World Oil Production Finishes Six Years of No Growth

From the article:

We are entering what may be the longest stretch of no growth in world oil production since the early 1980s. But the reasons for that lack of growth differ in ways that ought to make us all uncomfortable.

Starting in 1980, production slumped because for the first time in history people needed less oil. After the huge oil price increases in the 1970s, cars suddenly got smaller. People became more careful about combining trips to save gas. A lot of people switched their home heating to natural gas which was considerably cheaper than heating oil. And, in the United States the Congress severely restricted the use of oil for new electric power generating plants. Those using oil began to switch to cheaper natural gas and coal. The whole globe went on an energy efficiency binge.

Beyond this, the world went through two recessions, one in 1980 and the second in 1981-82 which turned out to be the worst since World War II (until the current one). That curbed oil demand as economic activity sank. All the while, large oil discoveries in Alaska and the North Sea and furious drilling elsewhere produced a glut of capacity that sent prices from a high near $40 a barrel in early 1981 to about $16 a barrel six years later. As it turned out, all of these factors combined to keep world oil production below its 1980 peak until 1988.

Fast forward to 2005 when conventional oil supplies stopped growing and then fluctuated between 73 million and 74 million barrels per day on an annual basis through 2010. (Production averaged 73.8 million barrels per day this year from January through July, the last month for which data is available.) The chain of events following the 2005 peak are both different and worrisome. Following the cessation in growth of conventional oil supplies, the world economy continued to grow until the end of 2007 when it slipped into recession. Prices peaked in July 2008 at around $147 a barrel.

But then they plunged to around $35 a barrel in December 2008 as the world sank into an economic slump worse than anything since The Great Depression. With it oil demand and production slumped as well. Then the price did something that few people expected. It bounced back even as overall global economic recovery remained sluggish. Rapid recovery in the Far East, however, created robust demand for oil even as North American and European countries remained locked into an unusually tepid rebound. As a result, last spring prices for Brent crude vaulted above $125.

Read more:

http://scitizen.com/future-energies/time-to-worry-world-oil-production-finishes-six-years-of-no-growth_a-14-3714.html

Subprime:

Been a while since I lasted posted. Very busy and lots of crazy shit going on in my personal life (those on JDU) know what I'm talking about LOL. Wanted to add that the debate taking place around the world right now is GROWTH! How the fuck are these economies going to grow out of their debt problem. Watch the business new channels and they talk about "Greece, Italy and the US and how they will GROW out of their debt problem." The reality is with energy prices skyrocketing relative to a decade ago, the energy input has messed the equation. Simply put, a higher percentage of GDP must be allocated to the energy portion, something that was minuscule in the recent past. Now Italy teeters on the verge of a bond market implosion as the spread between Italian and German 10 year bonds surged to nearly 500 basis points (or 5%). Those are huge numbers.

Just yesterday the Italian 10 year hit an astounding 6.66% yield. The monkeys on wall street say that 7% is the point of no return, the event horizon if you will. I expect the powers that be to throw the kitchen sink at Italy's debt problem, such as the ECB, the Bank of Japan, the Federal Reserve and even the Chinese central bank to place bid after bid on Italian paper to prevent an all out holocaust on the financial markets. While little Greece was a problem, Italy has a monster $2.2 trillion debt market, one that can easily threaten the entire ponzi. TPTB will fight reality tooth and nail, but they will lose in the end as all sovereigns blow up.

With brent crude trading over $114 DESPITE the sluggish economy in the US and EU which constitute over 50% of global GDP, it is obvious that oil supply concerns dominate the energy markets. Throw in the potential of a Israeli-Iran conflict and all bets are off. This is probably the biggest reason why no action has taken place as the rulers know that $180 brent will sink every economy back into depression.

In conclusion, higher energy costs will act as quicksand to these sluggish economies that need higher growth to get out of their debt funk. Assuming growth returns, I can only imagine where brent will be trading at then. Until a new energy source comes into the picture, we will be sandwiched into this shit economy.

30 year treasury yield plunges to 2.85%, Markets getting battered

Markets getting battered again but the big news is the plunge in US Treasury yields. A few weeks ago I called for a 2 handle on the 30 year and lo and behold here it is with the 30 yr trading like the 10 yr would LOL. 10 yr yields are at a pathetic 1.75%. We may possibly see even LOWER yields on treasuries confirming that the US is going "Japanese" with low or no growth, low interest rates and falling asset values. Better to go Japanese as opposed to going "Greek" with Greek 1 year bonds yielding an astronomical 100%. This is what happens when a country goes broke, when no one wants to lend you any money.

Gold and silver and getting the shit kicked out of them as well (metals on sale!) with crude trading at $80 this morning. Markets are still within range with the lower range at 1100 on the S&P 500. If we break 1100 then its geronimo time with 1000 being the next resistance level. The Bernank let markets down when he failed to announce more monetary heroin leading the markets to tank shortly after the FOMC minutes. The next fed minutes come out in 6 weeks from now and with Europe in the shitter there is little upside catalyst for the markets until then.

