Ep. 201 America Will Be Energy Independent in 20 Years
Male: S&A Investor Radio looks beyond the regular headlines heard on mainstream financial media. To bring you unscripted interviews and breaking commentary, direct from Wall Street, right to you on Main Street.Frank Curzio: How’s it going out there? It’s Wednesday, September 18th and I’m Frank Curzio, host of the S&A Investor podcast where I break down the headlines and tell you what’s really moving these markets. You know, I’m really getting sick of this Florida thing. Went to go get an oil change the other day. By the way, my wife is in Vegas celebrating her mom’s birthday for a week. I’m working hard, have the kids, take them school, feed them, doing homework, changing diapers, entertaining, all that fun stuff, working hard with you as well. I did squeeze in time to get an oil change which I needed.So I went to a place called Express Lube, no it’s not a porno site, but it’s a real place to get oil, owned by Texaco. So I had to take my two year old with me. She kind of has a mind of her own right now, can’t sit around. Just running all over the place and there’s like a waiting room with a TV. She’s running there changing the channels, change the channel with six people watching the Today show and they are all like getting ticked off, you know, total chaos. So, they finally finish my oil change. And they say, hey, Frank, come on up. It’s $66 because I have a new car and they have to use synthetic oil. I’m like fine you got the $22 oil change sign outside display, I’ll pay the $66 no problem, didn’t complain at all.So today, this morning, my light comes on, the oil light, it says I have 15 percent oil life. So I’m like great. Now I have to go back there, with my kids again, and doing a little daddy daycare thing right now. So I know something’s not right because it should say 100 percent after the oil change. So I asked the guy, I get there and I said, listen, let me talk to your manager. And he says sure. Some country guy comes, I won’t even use, that’s all I’m going to say, some country guy comes out. And he might have had like four or five teeth. And I said, look, I just got the oil changed. It says I have 15 percent oil life, you know what gives. He says, all right, let me check the oil and see what’s going on. He goes, you know what, I guess we forgot to put in the oil.So I said, unfortunately in front of my kids. I said, let me get this straight, I came here for an oil change only, you charge me $66 and forgot to put oil in my car. So I said, look, either you hire the biggest idiots on the planet, or you are robbing me, that’s the only case. The only thing I went in there for is for you to give me oil. That’s what you do. You change oil. It’s not a services firm. They change, that’s all they do, they change oil. And they forgot to put oil in my car. So he’s like sir, you know what, it’s probably a mistake. I said, okay, I guess you have idiots working for you then because I’m really upset because I’m dragging my kids around and I don’t have a lot of time these days. So I said, that’s fine, please fill up my oil tank, not a problem. So, I don’t lose it often. I try not to curse and lose my temper, especially in front of the kids, but I’m from New York and I believe the guys definitely tried to scam me. I Mean, the only reason is because I had five percent oil life and it said 15 percent oil in there, so you put a little oil in there, probably get the light shut off, but since it’s a new car, it actually shows me the gauge of percentage and life and stuff like that.Because, there is no way that people could be that dumb, actually, I live in Florida. There might be a way. But it’s just amazing, a simple oil change, an oil change I can’t even get done here. It’s amazing, I’m telling you. If you want a job, come to Florida, you’ll make a ton of money. Anyway, I don’t want to start off on a rant. Just frustrated, a guy had one job, give me an oil change and you forgot to put oil in my car. Anyway, moving on. Have a great podcast for you today. Today’s guest is the one and only Dr. Kent Moors. Editor of the Energy Investor Newsletter for Money Map Press, energy expert. Advises the largest oil companies, even L&G facilities. One of the smartest guys, by far, in the industry. Last time I had him on I received about 100 emails saying how great he was, from you. He’s not an arrogant guy, just a facts guy.Told us oil was going much higher, when, at a time, when if you remember, a lot of people were predicting oil prices to go lower, $70. All right, they were about $80 at the time now they are over $100. You have Syria going on and everything, but they were well over $95 before that even happened. So that call was so good and the facts he presented behind that argument was so good, it challenged my perspective on oil and completely changed my mind on a lot of different things. And this was right before I started visiting all the shell areas around the US, explaining stuff like this to Cactus and Cactus is like, yeah, oil prices might come down. Those of you that read my newsletter know exactly what Cactus is. You know, oil driller, wildcatter from like 40 years, you know, I was explaining to him about reserve ratios are going down tremendously, everyplace else, even though we are producing a lot of oil in the US. But Dr. Kent Moor is here and he’s going to tell us that oil prices can keep heading higher. He’s also going to break down the natural gas industry. Another L&G terminal just got approved in the US, exporting facility. So it’s a time to buy natural gas producing stocks. Interesting question. I know it’s early on.Also, he told us six months ago, I just mentioned. Most of the large cap oil companies around the world having trouble replacing their reserve replacement ratios, that means they are having trouble finding oil. I’m going to ask him if it’s still the case based on his recent visits outside America. And finally, Moors will give us his favorite pics in the oil patch, a trend that nobody is talking about. Guys, great, great, interview, don’t want to miss it.Later on, going to break down the markets, tell you why the markets should not be rising, stocks should not be rising because Summers withdrew his bid to become fed chief. We’ll also talk about my adventures of being on TV. Have a lot of producers calling and I have to say, I think I am going to change my mind about being on TV. Anyway, now I know why I gave it up back in New York. And, instead of an educational segment this week, I’m definitely going to take some of your questions. I didn’t do that last week. I have a lot of great ones including feedback, how to control my tempers. Elliot Gue, which was the interview last week. A ton of positive feedback. I thought Elliot was awesome, also an energy expert.Defense companies evaluations, so I’ll tell you why you should sell the small, mid cap names in this. I’m going to bring that up and how to get a job in the ___so I’m getting a lot of questions on that and I’m going to take a few, but first, let’s