The Financial Crisis – That’s Sooo Over – Isn’t It?

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That depends on who you ask.

If we look at the major market indicators:

House Prices at all time highs in London. (Being chased up by Chinese buyers apparently)
Stock & Commodities Markets
– Dow Jones Industrial Average – 16,572,
– FTSE 100 – 6,673,
– Gold down slightly over recent days to – 1292.72
– Silver ($/oz) – 19.97
– Brent Crude ($/bbl) – 106.57
– NYMEX Crude ($/bbl) – 101.02
– Copper ($/tonne) – 304.75

Looking at the above prices which were a snapshot on 4/4/14 – Friday lunch -time, you’d certainly think so.

Janet Yellen Fed Chair, has begun tapering – now we’re only getting $75billion QE this month, probably down another few billion next month, and lowering towards the Autumn, to zero. With employment numbers up on both sides of the Atlantic, in U.S., Euroland, and Britain.

David Cameron and George Osborne, as the two senior figures in the UK coalition are now walking around with a swagger as the next election looms just over 12months away, and the economy seems to be improving.

UK unemployment is lowering with figures heading to the 2 million mark again, and growth whilst subdued in the last month against the same month last year, probably owes more to the fact that this year, Easter is a month later, so the mini-boom that occurs as people begin sprucing up their homes which feeds through into the manufacturing sector with new kitchens and bathrooms: new electrical equipment, new plumbing, shower cubicles, flooring, furniture, kitchen cabinets, and taps getting installed.

And American Jobs seems to be improving too – albeit at variable rates. Today’s numbers though were below expectations.

But the structural mess the west has got itself into over the last twenty plus years, has not really been resolved, just as a new threat appears on the horizon.

For a few years recently, I worked in recruitment and employment services, and visited dozens of small and not so small employers selling our services, and the thing that stood out for me visiting the shop floors of engineering companies, and talking to warehouse managers, large and small, was the age range of the technical staff that worked there. They were all baby-boomers.

That’s right. These millers, maintenance fitters, service engineers, vertical borers, turners, technically skilled and semi-skilled staff were almost all without exception over 50.

They have accumulated decades of experience and wisdom, and time spent honing their skills. They have survived the countless recessions and financial booms over the time since the 1970s. They learned the basics in school in metalwork or woodwork classes. They went to Technical Colleges to do a HND, or OND in some engineering discipline or other, and learned technical drawing. They got their hands dirty messing about with things – tinkering if you will.

Many of today’s youngsters want to be TOWIE members, walk around in designer clothes, appear on X-Factor, Britain’s Got Talent, work in the Media, and Music, and be overnight successes as the 24/7 media channels focus on vox-pop issues, and makes “Celebs” of people who really shouldn’t be.

Their only real talent being for self publicity, and a willingness to make fools of themselves – on camera, and their personal lives become a mess as their rise to prominence and their fade to obscurity, wreak havoc with their self-esteem, and their relationships with those around them. But there’s only so much of that the viewing public can take.

In Britain, we are at last starting to offer apprenticeships to the young to learn skills that can’t be learned in the classroom – like turning up on time every time, as Woody Allen once observed which is 90% of success.

And keeping your nose clean (metaphorically speaking) at least until you know what you’re talking about – and even then, speaking out of turn can damage your chances of success.

But social commentary is not our beef. Political and Economic commentary is.

As the events in Ukraine of recent weeks seem to recede into the media background. And even the missing Malaysian Airlines flight MH370 seems to have gone quiet, as Australian Ships now search using SONAR technology, we need to look deeper at events worldwide, that will have an economic impact.

This morning we learn that Israel is sabre-rattling again, as Palestinians fire small rockets into that country, and the Palestinian leader discusses openly pursuing a “two-State” solution, outside the normal negotiation channels, as both the West-Bank developments, and the wall surrounding the Israeli state makes it almost impossible for ordinary Palestinians to make a living.

Of course if so few Palestinians have money to support their families, you have to ask: “Where are they getting the money for arms and munitions?”

And well you might.

Last week unmarked cargo planes, arrived in a sand lashed airfield just a short 45minute drive away from Amman. One of many such touchdowns in Sunni controlled Jordan.

