The U.S. and Global financial system is being kept alive by a highly leveraged paper system. The Fed’s recent announcement of a $10 billion taper has had the anticipated impact on the precious metals and bond market.
Even though I thought the Fed would never taper, the end result will be the same. As I have mentioned several times, Energy drives the markets… not Finance. The so-called U.S. Shale Revolution is the only thing that is holding off the collapse of the global markets as it has brought on more oil supply (only temporarily), desperately needed by the world.
Unfortunately, it looks like the “Illusion of Sustainability” in shale oil production took a BIG HIT, as the forecasted decline rate at the Eagle Ford Shale Field increased double-digits in just one month.
According to the EIA – U.S. Energy Information Agency, the daily decline rate in the Eagle Ford Shale Oil Field is forecasted to decline from 83,000 bd (barrels a day) in Dec 2013, to 91,000 bd in Jan 2014. This is an (10%) 8,000 bd decline in just one month.
If we look at the two next charts we can see the change in Net Oil Production from the Eagle Ford:
In the first graph, the companies drilling in the Eagle Ford added 116,000 bd of new production in Dec and if you subtract the daily decline rate of 83,000 bd, there was a net new amount for the month of 33,000 bd of production.
Even though these companies are forecasted to bring on 120,000 bd of new production in Jan 2014, their daily decline rate has increased to 91,000 bd, which gives the Eagle Ford a net new production for Jan at 29,000 bd — down 4,000 bd compared to the previous month even though production increased by 4,000 bd.
What we have here is a classic example of the DEATH OF OIL PRODUCTION by an ever-increasing decline rate. As I noted in a previous article, the Eagle Ford has been averaging a 24,000 bd decline rate a year for the past 3 years. However, it has increased 8,000 bd in just one month!
If we go back to the first month the EIA stated these statistics, Nov 2013, we can see the overall impact:
Here we can see that in Nov 2013, the daily decline rate at the Eagle Ford was only 81,000 bd. New production during Nov 2013 was 105,000 bd and minus the 81,000 bd of declines, we had a net production of 24,000 bd for the month.
If the companies in the Eagle Ford produced the same 105,000 bd in Jan as they did in Nov, they would have only had a net production of 14,000 bd. But as we can see, they were able to ramp up new production in Jan to 120,000 bd to get that net amount of 29,000 bd.
The daily decline rate will continue to increase and it looks like it will surpass the 107,000 bd three-year average trend by the end of 2014 by a far margin. If the Eagle Ford hits a decline rate of 115,000-120,000 by the end of 2014, it will have to produce a great deal more if it wants to continue to add net new production.
At some point in time, the “Drilling Treadmill” will not be able to keep up with the huge declines and production at the Eagle Ford & Bakken.
The United States has no PLAN B after the Great Shale Hype Peaks and declines.
Important Update : Stock Market & Gold
by and courtesy of
Martin Armstrong, Zerohedge & Mitch : December 19th
As Martin Armstrong stated in his blog update as of 18th December.
The Dow Jones Industrials rallied sharply with the Fed starting to taper. We have a near double top but today was a turning point and this week was also a target for a Panic Cycle which seems to be on point. However, while the market remains strong long-term, there are signs of some exhaustion starting to creep in. If the Dow cannot break to new highs and close higher tomorrow, we may still move back to retest support for Jan/Feb. A low at that time will point to a rally into the end of summer. A high in Jan/Feb in the 16,650 level, could warn of a decline into that period with a rally into 2015.75. But a low, may signal the Cycle Inversion is developing now. That will warn of a very serious period between 2015.75 into 2020.05. TIME remains constant. Events and Price are the variables.
And then here in another post By Martin Armstrong entitled “Complexity & the Future of the Dow”
Nothing goes straight up. What does have to happen is the thinking process will invert and higher interest rates will be seen as bullish for people are bidding for money to invest. There is a possibility that we get an initial high at the end of the summer of 2014 with the Dow. The minimum target for a high in 2014 is 16650 with the optimum target being 18545. Passing the first target will start to get the retail involved. Thereafter, the critical support will form at 10350-9580 level for the maximum extent of any correction. However, the Dow will then take off to new highs again and we are probably looking at 40,000 level when this Private Wave ends by 2032.
