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Fracking – the hydraulic fracturing of the deep earth and its cousin, horizontal drilling – is the new buzz word in energy today. It has been spread by journalists and correspondents and NGOs to the general public. What is this strange word's impact on our own lives?

A simple, four stage answer would include: 

  • jobs
  • energy
  • imports
  • environment


            Sorry ‘bout the failure to fail – it ain’t happening. Expectations for the demise of humanity are greatly exaggerated. The destruction of Mother Gaia has yet to be brought about through mankind’s abusive exploitation. Despite our every attempt to exterminate homo sapiens as a species, we remain.

            Why this constant failure to fail? Where have all the scary monsters gone – there is only so much room under the bed!

            The human population has stabilized across much of the planet: Europe, Asia, the Americas (exception, USA). Only northern Africa and the Middle East continue to grow significantly. While predictions are a cult unto themselves, the global human population may cease to expand within a generation. Its growth rate has declined precipitously. The general statement (much overused) of a married couple with 2.1 children being the ‘point of perfect replication’ is becoming the norm. The figures for Japan, Europe and Russia are well below this: 1.4 – 1.8, while China is at 2.0. As people die, fewer are being replaced by newborns. Simplistic, yes, but valid.

            Natural resources have yet to approach the point of exhaustion – far from it. We extract more from our Earth than ever while discovering more. Pricing mechanisms – supply and demand and efficiencies of design and use – turn the tide away from exhaustion to excess. Crude oil production is at 88M bbls/day and the price has collapsed as new supplies acquired at lower cost flood the market. Re-cycling has reduced demand for a myriad of basic materials. Better automotive technology means we drive more miles, exhaust less as ownership costs decline.

            The horrors of biotech – epitomized by GMO – are really our very best friends. ‘Food is more abundant today than ever before in history’, according to Ronald Bailey, author of The End of Doom. Global food production has more than tripled over the past 50 years, while the population has simply doubled. The newest edition of efficient food production is far more significant. It allows the introduction of Vitamin A to remove rickets from the global population, along with childhood blindness. GMO rice and grains use far less fertilizer and water with a concomitant increase in acreage productivity.

            The Green Revolution of Norm Borlaug exemplifies these trends. Biotech enabled by more efficient exploitation of natural resources has allowed humanity to grow – and do so more peacefully and healthier and wealthier.

            The Big Bad Wolf – whose name constantly changes from global cooling to global warming to climate change – is nowhere to be found. 24 years of steady to slightly declining global temperatures since the last great volcanism, Mt. Pinatubo in 1991, are directly associated with a 30% increase in atmospheric CO2. Where’s the beef? ‘Climatologists’ look under the ocean and under the bed, to no avail. The science is settled: it is not science but religion.

            Oddly enough, as food and health availability improve, education and human rights often follow suit. A wealth increase from starvation ($2/day) to subsistence ($4/day) makes a huge difference. Augment this with improved agricultural tools, power sourcing and basic medicine for pre-natal, infant and women’s health. Education becomes affordable and desirable. Stable home and house encourage savings. This can lead to inexpensive communications tools – cell phones -that empower farmers and merchants. Movement from the rural to the urban world ensues, as does closer ties and communication between citizens. This can lead to nascent capitalism (it can just as easily lead to nepotism in its thousand forms). Environmental awareness, known as conservation, becomes an acceptable norm as wealth grows. Family size is reduced, initially because fewer surviving workers are required; ultimately because young couples begin to factor in the cost of children to their world views.

            Fear is the only selling point for the pessimists. Facts simply refuse to support their way of life. Facts are dangerous because they tell the truth. Fear is far more dangerous because it manipulates the truth.

Each time you read or hear of a ‘well founded’ fear, ask yourself, ‘what are they not saying when they say this?’ Recall Sherlock Holmes in The Hound of the Baskervilles. His clue was the silent watchdog.

            Suggested reading:

                        The Rational Optimist by Matt Ridley

                        A World of Wealth by Thomas Donlan

                        Its Getting Better All the Time by Julian Simon

                        The End of Doom by Ronald Bailey


You recently asked me whether your portfolio had exposure to China. You had expressed concern about the economic challenges of Greece and China. We briefly discussed the Chinese ‘long view’, their understanding that the Middle Kingdom was just that, that the Han were the Chosen Ones, that the center of the world was in their nation, that the other humans were, at best, Doppelgangers.

