Something's Coming at the Healthcare Industry

I keep seeing these articles pop up... man, I see TPTB coming after physicians the way they came after Wall Street for the past 20 years... audit after audit (been there, done that... its like having an autopsy done on you without the benefit of being dead), crawling through your life, second guessing all of your decisions with the benefit of hindsight... given how badly the industry is ripping off the system I don't see how the largest payor (government) does not find a way to "incentivise" healthcare practitioners to make do with less income.

Medicare sowed the seeds of its own demise at its conception.  One look at the population graphs in National Geographic's latest "Population 7 Billion" at it was "POOF!!  Epiphany!!"  I love numbers. People lie, math does not.  All the silly things people say to support something they find appealing, irrespective of its sustainability, such as "a society should be judged by how it treats fill-in-the-blank"... you see math does not care, not even a little bit, what you think is fair, right, or just... in fact, its the people that use these impossible terms to support their un-analyzed position that make solutions politically impossible.

Just look at some of the lies, distortions, and outright manipulations contained in this article:

The system has worked for 45 years, with occasional fine tuning. But the retirement of the baby boomers, the first of whom become eligible for Medicare in 2011, threatens to push it over the edge.

Really??!! Well, sort of... it worked because of the population trends occurring during the period, and just as surely will absolutely no longer work when those trends reverse or change.  Sheeshh!

There are some hard and accurate numbers, though for the most part the article fails to calculate the net effect of compounding:

A single woman who retired in 1980, after earning average wages throughout her career, could expect to receive medical care worth about $74,800 over the rest of her lifetime. A comparable woman retiring in 2010 can expect services worth $181,000. Those numbers are in 2010 dollars, adjusted for inflation so they can be compared directly.

The life span of the $800,000 per year spinal surgeon is about to be cut quite short.

I expect the attack will have several fronts - unnecessary surgical treatments will be up there, but the attack on over-presribed diagnostic tests will be most intense... you know, MRI, CT, PET et al... especially for the Medicare age set.  How does it help a patient to KNOW what they are going to die from?  Especially if, because of age or malady, there are no real opportunities to extend length or quality to life?  Hell, I am 50 soon, and I told my physician there is no point in checking my prostate anymore, because I am willing to take my chances, and would be unwilling to undergo treatment.  For every 50 people that are found with prostate cancer, over 42 would have eventually died of something else. No one lives forever... so what's the point of being stressed to death, or impotent or incontinent while you wait for the bitter end?  As Kurt Cobain said:  "We are not here for a long time. We're here for a good time". Hard to have a good time with the side effects of prostate surgery...

(When my 78 year old father was diagnosed with terminal liver cancer, he got up, shook the physicians hand, and said "thanks for everything", and got up to leave.  The doctor said "I'd like to discuss treatment options"... to which my father said "on the other side of the torture, I mean treatment, am I going to be any healthier than I am now?  No? Then I am going to enjoy what time I have left.  Good luck, Doc."  My father left, and never returned for treatment, except for hospice care at the end.  My father enjoyed about 20 months of reasonably good health after the diagnosis, playing baseball everyday and dancing with my mother every night... before his health really deteriorated.  Yes, he might have extended his life by a couple of months had he begun treatment that day... but would he have enjoyed a total 20 months of life post-diagnosis?  NAFC. My old man was the original tough guy; the Real Deal.)

The Healthcare Industry is the new Wall Street as far as government regulation is concerned.

We don't have a "Healthcare Crisis" anymore than we have a "Housing Crisis".  What we have is a "Healthcare FINANCE Crisis" and a "Housing FINANCE Crisis" (though that being cured as we speak by lower prices).  Healthcare cannot remain 18% of U.S. GDP; healthcare will need to provide the same services it does now for about 13% of GDP.  How that comes about remains to be seen... not the outcome.

"Its rough out there."

The Socialist Utopia

I don't see many Lefty's commenting on this outrageous miscarriage of justice in Russia.

With the exception of President Obama.

This is where Socialism will soon lead us if left unchecked.

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Crude Oil's $2 price decline today in spite of a 9.5mm draw in total commercial inventories does not engender confidence in the rally.

Nat Gas had a draw that was less than expected... considering the rally, I took some off the table.  If it continues up, I will put it right back on the table.

The Mad Scientist beat me up about Oil given the issues in China... at first I was dismissive... but when you consider the Chinese are tightening up and their equity market (as of yesterday) was down 9 of the last 10 days... then today's decline... gotta keep your eye on the ball.  The opportunity WILL come for a big move in crude.

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Tomorrow is the "The Print".  Prices at tomorrow's close will be used to calculate the performance allocation of nearly all hedge funds.  If Silver continues its march, then I am tin-foil-hat loonie... my bet is that once the print-day is past, the desire to support the price will evaporate... maybe not on January 3, but soon enough.  Not feeling the Love for Gold, either.

Time will tell.

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Physicians be warned.  Remember "Jeffers' Media Theory"... no article makes its way on to the big News sites randomly. Every single article is planted by a very interested party.  Several of these have been making the rounds... Healthcare practitioners have been over treating people for a long time... They are about to undergo a radical colonoscopy...

Odds and Ends

"Those who structure their standard of living to allow a little surplus, control their circumstances. Those who spend a little more than they earn are controlled by their circumstances. They are in bondage.” - N. Eldon Tanner

Just Say No... to debt.

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Seems the housing bottom is not in after all.  40% of the world economy, and over 30% of the U.S. is CONSTRUCTION. Anybody think construction can continue at the pace of the past 50 years?  Me neither.

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Veteran money manager and Organic Farmer/Doom Monger gives his world view.  Great stuff.

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We are losing our Civil Liberties faster than our minds.  Read this, and if you have time view the video link.  "Encounter Deaths" with the police are Simply outrageous.  This is NOT AMERICA. The data for police killed in the line of duty is at the Department of Justice's finger tips.  The data for how many Americans are killed every year in "police encounters" just can't seem to be found. Hmmmm.....

THIS IS NOT AMERICA.

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Here's a new, and timely, popular term: "Student Life-Debtor".  The article lambastes the "for-profits"... nice try at deflecting some guilt, but the entire system is an embarrassment.

I gotta get my boots on... the B.S. is getting DEEP

The propaganda is coming hard and fast now.

Read that.  Ok, so far?

If every boomer had $1million saved in his 401k (equal to about $640k in after tax savings... keep this number in mind for further down the thread on drug costs for seniors), the present value equivalent of those defined benefit plans of yesteryear that somewhere along the line came to be seen as a birth right, do you know what the market capitalization of the U.S stock market would have to be (assuming that their investments were primarily domestic)?

You would have to add about $7 - $10 Trillion to the total market cap of the U.S. equity market... that would mean that many more cars built and sold, that many more houses built and sold, that much more Oil, Nat Gas, Coal et al, produced and consumed, that many more bombs built and dropped... everybody would be rich, good looking, in shape...

Does this Utopia exist anywhere on this Earth?

These expectations were never intended to be met. Never. Ever. These were political sales jobs over the past 5 decades that somehow people believed.

For example, from the article:

The traditional pension plan is disappearing. In 1980, some 39 percent of private-sector workers had a pension that guaranteed a steady payout during retirement. Today that number stands closer to 15 percent, according to the Employee Benefit Research Institute in Washington, D.C.

What percentage of the population was covered by "guaranteed" pensions in each generation previous to 1980?  The article makes it sound like pensions have been the norm since mankind crawled out of the muck.

It goes on to say that many boomers plan to "work till they drop".  And?  Isn't that the way its ALWAYS been?  Let me get this straight... who in their right mind thinks that they should be able to go to school until 30, work until 62, and then live another nearly 30 years on the dole?  That's what has been pitched to the American people by the University system (populated by you-know-who) for the past couple of generations... but it has no basis in reality.

Here's my personal favorite:

A 55-year-old man with typical drug expenses needs to have about $187,000 just to cover future medical costs. That's if he wants to be 90 percent certain to have enough money to supplement Medicare coverage in retirement, the EBRI said. Because of greater longevity, a 65-year-old woman would need even more to cover her health insurance premiums and out-of-pocket health expenses: an estimated $213,000.

OMG!! Who believes that this stuff???!!! Every single one of us is going to die... maybe we will go a few weeks sooner and leave a little more for the family when we go.  Forget working to save the extra $400k for you and your spouse's drug needs in old age... eat healthy, have lots of sex, wine, song, and exercise... you will come out much farther ahead than funding the drug companies... leave the $400k to your family and not the drug companies.

There is an EXCELLENT article this month in National Geographic Magazine - "Population 7 Billion". I can't link it... I highly recommend thinking people get a copy of the magazine and read it.

Forget the doom-n-gloom of the population story... the untold story is that older people on top of a population bubble can get financed with outrageous benefits and older folks on top of a population bust cannot.  FDR was NOT a genius... and Bush was NOT a moron... the population data is everything. If, after reading this excellent data point you still think a any U.S. president's policy was the critical input... well, you are a true believer.  No point debating with true believers.

