Heritage Foundation:
Trump Better Than Reagan
More here
Saturday, January 27, 2018
Friday, January 26, 2018
Grant's Interest Rate Observer
Oil Bull Market Of A Lifetime?
“Why are you all excited all of a sudden on shale? You know why, because you like to chit chat . . . you are an agent of disturbance,” he said, pointing a finger at his questioner. “Leave us alone and leave all these issues. We had enough of shale oil and talks of shale. Please talk about anything else.”
Thus pleaded (or commanded) the Saudi oil minister Ali Al-Naimi to reporters at a May 2013 meeting of the Organization of the Petroleum Exporting Countries (OPEC). With the benefit of hindsight, the minister would have been well served to pay greater heed to the uncomfortable topic. Amid a shale led-boom in U.S. supply growth that saw Department of Energy inventories (excluding the strategic petroleum reserve) jump to 535 million barrels in March of 2017 from 325 million barrels in September 2014, energy prices of course hit the fritz in mid-2014, with WTI crude briefly falling below $30 a barrel in February 2016 from $107 a barrel in June 2014.
History rhymed today, somewhat, as current Saudi oil minister Khalid Al Falih, speaking at a Davos panel with U.S. Energy Secretary Rick Perry, took issue with a suggestion in the International Energy Agency’s Oil Market Report that “explosive” shale production growth would spur oversupply and potentially curtail prices. “I was not disputing the amazing revolution of shale . . . [but] in the overall global supply demand picture it’s not going to wreck the train.”
It’s no breaking news that energy prices have been on a tear, amid broad strength in the commodity complex and a seemingly disintegrating greenback. The oil price bid has also been driven by decisive improvements to the fundamental picture, beyond the OPEC production cuts announced in November 2016 and extended last year (they are currently in effect through 2018). On Dec. 21, Rystad Energy announced that new oil and gas discoveries dropped to a record low in 2017, both in terms of the volume of discovered resources, and the resources per field discovered. Overall, the recent recovery in prices has coincided with a substantial easing of that inventory stockpiling seen through the 2014-16 selloff.
Natural resource investors and friends of Grant’s Leigh Goehring and Adam Rozencwajg believe we haven’t seen anything yet. In the fourth quarter 2017 letter for their investment firm Goehring and Rozencwajg Associates, LLC, the pair contend that the durability of the shale “revolution” has been widely overstated.
Although the development of the oil shales have been a technological marvel and have provided the U.S. with a surge of production, they represent just a drop in the bucket once you take into account the collapse of conventional oil discoveries and the surge in global oil demand.
As for their forecast for the oil market’s fundamental characteristics in 2018, the duo do not mince words:
Surging demand combined with the slowdown in shale production growth and the meager growth of oil supply outside of North America means that even if OPEC were to restore all of its November 2016 production cuts (1.2 mm b/d), the 2018 oil market will remain in deficit. It’s something that few investors appreciate.
Our research has made us more convinced than ever that oil has entered a huge bull market, and that oil-related investments represent the investment of [a] lifetime.
Grant’s, which produced a pair of bullish analyses on an array of energy related plays in 2017 (“Laddered oil play,” March 10 and “Viscous black yields,” July 14), continues to expect good things for investors in the energy patch. We do however, take careful note of what appears to be an overcrowded boat on the long side. According to the CFTC’s commitment of traders report, crude oil speculative net positioning rose to a record 708,000 net long contracts on Jan. 16, more than double its five year average. It’s the same story across the pond: The ICE Brent crude commitment of traders reached a net 585,000 contracts on Jan. 23, itself a record high and also more than two times its average position over the last five years.
On this day 20 years ago,
Bill Clinton: "I did not have sexual relations with that woman, Ms. Lewinsky."
On this day in 1918,
But it didn't last long and then things got really ugly.
More here from Wikipedia
Ukraine Declares Independence
But it didn't last long and then things got really ugly.
More here from Wikipedia
Thursday, January 25, 2018
The Dumb Acting Dumber (Again)
California Considers $1,000 Fine for Waiters Offering Unsolicited Plastic Straws
On this day in 1863,
Lincoln Replaces Gen. Burnsides With Gen. Hooker
Do you know the origin of the words "sideburns" and "hooker"?
On this day in 1961,
This is typical of how much better the press acted during pre-Watergate presidential press conferences.
JFK Holds First Televised Presidential Press Conference
This is typical of how much better the press acted during pre-Watergate presidential press conferences.
