Saturday, June 30, 2012

Why Isn't The World's Largest Firefighting Supertanker Being Used in Colorado?

Thanks to a reader for the heads-up.
It might be time for an executive order.
Here's Evergreen Aviation's 747:

Here is their response to queries:
Evergreen International Aviation Statement Concerning the Supertanker

We felt compelled to release this statement due to the overwhelming amount of calls we have
received concerning the availability of the Evergreen Supertanker. We at Evergreen are saddened
by the fire devastation now taking place in many Western US states. For over 60 years, we have
supported the US Forest Service in its important mission to battle and control fires, and it is our
desire to continue this rich history of service. While our helicopters continue to work fires for the
State of Alaska under State contracts, unfortunately, our Boeing 747 Supertanker Very Large Air
Tanker (VLAT) aircraft awaits activation with the US Forest Service.
We have never been told why we have not been activated by the US Forest Service, so we can
only speculate as to why we face this outcome:

1. We were offered a Call-When-Needed (CWN) contract a few years ago by the US Forest
Service (proving our technical viability), but we were never called into action resulting in
a multi-million dollar loss to our company as we were required to maintain and have
flight crew available should we be called. The only contract that will sustain a VLAT
program is an Exclusive-Use contract, which provides an income stream to sustain the
program even if the asset is not utilized. We invested over $50M to develop this asset in
the firm belief that we could better control fires as we proved in Israel and Mexico under
CWN contracts that we could afford to offer at the time....MORE

Risk: Map of Earthquakes Since 1898

Our amazing planet was a bit more effusive in their headline:
Stunning Map Reveals World's Earthquakes Since 1898
If you've ever wondered where — and why — earthquakes happen the most, look no further than a new map, which plots more than a century's worth of nearly every recorded earthquake strong enough to at least rattle the bookshelves.

The map shows earthquakes of magnitude 4.0 or greater since 1898; each is marked in a lightning-bug hue that glows brighter with increasing magnitude....MORE
(follow link for more detail)

article image

"The High Priestess of Fraudulent Finance"

From Smithsonian Magazine:
In the spring of 1902 a woman calling herself Cassie L. Chadwick—there was never any mention as to what the L stood for—took a train from Cleveland to New York City and a hansom cab to the Holland House, a hotel at the corner of 30th Street and Fifth Avenue internationally renowned for its gilded banquet room and $350,000 wine cellar. She waited in the lobby, tapping her high-button shoes on the Sienna marble floor, watching men glide by in their bowler hats and frock coats, searching for one man in particular. There he was—James Dillon, a lawyer and friend of her husband’s, standing alone.

She walked toward him, grazing his arm as she passed, and waited for him to pardon himself. As he said the words she spun around and exclaimed what a delightful coincidence it was to see him here, so far from home. She was in town briefly on some private business. In fact, she was on her way to her father’s house—would Mr. Dillon be so kind as to escort her there?

Dillon, happy to oblige, hailed an open carriage. Cassie gave the driver an address: 2 East 91st Street, at Fifth Avenue, and kept up a cheery patter until they arrived there—at a four-story mansion belonging to steel magnate Andrew Carnegie. She tried not to laugh at Dillon’s sudden inability to speak and told him she’d be back shortly. The butler opened the door to find a refined, well-dressed lady who politely asked to speak to the head housekeeper.

When the woman presented herself, Cassie explained that she was thinking of hiring a maid, Hilda Schmidt, who had supposedly worked for the Carnegie family. She wished to check the woman’s references. The housekeeper was puzzled, and said no one by that name had ever worked for the Carnegie family. Cassie protested: Was she absolutely certain? She gave a detailed physical description, rattled off details of the woman’s background. No, the housekeeper insisted; there must be some misunderstanding. Cassie thanked her profusely, complimented the spotlessness of the front parlor, and let herself out, slipping a large brown envelope out of her coat as she turned back to the street. She had managed to stretch the encounter into just under a half hour.

As she climbed into the carriage, Dillon apologized for what he was about to ask: Who was her father, exactly? Please, Cassie said, raising a gloved finger to her lips, he mustn’t disclose her secret to anyone: She was Andrew Carnegie’s illegitimate daughter. She handed over the envelope, which contained a pair of promissory notes, for $250,000 and $500,000, signed by Carnegie himself, and securities valued at a total of $5 million. Out of guilt and a sense of responsibility, “Daddy” gave her large sums of money, she said; she had numerous other notes stashed in a dresser drawer at home. Furthermore, she stood to inherit millions when he died. She reminded Dillon not to speak of her parentage, knowing it was a promise he wouldn’t keep; the story was too fantastic to withhold, and too brazen to be untrue. But she had never met Andrew Carnegie. Cassie Chadwick was just one of many names she went by....MORE

Dogbert on Competition


The Official Dilbert Website featuring Scott Adams Dilbert strips, animations and more
June 30

Last week pretty much covered the investment spectrum:

The Official Dilbert Website featuring Scott Adams Dilbert strips, animations and more
June 29

While June 26 and 27 took a look at Dogbert's Retirement Planning Service.

Nora Ephron: My Life as An Heiress

The woman could write.
From the New Yorker:

My Life as an Heiress
The will that wouldn’t
I never knew why my mother wasn’t close to her brother, Hal. I can guess. It’s possible that he didn’t help out financially with their parents. It’s possible that she didn’t like his wife, Eleanor. It’s possible that she resented forever the fact that her parents had found the money to send him to Columbia but made her go to a public college. Who knows? The secret is dead and buried.

In any case, I grew up without meeting my uncle Hal. We lived in Los Angeles, and Hal lived in Washington, D.C., with the aforementioned Eleanor. They were both government economists, and then, in the fifties, they quit. There were rumors of left-wing affiliations. My parents, who were screenwriters, had never been further to the left than socialism, but these were the blacklist years. They knew a dozen people who had named names, and they also knew at least two of the Hollywood Ten, plus a few they claimed would have gone to jail, along with the Ten, had there been Eleven, or Twelve. My parents were worried that rumors of Hal and Eleanor’s left-wing affiliations would reach all the way to California and bite them, and, apparently, that was exactly what happened, although without any real damage. One day, they were called into the office of Spyros Skouras, an old Greek who was running Twentieth Century Fox. Skouras waved a piece of paper about Hal at my mother and said, “Phoebe, vy you a Communist?” My mother explained to Skouras that she was not a Communist, and that was pretty much the end of it.

By the time I was in college, my uncle Hal and Aunt Eleanor were no longer anywhere near Communism, if they’d ever been: they were in real estate, and they were very, very rich. In 1961, when I was in Washington for a political internship, they took me to Duke Zeibert’s for dinner. Hal was a sweet, lovely man, and Eleanor was a pistol. She had a long, horsy face and blondish hair, and she loved a laugh. On weekends, I would go stay at their house in Falls Church, a splendid new place they’d built as part of a large development. Eleanor and Hal had no children, but they had lots of houses—they bought them and sold them without looking back. They owned art, and Chinese antiquities, and Persian rugs, and their house was run, magnificently, by a housekeeper named Louise. I mention Louise for a reason, as you will see....MORE

Showoff: Tronox Initiates $1.25 Dividend, Announces 5:1 Split, Stock Buyback (TROX)

Yeah but what have you done for me lately?
(the stock was down 3% to $120.72 on Friday)
From Barron's:
Titanium producer Tronox Ltd. (TROX) on Friday declared a dividend of $1.25 per Class A and B shares, saying it plans to continue that dividend on a quarterly basis, payable August 13 to shareholders as of July 13.