start with this amazing interview with Dr. Kent Moors. And I start by asking him, are triple digit oil prices here to stay.Dr. Kent Moors: By and large, I think we are going to see that for some time. We’ll see a range in the trading, but we’re looking a base right now as of this morning, um, would be somewhere in the neighborhood of $107 to $110 for WTI and probably closer to $115 for Brent over the next several weeks. We are of course working the Syrian premium through the system and then the lessening of tension there, which has been bringing the prices down the last couple days, but the dynamics in the market are still going up.Frank Curzio: You know, you had an interesting article about the Syrian premium and you know, after this whole Syrian thing that oil prices have obviously gone a lot higher, but you also say why it may not be temporary, why is that?Dr. Kent Moors: Well, there are several things that are occurring quite apart from the instability of the Middle East, quite apart from Syria, and that is, that we were beginning to see some supply and demand dynamics that are kicking in. There will be some supply constrictions on various parts, various regions of the world as we move over the next six to twelve months. And we are also seeing some spikes in demand. Now, once again, both of these are not either North American or Western European in origin, because the oil market for some time now has had both its demand and its price levels determined by what’s occurring in other parts of the world. And that’s going to continue, which means that even though in the United States we are talking about this large S of new unconventional oil discoveries and how we may be energy independent within a couple of decades, but that’s not noticeable declining the international price levels.And what that means is that crude is going to be in excess of $100 a barrel for some time.Frank Curzio: And it’s interesting you say a lot of people are talking about the shale boom in the US, massive boom taking place in places like the Permesian Basis, Eagle Ford, also __and these are all places that me and my research team visited in the past few months. Yes, we seem to have so much untapped oil potential in areas like the Three Forks, which is under the ___. And you have the Kline, which is under the Wolf Camp of the Permesian Basin. Also the Utica under the Marseilles. And you mentioned energy independence. Is there a chance that we could become energy independent if we had places like Florida, New York, California, open up their boarders to fracking?Dr. Kent Moors: It’s a bit more than that. It is true that there is a considerable amount of potential reserves available, but you also have to understand that even though the supply is now available, that doesn’t mean that the price is going to be cut. Just as an example, moving to the Utica, below the Marseilles, which there is apparently, a considerable amount of reserves to be tapped. It is far more expensive to drill that deep. The average Marseilles well is coming in and $2 to $2 ½ million per well. The average Utica is going to come in at $8 million or more. So even though the supply is there, that doesn’t automatically mean that the prices are going to be going down. I mean, the prices are going to still remain somewhat high. I have a greater confidence however that if we look at within the next 20 years, we are for example going to be producing more oil in the United States this year than we have at any point since the early 1990s and that scale is going to be going up.I do think that within 20 years or so, we are going to be dependent upon imports for only about maybe about 30 percent of what we need on a daily basis and virtually all of that is going to be coming from Canada. So that self-sufficiency idea is really not as outlandish as it may appear.Frank Curzio: So you are saying in 30 years, we are not going to need anything from OPEC, it’s going to be imported from Canada and we’re going to have enough production the US to basically serve our demand needs?Dr. Kent Moors: Yeah, absolutely, and at that point, the energy balance is going to be more diversified than it is now. We will have more hydrocarbon alternative sources contributing greater percentages of the overall daily need than we have currently, but to put things in perspective, OPEC doesn’t think it’s going to be selling us oil. It’s interesting, you can take a look at the latest OPEC planning document, which was revised some two years ago now. OPEC itself assumes that by the time you get to 2050, not a single member of OPEC will be selling a single barrel of oil to the United States, so this is something that’s the market itself has been recognizing for a while.Frank Curzio: Now, a lot of people getting their name in the paper with using the word depletion. They say there is not as much oil as people thing in these areas. What do you have to say about that where maybe we are just jumping the gun here. We are seeing a lot of production now, but it’s definitely going to tail off say in 10, 20 years from now.Dr. Kent Moors: That’s always an issue. We really don’t know the longevity of the basin until you have actually spud a large number of wells, you know where the sweet spots are. You have been doing a number of fill in and step out operations. And all of these things, and several of these basins still have to come. There are a couple of things, however that we have to keep in mind. Even though the depletion rate is a great unknown out there and people tend to play games with the debate upon occasion, there are two other things that we really ought to recognize. Number one, we are recognizing multiple horizons. As we drill deeper, as we get better and more efficient with the horizontal drilling, so we have multiple fracking stages, we are coming to recognize that there are more horizons for development than we originally had anticipated.And that’s occurring not meanly with the new finds, it’s also occurring at much more mature fields.And secondly, the technology factor is always improving. If we take a look at, for example, at the multidirectional or horizontal drilling operations that exist today and compare them with those that existed only three years ago, the difference is significant. Efficiency is increasing the amount of reserves we actually can tap and bring up whole. It’s also allowing us to keep wells open longer. To increase the amount of secondary recovery techniques that can be used efficiently. And even dealing with things like water cuts, to make wells where the water cut is becoming a prohibitively expensive proposition. Allowing those wells to remain open profitably longer.Recalled and until very recently, and by that I mean, on average within the last couple of years, it was not unusual for 50 percent to the known reserves at a well to be left in the ground because it was simply not economically feasible to pull the oil out. The overall increase price in crude oil has assisted in additional recovery, but the technological improvements have