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All Aboard The Instability Express

Tyler Durden's picture




 

Submitted by James H Kunstler via Kunstler.com,

The mentally-challenged kibitzers “out there” — in the hills and hollows of the commentary universe, cable news, the blogosphere, and the pathetic vestige of newspaperdom — are all jumping up and down in a rapture over cheap gasoline prices. Overlay on this picture the fairy tale of coming US energy independence, stir in the approach of winter in the North Dakota shale oil fields, put an early November polar vortex cherry on top, and you have quite a recipe for smashed expectations.

Plummeting oil prices are a symptom of terrible mounting instabilities in the world. After years of stagnation, complacency, and official pretense, the linked matrix of systems we depend on for running our techno-industrial society is shaking itself to pieces. American officials either don’t understand what they’re seeing, or don’t want you to know what they see. The tensions between energy, money, and economy have entered a new phase of destructive unwind.

The global economy has caught the equivalent of financial Ebola: deflation, which is the recognition that debts can’t be repaid, obligations can’t be met, and contracts won’t be honored. Credit evaporates and actual business declines steeply as a result of all those things. Who wants to send a cargo ship of aluminum ore to Guangzhou if nobody shows up at the dock with a certified check to pay for it? Financial Ebola means that the connective tissues of trade start to dissolve, and pretty soon blood starts dribbling out of national economies.

One way this expresses itself is the violent rise and fall of comparative currency values. The Japanese yen and the euro go down, the dollar goes up. It happens in a few months, which is quickly in the world of money. Foolish US cheerleaders suppose that the rising dollar is like the rising score of an NFL football team on any given Sunday. “We’re numbah one!” It’s just not like that. The global economy is not some stupid football contest.

When currencies change value quickly, as has happened since the past summer, big banks get into big trouble. Their revenue streams are pegged to so-called “carry trades” in which big blobs of money are borrowed in one currency and used to place bets in other currencies. When currency values change radically, carry trades blow up. So do so-called “derivatives” such as bets on interest rate differentials. When the sums of money involved are grotesquely large, the parties involved discover that they never had any ability to pay off their losing bet. It was all pretense. In fact, the chance that the bet might go bad never figured into their calculations. The net result of all that foolish irresponsibility is that banks find themselves in a position of being unable to trust each other on virtually any transaction.

When that happens, the flow of credit, a.k.a. “liquidity,” dries up and you have a bona fide financial crisis. Nobody can pay anybody else. Nobody trusts anybody. Fortunes are lost. Elephants stomp around in distress, then keel over and die, and a lot of “little people” get crushed in the dusty ground.

The happy dance about low gasoline pump prices featured on Fox News, combined with the awful instability in currency markets, will cut a swathe of destruction through the shale oil “miracle.” That industry has been relying on high yield “junk” financing to perform its relentless drilling-and-fracking operations — imperative due to the extremely rapid depletion rate of shale oil wells. Across the board, shale oil production has not been a profitable venture since it was ramped up around 2006. Below $80 a barrel, chasing profit only becomes more difficult for those who couldn’t make a profit at $100. A lot of those junk bond “investments” are about to become worthless, and the “investment community” will lose its appetite for any more of it. That will leave the US government as the investor of last resort. Expect that to be the object of the next round of Quantitative Easing. The ultimate destination of these shenanigans will be the sovereign debt crisis of 2015.

 

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Mon, 11/17/2014 - 12:55 | 5457522 Quinvarius
Quinvarius's picture

Which is why the CBs will never let a tail event happen in any currency linked to the USD.  They will buy up every last Yen that Abe vomits out like hungry dogs.  Nothing can be allowed to go too far in any direction. 

Mon, 11/17/2014 - 12:56 | 5457531 InjectTheVenom
InjectTheVenom's picture

Financial Ebola.

 

I love it ! +1000

 

<cough>

Mon, 11/17/2014 - 12:59 | 5457544 Dick Gazinia
Dick Gazinia's picture

Which makes Obama the "political syphilis" of today

Mon, 11/17/2014 - 13:14 | 5457607 alphamentalist
alphamentalist's picture

would a transfusion from reggie love help?

