Wednesday, July 13, 2016

Wood Mac: U.S. Shale To Be At Competitive Advantage In Coming Years

See?  Fracking is better for the environment.  No more Deep Water Horizon accidents.

U.S. shale, rather than deepwater, is now the lowest cost option for future oil production, Wood Mackenzie said in a report. This means that U.S. shale producers will likely be at a competitive advantage in coming years, which demonstrates the success of these companies in cutting production costs and achieving efficiency gains.


Average production costs have fallen by 30-40% for U.S. shale wells, but only 10-12% for large, new projects elsewhere, FT cited Simon Flowers with Wood Mackenzie as saying. They've largely done so by pursuing lower rates from oil services companies, and by achieving enhanced productivity by drilling in better locations to maximize the use of "sweet spots," the WSJ noted in a report.

For this reason, U.S. shale “oil will be the majority of what’s likely to be developed over the next few years, but at the same time, with decline rates and projected demand we still need all of the 13 million barrels a day,” Flowers added.

Tuesday, July 12, 2016

Next Prediction: If Trump is elected President, GOP Congressmen and Senators will switch to Democratic Party

Absurd Conclusion #1 Yup.  That is what will happen if we take the scenario to its absurd conclusion.  The hatred and animosity toward Trump will cause many members to switch.  The idea would be to create a unified voting block to stop anything and everything that Trump will want to pass.

Absurd Conclusion #2  The above is my prediction provided...provided Trump is even the nominee. The other absurd conclusion is that powerful forces are at work secretly behind the scenes to Dump Trump and install a more globalist candidate.  Who?  No idea.

If they do this, it will be the end of the GOP.

If Absurd Conclusion #1 occurs, it will be the end of the Democratic Party.

Parties: choose your poison.

Kimberly-Clark: Venezuela seizes and re-opens US-owned factory

This ALWAYS works out well (snark!)

The government of Venezuela has said it has seized a factory owned by the US firm Kimberly-Clark.

The firm had said it was halting operations in Venezuela as it was unable to obtain raw materials.

But the labour minister said on Monday that the factory closure was illegal and it had re-opened "in the hands of the workers".

Kimberly-Clark, which makes hygiene products including tissues and nappies, said it had acted appropriately.

Over the weekend it became the latest multinational to close or scale back operations in the country, citing strict currency controls, a lack of raw materials and soaring inflation.

General Mills, Procter & Gamble and other corporations have reduced operations in Venezuela as the country is gripped by economic crisis and widespread shortages of basic household goods.

Monday, July 4, 2016

US oil reserves surpass those of Saudi Arabia and Russia

Just amazing!  The Capitalists do it yet again.  History has been made!
The US holds more oil reserves than Saudi Arabia and Russia, the first time it has surpassed those held by the world’s biggest exporting nations, according to a new study.

Rystad Energy estimates recoverable oil in the US from existing fields, discoveries and yet undiscovered areas amounts to 264bn barrels. The figure surpasses Saudi Arabia’s 212bn and Russia’s 256bn in reserves.

The analysis of 60,000 fields worldwide, conducted over a three-year period by the Oslo-based group, shows total global oil reserves at 2.1tn barrels. This is 70 times the current production rate of about 30bn barrels of crude oil a year, Rystad Energy said on Monday.

Sunday, July 3, 2016

The Greater Depression, The Prescience of Elliott Wave and Economic Cycles

Update 2016-10-27  I've added additional external data that has nothing to do with economics but does lend credence to the idea that the sun is setting on American dominance.  It is in an addendum form at the end of the piece.

I've updated the post with Elliott Wave Trader's latest longterm SPX chart.  In some ways they line up.  But in other ways they don't. The new chart is first presented under the discussion of "Avi Gilburt".  Then the EWT and Real Estate Cycle projections are overlaid and are shown down in that section, with some discussion.

The date of the crash is more in agreement.  The date of the final high does not.

By the middle of 2012, it was clear to me that the drastic drop/crash I was expecting wasn’t going to happen.  The people to whom I had put my trust had gotten it all wrong.  I was stuck with ETFs shorting the market and watching them dwindle to almost nothing.

I had a short set up on the Japanese Yen going into 2012 that I decided to abandon.  The bears had me so concerned, I decided to sell my stake and get back into it later….but I never did.  This is what I walked away from:

I would have made a lot of money.

