About that lifting of the offshore drilling ban....

It is all smoke and mirrors. Obama has lifted the FEDERAL moratorium, but he has not deigned to share any of the royalties with the states. The states, feeling screwed by the feds will nut up and refuse any leases unless they get their fair share of the royalties. So Obama gets his cake and eats it too. He gets to say he lifted the ban, while being able to functionally maintain the ban at the same time. Meanwhile he has snookered a bunch of Congresscritters into voting for Cap and Tax in the process.

The problem with Federal Student Loans, and why nationalizing them does not help the situation.

Anybody remember a year or two ago how Fannie Mae and Freddie Mac went bankrupt because hey encouraged a whole bunch of people to take out loans on houses that they should have had no reasonable expectation of being able to afford? And how they went and sold this worthless paper off to major investment banking companies at the behest of the federal government in the form of credit default swaps and other murky and risky derivative investments? And do you remember how the Federal Government stepped in and paid off all of the investment banking firms that knowingly bought all of these risky bits of paper and paid them in full for these worthless investments, thereby socializing the losses. Anybody remember how that all worked out in the end? Yeah, apparently not... because we are doing the same thing with Federal Student Loans. What is that line about the definition of insanity again? Oh yeah, this is it....

Anybody who has been home sick or has been unemployed and tried to find any form of intelligence on the boob tube during the day has been inundated with the "become a dental assistant" or "become a paralegal" or "get your BS in Criminal Justice" ads (among many many other iterations on the same theme) in heavy rotation on virtually every broadcast and cable channel between the hours of 8 am and 4:30 PM. Virtually all of these are offered by private for profit companies that offer vastly overpriced, non-accreditied courses of questionable value to people who scored generally in the lower thirtieth precentile on standardized tests. (what is that line about fools and money?) And virtually every damned one of them is financed by federal student loans backed by the quasi-federal Sallie Mae corp.

By the time these people complete their 8 week BS degree coursework and finally discover that they have been sold a bill of goods, they find themselves looking at huge student loan bills staring them in the face without any hope of getting a job that will enable them to pay them off. So the loans go unpaid, the IRS refunds are garnisheed, and the interest and penalties continue to mount while the investment value of that loan dwindles down to nothing. But up until now, it was Sallie Mae and it's institutional investors on the hook for all those worthless loans. Not the Federal Government. Sallie Mae is NOT backed by the full faith and credit (such as it is) of the Federal Government, even though everyone assumed it would be. Just like they ASSUMED that Fannie Mae and Freddie Mac would be, even though everyone really knew better. Then Obama decided that after a few years of non-payment, those loans would be forgiven. Again, the Federal Government doesn't actually own the loans, I suppose they will be buying the worthless paper from the loan originators/investors. So now they are taking over Sallie Mae completely.

But the fundamental problem is that people with no chance in hell of every paying off the loan are being encouraged to take out loans they'll never be able to afford with the long term obligation to pay it back at some later date, knowing in the back of their minds that the loan will be forgiven eventually anyway. meanwhile the taxpayer is on the hook for all this endless free money.

If we are going to give away taxpayer money anyway (and there is no constitutional justification or authorization for that BTW!) why don't we just call this what it really is: a grant. "Free" money that we might as well be throwing down a hole more often than not. But in nationalizing it, Obama has taken the hand out of the institutional investor's pocket and put it in yours and mine.

Illegitimacy cometh

Ladies and gentlemen, up to now, congress has only flirted with illegitimacy, but Nancy Pelosi and her ilk are about to attempt something wholly unprecedented in the 234 years of the existence of this nation. They are conspiring to pass a law that is wildly unpopular by an illegal maneuver that makes the law itself illegitimate. Our constitution and political process is faced with a threat that was wholly inconceivable by the framers of the constitution and is therefore ill-equipped to address. That is of a rogue majority in congress conspiring with a rogue (and illegitimate!) executive branch. These actions are a conspiracy to violate the constitution of the United States and is therefore High Treason (I've been told this does not meet the technical definition of treason, but if it isn't treason, what in hell is it?). However, in order to prosecute such treason, a majority of Congress must indict the accused and impeach them. But since the majority of congress are themselves conspirators in this crime, this is impossible to achieve. The checks and balances of our constitutional form of government were predicated upon the concept that any attempt to overthrow the government would come from a minority faction. Defeating such an attempt through non-violent electoral means is therefore not possible. But the Framers were smart men. They left an all-purpose escape clause in The Constitution, that escape clause is the second amendment. If Pelosi succeeds with this illegal maneuver, there will be only two ways in which this may be fought. The first is in The Supreme Court. The court will have original jurisdiction and will be in a position to grant certiorari. In this, the Republic may be lucky. The current makeup of the Supreme Court would appear to be stacked in the Republic's favor, at least for now. The Supreme Court would be in a position to order the law null and void and the maneuver illegal. Whether they would then be in a position to hold the offenders to account for it, is a question mark. The law is silent on this point from my reading. But the question then becomes, if both the majority of congress and the Executive branch are in collusion, who would enforce such a judicial ruling? This brings us to the other way in which this may be fought. That comes down to the citizenry itself. In this, I am not quite so sanguine. The American people have become soft and complacent. The tea parties have been a welcome image but I question if even that large of a movement would be enough to overcome the inertia.

I despair for the Republic. I fear the future of the United States, if such a future even exists. Is insurrection the only answer?

This isn't your father's....

...shotgun wedding.

Shale Gas, looming train wreck?

In this month's E&P Magazine there is an article by Allen Brooks of Parks Paton Hoepfl & Brown which is an energy Investment Banking Firm, that indicates that the current rage in the oil and gas world, shale gas plays, may not be the panacea that it is made out to be and that there may be a looming time bomb ticking in the O&G markets. This article asserts that there is some controversy in estimates of the true long term production from (and therefore the valuation of) shale gas leases. Conventional wisdom and reservoir assessment has indicated that large initial gas production (IP) is associated with and is indicative of large Economic Ultimate Recovery (EUR) values. Or in layman's terms, if you get a lot of gas initially, you probably will have a well that lasts a long time before it plays out. And new Hyro-frac techniques have enhanced the IP's from these plays which makes them look even more prolific. But the production decline from these wells has been faster than the historical norm, which means the long term EUR values are most likely overstated. This has the effect of causing the companies that hold these leases to overstate their value and therefore the value of their portfolios.

To add insult to injury, these wells are bringing too much gas to market for the market to absorb, causing the price of natural gas to fall. The companies are overdrilling for the current market conditions, but they are being forced to do so in order to recoup the investment in these fields.

I forsee a very bumpy road ahead for the natural gas markets in the near term which combined with the faster than expected depletion of these wells will send aftershocks through the E&P markets.