Mon, 11/17/2014 - 18:17 | 5458923 BigJim
BigJim's picture

Ah, Mr. Kunstler, so it's 2015 that it all blows up? Sure about that?

Mon, 11/17/2014 - 13:16 | 5457612 Pinto Currency
Pinto Currency's picture

 

 

The issue is $120 trillion of excess debt and nobody is dealing with the problem just trying to keep juicing.

http://blogs.wsj.com/economics/2013/05/11/number-of-the-week-total-world-debt-load-at-313-of-gdp/

 

Mon, 11/17/2014 - 13:22 | 5457637 Crabshacker
Crabshacker's picture

HEEEYaaa......Walmart now has the 24mo. Payment plan

Mon, 11/17/2014 - 13:32 | 5457645 forexskin
forexskin's picture

ole JHK aiming for relevancy, while studiously avoiding mention of the precious (ZOG).

in other words, scream in a quite shrill money making manner, while things go pretty well according to plan (NWO)

The net result of all that foolish irresponsibility is that banks find themselves in a position of being unable to trust each other on virtually any transaction.

the only metric for trust with those assholes is "will it pay out". 2008 proved that when the question arises in a truly threatening way, fed hits ctrl P and another chunck of saved value gets bailed upward. same as it ever was, since 1913.

Mon, 11/17/2014 - 14:16 | 5457829 dontgoforit
dontgoforit's picture

Solution:  currency devaluation, 10:1.  Problem over.

Mon, 11/17/2014 - 14:51 | 5458006 cossack55
cossack55's picture

WTF? He used the words Fox and News in the same sentance.

"stupid football contest"  How dare JHK to refer to football as a contest.  The only contest is between the boyz in Vegas and the marks.

Mon, 11/17/2014 - 16:23 | 5458326 Hacked Economy
Hacked Economy's picture

@dontgoforit,

Such a move would only happen after hyperinflation started up the exponential curve, in which case the situation would already be free-falling into the abyss and the Gov would be acting only to delay the inevitable with a temporary measure (think Zimbabwe or Weimar).  Remember, kids, the paper FRNs are printed by the Fed Reserve, but our coins are handled by the US Mint per the Constitution (yeah, I know all the lines are blurring nowadays, but stick with me here).  It's easy to re-issue new paper notes in a re-valuation, but too difficult to re-issue new coinage in an environment such as America's where we have decades' worth of existing coins in wide circulation.  So the easiest thing to do is to allow them to retain their face value, since it wouldn't really affect things all that much in the grander scheme of things (i.e., a typical household might have $10K in their <digital> bank account, but perhaps only $20 in hard coins at home).  So as part of a prudent plan of preparing for anything that might happen, keep a couple of large jars of coins at home as a partial hedge.

Spread it out to minimize your losses, 'cuz you just don't know exactly what direction the shite will fly at you from.  Nobody will be 100% protected, but you can do a little bit to address most possibilities.

Some $$ in the bank for daily use,
Some in a Credit Union,
Some physical cash on hand (protects against ATM bank runs)
Some PMs (protects in the event of hyperinflation)
Some U.S. everyday coinage (protects in the event of re-valuation)

My $.02.

Mon, 12/01/2014 - 21:01 | 5506752 Oscar Mayer
Oscar Mayer's picture

Hyperinflation is impossible with credit as currency.  HyperDeflation, yes.

Mon, 11/17/2014 - 16:44 | 5458444 MalteseFalcon
MalteseFalcon's picture

I was very much in favor of cheap oil and gasoline before reading this article.

Now that I understand the ramifications, I am DOUBLY in favor of cheap oil and gasoline.

Mon, 11/17/2014 - 20:52 | 5459475 StychoKiller
StychoKiller's picture

When does the 'roid rage start?

Mon, 11/17/2014 - 13:05 | 5457564 Headbanger
Headbanger's picture

GTFO here with that shit Quin!

THE CENTRAL BANK'S ABILITIES ARE DWARFED BY THE REAL WORLD ECONOMY FALLING APART!