Searching for a Better Way

It was at that time I searched for those who had a better handle on the markets who could do a better job than the ones I had been following. That was when I stumbled upon Elliott Wave Theorydiscovered by R. N. Elliott:

The Elliott Wave Principle posits that collective investor psychology, or crowd psychology, moves between optimism and pessimism in natural sequences. These mood swings create patterns evidenced in the price movements of markets at every degree of trend or time scale.
In Elliott's model, market prices alternate between an impulsive, or motive phase, and a corrective phase on all time scales of trend, as the illustration shows. Impulses are always subdivided into a set of 5 lower-degree waves, alternating again between motive and corrective character, so that waves 1, 3, and 5 are impulses, and waves 2 and 4 are smaller retraces of waves 1 and 3. Corrective waves subdivide into 3 smaller-degree waves starting with a five-wave counter-trend impulse, a retrace, and another impulse. In a bear market the dominant trend is downward, so the pattern is reversed—five waves down and three up. Motive waves always move with the trend, while corrective waves move against it.
The theory, in its simplest form generates a chart of the underlying equity as such:

Since the waves follow a Fibonacci sequence, each wave can be subdivided down into more waves, but each subset following the same pattern.  I just know the very basics of EWT and have relied on those who know better than I in charting the paths. So, I’ve told you all I know!

Does it work?

The answer is yes.  The real beauty of EWT is that all market psychology is built into the charts.  Because of this, you don’t have to follow the rest of the world events that we have always been lead to believe affect the market…but there are caveats.  I started following Dan Stinson at, subscribing to his service.  This was his oil chart in 2013:

And this is what happened:

But what is missing in Stinson’s analyses in each of his charts… is timing.  The concern for timing really becomes important, not in charts like this.  Because, if you can identify a trend, then you follow the trend until it exhausts itself.  It doesn’t matter how long or how short the trend is.  As we say: The Trend Is Your Friend.  The concern in timing is when you see one of his very long term charts that looks like this for the S&P500:

It’s when you see a chart like this that you start to really focus on the present:  What can I do now to preserve my wealth then? As most people don’t realize, it is now possible to make money when the stock market goes down just as easily as when the stock market goes up. You just have to, you know…figure out which way it is headed…and when.  What’re missing in the chart are the market gyrations between the final peak and the low. 
      Elliott Wave Caveats:
Finding someone who can put together a good Elliott Wave chart is not easy.  Dan Stinson’s fortes are long range charts, commodity and currency charts.  He is able to nail the probabilities in what the various twists and turns gold or the Euro will take.  His long term oil chart was astonishing, but his short term oil charts reflect the incredible difficulty there is in determining the waves with the highest probabilities.
      Avi Gilburt
Mr. Gilburt is the founder of a website for traders called Elliott Wave Trader. He has proven himself to be one of the top EWT analysts in the USA.  He presented this chart that I found astonishing:

His chart is confirmation that Stinson is possibly correct.  They both are showing the SPX to tank with the added information of a date.  But, how accurate is the date?  Is there an external set of analyses we can use to confirm or negate this date?  Also, I need to point out that the Grand Cycle (3)to (4) don’t show any of the stock market gyrations. I have no information as to what this would look like.   
      Economic and Real Estate Cycles.  The pieces fall into place.
Larry Edelson, of Weiss Research first clued me into the power of economic cycles.  I had always known of these in a general sense, but up until his presentation, I didn’t really think any of it was helpful.  Cycles are not very precise.  But, in our case they are precise enough to let us know whether or not the Elliott Wave gurus are on to something.  You can listen/watch one of the subsequent presentations that  I recorded here. The presentation is in an M4V format, so use a player that is compatible with this format.

However, I found his presentation a little on the sensational side and didn’t sign up for his newsletter.  I may be completely wrong, but I wasn’t convinced he was the person to entrust my money or future.

His prediction is that these cycles will bottom out in the mid-2020s.

