Archives for December 2012

December 2012 - Page 15 of 17 - Money Morning - Only the News You Can Profit From

Investing in Facebook Stock? Keep an Eye on Dec. 12

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Facebook stock (Nasdaq: FB) investors are getting an early holiday present.

That's because on Dec. 12, shares of the world's largest social networking company will be added to the Nasdaq 100 Index.

Facebook will have some very good company in the index, joining tech behemoths Apple Inc. (Nasdaq: AAPL), Google Inc. (Nasdaq: GOOG), and Microsoft Corp. (Nasdaq: MSFT). It'll rank 13th by market value ($60 billion).

Snagging a spot in the coveted index, a compilation of the 100 most valuable non-financial stocks traded on the Nasdaq, is the latest in a string of welcome news for Facebook shareholders, especially those bruised in its initial public offering fiasco on May 18.

And the news couldn't have come at a better time for shareholders.

Here's why.

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How the Fiscal Cliff Deal Threatens Grover Norquist's Tax Pledge

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Washington doesn't need any more hurdles than it already has in reaching a fiscal cliff deal.

But one man, and the power he holds over our elected officials, is trying to prevent a deal.

I'm talking about Grover Norquist, the founder of Americans for Tax Reform, and his tax pledge.

Norquist is both hailed and loathed for his "no new taxes pledge." It commits to never raising marginal income tax rates on businesses or individuals, and opposing any net reduction or elimination of deductions andcredits, unless matched dollar-for-dollar by further reducing tax rates.

Norquist's tax pledge has been signed by almost every Republican in office. Only four current House representatives and six senators have not signed it.

But lately, those who signed on have started to change their minds concerning the 20-year-old pledge.

You see, U.S. President Barack Obama has made clear that higher tax rates for the wealthy must be part of a fiscal cliff deal – something 95% of Republicans have pledged to oppose.

And now the need for a fiscal cliff deal has caused some high-ranking Republicans to reject the pledge, threatening to loosen Norquist's ironclad grip on the party's stance toward taxes.

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South China Sea Dispute Could Fuel Global Energy War

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The South China Sea dispute, a fight over the 1.4 million-square-mile area crossed by one-third of world shipping routes, played out at the recently concluded Association of Southeast Asian Nations (ASEAN) summit in Cambodia among China, Taiwan, Vietnam, Malaysia, Brunei and the Philippines.

What's behind the fight is a vast quantity of oil and gas believed to lie beneath the South China Sea.

China and the other nations desperately want the energy resources beneath the South China Sea, and the dispute has caught the attention of global financial markets.

China's biggest offshore oil company, CNOOC Limited (NYSE ADR: CEO), recently updated its projection of energy assets in the South China Sea. It said the area could hold 17 billion tons of oil and 498 trillion cubic feet of natural gas.

All those resources could not be extracted, but enough could be taken out to double China's current reserves of oil and natural gas.

For its part, China's Ministry of Land and Resources says the area contains more than 40 billion tons of oil equivalent. Most of that is believed to be in the form of natural gas.

Another Chinese estimate says 2,000 trillion cubic feet of natural gas lie under the South China Sea. That would be enough gas to meet the country's needs for the next 400 years, based on 2011 consumption levels! No wonder energy-hungry China is so interested in pushing its claims in the region.

Exploration in the South China Sea has been very limited so far because few major international oil companies want to get involved in the territorial dispute. China has already successfully pressured companies like BP plc (NYSE: BP) and Exxon Mobil Corp. (NYSE: XOM) to abandon its deals with neighboring Vietnam.

CNOOC itself caused a diplomatic row with Vietnam in June when it put up for auction nine oil and gas blocks that Vietnam says are in its territory. The blocks had already been auctioned by Vietnam to companies including ExxonMobil and Russia's Gazprom.

CNOOC Taking the Lead in South China Sea

CNOOC plans to push ahead in the South China Sea.

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Get Ready to Play Higher Natural Gas Prices with These Picks

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After natural gas prices hit a decade low in 2012 of below $2 per million BTU, they're up about 80% from a year ago, trading around $3.60 this week.

Looks like the six-and-a-half year bear market in natural gas maybe be coming to an end.