Tronox also said its board approved a 5-to-1 stock split in which holders of Class A and B shares as of July 20 get 4 additional shares for each share of the same class by way of bonus issue, as well as the repurchase of up to 2.5 million Class A shares in open market transactions.

“While we have considered issuing a special dividend as a way to return capital to shareholders, we believe our stock is undervalued at the present trading levels and therefore the best use of corporate resources is to invest in ourselves at these prices by repurchasing our shares,” said Tom Casey, Tronox chairman and CEO, in a statement . “We intend to begin this program as soon as practical and expect to be purchasers of our shares for as long as and in amounts that we believe will create value for our shareholders....MORE
On Tuesday UBS initiated with a "Buy".

"Real Housewives of Beverly Hills" Mansion in Fiery Blaze Firefighter Seriously Hurt

Taking off the academic hat here's E! Online:
Lisa Vanderpump "Emotional" About Fire at Former Mansion
Although the mansion is no longer hers, Lisa Vanderpump said she was "pretty emotional" when she heard her former Beverly Hills home was on fire.

"I'm shocked, really," the Real Housewives of Beverly Hills star told KCAL-TV. "It's been an incredible journey coming to America and living there. My daughter got married in that house, so I'm pretty emotional about it even though I sold it a few months ago."...MORE
The Daily News has the story:Fire

Gawker has the reaction of her fellow Housewives.
Here's the house via Zillow:
We now return to our regularly scheduled programming.

Updated--Leon Cooperman: "A Case Study in Financial Brilliance: Dr. Henry E. Singleton of Teledyne Inc."

Update: A reader emails the 9-page rebuttal that Mr. Cooperman sent the editors of BusinessWeek regarding the story I mentioned. Thanks.
Original post:
On May 31, 1982  BusinessWeek ran a cover story on Teledyne. Among other sins, the story accused Mr. Singleton of milking the TDY operating companies to play the market, accumulating a pretty large portfolio for the company.
Ten weeks later the 18-year Great bull market began.

Mr. Cooperman spoke to the New York Society of Security Analysts on Thursday evening.
From the NYSSA's Value Investing Committee:
The presentation will profile the strategy of the late founder of Teledyne, Inc., Dr. Henry E. Singleton. In particular,  it will review Dr. Singleton's corporate and share buyback strategies.

Warren Buffett considers that Henry Singleton of Teledyne has the best operating and deployment record in American business. Leon Cooperman knew Dr. Singleton very well and thus is uniquely qualified to explain his strategies. Attend this program to better understand true corporate value creating strategies and learn criteria for assessing share buyback strategies.

Who should attend
Fund managers and executive officers.
Leon G. Cooperman retired from his positions as a general partner of Goldman, Sachs & Co. and as chairman and chief executive officer of Goldman Sachs Asset Management at the end of 1991 after 25 years of service in order to organize a private investment partnership, under the direction of Omega Advisors, Inc. At Goldman Sachs, Cooperman spent 15 years as partner and from 1990–1991, as of counsel to the Management Committee. In 1989, he became chairman and chief executive officer of Goldman Sachs Asset Management and was chief investment officer of the equity product line including managing the GS Capital Growth Fund, an open-end mutual fund. Prior to those appointments, Cooperman spent 22 years in the Investment Research Department as partner-in-charge, co-chairman of the Investment Policy Committee and chairman of the Stock Selection Committee. For nine consecutive years, Cooperman was voted the number one portfolio strategist in the Institutional Investor All-America Research Team survey. Cooperman received his MBA from Columbia University and his undergraduate degree from Hunter College.
Here's an earlier version of the presentation:

Leon Cooperman Value Investing Congress-Henry Singleton

Natural Gas, A Disappearance at Sea and a $2 Billion Fortune

From Forbes, June 28:
The Tragedy Of Guma Aguiar And A $2 Billion Texas Gas Fortune
In 2003, a 26-year-old man arrived in Houston to look for hidden oil and gas reserves. Guma Aguiar had next to no experience in exploration, but he had been dispatched by his uncle, Thomas Kaplan, an Oxford-trained historian turned natural resources investor. Kaplan had a hunch that oil and gas prices would soon skyrocket, and that technological breakthroughs would provide additional opportunities for  production, even in a well-explored area like Texas.
In Houston, Aguiar met with John Amoruso, a top-notch geologist, who explained to Aguiar his theory on drilling in the deep Bossier sands of East Texas. Amoruso was convinced large quantities of natural gas could be found there because the sand was thick, the very type of high-pressure formation, Amoruso reasoned, that was conducive to the development of natural gas deposits.

Aguiar told Kaplan about the meeting and arranged for his uncle and Amoruso to meet in Tampa, where Kaplan came to believe that Amoruso was on to something. For the next year or so, Kaplan financially backed  an effort that involved Aguiar working with Amoruso to identify and purchase gas leaseholds rich in deep Bossier sand, accumulating 30,000 contiguous acres in what would later be known as the Amoruso field. Kaplan set up Leor Energy and installed Aguiar as its CEO, forming a joint venture with Encana, Canada’s biggest natural gas company, and Goldman Sachs. When Encana finally drilled the field it found 2.4 trillion cubic feet of gas and the Canadian company in 2007 bought up all of Leor’s assets in the field for $2.55 billion.

Last week, at the age of 35, Aguiar got in his 31-foot boat and ventured out into the Atlantic Ocean off the coast of Ft. Lauderdale, Florida. He has not been seen since and the search for him has been called off. His boat was found on a Ft. Lauderdale beach last Wednesday with its lights on and its twin outboard engines running. Aguiar’s cell phone and wallet were found on the boat.

The Amoruso gas find was a great American discovery, but it produced nothing but tragedy for Aguiar. It tore up his family, resulting in a battle that has included nasty lawsuits over $2 billion of proceeds from the natural gas sale, causing a rift between Aguiar and Kaplan. It also destroyed Kaplan’s relationship with his sister, Ellen Aguiar, who is Guma Aguiar’s mother. Ellen also became involved in the family fight, launching a lawsuit against her billionaire brother that remains ongoing. Kaplan, who is president of  Manhattan’s 92nd Street Y and is a big philanthropist for Jewish causes as well as conservation efforts for endangered cats, has long denied any wrongdoing and has so far overwhelmingly won the legal battles. Aguiar, meanwhile, descended into mental derangement amid the fights for the gas fortune. His wife, Jamie Black Aguiar, even sued him weeks before his disappearance to try to get access to some of the natural gas prize. Now, Jamie and Ellen are fighting over it....MUCH MORE
Yesterday the New York Daily News picked up the story with an almost 19th Century style:

Aguiar wife and mother clash in court: Compromise over missing millionaire Guma’s $100 million estate could give Northern Trust conservatorship 

Missing tycoon's assets prompt family fight, tears in courtroom drama. The wife, Jaime, called the mother's petitions 'premature.' Guma's mother said Jaime asked for a divorce in the hours just before her son went missing.
The mother of vanished Florida tycoon, Guma Aquiar, has won a legal battle against his wife over control of the missing man’s $100 million estate.