As big of a basket case the US is it still has the world reserve currency so in times of deflation the dollar rockets higher. Right now the USD has broken out to a 7 month high and if the deflationary pressures continue to the dollar can easily rocket even higher, possible seeing 90 on the USDX.

6 month chart of the US dollar index. The latest pop is substantial.




That would be great as crude oil will plunge alongside with the metals granting us a sweet buying opportunity. In the end, however, policy makers will follow the path of least resistance and will press the PRINT button when things get too difficult. I expect QE3 to be announced no later than January 2012.

On a final note, I find it despicable that student loan borrowers are locked in at 8.5% on their loans while homeowners can refi at pathetic 4% rates. With the 10 yr treasury at 1.85%, there is no reason why a 10 yr student loan can't be adjusted to 4%. Seriously, the congress critters need to wake the fuck up and let people refi at these incredible rates.

Two More Law Schools Sued, London In Chaos

So much shit happening right now! Markets in turmoil, London in flames and the Law School Scam just suffered another massive blow as two more law schools have been named in class action suits. New York Law School and Thomas Cooley just got sued by former students represented by Kurzon Strauss, a NYC litigation firm. Give them hell boys. Pretty soon dozens of third tier law schools will be fighting off class action lawsuits and hopefully applications for next year will plunge like the dow is plunging LOL. Here is the link to the NYLS law suit.

http://www.kurzonstrauss.com/uploads/NYLS_Filed_w_Index_Number_Summons_and_Complaint.pdf

This firm is seeking to sue a bunch of schools across the country so give them a call if you want to pick a fight with your alma mater. I would like to personally thank attorney David Anziska for all his hard work and dedication into bringing these suits into fruition. Good luck as the schools will give you hell in opposing these law suits so give them hell X 500 in return.

Even EDMC is getting sued for fraud LOL LOL byebye University of Phoenix playtime is over.

Gold hit a record $1815 just a few hours ago while silver is chilling at the $39 range. I thought that we would have a meaningful correction but that has not come to pass. Despite the equity markets taking a hit silver has stood firm. I'm loading up this week on a bunch of eagles.

Witness the incredible gold bull market:



Now check out the historical dow/gold chart:




This footage out of London is absolutely incredible. Amazing how a world class city like London can go mad max so quickly. If the authorities don't get a handle on this situation soon then the tanks will have to be forced out of Helmand province in a scramble to secure their capitol city. How embarassing for the establishment.

Watch the police get overrun.



Unreal. I'm curious to see if similar shit will happen here soon. Just imagine if the US Dollar suffered a terrible loss of value in a short period of time. Imagine if prices here double or tripled in the span of a few weeks. That would equate to a large group of terribly pissed off people.

Stay tuned, the freak show continues.

Gold surges to new record, silver filling the gap

3 month gold chart:



6 month Silver:



And the S&P 500 LOL



The precious metals bull market continues.

UPDATE

S&P plunges to 1235 in a classic technical breakdown. 10 year treasury yield at 2.56%. Spreads blowing out in Italy and Spain. Looks like the Euro zone is having its fall 2008 moment.

Aug 5th 9:00 am update: Complete breakdown in technicals for S&P. Currently trading at 1174, intraday low at 1168.

Market update

The stealth gold bull market continues as gold saw yet a new record high of $1594 this week. Silver is near closing the gap as it bumps up against $40.00. I expected it to fall alongside equities during the summer but that has yet to transpire. The news out of Europe continues to put a dark cloud over the markets as Italian yields blew out this week alongside Spain. In response, the Eurocrats are already discussing the option of ballooning the size of the European Financial Stability Fund to a whopping $2.5 trillion Euros or $3.5 trillion dollars. You see, Italy has the potential of causing serious problems to the banking system as it has over $2.2 trillion in outstanding government bonds compared to Greece’s 400 billion dollar debt. With debt equating to 120% of GDP, Italy is dangling close to the debt death spiral. Now that interest rates jumped higher, their funding situation just became a whole lot more precarious.

Gold 1 year chart:



Silver 6 month chart:



Naturally the policy makers will come to the rescue as Italy is without a doubt “too big to fail” and so the ponzi will continue. Just as the republicans put up a little fight over the debt ceiling but ended up capitulating, so will the Germans who publicly oppose the subsidization of their southern buddies. There will come a point where the European Monetary Union will unravel as it is completely unsustainable for 17 separate countries to operate under a common currency with similar central interest rates but no central fiscal funding mechanism. However, the Eurocrats have fought hard for their beloved Union and will not go down without a fight. This monstrosity may last longer than most believe as powerful vested interests have billions at stake in keeping the EU together. Perhaps Greece and Ireland will get the boot at some point soon.