IT'S ALL FUCKING OVER NOW!

Sheeesh...

Mon, 11/17/2014 - 13:39 | 5457685 KnuckleDragger-X
KnuckleDragger-X's picture

It sounds good though and the nUmber one requirement of any used car salesman is to be able to lie convincingly.

Mon, 11/17/2014 - 14:02 | 5457771 Quinvarius
Quinvarius's picture

I am not saying works outside of paper.  Most likely everthing linked to the USD devalues massively at the same time vs real stuff on the shelves as they attempt top maintain equilibrium.  If not, no matter what happens, somewhere a bank loses 10,000% on derivatives and takes everything else down with it.  

Mon, 11/17/2014 - 13:14 | 5457606 astoriajoe
astoriajoe's picture

its the tails that happen, that they didn't know were tails to begin with, that I'm more worried about. Just wish I knew what they were.

Mon, 11/17/2014 - 13:49 | 5457720 holgerdanske
holgerdanske's picture

Except, that is, the stock market, which in spite of reducing forward earnings marches relentlessly on.

Well, I'm looking forward to the "nobody could see it" moment, where all the clever heads discuss why nobody saw anything until run over by the train.

Who woudda thunk?

Mon, 11/17/2014 - 15:39 | 5458227 TheMerryPrankster
TheMerryPrankster's picture

ignorance or "lack of knowledge/insight" allows denial of intent which is crucial to avoid criminal prosecution.

They have high dollar lawyers that tell them better to look stupid than be smart and in jail.

The ruling class is nothing if not clever, clever enough to play dumb.

Mon, 11/17/2014 - 21:21 | 5459576 StychoKiller
StychoKiller's picture

I don't think "fat, drunk & stupid" is gonna work against those trying to feed their children!  They WILL kill you just for spite.

Mon, 11/17/2014 - 12:54 | 5457527 dracos_ghost
dracos_ghost's picture

Or maybe the fantasy global crisis premium in oil is being called out as bullshit and the pumpers can sell the dead horse anymore.

 

Mon, 11/17/2014 - 12:56 | 5457528 Bangalore Equit...
Bangalore Equity Trader's picture

Listen Zero's

I love the Instability Express! I'll even ride the rooftop if I have to.

All aboard!

Mon, 11/17/2014 - 13:22 | 5457628 Frank N. Beans
Frank N. Beans's picture

never mind

Mon, 11/17/2014 - 12:55 | 5457530 viedoklis_lv
viedoklis_lv's picture

Low oil prices is terrible for poor Putin regime not me. 

Mon, 11/17/2014 - 13:40 | 5457688 Sparkey
Sparkey's picture

viedoklis_lv, you are an idiot, yes, a hard working Idiot who spends many hours working the net promoting the views of those who pay you, or perhaps you just do it because you like it, you have that single minded determination of the partisan true believer! But, belief wont save you, or any else if civilization becomes unglued! Try and stretch your view and see a bigger picture, get on the side of reason, if that is possible, of course, if you can't well 'so be it'. 

Mon, 11/17/2014 - 14:46 | 5457984 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Idiotski

Mon, 11/17/2014 - 12:56 | 5457534 Bumbu Sauce
Bumbu Sauce's picture

The happy dance about low gasoline pump prices featured on Fox News, combined with the awful instability in currency markets, will cut a swathe of destruction through the shale oil “miracle.”

I can't bring myself to be upset over low gas prices.  Even if they are reported on Fox News(endless amusement that that station chaps people's hides.)

Mon, 11/17/2014 - 13:31 | 5457662 duo
duo's picture

Similar to the California gold rush, the only people that will cash in from fracking are the people digging up and delilvering SAND to be sent downhole with all the secret toxic chemicals.  By "downhole" I mean the adjacent water table.

Mon, 11/17/2014 - 12:58 | 5457539 JustObserving
JustObserving's picture

It's just a matter of time before the Fed is openly buying US equities instead of levitating them by buying futures surreptitiously.  After all, Apple's valuation must be maintained to show the miracle of the robust US economy.

