The Housing Bubble

go= good. BTW, a physical market where the actual consumption of oil is about 1% lower than the actual production is not in glut no matter how the MSM tries to spin it. With rising consumption as we have, you want build up storage just to maintain the same amount of days of consumption in storage. Nothing but economic warfare using the futures market, but Russia and Iran will deal with it and it will not be a strong warning.

gartman is full of sh@T and you all know he is a paid propoganda mouthpiece like cramer.These folks will bankrupt you to fill their own pockets.

I am little more cynical than you and I am convinced that there’s a massive manipulation of oil by the oil companies, banks, governments, etc. Just like they have manipulated PMs, housing, stock markets. They will never let the market to the price discovery of anything….they have fixed prices for everything.

And guess what happens to prices when you stay out?

Consumption is falling. The world has overcapacity in everything. Steel and coal were the front runners, now oil. The price of everything used to build stuff was tremendously bloated for the past few years. The boom was unsustainable.

There has indeed been manipulation. It all goes back to cheap and easy credit. When money can be had for nothing, everything gets manipulated.

There are no free markets and everything is manipulated. However, I believe that assets that governments favor like housing and stocks are manipulated up and assets such as gold and now oil are manipulated down to benefit the fiat money system.

In this case, I agree with a-dan that $75-80(?)/barrel is likely a fair and sustainable price. Oil reminds me of what the Chinese are doing to solar panels — producing them at below cost and eating the losses just to drive the American manufacturers out of business. When in reality, solar panels are just expensive to make, and no amount of optimization or buying in bulk or competition will bring the price down to low levels.

Similarly the cheap oil was burned long ago, and someone is eating a loss with every barrel sold. The price drop is a lot sharper than solar panels because oil is shaking out extra manipulation that comes from being a strategic commodity, and I guess the Chinese finished building ghost cities. (And while I understand the resistance to drone war, I think it uses a lot less oil than a ground war.)

Bingo! Cheap and easy money is root of the evil. Too bad, that’s all they have left and they will use it again and again until the collapse.

“The danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt. Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank. With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights predicts the default rate for energy junk bonds will double to 8% next year. “Anything that becomes a mania – it ends badly,” said Tim Gramatovich, chief investment officer of Peritus Asset Management. “And this is a mania.”

But the bubble is in drilling not in the actual price in oil. Fracking is very expensive only the availability of relatively cheap money has allowed the wells to be drilled. Raise capital costs and the price of oil will have to be well above $100 to make it possible to drill the wells.

“In this case, I agree with a-dan that $75-80(?)/barrel is likely a fair and sustainable price.”

And how did you arrive it this one Donk?

Maybe the same way you arrive at the 50 dollars a sq foot number?

You’re not in the drilling business or the construction biz my friend.

You’re a bonafide fraud.

“In this case, I agree with a-dan that $75-80(?)/barrel is likely a fair and sustainable price.”

Oh good, we have a HBB consensus that oil prices are soon to go right back up again!

No, she and I are using a number that matches the facts. But if you can show me numbers how you can build a house in ABQ for that price please post them.

Oh good, we have a HBB consensus that oil prices are soon to go right back up again!

Why are they so averse to cheap prices? Oil has to go up, housing has to go up. Just because it’s cheap, doesn’t diminish the quality, people! Grrr…..

oil is a screaming buy at these prices. china is buying tankers of fuel left and right.

ABQ Dan made the wild claim yesterday that oil field development cost is “different” for every field, thus a development budget can’t be established.

Here’s your challenge ABQDan. go ahead and select one field and show me development costs line for line.

We have been waiting years for you to show how you can build a house anywhere for 50 dollars a sq. foot, start with ABQ and then you can show Oxide how you do it in the DC area.

We’ve shown it and the end product right here on this blog. You just don’t like what you see. Now onto oil field development and production costs ABQDan.

Go!

HA, I never claimed to be in the drilling business but I was involved in regulating oil drilling and have seen the reports but the information is proprietary and too extensive to be placed on a blog even for a single field.

“Since there is no real oil glut.”

You mean that massive glut of oil is actually fake crude? What are they using, syrup?

Abdan is back, and so are his prolific lies.

“HA, I never claimed to be in the drilling business but I was involved in regulating oil drilling and have seen the reports but the information is proprietary and too extensive to be placed on a blog even for a single field.”

You are a lying phony.

lol… He’s “seen reports”!

You mean that massive glut of oil is actually fake crude?

