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  • New York state to ban fracking, citing health concerns [View news story]
    Some very deep injections have apparently been linked to mild earthquakes - this has been known for decades. More shallow injections used for hydraulic fracturing - I am guessing that this is a rarity.

    Regarding earthquakes and water - that is why we have geologists and geophysicists - their job is to understand the geology and prevent either issue. It can be done. BTW, my degree from Colorado School of Mines included a lot of geology and geophysics although most of my business concerns the tech industry these days.

    An outright ban on hydraulic fracturing is just irrational.
    Dec 17, 2014. 05:41 PM | 6 Likes Like |Link to Comment
  • New York state to ban fracking, citing health concerns [View news story]
    Ban hypocrisy: Let NY freeze in the dark. No cars or use of plastics there either.
    Dec 17, 2014. 05:33 PM | 7 Likes Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    JM, Perhaps the label "conventional" is not correct. I am referring generally to big-budget projects (typically billion $ +) in their earlier stages - possibly still in planning phase. The capital to fund these projects is probably being pulled back to some extent. The longer that oil prices remain low the more of these will be put on hold. This will greatly increase their lead time since restarting such a project is not done with a light switch. Of course, these are not projects that will impact the supply picture within the next two years.

    I contrast that to shale oil that requires very low capital to move forward with (for an added well) but has certain fixed and variable costs that make it less or not economical at current prices. These can be rapidly scaled up or down in response to the pricing environment. Shale drilling will probably be maintained at least to maintain leases where applicable.

    Oil price realizations are at least in part based on long term projections, so cancellation of longer lead projects may cause an increase in oil prices if enough are announced. But I have no idea of the timeframe between announced pullbacks and reduced prices.

    My personal speculation is that Saudi Arabia is looking for some "dead bodies" among the big budget deals and will begin cutting production when they think enough future production is taken out of the picture. I can't give you any specifics on these deals - I would guess that the delays will be an attempt by big investors to balance out cash flow.
    Dec 16, 2014. 12:34 PM | 2 Likes Like |Link to Comment
  • How Long Does A 'Typical' Oil Downcycle Last? [View article]
    Richard, A lot of attention is being paid to the impact on shale oil. I think large capital / high risk projects in their early stages are at risk also. These include high capital "conventional" oil projects in politically unstable countries. An investor is going to be less willing to start these projects with lower profit margins.

    Shale, on the other hand, can bounce back quickly when prices rise above certain thresholds (depending on the particular oil play).
    Dec 15, 2014. 11:13 PM | 1 Like Like |Link to Comment
  • ConocoPhillips: New Capital Plan A Drop In The Bucket [View article]
    Casey, Thank you for another good solid article. The flywheel of oil production ramps versus demand will cause the imbalance to last for a while - I have no idea how long!

    One thing to consider - as prices fall - it is not just oil sands capital that is at risk. Investors also have to factor in political risks of conventional oil in countries like Venezuela. When margins drop below a certain point, a willingness to risk capital will diminish.

    My point is that the low prices target more than shale oil and sands. I am guessing that some of the high capital overseas projects will be among the most prominent long term casualties. Because shale can be rapidly ramped up it will recover as soon as commodity pricing stabilizes.
    Dec 14, 2014. 05:50 PM | 1 Like Like |Link to Comment
  • Buffett/Munger look to next 50 years for Berkshire [View news story]
    Same here John! We are real oddballs, aren't we!
    Dec 13, 2014. 01:03 PM | 3 Likes Like |Link to Comment
  • IEA cuts 2015 oil demand forecast for the fifth time in six months [View news story]
    This is a supply/demand imbalance - nothing more. $100 oil incentivizes many high cost and high risk projects. The resultant ramp up in production turned out to be greater than the ramp up in demand. And so, with oversupply, the price is plummeting.

    Where do we go from here? The ramp up will continue for at least a couple quarters because nearly completed oil projects will be completed.

    However, capital budgets will be slashed (witness COP reducing it by 20% - more than Morningstar analysts expected for example). Keep in mind - low cost oil also impacts conventional oil. Much of the conventional oil is in high political risk countries, and the profit may be too low to take risk of new capital investment. So the result is going to be reduced capital being spent globally. It will take a while for that to impact production volumes though.
    Dec 13, 2014. 12:53 PM | Likes Like |Link to Comment
  • Retirement Strategy: Total Return Or Income? The Debate Rages On [View article]

    What is wrong with both? My before-tax portfolio has a yield of just over 3% and yet includes certain stocks with low but fast growing dividends. It also includes some high yielding BDC's. My overall focus definitely focuses more on "total return" than on current yields and I will buy Berkshire Hathaway (or the like) when it is selling at a big discount. But at the same time I prefer to keep the overall dividends up to about 3%. That is roughly my metric. Also I find that some of the best total return candidates pay decent dividends. Does that make sense?

