OBOF TYMHM & MORE Vol 14 No 34

WELCOME TO OPINIONS  BASED  ON FACTS (OBOF)

&

THINGS YOU MAY HAVE MISSED (TYMHM)

YEAR ONE

YEAR TWO

YEAR THREE

YEAR FOUR

 

OBOF YEAR FOUR INDEX
OBOF TYMHM PART 14-01	Jan. 02, 2014
OBOF TYMHM PART 14-02	Jan. 09, 2014
OBOF TYMHM PART 14-03	Jan. 15, 2014
OBOF TYMHM PART 14-04	Jan. 24, 2014
OBOF TYMHM PART 14-05	JAN 30, 2014
OBOF TYMHM PART 14-06	Feb. 06, 2014
OBOF TYMHM PART 14-06 EXTRA	Feb. 09, 2014
OBOF TYMHM PART 14-07	Feb. 13, 2014
OBOF TYMHM PART 14-08	Feb. 21, 2014
OBOF TYMHM PART 14-09	Feb. 27, 2014
OBOF TYMHM PART 14-10	Mar. 08, 2014
OBOF TYMHM PART 14-11	Mar. 13, 2014
OBOF TYMHM PART 14-11    EXTRA	Mar. 15, 2014
OBOF TYMHM PART 14-12	Mar.  21, 2014
OBOF TYMHM PART 14-13	Mar.  29, 2014
OBOF TYMHM PART 14-14	Apr.  03, 2014
OBOF TYMHM PART 14-15	Apr.  12, 2014
OBOF TYMHM PART 14-16	Apr.  19, 2014
OBOF TYMHM PART 14-17	Apr.  26, 2014
OBOF TYMHM PART 14-18	May  03,  2014
OBOF TYMHM PART 14-19	May  10,  2014
OBOF TYMHM PART 14-20	May  20,  2014
OBOF TYMHM Vol 14 - No 21	May 28,  2014
OBOF TYMHM Vol 14 - Ho 22	June 10, 2014
OBOF TYMHM Vol 14 - No 23	June 20, 2014
OBOF TYMHM Vol 14 - No 24	July  04, 2014
OBOF TYMHM Vol 14 - No 25	Aug. 04, 2014
OBOF TYMHM Vol 14 - No 26	Aug. 25, 2014
OBOF TYMHM Vol 14 - No 27	Sept. 03, 2014
OBOF TYMHM Vol 14 - No 28	Sept. 10, 2014
OBOF TYMHM Vol 14 - No 29	Sept.  14, 2014
OBOF TYMHM Vol 14 - No 30	Sept.  21, 2014
OBOF TYMHM Vol 14 - No 31	Sept.  29, 2014
OBOF TYMHM Vol 14 - No 32	Oct.    10, 2014
OBOF TYMHM Vol 14 - No 33	Oct.    31, 2014
OBOF TYMHM Vol 14 - No 34	Nov.   09, 2014

 

 

Agenda

 

1.  Thoughts from Floyd.

2.  Fom the President.

3.  Obamacare is here to stay.

4.  Mega Projecs to Mega Default.

 

 

 

 

THOUGHTS FROM

FLOYD

 

As is always said after an election, "The people have spoken."  Personally, I don't think they know what they have said, but they have said it.  I hope they are happy with the outcome.  Needless to say, I am not, but let's look at what I think this election really means for the future.  What I think really doesn't matter much, but I get it off my chest, so to speak,  and it just might be that some of you do want to know what I think.

 

I'm sorry, but I just can't be optimistic about the future.  I do think we are going to have a pretty smooth 2 years ahead.  However, starting with these two years and 2016 complete Republican take over, we will see the Republican control for the next 10 years.

 

Why, why I do I feel this way?  First, I would have to hedge my statement about 2016.  This election has much more to do with the 2016 election than most realize.  The Republicans have one man that can beat Hillary Clinton.  That is Jed Bush.

 

Starting now, the Republicans are going to govern.  Their not going to be obstructionist, as in the past.  No matter what you may, or may not, think of Republicans, they are smart and they have the money they need.  Mitch McConnell, the new Majority Leaser in the Senate,  started it off in his very first statement.  "There will be no Government shut down and there will be no default on our debt." he said.  I guarantee you that played well with everyone including Democrats.

 

That is the way he is going to rule and he also, has control of Boehner speaker of the House of Representatives.  They are not going to pass legislation that they know will not get passed the President  They might do it one or two times for symbolic purposes, but that is all.   

 

They are not going to do things that make the President look good and they are going to get rid of gridlock.  That approach, along with Jed Bush running for President in 2016, will almost assure them of the Presidency and Congress for the next 10 years.  Do I like it?  Of course not, but I think that is reality, particular considering the disarray of the Democrats at this time.  We were saying that about the Republican, a short time ago, and man, have they ever turned it around.

 

The President said some right things after the election too.  They follow.

