Thursday, October 5, 2017

Thursday Night -- October 5, 2017

NFL-free Thursday night: this is simply amazing. As I've mentioned, I won't watch the NFL any more. But I just learned that the NFL Network football games are streamed live on Amazon Prime. Amazing. I was curious. I just got back from water polo with our oldest granddaughter, and I remembered that. I went to and two clicks later I'm watching Thursday night NFL. It is incredibly cool. So, I will watch a few minutes for the "thrill" of seeing it streamed for free on Amazon Prime and then go back to something more productive. 

Which US cities could declare bankruptcy next? Luckily, for those looking to escape the trauma of being taxed into oblivion by their failing cities/counties/states, JP Morgan has provided a comprehensive guide on which municipalities haven't the slightest hope of surviving their multi-decade debt binge and lavish public pension awards.  The list is here. Fargo, ND, makes the list, and so do the following:
  • Minneapolis, MN
  • Chicago, IL
  • too many cities in the northeast to list
  • Seattle, WA
  • Portland, OR
  • several cities in California: LA, San Diego, Sacramento, San Francisco
  • several cities in Texas: Dallas, Ft Worth, Austin, San Antonio, Austin
  • several cities in Florida: Miami, Tampa, Orlando
Must view: top 50 Jewish personalities. None of the top 50 are in the NFL. If the link is broken:
1: Jared Kushner, Ivanka Trump -- US royalty (prince and princess)
2. Gal Gadot
3. Bibi
4. Steven Mnuchin - US Sec Treasury
5. Gideon Sa'ar
6. Esther Hayut
7. Volodymyr Groysman
8. Anat Hoffman (female0
9. Bob Iger (Mickey Mouse)
10. Avichal Mandelb
11. Chuck Schumer
12. David Friedman
13. Ron Lauder
14. Avigdor Liberman - Naftall Bennett
15. Ayelet Shaked
16. Janet Yellen (so far down the list, it tells me how important the Fed is -- not very)
17. Natan Sharansky
18. Ruth Bader Ginsburg - Stephen Breyer - Elana Kagan (and Senator Feinstein was worried with one Catholic on the bench -- yes, Diane is Jewish as is Al Franken and Richard Blumenthal)
19. Israel Katz - Miri Regez - Gilad Erdan
20. Avi Gabbay - Yair Lapid
39. Judge Judy (which tells me the list is "legit")
Notable no-shows: Harvey Weinstein and about 50 other Hollywood personalities. 
Jobs. The unemployment report for September, 2017, is to be released tomorrow. Never take President Trump literally, but always take him seriously. Perhaps he is talking in "generalities" in this tweet, but when he says unemployment is the "lowest it has been in decades" suggests he has seen the data that will be released tomorrow. So, we'll see.

The market bubble or whatever you want to call it:

I believe the dates and Dow 30 data points are accurate in the graphic below (I didn't spend a lot of time double-checking this). Because of the nature of the graph, the arrows might not point exactly to the right spot, but they are "close enough."

Ten years ago:
  • July 28, 2006: 11,220
  • October 9, 2007: 14,093
  • 25.6% gain
  • July 29, 2016: 18,432
  • October 5, 2017: 22,775
  • 23.6% gain
The strength and duration of the "bull market"-- some rambling:
This is simply incredible, when one looks at the graphic above, how long this "bull market" has lasted, and how strong it has been. Children born in 2009 have never known anything but a "bull market." For the past umpteen months questions have been asked what accounts for this long "bull market."

During the second term of the Obama administration, the "bull market" was attributed to the typical economic cycle, a recession followed by a growing economy (for any number of reasons). The GOP simply blamed Obama for a very, very slow recovery, but other than that, it was what one would expect after a "great depression."

The second explanation for the very, very long "bull market": cheap money. Low interest rates are being explained for the "bull market" going on longer than expected. Warren Buffett alluded to that this week when interviewed on CNBC.

The most interesting thing is what no one seems to be talking about. I remember talking about this during Obama's first term (I've long forgotten if it was still being talked about in his second term).

Quick! Do you remember what that was?

The GOP was complaining about how much the government was spending (the "stimulus") with nothing to show for it. Hundreds of million of dollars went to each state to promote job growth. Remember those stories of the US government spending $500,000 for each job in states like Wyoming or Maryland. We joked that the Bakken resulted in more jobs than the trillions of dollars spent by the Obama administration for job growth. Despite all that money flowing to the states, nothing seemed to work.

The Obama administration and his supporters argued that it would take time for those trillions of dollars to circulate through the economy. Well, maybe we're now seeing what happens when trillions of dollars work their way through the economy.

From an earlier post on the blog:
[This is one of the] data points for January 20, 2017, the last half-business day for President Obama's presidency:
Someone smarter than I can look up the US debt when President Obama took office but it was maybe half of that $20 trillion when he left office. Whatever. The details don't matter.