    Dec 13, 2014. 11:05 AM | 1 Like Like |Link to Comment
  • I'm Increasing Apple To 30% Of My 2015 Portfolio [View article]
    "...many large mutual funds had upwards of 30 % in that one stock...What's good for the big boys also is OK for little guys..."

    Many mutual funds were over-concentrated in banks prior to the 08/09 meltdown. Some of them did not recover - since the government severely diluted companies like C and BAC. Sometimes investors go down with the big boys.

    Yes, AAPL worked out well - but that is easy to see in hindsight. Obviously if I knew the future I would put 100% in the most optimal stock. But without the benefit of hindsight concentrated positions add a lot of risk to your capital. Suppose Apple's subsidy business model melts down for example...not that I think it will...but how would that impact a 30% position?

    Appropriate risk tolerance is an individual decision. However, to suggest that 30% in Apple (or any other stock) is low risk to the investor is clearly wrong.
    Dec 10, 2014. 02:32 PM | 1 Like Like |Link to Comment
  • I'm Increasing Apple To 30% Of My 2015 Portfolio [View article]
    "I'm Increasing Apple To 30% Of My 2015 Portfolio"

    I can think of an even "safer" stock - BP - what could every happen to one of the largest oil companies? Then there was deepwater horizon. Apple is one of my largest positions now - at just over 4%. There is a reason well run mutual funds generally stay below 4%.
    Dec 10, 2014. 10:28 AM | 5 Likes Like |Link to Comment
  • World Proved Oil Reserves, Fact Or Fiction [View article]
    Very good point. The price is the first order driving factor in funding many of these unconventional or high cost conventional projects. I suspect that some high capital projects aren't going to get funded until the supply/demand imbalance shows a trajectory above $80 a barrel or so - actually I am not sure what the threshold is. What is interesting is that the market has a way of anticipating these things before the situation is manifest - sometimes getting ahead of itself. Anyway I appreciate your comments - definitely helps me to put things in perspective.
    Dec 9, 2014. 06:07 PM | Likes Like |Link to Comment
  • VNQ Delivers Across The Board [View article]
    Walter - I also have VNQ and some other interest rate sensitive investments. My "best guess" is that US rates will rise slowly. The good economy is an impetus for raising but the very low inflation and internationally weak economies is pushing the other way.

    However that doesn't mean that investors won't panic and temporarily depress bonds and REIT's. That will surely happen at some point - like the "rate spike" of last year.

    My strategy is to balance out investments that rise with high growth and inflation (e.g., oil stocks) versus investments that tend to do better with our current environment. I can't predict the future so I try to make progress either way.
    Dec 9, 2014. 05:45 PM | 1 Like Like |Link to Comment
  • World Proved Oil Reserves, Fact Or Fiction [View article]
    "So perhaps it is these sorts of fields that are now being counted while in the past they may not have." That makes sense. As technology improves and the easy-to-extract oil is consumed these will become "real reserves."
    Dec 9, 2014. 05:22 PM | 1 Like Like |Link to Comment
  • World Proved Oil Reserves, Fact Or Fiction [View article]
    David - see my comment above. There is a difference between "petroleum in the ground" and "proved reserves" which is the point I tried to make - but perhaps I was a bit sarcastic. There are regions of Saudi Arabia where it is known that there are large petroleum deposits but they have not yet been mapped out (via drilling, seismograms, and subsurface cross-sectional interpolations and interpretations by geologists and geophysicists). Thus they don't yet show up in the proven reserves. The author did not make this distinction and he needs to go back and better understand the reasoning behind the numbers. It will probably just turn out to be routine mapping work that is now being done and shedding more light on what is down there.
    Dec 9, 2014. 03:03 PM | Likes Like |Link to Comment
  • World Proved Oil Reserves, Fact Or Fiction [View article]
    Is the author a petroleum engineer?

    From a Colorado School of Mines Grad:

    The increase in proved reserves being reported is probably conservative actually - but keep in mind that proved means that the oil plays have been mapped out. There is no actual increase in oil in the ground - there is, rather, an increase in the amount of VERIFIED and extractable oil in the ground and that is what is being reported as proved reserves.

    "No one bothered to point out that all this oil was found in board rooms by bureaucrats who simply “decided” this was how much oil they had."

    This statement is probably categorically false. The oil is based on engineering done by engineers in two ways: (1) New fields are being mapped out and (2) improved extraction techniques. It is simple as that.
    Dec 8, 2014. 08:26 PM | 2 Likes Like |Link to Comment