What we have had for "political leaders" for generations have been LAWYERS (no offense to you legal beagles... some of my best friends are lawyers... snicker... its just that we need folks with an understanding of economics and science - not word smiths) willing to overlook the data and run a know-nothing campaign and fill the electorate with know-nothing policy Horse Sh*t.

Its just math.

Folks... our lives are a self-rescue story of sorts from now on... if you want something a certain way you will need to see to it yourself.  The Government is NOT here and they are NOT here to help you.

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Oil remains firm in the futures market, with a slight Contango going out on the time curve.  The Crude call option market has gotten quite rich... the market seems to think Oil prices head much higher.  Nat Gas has stopped embarrassing itself for the moment.

I think Oil could peak out well over $100 next year... if Oil gets north of a certain number, say $130 next summer, I think the political repercussions could get very, very interesting.... it is quite possible that the electorate will continue to deny what is actually happening and turn over the incumbents not a few times before they come around to what we are truly facing.

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I am so focused on all of my homestead projects this Spring... I can't wait to get at it.  I have been drawing up plans for my garden like I was an architect... I am moving the garden to east side of my barn, right behind my house, and making the old garden a hog yard.  I ordered 100, 8 foot cedar boards and already have 150 cinder blocks for making my permanent raised beds.

Stand back!  This is serious... a rabid gardener is on the loose....

Oil starting to really pressure U.S. Economy (again)

Consumer confidence and home price data out today support my contention that Oil is choking the living snot out of the U.S. economy.

This does not mean that Oil prices can't come in... if that happens that would lend a great deal of support to what the fed is doing... but think about that for a sec... Oil get s cheaper in $$ printed up from thin air?  Anything can happen... I just find it hard to come around to that way of thinking.

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Every market in the U.S., but especially the thinner markets, are under the control of the 1,000 biggest hedge funds.  My bet is they are behind Silver's recent run up... they are buying to get the big print on 12/31 and with it, a big increase in their performance allocation (their cut of the profits)... if I am correct, look for a very tough Q1 2011 for Silver... No opinion on Gold at the moment and at these prices.

I feel the same about Nat Gas as I do about Silver, but in reverse... between the tax loss selling in UNG and the depressed futures market, my bet is Nat Gas has a pretty good Q1 2011.  If not, I am going to sell every %#$^!! contract I have.

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OPEC says the market is "well supplied" with Oil.  It always amazes me to see that.  Of course the market is well supplied with $91.40 Oil.... there is a serious shortage of $80 Oil, and an overwhelming glut of $100 Oil at the moment... but nothing like the GLUT in disinformation and propaganda.

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Voting with my Feet - Part II

I always read James Kuntsler's blog.  Not because I agree with everything the man has to say, but because he is a THINKING man.  Today he mention's his view that the folks on the Right are running a know-nothing campaign of sorts while being only slightly more kind to the Left.

I half agree with Kuntsler: I believe both heads of the 2H1P run a know-nothing disinformation campaign - and they run it at high decibels... 24/7. Further, I think there is no hope that a solution to ANYTHING of substance is forthcoming from either of those "heads".  Mayhap a third party, but under no circumstances from this crew.

So many of the political questions of the day can be answered with a pencil, a calculator, and a napkin.  Yet it seems to me that 100% of the true believers simply will not work that calculator nor heed voices that will.

As my father used to say when I was 15 and he had forbidden me to do something that "everybody else is doing":  "If everybody else went down and jumped off the bridge... are you going to jump, too?"

I don't watch T.V... so I don't know what it is that folks find so objectionable in Glen Beck and Sarah Palin, et al, and their equivalents on the Left.  My bet is its just noise, and is of no bearing or meaning.  I can see slant and bias coming at me in loud colors in published "news" - and there are no articles, blogs, news... that are NOT slanted and biased (including yours truly).  The beauty of numerical analysis is the certainty of it all... though perhaps many don't see the beauty in that and go right on spinning and spitting and foaming at the mouth.

This much is certain: promises made by government will be broken.

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Pat Robertson is calling for Drug Law Reform?  Hallelujah!!! No pun intended.

Any step forward in ending the prison/industrial complex is a step worth taking.

Voting with my Feet

"The Looming Crisis in the States."  Captures the issues, with the required left-leaning pompousness of the NYT editors, facing the states, cities, towns, and counties.

If you reside in a Blue-State and are "True Blue", I want to point out why I think that this could be incredibly damaging to your future financial security, your children's education, your ability to leave an estate to your heirs, etc...

The Blue-States are in complete denial about their future.  Any rational examination of the data coming out of the Census would lead one to see clearly that the producing elements in American society are migrating to lower tax/smaller government/less regulation Red-States.  As the late, great Senator from New York Daniel Patrick Moynihan famously quipped:

Everybody is entitled to their own opinion... but not their own facts.

That this is happening is NOT UP FOR DEBATE.  Why it is happening might be, but not the salient fact of the matter...  So let us debate the WHY.

I grew up in Metro New York City, went to college in the South, and then headed back to NYC to go to work.  Know what happened once I started to make decent money?  I moved.  Yep, the New York State and City income taxes took 12.5% of my gross income; said the OTHER way my take home compensation would increase by about 20% if I moved to Florida.  (Guess what New York State did?  They fought me on the DATE that I moved so that they could collect the income taxes on a couple of extra months.  They extorted that money from me... and it just wasn't worth fighting with them any longer... so I just gave in and paid the extortionist.  I have made it a point to spend as little in their state ever since.)

Hmmmmmm... guess how long it took me to make that move?  Right.  I could do what I do from anywhere... why would I do it in a confiscatory tax and regulatory environment?  Why would I fund people whose political goals I found to be near treason?

This is happening in the macro sense as we speak.  People are moving from high property and income tax states and localities to low income tax states and localities.  Period.

This is also happening at the national level as jobs move to Chindia, et al... our ridiculous regulatory environment helped to assur this just as sure G-d made little green apples...

But there is another problem...

As people move from Blue to Red, they are downsizing, frugalizing, de-pressurizing.  Part of the "simplify your life" thing also cuts out the very overhead that encouraged (forced) the dual income rat race on us in the first place.  This spring my wive and I are moving to the farm full time. I plan to work managing money for a fund out of a home office & run the farm, and my wife plans to take care of the home and kids.  This is not the kind of lifestyle that supports a great deal of government.  If (as) it continues to grow as a lifestyle things like gasoline taxes, property taxes at offices, sales taxes at restaurants AND INCOME TAXES... will go down like a rock in a pond.

(Think of the irony.... the environmentalist Left, with whom I am somewhat sympathetic, have vociferously argued for a smaller carbon footprint to come from the biggest offenders - guys like me. So I move to rural Tennessee... cut back on driving and consuming... grow my own food... as a result government receipts of sales and property taxes from yours truly plummet, and if the environmentalist Left is successful in spreading this to too many others of my ilk they will be destroying budgets and funding for social programs... there are no actions without unintended consequences.  NEVER.)

Meanwhile, back in the Blue-States... tax revenues will continue to decline even as the relative demand on those revenues for services climb, forcing more of the productive citizens down to the Red States, increasing the Red States' populations and political influence... very definition of the vicious cycle you'v heard tell about.

The fly in ointment for Red States is that their pension systems are nearly as FUBAR as the Blue States...

Prichard, Alabama

"Alabama Town's Failed Pension is a Warning."

This is the first of thousands of towns, villages, cities, counties... that will absolutely, positively default on their pension obligations.  While this may be the extreme case, 50 to 75% haircuts will, by mathematical necessity, become the norm.

Say "Good Night, Grace."

Good Night, Grace.

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Tweel, come in Tweel... Please email me at mentatt@yahoo.com... I have a question on insulating a freezer .... I think you mentioned something about this a while back.

Hysterical!

I found the following in the comments section of a Zerohedge.com article:

Sung to the tune of Piano Man

It's eight o'clock on a Monday,

the Wall Street crowd shuffles in.

There's a banker sitting next to me,

makin' love to his TARP and economic spin.

He says Ben, can you blow me a bubble?

I'm certain your academic training knows how it goes.

But it must be enormous and hazardous and I knew it complete,

When Greenspan was at the controls.

Huff huff hufffff puff puff puffffff

Huff Huffffff puff puff puff pufffff

Blow us a bubble, you're The Bernanke, man.

Blow it for us right now.

We're all in the mood for record bonuses,

and you've certainly got us kowtowed.

Now Tim at the Treasury is a friend of mine.

His endorsement allows me to issue money for free.

And he's quick with the cash or to help you evade your tax,

but there's someplace that he'd rather be.

He says, Ben, if I had a conscious it'd be killing me,

as the frown ran away from his face.

Well I'm sure I could be an oligarch,

if I could get to seriously looting this place.

Huff huff hufffff puff puff puffffff

Huff Huffffff puff puff puff pufffff

Now Lloyd is a CEO of an investment bank,

who is doing god's work for life.

And he's talking with Bernie, who is in the clink,

and probably will be until he fake dies.

And the unemployed are watching D-list celebrities dance,

as the small business man struggles for a loan.

Yes they're sharing in the gutting of the middle class,

but it's better than suffering alone.

Blow us a bubble, you're The Bernanke, man.

Blow it for us right now.

We're all in the mood for record bonuses,

and you've certainly got us kowtowed.

