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While the U.S. Shale Industry produces a record amount of oil, it continues to be plagued by massive oil decline rates and debt. Moreover, even as the companies brag about lowering the break-even cost to produce shale oil, the industry still spends more than it makes. When we add up all the negative factors weighing down the shale oil industry, it should be no surprise that a catastrophic failure lies dead ahead.

Of course, most Americans have no idea that the U.S. Shale Oil Industry is nothing more than a Ponzi Scheme because of the mainstream media’s inability to report FACT from FICTION. However, they don’t deserve all of the blame as the shale energy industry has done an excellent job hiding the financial distress from the public and investors by the use of highly technical jargon and BS.

For example, Pioneer published this in the recent Q2 2018 Press Release:

Pioneer placed 38 Version 3.0 wells on production during the second quarter of 2018. The Company also placed 29 wells on production during the second quarter of 2018 that utilized higher intensity completions compared to Version 3.0 wells. These are referred to as Version 3.0+ completions. Results from the 65 Version 3.0+ wells completed in 2017 and the first half of 2018 are outperforming production from nearby offset wells with less intense completions. Based on the success of the higher intensity completions to date, the Company is adding approximately 60 Version 3.0+ completions in the second half of 2018.

Now, the information Pioneer published above wasn’t all that technical, but it was full of BS. Anytime the industry uses terms like “Version 3.0+ completions” to describe shale wells, this normally means the use of “more technology” equals “more money.” As the shale industry goes from 30 to 60 to 70 stage frack wells, this takes one hell of a lot more pipe, water, sand, fracking chemicals and of course, money.

…click on the above link to read the rest of the article…

As The Markets Sell-off The Precious Metals Rebound

October 12, 2018

As The Markets Sell-off The Precious Metals Rebound

To the surprise of many investors, the precious metals have rallied while the broader markets continue to sell-off. Currently, both gold and silver are solidly in the green while the major indexes were all the red following a huge sell-off yesterday. The Dow Jones Index has lost nearly 1,000 points in the past two days while the gold price is up nearly $25.

However, even though we could see a late-day rally in the markets, and even higher stock indexes over the next few months, the bear market for stocks is still coming. The Dow Jones Index has now suffered two large sell-offs in the past ten months:

In January, the Dow Jones Index fell by more 3,000 points, and the current correction is only one-half of that amount. So, I expect to see a continued correction over the next month. Because October is the worst month for market Crashes, this could be one hell of a blow for not only the economy but also, for investor confidence.

For example, according to the Zerohedge article, Used-Car Prices Plunge Most In 15 Years:

Looking deeper at the core inflation print, it reflected a 3% monthly drop in prices for used cars and trucks following increases in each of the last 3 months, and the biggest drop in 15 years…

And then, of course, the continued disintegration of the U.S. Retail Market, Sears Creditors Push For Bankruptcy Liquidation As Vendors No Longer Paid:

Amid recent reports that Sears is set to file for bankruptcy as soon as this weekend ahead of a $134 million debt payment due on Monday, the only question is whether the filing will be a Chapter 11 debt for equity reorganization or a Chapter 7 liquidation. And contrary to the desires of Sears CEO and biggest creditor, Eddie Lampert, who would like to preserve the core business, others are pushing for an outright liquidation.

…click on the above link to read the rest of the article…

The Federal Reserve’s Rising Interest Rates Are A Ticking Time-bomb For U.S. Economy

October 6, 2018

The Federal Reserve’s Rising Interest Rates Are A Ticking Time-bomb For U.S. Economy

One of the worst things for an over-heated and extremely leveraged economy is rising interest rates. So, with the recent 2-2.25% interest rate, big trouble is on the horizon, Also, with higher interest rates, the U.S. Treasury will have to fork out even more money to service its debt. In just a little more than two years, the U.S. Fed Funds Rate jumped by nearly 2%.

This is indeed a big change for the Federal Reserve’s “economic stimulation policy” as it kept interest rates below 0.25% since January 2009. And with extremely low-interest rates, nearly zero, it allowed the United States to more than double domestic oil production. Unfortunately, this newly created oil supply has come at a huge cost. It has created another big mess which I call the U.S. Shale Ponzi Scheme.