Real Estate Cycle (almost…the same but different)

There is ample information on the Internet to which we can turn to confirm whether Edelson is correct. Phil Anderson of Cycle, Trends, Forecast says in one of his publications on his website (behind subscription wall):

Not only has the real estate cycle been historically consistent at about 18 years in duration, each cycle has unfolded in a highly regular and consistent manner. In 2005 I created a clock to give you a visual diagram how the repeat plays out based on my research of US real estate (land) beginning from 1800.
Anderson is from Australia.  As it turns out, analysts from all over the world study the US real estate cycles going back almost to the founding of this country.
In fact, the real estate cycles in the US are so regular he formulated a 24 hour clock to represent these.

Granted, I make an assumption. And that is the cyclical behaviour I’ve discovered will repeat. But once you discover the fundamental law of economics — 19th Century economist David Ricardo’s Theory of Rent — you’ll see that a repeat is all but inevitable. Why? Because the underlying structure of the economy never changes, despite the endless fiddling and additions in regulations and laws.
You can see this most clearly in the history of the United States.
This is one of his clocks where he actually put dates against them, but I have a hard time following it:

From the same publication the author had this to say.  Bear in mind, this was written in 2015:           

So what’s next?
Just check the clock.
A modest peak in economic activity going into 2017–18. Higher stock prices, which we expect to peak in 2019. Then the mid-cycle slowdown into 2021.
So, we now have confirmation that 2019 (or thereabouts) is the peak of the stock market.

In another Phil Anderson publication to come out just a bit later in April 2016, we are given more information on timing:

Along the way, tightening monetary policy, problems in emerging markets, and the midcycle slowdown may lead to corrections. We’d expect a low to be made at some point in 2016. Later on, around 2019, we’d expect a mid-cycle economic recession to result in a stock market correction too.
Finally, in 2025/26, the stock market will hit its final peak for this cycle ahead of the peak in the economy.
So, we see some correlation between Gilburt’s 2025 and Phil Anderson’s 2025/26.  Phil Anderson is calling for one more final peak in the markets in 2025/26 with the subsequent crash –which will be fast.

What we have is a timing issue regarding Avi’s final high and the Real Estate Cycle.  Avi shows the market first peaking in mid-2017/18.  We could regard this as the beginning of Anderson’s mid-cycle recession.  This is followed by the final peak in 2019/20.  So there is a two to six year difference as to when the peak in the stock market is reached.  The chart is just for talking purposes and please….don’t take it to the bank! Other than timing, I’m assuming all other things are equal.

This is one of the problems with both EWT and Real Estate Cycles.  They aren’t precise to the gnat’s eye.  Which do we believe?  We don’t believe either of them.  We watch and prepare as we get closer to the dates.  All of this will unfold over time. The real answer is probably something in between.

Kondratieff  and Gann Commodity Price Cycles
Nikolai Kondratieff was a Russian economist during the early 1900s that researched and developed the idea of economic cycles.  Unfortunately, his ideas were despised by Stalin.  Kondratieff was later imprisoned and then executed by firing squad due to his anti-Communist ideas.

Kondratieff cycles last anywhere from 40 – 60 years.  Modern versions also point to the advent of new technologies and innovation that are timed to propel the Kondratieff cycle back up to a new peak.  Examples are:

The technological cycles can be labeled as follows:
The Industrial Revolution—1771
The Age of Steam and Railways—1829
The Age of Steel and Heavy Engineering—1875
The Age of Oil, Electricity, the Automobile and Mass Production—1908
The Age of Information and Telecommunications—1971
Any influence of technology during the cycle that began in the Industrial Revolution pertains mainly to England. The U.S. was a commodity producer and was more influenced by agricultural commodity prices. There was a commodity price cycle based on increasing consumption causing tight supplies and rising prices. That allowed new land to the west to be purchased and after four or five years to be cleared and be in production, driving down prices and causing a depression, as in 1819 and 1839.[14] By the 1850s the U. S. was becoming industrialized.[15]

From a published paper put out by Ascendant Strategy, there have been four distinctive waves that have been identified:

We entered the Fifth Wave in 2001.

Subset of Kondratieff:  Commodity Price Cycles:
Gann discovered a 30-year rhythm in commodity prices, which he used to look forward from major price highs and lows to identify future ones. (He also talked about 60 and 90-year cycles, but to keep things simple we will consider these as combinations of 30 year ones, i.e. a 60-year cycle is double a 30 year cycle).
The conclusion from these two cycles [Kondratieff and Gann commodity price cycle-GF] is that we should expect the long-term trend in prices to be up into the middle of the 2020s based on our projection of the current Kondratieff Wave upswing. However, in that time frame we should expect a low price in or around 2023, being 30 years from the low of 1993.