dramatically improved our ability of being able to take up greater amounts of reserves than we know are there.Frank Curzio: You said US as an exporter as natural gas. I mean, this is a trend that had you excited a few months ago when we talked. This week, the fourth L&G exporting terminal has been approved in the US. Why is it such a big deal for America and how come this isn’t getting more publicity and I have to see it basically on a fifth or sixth story, where, you know, is this like a big deal for America?Dr. Kent Moors: It is a very big deal for America. I had to use the term “game changer” but this is one of them. We have such a large known reserve of unconventional gas in the United States that we could literally increase the overall production of natural gas 25 percent each year into the foreseeable future. Now if we did that, of course, we’d destroy a market. So one of the problems always is, we know we have got a great deal of supply that we can bring on market, if companies actually do that they depress the price and they shoot themselves in the foot. Well, the way out of that is to be able to have increasing demand site needs for the natural gas. And in addition from moving from coal to gas as they fuel of choice and generation of electricity which is now underway. The export of L&G from the United States is a major ingredient in increasing that demand and thereby allowing additional American expansion in production.We currently provide zero percent in the L&G in the international market. Even Russian gas ___is not admitting that the United States is likely to be providing anywhere between 8 and as much as 12 percent of the L&G in international market as early as the early 2020, 2020, 2022, somewhere around there. This is going to be a major way of exporting additional, already known natural gas reserves in the United States and it’s not going to affect the domestic prices at all. It is going to generate a significant amount of development. There is going to be injections of tax revenues of local economies. There is going to be employment. We are also going to have some problems which we are going to have to overcome. Everything from an inability to develop the infrastructure necessary to support this quick enough to environmental concerns.But my belief is that you take the problem, you put it on the table and then you solve it. You don’t try to avoid it. L&G is going to be a major component of the American energy picture and exporting it from the United States into the world community is going to be a decisive change in the energy trades we see in this country.Frank Curzio: Now, this is an important question, you are a newsletter writer as well. What are some of the plays on this, because, what I notice and I read this back in February and I was wondering why this was happening, you had Chevron come into the Marseilles and they increased their well count from 94 to 219, natural gas. You have Chesapeake Ridge Well count from 30 to 62. You have Consul Energy, EQT Pointers, XTO and I’m looking at this, I’m looking at natural gas prices and saying, why are they doing this? This fourth L&G terminal just got approved right next door off the east coast, so it seems like they are getting ready for this. Is it time to start biting at the natural gas producers off of this trend?Dr. Kent Moors: Well, I mean, there are a couple of factors here, there is not going to be any exports until well into next year. But everyone recognizes in anticipation that this is coming. The exporting of L&G will be a major way in which excess production will be removed from the American market and therefore will not be depressing price. The exports themselves are going to be accelerating and they are going to be accelerating to both Europe and to Asia. And the reason why it’s not profitable by next year to start exporting of Asia is that we will have the completion of the widening and the deepening of the Panama Canal and for the first time, the canal will be able to service L&G tankers. So you are now going to be able to move L&G from Gulf of Mexico US, to Asia profitably. All of this is known by everybody in the industry.And so as a result, there has been a jockeying of position. There have been complaints of course that the Department of Energy has not be approving the terminals quickly enough, but that simply is a symptom of a broader problem, that is that we really need an overall multier-national policy for this export and we don’t have that yet. So some of that delay is simply to be expected given the fact that policy has to catch up with where the market already is. Lots of people are getting on this bandwagon and there are a couple things that you can see. Obviously, the trendsetter for some time has been LNG Energy and LNG Energy is still one of the darlings of the LNG stock category despite the fact that it won’t be exporting a single pound of LNG for over a year.We also have companies like Golar that are positioning themselves to be the main go to companies when it comes time to providing the tankers to move the LNG out of the United States into the national market. So there are plenty of things going on here. LNG is fundamentally going to alter how energy looks worldwide over the next 20 years and for those areas of the world such as Western Europe that have been dependent on high price take or pay multiyear based on crude oil pricing systems, for pipeline gas, may not for the first time, have a genuine option with the importing of L&G to reduce their overall gas expense in the European market and that’s going to have a residual major advantage in terms of offsetting other problems in economic and industrial development.But when you go to Asia, that’s the real big area. Asia is so thirsty for LNG that there is a huge premium that will be paid over other parts of the world for the foreseeable future. And as a result, you have situations like when I was advising on the Gorgon project, Chevron’s project in Northwestern Australia, we had a genuine concern that that was going to generate too much LNG for the Asian market to be able to absorb, especially given the fact that Exxon had its own project in Papua, New Guinea and that was also going to Asia. Well, every single drop of the LNG that will be produced for the next 20 years from both of those projects has already been committed. Chinese announced one morning that they are building five costal terminals at the same time.Asia sees LNG as one of the major ways of breaking the hold, of having to use inferior coal for it’s electricity generation. So you look forward, and the entire world is going to be getting on the L&G bandwagon and we just happen to be sitting on some of the major raw material supplies that are going to provide it.Frank Curzio: Once again, we are talking to Dr. Kent Moors, energy expert, political science professor. Also, editor of Energy Advantage and Energy Inner Circle Newsletters, Money Map Press, let’s stay with the international front. Last time I spoke to you, you said something that actually changed my