Mon, 11/17/2014 - 13:10 | 5457593 Bell's 2 hearted
Bell&#039;s 2 hearted's picture

if you go to Article 14 of Federal Reserve Act, it details what FR can buy.

 

Equity not on the list

 

not to say things can't change (market plunge), but no way do i see FR buying stocks without Congressional approval (and Rs will hold both houses come january) ... and no way do i see them giving it ... i do see them blaming everything on O and trying to clean up at the 2016 election

Mon, 11/17/2014 - 13:13 | 5457608 Lady Jessica
Lady Jessica's picture

Can't the primary dealers buy whatever they like?

 

Mon, 11/17/2014 - 13:36 | 5457678 forexskin
forexskin's picture

every entity downstream and dependent on the FED $ source is a proxy and will do exactly as bidden, thereby keeping their musical chair.

and no, you cannot have your own chair for this or any round of the game.

Mon, 11/17/2014 - 13:55 | 5457747 Matt
Matt's picture

I think maybe you have it backwards; the Fed does not tell the big banks what to do, the Big Banks own the Fed and tell it what to do.

Mon, 11/17/2014 - 13:16 | 5457618 Colonel Klink
Colonel Klink's picture

The feral Federal Reserve doesn't care what any laws say.  Que Bernanke testifying before CONgress that they're not monetizing the debt, subprime is well contained, they're not supporting foreign banks, etc., etc., etc.

Mon, 11/17/2014 - 15:42 | 5458245 TheMerryPrankster
TheMerryPrankster's picture

Alex, I'll take Charades for 100 Trillion,

answer, what is the Federal Reserve...

Mon, 11/17/2014 - 13:21 | 5457632 astoriajoe
astoriajoe's picture

But can they lend money to other banks to buy stocks?

Mon, 11/17/2014 - 15:45 | 5458258 TheMerryPrankster
TheMerryPrankster's picture

They gave European banks billions and they don't even fall under their pervue.

they can pretty much do what the fuck they want. They haven't ever been truly audited. They are a private goup with insiders in the governemnt and the biggest banks. They can buy a whole lot of lawyers and cops, they can do what they want as long as they keep the shades down and nobody knows whats really going on.

 

Mon, 11/17/2014 - 21:35 | 5459627 StychoKiller
StychoKiller's picture

What does it say about the "limitations" for the E.S.F.?

Mon, 11/17/2014 - 13:36 | 5457679 forexskin
forexskin's picture

spamalot?

Mon, 11/17/2014 - 13:04 | 5457565 Bell's 2 hearted
Bell&#039;s 2 hearted's picture

exactly

 

lower oil will lead to capex cutbacks (ie: layoffs)

Mon, 11/17/2014 - 13:04 | 5457566 flacorps
flacorps's picture

The prologue to the Road Warrior:
https://www.youtube.com/watch?v=9n29c-q3_8Q

Time to get a supercharged Ford Falcon XC Coupe.

Mon, 11/17/2014 - 13:08 | 5457583 Bumbu Sauce
Bumbu Sauce's picture

Time to get a hockey mask and some assless chaps.

Mon, 11/17/2014 - 13:43 | 5457687 hedgeless_horseman
hedgeless_horseman's picture

 

 

NOTE: All chaps are assless, or they are called pants.

Mon, 11/17/2014 - 16:28 | 5458377 Hacked Economy
Hacked Economy's picture

HH,

You win for Best Retort of the Day.  Up arrow for you.

Mon, 11/17/2014 - 18:53 | 5459082 tarabel
tarabel's picture

 

 

Not if you put them on backwards, but that variant is known as shepherd's chaps.

Mon, 11/17/2014 - 13:04 | 5457569 Drummond
Drummond's picture

Seems like Mr Kuntstler accidently took the blue pill

Mon, 11/17/2014 - 13:14 | 5457571 Kirk2NCC1701
Kirk2NCC1701's picture

If you can, do what China is doing:  BTFD!  Stock up on fuel while the blue-light special is on.

IOW:  Do a Liquidity Swap -- Swap liquid Cash for liquid Fuel.