Ellen Aguiar filed a petition seeking control of 35-year-old Guma Aguiar’s assets last week, before the U.S. Coast Guard even called off the search for her son. He was last seen taking his fishing boat out on June 19. It washed ashore on a Fort Lauderdale Beach hours later, empty and with no sign of Guma.

In her petition, filed on June 21 in Broward County Court, Aguiar, 59, originally sought to be the sole conservator. She later revised the documents, requesting Northern Trust assume control, the Sun Sentinel reports.
On Thursday in the same court, 10 lawyers tentatively agreed that Northern Trust should oversee most of Aguiar’s estate. The judge plans to consider the proposal by Tuesday, when the bank is expected to accept control.

Jaime Aguiar, Guma’s wife, had also filed a petition seeking conservatorship, on June 22, according to the newspaper.

 Guma Aguiar was last seen taking his fishing boat out on June 19.

In the document, she called her mother-in-law’s filing the day before “wholly premature,” as her husband had been missing for less than 48 hours. She says that the filing was the only way to “protect the interest of herself and her children from what is sadly the latest in a long line of Ellen Aguiar’s pervasive, persistent, and ill-advised attempts to disrupt the home life of Jamie, Guma, and their children and seize control of their finances.” 

Jamie also alleges Aguiar had interfered with the police investigation of her missing son, by possibly deleting “critical voice and/or text messages” from Guma’s phone, the petition states.
When her husband’s possible death was discussed on Thursday, Jaime reportedly fled the courtroom in tears....MORE

Friday, June 29, 2012

China, Robotics and I

I haven't figured a way to make money off of the robot manufacturers (other than ISRG which isn't even my idea) so this may be a situation where the users of the robots get just enough incremental advantage that compounded over time allows them to own their markets.

The usual suspects like ABB and Fanuc, Dover or even Immersion don't really attract.
 (ABB is superior for other reasons though).

So, like nano tech figure out who integrates the concept into their product offerings best, Caterpillar and Deere come to mind, or into their manufacturing  processes.
Anyhoo, from ZeroHedge, who's been on a roll today:

I, Not Robot: Why The Rise Of SkyNet Leads To Automatic Unemployment For The People
With so much hollow and pointless discussion over the past week, month and year over such fundamentally trivial things as who will inject more money faster, who will be bailed out first, who will go back to their own currency before everyone else, it is easy to forget that reality actually matters. And the reality is not who has their CTRL-P macro stuck, but what does the future of the world truly hold when one sidesteps such idiotic flights of fancy that debt may be cured with more debt. In order to completely change the topic from what has become trivial and generic - i.e., the various encroaching forms of central planning: Fed, SCOTUS, G-8 through G-20; European Finance Ministers, and now, with the ESM passing German parliament, the German Constitutional Court, we focus on something few have discussed, yet all have a morbid fascination with: Robots... And China. And why the combination of the two just may be the most dangerous thing for China's several hundred million strong migrant labor force, which, on the margin may just be the deciding factor defining the engine of global growth for the next decade. Oh, and did we mention global structural unemployment which will only get worse as increasing automation leaves more and more millions collecting their 99 weeks of extended unemployment benefits.

And since we have written far too much this week, we will let the charts do most of the talking.
Machinations and autobots, and unmet Chinese markets:

Robots and unemployment: correlation or causation?

Finally, here is why China better have learned all the tricks of the labor market manipulation trade from the BLS. It will need it....MUCH MORE

Market Indicators: Which Way Are the Model's Nipples Pointing?

Via Jason Zweig at the Journal's Total Return column:
...Chung has said he was inspired partly by word of a London trader who makes bets based on which direction the nipples of the daily bikini model are pointing on Page 3 of the British tabloid newspaper the Sun....
I, Robot, Am a Stupid Trader

"Dematerialization, smart phones, and smart grid"

From Knowledge Problem:
Do you have a smart phone? If so, list the functions you use on it: phone, camera, video camera, alarm clock, calculator, notepad, address book, maps, music player, and so on. This list scratches the surface, and your list probably differs from mine. One small device that fulfills many roles, substituting for several devices.
As Marian Tupy points out today in a Cato@Liberty post, the smart phone is a versatile, powerful device that is also good for the environment because its substitutability for so many things contributes to dematerialization. Dematerialization is the process of using fewer physical resources (materials and energy) per unit of output or unit of economic activity. As she notes,
Dematerialization, in other words, should be welcome news for those who worry about the ostensible conflict between the growing world population on the one hand and availability of natural resources on the other hand. While opinions regarding scarcity of resources in the future differ, dematerialization will better enable our species to go on enjoying material comforts and be good stewards of our planet at the same time. That is particularly important with regard to the people in developing countries, who ought to have a chance to experience material plenty in an age of rising environmental concerns.
The post also has a way-cool graphic to reflect this idea; go check it out!...MORE

Barclays: Fade the Euro Rally, Bro, (EUR/USD)

EUR/USD 1.2656.
Following up on this morning's "Euro Just Pips Away from a Short Term Top (EUR/USD)".
From ZeroHedge:

Barclays On The Rally: "Fade It", Because The Summit Is "Not A Game-Changer For The EUR"
With everyone scrambling to buy into the bathsalts rally, and shorts rushing to cover with a panic bordering on a QE-announcement, it is somewhat ironic that today's voice of muted reason comes from none other than Liebor expert extraordinaire: Barclays, whose suggestion is simple: lock your profits: "We remain bearish on EURUSD, expecting it to grind slowly down to 1.15 over the next 12 months. We therefore suggest investors look to fade this morning's European currency strength versus the USD and non European commodity currencies such as the AUD and CAD." Why? They have their listed reasons. The unlisted ones are the same that every other bank has for becoming bearish recently (we have recently listed Citi, Goldman, SocGen and DB to name but a few): for a real fiscal and monetary policy intervention to take place (i.e., a rescue package that lasts at least a few months, as opposed to today's several day max rally): the market has to be tumbling. That, as we have explained repeatedly, is the only way to get a powerful response. Everything else is (quarter end) window dressing.
From Barclays:
EUR: EU Summit is not a game-changer for the EUR

Very little progress, if any, on short-term measures was expected from this week's EU summit. However, the conclusions, so far, have exceeded expectations. Risk has rallied as a result. We expect the general improvement in sentiment to have legs because the measures announced tackle the dislocation in the banking sector. Also, later today further agreements on the roadmap towards fiscal integration are possible.  We suggest investors remain long cyclical, non European currencies, such as the AUD versus the USD....MORE
I swiped the headline locution from yesterday's FT Alphaville:
Transacting at Libor, bro

Trades We Didn't Make: Constellation Brands Calls Up 1625% in a Week ()

From Phil's Stock World:
Cheers to traders that got long call options on beer distributor Constellation Brands prior to- and following reports AB InBev NV may purchase the rest of Grupo Modelo SAB for $20.1 billion. Constellation’s shares spiked 14.0% on Monday with deal-chatter a-brewing and exploded to the upside today on news the company will purchase the other half of Crown Imports, a joint venture with Grupo Modelo, making Constellation the sole U.S. importer of Corona and Crown’s other brands.

Shares in STZ jumped nearly 26% today to a new 5-year high of $27.40, driving up the value of Constellation Brands call options. One Monday we noted the purchase of around 1,500 of the July $20 strike calls, initiated back on Friday, June 22nd, at $0.40 per contract. The big move in the stock on Monday saw the value of the contracts increase five-fold over the weekend to $2.30. Today it looks like the value of the long $20 strike call position is up 1,625% over the original purchase price based on the call’s last traded price of $6.90....