thinking the way I look at the oil industry in terms of prices. And you said, many of the largest oil companies in the world, most that are state run are having problems keeping their reserve ratios, replacement ratios above 100 percent. Is this still true today?Dr. Kent Moors: Yes, it is, and of course, we have to remember some of this information is more anecdotal, than it is, to give you the clearest example, once Saudi Arabia took over Aramco, we haven’t had a realistic reserve figure. So we really don’t know what Saudi Arabia has since 1979. What concerns me about what’s occurring elsewhere in the world, is that to keep pace with additional demand requirements, some of these national oil companies are doing what I think is substantial damage to their geological reservoirs. Just to give you an example, it is a regular condition in Saudi Arabia now, when they open a new field from the very beginning of that field, you have significant secondary recovery being introduced. It is not unusual in a new field to have as many injection wells as you have production wells.From the very beginning of the fields development. Now, what this does, of course, is that it pushes a lot of oil out up front. But it does damage to the reservoir to the extent that you are reducing the overall recoverable reserves as you extend that overtime. Now the Saudis would respond by saying they have so much untapped reserves that these kinds of potential text book difficulties are of little concern to them. The problem is we don’t know how many new fields are actually exploitable at which levels. In other parts of the world, we have national oil companies which once again are attempting to get as much out of the ground as quickly, triple digit cruise prices, tend to do that, but at the expense of putting in jeopardy overall long term supply. Let me add here, one of the offsets to this that we are seeing worldwide is we now have come to recognize that there is more type oil or unconventional oil world wide than we ever thought there was. And that was indicated for the first time this past summer when the energy information administration did the first revision of its shale gas survey, which first came out in 2011.And for the first time, put in initial figures on unconventional or tight oil. And they had to conclude that there was 40 to 60 percent more unconventional oil world wide than they had originally anticipated. So we have to expect more horizontal drilling and more fracking for oil worldwide, not simply for gas.Frank Curzio: Now, with this horizontal drilling, where do you see, what inning are we in? I mean, very early stages when you are looking international. But the people that I talked to in the industry say that they are least a decade behind because a lot of these companies don’t like working with each other. Halliburton will work with Exxon and you’ll have GE for Lufkin, for the pumps and everything, they all work together, seismic data companies to get the well done where it seems like overseas they are having that problem where everybody working together, I mean, when is this going to take place. I mean, in 20 years, are we looking three years. How long before we really see this development overseas of shale gas?Dr. Kent Moors: Oh, well, it’s already beginning, but it is quite true that the way in which one does business abroad is often more frustrating than what it is that you would find, say in North America. Currently, we are about, in the United States, we are about eight years ahead of most of the rest of the world in shale gas development, and that doesn’t seem like much, but in the industry, that’s light years. So what I have suggested repeatedly is that the next wave of profitability for American companies, and I’m talking about smaller companies. I’m not just talking about the Haliburtons and the ___and the giants of the world. But next real opportunity for smaller American companies is abroad and it’s moving its technology and its expertise and its experience abroad.Because what you don’t have in foreign fields is coordination, as you have mentioned. And it’s not simply coordination between and among the supply providers. It’s an ability to provide an efficient overall pad structure and pad organization. Now that takes years to develop and throughout much of the world, this was done by either a national company, or a consortium of state controlled entities and that merely increases the inefficiency. What the rest of the world doesn’t want is a Halliburton coming in and essentially controlling their domestic field. What they don’t have, however yet, is the development of their own domestic equivalent. They have set up much larger holding companies of oil field services for example. But that hasn’t translated this to any increased efficiency. It doesn’t normally help for you to bring together a whole bunch of outmoded equipment and provide it as one centralized location if that equipment doesn’t do the job. So the next stage actually, is being able to inject into international product and international projects the kind of almost seamless efficiencies we have developed in North America and that, I think is a real opportunity for North American companies.Frank Curzio: Last topic here, can you talk a little bit about the offshore industry? Barkley’s predicts energy companies are going to spend $640 billion this year to find oil, $640 billion this year alone and in conference calls I listen to which includes most of the majors, seem to be making a massive push into offshore. Are you hearing the same thing out there?Dr. Kent Moors: Oh sure, and there is a basic reason for it. If we move back to the conventional side here to the normal kind of oil and gas that were used too. There are multiple surveys that the vast majority of as yet, undiscovered large oil and gas fields, are located off shore and most of these are actually in deep water.It is far more expensive to drill out there. The infrastructure is more complicated. But you tend to have a larger field. You have larger initial flow rates, and you have actually reduced recovery of investment plan. And so that makes it a no brainier and this is also occurring in areas that are exceptionally mature. If you take a look at certain areas of the Gulf of Mexico, but the point the area that I’ve been dealing with over the last month or so, which is truly exciting, take a look at eth new horizons being discovered off shore in Cook Inlet, Australia, Cook Inlet, Alaska. This is an area that’s been under development for decades.But the amount of oil and gas that’s being discovered there now that the drilling platforms are in place and the jack ups are finally moved out and so on, is quite above what people had been anticipating. And so as a result, as you go offshore into new fields, we also have older fields where advanced newer technology is allowing us to recover reserves in some cases, we didn’t even know where there.Frank Curzio: Well, let me finish up with this last question here, one more, I promise it will be the last one. Do