 

~~~

From the

President of the United States

Yesterday, millions of Americans cast their ballots. Republicans had a good night and I congratulate all the candidates who won.

But what stands out to me is that the message Americans sent yesterday is one you've sent for several elections in a row now.  You expect the people you elect to work as hard as you do. You expect us to focus on your ambitions -- not ours -- and you want us to get the job done.  Period.

I plan on spending every moment of the next two years rolling up my sleeves and working as hard as I can for the American people. This country has made real and undeniable progress in the six years since the 2008 economic crisis.  But our work will not be done until every single American feels the gains of a growing economy where it matters most: in your own lives.

While I'm sure we'll continue to disagree on some issues that we're passionate about, I'm eager to work with Congress over the next two years to get the job done.  The challenges that lay ahead of us are far too important to allow partisanship or ideology to prevent our progress as a nation.

As we make progress, I'll need your help, too. Over the weeks and months ahead, I'll be looking to Americans like you, asking you to stay engaged.

I am optimistic about our future.  Because for all the maps plastered across our screens today, for all the cynics who say otherwise, we are more than a simple collection of red and blue states.  We are the United States.

And yesterday, millions of Americans -- Democrats and Republicans, women and men, young and old, black and white -- took the time out of their day to perform a simple, profound act of citizenship.  That's something we shouldn't forget amid the din of political commentary. Because making progress starts with showing up.

Let's get to work.

President Barack Obama

~~~

 

Obamacare Is Here To Stay

 

 

 

By Cynthia Tucker

November 1, 2014

 

Cynthia Tucker won the Pulitzer Prize for commentary in 2007.

  She can be reached at cynthia@cynthiatucker.com.

 

 

 

You’ve heard of Obamacare, right?

It’s that disastrous, costly and intrusive policy that President Obama and his fellow Democrats rammed down the throats of Congress back in 2010 — a failed plan that conservative Republicans have pledged to “repeal and replace.” According to its critics, it is un-American; it destroys the health care system; it burdens businesses; it hollows out Medicare. Right?

Ah, wrong.  Despite what you may have heard and despite the caprice of electoral campaigns, the changes wrought by the Affordable Care Act are here to stay. That’s because it accomplishes much of what it set out to do — and its beneficiaries mostly like it.

Don’t expect Republicans to try to turn back the clock.  Oh, some of them will continue to bash Obamacare and to blame it for any negative effects on the country’s dysfunctional health care “system” — including rising costs.  And some will even go so far as to continue to insist that it ought to be repealed.

Take Senate Minority Leader Mitch McConnell, who expects to lead the upper chamber if Republicans claim a majority.  In a debate last month with his Democratic rival, Alison Grimes, McConnell suggested that he would repeal the Affordable Care Act but leave in place Kentucky’s popular state exchange program.

“… The best interest of the country would be achieved by pulling out Obamacare, root and branch,” he said.  “Now, with regard to Kynect, it’s a state exchange. They can continue it if they’d like to.”

McConnell’s pronouncement was a tour de force of dissembling, a virtuoso performance of fabrications and disinformation.  The Washington Post’s fact checker awarded him three Pinocchios.

That’s because the state’s health care exchange, Kynect, is a part of Obamacare, made possible by the 2010 law.  If Obamacare is ripped out “root and branch,” the state exchanges could not continue to exist.  (The GOP has continually pledged to find a mechanism to replace Obamacare, but its warring factions have failed to agree on any plan that would leave state exchanges in place.)

Here’s the rub: Kynect is very popular with Kentucky’s residents, many of whom are enjoying health insurance for the first time in their lives.  They have been primed by Republican politicians to hate the president and any policy he endorses — including his signature health care plan — but they don’t want to give up Obamacare’s benefits.

Kentucky is emblematic of the states that have received substantial assists from Obamacare. It is largely rural and is among the poorest states.  It has also long ranked near the bottom in several health indicators, including obesity and smoking rates and cancer deaths.  Obamacare has been a boon for its residents, cutting the rate of uninsured in half.

According to The New York Times, people who live in rural areas are among the biggest winners from the Affordable Care Act. Other groups who have reaped substantial benefits are blacks, Latinos, women and younger Americans between 18 and 34.

Here’s another reason that Obamacare is here to stay: Its expansion of Medicaid is a boon to the states that have taken advantage of it.  After the Supreme Court ruled that Medicaid expansion was optional, most Republican governors vowed to resist it — even though the federal government will pay 100 percent of the cost for the first three years and 90 percent thereafter.

But some of those GOP governors are now having second thoughts as rural hospitals are forced to close down for lack of funds and poor people are sidelined by preventable illnesses. Several GOP governors have already expanded Medicaid — which provides health insurance for the poor — and others are considering doing so.

Last month, Ohio’s Republican governor, John Kasich, advised his GOP colleagues to stop fighting the Medicaid expansion.  The opposition, he said, “was really either political or ideological.  I don’t think that holds water against real flesh and blood, and real improvements in people’s lives.”