Oil Jumps 9% Dashing Dreams of Short Sellers, Normal Folks

 "The market has been all over the place recently."
-Stephen Schork
June 29, 2012

Mr. Schork is one of the best analysts in the business.
WTI was recently changing hands at $84.81 up $7.12 on the day and just in time for the Independence Day holiday.
From Bloomberg:
Oil gained the most in more than three years on optimism that Europe’s debt crisis may be contained after leaders agreed to ease repayment rules for emergency loans to Spanish banks and relax conditions on help for Italy.

Futures rose 9.4 percent, trimming the biggest quarterly decline since the final three months of 2008, as leaders of the 17 euro countries dropped requirements that taxpayers get preferred creditor status on aid to Spain’s banks. Prices also gained because a European Union ban on the purchase, transport, financing and insurance of Iran’s oil starts in July.

“The market is gathering momentum and should end the quarter strongly,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Expectations that the meeting would end in failure had been baked into the market, so the European agreement has been met with relief.”
Oil for August delivery gained $7.27, or 9.4 percent, to $84.96 a barrel on the New York Mercantile Exchange, the biggest one-day rally since March 12, 2009. Prices are down 14 percent this year and dropped 18 percent this quarter....
...Technical Analysis
Prices may rebound to as high as $90 a barrel if they hold above a support level near $75, according to technical analysis from Oil may rise 20 percent from the one-year intraday low of $74.95 touched in October, said Rich Ilczyszyn, chief market strategist and founder of in Chicago....MORE

Maybe Goldman Won't Be Going Private: "S&P Capital lifts Goldman to buy from hold" (GS)

When we posted "Time For Goldman to Go Private (GS)" the stock was at $90.95. Right now it's changing hands for $95.38. That's a decent move in 96 hours.
From MarketWatch:
Analysts at S&P Capital on Friday upgraded Goldman Sachs Group Inc. GS +1.99% shares to buy from hold but trimmed their price target for the Wall Street investment bank to $115 a share from $130. "Our buy opinion is based on our expectation of improving capital markets in the second half of 2012 continuing into 2013, with Goldman Sachs gaining share," the company said.

Natural Gas Rig Count FELL by 7 Last Week

We've been talking a number in the high 400's for the market to really believe E&P's are serious about cutting the glut.
The industry is getting there but any stall in the decrease would be bad news, bulls.
Considering the high initial production of shale gas wells, they have to stop bringing new wells onstream, at least for a while.
From Reuters Africa:
The number of rigs drilling for natural gas in the United States fell to a record 13-year low this week, oil services firm Baker Hughes said in its weekly report on Friday.

Low prices are behind the drop in the gas-directed rig count, which fell for the sixth straight week. It was down by 7 to 534 in the week to June 29, data from the Houston-based firm showed.

The gas rig count is about 43 percent lower than the peak it reached in October last year at 936 rigs. There were 38.9 percent fewer rigs drilling for gas this week compared with a year earlier. (Graphic:

The months-long drop affirms expectations that producers may be curbing dry gas production.
However, monthly data from the U.S. Energy Information Administration (EIA) showed natural gas output in the Lower 48 states rose for the first time in three months in April....MORE

EIA: Natural Gas Production ROSE in April

The futures are up 4.3 cents at $2.765.
We've been talking about how difficult it is for producers to actually cut production for reasons ranging from their need for cash flow from recently completed (and paid for) wells to gas as a "byproduct" of their search for higher value liquids to the ponzi finance of current life-cycle projections to wells awaiting completion and//or hook-up.

Any cuts in the demand side, combined theproven reluctance of producers to actually shut in production has them exceeding the 4.1 Tcf capacity of storage by October.

Here's Reuters
Lower 48 US April natgas output climbs, 1st gain in 3 mths
Gross natural gas production in April in the lower 48 U.S. states rose for the first time in three months, climbing 0.8 percent from March, data from the U.S. Energy Information Administration showed on Friday.
Lower 48 "wet" gas output in April totaled 72.48 billion cubic feet per day, up 0.56 bcf per day from upwardly revised March output of 71.92 bcf daily, the EIA said in its monthly Natural Gas Gross Production Report.
The EIA's previous estimate for March was 71.76 bcf per day.

And here's the EIA:
Natural Gas Monthly

Data for April 2012  |  Release Date:   June 29, 2012  |

Who's A Big Beneficiary of U.S. Fracking? The Canadian Tar Sands (SU)

I just made a couple heads explode among my friends on the far left.
From Reuters:
Canada's tar sands unexpected winner from fracking
Soaring output of light condensate in the United States has crushed refining margins for naphtha and added to the global gasoline surplus.

But it is also providing a boost to Canada's oil industry, which increasingly benefits from a captive source of the diluent needed to make bitumen and heavy oil flow through processing facilities and pipelines.
In the past two years, collapsing gas prices have forced drilling companies in the United States to shift from targeting dry gas fields to liquid-rich plays containing a mixture of gas and more valuable crude oil and condensate to keep paying the bills.

The result has been an upsurge in output of very light liquid fuels variously described as light condensate, drip gas, pentanes plus or natural gasoline, which compete head one with the light naphtha traditionally produced by oil refineries, an essential component in the production of both motor gasoline and petrochemicals.
The sudden increase in availability of light hydrocarbons like pentane (which has five carbon atoms) and hexane (six carbon atoms) has crushed refining margins for light naphtha in North America, and added to downward pressure on the naphtha market worldwide.

It is also worsening the global refining imbalance, which is producing too much gasoline and not enough diesel, pushing gasoline prices to a discount and worsening the outlook for older refineries in North America and Europe.

As U.S. prices for naphtha and natural gasoline fall, more and more of the surplus condensate is being exported to Canada for use in the production and transportation of bitumen and heavy crude oils, where it is being added as a diluent to improve viscosity and help them flow more easily through the processing and pipeline system.

In the first three months of 2012, the United States exported 10 million barrels of "pentanes plus," almost all to Canada, compared with less than 1 million barrels in the corresponding period last year, according to the Energy Information Administration (EIA), the independent statistical arm of the U.S. Department of Energy....MORE
See also:
The Coming Glut in Natural Gas Liquids (CHK; APA; APC; EOG)

Natural Gas Liquids at the Peters & Co. Limited 2012 Energy Conference

Suncor is the largest producer along with Syncrude (of which they are an owner) in the Athabasca Tar Sands. Here's Syncrude's ownership:

...The Syncrude Project is a Joint Venture undertaking among Canadian Oil Sands Partnership #1, Imperial Oil Resources, Mocal Energy Limited, Murphy Oil Company Ltd., Nexen Oil Sands Partnership, Sinopec Oil Sands Partnership and Suncor Energy Oil and Gas Partnership, as the project owners, and Syncrude as the project operator. Syncrude’s Mildred Lake facility is located 40 kilometres north of Fort McMurray....