No, mean the difference between the amount of oil a actually produced and actually consumed is not enough to be considered a glut. In 1987 the stock market crashed. It had nothing to do with fundamentals just like this crash and oil has very little to do with fundamentals. That is why both Russia and Iran are calling it correctly it is economic warfare waged on the futures market. But that paper oil cannot keep you warm or fuel your vehicle.

“this crash and oil has very little to do with fundamentals.”

Right. It must be a conspiracy. Iran says so, there you have it.

When a credit mania goes off the tracks, things go splat. That’s the fundamental. Global construction drove the energy mania. Global credit expansion drove the construction mania. The central banks drove the credit mania and introduced instability.

If I were China, I’d be filling the strategic reserve too, even in the face of industrial contraction, because instability is dangerous. My strategic reserve consists of an extra pair of walking shoes and spare bike tires.

Cheerleading the bubble prices in commodities is not just wrong, it is wrong headed.

BTW, permits to drill are down 30% already in the fracking areas, seems like my numbers are quite sound.

Update: newer numbers permits to drill are not down 30% but 40% in the fracking areas:
http://oilprice.com/Energy/Oil-Prices/Shale-Permits-Fall-As-Low-Oil-Prices-Start-To-Bite.html

With the high decline rates of the well, if this continues, we will not see a million barrel increase in oil production this year, we will be lucky to maintain production.

I linked to the wrong earlier story but here is the 40% link:

http://thehill.com/policy/energy-environment/225823-new-oil-and-gas-well-permits-fall-40-percent-in-november

Prices are falling.

Now back to your production cost claim. Show us production cost.

The new link citing to the correct 40% is coming but here is an excerpt:

Tumbling oil prices spurred a decline in new well permits issued in the U.S. by nearly 40 percent in November, according to new data.

Reuters reports it was provided industry data by the firm Drilling Info Inc, which revealed 4,520 new well permits were approved in November, down from 7,227 in October.

Oil demand is cratering.

“In this case, I agree with a-dan that $75-80(?)/barrel is likely a fair and sustainable price.”

Based upon what? Did you just pull this number out of your rear?

But if you can show me numbers how you can build a house in ABQ for that price please post them ??

He can’t so he won’t…He will come back with his same BS that its been shown here many times which makes him a lying fraud just like the realtors he vilifies…

And remember the 40% decline occurred when oil had dropped only into the seventies. The numbers will be much worse for December. Putin must be smiling looking at these numbers. Obama tried to punish Russia and has punished the U.S. instead.

just a Repeater.

I know, we all know. Left or right we agree on that.

Sorry you don’t like that fact Dave. Of all people, being a contractor as you claim, you know exactly what M&L costs are.

Right?

err…umm…what on earth are M&L costs? In my world that means “Moving and Living. In my alternate world that means “Machinery and Logistics”. What is it in this context?

On the edge of my seat (I love having details nailed down). What’s the real scoop?

“…err…umm…what on earth are M&L costs?”

My guess is “materials and labor,” jane.

Are you disgruntled cause uncle FED is handing out free money to people via stocks and homes?

Sometimes you just have to jump on the bandwagon even know you do agree with whats going on.

Hate the game, not the player.

“Are you disgruntled cause uncle FED is handing out free money…”

Could be, but I’ll have no sympathy for the debt minded when the money goes back to where it came from.

The clouds have been there for years, in plain sight. Now it’s anvils dropping.

Down by 50% and falling since 2008.

7% growth today increases demand for raw materials more than 10%, seven years ago since China is a much bigger economy now.

Demand for raw materials is dropping off a cliff in China. Notice what’s happened to iron ore and coal suppliers this year? China is the most indebted people on earth.

I’d say they have sufficient scapegoats to cover face. 100,000 in jail or executed and counting. Some miracle.

It is indeed a miracle to see so many economies fueled by electronically-issued debt and little else.

Talking about Rio, where the hell has he been…I don’t think Ben banned him…

demand side does not work, at least in the medium and long term. Since Brazil’s economy went south, as I predicted, he disappeared, I am certain he is posting under another name.

Petrified is more accurate.

I was going for the poetic understatement.

For example, people who have real bets on oil are “perplexed” about the size of the current laundry bills for their undergarments.

Them and the horse they rode in on.

My major position in that area is BHI and that has worked out quite well. I went for the people selling the picks and shovels. Admittedly got lucky with the buy out but my BP as of yesterday was 118/74 not bad for a 55 year old not on any medicine. I guess I am not worried.

“Petrified is more accurate.”

I’m guessing a lot of investors are sh!tt!n’ BRICs about now.

“I’m guessing a lot of investors are sh!tt!n’ BRICs about now.”

