Friday, April 27, 2012

Friday Afternoon Links

1. Stunned Home Buyers Find that Bidding Wars Are Back, As Housing Demands Picks Up After Long Six-Year Slump.
 
2.  Consumers Energy Reduces Natural Gas Prices for 1.7 Million Customers in Michigan to the Lowest Level Since 2003, Saving Consumers $130 Million Over Next Year.
 
3. Here's a 3-D Home Printer for $500. All you need to do is add a computer and you’ll be off printing almost any object that comes to mind. 
 
4.  Thanks to abundant and affordable supplies of shale gas, Pennsylvania is poised for a manufacturing renaissance that starts with the chemical industry and ripples through the state’s economy. 
 
5. ConocoPhillips CEO Jim Mulva says the company this year plans to drill 160 wells in the Eagle Ford shale in South Texas, 300 wells in the Permian Basin in West Texas and up to 30 wells in North Texas’ Barnett shale. “Everyone is going to have to cast aside the old thoughts and the old assumptions of domestic fossil fuels being in short supply,” he said. “That’s simply not the case anymore.”
 
6. A “perfect storm” of economic and regulatory factors is driving major United States utilities to rapidly switch from coal to natural gas as an electric power source, the top executive of one of the nation’s largest utilities said on Thursday.
 
7. Markets in Everything: Travel Dating (HT: Tyler)

17 Comments:

At 4/27/2012 1:39 PM, Blogger Moe said...

Here's a 3-D Home Printer for $500. All you need to do is add a computer and you’ll be off printing almost any object that comes to mind.

Anyone know how much paper it takes to print a Cindy Crawford?

 
At 4/27/2012 1:53 PM, Blogger juandos said...

"Anyone know how much paper it takes to print a Cindy Crawford?"...

LMAO!

Oh damn moe, now that's funny!

 
At 4/27/2012 2:06 PM, Blogger Buddy R Pacifico said...

"Anyone know how much paper it takes to print a Cindy Crawford?"

Quite a bit if you desire 3-D and triple-D.

 
At 4/27/2012 2:26 PM, Blogger morganovich said...

moe-

i believe there is a how to video called "weird science" that can show you how to do it.

 
At 4/27/2012 2:29 PM, Blogger juandos said...

Gee! I wonder if these items of notoriety being sold in the UK were designed on a 3-D printer?

 
At 4/27/2012 2:49 PM, Blogger Moe said...

3-D?....sends a rush of blood to my non-thinking parts. I'll be signing off now...

 
At 4/27/2012 2:53 PM, Blogger Methinks said...

Ha ha!! Nice, Moe!

 
At 4/27/2012 3:34 PM, Blogger VangelV said...

Nicholas K. Akins, chief executive of Ohio-based AEP, said the company plans to retire 5 of its 25 coal-burning plants and shut down coal-powered units at other plants it owns in a shift that collectively means the elimination of about 5,000 megawatts of capacity. The result will be that by 2020, only about half of the power AEP produces will come from coal, down from about 67 percent last year.

The good news is that the 5 coal plants can be replaced by 1,000 of these. Or 80 of these. Larry, Walt and Benny should be pleased. Until it gets dark of course.

The surge in domestic production of cheap natural gas, largely yielded by the rise of the controversial technique of forcing gas out of shale through hydraulic fracturing, has been a big factor in this shift. A series of NEW ENVIRONMENTAL REGULATIONS AND PRESSURE FROM ENVIRONMENTALISTS are also leading major utilities to either shut down older plants or spend billions of dollars to upgrade them.

How about that? If the regulations were not in place the plants may still have been kept operating.

And, as usual, Mark missed something. Given the fact that the shale producers have moved away from shale gas to shale liquids how do we expect production rates to stay high and prices low? Is there a reference to a source that tells us that the industry has agreed to supply low cost gas at low prices in long term contracts?

 
At 4/27/2012 3:39 PM, Blogger Jon Murphy said...

Something else in support of No. 6 out of Atlanta:

The king of coal is switching to gas.

 
At 4/27/2012 3:43 PM, Blogger VangelV said...

1. Stunned Home Buyers Find that Bidding Wars Are Back, As Housing Demands Picks Up After Long Six-Year Slump.

Krugman must be doing cartwheels. With all of that money printing we have seen where the inflationary effects are showing up.

Of course there could be other simple explanations.

Some sellers, unwilling to accept prices that are still down from their peak by one-third, are taking their homes off the market in anticipation of higher prices down the road. Meanwhile, investors have been outmaneuvering consumers for the best properties, often making cash offers that are quickly accepted by sellers. Does that sound like a healthy market?

Of course, political pressures may play a factor in an election year.