Falling with natural gas prices has been related investments. That means investors can go shopping now for low-priced natural gas plays before prices climb.

As Money Morning Global Energy Strategist Dr. Kent Moors said, the road to profits will not be straight up. Volatility will cut in both directions.

But the natural gas market is getting stronger.

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Allegheny Technologies, Inc. (ATI) - Bear of the Day

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We are retaining our Underperform recommendation on Allegheny Technologies (ATI) following its disappointing third quarter results. Both revenues and earnings missed Zacks Consensus Estimates. Profit tumbled year over year as sluggish economic conditions hurt demand for the company's products. The company cut its sales forecast for 2012. While Allegheny is expected to continue benefiting from […]

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The Impact of Shale Oil Means the Tables Have Turned in Our Favor

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The Eagle Ford shale formation lies south of our headquarters in San Antonio, Texas, giving the U.S. Global investment team a firsthand, tacit perspective on the oil and gas industry's growing natural resources phenomenon.

We've witnessed how the oil activity is boosting the local economy with solid-paying jobs, a healthy housing market and strong consumer sentiment, as oil giants such as Schlumberger and Halliburton take a bigger stake in the area.

After seven long decades of importing oil, the U.S. seems only a few years away from reversing the flow, largely from shale technology not only in Texas but several areas around the country.

In 2005, the U.S. reported net imports of 13.5 million barrels per day, or almost two-thirds of its oil needs, according to Raymond James. By the end of 2012, net imports are projected to fall to 8.6 million barrels per day, which is about half of the country's current consumption.

By 2020, the estimated gap between supply and demand narrows considerably. Take a look…

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Are the Russians on the Verge of a Major Arctic Oil Coup?

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As I move into the main meetings here in Moscow, something unexpected has joined the conversations on oil prices, European pipeline prospects, liquefied natural gas (LNG) trading scenarios, and the prospects of unconventional shale.

That something is venture capital funding.

The Kremlin has developed several venture capital funds with potential state-supported investments amounting to at least $12 billion.

It may be early yet, but I see signs of where these new efforts may be directed.

You should watch out for two aspects with this story.

The first must happen in Russia.

But the second is likely to take shape in an unexpected place: Boston, MA.

Here's why. It has to do with Arctic oil.

Several years ago, then-Prime Minister Vladimir Putin declared that the under-used and under-equipped shipbuilding sector would be transformed into a global leader in the design and construction of offshore platforms and drilling rigs.

Of even greater interest was the initial challenge given at the time – to develop a whole new generation of ice-resistant platforms for Arctic drilling.

Moscow had already recognized it could arrest a serious decline in its mature Western Siberian fields only by moving out in three directions. They are:

  • Into highly promising but infrastructure-poor Eastern Siberian;
  • Onto the continental shelf; or,
  • North of the Arctic Circle.

Then the U.S. Geological Survey (USGS) issued its long-awaited Circum-Arctic Resource Appraisal (CARA).

This major multi-year effort evaluated petroleum resource potential for all areas north of the Arctic Circle (66.56° north latitude) having at least a 10% chance of one or more significant oil or gas accumulations (50 million barrels of oil equivalent or above).

CARA concluded that 84% of the total undiscovered oil and gas left in the world is sitting offshore, the bulk of it in three huge Arctic basins.

Russia, the survey concluded, controlled the largest single chunk of it.

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Put These Shale Oil Fields on Your Radar for Energy Profits

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Energy companies in search of the next big shale play are scouring shale oil and natural gas fields in Oklahoma and South Dakota.

The shale oil fields in the two states remain largely unknown to energy investors.

As Money Morning reported Nov. 27, fracking technology has opened vast shale oil and gas fields that previously had been uneconomical to exploit.

With rapid growth in recent years, so-called unconventional oil has accounted for about 2 million barrels per day of production in 2012.

In Oklahoma, where oil was discovered in 1897, conventional oil production peaked in 1927, and the state's fields were thought to be exhausted.

Oklahoma's main field, the Anadarko Basin in the western half of the state, has yielded most of Oklahoma's oil and natural gas in recent years.

Now drillers are targeting the basin's Woodford shale layer.