Wednesday, January 24, 2018
Tuesday, January 23, 2018
On this day in 1870,
The Marias Massacre: The Worst Slaughter Ever of (Innocent) Indians By U.S. Troops
 |
| Site of of the Marias Massacre |
Grant's Interest Rate Observer,
A Warning to Facebook Bulls
Friend zone
You certainly can’t call them Pollyannas. In recent months, a number of higher ups at Facebook, Inc. have issued eyebrow-raising comments which seemingly call into question the value of social media itself.
This morning, global politics and government outreach director Katie Harbath wrote on the company blog: “From the Arab Spring to robust elections around the globe, social media seemed like a positive. The last U.S. presidential campaign changed that, with foreign interference that Facebook should have been quicker to identify, to the rise of ‘fake news’ and echo chambers.” That post is hardly the first display of public angst from prominent current employees and alums alike. On Dec. 15, director of research David Ginsburg penned a blog post asking: “Is spending time on social media bad for us?” In November, former vice president of user growth and current Social Capital CEO Chamath Palihapitiya commented during a talk at Stamford Graduate School of Business that: “I think we have created tools that are ripping apart the social fabric of how society works.”
It’s not just words. Facebook C-suite has been voting with its feet. In the golden wake of a 501% run-up in its share price over the past five years, company insiders have hit the bid en masse. Last September, CEO Mark Zuckerberg announced a plan to sell between 35 million and 75 million shares through the spring of 2019, in order “to fund the philanthropic initiatives of Mr. Zuckerberg and his wife, Priscilla Chan, in education, science and advocacy” according to filing made with the SEC. That equates to between $6.5 billion and $14 billion at the current price.
As those who know the company best have made ambivalent public statements while methodically divesting their holdings, passive investors have happily snapped up the supply. Facebook’s top five shareholders in the non-voting class-A stock, Vanguard Group, BlackRock, FMR LLC (nee Fidelity), State Street and T. Rowe Price, hold just under 25% of shares outstanding. The indexers’ ownership has likewise grown commensurately with Facebook’s surging market cap: Vanguard’s current 166 million share stake compares to 26.3 million shares as of year-end 2012. BlackRock’s 141 million shares compares to 22.7 million on Dec. 31, 2012.
Wall Street remains steadfastly bulled up, with 42 sell-side analysts rating Facebook shares “buy,” against three hold ratings and a pair of sells. One of the skeptics, Pivotal Research Group’s Brian Wieser, noted on Jan. 12 that time spent per-user on the site slowed notably over the summer.
Facebook (including Messenger but excluding Instagram) saw a decline in total person-hours (number of users multiplied by hours of consumption per person) during September of -0.1% year-over-year following a -0.9% decline in August. This represented a decline per user in each period as the unique audience on Facebook rose by +7.8% in August 2017 and by +4.7% in September 2017. Specifically, core Facebook saw a decline in time spent per user of -7.0% and -4.7% in those two months.
Last Aug. 11, Grant’s produced a skeptical analysis of Facebook (“Concerning Mark Zuckerberg”), while giving full credit “to the world beating success of the Mark Zuckerberg/Sheryl Sandberg enterprise,” as well as its pristine balance sheet, fat operating margin and spectacular share price performance. Facebook and Alphabet, Inc. (the parent company of Google), which combined took in 20% of worldwide advertisement spending (and 60% of the digital variety) in 2016, may be bumping up against the gravitational limits of their addressable market. That would render them more conventional advertising companies, subject to the cyclical limitations of that industry and potentially, stingier earnings multiples which would accompany moderated growth prospects. The comparison to another blue-chip investor darling in the 1990’s loomed large:
Coca-Cola Co. was a seemingly invincible, world-conquering growth stock 20 years ago. Roberto C. Goizueta, a CEO out of the Lord of Creation mold, liked to talk about “our virtually infinite opportunity for growth” (the italics were his). “To listen to Goizueta,” said the issue of Grant’s dated Oct. 11, 1996, “the stockholders face no meaningful risk from any contingent event because all relevant outcomes are under the control of the board of directors.” Somehow it never occurred to the bulls that a meaningful cohort of consumers would one day decide that they would rather drink water. The Coca-Cola share price peaked in 1998 and spent the next 16 years in growth-stock perdition.
Some unsolicited advice to the legion of Facebook bulls: Perhaps it is a good idea to pay attention to the actions, as well as the words, emanating from the company’s Menlo Park, California headquarters.
Monday, January 22, 2018
On this day 50 years ago,
Medal of Honor Winner, Serbian-American, and Milwaukee Native Lazar Sijan Dies In Hanoi Hilton
Sunday, January 21, 2018
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