It's a pretty good rally for a Monday morning,

and the SEC gives me a smile.

Cause it knows that it's me that issues money for free,

to paper over the depression for a while.

And the money printer,

it churns into the midnight hour.

As the bond vigilantes respond with ire.

And they trade their paper regardless,

as they continue to extoll my great power.

Huff huff hufffff puff puff puffffff

Huff Huffffff puff puff puff pufffff

Blow us a bubble, you're The Bernanke, man.

Blow it for us right now.

We're all in the mood for record bonuses,

and you've certainly got us kowtowed.

Is that hysterical, or what?

Merry Christmas to ALL, and to all a Goodnight! 

A Good Laugh with plenty of Egg on the Face

So, as it turns out, its a pretty small world...

The guy that wrote this article, whose position I took exception to in one of my very recent posts, happens to be the older brother of one of my very best childhood friends.  I still speak to the younger brother several times per month, and during these conversations we solve all of the world's problems... the younger brother is a notorious Libertarian while the elder brother, Tim, took a hard Left and lives, unsurprisingly, in San Francisco.  He was always such a brilliant fellow... don't know where it all went wrong... but I look forward to many a spirited debate with Tim Redmond in the future... see if I can't help him get over his faults and find his way home to Libertarianism.  The larger point, obviously, is that we should make our words soft today... for tomorrow we may have to eat them.

I had a good laugh with Tim's brother today...

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Moscow's Police Chief Questions Civil Liberties.

There is no other outcome for socialist societies. They have, and will, ALWAYS gravitate to extreme social control. The Left chafe's at the controls and belief systems of the Right, and I don't blame them for the most part... yet feel unencumbered by guilt in the hypocrisy they return.

Best to let self-determination do its thing.

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Oil continues to squeeze the economy - Oil is now firmly over $90 - and if the pressure continues the economy will look like any other ugly zit in the mirror.

Nat Gas is making me nuts. Inventories are no higher than last year when prices where nearly 50% higher... the economy is/should be consuming more Nat Gas... the "Shale Guys" are losing their shirt... everybody hates Nat Gas and open interest is at levels not seen in years... all of these things argue for a bottom in Nat Gas.... all except for the price.

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I want to talk precious metals for a moment.  The miner's index is not confirming the commodities.  Let me give you MY thought of what MIGHT be going on there... A lot of funds have a huge payday coming, and they have some unbelievable incentive to mop up any sellers prior to 12/31... especially in the smaller, thiner markets - SILVER.

If I am right, then a decent correction in the price of silver might be in the offing for Q1/2011.  BTW, I am not suggesting that I am sure of anything... I have my suspicions, nothing more... and suspicions are NOT investment advice.... but that's my story, and I am sticking to it (but reserve the right to change my mind on a dime).

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Margin Debt has risen dramatically, along with stock prices.  However, as a percentage of total U.S. Market Capitalization they appear to me to be an all time high, but I need to find more data to remove the "appear" qualification.  In any event, this data point does not give me a warm and fuzzy feeling.

There has NEVER been an environment quite like the one we are in. Never.  It is ok to take positions... it is ok to be wrong, as long as you are gone if you are... its ok to miss opportunities, too.  The only rule in a market like this is "Do no (serious) harm".  If you keep that in mind, you'll be fine (I hope).

Lies, Manipulations, and Distortions...

I almost spit out my breakfast this morning reading this.

The line that really, really caught my eye:

The U.S. government considers food stamps to be effective stimulus for the economy, because the recipients usually spend them right away.

Brother, if you really and truly want to help your fellow man, you will "Teach a Man to Fish".  Now, of course, that's not really fair or accurate because most of the individuals on Food Stamps/SNAP are single mothers and their children... most of whom live someplace where keeping a family cow is not really an option...

But... is saying that really going to help these people?

Not even a little bit.

The Left's inability to grasp the collective damage they are doing/going to do because of their lack of knowledge regarding simple mathematical theory, i.e. The Exponential Function (but they CAN tell you what i.e. stands for) irks me to no end.

TO NO END.

And.... Here's the funny thing... when they DO ATTEMPT to explain away their silly assertions using elementary statistical analysis, they trip all over themselves with half-truths, obfuscations, and out right lies (don't get me wrong... the RINO's do the exact same thing... may they both drop dead).

Let us take it apart, shall we?

First, let's look at the default threat. California has never failed to make its bond payments on time and in full, not even during the Depression. And there is no chance we will smudge that pristine record.

First rule in financial analysis: Past results are no guarantee of future performance.  Just because you are alive does not mean you won't die... this quote is the kind of reassurance we give to those with terminal cancer.

Next:

Payment of debt service is constitutionally protected, with bond payments required even when the state is operating without a budget. Debt service has second call on general fund dollars, right behind education. Under the California Constitution, making sure bond investors get their money is a higher priority than providing healthcare to kids, protecting the environment and keeping our communities safe.

Constitutionally protected?  HAHAHAHAHAHAHA! ROFL! LOL!! LMAO!!

Sorry, that got away from me.... what I meant to say was that this f&*^ing jag-off miscreant of a pea brain... a person (group) that has rejected most of the U.S. Constitution, supports judicial activism and "Case Law" says that the California State Constitution has this one covered?  BULL SH*T.

The $$ coming in and going out have no idea what is written in your Constitution.  $$$'s cannot read

Here is where the lies and obfuscations get serious:

During the current fiscal year, general fund revenues are expected to total $89.4 billion. Education spending under Proposition 98 will total $36 billion. That leaves $53.4 billion available to pay debt service on bonds — more than eight times the $6.6 billion the state will need.

Got that? And it sounds good and even right, doesn't it?  Problem is, it is disgustingly self-serving Horse SH#!. California's biggest problem is its pension liabilities.  They DWARF the debt issue... and are at least 10X the bond liability.  Why does this scum-bag write this drivel?  To manipulate and motivate the the troops by LYING to them.... something only Republicans do, right?  I am getting peptic just writing this....  but wait.... it gets BETTER.

Our critics say we are addicted to spending. But the numbers show that isn't true. Thirty years ago, general fund expenditures totaled about $7.43 for every $100 of personal income. In the 2009-10 fiscal year, that ratio was almost $2 less, at $5.52 for every $100 of personal income. In the current fiscal year, per capita general fund expenditures will total $2,246, less than the $2,289 spent 10 years ago and roughly equal to the inflation-adjusted level of 15 years ago.

Dear Jerk:  You skipped accounting 101 I take it?  Bet your Latin's pretty good... Ever heard of ENRON? Well, my innumerate friend, California has the vast majority of its liabilities OFF BALANCE SHEET. Congratulations on the level of hypocrisy... it is unprecedented.

But Wait!  There's MORE!

Moreover, state and local government has grown slimmer relative to California's population. In 2009, the state had 107 state employees per 10,000 residents, the fourth-lowest proportion in the nation and 25% below the national average. California also has the sixth-lowest combined number of state and local government employees relative to population, 12% below the national average and 16% below Texas.

I swear, if this article does not stop soon I am going to blow a blood vessel...

Dear complete f*&^%ing jerk, liar, and true believer (the worst insult I can hurl):

It ain't the number of people on the payroll... its the MONEY, stupid!  If you over pay and over-benefit people, and addict them to that unsustainable state of affairs (you guys seem to grasp this when it comes to the environment, but seem to go deaf, dumb, and f*&^ing blind when the concept comes up on this issue) you will be left defending the indefensible, as this jag-off is trying to do in this article.

(Oh, and BTW... No state should EVER compare themselves to Texas (well, with the exception of Alaska)... Oil revenues mask a great many wrongs.)

OK, here come's one of the few half-truths in the article...

California's current budget woes have been caused by the devastation visited on our revenue base by the recession, not a failure to curb spending. In the three fiscal years preceding this one, general fund expenditures fell by $16 billion.

Dear Moron:  You are correct that that is half the problem.  Actually, it is only 20% of the problem... the vast majority of the disaster in waiting is on the liability side of the balance sheet... you do know what a balance sheet is?

Organized lies (propaganda) will not solve anything - Neither from the Left nor from the Right.

Begs the Question...

There are no jobs for most recent college graduates.  For many, its working the sales floor at GAP or waiting tables.

The U.S. Secretary of Education had this to say today:

"I think they need to go to the right college. I mean, this is all about choice," he said. "Whether it's a 4-year university, a 2-year college, trade, technical, vocational training, at the end of the day today, there are no good jobs out there if you just have a high-school diploma."

This is one of those Emperor Has No Clothes moments...

Maybe we are looking at this the wrong way (ever take one of those 8th grade graduations tests from the early 20th century?  Gives one a whole new sense of the "and my grandfather only had an 8th grade education" story). Maybe, just maybe... our primary and secondary educational systems need to be revamped prior to suggesting that kids take on the equivalent of a mortgage to go to school to get a degree in photography, art appreciation, women's studies, or massage therapy...  Of course, as long as the NEA and the Democratic party exist not much is going to get done by the government... maybe that's what's up with the increased interest in home schooling...  but just wait till the online delivery idea gains traction.