So what is he saying here ??
Well first let me show you some charts courtesy of Zerohedge…Then I will explain below
Bank of Japan (BoJ) announced the introduction of QE on 19 March 2001 and kept it in place until 9 March 2006. The BoJ chose for a very orderly and gradual unwinding of its government securities portfolio, by continuing its regular purchases of these securities (i.e a taper and not sale).
The market rejoiced at the normalization for a week or 2… before dropping 24% in the following 2 months. Of course, that was a “policy mistake”; the Fed knows this time is different.
Awkwardly that lines up with the 1920/30s analog we have previosuly noted…
Mr Armstrong is giving you several different outcomes in the short to medium term (Jan/Feb 2014 into Summer 2014).
He is warning that the market looks tired up here (exhaustion) but price action will confirm several outcomes.
Dow Jones as of now is trading at 16,120 (19th December as New York opens for business).
1 …… A rally into Jan / Feb (considering we have closed at a new high yesterday – but todays close is very important above 16,087), will exhaust itself (approximately at 16,650) with a sharp decline to support into the summer of 2014, from there a rally into the 2015 October cycle high of the Economic Confidence Model (which we may see extreme highs of 30,000 to 40,000 in the Dow). Critical support comes in at 10,350 to 9,580. as far as the correction into Summer of 2014.
2 …… A failure to hold here and a close below 16, 087 will see a move lower to test support into Jan / Feb (less likely considering we have closed at a new high yesterday – but todays close is very important above 16,087), with a sharp decline to support and then a rally into the summer of 2014.
This call very much could line up with charts above (although not a perilous decline after Jan/Feb - just a major correction before the next huge move higher).
Now this leads into Gold……
As Gold went through its 50% correction from 1974 into 1976, it only found it’s base at exactly the same time the Stock market found its high (after an enormous multi year rally) !!!!
Cycles are calling for a base to be formed in Jan / Feb time (which lines up with an exhaustion in the Stock markets – above in the medium term).
The Chart below I have over-layed the Gold price action at the exact correct period of the Dow in the 1970′s (the last great Gold Bull market). The price correlating to Gold can be seen on the left hand side in yellow.
So today’s close of the Dow is very important, to line up with what to expect into Jan / Feb and ultimately into Summer of 2014, into 2015 and between 2015 and 2020.
Gold you should prepare yourselves mentally for a capitulation in price into January / February 2014 of at least $ 1,050 and maybe sub $ 1,000 down to $950 or even $880 – as the final low of this huge 2 year correction exhausts itself. This is necessary evil for the next stage of this bull market in precious metals - leading into $3,500 by 2016 and a test of $ 5,000 by 2017.
This is not the end of the story however….
Now no one has a crystal ball, but history certainly rhymes.
Best of Luck
Ever-Greening, Europe’s Banking Sector Closet Full of Skeletons are falling Out !
This is Not Simply Isolated to the Spanish Banking Sector
Written by Mitch, December 18th
As the Fed continues with its Quantitative Easing policy, U.S. gold bullion exports hit a new record in the first nine months of 2013. While it’s no secret to anyone in the precious metal community, the majority of U.S. gold exports found their way to Hong Kong and Switzerland.
Not only have gold bullion exports hit new records during Jan-Sept, they have already surpassed the total for 2012. If we look at the chart below, we can clearly see who has received most of the gold.
In the first nine months of 2013, Hong Kong received 176.3 mt (metric tons), Switzerland 130.9 mt and the United Kingdom 26 mt. Of the 416 mt of U.S. gold bullion exports Jan-Sept, these three countries received 342 mt or 82% of the total.
Why is this such a big deal? Because in the first nine months of 2012, total U.S. gold bullion exports were only 283 mt compared to the 416 mt so far this year. Which means the United States has exported 47% more gold bullion at an additional 133 mt compared to the same period last year.
Furthermore, total U.S. gold bullion exports in 2012 were only 371 mt compared to the 416 mt in the first nine months of 2013.
As the price of gold started to decline in March of this year, including the huge take-down in April, U.S. gold bullion exports picked up significantly:
The number of gold bullion exports increased from 40.1 mt in Jan to 62.1 mt in April. Then we can see they fell in May (38.1 mt) and June (40.7 mt) as the gold buyers were waiting to see if prices would stop falling. And in June, the price of gold finally bottomed right below $1,200 level.