you have any ideas to share with the listeners and I don’t want you to give away anything particular that people are paying for in your newsletters, but any large cap, small cap ideas on some of the trends that we talked about today?Dr. Kent Moors: Absolutely, the trend that I’m seeing that is increasing much more quickly than even I anticipated is something that I call a production threshold. The threshold below which major companies no longer can run projects at significant profitability is expanding. It means that the larger traditional international majors, what’s left of the VIOCs, the vertically integrated oil companies or you know, the big guys, the Exxon Mobiles, and the Conoco Phillips, and the Shells of the world, the Chevrons of the world. The threshold at which they must operate is getting larger. Now what that means is there is a whole new area of medium to smaller field plays that are beyond the ability of the large companies to operate.This is creating an environment for well-focused, well managed efficiently run companies to make what are actually greater profit returns on medium to smaller fields than even the big boys can run. There is a whole new generation here of profit that’s being developed with a whole range of smaller companies that tend to focus on basins they know well. They tend to operate with clearly defined objectives. They tend to do it far more efficiently and they tend to product greater profit margins than the larger companies. And I think that’s one really intriguing and profitable place that retail investors are going to be moving.Frank Curzio: All right, Dr. Moors, we’ll leave it there. I usually, I say this a lot to my listeners. I usually try to keep these podcasts under usually 20 minutes. We just had so many good things to talk about and it went a little bit long, but I really appreciate you coming on the podcast. I know a lot of people they always email saying how much they like, I really appreciate you taking the time.Dr. Kent Moors: Thank you. I enjoyed it.Frank Curzio: All right, take care.Dr. Kent Moors: Bye, bye.Frank Curzio: Bye. Okay, guys, awesome stuff from Dr. Kent Moors. Give me a shout, fcurziostansberryresearch.com that’s fcurziostansberryresearch.com. I got a lot of feedback from the Elliot Gue interview. Let me know what you thought about Dr. Kent Moors, again, feel free, debate his opinions. He is someone I listen too. Who has been dead right since I have been talking to him for over a year, fantastic, so again, it’s just my opinion, this podcast is about you. Let me know what you think. Fcurziostansberryresearch.com. Now, let’s get to the markets. Dow S&P jumped earlier in the week after Larry Sermons withdrew his name from consideration to become the next fed chief, big deal, right? I mean, he was sure win, definitely going to be next fed chief. He sees someone who may hike raise in the short term and Obama’s top man for the job. So once this news broke, some of the markets go a lot higher, at least the premarkets on Monday. On anticipation that rates will stay low forever and we will continue to drink from the punch bowl. Look, I don’t know if this is such a big deal or who becomes the next fed chief. I mean, actually I think you know, Sermons is really smart for removing his name. He blew up Harvard’s endowment and many consider him one of the people responsible for financial crisis. I mean, he was put in place during the Clinton administration when he was treasury secretary, also, this guy hates women in power.I mean he was actually quoted as saying, the underrepresentation of female scientists at top universities maybe in part due to the natural differences between men and women. I mean, his confirmation here would have been awesome to watch, that was the only reason I wanted this guy to become fed chief. I was hoping, that would have been broadcasted everywhere. It would have been fantastic. They would have torn that guy apart. Plus, with social media, I am sure there is definitely dirt on this guy. I mean, there is dirt on everybody. I think we all have dirt, right? A bit of a bachelor party at a strip bar. A bachelorette party at Chip and Dales when you were younger. Had a major argument with your wife, imagine have somebody taping that and some of the things that are said.Getting so drunk that you don’t know your name, with your buddies and stuff like that. Stuff like this happens all the time when you are a politician you can’t have any of that happen ever. Your life is an open book. Everybody taping you every minute of every day. I mean, why would anyone in the world want the top job at the fed anyway? Why? It’s the worse position. I mean, Bernanke saved the world and people hate this guy. They rather we let all the banks fail. Have 30 percent unemployment right now. Most major cities go into bankrupt, I mean, that was the alternative, I mean, people losing their life savings, is that really what you wanted? And Bernanke, people trash the guy all the time.I mean, look where we are now. I mean, it’s not that bad out there, right? We are sitting there, record profits. We are doing okay. It’s not great, but man, people forget how bad it was in 2008. I don’t know if there is another solution to get us where we are today. It’s debatable, what’s not debatable is sitting and doing nothing, come on, use your head. Really, you want to sit there and do nothing? But anyway, Bernanke gets no credit at all. I mean, it’s the worse job on the planet, so I’m not surprised he removed his name. Anyway, I think we need to start raising our rates. We have to get out of QE programs. These programs were intended our economy from falling into deep recession and they worked. The housing market is much better footing, profits at all-time highs and we are hiring, so unemployment is at its lowest levels since the credit crisis. Employees don’t email me labor partisan paste and rate, it’s nonsense. I tell you plenty of jobs. If you want jobs, I’ll answer it in my questions later. There is plenty of jobs out there guys, if you are willing to move and relocate, where it means, if it’s that bad where I am going to sleep on a park bench and I can’t feed my family, there is jobs out there, you got to be able to pick up and move. And if you are making, you used to make on Wall Street $400,000, and you got fired, guys, you are not going to make anywhere close to that.So if you don’t have a job and you drop out of the labor force and people want to site that because you want $400,000 again, sorry, you are not going to get a job, give me a break. But really, Sermons withdrew his name and the markets moved higher because we really want more stimulus. I mean, I wouldn’t be that rally is sustainable. Sure, interest rates have remained low for a long time, but tapering is on the way and we have to stop giving money to almost everyone who asks for it. Again, I don’t know if it’s reason why we should be going up so much, whoever the fed chief is, but man, it’s just pretty crazy that we are dying for more stimulus. We want people in