How Education WILL Absolutely and Positively be Delivered

I spent a couple of hours yesterday linking through the online education site from Dan's link in the comment section to Kahn Academy.

Hoo-boy... once this breaks through to the education consuming public all hell is going to break lose in that market place.  COUNT ON IT.  Organizations like this are going to to do to the education industry what online news did to the print media (how research is conducted remains to be seen).  Anybody that pays $200k for just about ANY under-grad education (and this is going to wipe the floor with the high school system as well). is making an outrageous error (unless they are rich, that is). Come on!  Do we need to pay somebody $200k per year for 6 hours of work per week to repeat the same lecture over and over again?  Some guy with a 190 IQ from Bhopal, India will be happy to put up the lecture - complete with source documents and graphical explanation - for much, much less.  And once its there, we certainly don't need LEGIONS of these $200k-per-year-6-hour-work-week folks.  Aristotle, Socrates, Plato, Diogenes, Pythagorus, Euclid, et al did an awful lot of thinking for a great deal less compensation.

BTW... CEO's? Same drill as College Professors.

America's university system has evolved to serve the same purpose that speaking accents serve in the U.K. and photos on resumes served in places like Chile and Argentina (It was a way for the establishment families to distinguish their offspring from the working class).  Of course, greed and self-serving dealing always rear their ugly head and this has been the case in spades within the University system.

But there is something else going on here.  The rate of change in scientific breakthroughs has declined dramatically, today's pop artists are "sampling" the underlying musical progression of songs popular generations ago, symphonies are not being written at the rate of increase in the population, and we have all of the self-help DIY books that we are EVER GOING TO NEED.

How many more 3 chord rock n' roll songs does the population need?  (Here is a great link for us older folks... a beautiful collage of music and photography.  Enjoy.)

Perhaps we have reached "Peak Useful Data", or perhaps I should say the point of diminishing returns for useful data.

"The First Casualty of War... is Truth"

Read this staggeringly FOS missive on economics and politics courtesy of the folks at San Fran Bay Guardian.

No wonder the American Body Politic is lying prone, anemically coming in and out of consciousness... it seems that every special interest group/political wing has a pre-determined point-of-view/outcome and then proceeds to promote anything/everything that supports their positions while discarding everything else... they must have learned this from the U.S. Department of Justice.

Mind you... these are the same people that claim to be the champion of the environment... but they want the economy to grow (burn MORE OIL, COAL, and NAT GAS) ostensibly via expansion of government spending to employ more people so that they can live alone in 2000 sqft homes and drive 6000 lbs cars back and forth to work while consuming massive amounts of industrially produced food during the weekend football games that will be viewed on 70" flat screens that burn 40 lbs of coal per hour.

California is on the verge of anarchy... but that's not good enough... now they want the rest of the U.S. to join them.  And don't confuse them with facts, analysis, or the numbers thank you.  These folks are all highly educated in the humanities... they have no need of a calculator... all of life's questions have already been answered... sounds like a religion to me...

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The Rail Data is not supportive of the view of an economy growing "organically" (whatever the hell that means).  The data (charts)clearly shows rail cargo transport rates have been declining steadily since the end of the 2nd quarter, and are well below the levels of 2008.

Not sure how to reconcile this with the steepening of the yield curve and the increase in stock prices... yes, markets are forward looking discounting mechanisms... but these data trends don't support that...

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The "Price of everything and the Value of Nothing"?

Propaganda is EVERYWHERE. It issues forth from the University/Industrial complex, Politics, the Military/Industrial Complex, Feminists/and other Victims...

Left-leaning political sites/groups parading as non-partisan are among my favorites... with politifact.com taking the cake with its "Lie of the Year" BULL SH#!.... Still, the University/Industrial Complex is makes every other group PALE by comparison... YES! You, too, can dig yourself out of excessive debt incurred to fund the lifestyles of the Left/Liberal Intellectual Elite that hardly work, refuse to be measured (else they might actually be managed), yet cause all manner of mischief from their titled positions!  But WAIT!  There's MORE!  Change a bed pans for an hour and you will be credited with $15 worth of student loans (never mind that you paid $375 per hour for a 3 hour class that was taught by an Adjunct who was working for a pittance)!  AAAANNND!!  You'll gain a degree that will qualify you to work at Wal-Mart!

The irony here is that the people supporting this system for their own personal interests have enslaved a generation of people to their peculiar University Plantation System.

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I speak about the price mechanism for Oil.... I should mention it should apply for Nat Gas, too.  A barrel of Oil has about 6X the energy content (BTU's) as 1 mmf of Nat Gas.  At today's price a Nat Gas BTU is about 28% of the cost of an Oil BTU.

That is simply so far out of bounds that, one way or another, that gap will close (but that is not to say that it can't get even wider in the short term).  The problem is that markets can remain irrational far longer than you can remain solvent.

A Funny Thing Happened on the way to...

A funny thing happened today. Total U.S. commercial petroleum inventories declined by over 15 million barrels, and the price of Oil didn't do much.

Kind of comports with my view that the U.S. is no longer the axe in the price of Oil... that is, the U.S. is no longer the price determinate for the world Oil market any longer.

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In the nothing to do with Energy department...

Some times I despair for my fellow man (woman). The one wild card in all of our lives that we can so little about are the crazies running amongst us, waiting to go off like a bomb.

We have nuts going into school board meetings and firing 9mm handguns at their innocent and unarmed fellow man... and we have well known WABC Weather Girl Heidi Jones fabricating an attempted rape... Our government has raided religious groups and their supporters blew up a federal building killing innocent children... a man flies his plane into an I.R.S. building... Going "Postal" is now broadly understood in the lexicon.... Good grief. What's next?

We lack civility in our political discourse, we glorify violence in the media we allow our children to consume, we reject the sanctity of Life from abortion, to street violence, to war, to capital punishment... everybody is a victim and everyone seems to belong to a group that hates somebody with a passion.... and we wonder that people are going off half-cocked because somebody did them wrong?

Rational, and other wise law abiding citizens barrel down my street here in South Florida (20 mph zone) at 60 mph and are furious when I don't get out of their way... seemingly oblivious to the consequences should they hit one of my kids...

Sometimes I think I'm the only normal person left... is it just me, or have we gotten meaner?  Well, mean people suck.

Maybe.... just maybe... the answer is not more government control, regulation, and tax extraction to fix all of these things.... maybe, just maybe, people would not be would so tightly wound that they are ready to shoot me over a parking space if they weren't so frantic in their lives... maybe we need to stop growing GDP and start growing GNH - Gross National Happiness.  It seems for every attempted government solution we wind up with 2 new problems to solve - and 4 new taxes to pay for the solutions.

Forget "Power Down"... how about "Frantic Down"?

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Governor-elect Jerry "Moonbeam" Brown says he's shocked.  Shocked, I say!

What a cluster f*%!! the California Body politic must be.  Their perfect storm liberal economic policies, and a lack of anyone else to blame, have left them in a uniquely awful position.

California absolutely, positively will default on either its bonds or its pension obligations... they just might call it something else AND blame Republicans in the American Southeast.  How's that you say? Well, it can't be the Liberal Elite's fault...  They are the ENLIGHTENED ONES...  It MUST be those troglodyte Republicans in the Old South....

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Markets zig and zag... they don't zig and zig (forever).  At these prices I like Nat Gas more than Oil, Platinum more than Silver, and 7-10 Treasuries more than equities... but I reserve the right to change my mind on a dime... if I am wrong, I am gone.

Oil, Oil everywhere... and not a drop to drink...

Several reports going around the web claim that oil output rose to its highest point ever last month, and that there is 6 to 8 million barrels per day of spare capacity around the world.

Yea... and I'm still young and handsome (and I would be if it weren't for these g0t damned mirrors).

The price of Oil is holding quite well at near $90 per barrel... but there is plenty of Oil in the market place... and the producers are standing ready to bring the price of Oil down to the $70-$80 target band...

Hoo-boy.... who writes this stuff?  And who believes it?  Does any investor really believe one word coming out of the mouthpieces of the producing countries?

Not a one of us has any idea of the truth in places like Saudi Arabia, Kuwait, Iran, Venezuela, et al... the only thing WE DO HAVE is the f*&%$(ing price mechanism, and a small ability to extrapolate, infer, and induce.  We can't deduce squat.

I will bet $$ to donuts that in a few months the production numbers for November will be adjusted... downward.

Now look.... I will be the FIRST to say that I could be wrong... but if Oil cracks $100 in the next 90 to 180 days, that will give you a good idea of just how accurate or truthful these knuckleheads have been.
This is not something that can be swept under the rug and explained away in the media.  $100+ Oil means a great many things... but the most important thing it means to America is that our supply of imported Oil is in steep decline, and at some point the Federal Government is going to be forced... BY TOTAL SUPPLY.... NOT BY PRICE... to do some really, really unpopular-with-the-markets type of policy shift.

Allow me to be specific:

Bill Gross of PIMCO fame thinks that capitalism cannot survive a long term population decline, and I think that concept has merit.  Take that concept and apply it to long term energy inputs and I think you come up with the same outcome as declining population (with unlimited energy inputs).

