What I Learned About Natural Gas from Boone Pickens

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Rich Karlgaard::

Here is what Pickens said:

– Global demand for oil is 86-88 million barrels per day. It will be 90 million by the end of the year, due to global growth.

– Global production is 84 million barrels per day. Since production falls short of demand, prices have risen.

– America consumes 20 million barrels of oil per day. We produce 7 million barrels domestically and import the other 13 million barrels. Of the 13 million barrels of imported oil, 5 million come from OPEC – “nations that hate us,” says Pickens.

– The true cost of Middle Eastern oil is over $300 a barrel if you account for U.S. military presence in the Middle East, according to Pickens.

– “Drill baby, drill” – the conservative mantra to drill more oil from the Gulf of Mexico, off the East and West Coast shelves, and the Alaska Natural Wildlife Refuge (ANWR) would produce an extra 2 million barrels a day at best, says Pickens. The would raise America’s domestic production from 7 million to 9 million barrels but still leave America 11 million barrels short each day.

– In ANWR, the bottleneck is the pipeline from Alaska’s north shore. “It would take 30 years to build another pipeline,” says Pickens.

Well worth reading.

Enterprise remains rooted in the land

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Luke Johnson:

Farmers were the first entrepreneurs. About 10,000 years ago, in Phoenicia and Mesopotamia, humankind started to cultivate crops and converted from hunter-gatherers to settlers. This initiative enabled cities and, indeed, civilisation to flourish.
Since then, agriculture has developed into a modern industry. But it remains dominated by family concerns, headed by rural entrepreneurs focused on the same core issues as their ancient predecessors: land, water, weather, disease, soil and yields.
Traditionally, farms were passed down the generations, offering modest but volatile cash returns and the possibility of long-term capital appreciation – at least, for those who were not tenant farmers. But while more than 90 per cent of farms in countries such as Britain and the US remain privately held, big business has become seriously interested in the sector.
The soft commodities boom of recent years means that many institutions now see farmland as an attractive asset class and an offset against inflation. Hedge funds, private equity, pension and insurance groups are all investing in land in places such as Brazil, Ukraine and Africa. This weight of capital, as well as better farm incomes, has helped drive farmland prices up. Meanwhile, demand among these investors for agricultural opportunities in mature economies such as the US, Australia and Canada has also increased.

Facing Default, Publisher Lee Enterprises Sells ‘Junk’ to Foil Distressed Investors

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Matt Wirz:

Newspaper chain Lee Enterprises Inc. is on the verge of saving itself from bankruptcy–and many of its debt holders are livid.
Lee, weighed down by about $1 billion of debt, has long been high on the list of potential bankruptcies. But thanks to the roaring market for debt of risky companies, Lee is preparing to sell junk bonds that would enable it to pay off its obligations and give it a new shot at survival.
But what is good news for the company has thwarted the plans of a flock of “vulture” investors–Monarch Alternative Capital, Alden Global Capital, Marblegate Asset Management and a unit of Goldman Sachs Group Inc.–which have been buying Lee’s loans. The group had been betting the company would default, and that they could turn their holdings into an ownership stake, giving them access to the company’s assets, which include St. Louis Post Dispatch and the Arizona Daily Star newspapers.
…..
Lee incurred much of its debt in 2005 when it paid top-dollar to buy Pulitzer Inc., a chain of 14 newspapers including the St. Louis Post-Dispatch. The combined company would have been a particularly valued prize because, unlike many of the other publishers that went bankrupt in recent years, the company generates over $100 million of free cash flow despite its debt load. The publisher’s focus–running small and midsize papers and keeping a rein on costs–has insulated it from the worst of the decline in subscriptions and advertising affecting newspapers in metropolitan markets.

Lee owns half of Capital Newspapers, publisher of the Wisconsin State Journal.

You Call This Global Leadership?

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Suddent Debt:

The US government is about to be shut down in the next 24 hours over the federal budget impasse. Here are the only numbers you need:
Federal spending is approx. $3.7 trillion, the deficit this year alone is projected at $1.4 trillion – and the politicians are squabbling over spending cuts amounting to $33-40 billion; that’s 1% of spending and 2.9% of the deficit. You gotta be joking, right?