FYI... some info on Fuel Storage Tanks:  http://clean-water.uwex.edu/pubs/pdf/storage.pdf 

I strongly suspect that the ROI on this is a helluva lot better or sooner than on yet another box of ammo, silver or Ebola spacesuit.  Think: Resilience, mitigate overall Risk.

Mon, 11/17/2014 - 15:28 | 5458121 tarabel
tarabel's picture

 

 

The only way this strategy really works is to first obtain some nice agricultural acreage so you can have tanks large enough to actually make a difference rather than simply having an extra refill on hand for bugout purposes. Also, don't forget to stabilize your fuel or at least keep it rotated.

I paid 400 for two nice 300-gallon tanks on stands and one of them turned out to have 66 gallons of offroad diesel in it while the other had about 20 in gas. Dollar per gallon of storage capacity seems to be a common price point around here, so I got a great deal on the tanks plus a rebate of nearly 250 on all that free stuff. Which was nice, except that I drove 120 miles to pick them up and had made no preparations for all those free petrochemicals. What a mess and a real tense trip to get all that shit back to the ranch without blowing up somewhere along the road or running into a helpful revenue collection agent (read: cop) who would have been glad to assist me in being safe.

 

PS-- stay away from offroad gas. You avoid the gas taxes but give up all rights to privacy. The government can show up anytime they like and dip your vehicle's gas tanks to see if you're cheating. Fines start at 15,000.

 

PPS -- cost of tanks and costs of either fuel delivery in bulk or hauling it yourself little by little really obviate the cash savings. It is all about having your own gas station when everyone else doesn't and not really much about saving money.

 

PPPS-- Gas storage regulations will get you if you live in a high-oversight environment. I know several contractors who gave up keeping gas in their yards due to the constant regulatory headaches. Fortunately, bureaucrats tend to be allergic to areas that are beyond easy Starbucks distance. Out in the country, you're fine. In town or the suburbs, you will receive a visit sooner or later.

Mon, 11/17/2014 - 13:09 | 5457592 altheatoldme
altheatoldme's picture

Alas! our morning serving of doom gloom and hate!  bring it on HAters!

Mon, 11/17/2014 - 13:11 | 5457599 Lady Jessica
Lady Jessica's picture

Tautology overload.  

"linked matrix"

"destructive unwind"

"foolish irresponsibility"

Less is more.

Mon, 11/17/2014 - 13:12 | 5457604 disabledvet
disabledvet's picture

Natural gas is a double plus off the lows.  New York State gets over half its electricity from that source now which is criminal in my view. Having said that no instability there just pure profit.  "Complexity" is being annihilated by liquidity.  That's a far more stable...if completely criminal...system.

Mon, 11/17/2014 - 13:18 | 5457610 Colonel Klink
Colonel Klink's picture

Financial Ebola means that the connective tissues of trade start to dissolve, and pretty soon blood starts dribbling out of national economies.

Then the patient shits the bed and it's fully contagious to other eCONomies.

Mon, 11/17/2014 - 13:39 | 5457683 Farmer Joe in B...
Farmer Joe in Brooklyn's picture

When this patient shits the bed, it is going to be EPIC to watch...!!

Mon, 11/17/2014 - 13:47 | 5457709 Colonel Klink
Colonel Klink's picture

I've had my popcorn ready since 2009, it's starting to go stale though.  Let the movie begin!!!

Mon, 11/17/2014 - 13:21 | 5457620 esum
esum's picture

want a reallly strong DOLLA  

print greenbacks backed by gold.... (1/10th of an oz each)

and let greenbacks trade against the fed reserve toilet paper...

excuse me sir, here is your $90 change from your $1 greenback purchase of $10 Marlboros 

Mon, 11/17/2014 - 13:47 | 5457717 Dead Man Walking
Dead Man Walking's picture

excuse me sir, here is your $90 change from your $1 greenback purchase of $10 Marlboros

 

Or don't back it with gold :

excuseme sir, here is your $90 echange rate for a package of Marlboros

Mon, 11/17/2014 - 13:29 | 5457654 ghostzapper
ghostzapper's picture

You mean there is risk in carry trades and shale oil debt instruments?  No way!