As a stone cold free-market capitalist... I am here to tell you that that is quite disconcerting... because it means that physical rationing of things like heating fuels is a very real possibility... as in, no matter how rich you are the government might not permit you enough fuel to heat and cool a 10,000 square foot mansion or to fly a private jet... and that would be the end of free market capitalism, and the beginning of a whole new phase of Big Brother. (I mean, come on... our government wouldn't use this as a ruse to enact MORE CONTROLS, now would they?)

This is not to say that Shale gas, Coal to Liquids, solar, wind, hydro, switch grass ethanol, et al, won't make that outcome the stuff of fiction... but its worth thinking about.

Its all in the giga-joules, and your first indicator is the price of Oil.  Time will tell.

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On another unhappy note.... here is yet again another perfect example of what years of entitlement spending has wrought... a society that firmly believes that something can be had for nothing and a political class unwilling to even try to re-educate the electorate in the simple math or the truth.

Peak Oil is small potatoes next to this.

The Wages of Sin

By now we have all heard that Mark Madoff, son of infamous swindler Bernie Madoff, committed suicide on the second anniversary of his father's arrest.

I would be willing to make a massive bet that Mark Madoff is just another victim, and not a criminal, in this "scam of the century". My bet is the elder Madoff would never have involved his sons, and incompetent or not is not the issue.  It is not illegal to be an incompetent rich kid. I know lots and lots of them, and they don't deserve to end their lives at the end of a dog's leash tied to a pipe. The sins of the father have now been visited on the sons AND grandsons... but we should all take a good, hard look at our criminal justice and tort system. If in the end my contention holds, and that Mark Madoff had no idea what his father was doing, and it turns out that he was driven to suicide... his father AND the prosecution team AND the SEC have all contributed in his murder.

Many may wish to see revenge done upon Bernie Madoff... but killing an innocent man leaves little satisfaction.  I have no love lost for Bernie Madoff. His crimes have left the industry in a shambles and the witch hunt now being conducted by a very egged-faced SEC will likely leave other innocent people's lives in tatters.

A hard truth hit a great many people with this news.  How one conduct's oneself has a great impact upon those closest to them.

"Greed is NOT good."

Sincere Apologies

"There is only one basic human right, the right to do as you damn well please. And with it comes the only basic human duty, the duty to take the consequences." P. J. O'Rourke

I want to offer my sincere apologies to the American Feminist Movement.

No.  This is not a joke.  A Real Republican (Libertarian) like me and a Real Feminist like Naomi Klein on the same page.  Who'd a thunk it!

American feminists are out in several publications hammering the past 2 American administrations about using the subjugation of women in Afghanistan as a pretext for military operations in that country.

"Rape is being used in the Assange prosecution in the same way that women’s freedom was used to invade Afghanistan. Wake up!" Tweeted Naomi Klein.

(I have no opinion on any of the Assange issues. I do not download nor read the cables. I do not visit the wikileaks site. America is entitled to some level of secrecy, and of course some evil will necessarily come with that...  The world is not a perfect place... and while I reject the notion of empire I most certainly do NOT reject the need for our national security apparatus to operate in our defense.

What's done is done. I'll let the rest of the media and bolgsphere sort this out.  It is against the law to possess or download classified documents and I am a strict constructionist when it comes to the law.  I don't violate the law and nobody kicks my door down at 5 a.m. Pretty simple, really.  This is not to say that I do not believe we have certain Constitutional Right's that may be invoked against unjust laws...)

I have railed about the "Rape!" cry whenever the U.S. wants/needs to invade a small country usually containing Oil, minerals, or passage for one or both.  Unfortunately, while the feminists seem to see this for what it is, the balance of America's fairer sex (and no small number of its not-so-fair-sex) seems to accept this B.S. as Truth, Justice, and the American Way.

Strange bedfellows are coming up in spades all over the place.

Recently Sharon Astyk took on the "Abandon America" crowd (a bit less enthusiasticly than I would have liked); you know, those nit wits on the doomer sites telling people that they would be better to relocate to Canada (Brrrr!) or South America (Oy! Its so humid!). I simply cannot heap enough scorn upon such people.  These are the very same people desperately trying to destroy America from within... and now from without.

I have 2 words for these folks: Drop Dead.

The promise that is America is/are our Rights and the Obligations to Personal Responsibility that separate a free people from the enslaved and the controlled.  The drek that advocates abandoning that promise are the very folks that led us to this unhappy impasse.

America can, and will, once again be the Constitutionally respectful Republic that our founders envisioned.  We have lost our way, but we will find it again - and soon.

Oil Consolidates its gains

"(Sec of State) Clinton stated that "lives are at risk" but having lived through the Pentagon Papers and Watergate I think the real issue is that lies are at risk." - Thomas Cornick, my cousin and genius par excellence.

Oil prices have remained firm, consolidating their gains at just under $90 per barrel.

While China's equivalent of the U.S. SPR is contributing to the firmness, that is hardly the whole story.

Booming (relatively) economies within the exporting nations has far more to do with this issue than China alone.

This is not to say that China might not upset the markets by tightening credit (or if their property market blows up).  There just ain't no such thing as a "sure thing" trade. That would include Oil.

If you are an investor and are not concerned with the China property issues you might not be an investor for long.  That market freaks me right out of my skin.  Right now I am long, but I am not "long and strong".  Even if OPEC is expecting $100 Oil "Pretty Soon".

Oil has a nasty habit of dropping other markets to their knees...

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Mexico's Oil production is in steep decline, and Mexico's exports to the U.S. will approach ZERO sometime in the middle of this decade at the current rate of decline.  Contrary to wishful thinking, no amount of investment in "other fields" is going to make up for declines in a field like Cantarell.  That field was one of the giants, along with the North Sea and the North Slope, that brought the world back from the brink in the 1970's... but all of those fields are declining briskly... and now 5 nation's hold all of the Oil cards...

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In a country where 15% of the population needs government assistance in order to eat and where 17% are out of work and desperate... I think it is the HEIGHT OF FOLLY to drive around in a $200,000 car, wear expensive jewelry, designer clothes, or any other marker of wealth.  You have to be out of your mind to want to draw attention to yourself.  I cannot envision an environment where these sorts of incidences do not increase.

Take it from someone who has traveled safely in the back country of places like Columbia, Puru, Nicaragua, Brazil... do not tempt anyone.  "Invisibility is the best policy".... even better than honesty in this case.

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More on my pet-peeve on sports caused spinal chord injury and chronic traumatic encephalopathy... just another "freak accident"?  The data is in... Peak Oil, Schmeek Oil... you need your brain and you need your spine... and you need them in perfect condition.  I used to be heavily involved in Mixed Martial Arts... no more.  Grappling and wrestling will continue to be interests of mine, but watching young men engaged in injuring each other's brains in a cage has lost its appeal.  If you have a kid playing or interested in playing football, get him a tennis racket.

Osama Bin Laden, Chess Player Extraordinaire

If an enemy wanted to defeat the most powerful nation on earth they wouldn't attempt a frontal attack.  They would work and worry at your weak point.

The U.S. response to Bin Laden, "radical Islam, "The War on Terrorism", whatever you want to call it... appears, when combined with impossible entitlement spending, to be leading the U.S. to the brink of disaster.  While we cannot know if Bin Laden understood that the impacts of Peak Oil and a huge military/regulatory/law enforcement/security apparatus buildup would then be "traded", within the American Body Politic, for massive social spending.  The result is the massive debt now placed upon the backs of the American taxpayer at the same time that said taxpayer is being slowly (for now) starved of Oil.

Perhaps Bin Laden, et al are not that smart... but its an awfully disconcerting possibility to consider... because even if it was just plain dumb luck, that doesn't change anything... now does it?  Worse, those within the American political leadership are all too blind and all to willing to do anything to get reelected.

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I wonder how many of the men that signed the Declaration of Independence could pass today's sexual background check... not a one, I suspect.  For every philandering husband there is a philandering woman/wife/female on the other side of the trade... the one thing that should not even be remotely considered in policy is an individual's sexual history... yet it seems to be the only thing that matters for a significant portion of the electorate, an electorate that philander's with great aplomb...  This piece is as artful a piece of propaganda as has ever been written: Mom, Home, Apple Pie, Baseball have ALL been violated by John Roberts (and believe me, I am NO FAN of John Roberts the policy maker), it seems... When somebody dies, they are re-cast in the angelic light of the heavens... I have no idea what kind of husband John Roberts was, nor any idea of what kind of wife Elizabeth Roberts was (or how much rutting around was done by whom) - BUT, I am ABSOLUTELY SURE that it is none of my g-- damn business - still, it seems the American electorate is absolutely willing to pass on the next Ben Franklin Martin Luther King, Thomas Jefferson, or John F. Kennedy (all outrageous philanderers) should he or she show up.

Ms. Carlson speaks of Roberts' love child like it was the Anti-Christ.  It never occurred to Ms. Carlson that maybe, just maybe, this child was meant to be for reasons that I am not capable of understanding (and men are not uniquely guilty here... 4 to 5% of American's are sending their father's day cards to the wrong guy... should we wipe these people from the face of the earth?) Life is a funny thing, and it really is a "funny ol' world"... we all want and understand the need for forgiveness... but it seems not a single one of us is willing to give it.