Euro Just Pips Away from a Short Term Top (EUR/USD)

Currently 1.2679.
With the jubilation coming out of Brussels, Berlin and Athens the short squeeze has had a lot of power but we are nearing the June 15 and 20 resistance.
From Alpha Global Investors:

See also June 18ths:
Chartology: What's Up With the Euro?
ehich highlighted the May 2 bottom and trend reversal

Pssst--Nomura's Bob Janjuah is Bearish (S&P to 1000) But first We Go Up

The index is at 1353.72.
Lifted in toto from ZeroHedge:
Bob Janjuah on The S&P Trek From 1,400 To 1,000 To 800
Between 'Twist+', his belief that Germany will 'blink' leaving any eurozone breakup/exit unlikely this year, and confidence that the US (Fed) and China (fiscal and monetary) will attempt once again to pump things up, Bob Janjuah (of Nomura) expect to see a risk-on phase that lifts the S&P - possibly climbing the wall of worry back up to the 1400s by late July or early August. His stop-loss (which would be very bearish in his view) is a weekly close under 1267 for the S&P. And then? He would look to position for an extremely bearish risk-off phase over late August through to November or December. The drivers of this extremely bearish expected phase are not new: overly bullish positioning and sentiment; weak global growth, not just in the eurozone but also in the US and the BRICs; the next leg of crisis in the ongoing eurozone debacle in my view; and of course the looming US fiscal crisis, which in Bob's view is not even ‘slightly’ priced into markets, but where he feels the probability of a crisis is close to 75%.
From Bob's latest missive:
Hopefully by year-end US sell-siders will realise that blaming the eurozone crisis for everything that is going wrong in the US has been a serious error, which has resulted in them being blind-sided to the other real ‘gorilla’s in the room’ – namely the US debt/fiscal weakness, and the hard landings now beginning in the BRICs.

My forecast for this extremely bearish risk-off phase over late Q3 and Q4 is that the S&P500 trades below the low of last year, perhaps as low as 1000 +/- 20. The iTraxx Crossover index should over that period widen from around 550/600bp (my end July/early August risk-on target) out all the way to certainly 800bp, and more likely closer to 1000bp. And we should see core bond yields rally hard – I expect 10yr UST yields to rally from my 2.35%/2.45% end July or early August target, all the way down to 1.5%, maybe even lower.
Into 2013-14, I am still concerned that my long-standing 800 S&P500 target will be hit, but it will not be a straight line. In December or early 2013, I expect Bernanke to give us a substantial dose of QE3, in response to the growth and fiscal crisis that I expect the US to be suffering from at that time. This QE3 will provide a short but sharp risk-on relief to markets. But as I forecast, once its ‘benefits’ subside (in weeks) it will be the failure of this QE3 to ‘fix’ things that, I fear, will open the door to 800 S&P. I will write more on this issue later this year.

For now, I recommend using the next 4-8 weeks of risk-on to trade tactically, to put in place long volatility trades and other portfolio hedges, and to lighten up on risk.

Japan Makes Huge Rare Earth Find

Japan has taken the rare earth sector very seriously since prices spiked ten-fold a couple years ago, some of our links are below the jump.
From the WSJ's Japan Real Time blog:

Clear As Mud: The Answer to Japan’s Rare Earth Concerns
Amid mud on the seabed 2,000 kilometers from Tokyo, Japan may have found the answer to its rare-earth supply concerns for centuries to come.

For the first time, Japanese explorers have discovered large deposits of rare-earth minerals on the ocean floor within the country’s exclusive economic zone.

The researchers estimate about 6.8 million metric tons of rare earth minerals, including dysprosium, exist in the mud across a 1,000-square-meter seabed near Japan’s easternmost island, Minami-torishima, about 2,000 kilometers southeast of Tokyo.

The volume is impressive: The recoverable minerals could be enough to supply Japan’s rare earth metal consumption for at least 200 years, team leader Yasuhiro Kato, an earth sciences professor at Tokyo University, said on Friday.

The underwater discovery of the minerals – a centerpiece in rising global trade tensions with China – could be a valuable boon for Japan. In March, Asia’s second-largest economy joined an international trade action lodged by the U.S. and European Union against China, which produces more than 95% of the world’s rare earth supplies over curbed exports of the minerals....MORE
Oct. 2010 
"Japan Scrambles for Rare Earth" (AVL.TO; LYC.AX; MCP) 600111: Shanghai
Oct. 2010 
"Japan's rare earth minerals may run out by March" and Japan to Mine Sewage Sludge, E-Waste for Precious and REE Metals
July 2011 
Rare Earths: Japan Finds Huge Undersea Deposits; German Industry Dubious; Stocks Droop (AVL; MCP; REE)
Stocks trade generally mournful and reflective.
In early premartket, Molycorp is down, $1.54 (2.57%) at $58.30, Rare Element is down 2.65% at $10.64 and Avalon is down 2.92%
Auspicious update, below.
Sept. 2011 
Predictions: Rare Earth Demand 2015-2020 (MCP; REE; AVL)

Of Playboy Playmates and 'Genius' Visas

From Reuters:

U.S. 'Genius' visa attracts entrepreneurs and Playmates
Shera Bechard, the Canadian-born former girlfriend of Playboy Enterprises founder Hugh Hefner, would not be an obvious candidate for the special visas that the U.S. government reserves for "individuals with extraordinary ability."

Playboy magazine named Bechard Miss November in 2010, and she also started an online photo-sharing craze called "Frisky Friday." Neither seems quite on the level of an "internationally recognized award, such as a Nobel Prize," which the government cites as a possible qualification.
But Los Angeles immigration lawyer Chris Wright argued that Bechard's accomplishments earned her a slot. The government ultimately agreed.

That kind of success has put Wright on the map as the go-to visa fixer for both Hollywood and Silicon Valley. It also highlights the use of so-called genius visas known as O-1s and EB-1s, which have largely escaped political controversy and are now the immigration solution of choice for many entrepreneurs....MORE

Thursday, June 28, 2012

In Other News: "Shatner drops pants at L.A. airport"

From the Toronto Sun:
Star Trek legend William Shatner was left nursing a bruised ego when his trousers fell down during an airport security check in front of dozens of fellow travellers.

The actor was queuing at Los Angeles International Airport to catch a flight to South Africa when he was singled out for a search by officials.

He had decided to wear loose-fitting clothing for the journey and did not have a belt holding his pants up - and he was left red-faced when they fell down, exposing his underwear....MORE
The story does not report whether Mr. Shatner was singing his smash, #1 hit (truth, the CD debuted #1 on Billboard's Heat Seekers chart) Iron Man cover at the time (Zakk Wylde, ex Ozzy guitarist played guitar and did a vocal on this track.):

The World's Economic Center of Gravity: A.D. 1 to 2025

From The Economist:
IT IS not exactly news that the world's economic centre of gravity is shifting east. But it is striking how fast this seems to be happening. In a new study on the economic impact of urbanisation the McKinsey Global Institute, the research arm of the eponymous consultancy, has attempted to calculate how this centre of gravity has moved since AD 1 and how it is likely to move until 2025....MORE

LIBOR: the FT and Gillian Tett get a "Well Done" from the Columbia Journalism Review (WSJ too)

From the CJR's The Audit:
The Libor lie unravels
A big win for the business press
Way back in September 2007, the Financial Times’s Gillian Tett started raising questions about the benchmark London Interbank Offered Rate—Libor—a critical benchmark that measures how much banks charge to lend to each other.
Tett noted that:
In particular, the recent turmoil is prompting suggestions that Libor is no longer offering such an accurate benchmark of borrowing costs as before…

