Oil: Waiting for the “Fed Mistake”?

With Iran and Russia both pumping oil for all they’re worth, you’d think that some of the Big Brains in Washington could figure out that while “sanctions” sound like a high road morally, the reality is that when you kick a country enough, they will react in any way they can to set things back to normal.

So, quite naturally, when we put sanctions on Iran, it just gave China a cheap way to fill up its new strategic petroleum reserve.  And then along came the Russia sanctions, a gaff in the last Fed wording and next thing you know, we are at the 49 handle in oil with $40 and under getting to be a real distinct possibility.

Not every country has the natural resource at hand to jack their economies back to level after we deliberately try to push them over.  Some countries don’t – and in this case, you get the “cornered snake” effect.  If you don’t follow this, ask North Korea (or Sony) how this plays out.

Oil’s Collapse and The David Bird Mystery

Meantime, the mystery of David Bird continues. 

Odds are, you won’t remember his name, but he’s a Wall St. Journal reporter who forecast that with the end of the Federal Reserve’s quantitative easing, there would be potential for a catastrophic collapse in oil prices.

A year so, after writing such hard truths (such as are now coming to pass) David Bird simply vanished.  Even this weekend, there was coverage in New Jersey of his disappearance and the mystery that surrounds this most odd twist.

Or, is it really so odd? 

Dead bankers seem to be popping up all over the place, including a top Belgian banker who was found in the North Sea.  This fellow was #36.

All of which begs the question:  Who would be offing reporters for outing the Federal Reserve’s quantitative easting calamity which has only served to jack up commodity prices and thereby reduce the obviousness of our non-recovery?

That’s a toughie. 

One thing’s for sure, lots of people in the Oil Patch saw it coming, including and especially our source Oilman2 who yes, really is a rig engineer, and yes, really holds patents, and yes, really designs specialized equipment for rigs…One can almost imagine a massive intercine war in the oil patch over various kinds of oil-gang turf  like Bakken & Frackin’…

Hey G –

The big boys will be doing M&A stuff as the over-leveraged have to bail out of their sinking businesses. This is baked in for some now, but if prices stay as-is through end of Q1 (or lower), it will be baked in for the remainder of the year. Halliburton may benefit hugely by this in their acquisition of Baker-Hughes….wonder how many shares Dick Cheney holds of Big Red preferred???

Traditional wells (unfracked) have costs that can make money at $30-40. This is what we did in the 1990’s and industry grew. There will still be drilling, but it will be with rig count around 800-1000 in the US most likely. This means huge layoffs in the rig sector, oilfield services and steel mfg sectors. Difference this time?  There is no dotcom craze to switch a career into – can’t just know HTML or system admin and land a job anymore, as the digital sector is mature, not burgeoning.

For me?  Hell, I am 57 this year and consulting. It all depends on whether they realize that Peak Oil is reality – and that we are witnessing demand destruction come full circle, exacerbated by ZIRP. Long term players will find savvy investors and drill, because costs will be down tremendously. But the guys looking for the quick killing will vanish – will kill fracking by mid-year if prices remain below $85-90.  Already been through this back in the 1980’s….

This seems like what Occam might think: http://petroleumtruthreport.blogspot.com/    ….and I tend to agree. However, if we get anything like freakish terror in the kingdom or other incidents that disrupt significant oil flow – it can turn in a matter of days.

I’ll call you later in the week…

Oilman2

And thus, I refer you back to my chart of Ure’s Discontinuity.  It shows that a stock earning $1 is worth $20 in a 5% rate environment, going up to $200 in a 0.5% rate regimen, but it collapses to zero (and beyond) when rates go negative.

Oh, sure, how can rates go negative?

We need to ask the Swiss about that.  The alpine gnomes are seriously pissed at the US ever since we got serious about tax cheats, which has kept the Swiss in the cheese, so to speak.

But is it worth killing people over to out such globally dimensioned complicity to fix rates, control the global economy, and extort peace and happiness from people?  Why, of course!

What is it one of the world’s (if not THE) original financial engineers taught me?  “Your money doesn’t care where it came from…”

Which leaves up with all oil producers scrambling to pump all they can, which when it fails will lead to $200 oil.  Meantime, in the oil patch, the Guido and Luigis of oil are planning to consolidate based on those unfortunate oil prices….oh, and bankers who might mention things like this are…er….no longer present.

And that leaves us with the pending January 27-28 Fed meeting.  All they have to perform is a miracle.  And that’s not a good bet; not at all.

In fact – this is really interesting and I can’t give my source – but some of the best technical analysts in the world held a conference online recently and they more or less came to an agreement, based on how charts are working, that it might be propitious to short the market in advance of January 28th.

Not that we can’t get a dead cat bounce right in here, mind you, but their work points to month-end.  And that’s when the Fed meeting is due and Janet Yellen will be on the hot-seat to introduce Lazarus and have him perform an economy-raising.

What’s really needed is Constantine  to make an appearance (Zed can come over and party with us).

Fortunately, being a nutter in the Outback of East Texas ought to be a safe enough distance as we watch to see if Don Janet can keep peace between the families for a while longer, while simultaneously putting on a magic act. 

In the meantime, spaghetti bolognaise and a nice house red served at a the kitchen table seems like a good choice.

Just bring your own bulletproof vest and the Florsheim-Mouth extractor kit.  Flash goggles ready, too, since terrorism is always an option if the heat gets to close.

As reader Dave reminds us:

George the 50th jubilee is sept. 15  this year. Sounds like a good dart for total collapse. Keep that in mind.

Ah, the Kondratieff cycle in the book of Leviticus…there is that.

Swearing at Congress

Well, it’s either at or in…not that it makes any difference.

As I’ve said before, I’m so old I can remember when politicians didn’t lie until about halfway through their terms.  Now, as soon as the polls close.

But, then again, that’s what productivity improvements is all about, eh?

Life in the Police State

Illegal decoy cell phone repeaters are going to be used in “public places” says Uncle Fed in the latest usurpation of right to privacy.  So the axe murder of electronic privacy continues.  But as irritating as it is, what’s the old saying?  An honest man has nothing to hide.

Except reader Bruce down in Ecuador was kind enough to send me “Three Felonies A Day: How the Feds Target the Innocent.”  I promise to read…but seems fake cell towers are a push to bump the number up to 4 or 5 felonies per day.

Sort of like having the Sheriff of Nottingham for a neighbor, all this militarization of ‘Merica, ain’t it?

Meantime, you saw where the US military is going back to recruiting NON-US citizens into its ranks?  WTF?  Having lost posse comitatus effectively with NORTHCOM, here come the non-citizen occupation forces.

Did I miss a pill this morning?