We need a leader that can sort this mess out far more than we need a Saint.

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Oil prices fell with the inventory report...  now they have turned positive on the day... Its all about the price.  Time will tell.

Oil Continues Melt-Up - needle's in the red-zone

Oil is now $91 for February Delivery (in reality, that means late January).

We appear to be crossing that strange boundry where monetary stimulus drives Oil prices to the point where they tank the economy... or maybe its just a coincidence and this is what Peak Oil Imports looks like either way.

The American political response?  Extend and pretend.  Extend those benefits, and pretend that the Oil is is not wracking the American economy (along with credit issues and a population insidiously addicted to social programs that will absolutely, positively not be there as expected). Pretend that things will get back to "normal" and we will all live happily ever after in our mortgaged McMansion, with our Borderline Personality/silicon-enhanced-trophy-liability keeping us company in our champagne filled hot tube.  Yep, and "you are not getting older, you are getting better..." (I fantasize of pushing the Ad exec that came up with that one down an elevator shaft in a tall building along Madison Avenue... just kidding... sort of.  One of my Boca friends told me that 50 is the new 30!  Holy smackers! The human capacity for denial is hyperventilating!  He's in great shape... but hair implants, botox, and silicon ain't youth... but who am I to burst his bubble...).

The liquid petroleum system is now priced for perfection - nothing - no wars, attacks, hurricanes, earthquakes, "watered-outs", or, MOST WORRISOME, an exporter coming to its senses... can happen, or Oil is $200 per barrel, and overall supplies to the U.S. economy have dropped by 5mm barrels per day.

In my opinion, one of the above mentioned issues is a "when", not an "if".

As always, we will be looking for someone to blame.  Remember in 2004, when the media and the political establishment were blaming the high price of oil on "speculators"?  Thankfully, no innocent investors or traders went to prison as a sacrifice to the mob (so far).  The problem was Peak Oil, not those "speculators", and our government knew it (remember the "Hirsch Report"? Well that was commissioned in 2004, and must have been in the works somewhat earlier).  Still, many a "speculator" feared for his life.  Welcome to 21st Century Rome.

Still, this run-up might be just another run thru.  Deflation has been beaten back... but is it beaten? Stay tuned.

Back in the Land of the Philistines

$90 Oil with 17 % real unemployment (U6) means recession.

Oil prices have to come in soon.  If they hold here, or worse, head higher, it means Peal Oil (and Peak Imports) is here, with all of its attendant issues, in my opinion.  The simplest explanation is usually best.

Like any rational trader I spend nearly all my time feeling like a guy balancing on the back 2 legs of a chair, almost falling backwards, and then catching himself.  You know that feeling... I feel like that ALL the time...

There is NO WAY producers can pass costs onto the consumer... especially when higher energy costs are emptying out the consumer's wallet... this does not have to be the case in the Oil market... Oil price is likely an equilibrium indicator, as their are no substitutes for the most part and the supply appears to continue to contract... how this all works out still depends upon the rate of change more than total change (I think).

House prices continue to contract while silver continues to soar... Food prices have risen even though percentage of people that cannot afford to pay for them has increased dramatically... Our leaders are willing to go further into long term debt in order to fund today's unemployment compensation.... these statistical anomalies will only get much, much worse if Oil prices rise further (and Peak Oil is here).

Oil is at its absolute resistance point.  If it breaks thru it, look for much higher prices.  If not, look out below.  I am long, but like the guy balancing on the back 2 legs of that chair, I am always thinking about not crashing in a heap on the floor.

The Politics of DOOM

We're doomed.  Doomed I say!

The election is over... and not a damn thing has changed.  The Federal government needs to cut its spending (that would include unemployment insurance) and raise revenues (that would include higher taxes).  What do we get?  Hypocrites on this side willing to let the hypocrites on the  other side spend more if the other side agrees to tax less.  That is, we are making the problem worse from both angles.

Look, I am for extending the "Bush Tax Cuts" (what a silly name for something even DUMBER... temporary tax cuts... come on, all tax cuts AND tax increases are temporary... for pity's sake!) only because I understand economics reasonably well and I know how to add and subtract (the left opposes the cuts, of course, but then again those folks don't understand economics and have no math skills whatsoever).  Under no circumstance would I trade tax cuts for extended unemployment "benefits".  The quicker people move in with each other contracting households, accept employment that they no reject, and get their own house in order... the better off the people will be.  The Oil is not there for another bizzilion singe family homes where everybody and the family dog get their own room and bathroom.  Got it?

The American people sent a message to D.C., a message that already seems to have been forgotten.  I look forward to 2012 with great anticipation, even if the Repubs run the only person that can't beat Obama, because our elected officials continue to doing the same things over and over.... and expecting different results.

The New Wealth

Come on folks, have a little fun with the TSA!  Pull a "When Harry met Sally" restaurant scene (Meg Ryan shows how to fake the big "O") when the TSA does their dirty work.

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I read with interest the comments to my post "Ok, you've made your point".  

Life will go on after Oil. The pursuit of wealth will go on, as well. We will always compete for what it is we truly desire most (and we all know, in our heart of hearts, what that is)... no amount of grey-haired pony tails claiming a tye-dyed uniformed worker's paradise is going to change that... and wealth will NOT be defined as a tenement apartment in a city.

Maybe wealth will be defined by gold... but I doubt that, too.  Wealth will be defined as the "means of production" that has always defined it... and nothing "produces" stuff quite like land. Timber, crops, livestock products... these things cannot be produced in a city apartment or suburban home.

The massive cities of today have one tremendous liability - sanitation.  The waste produced by 8 million people is truly of a volume of mind boggling proportions.  Concentrating populations in small areas that will need heat, cooking fuels, a means of making a living, and sanitation with severely constrained energy inputs leaves much to be desired.  Its all about energy inputs - if nuclear, solar, wind, ethanol, etc... can produce consumable energy in amounts sufficient to run any given closed system, then this is not an issue... if not, the outcomes are not terribly appealing.

Of course, the U.S. wastes electricity like we do potable water... and that makes for a great deal of slack within the system... but only for a very short period of time, say a decade - and then one must think about the economic effects of curtailing electricity consumption (and that is a very significant consequence).

No, mega-cities like New York, Chicago, Sao Paulo et al simply could not exist in a severely energy constrained environment... how that unwinds and over what time frame with what unintended consequences... well, your guess is as good as mine.

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Much has been said about "Shale Gas" and "Fracking".  I have read most of it.  As in all things, it seems to be nothing short of "Sex, Lies, and Videotape".  So I go back to the numbers.  The largest Shale contributor to U.S. Nat Gas production is the Barnett formation.  It produces a whopping 6% of the Nat Gas produced in the lower 48.... or about half what the U.S. imports from Canada every year... and to get that 6% required about 20% of the drilling equipment by capital investment. 

The Haynesville play has got to be the biggest disappointment yet in Shale Gas given the hype that surrounded it.  Last year, Haynesville was going to save the U.S. from imported Oil... now, those companies with the largest exposure to Haynesville are moving rigs elsewhere....  Haynesville might make sense at $15 mmf Nat Gas, but it is suicide at $4.25.

Mayb, MAYBE, the Shale Gas extractions can overcome the decline in conventional gas plays for a  couple of years... but no more (and maybe not).  The media onslaught and propaganda from "Big Gas" has convinced the futures market that Nat Gas will never rise again and if we give these guys all of the capital and permitting they request they can save us from $200 Oil with their Shale Gas production - my bet is that the market has been fooled along with the public.

This is not a recommendation to buy Nat Gas futures... Nat Gas is THE MOST VOLATILE FUTURES CONTRACT on the board, and has been nicknamed "The Widow Maker" by futures traders with very, very good reason.

Meanwhile, back at the Oil Ranch....

I look forward to monday's action in the crude futures market like it was "Super Sunday".  This could be one of those moments of truth, or nothing more than just another lie in the markets.

"Come in, Rangoon!"

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"Ok, you've made your point"

“Okay, you’ve made your point. So what do we do about it?” John Michael Greer, speaking rhetorically to the Peak Oil "movement", et al.

That's the correct question, isn't it?  Oil has now cleared $89 for every delivery month from February 2010 onward, and is over $90 for every delivery month from July 2010 onward, and this is still technically a "shoulder period" for petroleum demand.  This at a time when nearly 20% of Americans are not working (that is U6 unemployment, not the completely FOS U3).

The debate is over.  Even the IEA has cried "Uncle!" Now what?

Greer was speaking in the rhetorical.  There is very little left to do.  The American body "politic" has shown quite clearly that it is incapable of rising to ANY OCCASION, and individuals have either made their moves years ago... or are going to work around the circumstances that they find themselves in.  As Ruth Gordon of "Harold and Maude" fame (if you have never seen this cult classic, you are operating without a proper education) famously said when asked the secret to aging gracefully - "Money helps".  If you sold your house in 2005 at the top of the market and invested it all in precious metals... good for you!  That does not cover most of us... and for 20% of the population, the "collapse" is already very much here and very real.