“The Libor rates are a bit of a fiction. The number on the screen doesn’t always match what we see now,” complains the treasurer of one of the largest City banks.
…some have been refusing to conduct trades at all at the official, “posted” rates, even when these rates have been displayed on Reuters.
In April 2008, after Bear Stearns collapsed, but before Lehman Brothers went broke, The Wall Street Journal’s Carrick Mollenkamp reported that the “growing suspicions about Libor’s veracity suggest that banks’ troubles could be worse than they’re willing to admit” and raised questions about whether they were deliberately manipulating the rate....MORE
And in today's FT:
Libor affair exposes big conceit at heart of banking
Gillian Tett

Gold Nears Lows For the Month

From Bespoke Investment Group:


Silver Down 3%, Hits 2012 Low (and going lower) SLV

This is a market which has fascinated and dumbfounded me for many years. From our Jan. 3, 2012 post "Lines on Charts: Silver":
Silver futures are trading at $28.875 up $1.005.
I happen to know something about this market and because of that very rarely post on it.*
From Nifty Charts (that's Nifty as in the Indian equity index)...
...If China's economy implodes you can kiss that $26 support goodbye and look for a $16 handle....
It has also supplied me with one of the great (little known) investing quotes of all time. From 2009's "How to Break a Market Corner: Breeding Breakthrough Helps Sushi Baron Create Sustainable Tuna":
*In January 1980, as the Hunt Brothers were gunning the price of silver toward it's historic high, the CEO of one of the world's largest trading firms said "Those boys don't know what deep pockets are", rather an amazing statement when talking about billionaires.
Within 48 hours both U.S. silver futures exchanges had gone "Liquidation only", the corner was broken and the Hunt's had lost their fortunes.
I'll leave it to you to guess the CEO.
At the time the Hunt boys were worth around $6 Billion.
Here's today's story, from MarketBeat:
Silver Prices Slide to 2012 Low; Watch That $26 Level
Silver continues to take its lumps today, dropping about 3% and hitting a 2012 low. At least one investor thinks the carnage in silver prices could continue into the end of the quarter.

Silver, as well as gold, have been hit hard today amid worries of slowing global economic growth and Europe’s debt crisis. The threat of slowing industrial demand for silver is weighing heavily on prices.
Silver was recently down 3% at $26.135 an ounce. Prices are down about 30% since peaking in late February.

Michael Shaoul, chairman of Marketfield Asset Management in New York, notes silver has been in a long-term downtrend since the middle of last year, and prices are pressing against a “key support level” that has been in place for about a year and a half....MORE
Some of our 2012 silver posts:

Jan 29, 2012 
Silver Closing the Gaps, Look Out Below (SLV)
Jan 30, 2012 
Silver ETF: "SLV Near Triple Resistance"
Feb 2012 
Warren Buffet and the Great Silver Market Corner of 1998 (BRK.B)
May 18, 2012 
Dear Silver Bugs: There are a Billion Ounces of Supply Coming on the Market This Year

And many more in prior years.

Natural Gas: "Third Avenue Management Comments on Devon Energy Corp" (DVN)

Devon is one of the class acts of the Nat biz. See May 1, 2012: "Natural Gas: "Devon Energy: Undervalued, Underrated" (DVN)":
This month we will be looking at some of the classier Exploration&Production companies.
Unless you have a five year timeframe it is still too early to make major commitments but we will be referring back to these commentaries later this year.
The stock close at $69.85 on Monday....
The stock is changing hands at $55.82 today.

Third Avenue Management is a deep value, even distressed, investor running $15 Bil in a handful of mutual funds and separate accounts. The recently got a new president:
 David Resnick, chairman of global financing advisory at Rothschild North America Inc., is leaving the investment bank to become president at Third Avenue Management LLC, said four people familiar with the matter....

From Gurufocus:
From Marty Whitman's second quarter 2012 letter:

As discussed in last quarter's letter, a new position was initiated in Devon Common (DVN). We added modestly to the position this quarter. Devon Energy Corp. is an Oklahoma-based oil and gas exploration and production company. In April, I attended the presentation of Devon's CEO, John Rickels, at the IPAA Oil and Gas Investor Symposium in New York City. The highlight was the company's discussion of its long-term growth outlook: production is projected to increase from 240 million barrels of oil equivalent ("BOE") in 2011, to 340 million BOE by 2016, representing a 7% annual growth rate. This growth is projected to be driven by high margin oil and natural gas liquids ("NGLs") annual growth of 16% to 18%, while natural gas production declines slightly. The company should retain a very strong financial position throughout this period, as most of the growth is expected to be funded by operating cash flow (the company expects to use only $1.5 billion of its $7 billion in cash over this period).

In early May, Devon reported first quarter results that showed significant progress. The company generated 10% year-over-year production growth, driven by increases in oil and NGLs production of 26% and 21%, respectively. The company's Jackfish oil sands projects in Canada generated a 55% increase in production, while oil production in the Permian basin in Texas, which has been revitalized by the application of horizontal drilling technology, increased 32%. The primary negative factor was low natural gas prices, which declined 35% to $2.34 per thousand cubic feet equivalent ("mcfe"). Fortunately, Devon's realized price was $3.02 owing to gains from its hedges, and the company has about 40% of its natural gas production hedged at $4.42 per mcfe for the balance of the year....MORE

From the Democratic National Committee: 'it's constitutional. Bitches.'

Via Politico:
How the DNC is celebrating (Updated):
 ..the SCOTUS ruling, in three words, from executive director @patrickgaspard:
'it's constitutional. Bitches.'
Over to you, RNC...

UPDATE: In a more somber tweet a few minutes ago, Gaspard curbed his enthusiasm:
"I let my scotus excitement get the better of me. In all seriousness, this is an important moment in improving the lives of all Americans."
This has apparently caught some people's attention:
@petemichaelson he's the executive director of the DNC. i thought it note-worthy that he tweeted that. you dont?

Psychiatric Hospital Operator Jumps on Obamacare Ruling (UHS)

The stock is up $4.99% at $41.21.
Here's Barron's from February:
A Different Kind of Hospital Stock 
Hurt by a weak economy and worries about cuts in government health-care spending, hospital stocks lost a lot of luster last year.

And Universal Health Services (ticker: UHS) got tarnished right along with the rest. Though up 29% since October, the stock, trading at less than $42 a share, sits 27% below the multiyear high it reached last May and has fallen further than rivals LifePoint Hospitals (LPNT), Community Health Systems (CYH) and HCA Holdings (HCA), as well as the broader AMEX Morgan Stanley Healthcare Provider Index.

But don't be scared. Universal isn't your ordinary hospital operator – a fact overlooked by many investors.

It's the only hospital company that pays a dividend (albeit a modest one). While its peers focus on surgical centers and traditional acute care hospitals, Universal gets roughly two-thirds of its operating profit from a string of psychiatric facilities, and it is outgrowing the rest of the industry.

"At the moment, we are being valued as if we are simply an acute care company, which entirely overlooks how our behavioral health business is performing," says Chief Financial Officer Steve Filton, during an interview with
Business is booming.

(for the record, the other hospital stocks are also up)

Perhap I Was Too Tough On Mayor Bloomberg and His Home Air Conditioner Equipped SUV's

Thanks to a reader.
Following up on Yesterday's "Mayor Bloomberg Hooks Home Air Conditioner On SUV" it  appears there is quite a long history of politicians getting into the personal comfort arena.
From the Los Angeles Times, March 31, 2007:

Howard Bernard 'Reds' Arrington, 79; plumber kept White House flush
...Arrington, who was on call virtually around the clock, seven days a week, was chief plumbing foreman at the White House for 19 years. He retired in 1979, having served every president from Harry S. Truman to Jimmy Carter....
...The one president who took the plumbing far too seriously was Lyndon B. Johnson.

