To the left is the front-page of the recent issue of “The
Economist—Nowhere to Hide...Investing during a time of
crisis” and you know what it’s all about.
Their feature topic is about where does an average
investor anywhere in the world these days get a return.
Bonds in most countries are offering next to nothing.
Treasuries in the United States yield less than the rate of
inflation and one is assuming of course that the Ameri-
can get their act together and are able to pay you back.
The markets have been terrible over the last decade as
a whole with two huge scares in the last three years and
while commodities did offer a couple of years of fun, if
you didn’t take your profits six months ago, it’s gone.
And then some.
Many oil and gas stocks, some of which we liked are
now offering two, three or four-for-one sales and the
question is, where do you hide?
The Economist answers, “Nowhere to hide (before and
afterwards)”. They lead into their front-page article,
“Investors have had a dreadful time in the recent past.
The immediate future looks pretty rotten, too.”
In the article, the Economist writes, “PITY the world’s
savers. Economists and other busybodies chide them for
not spending more, thereby stimulating the economy.
Meanwhile their pension schemes are steadily being
made less generous, a process that will require them to
save more, not less, if they want to enjoy a comfortable
retirement. Britons now retiring on private pensions will
receive an income 30% less than those who left work
three years ago. When savers try to find a home for their
money, they face daily headlines about bank bailouts,
sovereign-debt crises and the possibility of another re-
cession. Given the scale of the risks, investors are not
being offered much in the way of reward.”
Looking forward...they are a little bit nervous, but they
write, “Polish up our crystal ball: Investors’ choices will
be guided by how they think the crisis will unfold. The
best hope is that the authorities will “muddle through”:
stabilize the European sovereign-debt crisis, steer devel-
oped economies back on to a path of 2-3% annual growth
while simultaneously devising realistic plans to reduce
government debt over the medium term. But if that rosy
prospect does not materialize—and the odds are against
it—the world is looking at three scenarios.”
The Economist suggests that one possibility is that
governments will try to inflate its debt away, possibly
with larger doses of easing, basically printing money,
which is usually good for gold.
A second possibility would be a very big disaster in
that European authorities make bad mistakes regarding
Greece and things get out of control.
Pie-V
Some things seem to take a long time to happen...but
now it has happened and it has happened with pizzazz,
albeit into an ugly market.
Primary Petroleum has finally announced a deal with
their large lands in the Bakken Fairway on northwestern
Montana.
They announced, “Primary Petroleum is
pleased to announce that its wholly owned U.S. subsidi-
ary; Primary Petroleum Company LLC, has signed and
closed a Sale and Joint Venture Agreement with a major
U.S. based industry partner that will pay $48.5 million to
acquire a 32.5% working interest in Primary’s 291,000 net
acres in Western Montana.”
Basically, the un-named company has agreed to pay
$7.5 million in cash to Primary plus $41 million for joint
exploration program including shooting 3-D seismic and
six or seven vertical and six or seven horizontal wells. If
they like what they see after the next years work, the un-
named major can acquire an additional 17.5% working
interest in the play for another $41 million. Wow! This
sound like real money.
The talk is that the un-named major oil company in-
volved (we believe) is Occidental Petroleum and OXY has
already acquired big chunks of land in the Bakken area
and is a big player with nine rigs currently drilling ac-
cording to the latest report on the Bakken and Three
Forks, by RBC Capital Markets.
That report takes a look at the economics of Bakken
and suddenly you realize at $80 oil, good operators can
still make a ton of dough. What makes this all timely is
that Statoil this week, bought out Brigham Exploration
for about $4.5 billion in cash, getting the big Norwegian
producer an entrée into the Bakken (Statoil is having
trouble as its North Sea production has dropped dramati-
cally).
By making that purchase, Statoil will join the biggies
such as ConocoPhillips and Exxon Mobil and Occidental
Petroleum for their big land holdings in the area.
This is almost the ‘Good Housekeeping’ seal of ap-
proval to see all this happen, although one has to re-
member that they have a huge chunk of land and it is in
the right area, but they have yet to drill a well into it and
have results.