To me, this is an intellectual exercise.  Something to bear witness to; a spectacle.  I freely admit I have no idea what I would do if I were in the POTUS's shoes (but I do wish him G-dspeed).

(Any REAL Peaknik, the kind of guy that writes a thousand plus blog posts on for zero monetary compensation, that does not have his doomer homestead stocked and prepped is nothing more than a "poser".)


The following is from my October 17, 2007 post on what Peak Oil will mean to Americans:


1. New Orleans will never be rebuilt, nor will any other future major natural disaster of similar scale (are you listening Florida and California?).
2. American children born in 2007 will not need a driver’s license when they are 30.
3. Your 401k will become a 201k, and then a 101k, and then just a k…
4. Social Security and Medicare will fail.
5. America’s farm labor workforce will be 33% of the population by 2030, not the 1.5% of 2007 (Texas A&M might actually be a better bet than Harvard for junior after all).
6. Student loans will be a future credit crisis. (Borrowing $200k for a literature degree will, in retrospect, not appear to be an intelligent investment.)
7. The luxury car you now drive will be a very nice pottery holder in your garden.
8. But, your milk goat is really going to appreciate those fine leather seats, and your chickens will really enjoy perching on the engraved wood steering wheel.
9. You’ll be using dollar bills to light candles on your birthday cake because they are cheaper than matches.
10. Homes will come with only 1 zone heating and AC - your bedroom.
11. You’ll be thin again!
12. Home cooking!
13. Your wife’s depression/personality disorder, junior’s ADHD, and your alcohol problem… cured, with all that fresh air and sunshine instead of driving everywhere.
14. South Florida’s housing crisis will never be resolved.
15. The Southwest water problem will no longer be academic.
16. You won’t feel so rushed anymore. You won’t be spending time going to the gym, filling up the car, commuting…
17. No problem not fulfilling your new year’s fitness resolution as walking and biking will no longer be optional means of transportation.
18. You will care far more about who is Mayor than who is President.
19. You will get to know the neighbors, one way or another.
20. Conspicuous displays of consumption or wealth will not be good for your health.
21. The response time for 911 is going to be a great deal longer than it is now.
22. The end of Feminism, Liberalism, Conservatism, etc… these were luxuries of the cheap fossil fuel era.
23. No more keeping up with the Jones’. Keeping up will be quite enough.
24. Flush it and forget it will be replaced by compost it and fertilize with it.
25. You will never have to mow the lawn again, ‘cause your gonna need that hay.
26. You won’t have any trouble finding a parking space.
27. No more road rage, you will truly appreciate the use a of vehicle.
28. You are going to look fabulous in designer jeans while working in your garden, fixing your bike, etc…
29. Golf courses will become community gardens or farms and that home on the 9th hole will likely become a home in the Spinach field or pumpkin patch... and you will be working on your swing all right – for your hoe, your scythe, your axe…
30. The demand for lawyers, stockbrokers, accountants, insurance agents, realtors, hair -dressers, massage therapists, psychologists, etc… is going to dry up in ways I am not poetic enough to describe (and I own a brokerage firm).

No, this won’t happen overnight, but that is not the point. The point is that it WILL happen. Things will change, and since “for the better” or “for the worse” is an abstract I have no comment on either. Things will change and some people will be the “winners” in the new paradigm, while others will be the “losers” (sorry, more abstractions), and it is up to you to decide where it is you would like to be and what actions you plan to take to execute your plan.


end of re-post

Not a few of those items have already come to pass, most of the balance are on their way... but there will still be cold beer, great food, and fun to be had.

More soon.

Standing in Front of Freight Trains (and other stupid ideas)

Fighting a market is a lot like standing in front of a freight train.  I am far more sympathetic to dopes that say things like "if it goes there it will go there without me"... mostly because I have been dopey enough to have said that once or twice.

Insisting that the very volatile market's like Silver, Oil, Nat Gas... are all wrong... can lead to some painful losses and missed opportunities.  I say this because while a future correction might prove you right in the long run... markets can remain irrational FAR LONGER than you can remain solvent (or even alive).

I was speaking to one of my trader buddies in New York yesterday... I knew things were going wrong when he told me "this doesn't make sense"... sure it does... when a market is going against you in a powerful way, it is usually because the market feels or knows something that YOU are missing.  Calling tops (or bottoms, though bottoms are somewhat easier) in powerfully moving markets is a good way to find employment in another field (would you like some ketchup with those fries?).

The markets don't give a good %$&# what you or I think.

That said, Oil did not break today... the melt up is on, at least for another day.

Oil Tested by Jobs

Today's disappointing non-farm payroll data is an excellent test of my "no-spare-capacity" theory, and of the recent rise in energy prices to their near term resistance point.

Please keep in mind that my "theory" is based entirely on the price action in the commodity and the fact that this is happening with inventories at multi year highs... you see, I have started to see those inventories as the first wave of hoarding - and that is a very, very serious accusation on my part.  Please keep in mind that I reserve the right to change my mind on a dime, I don't stand on ceremony... "if I am wrong I am gone"... but hoarding, IMHO, would first show up in inventories - NOT with John Q. Public showing up at gas stations, filling his containers and hiding them at home.... but we shall have to wait and see.

My 1030th post.

I like to celebrate odd (or in this case, even) numbers. This is my 1,030th post!  What's so special about 1,000, anyway? (This site averages 7,500 to 9,000 unique visits per month, and unlike many of the other peak oil sites most of the commenter here actually make sense.)  And what is so special about $100 Oil?  I think the important number for Oil in American $$ is 88.  Yep, $88 per barrel on the front end is my magic number. And we hit it again today ($87.99 for you sticklers), for the second time in a couple of weeks.

At $88 per barrel, Oil crosses the imaginary line where it begins to grind on the American economy... not a hard, decisive grind the way $120 does it... just the withering, torturing kind of grind. Can Oil make it to $120 in 2011? I think so, though I doubt it will average that high... to do so would mean that imports really, really imploded.

I think Nat Gas is the more interesting of the 2... there is this common wisdom that the U.S. has entered into a permanent glut.  I doubt this very, very much.  I also doubt that prices will remain at $4.2 or so for 2011, given the Fed's propensity for stimulus and the BTU comparison with Oil.  Nat Gas at $6 - $8 and Oil over $100 are very possible... and while Nat Gas is almost entirely produced domestically, all of the money the Fed stimulated in this round will leave our shores within 18 months via paying for imported $100 Oil... and $8 Nat Gas would be a nice near double from here... (disclosure: I am long Nat Gas futures contracts... and no, this is NOT a recommendation... Nat Gas isn't known as the "widow maker" and the "career killer" without good reason).

This could get really, really interesting politically. What if Peak Oil Imports does not wait until the 2012 elections to make its presence known?  Goldman Sachs says OPEC exhausts spare capacity by 2013... Greg Jeffers says they exhausted spare capacity in 2010... that's why the price is $88.  Waiting for $147-Oil to confirm this is kind of defeating the purpose, me thinks.

Oil has been in a "melt-up" for the past coupe of days... if this is the real thing, Oil will break $90 almost immediately, in a matter of days (if not, Oil will correct almost immediately, too)... if so, look for triple digits... Simple. Like. That.  If you don't know how to sell if it goes against you, don't go long.

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My hat goes off to the Federal Reserve Bank.  While we cannot know the propriety of their actions, there is NO DOUBT that they succeeded in driving up the price of assets, particularly the U.S. stock market.  Whether they can hold it is irrelevant... they have bailed out the establishment, kept society's classes static, and all is right with the world... I only wish I had participated more in the market's gains... unfortunately, on balance energy has lagged badly... may the worm turn.

Big Brother and the Federal Bureau of Intimidation

Think you have "Rights"?  Sorry, that's propaganda.

How can you possibly have "Rights" if the government can charge you with a "crime" on actions they have condoned for decades, that will be tried in a forum that will cost you several million dollars to defend, against a foe with the resources of a government and the willingness to do ANYTHING (their standard immoral weapon is suborning perjury) to win?

The Masters of the Universe that control Goldman Sachs, the U.S. Treasury, Bear Stearns, Lehman Brothers, et al, nearly brought the system down... and it probably was not a "crime"... but now somebody has to pay for their sins, and the nice folks working for the S.S., or whatever they call themselves (there is no difference between a KGB agent and an FBI agent.  These people exist in EVERY society and in every age... they are the muscle for the government - and they are absolutely necessary, after all they are OUR gangsters that society hires to deal with the gangsters in "private practice"... but don't think for one moment that any FBI personnel has any high minded view of the Constitution or your "Rights" as an American, or a fair and just outcome of your case) are out there using TERRORISM in order to force people to confess to crimes they may not have committed.

Welcome to the American Inquisition.

Well, in this case, somebody stood up to them.  Not only did he stand up, he went public. VERY public.   I pray for his continued freedom, and hope that this act of bravery is not overshadowed by the Wikileaks folks.  Americans need to take back the Rights that are our birthright.

G-d bless John Kinnucan!

Lies, Propaganda, and Statistics

As I mentioned recently Chris Whalen, of Institutional Risk Analytics fame, really stirred the pot by saying in a viral video that California would eventually default on its debts.  Seems he was talking out of his hat, and had not done any hard analysis... but was asserting in the rhetorical.