            Let’s dig a little deeper. The Chinese markets are really three: Shenzhen, Shanghai and Hong Kong. The 1st is their NASDAQ, the ‘fleet of foot’ high risers and fast fallers. The 2nd is their DOW, the large cap world of banks, industry, energy, etc. HK is a different beast in that it has been around far longer (100+ years, vs. 25), is much deeper and enjoys the participation of global players. The MSCI, the most liquid and played of the global indices, recently refused to admit #1 & #2. They are, as The Economist would call them, a punters world: composed entirely of retail players. It is a gambling den, simple. These taxicab drivers, bellmen and minor government officials are deeply involved in the Largest Casino on Mainland China. Fewer than 5% of the daily volume is international, by design. Liquidity is defined by the companies and government participants – each can add liquidity or withdraw it during the course of the day. No global institution is willing to submit to such a racketeering realm.

            The national leaders of China have encouraged full participation in the markets since 2008, just as they have provided significant liquidity to the same markets. Give a punter a few grand in chips and he will play his entire fortune on the game, no matter what its size. You could not design a more rigged game. The Party has partitioned off the garbage of the SEOs (state owned enterprises), put these shares to market and told the gamblers to have a field day. They have.

            Over the past 8 months the game has been called. Fewer chairs each song, fewer chips each dice roll. As a result, the markets have dropped by 40%. This has now become global media noise. You are a smart guy; you understand math. If a statistical series drops by 40%, what is the probability that it will drop further? What is the probability that it will change direction? The same statistical series event happened with oil 11/14 – 3/15: a drop of 55%. What happened? This was absolutely outside the realm of supply, demand, politics and economics. Ebola ran the same course. The Plague did the same – three times in 120 years – in the late Middle Ages. No series runs a complete course to zero. Life on the planet has approached extinction on at least five occasions (once to 90%+ ) only to rebound in renewed form and energy. It is nearly impossible to destroy a mathematically diverse event. No series perfectly repeats itself, either: history is not constant, nor is it unintelligent. The human race learns at several levels, not least of which is survival.

            There is more liquidity in the fracking capital markets than in all of Greece. The average family income in China has risen tenfold in 25 years, to $7K/year. The same figure here is $56K. While the Chinese markets are the 2nd largest in the world, this is only in trade volume, not in absolute stock value. It may be the 2nd largest economy in the world – it is far from becoming the 2nd most vibrant economy in the world.

These simple math features are why there is no ‘global contagion’ to the Chinese markets. As Shakespeare said in a slightly different situation, this is ‘full of sound and fury, signifying nothing’. Notice that the Chinese market collapse has been going on for months and only now is the media fretting about it. They have nothing else to worry about during the quiet summer months.

The most worrisome people on the planet these days are: George Soros, Al Gore, Vlad Putin. The 1st is intent upon destroying capitalism. The 2nd is intent upon destroying capitalism. The 3rd is intent upon destroying capitalism. GS will do so in the capital markets; AG will do so in the education arena; VP will do so in Mitteleuropa. Each is a small man with Napoleonic designs. Each has leveraged his ability far beyond his skill set. Each is deadly as a viper.

If you want to worry, worry about them. Your daughter, a very intelligent young woman, is fairly convinced that humans are the scourge of the Earth. Many highly educated members of her generation agree, wholeheartedly. Far more attention is paid to race and income inequality than to the Russian bear. My professional world of money management’s greatest challenge is in finding competent young participants to whom we may pass the baton when we retire or pass on. Few seem interested these days. These are design features of GS’s, AG’s and VP’s Brave New World. Entitlement trumps Entrepreneurship. Entertainment politics holds sway as intelligence takes a back seat to sleight of hand and mouth.