"President Johnson started right in about his shower when he moved into the White House. He said, 'I don't have any pressure, for one thing,' and that he wanted it just like the shower at his Georgetown home," Arrington said in the Life interview.

"So my assistant and I worked on his shower, and the president tried it and said, 'That was nothing.' Then he said he wanted body sprays all around, not just overhead. He wanted one on the floor, too. This wasn't for his feet -- he wanted it to hit up his rear," Arrington said.

When he was experiencing trouble adjusting the shower, he felt the full fury of Johnson's legendary temper in a three-minute phone call that concluded with the president slamming down the phone.
Normally, calls conveying the president's wishes came from the chief usher at the White House, but not this one, Margaret Arrington said.

"We have flunkies in Johnson City that can fix it, why can't you? I don't want any change in pressure when I go from the overhead to both. Bring in the engineers, anybody, but have that thing fixed by the time I get back from Texas," boomed the president, as recalled by Margaret Arrington.

To inspire Arrington, no doubt, the president added: "If I can move 10,000 troops in a day, you certainly can fix the shower."

"We ended up with four pumps, and then we had to increase the size of our water lines because other parts of the house were being sucked dry," Arrington said in the Life interview.

"One day the head usher tried out the shower. It pinned him right against the wall, and he looked like a lobster when he came out. 'I don't see how he can stand it,' " the usher said.

After five years of tinkering and fine-tuning the shower, it was President Nixon who ordered Arrington to "get rid of this stuff," after taking office in 1969....MORE
No firehouse up the bum for Nixon, no sirree.

EIA Weekly Natural Gas Storage Report: UP 57 Bcf

The new front futures, August, are down 9.5 cents at $2.703.
Estimates of injections for the week ending June 22 had been 50 to 55 Bcf.
From the U.S. Energy Information Administration:

Released: June 28, 2012 at 10:30 a.m. (eastern time) for the Week Ending June 22, 2012.
Next Release: July 6, 2012

Working Gas in Underground Storage, Lower 48
Region Stocks in billion cubic feet (Bcf) Historical Comparisons
06/22/12 06/15/12 Change Year Ago (06/22/11) 5-Year (2007-2011) Average
Stocks (Bcf) % Change Stocks (Bcf) % Change

Working Gas in Underground Storage Compared with 5-Year Range

ExxonMobil CEO: Global Warming is Real, Manageable (and we're losing our shirts on natural gas) XOM

Here's the transcript of a speech Mr. Tillerson gave to the Council on Foreign Relations:
The New North American Energy Paradigm: Reshaping the Future
Speaker: Rex W. Tillerson, Chairman and CEO, Exxon Mobil Corporation
Presider: Alan S. Murray, Deputy Managing Editor and Executive Editor, Online, Wall Street Journal

ALAN MURRAY: Thank you. I want to welcome everyone to today's CFR meeting, which is part of the CEO Speaker Series. I also want to remind you to completely turn off -- not just put on vibrate, but completely turn off your cellphones. And I can see that there's a bunch of avid tweeters in this audience. I'm sorry, you're not going to be able tweet today. Also remind you that this session is an on-the-record -- on-the-record session.

Our guest this morning really needs no introduction. Rex Tillerson is the CEO of Exxon Mobil, the largest publicly traded oil company in the world. He's been in that position for six years. He was responsible for the big move into natural gas, the $30 billion acquisition of XTO Energy in 2009. In his new book, "Private Empire," Steve Coll refers to Exxon Mobil as a corporate state within the American state, with its own intricate web of international relations and, in a sense, its own foreign policy. So I think it's particularly fitting that Rex Tillerson is speaking to this group at the Council on Foreign Relations today.
He will speak for 15 minutes, then he and I will have a conversation up here for about 10 minutes or so, and then we'll open it up to your questions.
Mr. Tillerson. (Applause.)

REX TILLERSON: Thank you, Alan. And, Richard, thank you for the invitation to speak and address this group this morning. I spoke to this group -- I guess it's now been about five years ago, 2007. I was looking back and at that time talked about U.S. energy security, talked a little bit about, you know, how I thought our nation could strengthen trade in energy supplies through broader engagement, through education of the public on the importance of energy and how it affects their daily lives.
So here we are five years later. And you go back to 2007 -- now, these issues are still important today, obviously, but when I last had the opportunity to speak, a lot of things have happened since then. You know, oil prices from 2007, on the strength of a very robust global economy and a very robust emerging China, many of you will recall, ramped up to near $150 a barrel. Then we had the financial -- U.S. financial collapse. Oil prices collapsed all the way down to $40 a barrel....MORE
On global warming:
QUESTIONER: Hi, I'm David Fenton (ph).
Mr. Tillerson, I want to talk about science and risk, and I agree with you that's the way we must proceed. So, as you know, it's a basic fact of physics that CO2 traps heat, and too much CO2 will mean it will get too hot, and we will face enormous risks as a result of this not only to our way of life, but to the world economy. It will be devastating: The seas will rise, the coastlines will be unstable for generations, the price of food will go crazy. This is what we face, and we all know it.

Now -- so my question for you is since we all know this knowledge, we're a little in denial of it. You know, if we burn all these reserves you've talked about, you can kiss future generations good-bye. And maybe we'll find a solution to take it out of the air. But, as you know, we don't have one. So what are you going to do about this? We need your help to do something about this.

TILLERSON: Well, let me -- let me say that we have studied that issue and continue to study it as well. We are and have been long-time participants in the IPCC panels. We author many of the IPCC subcommittee papers, and we peer-review most of them. So we are very current on the science, our understanding of the science, and importantly -- and this is where I'm going to take exception to something you said -- the competency of the models to predict the future. We've been working with a very good team at MIT now for more than 20 years on this area of modeling the climate, which, since obviously it's an area of great interest to you, you know and have to know the competencies of the models are not particularly good.
Now you can plug in assumptions on many elements of the climate system that we cannot model -- and you know what they all are. We cannot model aerosols; we cannot model clouds, which are big, big factors in how the CO2 concentrations in the atmosphere affect temperatures at surface level. The models we need -- and we are putting a lot of money supporting people and continuing to work on these models, try and become more competent with the models. But our ability to predict, with any accuracy, what the future's going to be is really pretty limited.

So our approach is we do look at the range of the outcomes and try and understand the consequences of that, and clearly there's going to be an impact. So I'm not disputing that increasing CO2 emissions in the atmosphere is going to have an impact. It'll have a warming impact. The -- how large it is is what is very hard for anyone to predict. And depending on how large it is, then projects how dire the consequences are.
As we have looked at the most recent studies coming -- and the IPCC reports, which we -- I've seen the drafts; I can't say too much because they're not out yet. But when you predict things like sea level rise, you get numbers all over the map. If you take a -- what I would call a reasonable scientific approach to that, we believe those consequences are manageable. They do require us to begin to exert -- or spend more policy effort on adaptation. What do you want to do if we think the future has sea level rising four inches, six inches? Where are the impacted areas, and what do you want to do to adapt to that?