What is interesting to see here is that there were a higher amount of gold bullion exports in July (64.4 mt) than in April (62.1 mt)
As the price started to rise in July, gold exports to Hong Kong & Switzerland picked up substantially. The table below details which countries were the recipients of U.S. gold bullion exports.
Not only did Hong Kong increase its gold bullion imports from the U.S. in July to 27.9 mt up from 15.5 mt in June, but it jumped even higher in August when it reached a 30.7 mt — a record month for the year.
According to the data from the USGS Gold Mineral Industry Surveys for Jan-Sept 2013, Hong Kong has received a total of 176.3 mt and Switzerland 130.9 mt. The United Kingdom came in third at 26 mt while Thailand came in fourth at 21. mt, followed by South Africa at 19.5 mt, Canada at 15.3 mt, China at 11 mt and India at 2.7 mt.
There was an additional 13.5 mt that went to several misc. countries in which the United Arab Emirates received the greater share.
Now, I want to make something clear here. These figures only represent “Gold Bullion” exported out of the United States. There are also two other categories that come under the heading of gold exports beside manufacturing and scrap supply. We also have the following:
JAN-SEPT Gold Exports:
Ores & Concentrates = 5.1 metric tons
Dore’ & Precipitates = 152 metric tons
If we add up all the three categories of U.S. gold exports we have total of 573 metric tons for the first nine months of 2013. This turns out to be a significant trend when we factor in several other figures.
As U.S. gold exports increased in 2012, its imports have fallen considerably. The chart below shows the change in U.S. net gold supply:
The chart is broken down into four components; Mine Production, Gold Imports, Gold Exports and Net Supply. There is no real change in U.S. gold mine supply, but we can certainly see that gold imports have fallen off dramatically since 2011.
U.S. gold imports fell to 332 metric tons in 2012 down from 507 metric tons in 2011. I would imagine overall gold imports in 2013 will be about the same as they were in 2012 when we receive the remaining four months of data from the USGS.
However, the big change here is the large increase of U.S. gold exports. Total gold exports out of the U.S. increased from 474 mt in 2011 to 693 mt in 2012. Currently, the United States has exported 573 mt, 45 mt more than the same period last year.
Compiling all the figures for the past three years (including only Jan-Sept 2013), the United States has a negative 171 mt of net gold supply so far in 2013. Basically, this means that the U.S. has exported 171 mt more gold than it has produced from its mining sector and imports combined.
In 2011, the U.S. had a positive net supply of 265 mt, but due to high demand for gold abroad this fell in 2012 to a negative 127 mt. And as you can see, U.S. net gold supply continues to decline — a negative 298 mt since the beginning of 2012.
It will be interesting to see what takes place for the remainder of the year. If we consider that Hong Kong had record gold imports in October, I would imagine the U.S. supplied a good portion of this amount.
Lastly, when we realize that the majority of U.S. gold exports to Switzerland and the U.K. are probably making their way to the East…. we can assume that the overwhelming majority of the gold leaving the shores of the United States is most certainly ending up in China.
83 Numbers From 2013 That Are Almost Too Crazy To Believe
By Michael Snyder, on December 16th, 2013
Curtesy of ’The Economic Collapse‘ site
During 2013, America continued to steadily march down a self-destructive path toward oblivion. As a society, our debt levels are completely and totally out of control. Our financial system has been transformed into the largest casino on the entire planet and our big banks are behaving even more recklessly than they did just before the last financial crisis. We continue to see thousands of businesses and millions of jobs get shipped out of the United States, and the middle class is being absolutely eviscerated. Due to the lack of decent jobs, poverty is absolutely exploding. Government dependence is at an all-time high and crime is rising. Evidence of social and moral decay is seemingly everywhere, and our government appears to be going insane. If we are going to have any hope of solving these problems, the American people need to take a long, hard look in the mirror and finally admit how bad things have actually become. If we all just blindly have faith that “everything is going to be okay”, the consequences of decades of incredibly foolish decisions are going to absolutely blindside us and we will be absolutely devastated by the great crisis that is rapidly approaching. The United States is in a massive amount of trouble, and it is time that we all started facing the truth. The following are 83 numbers from 2013 that are almost too crazy to believe…
#1 Most people that hear this statistic do not believe that it is actually true, but right now an all-time record 102 million working age Americans do not have a job. That number has risen by about 27 million since the year 2000.
