Friday Morning News, Links, And Views -- Krugman Must Have Missed The Bull Market --Part II

What happened to global warming and all those hurricanes we should be experiencing this summer? The Christian Science Monitor is even asking:

The weather system that had become tropical storm Gabrielle overnight Wednesday has abruptly lost strength and was demoted to tropical-depression status with sustained winds of only 35 miles per hour at 11 a.m. Thursday.

And so goes the 2013 Atlantic hurricane season so far.

The season has produced seven named storms to date – meaning tropical storms or hurricanes. Typically, the seventh named storm doesn't appear until Sept. 14, according to data gathered by the National Hurricane Center.

The number of named storms is on pace to fall within the range several seasonal forecasts have projected. On average, however, the season should have seen its first hurricane by now, and none has emerged. Indeed, the first major hurricane, with maximum sustained winds of 111 miles an hour or more, typically appears around Sept. 4, notes Dennis Felgen, spokesman for the National Hurricane Center.

The storms are there; they just don't develop into full-fledged hurricanes. I assume Allah is trying to make it easy for President O'Bama, allowing him to concentrate on war plans and not be bothered by those pesky requirements for photo ops when hurricanes do hit.

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WSJ Links

Sugar processors defaulting on loans. 

Sugar processors have defaulted on about $34.6 million in federal loans due in August, the U.S. Department of Agriculture said.

The USDA said Thursday that processors had forfeited an estimated 85,000 tons of sugar put up as collateral for the loans, marking the first defaults for the U.S. sugar industry since 2005. The defaults are a setback for the USDA, which has spent $53.4 million buying sugar this year to reduce a glut of the sweetener that has sent prices tumbling.

Peak sugar?

Cancer vaccine not working. 

An experimental cancer vaccine failed to help skin-cancer patients in a GlaxoSmithKline PLC clinical trial, a setback for a hot area of medicine that seeks to harness the body's immune system to fight tumors.

When compared to a placebo, the vaccine, called MAGE-A3, didn't increase the amount of time melanoma patients lived without their disease returning, Glaxo said Thursday. The 1,345 patients in the late-stage trial were given either the vaccine or a placebo after their tumors were surgically removed.

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Mr Paul Krugman must have missed the bull market. He finally gets it --

Nobel Prize-winning economist and New York Times columnist Paul Krugman argues in his new editorial that U.S. economic policy over the last five years has been “an astonishing, horrifying failure.” Krugman, a long-time critic of the Obama Administration’s stimulus efforts, writes that the U.S. government should have spent three times the amount of money it did to get the economy back on its feet:

“…if the U.S. government had actually been able and willing to do what textbook macroeconomics says it should have done — namely, make a big enough push for job creation to offset the effects of the financial crunch and the housing bust, postponing fiscal austerity and tax increases until the private sector was ready to take up the slack…we would be a richer nation, with a brighter future — not a nation where millions of discouraged Americans have probably dropped permanently out of the labor force, where millions of young Americans have probably seen their lifetime career prospects permanently damaged, where cuts in public investment have inflicted long-term damage on our infrastructure and our educational system.”

It should be noted that the money from the cuts in public investment had to have gone somewhere: DOE-bankrupt solar energy companies; automobile/union bailouts; bank bailouts; O'Bamacare. Can you imagine how much better off we would have been had all that money gone into infrastructure: highways, ports, pipelines, railroads, bridges?

The unemployment rate down just 0.5 percent in 56 months under President O'Bama. And the trillions of dollars for job training and stimulus. Wow. The unemployment rate down just 0.5%, Krugman finally noted what we've been saying for quite some time: a nation where millions of discouraged Americans have probably dropped permanently out of the labor force, where millions of young Americans have probably seen their lifetime career prospects permanently damaged.

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I guess Yahoo!Finance took Krugman's story and expanded upon it:

The dominant story about the job market is no longer the nation’s 11.3 million unemployed people or the painfully slow pace of hiring. It’s the growing portion of the working-age population that has dropped out of the labor force and isn’t even looking for a job.

