Energy analyst Kurt Wulff of McDep.com says the massive billion-dollar buyout of BG Group by Royal Dutch Shell is a sign that the energy industry believes we’ve seen a turn in oil; Michael Lewitt of The Credit Strategist says the bull market ends when there’s no longer any faith in central banks and we’re nowhere near that point; Chris Martenson explains what happened to Peak Oil; and Kurt Kallaus believes stocks eventually peak in 2-3 years.
Here are a few excerpts from this week’s set of interviews. Logged in subscribers can click the links below to hear the full broadcasts (click here to subscribe).
Is Royal Dutch's buyout of BG the start of things to come?
Kurt Wulff: I think it could be. It's more akin to Exxon buying Mobil than Exxon buying XTO because it's a much bigger deal; it’s some 80 billion dollars plus. And that's the kind of deal that comes along only once a generation or so. It's happening this time in Europe rather than in the US. It's a deal between the two big companies in the UK…and I think management was pretty much watching for when the turn might come in oil. They didn't want to buy too soon and now that they've acted it's a good sign of confidence. (click here for full broadcast)
What ever happened to peak oil?
Chris Martenson: So one of the myths that's really been hammered home in our country in the US in particular is this idea that ingenuity and good ol' American gumption is what unlocked the shale plays; and of course what unlocked those was not fracking and horizontal drilling--two technologies that have been with us for decades--but price. Once price climbed over $70-75 a barrel those were reasonable plays to go after and that's what we would expect in a peak oil scenario: as prices rise in response to perceived or actual shortfalls relative to what demand is saying it would like to have, price will rise and then people will go after more marginal plays. So, to me, the ultra-deepwater, the shale plays, tar sands in Canada--these are all marginal plays because they're extremely expensive, very capital intensive in most cases...so what I'm seeing is that price unlocked the shale plays and price is busy locking it back up again. So this is an idea we would look at from the peak oil context and say, "Look, we wouldn't be going after the expensive stuff if there was cheaper stuff. The cheap oil is pretty much gone. (click here for full broadcast)
How much farther do you think this bull market can go?
Michael Lewitt: That's the 100 trillion dollar question...no one really knows how long it can go but clearly the path is unsustainable. I think the issue becomes when does the market lose faith in the ability of central banks to keep the system afloat and it doesn't seem like we're anywhere near to reaching that point but...10 years can we be going like this? No. Five years from now? I don't think so, not without some kind of major market event because economies are not just growing fast enough...but markets are largely driven by psychology and right now the psychology is for buying into the ability of central banks...[that] did save the world in 2008 from the problems their policies created earlier; but the fact that they were able to save the world may have proved to have been a very dangerous thing even though it's widely praised now because what's it's done is it's convinced everybody they can do it again. The difference is when they did it in 2008 the federal deficit was $7 trillion; now its $18-19 trillion. Their own balance sheet was 800 billion; now it’s $4.7 trillion. I can go on and on but the point is the world is infinitely more leveraged now. (click here for full broadcast)
Do you think the US economy is slipping into recession?
Kurt Kallaus: I don't think we are on the verge of recession… Right now I think we've been in a secular uptrend that I like to compare to past cycles… The 1980 bull market in stocks...was about 8 years and the 1990s bull market…was over 9 years. Given the unique and uncharted efforts to combat deflationary forces through massive monetary inflation and debt guarantees, I still believe we are in a bull market that should progress at least as long as the post-1980 bull markets or, let's say, 8-10 years, targeting the 2017-2019 time period. And 2017 is also a modest rebound and peak in the age demographic spending potential...before the spending demographic falls off more sharply into the end of the decade. (click here for full broadcast)
Our market technician for this Saturday’s broadcast is David Nicoski CMT, Director of Research at Vermilion. Dave sees a recoupling of foreign markets with the US and also gives his outlook on energy, the technology sector, health care, and the overall market.
In the first segment of Saturday’s Big Picture, Jim discusses “Financial repression—the greatest wealth transfer in history.” He then looks at central bank efforts to re-inflate the stock market and, lastly, the changing dynamics in the energy sector.
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