#2 Because of the lack of jobs, poverty is spreading like wildfire in the United States. According to the most recent numbers from the U.S. Census Bureau, an all-time record 49.2 percent of all Americans are receiving benefits from at least one government program each month.
#3 As society breaks down, the government feels a greater need than ever before to watch, monitor and track the population. For example, every single day the NSA intercepts and permanently stores close to 2 billion emails and phone calls in addition to a whole host of other data.
#4 The Bank for International Settlements says that total public and private debt levels around the globe are now 30 percent higher than they were back during the financial crisis of 2008.
#5 According to a recent World Bank report, private domestic debt in China has grown from 9 trillion dollars in 2008 to 23 trillion dollars today.
#7 The six largest banks in the United States (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley) have collectively gotten 37 percent larger over the past five years.
#8 The U.S. banking system has 14.4 trillion dollars in total assets. The six largest banks now account for 67 percent of those assets and all of the other banks account for only 33 percent of those assets.
#9 JPMorgan Chase is roughly the size of the entire British economy.
#10 The five largest banks now account for 42 percent of all loans in the United States.
#11 Right now, four of the “too big to fail” banks each have total exposure to derivatives that is well in excess of 40 trillion dollars.
#12 The total exposure that Goldman Sachs has to derivatives contracts is more than 381 times greater than their total assets.
#13 According to the Bank for International Settlements, the global financial system has a total of 441 trillion dollars worth of exposure to interest rate derivatives.
#14 Through the end of November, approximately 365,000 Americans had signed up for Obamacare but approximately 4 million Americanshad already lost their current health insurance policies because of Obamacare.
#15 It is being projected that up to 100 million more Americanscould have their health insurance policies canceled by the time Obamacare is fully rolled out.
#16 At this point, 82.4 million Americans live in a home where at least one person is enrolled in the Medicaid program.
#17 It is has been estimated that Obamacare will add 21 million more Americans to the Medicaid rolls.
#18 It is being projected that health insurance premiums for healthy 30-year-old men will rise by an average of 260 percent under Obamacare.
#19 One couple down in Texas received a letter from their health insurance company that informed them that they were being hit with a 539 percent rate increase because of Obamacare.
#21 The U.S. government has spent an astounding 3.7 trillion dollarson welfare programs over the past five years.
#22 Incredibly, 74 percent of all the wealth in the United States is owned by the wealthiest 10 percent of all Americans.
#23 According to Consumer Reports, the number of children in the United States taking antipsychotic drugs has nearly tripled over the past 15 years.
#24 The marriage rate in the United States has fallen to an all-time low. Right now it is sitting at a yearly rate of just 6.8 marriages per 1000 people.
#25 According to a shocking new study, the average American that turned 65 this year will receive $327,500 more in federal benefits than they paid in taxes over the course of their lifetimes.
#26 In just one week in December, a combined total of more than 2000 new cold temperature and snowfall records were set in the United States.
#27 According to the U.S. Census Bureau, median household income in the United States has fallen for five years in a row.
#28 The rate of homeownership in the United States has fallen for eight years in a row.
#29 Only 47 percent of all adults in America have a full-time job at this point.
#30 The unemployment rate in the eurozone recently hit a new all-time high of 12.2 percent.
#31 If you assume that the labor force participation rate in the U.S. is at the long-term average, the unemployment rate in the United States would actually be 11.5 percent instead of 7 percent.
#32 In November 2000, 64.3 percent of all working age Americans had a job. When Barack Obama first entered the White House, 60.6 percent of all working age Americans had a job. Today, only 58.6 percent of all working age Americans have a job.
#33 There are 1,148,000 fewer Americans working today than there was in November 2006. Meanwhile, our population has grown by more than 16 million people during that time frame.
#34 Only 19 percent of all Americans believe that the job market is better than it was a year ago.
#35 Just 14 percent of all Americans believe that the stock market will rise next year.
#36 According to CNBC, Pinterest is currently valued at more than 3 billion dollars even though it has never earned a profit.