+1 Lolz!

oil is a bargain at these prices dont you think? It wont last forever. Back up the truck. Go long dude.

China is in contraction. We will all follow.

Crude and refined product prices are falling Donk. Just like housing prices.

‘I’m tired of the over-reliance on simple supply-and-demand to determine prices’

Zillow?

“So why the immediate need crash prices to sell it just because “oh god supplyyyy and demaaaaand?”

You’re referring to a world that no longer exists, where not everything was financialized to the hilt and leveraged to the teeth with toxic debt. People and companies hunkered down and rode through the lean years. I’m old enough to remember.

Debt donkeys have nowhere to turn when the cash flow dries up.

Watching and reading the twisted contortions of DebtDonkeys is fascinating.

Example…. The cost to install roof deck, felt and shingles is $80k minimum(it’s gotta be that much!) but the cost to replace it is somehow less even though the labor is doubled due to stripping it not to mention transportation and disposal cost.

So goes the twisted world of DebtDonkeys.

Hint: Homedebtors are easy targets. That’s why theyre homedebtors.

Yeah, we used to refer to them as the “weaker hands”. Now we refer to them as “just about everyone”, alas.

A little bit of unexpected pricing behavior outside a narrow bound, and an entire sector and all the financial hands behind it immediately blow up, and go begging for bailouts. Doesn’t matter what in particular anymore. When will we put a tight clamp on this nonsense?

“I’m tired of the over-reliance on simple supply-and-demand to determine prices.”

Economics ain’t chemistry…

Evidently not, Whac. But iftheshoefits makes a good point. Companies don’t have to sell oil right now by reason of the oil rotting away, but they DO have to sell oil right now to pay off the minimum payment of whatever credit card they charged the production costs to. Got it.

Now see, those frackers should have bought off a few Congressmen and a Treasury Secretary or two. Then they could have gotten “mark-to-fantasy” accounting on in-the-the ground shadow-inventory of oil, and use the fantasy assessed inventory as collateral to borrow more money to make their payments. Just like the mortgage banks did for zombie housing.

‘use the fantasy assessed inventory as collateral to borrow more money to make their payments’

Already happened:

‘What is the collateral for the 5% yields advertised by these fly-by-night funds—–often issued and managed by the same folks who sold housing sector CLOs and CDOs last time around?’

‘Why its the leveraged loans issued by E&P operators in the shale patches. The collateral for these leveraged loans, in turn, is shale rocks 4,000-9,000 feet down under that have been worthless until approximately 2005 and would be worthless today without dramatically over-priced crude oil and drastically underpriced debt capital.’

‘That is to say, the vaunted collateral in the shale patch craps out after about two-years unless new money is poured down the well bore and oil prices are above $75-$80 per barrel on the WTI marker price to cushion the sharp discounts back to the wellhead. But with marker price now plunging into the $50s, the drilling will soon stop, the production will crap-out, the shale rock collateral value will regress toward the zero bound, the E&P borrowers will default, the energy CLO’s will implode and the hapless yield chasers will be left high, dry and panicked.’

http://thehousingbubbleblog.com/?p=8751#comment-2400778

“the shale patch craps out after about two-years…”

It was a play on a credit ponzi from the get-go. Information on well depletion has been widely available, but the hot money mob wasn’t interested.

I don’t know what a Six Sigma “blitz” is (and I probably don’t want to know) probably because I, myself, am not directly involved in the Six Sigma process - I only have to DEAL with results of these processes.

Or, rather, my boss has to deal with the results of these processes. I more-or-less get to sit back and watch.

There is a management concept that has somehow sprung into being which goes something like “A good manager can manage anything”. This concept implies that a manager doesn’t have to know anything at all about a job (knowing a job is what workers need to know), all a manager needs to know is how to manage the workers.

Then in steps the Six Sigma folks who also do not need to know the job, all they need to know is how to manage the managers who manage the workers who know the job. And these Six Sigma folks grade their success (not their failures because there is no allowance for failing) by the use of numbers - and as everyone knows numbers do not lie, not ever.

So the edicts pour forth the from the all-knowing Six Sigma folks to the managers that manage the workers and the workers laugh at these edicts because most of them are just pain stupid but nevertheless these edicts MUST be implemented and so they are and the numbers that emanate from these edicts suck - really and truly suck - and thus these numbers have to be “cooked” a bit before they are reported up the line to the Six Sigma folks who become HAPPY AS HELL because the cooked-up numbers that are presented to them turn out to be the EXACT numbers that they demanded be given to them.

Funny how that is (snort).