But, before I get into details of this article, I wanted to let my readers and followers know that the lack of articles this week was due to a freak storm that impacted our area. We had a mini-tornado or a micro-burst that touched down in our local area which caused a great deal of destruction, mostly to trees and bushes. In a little more than 10 minutes, upwards of 100 mile per hour winds uprooted, snapped and destroyed a large number of trees on our property.

Interestingly, there was only minor damage done to one home in the adjacent neighborhood. The homeowner’s wooden porch and garage tin roof were ripped off, and part of the roof is still hanging 30 feet up in one of our trees. So, I have been quite busy not only cleaning up the mess on my property, but also helping my neighbor. I will say, the good thing that came out of all this destruction is how our neighbors came out together to help out.

…click on the above link to read the rest of the article…

The Amazing Amount Of Solar Power Needed To Run The U.S. Transportation Sector

September 28, 2018

The Amazing Amount Of Solar Power Needed To Run The U.S. Transportation Sector

The U.S. Solar PV Industry will never be able to grow large enough to power the transportation industry. Why? Because the amount of energy needed is well beyond the forecasted growth of U.S. solar power generation. And, it’s even worse than that. Industry analysts are making their forecasts based on rising fossil fuel production… the critical energy necessary to manufacture and build solar power plants.

There seems to be this notion by Americans, that in the future, they will just plug in their electric cars and drive to their heart’s desire. It seems as if no one takes the time to do a bit of simple math. While U.S. solar power generation has increased significantly over the past several years, it is still a fraction of the total energy supplied.

For example, U.S. fossil fuel production (coal, natural gas, and oil) still supplies 88 times more energy than solar PV power. However, if we just focus on the U.S. solar power generation versus the transportation sector, it only amounts to 2.6% of the total:

According to the EIA, the U.S. Energy Information Agency, total U.S. solar power generation in 2017 was 0.77 Quadrillion BTU’s versus 29.5 Quad BTU’s consumed by the entire domestic transportation sector… cars, buses, trucks, and trains. To give you an idea of how much 1 Quad BTU equals, it represents the energy in 170 million barrels of oil. Thus, the U.S. transportation sector consumes 29.5 times that amount or roughly 5 billion barrels of oil per year.

For the U.S. Solar Power Industry to increase in size to equal the same energy that is consumed by the transportation sector, it would need to grow by over 33 times. Now, I am just making some simple calculations here, but even with the optimistic projects in this renewable energy industry, solar would still only represent about 15% of the present transportation energy consumption by 2035:

…click on the above link to read the rest of the article…

Central Bank Gold Purchases Now Control 10% Of The Total Market

September 22, 2018

Central Bank Gold Purchases Now Control 10% Of The Total Market

Central Banks have become big players in the gold market and now control 10% of the total market demand. Now, this wasn’t always the case. Just ten years ago, the Central Banks were main suppliers via their policy of dumping gold into the market. However, the Central Bank strategy to sell gold into the market to depress the price, had quite the opposite effect.

For example, Central Banks dumped over 2,600 metric tons of gold into the market between 2003 and 2007, according to data from the World Gold Council. So, what kind of impact on price did the sale of 84 million oz of Central Bank gold have on the market during that period? The price of gold nearly doubled from $363 in 2003 to $695 in 2007.

The last year Central Banks sold gold into the market was in 2009. However, it was only 34 metric tons. Since 2010, Central Banks have been net purchases of gold. Between 2010 and 2017, Central Banks purchased nearly 3,700 metric tons (mt) or a stunning 119 million oz of gold.

And Central Bank gold purchases don’t seem to be slowing. The World Gold Council (WGC) just released yesterday in their Market Update: Central bank buying activity, that official gold purchases are now 10% of the total market.