Of course, Aristotle had similar worries 2,200 years ago: ‘the youth of Athens are run rampant. They care more for wine and song than for politic and achievement’. Series do continue and do not repeat. We shall constantly improve our well being, as individuals and as a race for our lifetimes, I certainly believe. Your daughter will be one of the New Leaders of her own new World, defined by their own expectations, giving slight attention to the three stooges/scourges above mentioned. She and her friends are far too intelligent and far too caring to fall for that gibberish.

Does your portfolio have exposure to China. I shall make every attempt to do just that. Buy when blood runs in the streets!



            Each morning I read the Wall St. Journal and The Economist, either on line or on paper. Today’s headlined stories have a common theme, one that resonates with many and permeates our culture.


What shall we fear today? Russian intellectual incursion into Bulgaria? The planet’s temperature exceeding 2 degrees Celsius in 85 years? Chinese cyber warfare?  FIFA’s coming elections? Excess debt in Greece, China, California or… ?. Stock market plunges in Europe, Wall St. or China? Safety of our personal medical records? Private college bankruptcies? The price of eggs?


The list is exhaustive. These few headlines are simply the current batch. Every day we are told to be afraid, be very afraid. It is amazing that we can even get out of bed without danger – perhaps we cannot! 

Surely goodness and mercy will follow us to the ends of our days! Certainly we live in a cleaner, healthier, wealthier, safer, happier world than our parents’ or grandparents’ world – than we are led to believe. If you have been to our offices, you have seen one of my favorite books prominently displayed for all to peruse: It’s Getting Better All The Time, by Stephen Moore and Julian Simon. You may know Mr. Simon as the fellow who bet Dr. Carl Erlich $10,000 in 1984 that the prices of a basket of commodities – to be chosen by the good doctor – would each be lower a decade hence, refuting his argument of global scarcity. He won handily, although he was never paid… The point is this: scarcity is a matter of conjecture. Supply and demand elasticity is profound, which means prices and supply are dancing a Tango with no predictability, no knowable results. Simplistic jargon is the enemy of knowledge.


Fear is an easy story to tell. It requires no previous knowledge (as does ‘supply and demand elasticity’). It is easy to describe in words and in the elevator. It works with sound bites. While usually groundless, it can be ground shaking. Our emotional response can be both overwhelming and spontaneous. Our response is also uncontrolled. Fight or flight, we are trapped in the ultimate Hegelian dialectic of every predator/prey in Earth’s long history. We require an act of faith in reason to overcome the chemical charge. Reason is intellectual. Fear is chemical. You may have lost the battle before it has begun if your response to fear has to be considered before accepted. You have no choice but to fight or flee.


Yet fear’s greatest enemies are facts. Facts are universally agreed upon. They are the atoms of which the world of humanity is composed. They distinguish us from beasts. They are our fleeting contact with the Eternal, with God, with our humanity. Each of us must engage each day in Milton’s battle. Take down Paradise Lost from the bookshelf. Download it – it’s free – and read his tale of good and evil. It is Gilgamesh told once again. It is the Baghavad Gita. It is Star Wars. As humans, we are embattled with the Dark Side and its Death Star. We can succumb to its universal appeal or fight with the few weapons we have. Reason is a strong weapon. While it can be weakened with disuse, it remains formidable. Faith is our strongest: faith in ourselves, our family and community, in our nation, in our Creator. Unbounded faith can lead to black holes, just as twisted reason can destroy worlds. Strength of purpose – integrity – offers us rescue. Integrity of beliefs and of person urges us to consider, with due reflection, before we run raging into the night. We are neither Vampires nor Undead. We have the gifts, the sword and sheath, of reason and ethic.


In the struggle to understand, we are often told of distinctions between right and left, red and blue, God and Mammon, East and West, good and evil, ‘ the devil and the deep blue sea’. This framing allows the story to be told in a simple manner. It is the basic tool of all storytellers since ancient times. It is a false dichotomy. Very few things in our world are simple, fewer are simplistic, none are two-sided. Every story has the glint of a diamond, with brilliant colors emerging with the storyteller’s skill. We first learn with a simple tale, then it is embellished with back-story, with color, with romance and intrigue. Thus each poem, novel and script becomes real. In the non-fiction world of news and politics and science, storytelling is often lost. A good editor will encourage a reporter’s tale; a typical editor simply works to a deadline. Story becomes fear. Fear sells advertising. Next story.