The jobs report for August seemed upbeat on the surface, since the unemployment rate dropped by one-tenth of a point to 7.3%. But analysts have been quick to point out that the unemployment rate fell because the number of people looking for work -- part of the numerator in the equation used to determine the unemployment rate -- declined. That’s usually a sign of an ailing economy, not a recovering one.

Overall, the U.S. economy is being driven by a smaller portion of the population. The percentage of adults either working or looking for work peaked in the late 1990s, declined gradually until the recession began at the end of 2007, then began to fall more sharply.

Black unemployment edges up: now up to 13% ("official" -- the real unemployment rate is estimated to be a lot higher.)

Bakken 101 -- Shorthand -- Naming Wells In 2560-Acre Spacing Unit -- Hess Method

It's possible this is nothing new for most readers, but it is something I just noticed. Hess has an interesting way of naming their wells on larger spacing units. For example:

• 26380, loc, Hess, HA-Chapin-2560-152-95-3229-3328H-1, Hawkeye

The "2560" designates this as a well that will have a 2560-acre spacing. It will be in T152N-R95W. The well will be sited somewhere in sections 32/29 and will drill west-to-east into sections 33/28. From the name, one can't tell which section it will be sited in; the legal description says it will be in section 32-152-95.

And, of course, as soon as one sees "HA-Chapin," one sees:

Taxi, Henry Chapin

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Note To The Granddaughters

The Harry Chapin song brings back incredible memories of my coming of age stories in Boston 30+ years ago.

"... you see, she was goin' be an actress, and I was going to learn to fly ...

... we both had gotten what we asked for such a long, long time ago ..."

Incredibly bittersweet. Could be followed up with Garth Brooks' "The Dance," but time to move on.

The President Orders The Pentagon To Expand The Syrian Target List; Job Growth Weak, Market Plunges -- Look At That Revision

I normally don't have stand-alone posts like this, but the headline struck me as quite remarkable. I can just see President O'Bama in "the tank" discussing war plans with his military brass. Why does Quentin Tarantino flash in front of me?

Inglorious Basterds, Quentin Tarantino
This must really be messing with the minds of the dovish liberal Democrats in Massachusetts -- their party going to war. Gotta love it. [I wrote the above before getting to the WSJ. The op-ed in today's WSJ: Obama's Syria problem -- his own democrats.

One political party is proving especially troublesome for President Obama in his quest for congressional authorization to strike Syria. Its members are trashing his strategy and priorities.

One congressman calls the situation "embarrassing"; another vows to "vote and work against the president's request"; still another has launched "dontattacksyria.com." The party's outside partisan groups are mobilizing against an affirmative vote.

Yes, this is the Democratic Party.

The press is obsessed with the Republican reaction to Mr. Obama's resolution. But the party facing the biggest split over the vote—and whose actions will have the greatest ramifications for the presidency—is Mr. Obama's.

Things are not looking good for the president, and that's no surprise. Mr. Obama's liberal governance—cramming the economic stimulus, the health-care law, a cascade of regulations down voters' throats—led to the 2010 revolt. That midterm obliterated Blue Dogs and hawkish Democrats who would have been most supportive of the president's Syria mission. The remains of Mr. Obama's House caucus tilts significantly more to the left. It has been indulged by the president's lead-from-behind foreign policy and is unprepared to step up to Mr. Obama's call.

And so it goes.]

I think President O'Bama should have dumped Joe Biden and replaced him with John McCain as his vice president.

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Wow, the job numbers came in really, really marginal, and the market plunges, down 110 points in early trading. Or maybe folks realize that President O'Bama will be directing military operations in a new war in the Mideast.

The job report, as reported by TheDailyTicker:

A weak jobs report just landed with a thud on Wall Street.

The numbers: 169,000 new jobs were created in August, just missing consensus estimates. There was a huge revision down for July however -- from 162,000 to 104,000. And the unemployment rate dropped to 7.3%.