As I said before, and I have no problem saying it again, I would rather slam my wedding tackle in a car door than buy California municipal bonds... California will absolutely, positively default in some shape or form... and a Federal bailout is not going to be forthcoming.

Well, MarketWatch's Brett Arrends took Mr. Whalen to task in this fantastic piece of statistical Horse Sh*#.

This is a prime example of why you cannot believe one f*&%ing word on the web, media, print media... without scrubbing the living h*ll out of it.  Let's take it to task, shall we?

California’s a basket case? The state has one of the highest living standards in the country, yet over the past 10 years the economy has still grown much faster, per person, than the national average. According to the U.S. Bureau of Economic Analysis, it’s up 15% — compared to 8.9% for the U.S. overall.

It’s grown faster than low tax neighbors like Arizona, Utah or New Mexico. It’s grown three times faster than Texas.

And this was from 1999 through 2009: In other words from the peak of the dot-com years through the depths of the recession. It managed this growth despite the double blows of the tech and housing busts.

Most of the states that have grown faster than California during that time are farm states, riding an incredible boom in agriculture prices. 

Fact.

Fact?  Well, sort of.

Economic growth in Cal this decade was entirely population growth plus uncounted inflation.

Cal's 2000 population? 33,872,000. And in 2009?  36,662,000.  Anybody care to guess at the population of illegal immigrants that WERE NOT COUNTED?  Wanna bet it exceeds 10% of the population? And as we all know, most of that growth came in the past 10 years.

Hmmmm....

Population growth accounted for 9% of the "economic growth"Mr. Arrends speaks of.... more like 12% if I include my GUESS of the illegal population.

There were states, Connecticut and Rhode Island come to mind, that LOST population during the decade, and still showed "economic growth" (though it was entirely inflation and price appreciation of financial assets in NYC's financial services industry).

Sorry, Mr. Arrends, your assertions are FUBAR. Cal is in terrible shape, and it will eventually default (though they might call it something else), either on their bond OR on their pension and benefit liabilities.

All of your Leftist propaganda does not change the laws of mathematics, irrespective of how little work Chris Whalen did to back up his assertions.  That California is in this position despite all of its natural advantages of weather AND geography is testament to how badly Liberal economic policies served the people.

So Much to Blog... So Little Time

I'll spare you the Thanksgiving story... I traveled for the holiday, and in my own OCD way, I studied my fellow man as he/she passed me by... OMG.... are the American people ever fat!

We all tend to look to the far off for trouble in ours lives... Peak Oil, Iran (well, that IS real trouble), the monetary system, deficits... turns out McDonald's and Coca-Cola were the enemy within (don't miss this excellent article).

The people I took in on my travels are not in any condition to compete with workers in China or Viet Nam... or even Mexico (now that is embarrassing)!  The people I observed were in no condition to put in a full day in a factory or on a farm... many of them had a hard time negotiating the curb in front of the airport.  A country is NOT its borders, nor its political leaders (thank goodness)... it is its people.  Our people have been misled (or have misled themselves) into thinking that eating themselves into oblivion is somehow acceptable.

I can speak only from my experience.  I bought a small farm nearly 5 years ago.  I live half the year on the farm and half in South Florida.  While on the farm, by my best guess about 80% of the calories I consume come from my production on the farm, and in Florida I live an industrialized lifestyle complete with contrived exercise routines (no need for contrived exercise routines on the farm). Within a month of leaving the farm I usually put on 8 to 10 pounds (and that's with me really watching my intake like a hawk), I am softer, and I don't fall asleep the moment I hit the pillow.  After a month back on the farm, I have the makings of a six pack (sort of... for a guy my age... ok, its not that close but it ain't that far), and I feel like a million bucks.  I eat eggs, full fat milk and cheese, butter, bacon every day with breakfast, and at least one full serving of beef or pork at lunch or dinner (all grass fed and raised on my farm)... and I am lean, my cholesterol, blood pressure, and resting heart rate are excellent... and my love life is like a newly wed.

This is not to say that I don't miss walking out my door and down the street to pick up a pizza like I do in Florida, or any of the million other conveniences that city dweller's enjoy... I do (and my wife misses them a great deal more than I do)... but just maybe our lives were NOT supposed to be all that convenient, at least as far as our health is concerned.

Recently Matt Simmons passed away.   A few years prior, Bruce Wasserstein died suddenly of a heart attack.  Most of you know Simmons and likely none of you ever heard of Wasserstein.  Wasserstein was a legend on Wall Street and my personal hero; an investment banker that would have made J.P. Morgan (the man) look slow and dim witted... yet he was not smart enough to notice that he looked like a train wreck waiting to happen, and he died of a massive heart attack at the age of 62 with $800 million in his check book... both of these guys spent too much time at the office, and not enough time doing manual labor, drinking wine, and making love (in my opinion... after all, I wasn't there in their bedroom... but a huge gut is not usually indicative of lots of great sex)... and were likely addicted to the "action" that came  with their jobs as "masters of the universe".

And I understand.  I miss that "action".  But I'd rather live.

------------------------------------------------

President Obama took a pretty good symbolic baby-first-step in freezing Federal Pay... BHO does NOT have to go down in history as another Hoover or Carter... even if he were to wind up a one term president.  BHO can take this opportunity and go down in history as one of the great presidents... what we face now is just as significant a threat as that faced by Lincoln or FDR... history won't give a good fart about Pelosi, et al... it will judge BHO... maybe, just maybe, the President has his ear to winds of history... if he does, this would be an excellent time to sacrifice your political career, Mr. President, and bring those that want to destroy our country from within to their knees.  If you do, you will be remembered as one of the Great Men of American history... if you do not, you will be an unpleasant foot note... I hope you accept the mantle of the former.

The Following was taken from an email I received from the firm where my good friend and Rabbi (he is a real Rabbi) Mo Silver hangs his hat and was written by Keith R. McCullough:

"You never see the old austerity. That was the essence of civility; young people hereabouts, unbridled, now just want."

-Moliere

 That's an old quote from a famous French playwright who has long been dead. "Moliere" was Jean-Baptiste Poquelin's stage name. His urban legend was born when he collapsed and died in the middle of a play in 1673. He was 51 years old.

 I'll take some editorial liberty this morning and evolve Moliere's quote for the Age of American Millenials and Baby Boomers: 'You've never seen austerity. That was the essence of our grandparents; Millenials and their parents, unbridled, now just want.'

 This is obviously a generalization but, in principle, I can't imagine that an analyst from outer-space wouldn't see the hypocrisy in Americans door busting each other on Black Friday for i-Pads at the same time as their Congress fights to keep interest rates on my savings account at zero percent as a result of an alleged depression.

 Want, want, want. What can I get out of this market? Pretended Patriotism be damned, what's in this for me?

 The good and the bad news on this front is that we have leaders in this country who can enforce change. Some of that change is going to be slow. Some of it is going to hurt. Some of it is needed or what you're seeing in European stock and bond markets is going to be playing at an American "Lifestyle" Center near you in 2011.

 In proposing a 2-year pay freeze for US Federal employees, President Obama did the right thing yesterday in implementing the first stage of what we have been calling for since July of 2010 (when we were short the US Dollar on reckless government spending). Our Q3 of 2010 Hedgeye Macro Theme was titled "American Austerity" and we think that fiscal conservatism is the only path to US Dollar driven prosperity.

 The debauching and devaluation experiments of the Big Government Interventionists have been tested and tried. From Japan to Europe and back home again, they have not worked. We need to fix these deficit and debt to GDP ratios, or the global bond market is going to fix us.

 This morning you are seeing Greece's stock market test its lows from June 2010 when the European Fiats made a conflicted and compromised promise to the world that Piling more short-term Debt-Upon-Debt was the elixir of life. Apparently 8 centuries of Reinhart & Rogoff data has once again trumped political storytelling. This time isn't different.

 Why me? Why now? Shouldn't this be someone else's problem?

 I get that line of thinking, but I also get what wearing a team jersey means  - and, as legend USA Hockey Coach Herb Brooks said:

 "You're looking for players whose name on the front of the sweater is more important than the one on the back."

 Back to the construct of our intermediate-term global macro forecast...

1.       Growth Slowing

2.       Inflation Accelerating

3.       Interconnected Risk Compounding

 We don't have a choice but to do this now. European and Emerging Bond markets are telling you this and so are American Bond yields:

 1.       European Sovereign Debt Yields continue to make a series of higher-highs as concerns push rightly towards Spain and Italy. 

2.       Emerging Market Debt just had its worst month in 2 years (NOV down -2.9% on the EMBI Index with Brazilian and Russian weakness).

3.       US Municipal Debt funds just flashed their 2nd consecutive week of outflows, taking the 2-week total to north of $5 BILLION.

 Yes, we recognize that a BILLION or a TRILLION dollars isn't what it was to our grandparents, but these are still big numbers to consider on the margin. Remember, everything in global macro that matters happens on the margin.

Europe is unwinding at this very moment.  Can anything be done?  Probably not to save the European Union... let those of us on this side of the Atlantic take a long hard look in the mirror and turn our attention to our own Union and our own Republic.