Using data from the WGC Demand Trends, Central Banks purchased 193 mt of gold in the first half of 2018, representing 10% of the total global demand:

The majority of the official gold purchases during the 1H of 2018 came from Russia, Turkey, and Kazakhstan. Now, what a difference than just a little more than a decade ago when Central Banks were selling rather than buying gold.

…click on the above link to read the rest of the article…

Which Precious Metals Are Likely To Be Better Investments During The Next Market Crash?

September 18, 2018

Which Precious Metals Are Likely To Be Better Investments During The Next Market Crash?

The question on the minds of many investors, is which of the precious metals will be better investments during the next market crash? I should know because I receive this question in my email box quite often. So, I decided to test the price action of several metals and how each traded during a large market correction.

This article will focus on the top four precious metals, gold, silver, platinum, and palladium. Even though Rhodium and other metals are considered precious, the ones listed above take the lion’s share of the investment market. Furthermore, while platinum and palladium are purchased as investments, they have a much larger industrial component than gold or silver.

As I have mentioned many times, gold and silver disconnected from the broader markets when the Dow Jones Index fell 2,000 points in the first six weeks of 2016.

The two reasons I believe gold and silver jumped considerably as the markets sold off at the beginning of 2016 were:

Gold and Silver were extremely oversold, and the Commercial hedgers’ short positions were at a low, thus very bullish
Investors were extremely worried that the Dow Jones and markets were beginning a massive correction, so they moved into both gold and silver

To explain why investors were spooked in 2016, we need to look at the following chart:

Typically during a major correction, the market makes several attempts at a top. In 2007, there were three tops made before the market finally came down in 2008. Then in 2015, we had three more tops and two large corrections. The reason investors’ worry turned into fear at the beginning of 2016 was that the last top did not reach the previous 18,000 level.

And this can be seen in the next chart:

…click on the above link to read the rest of the article…

U.S. Government Financial Balance Sheet One Step Closer To Blowing Up

September 8, 2018

U.S. Government Financial Balance Sheet One Step Closer To Blowing Up

The U.S. Government’s balance sheet is one step closer to blowing up as its debt, and interest expense hit new record highs. And when I say “new record highs,” I am not exaggerating. It’s been a while since I checked the data on the TreasuryDirect.gov website, but when I researched the figures for this article, I was quite surprised by just how quickly the numbers are rising.

Thus, it’s also no wonder the stock markets continue to grind higher and higher because, without the U.S. Government’s unlimited check-writing ability, the markets would have collapsed years ago. So, to all the Keynesian wanna-be’s who believe the Central Banks can print our way to prosperity forever, please tap your shoes together three times and say, “Everything will be okay because I have my 401k.”

Let’s get started with the tremendous surge in the U.S. Government interest expense. Well, it seems as if things are really starting to get crazy at the U.S. Treasury when its interest expense in July jumped by a whopping 41% year-over-year. That’s correct. The U.S. Government paid $40.5 billion in interest expense this July versus $28.7 billion for the same month last year. That is one heck of an increase.

If we look at the following two tables, we can see that the percentage increase of the interest expense in July is much higher than the previous months:

The interest expense the U.S. Government paid in Apil, May, and June was up 22%, 28%, and 6% respectively versus the same months in 2017. However, July was up 41% compared to July last year. Furthermore, total U.S. interest expense in 2017 was $458 billion while the amount paid this year is $455 billion and we still have two months remaining.

…click on the above link to read the rest of the article…

The Coming Collapse Of U.S. Shale Oil Production

September 4, 2018

The Coming Collapse Of U.S. Shale Oil Production

The death of U.S. Energy Independence will occur when the collapse of shale oil production begins. And when U.S. shale oil production finally peaks and declines, it could fall much more rapidly than we realize. The rate at which U.S. shale oil production declines in the future is based on two key factors, remaining reserves, and the oil price.

Before I get into the remaining shale oil reserves, let’s first consider the price. When the oil price collapsed from mid-2014 to a low at the beginning of 2016, frackers cut drilling considerably. From March 2015 to September 2016, total U.S. shale oil production fell approximately 600,000 barrels per day (info Shaleprofile.com). However, this decline was not due to the peak in production, but rather, because the low oil price made drilling shale oil uneconomical.