I said this once before but it bears repeating:

In the company I work for power - true power - has shifted from the management ranks to the ranks of the workers BECAUSE the management ranks depend on the workers to supply them with success as represented by numbers and the only way these successful numbers can be obtained is by … by lying.

Soooooo … if a worker bee does not like the queen bee all the worker bee has to do to remove the queen bee is report the truth - report the truth as represented by numbers. If the numbers do not fall into line then the queen bee will be removed and another queen bee will take her place. And probably the new queen bee will treat the workers, oh, so wonderfully, because she knows - KNOWS - that if she jacks any of us around - jacks any ONE of us around (because it only takes one of us) - then she, too, will be replaced.

It makes for an interesting dynamic.

“There is a management concept that has somehow sprung into being which goes something like “A good manager can manage anything”. This concept implies that a manager doesn’t have to know anything at all about a job (knowing a job is what workers need to know), all a manager needs to know is how to manage the workers.”

Happening at my company, not my department yet, but I see it in others and it’s crazy. This is technology man, having a non-tech manager is horrible.

#FundamentalTransformationOfCorporateAmerica.

You don’t need a train engineer to manage a train schedule. It’s perfectly reasonable to have non-tech people manage tech projects. Some of the best managers I have seen have been people who didn’t really know how the “stuff” got done, but they made the “stuff” get done on time and on budget.

Techies have this sense that what they do is special. It really isn’t. Building software or building a car is the same thing from a managerial standpoint. You have inputs, outputs, employees, deadlines, quality control, etc. An experienced manager of an assembly line should be able to manage an IT rollout and vice versa.

gold is money cause it holds its value over time. It is divisible. It is easily stored. It has intrinsic value.

Then so is good whiskey!

Exactly. And that is why gold is the money of free people and fiat currency is the “money” of serfs.

Then so is good whiskey ??

Not as compared to a single malt scotch… :>)

At least two boxes of oatmeal.

No apology necessary.

As I tell people in the real world…

You’ll have to do better than that to hurt my feelings.

It’s cool, have a good day.

“Tell your local cops not to respond to emergency calls at your residence or cell phone numbers, then post signs on your house and cars saying such.”

And while you’re at it make a sign that says GUN FREE HOME and put that sign in the front yard.

Don’t be angry Lolacado. Cheer up!

Top Level? LOL

How many more goat herders would you like torture before it satisfies your thirst? Why are you so afraid of living under the same law?

BTW, why do you fear goat herders so much?

You really have drank the liberal kool-aid.

We are talking about of handful of top level terrorists over a decade.

If these were all deaths in Chicago over just a month - it would be just about average.

BTW - international law for dealing with terrorists, saboteurs, piracy and partisans is summary execution. When are we going to live under the law?

——————–

America Trades Torture for Drones
The Senate’s report on CIA interrogation closes one dark chapter—and leaves another open.
Kathy Gilsinan - Dec 9 2014 - The Atlantic

Tuesday’s report from the Senate Intelligence Committee, meanwhile, lists 119 terror suspects known to have been detained by the CIA, of whom “at least 39 were subject to the CIA’s enhanced interrogation techniques.”

Liberals/progressive expect to exempted from the laws and taxes they want for everyone else.

__________

Warren Buffett, Obama BFF and proponent of higher taxes for the masses, owes the IRS $1B and is doing all he can to avoid paying that back tax.

GE, whose CEO is also an Obama BFF and was in the Obama administration, paid $0 in taxes in 2012.

Facebook, whose is CEO is an Obama bootlicker and proponent of higher taxes, paid $0 taxes in the UK in 2012 and 2013.

And there are hundreds of these examples. They all have one thing in common…a millionaire/billionaire liberal who wants everyone else to pay 75% tax rates, yet has an army of lawyers/accountants to make sure they pay no taxes.

Boohooo….Obama this, Rino that.

One phone call from Goldman, Cruz will bend over like Tom Cruise in secret Scientology gatherings….

One phone call from Goldman, Cruz will bend over like Tom Cruise in secret Scientology gatherings…

Considering every democrat in the senate has is already doing Goldman’s bidding.

Our only hope is a few CONSERVATIVES in the DEMOCRAT controlled senate.

Let that sink in for a while.

I lived in that type of place in the late 70s and early 80s. Ain’t going back to those conditions.

I lived in those kind of conditions in the late 80’s then again from mid-90s through early 2000s. And like you, I don’t plan to go back again. However it was a great way to save on housing expenses, as the risk of getting mugged or murdered tends to seriously suppress housing demand.

“It is a beautiful area…”

+1 Indeed.