The point is that the Obama administration and his supporters are probably exactly correct: it took time for those trillions of dollars to work their way through the economy. I certainly can't comprehend it nor fathom the gigantic number $20 trillion represents but it has to be unprecedented in the history of mankind.

The "bull market" can't simply be explained away by cheap money. Let's say Venezuela announced tonight that the banks will now charge zero percent interest on all money and folks can withdraw as much money as they need to survive. Does anyone seriously believe the Venezuela economy would take off?

I know Europe is supposedly doing well; some say it is doing better than the US economically. I don't know; maybe it is, maybe it isn't. But the EU certainly doesn't excite me like the US does when it comes to future economic growth. And yet EU's central bank rates are even lower than in the US: currently the EU's central bank lending rate is a negative 0.4%, I believe. A negative rate of return.

Joe Biden once famously said ObamaCare "was one big f***ing deal." Heath care accounts for one-sixth of the US economy and Medicare and ObamaCare must make up most of that. And Medicare and ObamaCare are the gifts that will keep on giving regardless of what happens next.

My point, even as "stimulus" (measured in trillions of dollars) continues to work its way through the economy, Medicare and ObamaCare will provide a floor, as it were.

I can't articulate this as well as others can but the bottom line for me is: cheap money alone cannot be the reason for the duration and strength of the economy. There has to be something else. Our energy exports are helping, but the energy revolution is way, way too young to account for much of this.

I wonder if 90% of the duration and strength of the "bull market" this past year might not be explained simply by stimulus money finally working its way through the economy along with Medicare/ObamaCare dollars. Ten trillion dollars poured into the economy had to have gone somewhere. Even if it all went to the rich, most of it would have trickled down. The wealthy like to put their money to work just as much as anyone else.

Some would argue, "hey, the bull market took place after Trump won the election." Not true; one can see that the "bull market" began many years ago. That's why I call this "Riding The Wave" at the sidebar at the right.

So, bottom, bottom line: my thoughts about the strength and duration of the "bull market":
  • 90% due to stimulus working its way through the economy, along with ObamaCare and Medicare
  • 9% due to cheap money
  • 1% due to "just one of those things"
I'll be off the net until later tonight. If there are typographical errors I won't catch them until later. I probably won't catch factual errors unless someone points them out. 

Was Oil Up Today Simply Because Of Tropical Storm Nate? Operators Shutting Down Platforms In The Gulf -- October 5, 2017

The WTI / Brent spread, in round numbers: $6.00. See first comment:
Since Hurricane Harvey (the hurricane that hit the Houston/Corpus Christi area), US crude oil has been selling at a price so low compared to prices overseas that the Iranians could buy it, ship it to their country, sell it as their own and still make a 10% profit...

Now, I don't know if it's the Iranians or not, but it looks like someone has figured that out:
They could probably do this with natural gas, also. $8+ overseas; $3 here in the US.

Active rigs:

Active Rigs593267190183

Seven new permits:
  • Operators: MRO (5); Whiting (2)
  • Fields: Reunion Bay; Stockyard Creek, Epping
  • Comments: MRO has permits for a 5 well pad in NESE 15-151-94 in Reunion Bay (see below)
Fifteen permits renewed:
  • BR (9): three State Dodge permits; three State Veeder permits; two Renegade permits; and one Chuckwagon permit, all in McKenzie County
  • Oasis (4): three Seattle permits in McKenzie County and one O M Erickson permit in Williams County
  • QEP (2): two MHA permits, both in Dunn County
One producing well (a DUC) reported as completed:
30369, 1,613, Petro-Hunt, Thompson 153-95-8D-6-3H, Charlson, t9/17; cum --  ; (20342, 27918, 27208)


Existing wells:
  • 19514, 527, MRO, Jones USA 14-14H, Reunion Bay, ICO, t4/11; cum 506K 8/17;
  • 29208, 2,533, MRO, Lun USA 11-14H, Reunion Bay, ICO, t6/15; cum 215K 8/17;
  • 29209, 2,776, MRO, Ernestine USA 11-14TFH-2B, ICO, Reunion Bay, t6/15; cum 318K 8/17;
  • 29210, 2,900, MRO, Tony Lun USA 12-14TFH, Reunioin Bay, ICO, t6/15; cum 330K 8/17;
  • 29211, 2,929, MRO, Doll USA 12-14H, Reunion Bay, ICO, t6/15; cum 402K 8/17;

Jobless Claims Fall More Than Expected; The Trump Rally Extends; The Energy And Market Page, T+257 -- October 5, 2017

The market, another trifecta: S&P 500; NASDAQ; and, Dow 30 all closed at record highs. Quick: name the first offering billed by Netflix as exclusive content. Answer: Lilyammer. From wiki: "Lilyhammer was promoted as "the first time Netflix offered exclusive content." We have the series on DVD; love the premise; when it's good, it's very, very good. When it's bad ... well, not so good. I don't have much interest in re-watching it, though I still watch Columbo over and over.