Give it a bit to see how the market settles this morning and whether this number could push the Fed to delay the taper.

But stepping back, it’s important to remember where this jobs data really fits in the bigger picture of a labor market that has been severely stunted since falling off a cliff during the recession. Typically what gets all the attention is how the data came in relative to expectations, but that's too myopic of a view now.

And that's why we're going to war. To get Americans' minds off a) the economy, and, b) O'Bamacare.

China Going Back To The Drawing Board On Shale

This is a very interesting story -- I have had several posts over the past two years regarding this; it seems to be gaining traction -- the Bakken and the Eagle Ford are somewhat unique. Reuters is reporting that China is going back to the drawing board as shale gas fails to flow.

Can anyone say King Coal?

This is a 5-page internet article, not to be missed:

China has gone back to the drawing board on how to develop what could be the world's largest shale gas reserves after attempts to stimulate investment and engineer an energy revolution brought little progress in the gas fields.

Beijing has struggled to find a way to emulate the frenetic exploration and production activity of the shale gas boom in the United States, and the latest setback makes reaching even a modest 2015 output target of 6.5 billion cubic metres (bcm) unlikely.

This is only a fraction of the 224 bcm of shale gas the United States produced in 2011, and would amount to just 6 percent of China's total current output of natural gas.

But even that target is under threat as an eclectic mix of new participants in the sector drag their heels on development, while China's biggest energy companies prioritise spending on other oil and gas projects.

Frustrated with slow progress on shale from state energy giants PetroChina and Sinopec Corp, China in late 2012 encouraged a broad range of companies - including a property developer and a grains trader - to bid in its second shale gas auction.

Not one of the 16 firms that won exploration rights had ever drilled a gas well. But they did promise to spend at least $2 billion over three years to pump gas from shale.

And it ends with:

One of the challenges Chinese firms have struggled to overcome is how to adapt shale technology developed in the U.S. to China's geology. Chinese shale formations tend to be deeper than those that have provided the energy that has ended U.S. dependence on imported gas and slashed reliance on imported oil.

"A realistic way to look at China's shale gas is that it is a very rich resource, but one that needs a long process to unlock," said the government official. China took nearly 20 years to embark on full-fledged development of its conventional gas fields, he said, and shale may be similar.

Friday Morning News, Views, And Links -- Part I

Active rigs: 187 (steady)

RBN Energy: This is part 2 (I believe) of a continuing series on the economics dry natural gas wells in the Haynesville. I now know what a reservoir engineer does:

But producers have to make those estimates on a regular basis to understand the rate of return they will achieve on each well. That task falls to reservoir engineers whose job it is to estimate well production, production decline and EUR. Typically, reservoir engineers use complex geophysical models to arrive at these estimates. Analysts and investors are also interested to understand production estimates but, due to their limited access to data, they tend to adopt a more rule of thumb approach to modeling. We describe four methods here that are commonly used to estimate production.

Mixed news for investors; a bad omen, being reported by Reuters/Rigzone:

Oil and gas firms are cutting back on investments to try and improve profits and save cash for dividends, perhaps signalling an end to a decade-long boom in capital spending.
Companies seeking to bring oil fields into production have splashed out on new drilling, equipment or pipelines, supported by rising oil prices.

But suppliers and analysts expect investment growth to slow sharply this year and in 2014, in line with a projected fall in oil prices. The spending boom has squeezed budgets and forced companies to sell assets and issue debt to pay dividends.

Onshore spending will be hurt the most, including the saturated U.S. shale segment. New ultradeep markets, such as Brazil, West Africa and Mexico, will still flourish, however, as they offer the rare opportunities for big finds.

"Oil firms have a dilemma: They still need to grow their production, which is virtually flat and even declining, so they have to spend but will have to become much more selective," Magnus Lundetrae, the chief financial officer of Seadrill , the world's biggest offshore rig operator said.

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