Italy 10 year government bonds:



In response to all this news gold jumps higher and will continue to rise as currency debasement has become in vogue across the developed world. Gold also jumped when that pesky little critter Bernanke uttered words that “in the event that conditions are such that accommodation may be required, the federal reserve is willing to provide additional monetary support and accommodation.” In other words, QE 3. Upon the official pronouncement of the third round of monetary easing the precious metals will be set to rally hard. And they will rally again on the 4th, 5th and 6th rounds of easing until we enter a new paradigm regarding international transactions and what the pricing mechanism will be. Already we are seeing gold rise to its historical position of reserve currency.

Left out of this discussion is the effect that future easing will have on the oil market. Although it’s possible that the Middle East conflicts could calm down it is equally possible that a larger conflict erupts involving bigger players such as Saudi Arabia and Iran. For example, the Kingdom of SA has increased military spending to over 11% of GDP and has been getting armed to the teeth with the KSA ranking in the top 10 countries in the world for military spending. Not that I see any armed conflict between these two regional powers breaking out anytime soon the potential is there. And there is always the potential for a Iran-Israel air war which could break out if Israel engages in a pre-emptive strike on Iranian nuclear sites. Per ex-CIA Robert Baer, "There is almost "near certainty" that Netanyahu is "planning an attack [on Iran] ... and it will probably be in September before the vote on a Palestinian state. And he's also hoping to draw the United States into the conflict."

http://www.zerohedge.com/article/cvn-77-ghw-bush-enters-persian-gulf-cia-veteran-robert-baer-predicts-september-israel-iran-w

In the event of a Iran-Israel war, even if short lived, could easily send the oil market in a tizzy as we could potentially see $150 crude sinking the world economy back into recession. This is a tail-risk that needs to be closely watched. I have had a Iran-Israel conflict on my list of potential tail-risks and this recent report definitely raises the scales.


But back to the oil market more monetary easing will simply translate into higher energy prices which will then push the prices of everything else higher. Lastly, there are serious supply issues that will need to be addressed in the next decade as supply constrains will act as a further tailwind for energy prices.

To this day the majority of the wealthy people that I know own virtually no gold or silver holdings. Faith in paper currency is practically as strong as it was a decade ago but there are cracks appearing in the fiat edifice. Many are hesitant to buy at these lofty levels but the point is not to see the value of gold against the dollar but the value of the dollar and all paper currency against gold. I reiterate my call for $5,000 gold and $100 silver.

Lastly, the law school bubble continues to blow upward with law school applicants acting as momos (momentum chasers). These fools are buying into a extremely overpriced product that has deteriorating fundamentals (jobs and wages) just because of legacy value and confirmation bias. I still hold the view that the bubble will bust when the funding source (the department of Education) cuts the money spigot as younger aged Americans are simply too naive to see the risks inherent this market. Although quality applicants will fall in number to lower tiered schools, there are plenty of people out there that are willing to "give it a shot" and take the plunge. At least when I applied in 2005 there wasn't much information about the TTT world. Enter 2011 and the net is inundated with articles and blogs bemoaning the dismal state of the legal market for TTT grads. Just typing in tier 4 law school in google will show hundreds of articles and message boards warning people not to attend. At this point the information is there.

Commodities to rumble and tumble in 2011

I expect this year will include wild swings and volatility in commodity, credit and currency markets. Investors, savers and speculators are piling into commodities as a hedge to Bernanke's madness. Take a look at the bizarre behavior of sugar in the past week.




Massive intraday swings larger than 10 percent as governments intervene and investors become seduced by greed but terrified by fear. The best summary is this as to why the roller coaster will continue. As the government continues to print more digital money and the deficit and debt become ever larger, investors will run out of dollars and into things they can actually touch and hold. Real things. However, there will also be periods where they realize that they have purchased sugar, corn, wheat, or soybean futures at the highest level in history and will sell off after making some gains. Take note that commodities have recovered after every single take down which portends a healthy bull market.

It is not set in stone that the dollar will get wiped out or even become severely devalued. There is still a possibility that the ship gets turned around away from the rocks and towards the harbor. Unfortunately our leaders keep sailing towards that hyperinflationary outcome "full speed ahead". Their hubris is astounding. Congress recently passed the extension of the bush tax cuts and payroll tax cut extension for the next two years which will cost close to $900 billion. Thats $450 in more debt each year. So much for the deficit projections made by the Congressional Budget Office as the third (and likely not the last revision) will have to be made going forward. I'm a firm believer in FREE markets unimpeded by government and I think lower taxes is always better as people know best how to spend their own money. However, at a time when our store of value and medium of exchange (dollar) is at risk I think its safe to say that these types of policies are fiscal suicide.

For those that are fortunate enough to have some cash on the side, it never hurts to hedge out of the "official" currency of the day. Although fiat digital dollars will be exchanged for goods and services it is possible that some day soon the value of those dollars may drop suddenly and violently. Currencies have collapsed over and over again all around the world and throughout history. Why let the thieves at the top rob you by stealing your purchasing power? Hedge by buying some silver coin. Here is a photo of a silver eagle coin.



Would you rather trust fiat digital currency or this? Im going with my silver bitchezz.