The plane, one of approximately 150+ such flights in both Turkey and Jordan since the Syrian crisis began in early 2013. was filled with military equipment, approximately 3,500 tonnes in total. And this was directly authorised by the American President.

This military hardware is supposed to go to anti-Assad moderate groups who are fighting to overthrow Basher Al-Assad, President of Syria after years of dominance by the Assad regime.

Of course, not all the groups fighting for their freedom, are what they claim to be. Some contain Al-Qaeda operatives, who use their time there to get much needed experience of military hardware, and divert some of that to fights in other parts of the region.

Of course the US. media channels are prone to hide these disturbing facts from most Americans, who like the British are distracted by the media equivalent of MUSAK – that inane music that used to be so common in lifts and public spaces where they didn’t want to play anything that would distract you from shopping and spending money.

Of course Israel has its own reasons for being paranoid – almost 70 years have elapsed since 1947, when they were granted the state of Israel under a UN charter, and they have had to defend their territory from their Islamic neighbours ever since, having fought several wars, particularly during the 60s and 70s when their newly enriched neighbours decided to launch attacks on Israel for their own political agendas.

In 1967 the six days war was fought as Jordan, Syria and Egypt prepared a sneak attack on Israel, who took the opportunity to get their revenge in first, and after six short days captured the high ground in the Golan Heights, pushed the Jordanians back to the Jordan River, and the Egyptians back across the Syniai peninsula. The Arabs were humiliated, and a fresh war in 1973 – the Ramadan War was their attempt to take their revenge.   The two wars helped push up oil prices already rising from increased demand, and it was this that was the major driver of the price rises that raged that winter of 73 and into 1974 pushing inflation to 26.9% in late 74 in the UK.  Then the Iranian revolution in 1979, when the Shah of Iran was ousted and chased overseas allowing Ayatollah Khomeini to return from exile in Paris, and the scene was set for 21% inflation the next year, as oil prices once more reacted and the west would again be mired in recession.

1970s revisited?

As the war in Iraq and Afghanistan comes to an end, and troops begin returning home to bases closer to home, those troops were keeping a lid on sectarian violence that goes back 1300 years.

These wars are similar in effect to the Vietnamese war where Americans lost 56,000 personnel, and spent countless billions of dollars on arms and equipment for their forces stationed there.

These American involved wars were both funded by a government able to buy goods and services essentially for FREE as the Central Bank – The FED, creates money out of thin air, and this allows America to throw its weight around in places it shouldn’t really be, and where it lacks the knowledge of the culture to make improvements in the country without first destroying much that was there already.

In the middle east, this lack of knowledge has cost it dear with rises in Terrorism. The Islamic world also suffers a schism, divided just as Christianity is into two major factions, but this divide began one day in 629 A.D. as the prophet Mohammed sat down to a lamb or goat dinner that would begin the split that has affected middle-eastern politics ever since.

The meal was poisoned, and while Mohammed tasted the poison and spat it out, he had already bitten off more than he should chew, and on his demise which was sudden, no one could agree on who should replace him.  The two views of Islam, one backward looking, one more progressive, became like Catholicism, and the Church of England who split apart when King Henry VIII decided he wanted a divorce in 1533, so he could father a child with yet another new bride who he married when it became obvious his bride-to-be was pregnant. (Divorce was a taboo of Catholicism)

The Islamic split though is the reason we may yet be plunged into another economic malaise.

The Shia population consists of about 70million Iranians, 22million Iraqis, 2million Lebanese, 4million Syrians, 10million Yemenis, and in the Arabian Peninsula populations of 700,000 Kuwaitis, half a million Bahrainis, 300k in Oman, 400k in UAE and another few hundred thousand dotted about the middle-east, with upto 11million in Turkey, 7million in Azerbaijan, and upto 30million in the hills of Afghanistan and Pakistan – between 145-160 million in total.

Many of those Shia side with their Palestinian brethren in the eastern Mediterranean, and the split I mentioned harks back to a time that Iran was called Persia, which many will remember ruled the Persian empire in the centuries around the time of the Holy Roman Empire and beyond.