In the struggle to dominate, simplistic dominates color. Fear sells. Move on. Organization is bereft of depth. Clubs are encouraged. Defense is raised, to attack a perceived enemy. My final point here is complex: dig below the surface of any story that interests you. Ask questions. Check facts. Know the writer and the source. The battle is not about left or right. It is not about the environment or capitalism. These are false fronts, Potemkin villages portraying a fiction (a Potemkin village is like a Western movie set with nothing behind the storefronts). These urge you to view things – issues – as either/or, good/bad. These are tools of deception.


The real game is power. Dichotomies allow the powerful to manipulate the story until it is no longer a story – it is a tirade, a polemic. The distraction is far more important than the truth. If you are so distracted that you swallow the line, you are caught. You are sold the fear. You buy the product. Your ignorance is their bliss. They laugh at your chains. They have forced you into the age old fight/flight choice. Your have become the animal in their cage. You are their infidel, to be destroyed at their whim.


Reason. Think before you respond. Yes, the markets will be down significantly today. Perhaps for the summer. Understand how things work. Rather than be worked, work information to your advantage. As Baron Rothschild said in 1874, as the streets of Paris were in flames from the Communard attacks, ‘Buy when blood runs in the streets’. Warren Buffet has been stirring the pot recently; follow his advice: ‘buy when everyone else is selling, sell when everyone else is buying’.


Above all, charm the bastards!


Eat wisely.

Sleep well.

Love with abandon.



Mr. Lincoln was shot during a performance of a hit stage play last night and died in the early morning hours. The play remains a huge success across the Eastern Seaboard. Please consider our advertisers products.

In so many words, the death of the president was announced to the nation 150 years ago. The stories ranged from a review of the play to the story’s placement on the front page next to an ad for The Elixir of Love. Funny how the media views the world through its own lens.

Of course, we do the same today. The media tells their stories: ‘if it bleeds it leads’.

We readers digest what we choose, as we wish. You could easily imagine these headlines from central China 600,000 years ago:

Fire and Light

Ug brought light into his cave today with a burning branch. Ms. Ug promptly cooked a meal for the first time.

Heavens Angry

Ug tempted Fate and brought destruction upon his fresh meal by an ignorant wife.

These headlines from today’s press, stand out from the crowd.

While related to energy as a whole, they have their own significance:

Yucca Mountain, NV Declared Safe for Nuclear Storage

US Natural Gas Potential Increases Again, to 2,505 Trillion.

Global Leader in Oil & Gas Production: USA

US Senate Rejects Wind Energy Tax Credits

US ON Verge of Energy Independence–on-verge-of-energy-independence–peter-kenny-171324902.html.

IPCC, Oregon Governor, Join Al Gore in Sex Scandals Parade

Founder of Greenpeace, Patrick Moore, Remains Climate Change Skeptic

Perspective. It changes how you view your surroundings. Today’s intention is far less about the substance of the stories above, far more about the manner is which they are presented. Just as locating a headline next to an ad for sex therapy helped to sell papers in 1865 New York, so too does the title of a story today help sell the idea globally. The story could be told from exactly the opposite perspective, as long as it sold…!


Spring offers renewal across the land. Bird song suggests the season. In Ojai, the falcons and hawks spirited across the sky in mating ritual. Their aerial play was evolutionary, allowing them to display their best hunting skills. The top of the food-chain allows longer courtship and nesting. Success demands an aviator’s flight skills. Crows mobbed the coupling routine, as if they knew their adversary’s genetic strengths. In the early morning, two owls would beckon to one another, each soft scree, almost a warbling, coming closer to each other. Hunting or mating, they seemed to work together.

In the arboreal forest of north Raleigh, the same music is played by a new orchestra. Hawks and crow battle for the high sky, screeching their domain names, pummeling one another in combat. Passerines – small migratory birds such as finches, warblers and larks – are moving up the open sky-ways from the Caribbean. Their 1,700 mile journeys bring them to us, just behind the Canadian geese. These noisy, nosy brown beauties have already passed through, drinking in our forest stream, annoyed at our penchant for staring at their strident trumpeting.