From "Locomotive":

Gonna find a way to cure this loneliness
Yeah I'll find a way to cure the pain
If I said that you're my friend
And our love would never end
How long before I had your trust again
I opened up the doors when it was cold outside
Hopin' that you'd find your own way in
But how can I protect you
Or try not to neglect you
When you won't take the love I have to give
I bought me an illusion
An I put it on the wall
I let it fill my head with dreams
And I had to have them all
But oh the taste is never so sweet
As what you'd believe it is -
Well I guess it never is
It's these prejudiced illusions
That pump the blood
To the heart of the biz

You know I never thought
That it could take so long
You know I never knew how to be strong
Yeah, I let you shape me
But it feels as though you raped me
'Cause you climbed inside my world
And in my songs
So now I've closed the door
To keep the cold outside
Seems somehow I've found the will to live
But how can I forget you
Or try not to reject you
When we both know it takes time to forgive

Sweetness is a virtue
And you lost your virtue long ago
You know I'd like to hurt you
But my conscience always tells me no
You could sell your body on the street
To anyone whom you might meet
Who'd love to try and get inside
And bust your innocence open wide

'Cause my baby's got a locomotive
My baby's gone off the track
My baby's got a locomotive
Got ta peel the bitch off my back
I know it looks like I'm insane
Take a closer look I'm not to blame
No

Gonna have some fun with my frustrations
Gonna watch the big screen in my head
I'd rather take a detour
'cause this road ain't gettin' clearer
Your train of thought has cut me off again
Better tame that boy 'cause he's a wild one
Better tame that boy for he's a man
Sweetheart don't make me laugh
You's gettin' too big for your pants
And I's think maybe you should
Cut out while you can
You can use your illusion -
Let it take you where it may
We live and learn
And then sometimes it's best to walk away
Me I'm just here hangin' on
It's my only place to stay at least
For now anyway
I've worked too hard for my illusions
Just to throw them all away

I'm taking time quiet consolation
In passing by this love that's passed away
I know it's never easy
So why should you believe me
When I've always got so many things to say
Calling off the dogs a simple choice is made
'Cause playful hearts
Can sometimes be enraged
You know I tried to wake you
I mean how long could it take you
To open up your eyes and turn the page

Kindness is a treasure
And it's one towards me you've seldom shown
So I'd say it for a good measure
To all the ones like you I've known
Ya know I'd like to shave your head
And all my friends could paint it red
'Cause love to me's a two way street
An all I really want is peace

But my baby's got a locomotive
My baby's gone off the track
My baby's got a locomotive
Got ta peel the bitch off my back
I know it looks like I'm insane
Take a closer look I'm not to blame
No

Affection is a blessing
Can you find it in your sordid heart
I tried to keep this thing ta-gether
But the tremor tore my pad apart
Yeah I know it's hard to face
When all we've worked for's gone to waste
But you're such a stupid woman
And I'm such a stupid man
But love like time's got its own plans

'Cause my baby's got a locomotive
My baby's gone off the track
My baby's got a locomotive
Got ta peel the bitch off my back
I know it looks like I'm insane
Take a closer look I'm not to blame
Yeah
If love is blind I guess I'll buy myself a cane

Love's so strange

Mon, 11/17/2014 - 14:22 | 5457850 LFMayor
LFMayor's picture

That was touching, many thanks Zamphir.
Master of the Skin Flute

Mon, 11/17/2014 - 13:32 | 5457669 Plato's Law
Plato&#039;s Law's picture

I don't care that I have no realy concrete idea what looks like a US military dictatorship.   I'd take it over this effing hot mess.  At least till it proves to be worse than this ridiculous excuse for a "government." 

Mon, 11/17/2014 - 13:56 | 5457757 holgerdanske
holgerdanske's picture

You are in a military dictatorship. You just don't know it, yet.

Obama is just a golliwog manipulated by the military/industrial/banking interests. You can spend almost a lifetime without realizing that your vote has no influence. big money, big connections and big power rules the land. As long as you play along, you might not even notice the military/police which is there to control you.