Iran, according to Byron King a Harvard geologist, a former US Navy pilot, and Military intelligence officer with high military clearance, believes the real reason Iran wants a nuclear device is because its near neighbour the Kingdom of Saudi-Arabia dominates the region thanks to oil and American military support, and with Iran’s growing population of upwards of 88million, and one of the largest oil reserves in the world, Iran nurtures a yearning to return to its former glory days of the Persian Empire.

And, lest we forget, the Persians invented Chess, Algebra, traded with China and built the hanging gardens of Babylon, invented bricks and before the Islamic rules against alcohol – invented wine.

And as Iran recently launched its second naval vessel into the Caspian Sea as oil resources there become important, this is just repeating what they did 1500 years ago when they held off Roman armies.

Iran if you know your geography well, sits on one side of the Persian Gulf, where 40% of the world’s oil gets to market, and where 90% of the oil exported from the middle east passes through the narrowest point, at just 21 miles wide – the Straits of Hormuz.

But, what most people don’t know is that middle-eastern oil was first found in Iran in 1908, and Western oil majors swooped in to fuel Western growth and the war machine that would be so important in the war that was to come in Europe, so there is bitter resentment still.

On the other side of the Gulf is Saudi-Arabia, Oman, UAE, Qatar and both North and South Yemen who are mostly Sunni muslims.  Yemen covers the whole of the Southern Arabian peninsular to the Red Sea, across from which, sits the Horn of Africa, and the narrowest point known as Bab El-Mandeb – or “The Gates of Tears”.

These shia controlled nations have over the last 50 years surrounded Iran’s mortal enemy – the Kingdom of Saudi-Arabia, who helped fund Saddam Hussein for 8 years, during the Iran/Iraq War in the 1980s, in which Saddam launched Scud missiles into Iran, and gassed thousands of his Shia citizens.

To the west of the Saudi peninsula sits the Red Sea, facing Egypt, Sudan, South-Sudan, Ethiopia, Eritrea, and other hotbeds of unrest.

On the south of the Saudi peninsula -Yemen, has a particular section of the Shia population who are the Huthis. In a recent incident in the Indian Ocean, off the coast of Yemen, a US naval vessel stopped an arab Dhow – a small sailing ship with a broad trangular sail, and the sailors found not fish as might be expected from such a small vessel, but military hardware destined for Huthis, Al-Qaeda operatives now headquartered in Yemen.

This hardware wasn’t just a few rifles, and handguns, but military binoculars, sophisticated explosives, detonators, and both ground to ground rockets, and heat-seeking portable anti-aircraft missiles – Not the kind of stuff you find in a military hardware supplies’ shop. And the source of this booty? You guessed it – probably Iran.

So, why is Iran selling armes to rebel groups or giving them away?

Who is funding Al-Qaeda?

It is just possible, that to maintain its grip on the society, Iran needs a high oil price and fomenting unrest in the region, to heighten the perceived risks in the area, is one way to achieve that, or is it really just part of a master plan to unseat KSA from its dominance in the region.

And if Iran and the Kingdom of Saudi-Arabia DO go to war, the battle would embroil all who depend on middle-eastern oil to make their economies run, as the price of oil would spike on International markets.

If a new battle between the Sunnis and Shia erupts, the Arab Spring 2.0 will seem like a cakewalk, and the oil price could hit $200+/barrel.  Is this why Abu-Dhabi recently spent $17bn on anti-missile hardware? And UAE and Saudi-Arabia have also splurged on weapons and British Fighter Aircraft.

Is this the real reason America is pursuing shale oil and gas with such fervour?

Recent reports suggest that U.S. now holds the biggest energy reserves on the planet.

In the Bakken oil fields alone in north-western America, the US Geological Survey suggested there might be 500+ billion barrels of oil, and a more recent survey, suggests that there is even more oil buried beneath the already huge Bakken field.

This with the West Texas shale oil-field – the Eagle Ford basin, the Monterey shale in California, the Utica shale gas and liquids finds in Ohio, the Mississippi basin oil find and the shales in the North East – could add upto 2 Trillion barrels. Enough for 100 years, and the U.S. could already be the world’s biggest producer.

And as I’ve mentioned on a previous occasion, the U.S. intends liquifying some of these natural gas finds and exporting them at international prices.