And as human beings as a -- as a -- as a species, that's why we're all still here. We have spent our entire existence adapting, OK? So we will adapt to this. Changes to weather patterns that move crop production areas around -- we'll adapt to that. It's an engineering problem, and it has engineering solutions. And so I don't -- the fear factor that people want to throw out there to say we just have to stop this, I do not accept.
I do believe we have to -- we have to be efficient and we have to manage it, but we also need to look at the other side of the engineering solution, which is how are we going to adapt to it. And there are solutions. It's not a problem that we can't solve.

MURRAY: But let's stick with that for just a second. I mean, Exxon Mobil, before you became CEO, was very aggressive and overt in challenging and mounting a public relations campaign against the sorts of things that Mr. Fenton (sp) just managed. You changed that when you came in. But I guess the question I'd ask -- I was at my daughter's graduation last weekend, and the graduation speaker said that global warming is the great challenge of your generation. Do you agree with that? Would you agree that it's in -- at least one of the top five challenges of the generation, or do you personally think that it's been way overblown?

TILLERSON: No, I think it's -- I think it's a great challenge, but I think it's a question back to priorities. And I think, as I just described based on our understanding of the system and the models and the science and that there are engineering solutions to adapting, that we think it's solvable.
And I think there are much more pressing priorities that we as a -- as a human being race and society need to deal with. There are still hundreds of millions, billions of people living in abject poverty around the world. They need electricity. They need electricity they can count on, that they can afford. They need fuel to cook their food on that's not animal dung. There are more people's health being dramatically affected because they could -- they don't even have access to fossil fuels to burn. They'd love to burn fossil fuels because their quality of life would rise immeasurably, and their quality of health and the health of their children and their future would rise immeasurably. You'd save millions upon millions of lives by making fossil fuels more available to a lot of the part of the world that doesn't have it, and do it in the most efficient ways, using the most efficient technologies we have today....
And on natural gas:
...MURRAY: So I was with the CFO of Siemens yesterday, who was basically lecturing a group of American businesspeople, saying you have an historic opportunity right now to rebuild the American economy on cheap natural gas. Do you agree with that?

TILLERSON: Well, generally I do. I'd maybe say that we have a historic opportunity to rejuvenate the American economy and rejuvenate and restore American manufacturing competitiveness because we now have long-term, secure, stable supplies of natural gas at some price. Cheap is a -- I mean cheap is in the eye of the beholder.

MURRAY: Relative, yeah.

TILLERSON: It will be supplied at whatever its cost to supply will be. And what I can tell you is the cost to supply is not $2.50. We are all losing our shirts today. You know, we're making no money. It's all in the red. And so right now, we're enjoying the overhang, which again, it's this -- we're not -- the system is so enormous, the price supply/demand signals are always slightly out of sync. They're always doing this -- (gesturing) -- you know. We just can't quite hit -- we can't hit a bull's-eye. Hopefully, we can hit the backboard. (Laughter.)

But today we're seeing these very low prices because the industry overshot when we had those $6, $7, $8, $9 prices, and we overdeveloped the supply, and now people are just -- they're getting by on cash in some cases. I can tell you it's negative earnings, by and large, and some people -- or it's negative on cash for them, depending on how efficient they may be. So today's price is not sustainable to deliver that energy security.
What -- you know, what the price is that's necessary to do that, the market will seek it and it will find it. It's not $9, I can tell you that. And so, clearly, in a global -- if you're thinking about what others are paying for natural gas and those that are importing LNG, liquefied natural gas, it will be substantially below the cost of that to maintain a secure supply....MORE
As they say, "The whole thing is worth a read".

Big Problem at Aramco/Shell Motiva Refinery So Saudi's Stop Sending Crude

Stupid, stupid, stupid.
Two from Reuters:
June 22
Motiva prepares Texas refinery for long shutdown
Motiva Enterprises LLC moved to prepare half its giant Port Arthur, Texas, refinery for an extended shut-down this week after a major glitch with a new unit, closing down other units and reducing oil shipments from Saudi Arabia.

In the first public acknowledgment of the severity of the problem at the plant, Motiva co-owner Royal Dutch Shell Plc said late on Wednesday that the stricken 325,000 barrel-per-day (bpd) unit was shut due to "corrosion problems," as originally reported earlier this week by Reuters.

On Thursday, an industry source said Saudi Arabia halted crude shipments to the new unit until at least mid-July. State oil firm Saudi Aramco, the other co-owner of the plant, had ramped up supplies to the plant this year to feed the new unit, the cornerstone of its five-year, $10 billion expansion.

Aramco would evaluate restarting shipments after that depending on the status of the refinery.
"The outage of the new crude unit may continue for several months, while the causes of the issue are established and rectified," Shell said in a statement late on Wednesday.

Sources said the new crude distillation unit, which began production in April and was shut following a June 9 fire, may be idle for up to a year to repair extensive corrosion found in the unit -- up from initial estimates of two to five months.

Shell said all secondary units built as part of the five-year, $10 billion project were fully operational, although some were running at reduced throughput....MORE
June 25
INSIGHT-In hours, caustic vapors wreaked quiet ruin on biggest US refinery
In the end, all it took was a small chemical spill -- perhaps less than a barrelful -- to bring down the newest, mightiest oil refinery in the United States.

Three weeks ago, while workers repaired a minor leak at the Port Arthur, Texas plant owned by Motiva Enterprises, a few gallons a day of so-called "caustic" was inadvertently seeping into the newly built crude distillation unit (CDU), the 30-story-high network of interconnected cylinders and latticed pipelines at the heart of the refining process.

While harmless when mixed with crude, the undiluted caustic vaporized into an invisible but devastating agent of corrosion as the chamber heated up to 700 degrees Fahrenheit ( 370 Celsius); t he chemical gas raced through key units, fouled huge heaters and corroded thousands of feet of stainless steel pipe.

Now, just weeks after they commissioned the biggest U.S. refinery project in a decade, two of the world's biggest oil titans -- Royal Dutch Shell and Saudi Aramco , which own Motiva -- are rushing to repair the potentially billion-dollar glitch that has added an embarrassing and costly coda to a landmark $10 billion expansion.

After a five-year effort to double the plant's capacity, making it the largest in the country, they must now reassemble many of the same people and parts for a blitzkrieg fix that may exceed the original $300 million cost of the unit: corrosion experts are flying in from across the world; hundreds of workers are being hired; bespoke 30-inch (75-c m) stain less steel pipelines and 30-story cranes may need to be obtained quickly, according to sources involved in the repairs.

Sources familiar with the effort provided Reuters with the most detailed account yet of what officials believe went wrong at the 325,000-barrels-per-day (bpd) unit known as vacuum pipestill-5 (VPS-5), showing how a series of seemingly minor glitches crippled the vast plant.

Motiva has said little about the incident. Late on W ednesday, 11 days after it occurred, the company confirmed for the first time that the unit might remain shut for "several months". Sources say officials are telling workers that the unit could be idle for as long as a year.

On Friday, in response to Reuters questions, Motiva spokeswoman Kayla Macke confirmed the contamination: "The preliminary inspection indicates that parts of the new unit have been contaminated with elevated levels of caustic."...MUCH MORE
April 11
Saudis Sending Seven Tankers to Begin Stockpiling Feedstock for Soon to Be Largest Refinery in the U.S., Motiva (RDS)