Each morning we hear new song as the forest awakes. It invites all comers to gaze and to multiply. An early riser from her winter sleep, a 5′ black rat snake warily eyes my close examination. Her double eyelids open, her tongue lashes the air to taste my scent. Her skin is rough and mottled as she readies involuntarily for her new coat of spring. Finding a recently dead bluebird, I place it near her nest. It has disappeared by morning. Her extended belly digests the free meal in unapparent thanks. Her bite is reported to be painful but not deadly – I leave her to her leafed domain.

Each day brings new colors to the towering grey old men of the forest. Maple, elm, oak, birch, cypress, pine, dogwood and cherry wrestle across the forest floor. Some reach 80′ seeking sunlight. Their crowns crowd the canopy. Their saplings cover the forest floor. Every color is vibrant: the pure white cherry blossoms, the searing green shoots in the tops, the purple of the dogwood blooms. Even I can see this vibrancy of display. Birds eat and nest and recycle. Seeds are dropped, consumed and worked through the thick leave-left rotting mulch on the floor. New saplings fight for domain and replace their parents over a few decades of strident growth.

The vibrancy of the forest amazes us each day. The pollen is just beginning to fall, covering everything with a thin green haze. We are told to expect a thick green carpet over the ensuing weeks. Anything outside must be covered. Screens are replaced on windows. Doors are kept shut to keep the birds out – we have had five guests this past week. As the temperature climbs, activity rises. From singing (stinging!) caterpillars and honey bees to bats, birds, snakes and deer, we are ensconced within the living forest. This massive ground cover has blanketed the East for millennia.  There is more arboreal forest across the North American continent than in 1492.

Concrete and fiberglass stand no chance of survival against such a living presence. There is no hubris like that of Man, there is so little reason for such unwarranted pride. We too shall be consumed by the forest, nurturing as we decay. The chthonic Easter story has a natural basis in our faith and in our land. Only through death do we survive. Only through recycling does the forest thrive. Concrete and fiberglass have given over that simple skill. Our success lies in our families, our communities, our neighbors and our friends. We too live at the top of the food-chain. We too can succeed or fail with our learned skills. Our children are our mercy and our survival, the birthright of success. Just as raptors, we lead from strength, we succumb to death.

Enjoy this Spring day. Ignore the TV and computer. Take a walk with your loved one. Listen. See. Enjoy.     Eat wisely. Sleep well. Love with abandon!


January 16, 1362, is the date when die grote mandrenke devastated much of Europe. Thousands perished in a massive winter storm that destroyed much of the continental coastline. This economic and social horror is the direct precursor to much of the rebirth of Europe, the Enlightenment. While Fibonacci is importing the zero from the Muslim world and Marco Polo’s Chinese adventures are opening Venice to The Levant and beyond for trade, this devastation opens the interior of the Netherlands – the Zuiderzee. This lake becomes a shallow sea. Small villages along its banks can now thrive with more coastal commerce. Fish lead to salt, to lace and to flax. The smallest of these villages , Amsterdam, becomes a global powerhouse by the 1600s, ruling the seas and inventing international commerce in the 17th and 18th centuries. England follows suit, as the global terrorist organization, Spain, having reduced much of the New World to slavery and death, self destructs after trying to conquer Holland and England in its own disgraceful Holy War.

What’s the point of this historical study? Disaster often leads to opportunity. Do we face such challenges today?

For the past few months we have all suffered at the hands of OPEC. The price of crude oil has been cut in half. They are trying to preserve their share of the energy market by refusing to reduce production, even as global demand drops. Whether this is a war against the US, Russia or Iran is less important than knowing it is a battle. We who are shareholders in the U S Energy Revolution are figures on the battlefield. Our loss, the blood on the field, is our wealth being destroyed. Share prices drop with oil prices. It has been a trying winter for all of us.

