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What Cheap Oil Means For The Shale Boom

Shale oil production is more expensive than traditional oil production – It costs more to get shale oil out of the ground. So when the price for oil drops, like it has, it hurts shale oil production a whole lot more than with other production methods. Bloomberg estimates that the price of oil needs to be over $80 a barrel for US drillers to make any profit. Oil is hovering right around that figure now.

For more reading:

Bloomberg’s Quick Take

Oil at $80 a Barrel Muffles Forecast for US Shale Boom

Should You Be Rotating Out of Bonds?

This past summer, we may have seen the warning we needed when it comes to the portion of your portfolio in bonds. Interest rates can’t go down any more, they can only go up. This could result in the value of your current bond holdings going down. This is discussed as “The Great Rotation”. Investors who flocked to bonds in 2008 and 2009 are now starting to rotate to stocks. On the surface, many investors think it’s time to drop bonds altogether.

And it’s not just investors thinking this way. Many of the top financial institutions agree (great chart on that here)
When the consensus is that bonds will be a weak investment, it’s easy to jump on the band wagon. But markets often do exactly the exactly opposite of what you would think.

Instead of following the heard, perhaps investors should simply review their bond holdings and look to upgrade the quality of the funds. Not all bonds or bond funds will be affected by rising interest rates the same way –something the chart and most investors don’t follow.

The Mississippi Bubble: One of the First Bubbles

There’s a lot of talk about if the US market is in a bubble these days. It’s next to impossible to determine if we are, in fact, in a bubble. But the media will do just about anything to produce a story that will get more people to read their publications.

Instead of reading their predictions, consider watching this video about one of the first economic bubbles ever recorded.

John Law and the Mississippi Bubble by Richard Condie, National Film Board of Canada

John Law and the Mississippi Bubble

The US Energy Revolution Could Be Big

 

It’s hard to believe the energy revolution that is going on in this country.  It’s being touted as a “game-changer” and “transformative”.  The US is quickly becoming the low cost provider of energy. International companies are in the process of building new manufacturing facilities in the US because energy prices are so low (especially natural gas). Just to stay competitive, they need to set up shop in the US. In the next few years, the US could be exporting energy to other countries.

This could all lead to…

  • Lower cost to do businesses (especially energy dependent ones) can lead to more profits.
  • Industries could transform. Perhaps in the near future natural gas will be a bigger player in transportation.
  • Added infrastructure and jobs to support this booming industry

More stable energy prices.  It was just a few years ago that OPEC was discussed what seemed like daily on the nightly news and price swings at the pumps would occur everytime there was a disruption in oil production abroad.

If you’re interested in reading more, visit: Blackrock