What happens when U.S. shale oil production finally peaks along with much lower oil prices? Well, that will be the PERFECT STORM for the U.S. shale oil industry. As I have mentioned in several articles and videos, when the current economic market cycle of 9-years finally rolls over, we are going to have one heck of a market correction. When the broader markets crack lower in a big way, they will most certainly pull down the oil price along with it.

To get an idea of the total U.S. shale oil production, here is a chart from Enno Peters at ShaleProfile.com:

This chart shows U.S. shale oil production as of April this year. Total U.S. shale oil production is shown to be a little bit more than 5 million barrels per day. Each color in the chart represents a year’s worth of oil production. What is interesting about the chart above, is the huge decline rate of domestic shale oil production. And as each year passes, the degree of decline steepens.

…click on the above link to read the rest of the article…

GOING CASHLESS?? Someone Better Tell The Federal Reserve As Currency In Circulation Reaches New High

August 24, 2018

GOING CASHLESS?? Someone Better Tell The Federal Reserve As Currency In Circulation Reaches New High

With all the talk about Central banks going “Cashless,” someone needs to tell the Federal Reserve. Why? Because the Federal Reserve just placed another large order for newly printed 2018 Dollars. Interestingly, the U.S. Treasury will print the largest number of $100 bills since it came out with the updated anti-counterfeit $100 bill in 2013.

Not only is the Federal Reserve ordering more bills to replace worn-out bills that will be taken out of circulation, but it will also add a percentage for the increased public demand. And let me tell you, this demand continues to rise significantly. For example, total U.S. currency in circulation is now $1.57 trillion, up nearly double from the $792 billion in 2007:

Not only has total U.S. currency in circulation nearly doubled since the last Market Crash (2008), the Federal Reserve plans to add a lot more “Paper Notes” this year based on even higher demand. From the Federal Reserve website on How does the Federal Reserve Board determine how much currency to order each year?:

We use the majority of new notes printed each year to replace unfit notes that Reserve Banks have removed from circulation. For example, we estimate that in 2015, 85 percent of the new notes printed will replace destroyed currency, while the remaining 15 percent will meet increased public demand.

So, the Fed states that they replace 85% of old Notes with new ones and add 15% for increased public demand. However, in their current 2018 Federal Reserve Print Note order, they published the following:

The nearly 7.4 billion notes included in the FY 2018 order reflect the Board’s estimate of net demand for currency from domestic and international customers. The print order is determined by denomination and is based on destruction rates and historical payments to and receipts from circulation.

…click on the above link to read the rest of the article…

BIG TROUBLE BREWING AT THE BAKKEN: Rapid Rise In Water Production Signals Red Flag Warning

August 18, 2018

BIG TROUBLE BREWING AT THE BAKKEN: Rapid Rise In Water Production Signals Red Flag Warning

Big trouble is brewing in the mighty North Dakota Bakken Oil Field. While oil production in the Bakken has reversed since it bottomed in 2016 and increased over the past few years, so has the amount of by-product wastewater. Now, it’s not an issue if water production increases along with oil. However, it’s a serious RED FLAG if by-product wastewater rises a great deal more than oil.

And… unfortunately, that is exactly what has taken place in the Bakken over the past two years. In the oil industry, they call it, the rising “Water Cut.” Furthermore, the rapid increase in the amount of water to oil from a well or field suggests that peak production is at hand. So, now the shale companies will have an up-hill battle to try to increase or hold production flat as the water cut rises.

According to the North Dakota Department of Mineral Resources, the Bakken produced 201 million barrels of oil in the first six months of 2018. However, it also produced a stunning 268 million barrels of wastewater:

Thus, the companies producing shale oil in the Bakken had to dispose of 268 million barrels of by-product wastewater in just the first half of the year. I have spoken to a few people in the industry, and the estimate is that it cost approximately $4 a barrel to gather, transport and dispose of this wastewater. Which means, the shale companies will have to pay an estimated $2.2 billion just to get rid of their wastewater this year.