#37 Twitter is a seven-year-old company that has never made a profit. It actually lost 64.6 million dollars last quarter. But according to the financial markets it is currently worth about 22 billion dollars.
#39 Total consumer credit has risen by a whopping 22 percent over the past three years.
#40 Student loans are up by an astounding 61 percent over the past three years.
#41 At this moment, there are 6 million Americans in the 16 to 24-year-old age group that are neither in school or working.
#42 The “inactivity rate” for men in their prime working years (25 to 54) has just hit a brand new all-time record high.
#43 It is hard to believe, but in America today one out of every ten jobs is now filled by a temp agency.
#45 According to the Social Security Administration, 40 percent of all U.S. workers make less than $20,000 a year.
#46 Approximately one out of every four part-time workers in America is living below the poverty line.
#47 After accounting for inflation, 40 percent of all U.S. workers are making less than what a full-time minimum wage worker made back in 1968.
#48 When Barack Obama took office, the average duration of unemployment in this country was 19.8 weeks. Today, it is 37.2 weeks.
#49 Investors pulled an astounding 72 billion dollars out of bond mutual funds in 2013. It was the worst year for bond funds ever.
#50 Small business is rapidly dying in America. At this point, only about 7 percent of all non-farm workers in the United States are self-employed. That is an all-time record low.
#51 The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.
#52 Once January 1st hits, it will officially be illegal to manufacture or import traditional incandescent light bulbs in the United States. It is being projected that millions of Americans will attempt to stock up on the old light bulbs before they are totally gone from store shelves.
#53 The Japanese government has estimated that approximately 300 tons of highly radioactive water is being released into the Pacific Ocean from the destroyed Fukushima nuclear facility every single day.
#56 Wal-Mart recently opened up two new stores in Washington D.C., and more than 23,000 people applied for just 600 positions. That means that only about 2.6 percent of the applicants were ultimately hired. In comparison, Harvard offers admission to 6.1 percent of their applicants.
#57 At this point, almost half of all public school students in America come from low income homes.
#58 Tragically, there are 1.2 million students that attend public schools in the United States that are homeless. That number has risen by 72 percent since the start of the last recession.
#59 According to a Gallup poll that was recently released, 20.0 percent of all Americans did not have enough money to buy food that they or their families needed at some point over the past year. That is just under the all-time record of 20.4 percent that was set back in November 2008.
#61 Right now, one out of every five households in the United States is on food stamps.
#62 The U.S. economy loses approximately 9,000 jobs for every 1 billion dollars of goods that are imported from overseas.
#64 According to one survey, approximately 75 percent of all American women do not have any interest in dating unemployed men.
#65 China exports 4 billion pounds of food to the United States every year.
#66 Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.
#68 It is being projected that the number of Americans on Social Security will rise from 57 million today to more than 100 million in 25 years.
#69 Back in 1970, the total amount of debt in the United States (government debt + business debt + consumer debt, etc.) was less than 2 trillion dollars. Today it is over 56 trillion dollars.
#71 The U.S. government “rolled over” more than 7.5 trillion dollars of existing debt in fiscal 2013.
#72 If the U.S. national debt was reduced to a stack of one dollar bills it would circle the earth at the equator 45 times.
#74 The U.S. national debt is on pace to more than double during the eight years of the Obama administration. In other words, under Barack Obama the U.S. government will accumulate more debt than it did under all of the other presidents in U.S. history combined.
#75 The federal government is borrowing (stealing) roughly 100 million dollars from our children and our grandchildren every single hour of every single day.
#76 At this point, the U.S. already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.
#77 Japan now has a debt to GDP ratio of more than 211 percent.
#78 As of December 5th, 83 volcanic eruptions had been recorded around the planet so far this year. That is a new all-time record high.
#79 53 percent of all Americans do not have a 3 day supply of nonperishable food and water in their homes.
#80 Violent crime in the United States was up 15 percent last year.
#81 According to a very surprising survey that was recently conducted,68 percent of all Americans believe that the country is currently on the wrong track.
An interesting video / documentary on Fort Knox and it’s secrets.
You make you mind up !
From the start, up to 24 minutes with Mr Armstrong.
This Week in Money October 26th, 2013.