Related:

Reforming the Banks

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Michael Pettis:

just got back from a very interesting but hectic week in New York and Washington, followed by two days at a conference in Hangzhou. During my meetings I noticed that much of the discussion, and many of the questions I was asked by both government officials and investors, focused on debt levels and reforms in the Chinese financial system. I have written a lot about rising debt in China and am glad that analysts and policymakers seem to be spending a lot more time thinking about balance sheet issues. Every case of rapid, investment-driven growth in the past century, as far as I can make out, has at some point reached a stage in which debt levels rose to unsustainable levels and precipitated either a debt crisis or a long grinding adjustment period.
The reason debt levels always seem to grow unsustainably, I suspect, is that in the initial stages of the growth model much if not all of the investment is economically viable as it pours into building necessary infrastructure whose profits and externalities exceed the cost of the investment. The result is real growth. At some point, however, the combination of subsidies, distorted incentives (in which investment benefits accrue to those making the investment while costs are shared broadly through the banking system), and very cheap financing costs leads inexorably to wasted investment and debt rising faster than asset values. This is when the debt burden begins to rise in an unsustainable way.

Tracking Inflation: The Billion Prices Project

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The Billion Prices Project::

Data collection: our data are collected every day from online retailers using a software that scans the underlying code in public webpages and stores the relevant price information in a database. The resulting dataset contains daily prices on the full array of products sold by these retailers. Our data include information on product descriptions, package sizes, brands, special characteristics (e.g. “organic”), and whether the item is on sale or price control.
Daily Online Price Index Computation: The daily online index is an average of individual price changes across multiple categories and retailers. The index uses a basket of goods that changes over time as products appear and disappear from a retailer’s webpage. It is updated on a daily basis and leveraged to estimate annual and monthly inflation. This index is not designed to forecast official inflation announcements, but to provide real-time information on major inflation trends.
Monthly Inflation: The monthly inflation rate is the percentage change between the average of the daily online price index of the last 30 days and the average of the previous month. For example, on the last day of September 2010, we compared the average of the daily index between September 1st and September 30th to the average of the daily index between August 1st and August 31st. On the last day of each month, the value of our monthly inflation is equivalent to the monthly statistic reported by official offices.

The Constitution, President Obama and Libya

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Ben Smith @ Politico::

“He’s been more bold than any other president,” said Fein, who said Obama has failed to secure congressional approval for his military action in a much more brazen way than previous administrations.

“If he can wipe out the war powers authorization, why can’t he wipe out Congress’s authority to spend?” asked Fein. ” If we’re going to be a government of laws, and not descend into empire, this is Caesar crossing the Rubicon.”

Fein said a number of Congressional offices have expressed interest in his proposal.

“They actually need to defend constitutional prerogatives,” said Fein. “There’s definitely been interest on the Hill. There’s at least two dozen who have been open to the idea that this is a serious constitutional crisis.”

Lufthansa Flight Attendents Busted for Smuggling 63,000lbs of Euros into Germany

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Matthew::

Six Lufthansa employees, including four flight attendants, have been arrested after sneaking in more than 63,000 pounds of out-of-circulation, €1 and €2 coins from China back to Germany over the last four years.

Euro coins have two color tones, gold and silver, and when the German Central Bank takes the coins out of circulation, the two colors (see picture to the left) are separated then sent to China to be melted down into scrap metal.

A wily group in China reassembled the coins rather melting them, then sent them back to Germany with four LH flight attendants serving as “mules.” Because FA’s don’t have baggage weight limits and can typically carry-on their bags and breeze through customs, they became the ideal method of transporting this discarded money. The FAs would then take the coins to the Bundesbank (only the central bank in Germany accepts damaged coins) and turn them in for bills. The bank typically does not count coin deposits under €1000 but will instead weigh the money bags without inspecting the coins. The scheme went off without a hitch for over four years.