At the same time, we are also winners in this battle. Each time we fill up, we pay less at the pump. Companies who depend upon transportation are enjoying the same respite. Firms with lowering energy costs will see lower production costs soon. These lower costs usually translate into higher share prices, higher employment and better tax revenues. The U S economy should continue to lead the world economically. As long as the drumbeat for higher fuel taxes is ignored (a difficulty, certainly), we should weather this storm and win this battle. Private capital is preferred to government spending . Your wealth increases as taxes decline – a very simple equation.

2014 was a hard year for portfolio management. 86% of mutual funds managers underperformed the S&P 500, as did I. Four significant market drops preceded the oil decline in late November. Much of your portfolio has been ‘rebalanced’ away from energy to preferred stock and transportation. As happened in 2000 and 2008, I await the passing of the storm. New opportunities are always present once the sky clears. No one knows when this will occur, for none of us have any idea of the future. You have suffered through these times before – and you have been well rewarded by our subsequent actions.

They call it fall, here in the East, for a reason. The leaves fall like rain for weeks on end. The sky drops clouds as winter drags them across the barren treetops. Cold alternates with colder and we await the first serious snow of winter. We live deep in the Carolina arboreal forest, surrounded by elm, birch, oak, pine and hemlock. Deer tend to the acorns as squirrels bury their favorite seeds.

In the capital markets, we anticipate the growing U S to provide leadership to a faltering global economy. Jobs creation, low cost capital, technology efficiencies are coupling with this drastic fuel price reduction to enable the next revolution, the American Manufacturing revolution. U S manufacturing is coming on strong. Natural gas powered utilities provide low cost energy. Technology allows plant level scaling efficiencies to increase productivity. Demand drives production. Jobs follow. Taxes are paid to support local communities.

Isn’t it amazing how capitalism works? Adam Smith trumps Maynard Keynes every hand.

Many energy based portfolios suffered during 2014. Four downdrafts in the market and OPEC’s disastrous decision to maintain production in the face of weakened demand were real challenges. After five years of stellar growth and excellent income, 2014 set new bounds for expectations. We are adjusting to these realities.

As I have met with each of you over the year, two questions were universal:

How is North Carolina?

What will the future bring?

North Carolina folk are friendly, warm, open, hospitable, helpful and charming. Everyone goes to church on Sunday – the roads are empty before noon; most stores are closed. The weather changes with a defined regularity. It rains, nearly every week. Green is the predominant color. The city of Raleigh is built into the forest: every developer may use only 30% of the land, with 70% left in its natural state. The cost of living is 1/3 lower than Southern California. State income tax is a flat 5% for all citizens (after deductions). The ethnic mix is 65% Caucasian, 24% African- American, 8% Latino and 3% Asian. While the state is strongly Republican, the urban areas of Raleigh and Charlotte are quite Democratic. As much as 35% of the state are newbies such as ourselves – the city of Cary stands for ‘corral all retired Yankees’ or some such silliness. The food is amazingly good, with ‘farm to table’ nearly a requirement for the Raleigh urbane elite.

I now have a crystal ball on my desk. It is opaque. No One Knows The Future. Tea leaves, the stars and pundits all share a common trait: taking advantage of the gullible. If you want to know what will happen tomorrow, go to sleep. When you wake up, you will know. It really is that simple. I can make the most rational arguments for a strong economy, knowing full well that rational behavior is as rare as a bird’s nest on a wind turbine, as snow in San Diego. It happens but rarely. Irrational thinking, emotional responses, chaos, fear, greed, antipathy, graciousness, faith and lack thereof are far more prevalent.

My only prognostication is this: you will be led like a sheep to slaughter each time you listen to forecasters. None of us has a clue. The more I work with the tools of my profession, the more I understand how much I have to learn. I suspect this is the beginning of wisdom. A shame it takes so long to learn! I am glad that I have another 30 years to continue the lessons…yes, I celebrated 30 years as a professional in December.

Opportunities abound here in America. If the wild men of the Left and Right simply quiet down, the Middle can do what we do best – listen, debate, understand, agree to disagree. Compromise. It is the quintessential American way. States are meant to be the laboratories of political science – lets get back to this Constitutional idea. Federalism rather than federal leadership. As we keep more of what we earn through lower fuel costs and taxes, we can devote more time, energy and resource to the well being of our families, our home and our community. Those of us who are business leaders can lead by example; we fail often, as expected. We succeed enough to be pioneers: crawling across the desert with arrows in our back, still seeking the Promised Land.