Others, besides Ascendant Strategies have spent a lifetime studying the Kondratieff Waves and have formed investment companies around what they have done extending K-Wave theories for modern use.  Another investment advising company, The Longwave Group, is notable.  Below is a chart they put together to show where we have been and where we are headed.  We are headed into what Kondratieff himself has termed “The Winter” showing it finally bottoming out sometime in 2020.

More specifically, he shows “2020?” indicating that the exact date is unknown but having the highest probability in the 2020s.

Ian Gordon has several Youtube videos where he discusses the K-Waves and his pictograms. You can watch all five of his videos, but the guy is a little dry in his presentation:

So…where does all of this leave us?
We look for signs.    Now that we know generally where and when all of this is headed we can look for the signs that it will and HAS happened
There are three signs in this order:
       1)      Faltering housing market prices- possible subprime mortgages default like in 2008

As the graph shows, the first sign of trouble is the housing market.  Sales start to peak as prices reach unsustainable levels.  
      2)      Market turns over from a high of ~3200SPX

Will the SPX really hit 3200?  Well, we’ll just have to see.  The waves chosen are based on those with the greatest probabilities. Others who implement EWT haven’t mentioned that at all.  If you look at Stinson’s long term S&P Chart he does seem to indicate a high of about 2200.  But the whole top of his chart is a bit vague and appears unreliable.

I was able to find one analyst who is, in a sense, calling for it:  There is this article on Barrons’s “The Stock Market Will Make New Highs This Year” with qualification:
In August 2015, you suggested the S&P 500 would hit 3200. It is now just above 2000, and peaked at 2100.
This isn’t going to be a pop-up bull market. We provide some sort of historical perspective with that forecast. We said that if the market continued to gain 11 basis points [hundredths of a percentage point] per day, as it had to that point, and if it were to equal 1990’s rally in length, it would trade up to 3200. It wasn’t meant to be a forecast but something along the lines of guidance, and that investors should at least be open to that possibility. We tried hard to distinguish between the possibility and a forecast, but everyone fixated on that number.
The point we were making was, don’t take it off the table—don’t presume it will happen, but don’t give up. Don’t let all the bad news take you out. We aren’t saying the market will go to 3200 but that it could go there, so leave the door open—and so far, it hasn’t cost you. Nobody was expecting anything good at the time, but we were willing to say the possibility exists.
So, the next question to ask, if we don’t see 3200SPX, how do we get from here (today) to there (2024)?  The mind reels at the possibilities.  The other most likely scenario is that posited by Dr. McHugh, using his Primary Degree Trend Indicator (behind subscription wall), sees the US stock markets topping this year and then heading lower over the coming years:

Wherever the market peaks, the clock will start ticking.


       3)      Rapid rise of unemployment. 