Now, some companies may be recycling their wastewater, but this isn’t free. Actually, I have seen estimates that it cost more money to recycle wastewater than it does to simply dispose of it.

…click on the above link to read the rest of the article…

Gold, Silver, Shale Oil Industry & The Economy: My Interview With James Kunstler

August 16, 2018

Gold, Silver, Shale Oil Industry & The Economy: My Interview With James Kunstler

How insane are the markets today? Well, it’s always a pleasure to discuss this and other topics with James Howard Kunstler. Jim and I had a lively conversation about gold, silver, the shale oil industry and the overall economy in his most recent KunstlerCast. James is one of the few that understands the dire energy predicament we face.

I started following James Kunstler after listening to an interview he had with Art Bell on Coast-To-Coast AM, back in 2005. James is way ahead of his time and in his book, “The Long Emergency” and in the video, “End of Suburbia” he describes what the world looks like after peak oil… and it isn’t pretty.

During our interview, James and I chatted about precious metals manipulation, the soon-to-be disintegrating shale oil industry, the insanely overvalued markets, peak oil, and many other topics. One of the more important items I brought up was the incorrect notion that the Central banks can continue to rig the markets indefinitely. They can’t.

And why is that? Because Central banks can’t continue to prop up the market with paper when the problem is one based on a limitation of PHYSICAL OIL. If the Central banks want to really solve our problems, they have to find a lot more oil… but there just really isn’t much left to find.

So, there lies the rub

To listen to my interview with James Howard Kunstler, please click on the link below:

KunstlerCast 306 — Gold, Silver, and Oil with Steve St. Angelo

Also, please check out James Kunstler’s website as he is a prolific writer and has many interesting books on his website.

Top U.S. Shale Producers Soaring Debt Service Guts Profits

August 14, 2018

Top U.S. Shale Producers Soaring Debt Service Guts Profits

The massive debt accumulated by the U.S. Shale Industry is now decimating company profits. As company debts and interest rates rise, these shale producers interest expense also continues to increase. Debt service is not only cutting into company profits, but it also takes a great deal of oil and gas production to cover this expense.

For example, 16 of the top U.S. shale energy companies racked up a hefty $5 billion interest payment. The company with the highest annual interest expense is Anadarko Energy at a stunning $932 million in 2017:

Devon Energy came in a distant second at $514 million while Chesapeake took the third spot at $425 million. The 16 shale energy companies shown on the right-hand side of the chart are listed from highest to lowest annual interest expense for 2017. And, it is a simple rule-of-thumb that the higher the annual interest expense, the higher overall debt on the company’s balance sheet.

Anadarko has such a high annual interest expense ($932 million) because it holds over $15 billion in debt. Devon Energy had the second highest interest expense in 2017 due to its $10+ billion in debt. However, Devon has recently sold assets and paid down its debt and lowered its interest expense considerably. Furthermore, Chesapeake is paying $425 million a year to service its $9+ billion in debt.

It is quite remarkable that these 16 shale energy companies forked out $5 billion to service their debt last year. The debt service is an expense that impacts the company’s net income profits.

For example, Anadarko posted a loss of $456 million in 2017. However, they paid $932 million in interest expense last year. If Anadarko didn’t have an interest expense, their $456 million loss would have been a $479 million net income profit. So, these 16 companies lost $5 billion in potential profits because they have to service their skyrocketing debts.

…click on the above link to read the rest of the article…

The U.S. Government To Fork Out A Half Trillion To Service Its Debt In 2018

August 4, 2018

The U.S. Government To Fork Out A Half Trillion To Service Its Debt In 2018

The U.S. Government is going to surpass another significant milestone this year. According to the recently released data from the TreasuryDirect.gov, the government will fork out a stunning half trillion dollars just to service its debt in 2018. Unfortunately, as U.S. interest rates rise, along with ever-expanding public debt, the cost to service the debt will continue to increase.