The market:
  • portfolio in autumn, 2015: $100,000
  • portfolio in autumn, 2017: $130,000
  • ten-percent correction between now and the end of 2017: $117,000
    • okay
  • what else, with a ten-percent correction?
    • everything goes on sale; there will be some incredible opportunities -- starting with Warren Buffett's suggestions
    • "accidental" high yields will "temper" the correction
Coal: so many story lines in this story -- no time to go into them now. But for the archives from The Bismarck Tribune:
On Friday, the Department of Energy issued a proposal to the Federal Regulatory Energy Commission, suggesting that FERC adopt a rule that pays baseload power plants for having 90 days’ worth of fuel on-site, which DOE says makes them more reliable and necessary to power production when renewables aren’t available.
“Competition from other power sources has flipped energy markets on their head,” said Bohrer during the organization’s fall industry group meeting in Bismarck on Wednesday.
In North Dakota, coal competes mostly with wind energy. Because mines in the state are located at the mouths of power plants, the coal power generated here is more comparably priced to the natural gas plants that are making it hard for coal plants in other parts of the country to compete.
But coal-fired plants can provide a constant source of power. Wind power is only available when the wind blows. Because of this, the coal industry would like to see that reliability reflected in the value of the power they supply.
North Dakota: coal competes mostly with wind; and, yet, before it's all over, there is going to be such a glut of natural gas in North Dakota. Wind, coal, natural gas. We need to have some folks from Minnesota invest in a solar farm west of Fargo. That would pretty much cover all bases -- along with biomass from cow dung, cornstalks, and cattails. Don't forget hydroelectricity from Garrison Dam. 

The market: NYSE, new highs, 219 236 243, up from 194 earlier; including Manitowoc, recommended by Karen (?) during Fast Money yester-afternoon.

Jobless claims:
  • forecast: 265,000
  • actual: 260,000
  • from previous report: an astounding decrease of 12,000
Comments from Reuters:
  • the continued impact of Hurricanes Harvey and Irma on the data made it difficult to get a clear picture of the labor market (sure, why not? Hate to give any credit to Trump, now almost a year since his election; under Obama the bad jobs reports were said to be due to a) cold weather during the winter; b) hot weather during the summer; and, c) Easter falling earlier/later than the year before
  • claims shot up from a low of 236,000 in late August, hitting 298,000 at the start of September. As a result, Harvey and Irma are expected to cut into job growth in September (we'll see)
  • government forecast for tomorrow's employment report: nonfarm payrolls to have increased by 90,000 jobs last month after rising by 156,000 in August
Elsewhere, Jim Cramer was already "blowing off" whatever the number is tomorrow.

The good news: government figures could never be trusted; under the Obama administration they admitted they massaged the numbers (previously reported; well documented); under the Trump administration, the mainstream media will find ways to make good news sound "bad" and bad news to sound even "badder."

The Book Page

The Hiltons: The True Story of an American Dynasty
J. Randy Taraborrelli
c. 2014

Great, great story. Easy reading. Not great literature but a great story. Reads a bit like People magazine, or at least how I imagine People magazine would read.

Quick, without looking (answers posted here):

1a. Who "discovered" Conrad Hilton's most famous granddaughter? 1b. Before she was discovered, what did she want to be when she "grew up"?
2. Whom was Barron named after? Yes, that Barron.
3. Who was Conrad Hilton's second wife?
4. The Melba was one of Conrad Hilton's very first hotels; in what city was it located?
5. What hotel was the first hotel that Conrad Hilton built from the ground up?
6. Where did Conrad Hilton serve in WWI? 6b. In what capacity? 6c. In what service and at what rank?
7a. In what country was Conrad Hilton's dad born? 7b. What was his Dad's middle name? 7c. In what month was Conrad Hilton's father born? 7d. In what state was Conrad Hilton born? (this is a trick question)
8. Hilton Conrad's first child was a son, Conrad Nicholson, Jr. Whom did "Nicky" marry?
9. What major airline bought Hilton International in 1967?
10. What was the first company registered with the New York Stock Exchange to operate gambling facilities (in Nevada).

Bonus essay: what was Conrad Hilton's fatal flaw? (Perhaps he had two; either answer will earn you ten bonus points).

