 2014: slump in oil price takes many outside the oil industry by surprise
  • November, 2014 -- June, 2015: survival mode; CFOs working overtime to make "it" work
  • July, 2015 -- December, 2015: CEOs watching tea leaves closely to see if Saudi's strategy works; worse might be over;
  • January, 2016 -- June, 2016: companies that survive, see light at the end of the tunnel; financial statements and balance sheets much improved over a year ago
  • July, 2016 -- December, 2016: signs of consolidation as CEOs take advantage of opportunities
  • January, 2017 -- June, 2017: pundits start talking about all those off-shore projects canceled, delayed; will see if Saudi's strategy worked
As bad as things are right now, or might seem to be bad, here in the US, the fact remains that this is a most remarkable country. We are dealing with nothing even remotely close to what the Mideast is dealing with, and nothing even close to what the Europeans are dealing with.

In the Mideast, it's barely one step forward and then several steps backward whenever what was built is blown up.

In the United States, the entrepreneurial spirit thrives. Look at this story in the Seattle Business Journal:
Up to 1 million barrels of crude oil could move through the Northwest daily if all 15 proposed oil terminal projects are completed in Washington, Oregon and British Columbia.
That’s the conclusion of a just-completed update to a report by Seattle-based Sightline Institute, which has been monitoring the growth of oil train movements for some years.

Rail oil terminals at BP and Phillips 66 refineries in Ferndale near Bellingham, the Tesoro Refinery in Anacortes, and the Chevron Canada Refinery in British Columbia are all already operating.

Trains supplying those refineries already travel north under Seattle, through the Great Northern tunnel under the heart of downtown. If the rest of the projects are completed, as many as 14 oil trains per day could traverse the region.
I'm not holding my breath; these projects are unlikely to happen. Any doubt? The next story in the sentence:
Such trains have suffered repeated explosions around the United States, even after the U.S. Dept. of Transportation required improved designs.
It's important to note more people died in Ted Kennedy's car than have ever been killed in a crude oil derailment in the US. (The deaths associated with a crude oil derailment were in Canada, and that mishap was due to incredibly poor human judgment.)

But this is the good news. America doesn't need those northwest terminals. (California might need them, but not the US.) Here's why, from Reuters:
As it enters the final stretch of a massive expansion, the Panama Canal Authority is setting its sights on an even more ambitious project worth up to $17 billion that would allow it to handle the world's biggest ships.
Workers are now installing giant, 22-story lock gates to accommodate larger "Post-Panamax" ships through the Canal, one of the world's busiest maritime routes.
The project involves building a third set of locks on the Canal. It is being headed by Italy's Salini Impregilo and Spain's Sacyr, and should open on April 1, 2016.
But Jorge Quijano, who leads the Panama Canal Authority, is already looking beyond this project to a fourth set of locks which would serve a new generation of even bigger ships that can carry 20,000 containers.
"Looking at our geology and the experience we gained with this current expansion, we estimate it's a project that could cost between $16 billion and $17 billion," he told Reuters, adding it would allow Panama to compete head-to-head with Egypt's Suez Canal.
Once the current widening project is completed (scheduled for 2016, next year), huge tankers and  cargo ships can bypass the west coast and go to South Carolina if the west coast has problems with activists in the Northwest and work stoppages in Los Angeles port.

The Panama story is a huge story that may be one of the first game-changers in oceanic shipping in a long, long time. Remember, ships are already slowed down due to an effort to lower CO2 emissions; the extra time through the Panama Canal to the East Coast will be trivial. Remember: the recent work stoppage in the Ports of Los Angeles and Long Beach last several months, and repercussions are still being felt months later.

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