there who are going to keep interest rates low forever and ever and ever and keep giving money away. I don’t know. Not such a good idea. Now that things are better, again, we have to start giving back a little bit, have to get those rates a little higher, little by little, at least startMoving on, Twitter announced it’s in the early stage of becoming a publicly traded company. According to E-Marketer, the social media generated less than $600 million in sales over the past year. Early valuations place the company at around $10 billion. I am bringing this up because I got a lot of questions on it. Now, this suggest twitter is trading at over 17 times sales, I mean, crazy, crazy evaluation, super expensive, but it’s comparable to Facebook. Facebook is trading about 16 times sales. However, Facebook has figured out how to generate revenue through the mobile. And we don’t know if Twitter will have the same success.It’s a huge deal guys, huge. And Facebook is cut in half to under $19 a share. The social media giant found a new way to generate sales through mobile. And today’s stocks trading at what, 43, 44, well, well off its lows. But if Twitter trades above 16 times above sales. And here is the big deal, why I want to mention this to people. I have so many questions with Facebook coming out. Even my mom emailed me, one of my best friends who never bought stocks in his life emailed me. I mean, when this stock comes out, you have to be careful here. I mean, it’s trading at 16 times, I’m sure there are going to be a lot of early institutional investors looking to dump shares. These investors include a who is who of hedge funds and private equity funds, will likely get a six month lock up period. And some may get a three-month lock up period, which happened to Facebook. They got a three-month lock up period.I mean, what would you do if you owned Twitter early on and it comes out trading at 16 times sales, and by the way, it’s going to come out much more expensive than that. They say it’s $10 billion now, it’s probably going to come out more like a $15 billion evaluation, like a $12 billion evaluation. We’ll see. It’s gonna be higher. It’s not going to be lower. I can tell you that. But what would you do? I mean, I would look to dump-, why do you think they are changing their lock ups from six months to three months, why do you think all the insiders, if I am an insider, I would do anything I can do dump those shares on the market. What does that say for the people who are emailing me right now saying, Frank, should I buy Twitter, I like to Tweet. It’s much more than that. It’s your money. Look at the people at Facebook. You know the people that bought Facebook? Rode it down to 19s, rode it down to 20’s and then sold it?And got burned? So you know, I would look to dump shares right aways, especially with stocks near all-time highs, and market sentiment is great, selling to the massive height taking place right now and take my gains. That’s what I would do. I’m not saying there is anything wrong with that, with the hedge funds and the private equity funds that have been invested in Twitter, good for them. But just think about it, I’m talking about the individual investors out there. They didn’t want to listen, so you are going to buy Twitter because you like to Tweet every day, understand, there are plenty of institutions that are willing to sell you those shares in a heartbeat, so be a head of the streak not behind it, plus on these big IPOs think about it. I mean, it’s better to wait before buying. Don’t buy into the hype. Don’t buy into the hype. I mean, you could have bought Facebook at a 50 percent discount than its IPO price, if you would just waited.You look at Google, when I say big IPOs, I’m not talking about big name IPOs, I’m talking about the amount of money raised, these hug, $10, $20, $30 billion IPOs sometimes. You look at Google traded at 80. They couldn’t give enough shares. I mean, nobody wanted Facebook. Everybody had a Facebook when it came out of $80. It’s $880 today. Master Card, you had a full year to buy Master Card under $100. It’s $675. Their IPO was in 2006. So just be careful, I know there is a lot of hype. I know tweeting is the thing, it’s awesome. Something I don’t do, but I am on Facebook and I understand. There is no need to buy Twitter right away, there is no need. It’s not going to suddenly go up like 5,000 percent, maybe it does, maybe it doesn’t and you can based on these large IPOs that come up just be patient and just remember for those that want to buy it, there is a lot of people looking to sell it to you.Let’s move on to some of your questions and by the way, any questions/comments fcurziostansberryresearch.com. Getting a lot of feedback. I try to answer these at least every other week, if not every third week so keep sending them in. I read them all. I read all your emails. Fcurziostansberryresearch.com. Let’s start with Eric. And he says, “Elliot Gue, guy you interviewed was insane. I’m actually going to print the transcript. Where do you find these guys?” And he has in parenthesis, “Not on CNBC.” I have gotten so many emails about Elliot and I am really happy about that. It was the first time he was one. I thought he was fantastic. And it’s funny you say, not on CNBC, because a lot of my guests, I mean, Dr. Kent Moors go on CNBC and everything, but they are not on CNBC all the time and it’s important because I’m getting called by producers now. You know, we met with a couple of these from CNBC and Fox business and everything and it’s funny what they are calling me for because they are calling me for things like Twitter and stuff things I’m not really interested in, but it’s the topic of the day and they need to talk about that.And you have to think about that before going on CNBC, where you know, you are listening to people talk about current events and they are not necessarily invested, or going to be invested in twitter. They are not really, know too much about Syria and the oil premium, but that’s the flavor of the day. That’s what’s going to be talked about on Fast Money. What I want to know about is what they own and everything. I would like to have them call me and talk about small cap stocks. And that’s not the case. They are calling to talk to me about general knowledge about so many different things and I’m like you know what, I have so many small cap ideas I would like to share with the world right now. So I forgot why, I used to be on Fox business news almost on a daily basis at one point and I kind of just got sick of it because I had to talk about a lot of stuff that I didn’t really care too much about, I mean, the Twitter thing, I care al little bit about, get a lot of questions on it. But you know what, I would rather go on TV and talk about these small cap ideas, these dividend plays that I have, small cap dividend plays why I think there is so much better plays than buying McDonalds and Coca Cola because these are much better plays raising their dividends just as long and they are cheaper and have higher yields