But once you realize that there is no way to turn this around at the ballot box, you will see what lies beneath.

And then you would soon wish for something else, almost anything else, would be my guess.

 

Mon, 11/17/2014 - 15:57 | 5458296 TheMerryPrankster
TheMerryPrankster's picture

JFK assination was the military industrial coup, led by the CIA.

how do you think the fascist corprotocracy came into place. the roots go deep and thereby support the all encompasing embrace we find ourselves entombed within.

We must use their money to pay their taxes, we must work their jobs to earn the money to pay their taxes. We are economic prisoners of the military industrial state, shall we die as soldiers or civilians, is our only choice.

 

Mon, 11/17/2014 - 13:41 | 5457691 alangreedspank
alangreedspank's picture

I know all about that and I still love lower gas prices. Major flush coming, plenty of bankrupted assets to buy in the not so distant future.

Mon, 11/17/2014 - 13:45 | 5457701 Dead Man Walking
Dead Man Walking's picture

Mind over matter

spoo's are UP, so if you don't mind,  it doesn't matter

Mon, 11/17/2014 - 13:49 | 5457719 Colonel Klink
Colonel Klink's picture

Obama must have just gotten excited, he thought you said spooge.

Mon, 11/17/2014 - 14:05 | 5457787 Jack Burton
Jack Burton's picture

Junk bonds fund a good deal of fracking enterprise, and this is a provable fact. The miracle of fracking is heavily leveraged because of the high costs to start up. You must lease land from greedy landowners, that lease has a drill clause, menaing you better drill soon or lose that lease. Have you seen the sand mine springing up to feed fracking, have you seen the chemical plants going 24/7 to produce the needed mixes for fracking fluids, have you seen the water wells drilled to get at water, or the fleet of trucks carrying water to drill sites. These start up costs are funded by junk bonds in many cases. ZIRP interest rates are the lubrication for fracking, the drillers need zirp to service that leverage. Then their is the fact that fracking must be widespread with wells all over to draw up the oil and break the rocks to do it.

Saudi Arabia does not frack, it sips oil from straws. It uses methods to pressure more oil from old fields, but at minimum costs.

Fracking is the great messia that is going to prove a bust of epic scale. Not today, not next year, but pretty damn soon. Unless oil spikes again, which it may, but that buys a few years more life.

How much does it cost to frack. I watched 5 sand mines open just north of my Daughter's new home town, I drive by them now when I come to visit. A year ago were farmers fields, today is a large central tail yard, hundred of rail cars, loading facilities, and the mines strung out in a 20 mile row. Each a self contained mine, all connected by the brand new rail system built to them. Costs, not counting transport to ND? How is this profitable for the short term well life? Well, I know how to keep books, and I want no part of fracking. wouldn't put one thin dime into it. Based on costs and based on well life, or should I say, production curves. Those production curves graphed versus imput costs are ugly fucking things!

Mon, 11/17/2014 - 14:21 | 5457844 LFMayor
LFMayor's picture

Listen.

Probobabaly when they have train wrecks in your filthy country as pictured, they do it correctly.

AmIright ami right?

Mon, 11/17/2014 - 14:40 | 5457963 Vin
Vin's picture

I thought that was the picture of the Obamacare IT team coming to the rescue.

Mon, 11/17/2014 - 14:58 | 5458037 Ewtman
Ewtman's picture

If there was ever a question about whether inflation or deflation was the prime mover of the global economy today, the question is no longer unanswered. Deflation is the obvious winner...

 

http://www.globaldeflationnews.com/inflation-vs-deflation-part-1which-on...

 

Mon, 11/17/2014 - 15:20 | 5458108 jubber
jubber's picture

CNBC discussing earlier how Petrobras bonds have are in trouble, anyone got any info on this and the other prone oilers?

Mon, 11/17/2014 - 17:51 | 5458800 brainlpb
brainlpb's picture

Well dang, I thought this going to be an article about trains based on the thumbnail!

http://zookeepersblog.files.wordpress.com/2007/05/so-many-people-on-trai...

Do NOT follow this link or you will be banned from the site!