One of the Most Unknown -and Promising – Shale Oil Fields

One of the companies drilling in the Woodford shale layer is Continental Resources (NYSE: CLR), who told Reuters the site is "one of the thickest, best-quality resource shale reservoirs in the country."

Continental is known for its success drilling in North Dakota's Bakken, one of the best-known shale oil fields.

At 3,300 square miles in area, the Woodford shale layer is smaller than the 13,000-square-mile Bakken shale oil field or the 5,000-square-mile Eagle Ford field in Texas. But the Woodford shale reservoir is thicker, at 150 to 400 feet thick, compared with Eagle Ford at 100 to 250 feet and Bakken at 10 to 250 feet.

The U.S. Geological Survey estimates Woodford contains 400 million barrels of recoverable oil. The site is also believed to contain 250 million barrels of condensates and lots of natural gas.

Continental Resources is one of the bigger players in the Woodford reservoir. The company has increased its acreage holdings in Woodford at an even faster rate than it has in the Bakken. From 2009 to October 2012, Continental's net acreage in Woodford rose 1135 to 316,000 acres while its net acreage in the Bakken increased by 51% to 915,000 acres.

Shale Oil: Moving South from the Bakken

Another developing shale oil play that is relatively unknown – the Tyler formation – is in the Dakotas.

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Why Gold Prices Will Soar After the Dec. 12 FOMC Meeting

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Gold prices will start another epic run beginning Dec. 12 – the day the Federal Reserve will double down on QE3 at its Federal Open Market Committee (FOMC) meeting.

Decisions made at the Dec. 12 FOMC meeting could add as much as $2.2 trillion to the Fed's balance sheet over the next two years, which will turbocharge gold prices, silver prices and oil prices.

The FOMC is the select group within the Fed that sets monetary policy, such as interest rates and the bond-buying programs known as quantitative easing, or QE.

That the Fed will dramatically increase QE3, which launched in September with the monthly purchase of $40 billion in mortgage-backed securities (MBS), at the Dec. 12 FOMC meeting is almost a given; it practically has no choice. QE3.

But the real issue at the Dec. 12 FOMC meeting will be what to do about the Dec. 31 expiration of the Operation Twist program. In Operation Twist, the Fed sells about $45 billion of short-term Treasuries each month and uses the proceeds to buy long-term Treasuries.

The Fed probably would opt to extend Operation Twist – which has not added to the Fed's balance sheet as QE1, QE2 and QE3 have — except that it is starting to run low on short-term securities to sell.

Yet the Fed committed in October to extending its easing policies as long as necessary to bring down unemployment and aid the U.S. economy. Its only option is to convert Operation Twist to a conventional bond-buying program – effectively doubling its QE3 money-printing.

"Our baseline expectation is a continuation of the current pace of asset purchases of $85 billion per month on an open-ended basis, which would imply that the current $45 billion per month in [Operation] Twist-financed Treasury purchases is replaced by $45 billion per month in QE-financed Treasury purchases," Jan Hatzius of Goldman Sachs (NYSE: GS) said of the likely actions at the Dec. 12 FOMC meeting.

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Everyone's Getting Antsy with No Fiscal Cliff Deal in Sight

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After another day and still no progress on fiscal cliff discussions, many are beginning to think we might not see a deal before the end of the year, or even at all.

Republicans on Monday proposed their counter-offer to U.S. President Barack Obama's initial deal and, like his, it was basically the same plan previously offered.

This has led many, including Bank of America Corp. (NYSE: BAC) CEO Brian Moynihan, to wonder how far apart the two sides really are, and how long the effects of delaying a deal will be felt.

"I'm more concerned about business behavior slowing down than I am about consumer behavior," Moynihan told CNBC this morning. "I think we're in danger if this thing strings out into 2013 that you could start to have problems of what 2014 would look like."

The Republican-proposed deficit reduction deal, which was quickly rejected by the White House, would save $2.2 trillion over the next decade by generating an additional $800 billion in tax reform, but not by raising rates, and saving $300 billion by cutting discretionary spending, $600 billion in "health savings," $200 billion in changes to the consumer price index and another $300 billion in mandatory spending.

This is in stark contrast to the president's offer, and so far it seems neither side will budge from their original positions and even begin to compromise.

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