Once the bear market is a sure thing, the people start to be pushed out the doors.  Unfortunately, I couldn’t glean much information from this chart.  I don’t have enough resolution toward the left end.
The Bad News.  The Good News.
First, The Bad News: The Greater Depression
This is the part I hate to really conjecture upon.  I don’t want to sound like it’s the end of the world as we know it…but that is exactly what will occur.  The most likely things that will happen are:
-          Massive unemployment
-          Collapse of housing prices – massive homelessness.
-          Collapse of commodity prices
Probably the most somber professional article I’ve read was written in 2012 by Dr. Folvary entitled “The Coming Depression of 2026”.  He lays the blame of a coming drop in markets on inflated land prices:
Nobody paid attention during the 1990s when those familiar with the real estate cycle predicted the Depression of 2008 (including myself, in 1997). Almost all economists, financial analysts, journalists, pundits, bloggers, and armchair cynics will also scoff at this prediction of a severe recession and depression in 2026. They will say there is no way to accurately predict such an event so far in advance. But the cycle exists precisely because people don’t believe it.
There has been one fundamental cause of the boom and bust cycle: massive subsidies to land values. Since these subsidies are a governmental intervention into the market, the cause of the cycle is not “business,” hence the term “business cycle” is misleading. It is a cycle of economic distortions caused by government policies.
The monetary subsidy to real estate consists of cheap credit. In the US, the Federal Reserve manipulates interest rates by expanding the money supply. An injection of money increases the money reserves of the banks, which then lower their interest rates to loan out the extra money. Cheap credit fueled the real estate bubble that peaked in 2006, and super-low interest rates today are sowing the seeds of the next bubble. Similar money creation occurs by other central banks.
Some have conjectured that what is occurring longterm is the culmination of a massive wealth transfer from West (North America and Europe) to East (China and Asia in general). Granted, China is now mired in their own problems (mainly demographics, massive amounts of debt and continued central control) and in my opinion its participation may not be as great as many expect, but many economists posit that when all of this is over, the Asian countries will be poised for phenomenal growth.
There are many things we know of now that will affect the long term future of America.  We could mention the massive US government debt of $20 trillion.  We could mention the trillions of dollars of sketchy municipal bonds and those held by pensions and the billions in stocks that will spiral to zero not to mention the huge amounts of corporate debt from unending stock buy backs.  So, we could see many pensions end up completely broke.  The affect of defaults will be worldwide.  Some are already talking about a future Jubilee period – a period of complete debt forgiveness, a practice from Biblical times.
As Donald Rumsfeld is famous for saying about trying to account for causes:
Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones. 
And this is the real problem we’re face with in trying to understand what lies ahead. And these are the problems (unknown unknowns) that Elliott Wave Theory and Cycle Theories avoid. How?  They are already baked into their charts and accounted for.
Next, The Good News.
Part and parcel with the Kondratieff Cycle is the idea of technological innovation and invention.  Generally, once the wave has exhausted itself, a new technological achievement will propel the economy upward.  That’s the good news.
The cautionary news is that government meddling and controls, especially at the levels we see them now, can easily delay the implementation of any new innovation, prolonging the agony. As you saw above in the table, K-Waves turned upward and followed the 50-60 year cycles in Capitalist countries.  Without true Capitalism or an economy with extreme government controls on Capitalism, an improving economy will be delayed or never occur.
Putting that aside, many have pointed to the Internet as the catalyst for empowering the individual to innovate and improve his life.  And usually, that is where they stop when trying to determine what the future holds (Read Dr. Pippa Malgrem’s book “Signals: The Breakdown of the Social Contract and the Rise of Geopolitics”) .  But why stop there?
Doug Casey of Casey Research recently had this to say about the coming next Industrial Revolution:
 Some of these things, like energy and space exploration, are just extensions of current technologies. Others, especially nanotech, are game changers.
Energy—With the exception of nuclear, all power comes from the sun. In the past, solar, wind, and similar power sources existed mainly in the dreams of economically illiterate hippies. But now, combined with rapidly advancing battery technology, they finally make sense. Better yet, oncoming generations of modular nuclear reactors will be tiny, extremely safe, simple, and cheap. Maybe fusion power will finally become practical—although that would just be a bonus.
Oil and gas?  They’re important as feedstocks, but mainly because they provide very dense energy.  They are, however, essentially compounds of hydrogen and carbon, two of the most common and simplest elements.  With adequate (and sufficiently cheap—this is the key) power, they can be created in unlimited quantity; the chemistry is quite basic and well understood. Among other things, algae can be programmed to manufacture them in quantity.
Space—One of the good things about most governments being bankrupt is that they’re being forced to cede the conquest of space to entrepreneurs, who will colonize the moon, the asteroids, and the planets. I love Elon Musk’s quip: “I hope to die on Mars. Just not on impact.” Of course, if he’s lucky, he may live to be several hundred years old because of other developments.
You need “stuff” to make what you need. A lack of raw materials has always been a major reason for conflict. But digging things out of the Earth, using big yellow trucks, will no longer be humanity’s only option. The asteroids are full of dense elements. They’ll soon become available in massive quantity, cheaply.
Life extension—It’s clear we’re on the edge of solving the problem of aging; it should be addressed as a degenerative disease. All other diseases are simply footnotes to aging. If you live long enough, you can be, do, and have everything that you can imagine. It’s likely to be possible soon.
Biological engineering—The creation of not just new body parts, but new bodies, made to order, is in the works. And new species. And much more. Who really knows what can be done with DNA? But the answer is probably: Almost anything, in lots of ways.
Distributed manufacturing—A.E. van Vogt’s The Weapon Shops of Isher predicted machines that would create advanced weapons for you, in the privacy of your own home. Now that’s possible with 3-D printing. Soon, if you can design something, or get the design, you can create it. At home.
Robotics—Not just smart machines in factories. In fact, factories themselves may be on their way out. Humanoid beings—products of bioengineering and AI—could replace them. They’ll perhaps be almost indistinguishable from normal people.
This alone, the creation of intelligent machines, will overturn the nature of society, family, warfare, work—everything.
Artificial intelligence—I believe that a difference that makes no difference is no difference. That’s the concept behind the Turing test. At some point, very soon, machines will be smarter than their creators and will in turn create other machines smarter than they are. And continue doing so at a geometric rate.
Nanotech—I did a chapter on this in Crisis Investing for the ’90s. At the time, not one person in 100 had a clue what it was. In its ultimate form, nanotech—the use of molecular-sized assemblers and supercomputers—will change the character of reality itself. Totally and unrecognizably. It amounts to pixie dust, making it possible to manipulate the 92 naturally occurring elements into useful compounds cheaply and easily. It’s becoming possible to fabricate totally new materials, like carbon nanotubes, vastly more capable than any “natural” material.
Computer science—Electromechanical switches, then vacuum tubes, then transistors, now silicon chips, and soon quantum computing are taking place on a molecular level. All the knowledge in the world, contained in a cube. Or perhaps in the head of a biologically enhanced robot. Or perhaps in an interface to your own brain.
Virtual reality—You’ll be able to immerse yourself in a world of your own creation, activating all of your senses, in a veritable Star Trek holodeck that will be almost indistinguishable from real reality. Perhaps you will prefer to live in unreality. All in the privacy of your own home.
On the subject of fusion, great strides are being made.  Lockheed Martin is on schedule to deliver prototypes to the military.  Here is a youtube video that discusses their program:


So, there you have it.  The short term, the near term, the long term.  The path is laid out in front of you.  It’s up to you to make the right decisions to ensure a long and prosperous life.  Technical analysis and cycle studies have told us the general path from riches to rags to riches and to understand that the path forward is multigenerational.
It’s important that we be aware of what is in store for us at each point.  Not just to ensure our survival.  And not just to ensure our children’s survival.  But to ensure the survival of our children’s children.  So, it’s important that this information be handed down to your kids with instructions that this information be given to their kids.
Because, one of the tenants of Kondratieff was that the waves are so long that those that experienced the prior wave are long dead and the next generation goes into the next wave blissfully ignorant as to what is in store for them.
The Kondratieff Winter cannot be avoided.  It can only be postponed.  But from what I can tell, postponement only leads to deeper and deeper pain due to mountains heaped on mountains of debt that finally collapse.
But we can hope that one day; the Final Innovation will be invented to eradicate Want and Need in the world, thus finally ending the relentless cycles forever.

UPDATE: I had completely forgotten that Ted Aguhob had also done an analysis on the DOW, SPX and NDX and calculated a  peak in the threes as such; 33,000, 3,300, 7,500. 
     He originally did his analysis back in 2013/2014.  Everyone thought he was crazy. But...maybe not so much anymore.
      Here is one of his youtube videos where he talks about it:

Addendum 2016-10-27

Sir John Glubb was a soldier, scholar and author (see this Wikipedia write-up on him:  He studied a number of empires and wrote an essay called The Fate of Empires and The Search For Survival (  He shows this table that lists how long each empire lasted:

He breaks down the stage of an empire as:

The Age of Pioneers (outburst)
The Age of Conquests
The Age of Commerce
The Age of Affluence
The Age of Intellect
The Age of Decadence.

He goes into a decent amount of detail about each one. When you read his breakdown of the Age of Decadence, try to figure out where we are in that.

He states the average age for an empire is 250 years.

If you take the founding of the USA as 1776, 250 years brings you to 2026. If you recall my write up on cycles, this puts the end of the American empire (but not necessarily the end of the country called USA) near the beginning bottom of the "Winter Season" of the Kontratieff Wave.