Some Republicans have trouble admitting that on the campaign trail, but they all know it’s true.

~~~

From Mega-Projects to Mega-Defaults

 

 

Alan Gula, Chief Income Analyst

Wall Street Daily

Published Tue, Nov 4, 2014  

 

 

Right now, the consensus seems to be that nothing in the economy or the markets can go wrong. Optimism abounds, even though history shows that boom-and-bust cycles are a permanent fixture.

What’s more, there’s a classic boom-bust cycle going on at this very moment – and it’s easy to see if you look closely.

That’s because every cycle has similar elements… and that should make the oil and natural gas industries very, very nervous.

The boom starts with optimism, and confidence in higher prices spurs investment.  Speculators then stoke that optimism by pushing prices higher, leading to even greater spending.

Meanwhile, debt accumulates, and after a period of time, supply begins to overwhelm demand.

Excess supply drives prices down, leading to the bust.  Debt becomes unserviceable for the overleveraged, and the default cycle begins.

The bigger the excesses and debt levels, the bigger the bust… and today’s energy sector could be heading for a very big bust.

The U.S. Energy Boom

It’s no secret that the United States has undergone an energy renaissance, driven primarily by the shale boom.

In fact, America became the world’s largest natural gas producer in 2010 and has now eclipsed Saudi Arabia as the biggest oil producer, as well.

Despite the increased difficulty of fossil fuel extraction, supply has swelled.  Elevated oil prices have made expensive extraction techniques, such as hydraulic fracturing (fracking) and deepsea drilling, economically viable.

However, these techniques require significant capital expenditures (capex). According to Ernst & Young, there are 365 global oil and gas mega-projects (those with a proposed capital investment greater than $1 billion).

These projects total $2.6 trillion across the exploration and production (upstream), liquefied natural gas (LNG), pipeline, and refining segments.  The U.S. share of this investment is $482 billion.

But how can the U.S. energy sector afford nearly half a trillion dollars in mega-projects?

For starters, we can thank the Federal Reserve!

The low-interest-rate environment and continued central bank stimulus have helped energy companies ramp their capex via cheap, ubiquitous financing.  Consequently, debt levels in the energy sector have soared.

For example, Linn Energy, LLC (LINE), a favorite stock for yield hogs due to its 10%-plus yield, has increased its long-term debt levels from $2.7 billion at the end of 2010 to $9.6 billion currently.

The Energy Information Administration (EIA) estimates that, in the last year alone, major oil and natural gas companies added over $100 billion in net debt.

In fact, aggregate debt levels in the energy sector are rising so rapidly that they’ve transformed the composition of the Barclays U.S. High Yield Bond Index:

Similarly, the popular iShares iBoxx High Yield Corp Bond ETF (HYG) is now more exposed to oil and gas, at 14.5%, than any other single sector.

Unfortunately, I don’t think many high-yield debt investors realize just how exposed they are to declining oil prices. Even institutional fixed-income investors typically don’t think on a macro level like this, let alone retail investors in high-yield ETFs.

The Coming Bust

Today, slowing global economic growth, increasing supply, a stronger U.S. dollar, and a decrease in bullish speculative bets are all putting downward pressure on the price of oil.

The price of West Texas Intermediate (WTI), for example, has fallen 15% this year and is currently under $80 per barrel. The price of Brent crude has declined over 20% year to date.

Yet Douglas-Westwood, an energy advisory firm, estimates that nearly half of the oil projects under development need oil prices greater than $120 per barrel to achieve positive cash flow.

Thus, while lower oil prices may be welcomed by consumers, they’re a nightmare for debt-laden oil producers.

And worst of all, costs (capex per barrel) have been rising at a 10%-plus compound annual growth rate since 1999, according to the IEA and Barclays Research.

There Will Be Blood

Now, don’t get me wrong… The shale boom is great in the sense    that it’s creating tens of thousands of jobs and leading to further U.S. energy independence.

However, the buildup of leverage will ultimately hurt many unsuspecting equity and debt investors.

Martin S. Fridson, a prominent figure in the high-yield bond market, sees as much as $1.6 trillion in high-yield defaults coming in a surge that he expects to begin shortly.

If the price of oil remains depressed, the energy sector (and the broader commodity complex) could be what sets the default cycle in motion.

So even though there are many cheap energy stocks, the companies need to have reasonable debt levels to be investable.

Finally, stay alert, because we’re going to start to see a deluge of dividend and master limited partnership distribution cuts, and then… there will be defaults.

 

Alan Gula, CFA

Chief Income Analyst

As Wall Street Daily's Chief Income Analyst, Alan is continually and fervently analyzing the financial markets. He draws upon a wide range of finance experience, including investment banking, research and trading. Alan is highly regarded for his work in the industry. Before joining the team at Wall Street Daily, he held positions at Bright Trading, Barclays Capital and Goldman Sachs. Alan became a CFA charterholder in 2011, and he earned his MBA from New York University and an undergraduate degree with honors from Villanova University.

~~~

If the good Lord is willing and the creek don't rise, I talk with you again next week or maybe Friday or Saturday this week.  Take good care of yourself.  Remember, to have a friend, be a friend.

Smile at someone.  I bet they will smile back.

 

God Bless You All

&

God Bless the United States of America.

Floyd