and been in business for 100 years. And people don’t know about these companies, I think it’s great. It’s like buying McDonalds and Coca Cola just from years ago, so from 20, 30 years ago, or you know the Eagle Deal trend I call it, natural gas as a transportation fuel. And all these stocks and all the places I visit.That’s what I would rather talk about on TV, so yeah, it’s interesting that you said, no on CNBC, you these guys are on CNBC sometimes, but a lot of times you got to be careful what you listen to on TV because they just talk about het flavor of the month and sometimes that person that is talking isn’t really suitable for the subject they are talking about. I mean, he may be a large cap manager and he’s talking about Syria and oil, he might not even have an oil companies portfolio, but he has to talk about it because that’s what everybody wants to know about it and that’s what’s going to attract viewers on TV.Moving on, it’s from Mike. It says, uh, “I listen to your brief discussion of defense sector, let’s not discuss the big three defenses stocks. They will all survive the down turn, probably do well with consolidations. Let’s talk about DOD contractor services. You might be aware that DOD wants to cut services back to 2001 levels by 2019, starting now so coal piece dividend. There is about 15 percent per year decrease approximate revenue decrease of 50 percent to 75 percent in five years. So how about BAE, CSC, Camber, SAIC, they should be rolling over soon, watch it defense contractor services, just starting to lay off people now for 2014, we’ll be a lot of blood. Should be some great shorts to watch, revenue can only go down.”Mike, you have done your homework on this. I am aware of all this and I definitely agree, do not short the defense companies. In fact, I think it was a podcast ago I told you to take profits, you are up 40 or 50 percent on that trade. I didn’t want it to be a trade, I just said that all of this that you explain has been on the table for a long time and the only reason why you I say this Mike, but I made the mistake with pharmaceutical companies saying like wow, the patents are going to expire and it’s like $3 to $600 billion in revenue, but you know what, when you see that time line ahead of you are able to adjust, so now you are seeing these service companies and revenues is going to be cut. But not all services are going to be cut, because I did some research on this for the defense companies and they will put more money into sectors that actually the government is putting more money into. They’ll increase their dividend. They’ll become more shareholder friendly and buy back shares. That’s what the pharmaceutical companies did, and then they invested in biotech and add partnerships for the next big drug and look what happened, all this patent expiration turned out to be bogus, a big buying opportunity and there are 52 week highs. So just be careful.I understand this news, but this news is on the table and these companies know exactly that this news is on the table. And you just mentioned too, they are starting to cut jobs, again, ways to save money. I don’t like to see people lose jobs, but just be careful shorting companies on news that already exists and everybody knows about, you may be right, but just be careful. Good email, Mike. The next one is from Sam. Sam is pretty cool. It says, “First I really enjoy listening to your podcasts. I am a 21-year-old college student studying mathematics North Dakota State University, your podcast about the oil boom out west was fascinating to me.What you had to say about GE being out there is interesting. My father is giving me some money, not a lot, to invest for him in his retirement. I study General Electric's financial statements and wanted your take on if GE would be a solid place to invest my dad’s dollars. Thanks. Driving back to Minnesota today, be catching up on your podcasts. And Sam is Samantha.” So Samantha, a lot of good questions. First, I can’t give personal advice, I can’t tell you yes, buy GE. I know GE is a good company. If you can read the financial statements, you are better than me. They have hundreds of different divisions. Very difficult. I mean, you can read PE ratios and stuff like that, but going really into the financial statements and digging deep, I didn’t know that they had I want to say 40 or 50 different oil related companies, I mean, huge and GE is just a monster company, good dividend, you know, I don’t think you can go wrong. Again, I’m not giving you personal advice on this. I wouldn’t tell you to buy one stock for your father’s retirement either, depending on how old he is, you want to diversify. As far as getting jobs in this industry, I also have a lot of people sending me resumes saying, Hey Frank, these are some of the jobs I applied too and they had like 20 different jobs. My advice is go down to the Baken. Go visit the Baken because there is for hire signs, I’m not kidding 300 we saw. Just in Williston and Waford City. And I think if you go into these places you have a much better chance than someone just looking at your resume and you sending it along with 100 other resumes. I know this personally. I look at these resumes sometimes when we hire at the Street, and you know, you can’t really separate anyone from anyone else, so it’s all generic. So, it’s not fun. You basically have to know somebody, basically, you get to the top of that pile, but if you just sending your resume just blindly to something, a lot of times it doesn’t work.I would go down there and say, you know, I am willing to work tomorrow, what do I need to do? And you would get hired. I would do that even in Eagle Ford as well and the Permian Basin. You are going to see massive amounts of oil service companies. The four majors are there, all over the place, again, a lot of for hire signs and these guys are paying well right now because they are pulling oil out of the ground like crazy. You just heard from Dr. Kent Moors, this trend, very, very early in its infancy, it’s gonna be around for a long, long time and for Samantha, you are studying mathematics, also, if you could, study engineering, and I can tell you probably within five years, you’ll probably be making $300,000 a year. They are dying for engineers and the whole industry is turning to mathematics. And I am actually writing about that right now for my small stocks specialist’s newsletters, so Samantha, thanks a lot for that email.Last one here, this is Ken, he goes, “Just learned of the podcast with Sugarood, listened for the second time to the podcast with Batty Allie.” These are S&A editors. “You have a lot of good guest interviews. The ones from the S&As are the most interesting. Batty Allie has a helpful way of explaining the industry, he really does. Batty Allie is great at breaking stuff down which is really cool and he’s using the analogies of pictures and kitchens with respect to shale and explaining that the oil industry doesn’t take hole in places like Poland because they don’t have the oil culture that places