In addition, some economists say that inventory levels are being held artificially low because Fannie Mae, Freddie Mac and the nation's biggest banks have been slow to list for sale hundreds of thousands of foreclosed homes they currently own. The lenders slowed down foreclosure sales and repossessions after record-keeping abuses surfaced 18 months ago.

I still ask the same question. If you have to put all your money in one asset class right now and hold it for a decade would you choose real estate, oil, natural gas, silver, or gold?

 
At 4/27/2012 5:11 PM, Blogger Larry G said...

" I still ask the same question. If you have to put all your money in one asset class right now and hold it for a decade would you choose real estate, oil, natural gas, silver, or gold?"

is assuming the fetal position an option?

 
At 4/27/2012 5:13 PM, Blogger Larry G said...

re: "let's permanently shut down the coal plants and use nat gas cuz we have a 200 year supply?

why am I worried about this?

 
At 4/27/2012 5:26 PM, Blogger Larry G said...

re: more natural gas = less coal.

ergo

more natural gas jobs = less coal jobs...

zero sum game?

 
At 4/27/2012 5:49 PM, Blogger VangelV said...

more natural gas jobs = less coal jobs...

zero sum game?


Mark and the nat gas optimists are missing the point. Coal is cheap to use because there is a lot of it and it is easy to produce. The producers make a nice profit because the cost of production is well below the market price. As prices fall they simply shut down the marginal mines and that production is gone forever. And without new capital spending programs the coal companies can remain cash flow positive for a very long time.

The problem with the cheap gas story is that it makes no sense. The cost of producing shale gas in the average formation is about three times the market price. That means that in order to keep drilling and producing the shale companies will have to find new loans and sell off their properties to other companies looking to enter the business. The logic fails. If the companies are successful at becoming profitable the price will have to rise substantially. That makes it very expensive to use natural fas for electricity or chemical production. If the price remains low the producers will go out of business and supply will collapse to previous levels less the depletion from the conventional sources.

The effect on jobs in the US is very negative because malinvestments destroy the very capital that is necessary for a healthy labour market.

 
At 4/27/2012 7:18 PM, Blogger Che is dead said...

"Given the fact that the shale producers have moved away from shale gas to shale liquids how do we expect production rates to stay high and prices low?" -- Vange

I thought that all of the shale gas producers were supposed to be bankrupt by now?

"Natural-gas futures have risen 15% the past six sessions ... Kyle Cooper of IAF Advisors says it’s possible the market has seen the bottom. ”We’re just having very, very solid demand,” he says." -- WSJ

"Everyone who has a brain should be thinking of how to make money on this in the longer term," the renowned investor Jeremy Grantham of GMO wrote recently ... Historically, says David Tameron, an analyst at Wells Fargo Securities, natural gas has been about 10 times cheaper than crude oil. At today's depressed prices, gas is roughly 50 times cheaper. "That discount is enormous and unsustainable," he says. "If you look to the future of the U.S., the free market will turn natural gas into the answer for this country's energy problems." ... Eventually, the rise in demand is bound to drive prices higher. Then the profitability of the companies that discover and produce natural gas will heat up. "Investors can make big money longer-term," says Dan Rice, co-manager of the BlackRock Energy & Resources fund, "but you tell me how many people have horizons longer than three or six months." -- WSJ

None of these people seem to be aware of Vanges research. Perhaps, he should send them a copy of his newsletter.

 
At 4/28/2012 9:13 AM, Blogger VangelV said...

I thought that all of the shale gas producers were supposed to be bankrupt by now?

No. As long as there are asset sales and loans to deal with the negative cash flows and as long as the asset side of the balance sheet is not written down to reflect market value many of the players can keep going for a while.

Eventually, the rise in demand is bound to drive prices higher. Then the profitability of the companies that discover and produce natural gas will heat up. "Investors can make big money longer-term," says Dan Rice, co-manager of the BlackRock Energy & Resources fund, "but you tell me how many people have horizons longer than three or six months."

Thanks for supporting my argument. Gas prices have to rise as demand goes up and production does not keep up. This means that Mark's argument that abundant and low priced gas will help utilities and chemical companies is very weak and inconsistent with reality.

 
At 4/28/2012 9:16 AM, Blogger VangelV said...

None of these people seem to be aware of Vanges research. Perhaps, he should send them a copy of his newsletter.

Let me make clear two points.

First, none of the material you cited contradicts my point that the shale gas producers have been losing money from operations.

Second, Mark's argument that we will get abundant and cheap gas is not supported by what you have cited. In fact, the bet is that natural gas prices have to go up because the low price level will cause production to decline even as demand goes up. My argument is that the price increases, when they come, will not save the shale gas industry because outside of a few core areas the energy return on the energy invested is negative.

 

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