"The American people are sold," Barack Obama said today. "The problem is members of Congress are dug in ideologically."
According to Obama, Congress is the only thing delaying a deal for increasing the debt ceiling... Never mind the millions of Americans and businesses who will pay for this.
How brash of Congress to oppose squandering the hard-earned wealth of the American people. Obama said 80% of Americans agree with his proposed solution to the debt debate (read: higher taxes and no Medicare cuts). He said voters are watching and, "It's going to be in the interests of everybody who wants to serve in this town to make sure they are on the right side of that impression."
Unfortunately, Obama's right. More than 50% of Americans receive more in federal benefits than they pay in taxes. Any time the majority is voting with the minority's checkbook, we'll see the same result...
Things abroad aren't any better... Thursday, one day before European officials released results from their banks' stress tests, the International Monetary Fund (IMF) warned of their miserable state. The IMF said Europe's banks are underfunded. The agency said it is "critically important to put in place and immediately publicize credible plans" to deal with failing banks.
The IMF said the stress tests from the European Banking Authority were an important opportunity to highlight the weaknesses in the European banking system. Yes... Highlighting problems in a region's financial system is a key step in solving them. But we all know how these government-administered financial stress tests play out. The government wants to keep everyone calm. It was no different in Europe's case...
Only eight banks failed the European Union's stress tests, with a combined shortfall of $3.54 billion in a simulated "worst-case economic scenario." The European Banking Authority said another 16 banks "narrowly passed" the tests. The test covered 90 of Europe's biggest banks. Europe is a mess. Entire countries are collapsing. And two too-big-to-fail countries – Spain and Italy – are next. Yet the EU expects us to believe the eight worst banks in the region only need $3.54 billion?
The euro fell on this "positive" news. Silver and gold are both up. As you can see from the chart below, gold has crushed the euro in the past three months. (The metal is currently at all-time highs.) Silver, on the other hand, is underperforming. And the metal is starting to break to the upside...
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The company that originally pioneered the Eagle Ford – Petrohawk Energy – is still a relatively small oil and gas company, with a market cap of $6 billion and total current production worth about $1 billion a year. |
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Currently, the company's proven reserves at Eagle Ford make up only 13% of its resource base. But it controls more than 300,000 acres in the Eagle Ford, making it one of the largest landholders. It also controls what's widely believed to be the best field in Eagle Ford, the Hawkville field. Additionally, it owns what will probably be the first major oil field in play, Red Hawk. Petrohawk is running five drill rigs in the Red Hawk field currently and expects to have 60 wells operational by the end of 2010. |
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I believe Petrohawk's Eagle Ford production will ramp up sharply in 2010 – particularly its production of oil... In addition to its large acreage position and production head start, Petrohawk was the first company to figure out how to get to Eagle Ford's oil and gas. Its horizontal wells were the first major producers of oil and gas there, coming online in late 2008. Given its track record, I believe Petrohawk is the best operator in the field and will increase both reserves and production faster than any other company. |
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Despite its notable success in the Eagle Ford shale, the stock hasn't yet begun to show any appreciation for the large amounts of oil production that should be coming online in 2010. The stock is still down more than 50% from its peak in mid-2008. – Porter Stansberry, Stansberry's Investment Advisory, April 2010 |
Yesterday, the world's largest mining company, BHP Billiton, made a $12.1 billion all-cash bid for Petrohawk Energy – a 65% premium to Petrohawk's closing price yesterday. This bid is on top of the $5 billion BHP spent in February to buy shale gas assets from Chesapeake Energy.
The world's largest energy and commodity companies are scrambling to buy shale gas assets. They're flooded with cash (as most commodities are hitting all-time highs). And they're funneling that cash into one of the world's last cheap assets – natural gas.
Last year, Royal Dutch Shell announced it would pay $4.7 billion for most of East Resources' shale gas assets. And in 2009, ExxonMobil paid $31 billion for XTO Energy, the largest natural gas producer in the U.S. Most recently, Chinese oil giant CNOOC invested nearly $1 billion in Chesapeake's shale gas assets.
We explained why the world's largest energy companies are buying so much natural gas in the February 2 Digest…
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The belief that we have more gas than we could ever use is pushing the government to use natural gas instead of oil for transportation fuels. Also, two liquefied natural gas (LNG) exporters are applying for permission to add extra export facilities. If granted, the two terminals will have the capability to ship 3.4 billion cubic feet of gas a day – 5% of total production. The exporters believe natural gas will stay cheap (less than $5 per mcf) through 2023, attracting European and Asian buyers. So at the same time, the appetite for natural gas in China and India (aka "Chindia") is booming, the U.S. wants to increase its usage. Matt says this will eventually lead to an "oh s**t" moment when the natural gas supply can't keep up. |
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New 52-week highs (as of 7/14/11): Prestige Brands (PBH) and SPDR Gold Trust (GLD).
We've been getting lots of flack about Jeff's short euro trade – which made our subscribers a fortune. If you're taking our advice, please be sure to read it carefully. And send your feedback to feedback@stansberryresearch.com.
"Since I made this trade on EUO I went back to the May issue to re-examine it more closely. After reading it several times I found NO MENTION of Call Options. So I then loaded the 'Find' feature to locate the phrase and guess what? Again there was NO MENTION of Call Options. You are disingenuous when you comment that the recommendation was for a Call Option when it never appeared in 'HOW TO TRADE EUO'! Correct me if I'm wrong." – Paid-up subscriber Thomas Z.
Goldsmith comment: You're wrong. From the July 6, 2011 S&A Short Report...
Buy the ProShares UltraShort Euro Fund August 16 call options (EUO110820C00016000) up to $1.40.
"I have to say I've recently posted 50-150% gains on EUO Call options using the information Porter has been conveying. Thanks for everything, your information has become a game changer for me." – Paid-up subscriber Mark Richard
Goldsmith comment: Finally!
Regards,
Sean Goldsmith
Baltimore, Maryland
July 15, 2011
80% of Americans agree with Obama... S&P downgrade within three months... IMF warns European banks... Another farcical stress test... More interest in shale gas... Were we wrong on the euro?...