Companies way ahead of the rest of the industry are – Cheniere Energy, (NYSE:LNG) who signed a 25 year deal with Centrica – owner of British Gas, to supply LNG and similar contracts with 4 others including Spain’s “Endesa Generacion S.A.” and Indonesia’s “PT Pertamina” from its Corpus Christie liquifaction plant, via its new export facility it is building in Sabine, Louisiana.

Together with Cameron LNG who obtained approval from the U.S. Department of Energy (DOE) to export up to 12 Mtpa, or approximately 1.7 Bcf per day, of domestically produced LNG to all current and future Free Trade Agreement countries and on February 11, 2014 received conditional authorization from the DOE to export LNG to non-Free Trade Agreement countries, including those in Europe and Asia. It should also be noted that the Panama Canal is being widened and due to open in 2015, to allow the huge LNG cargo ships that will be needed to carry all this oil and gas to China.

Cameron also has an application under review with the Federal Energy Regulatory Commission, the lead agency responsible permitting the new facilities. This new facility in Hackberry, Louisiana was an import terminal, but it is being specially adapted for export. This company therefore faces long-term growth as their facility sits alongside major pipelines from most of the major sources of Gas.

The completed liquefaction facility will comprise three liquefaction trains capable of exporting up to 12 million tonnes per annum (Mtpa), or approximately 1.7 billion cubic feet per day of liquefied natural gas. In addition, a new 21-mile natural gas pipeline, a compressor station and modifications to existing pipeline interconnections are proposed. Construction on the project is already underway, with the first LNG production in 2017, and full commercial operation in 2019.

The new and existing facilities will be wholly owned by Cameron LNG Holdings, LLC, a joint-venture with 50.2 per cent indirectly owned by Sempra Energy (NYSE: SRE) and the remaining owned by GDF SUEZ S.A. (GDF SUEZ), Japan LNG Investment, LLC (a joint venture entity that has been formed by subsidiaries of Nippon Yusen Kabushiki Kaisha (NYK) and Mitsubishi Corporation (Mitsubishi)) and Mitsui & Co., Ltd. (Mitsui) each owning a further 16.6 per cent.

Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2010 revenues of $9 billion. The Sempra Energy companies’ nearly 16,000 employees serve about 26 million consumers worldwide.

And if you’re wondering who is going to build this new facility – on March 17, 2014 Cameron LNG, LLC announced the joint venture between CB&I and Chiyoda International Corporation, a U.S. based wholly-owned subsidiary of Chiyoda, a Japanese Oil Services Major, had been awarded the contract valued at approximately $6 billion. – CB&I (NYSE: CBI) and Chiyoda Corporation (TSE: 6366; ISIN: JP3528600004) – I wonder what that contract will do to their bottom line?

Also, a recent off-shore find in an area called “Tubular Bells” basin in the Mississippi Canyon – Gulf of Mexico, has given Hess Corporation (NYSE:HES) an independent oil major a fillip.

The company estimates that the field will have a peak production of 40,000-45,000 boe/day. The field holds more than 120 million boe of reserves and possibly as much as 200 million barrels, according to Hess, but as these finds add to the US output, we may yet see oil prices level off (in the absence of Middle-Eastern turmoil), though it is likely that output will not begin for a year or so.

The prospects for these companies is all the more important if the disruption in the middle-east curtails output, or raises tensions there, as the value of the reserves and any output, will merely add to the bottom line of these American Corporations.

However, any prolonged rise in oil prices would raise the QE question again, and cause major problems for importing nations such as Japan, and Germany which does not have any major oil fields.

And if the price of oil rises, then it is inevitble that Gold and Silver will follow suit, whether China decides to announce its Gold reserve position this month or not. (See my last post)

If any more currency gets printed by the Fed, as a result of all this oil money sloshing around the world? Then you better get yourself some alternative currency, as thes crypto-currencies become more widely accepted, and for those who are interested in a new business that mines for currency, and makes an initial deposit, and daily top-ups into your account – with referral fees for any new members found, you can get details and membership for free by clicking —>> HERE.

W.

If you liked this post then please like it, post it to family or friends, or copy and paste, but remember the discussion of the above companies is not a recommendation to purchase. But merely to offer a starting point for your own research. Share prices can go down as well as up, and any investment may be at risk.

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