WTI Up 1% -- - October 5, 2017 -- I'm Done With This Page -- No More Updates (Except Formatting)

Saudi Arabia: again, I am spending a lot of time on Saudi in this post, for several reasons. Over time, the reasons why I spend so much time on Saudi Arabia have changed. These are the three reasons that currently make this a compelling story:
  • a) having lived through the "embargo" back in 1973 or whenever it was, this is schadenfreude for me;
  • b) Saudi is facing an existential situation; with a new heir recently named; huge "opportunity" for huge shake up (peaceful or not) in the Mideast. This could be the third most momentous period in Saudi's modern history (since 1951; and,
  • c) WTI (and the viability of many US shale operators) is directly related to what is going on with/in Saudi Arabia
Back To The Bakken And The US

Active rigs:

$51.00 10/5/201710/05/201610/05/201510/05/201410/05/2013
Active Rigs593267190183

RBN Energy: Tallgrass gears up for DJ production growth with Cheyenne expansion plans.

Trump approval rating at 45%. Hannity more than doubles Rachel's viewership. In fact, Rachel even trails Wolf (CNN). Drudge says he passes Yahoo!, Twitter, Googlenews in traffic. Doesn't mention Facebook

US economy: optimism about the economy at a 13-year high.

Jobless claims: drop 12,000, despite two incredible hurricanes.

WTI: oil up 1%. Who wudda thought?

Crude oil exports: there's a story out there, yesterday or today -- that US crude oil exports for most recent reporting period -- September, 2017 -- was way more than forecast; caught analysts by surprise.

Saudi king visits Russia. Astounding. Tectonic shifts in the Mideast. Even the king doesn't need his reading glasses to see this chart:

Market: looks like new records, again, today. I'm sure CNBC is still trying to figure this one out. Suggestion: listen to Warren Buffett's recent interview on your show. Already in early morning trading, 194 new highs on the NYSE, including BRK-B; GM; D. R. Horton; Lennar; Oasis Midstream Partners; Valero;
  • new lows: only 4
Investing: wow, I would love to talk about individual companies with regard to investing, but this is not an investment site, so I won't do that. Of the companies noted above, I only own shares in one of them (this does not include what I might have in IRAs, 401(k)s, etc.)

Methane venting and flaring: I will post the link later, but a federal judge -- in San Francisco, if I remember correctly, nixed the Trump's administration to rescind Obama's rules on methane venting and flaring. This will resolve itself by the end of 2018.

NFL-free Thursday night. Speaking of sports, last night's "win or go home" game between Colorado Rockies and the Arizona Diamondbacks was simply incredible. I'm glad I saw it. It is ironic (?) that just as my love affair for the NFL and college football is pretty much over, I'm starting to enjoy baseball. I think I will enjoy NASCAR less when "junior" retires; I care not a bit for Kyle Busch. I don't miss #24 but I'm still glad #48, Jimmie Johnson, is still racing. Danica Patrick? No longer matters one way or the other. I was thrilled when she joined NASCAR but the thrill is gone. I used to really, really dislike Keselowski, but I'm changing with regard to him, also. I look forward to the PGA, again, but not to the NBA. If we still lived in San Antonio, I would likely be a huge NBA fan. The golden years for the NBA for me? When Phil Jackson coached the Chicago Bulls.

The kingdom's cash situation: FUBAR, to quote "Doyle and Debbie."

Not to belabor the issue but look at the Saudi cash debacle. The chart above only goes back to September, 2016. What did it look like before then?

From an older post, January 14, 2017:


Compare these two graphs, taking particular note of the size of the bars for May, 2016, and comparing most recent data.

First, the "old" graph:

Now, compare to the "new" graph with updated data.

There are several things to note:
  • the right hand (vertical) axis has changed
    cash reserves had a slight uptick in May compared to April (2016) 
  • from June, 2015, to November, 2015, one could argue the decrease in cash reserves was steep but somewhat "smooth"
  • in the "old" graph, there was a deep drop-off in January, 2016
  • although the decline seemed to flatten a bit in spring / early summer, 2016, it took another drop by autumn, 2016
  • but, look at that huge drop-off in November, 2016 -- in percentage terms, it looks like the biggest drop since June, 2015
I don't know what others might say, but to me this is quite staggering.

From a later post, March 8, 2017:
Cry me a river.

I "predicted" there would be a month-over-month drop going into January, 2017, but I honestly never thought it would be that .... well, that graphic.

I mean, look at that drop. It's hard to read the numbers, but it looks like November to December (2016) it was "only" a drop from 2,020,000 to 2,010,000 million SAR ($2.7 billion) but the most recent data suggests a drop from 2,010,000 to 1,960,000 million SAR ($13.5 billion).

One Saudi riyal equals about a US quarter, more accurately 27 cents.

So, 2,010,000 million SAR x 0.27 = $542,700,000,000 or $542.700 billion.

and, 1,960,000 million SAR x 0.27 = 529,200,000,000 or 529.200 billion.

In the February note, it looked like the month-over-month decrease was in the $8 billion range and between November/December, 2016, the delta might have been significantly less, maybe $3 billion, but my calculations suggest the drop was closer to $14 billion between January, 2017, and December, 2016.