Technology and applied science have an ever  increasing impact upon our economy, our culture and our society. The Voice, Tesla, Fracking and Amazon demonstrate these applications of science to technology. On the surface there is little difference between the Voice and the Roman Colosseum. Bread and blood. Yet look deeper – the entire audience has expanded; it participates directly and the blood has been removed. Tesla replaces the chariot, by six degrees of separation. Oil and gas have replaced slaves (except for Daerth, or IS). Electrons have replaced papyrus scrolls and billions now read vs. a few hundred. The rate of increase is increasing. This is velocity in physics. Applied to momentum it converts energy to efficiencies unknown. Do this enough times to overcome the mistakes and you have progress.

My point is: worry less. Life is getting better. Globally, fewer than 700 million now live in abject poverty. This is less than 10% of the human population. The figure was 90% a century ago. Health, human rights, legal and property rights are the norm today. Their absence is obvious. Women, children and minorities are equals in much of the world. The environment improves with wealth creation. We have ‘certain inalienable rights. Among them life, liberty and the pursuit of happiness.’ What a concept!

Sleep well. Eat wisely. Love with abandon!

‘I can think of six impossible things before breakfast’ says the Red Queen from Alice In Wonderland.

Looking at the financial media over the past six months, you would think she runs the presses.

“Lower oil prices will stimulate deflation.” Oh? Your cost to fill your gas tank has dropped by $10-$20 per tank. Are you more worried about you spending habits now?

“Stock prices are at all time highs.” Yes, as they were in 1944, 1951, 1968, 1970, 1989, 1999, 2007. Where are they today – higher or lower? What’s your point?

“Global unrest threatens the world”. Fewer people die from murder – in war or on their streets  – than at any time in the past.

“Civil unrest threatens our social fabric.” Arrest rates are lower than ever recorded by the FBI; prison populations are dropping fast; the police are far more honored than attacked.

“Energy prices are destroying my portfolio.” Yes, energy stocks have declined. They will stabilize as supply matches demand. This cycle is one of the few that regularly repeats itself every decade or so. Opportunities abound!

“We are destroying ourselves by harming the planet.” Actually, She is doing rather well, thank you. Every pollution measurement in the US has declined, particularly the new evil, carbon. As the New Year approaches, and as we have so much for which to be grateful, let us think of six possible things during today’s breakfast.

“Inflation is low.” Even gas prices have dropped. Food, clothing and most ‘consumer discretionary spending’ will follow suit. You will have more discretionary income in 2015.

“Debt is declining.” At least for most consumers, that is. While governmental debt remains a concern, many consumers, especially Boomers, have reduced or eliminated debt after the 2008-09 recession.     “Politics is about Compromise.” Despite the bleatings of the lambs on the left and right, most of us work the center and respect Representatives who do the same.

“Global events are interesting but far less disturbing.” IS, Syria, Russia: ‘whack a mole’ is the game for media contestants. For us, let’s just do our family and our community well.

“The people of the world are becoming wealthier.” You may not see this headline often; yet it is undeniably true. Health, wealth, family, education and rights are each and all improving for the majority of the global population.

“Breath deeply on a long contemplative walk.” Enjoy your home, yard, street, community, city, state and nation. You have earned the right to breath freely. Do so. Worry less, smile more. Yes, it has been a volatile year. Yes, you can easily forget the sunshine for the clouds. Both are necessary. None of us has any skill at predicting the future. Trash every commentary so doing. Ignore pundits. Over time, capitalism creates wealth. Healthy families result. Education and human rights follow. The environment improves. Adam Smith beats Maynard Keynes every time they sit down to a hand of cards… Lest we dispose ourselves to slothful repose in contemplating this earthly paradise, never forget our neighbors. Many are in need. We can give of our time, our experience, our wealth in so many ways. Help your neighbor. Tithe at church. Serve a meal at a veterans’ or homeless’ food line. Support your charities as you find best able to do. Think globally, act locally. In expectation of a Remarkable Year

Eat wisely.