In just the first nine months of the year, the U.S. interest expense has increased by an additional $40 billion. Last year, the U.S. Government paid only $375 billion to service its debt from October to June, but this year it has jumped to $415 billion:

Now, if we consider that the U.S. Treasury paid $83 billion in interest expense for the three remaining months last year, and add it to the current total, it would equal $498 billion. However, the U.S. interest expense is up over 10% already. So, if we assume that the interest expense for July-Sept will also be up 10%, then the estimated total debt service for fiscal 2018 will reach $506-$510 billion.

A half a trillion dollars to service one’s public debt is truly a staggering figure. Since 2012, the U.S. interest expense has increased from $360 billion to an estimated $500+ billion this year:

Interestingly, the U.S. debt service in 2000 of $361 billion was higher than the $360 billion in 2012. The U.S. government paid more interest payments in 2000 because of a much higher interest rate of 6.6%, even though the public debt was only $5.6 trillion. In the chart below, we can see how the falling interest rate and higher debt kept the U.S. debt service from exploding:

…click on the above link to read the rest of the article…

Top U.S. Shale Oil Fields Decline Rate Reaches New Record…. Half Million Barrels Per Day

July 26, 2018

Top U.S. Shale Oil Fields Decline Rate Reaches New Record…. Half Million Barrels Per Day

While the U.S. reached a new record of 11 million barrels of oil production per day last week, the top five shale oil fields also suffered the highest monthly decline rate ever. This is bad news for the U.S. shale industry as it must produce more and more oil each month, to keep oil production from falling.

According to the newest EIA Drilling Productivity Report, the top five U.S. Shale Oil fields monthly oil decline rate is set to surpass a half million barrels per day in August. Thus, the companies will have to produce at last 500,000 barrels of new oil next month just to keep production flat.

Here are the individual shale oil field charts from the EIA’s July Drilling Productivity Report:

The figures that are shown above the UP arrow denote the forecasted new production added next month while the figures above the DOWN arrow provide the monthly legacy decline rate. For example, the chart on the bottom right-hand side is for the Permian Region. The EIA forecasts that the Permian will add 296,000 barrels per day (bpd) of new shale oil production in August, while the existing wells in the field will decline by 223,000 bpd.

If we add up these top five shale oil fields monthly decline rate for August will be 503,000 bpd. Thus, the shale oil companies must produce at least 503,000 bpd of new oil supply next month just to keep production from falling. And, we must remember, this decline rate will continue to increase as shale oil production rises.

We can see this in the following chart below. Again, according to the EIA’s figures, the top five U.S. shale oil fields monthly legacy decline rate increased from 398,000 bpd in January to 503,000 bpd for August:

…click on the above link to read the rest of the article…

BLINKING RED BUBBLE LIGHT: Stock Market Investor Margin Debt Reaches New High

July 3, 2018

BLINKING RED BUBBLE LIGHT: Stock Market Investor Margin Debt Reaches New High

The world is standing at the edge of the financial abyss while most investors are entirely in the dark. However, specific indicators suggest the market is one giant RED BLINKING LIGHT. One of these indicators is the amount of margin debt held by investors. What is quite surprising about the level of investor margin debt is that it has hit a new record high even though the market has sold off 2,500 points from its peak in February.

It seems as if investors no longer believe in market cycles or fundamentals. Instead, the Wall Street saying that “This time is different” has become permanently ingrained in the market psychology. For example, it doesn’t seem to matter to the market that Amazon makes no money on its massive online retail business. The only segment of Amazon’s business that made a decent profit last quarter was from its Cloud hosting services.

So, the new Amazon way of doing business in the United States is to destroy the retail industry so it can break even. I gather once many of the retail chains have gone out of business; Amazon might then increase its prices and shipping costs. But for now, the mighty online retail chain is firmly entrenched in the U.S. RETAIL CANNIBALIZATION mode.

Unfortunately, if Amazon is successful in destroying a significant portion of the brick and mortar retail industry, it will spell bad news for Americans when the next financial collapse takes place. Why? Well, the simple answer is that we can’t go backward. Think about this for a moment.

…click on the above link to read the rest of the article…

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