that US and Australia have, really good stuff. SO he says, “Question, you didn’t want to name the dufus that you interviewed recently, but you were willing to call out Tobin Smith and Peter Shift, what’s the difference? Keep up the good work.” That’s from Ken.It is an interesting question. I called out a couple people that I interviewed, I actually, they interviewed me on their radio shows and they were absolutely horrible, atrocious. It was a horrible experience and I’ll never do it again and I said, I don’t want to mention their names but yet, I did tear apart Tobin Smith because I think that, I don’t know, it’s sad what he does. I think, it’s all legal what he does. I know exactly what he does. If you are getting some of those things in the mail, and it’s hard because I have to separate myself from guys like this. Because we don’t do this. We don’t get paid by our companies to recommend them. And we don’t even buy the companies we write about in the newsletter, that is why there is absolutely no bias. I would love to buy the companies I write in my newsletter, but I’m not allowed too.So what Tobin does is he discloses it. With the SCC, if you-, I mean, with the SCC you can basically say, I am going to shoot you and if you shoot them you are like hey, I wrote it down. And they are like okay. As long as you disclose it, it’s okay with the SCC. So, you know, he discloses that this company is paying me $50,000 and I own shares and I can sell them any time, so he recommends stocks that are penny stock garbage stocks and ads they are sending out, all this information you are receiving in the mail, make sure you read that fine print because as he is sending them out and these people who don’t know better are buying the stock, he’s selling his shares and he’s getting paid by the company. Again, 100 percent legal and you’ll be a millionaire doing that and I can make probably $20 million doing that, but I don’t because my integrity is in place. As a Peter Shift, Peter Shift is a really smart guy, I just think that he has selective memory. I mean, you can go on You Tube and see, he did call the crash, but he’s been calling even a further crash from 2010 on I just think, which is perfectly fine being wrong, but going on TV every single day telling people how right I am just ticks me off a little bit.So a little humility would be in place with that. But you know, I’m not calling out everybody because I’m trying to control my temper a little bit, so I don’t want to call out everybody, plus it’s not really good business. But when people really hurt individual investors, then I call them out. Especially, when they don’t admit it. Everybody gets things wrong from time to time. We all do, that’s fine, you have to be right more times than wrong, but for you not to acknowledge that you are wrong, or be very shady in recommending penny stocks and getting paid for it and stuff like that, it’s just not part of the S& culture, the reason why I work here. The reason why, when people subscribe to our newsletters they stay around forever. That’s why we have the largest subscriber base of any newsletter publisher, I want to say in the world, definitely in America right now. So, because we write good products and we have integrity and we do, we work really, really hard. As you can see, I travel everywhere to get the story right. And it’s not always right, it’s wrong, but we come out here and we write about why we are wrong. So it’s very important.I’m trying not to call out as many people and it’s working. A little anger management. Well, that’s it for me. Man, Chip Kelly’s offense for the Eagles, definitely a game changers, but I don’t think he’s going to be a head coach much longer since he has no clue about managing time. I noticed that in Oregon. I also noticed that with the Eagles. Got the ball with what, 2 minutes left and you basically rush down the field and kick a field goal and gave it to the Chargers, by the way, didn’t punt once. I watched the defense. That was like a high school defense for the Eagles, which was kind of sad, but you don’t want to give it to their offense. You snap the ball on 25 seconds on the play clock, run it down to nothing. That’s why you kick the field goal, you got a shot to get the ball back. You can win the game in overtime. Anyway, it’s going to be interesting to see the Eagles and how they develop this year.Also, the Seahawks, Broncos look amazing, two top teams for now with KC again looking to turn some heads. I do like KC as a sleeper, although they are no longer a sleeper 2 and 0 and I think that they are definitely going to make the playoffs. So glad football is back. Much better than watch the Red Socks smoke the Yankees every time they play them, anyway. Don’t forget to visit us online at www.stansberryradio.com, you can subscribe to our mailing list just by putting your email in a little box. We are going to send you latest offers and newsletters at S&A all at discounts. A lot of people you listen too like Sugarood, Batty Allie, Jeff Clark, Ferris, I mean, if you put your name in that box, you are going to get offers, really good deals for these newsletters that we try to provide. I get questions on that all the time, what’s the best rate I can offer. Put your email in the box and you’ll see the best rate that we have for a lot of these newsletters that go on sale like pretty much at least once or twice a year.Also by doing that, you’ll be able to view transcripts which is very important, more than just listening in a car. A lot of people email me and say, Frank, you know, I was listening in the car and I didn’t get this. Well, one, you can listen to the podcast again, or you can just print out the transcripts and read them which is really, really cool. All that stuff, you can do at stansberryradio.com. Again, any questions, comments, feel free to email me at [email protected]. Thank you so much for listening, enjoy the week. Be safe, and I’ll see you in seven days, take care.Female: The information presented on S&A investor radio is the opinion of its hosts and guests. You should not base your investment decisions solely on this broadcast, remember, it’s your money and your responsibility.Male: S&A investor radio is produced by Stansberry and Associates investment research, the leader in investment newsletters.[End of Audio]
- Dr. Kent Moors
This Episode's Guest
Dr. Kent Moors
Dr. Kent F. Moors is an internationally recognized expert in global risk management, oil/natural gas policy and market risk assessment. Moors has been an advisor to the highest levels of the U.S., Russian, Kazakh, Bahamian, Iraqi and Kurdish governments, to the governors of several U.S. states, and to the premiers of two Canadian provinces.
A prolific writer and lecturer, Dr. Moors has authored six books and over 750 professional and market publications. He has appeared over 1,400 times as a featured television and radio commentator in North America, Europe and Russia, including ABC, BBC, Bloomberg TV, CBS, CNN, NBC, Russian RTV and regularly on Fox Business Network.