Sleep well.

Love with abandon.


The most important holiday of the year for this great nation, Thanksgiving is like no other holiday in any other land.

We express a simple awareness of our gifts and express our heartfelt thanks.

We remember our families, friends, neighbors, service members and leaders of all walks in life.

We give a hearty Thank You to one and all.

We express, over a family meal, our gratitude.

With joy in our hearts and a bountiful table, we eat, talk and recall.

Many have less than we have. To them we offer an outreach of gifts, food, clothing.

We share our wealth – without recompense, without reward.

In our expression of goodwill, we acknowledge our partnership with those of whom we know nothing, other than their unknown need.

Work is our pastime, our reward and for many, our pleasure.

We give thanks for the sweat of our brow, from the bottom of our hearts.

We are honored with the task of earning our daily bread. While we may well earn far more than food, we earn a living from our efforts, we build our lives around our careers – and give thanks.

I recently received a note from a dear friend. In this time of Thanksgiving, I’d like to share it with each of you. His expression of thanks fits well into this Season and leads well into our Christmas Season.

We all come from humble beginnings. Many have achieved well being, success, happiness through work and good ethics. He shares this with us.

John, I just reread your 20:15:14 email for the third time. Each time I think I get a better feeling of comfort within my being. As you know I was born in 1932. Lived my first 16 years in seven different homes with two grand-parents, two parents and one sister. All with a very strong allegiance to the Democratic Party, Christian training, and hard working parents. For the most part I believed I was a very lucky boy living in a mid-blue collar world, with a strong desire to work, starting in the fifth grade with morning and evening paper routes. The bottom line is your writings are very helpful with my feelings of being reasonably comfortable for the rest of my life, hopefully with a little left over for our children and grand and great grand kids. Keep up the great writing.

My response to him is simple and direct: Your references to your youth are well received. Yes, work was an honor, well rewarded. We were glad to have a job – the opportunity to set forth in the world. Blue collar was a badge of respect and honor, or certainty. During this Thanksgiving Season, we are each well reminded of these simple facts of life: love, respect, patriotism, honor, hard work. Thank you!

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Liam Denning at WSJ reports on suspicious price fixing efforts by KSA (Kingdom of Saudi Arabia). Is it to pressure Iran, Russia and Canada to reduce production or simply to maintain market share?

Recent KSA price reductions on current and near future deliveries have destabilized Brent, with Iraq following suit on the shifiing sands of the rub al’ Khali. Lifetime break even production costs are closely guarded state secrets (90% of global reserves are state owned), but Russia’s may be $100, Iraq’s may be $90 and KSA’a may be $80.

In the US, the calculus is different. Each well’s production and completion costs are well known. Any well can be capped at any time to reduce output or opened to increase throughput. Returns are calculated based upon an assumed 10% p. a. against down hole capital. Generally speaking, given this intimate detailing, the Bakken costs range about $80/bbl, the Permian about $70/bbl  or lower depending upon the age of the well and its recompletion stage – and the Eagle Ford less than $60/bbl. Hedging further reduces market risk for the E&P firm as most will lock in prices as far as three years out.

Canada has a higher capital cost for both development and delivery. Sands are costly to deliver upon and the pipe distances are immense. Costs continue to rise; thus, Canadian crude trades at a discount to US crude, as much as 30%.

State owned enterprises (SOEs) tend towards higher costs. The multinational oil firms tend towards massive capital projects. Multi-billion USD projects are almost always over budget and under producing: witness Chevron’s debacle in NW AS, the Khashagan monster in the Caspian, Petrobras’ sub salt challenges and the recent Angola shutdown. These nations and firms value the entire operation over its lifetime of crude delivery rather than the piecemeal approach of U S independents. This significant accounting differential leads to enormous valuation preferences geared toward the Indies. Breakdowns, cost overruns and delivery debacles add to both capital cost and share price sensitivity.

KSA has the upper hand at the global output level. U S indies have the better hand in North America. They have the technology, experience, skills, land ownership rights and technology. Couple this to proximity of demand and ease of delivery.

October is the cruelest month. November may be MLPs warmest.

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