The Rude Awakening
Wall Street, New York
Wednesday, October 12, 2005
------------------------- - The third installment of Dan Denning's oil shale
essay,
- Google's share price does a deathly tango with Eric
Fry's cholesterol,
- 8 days left to invest in a CD made of gold.
------------------------- Eric Fry, reporting from somewhere near the Hudson River… My cholesterol is too high…and so is Google's share
price. Both Google and I, it seems, are living a bit too
well. Happily, my cholesterol is not as high as Google's
share price. My cholesterol is only 240, Google's share
price is 307. But the experts say both numbers should be
much lower. "Your cholesterol should not be over 200," my doctor
warned last month. He insisted that I return within three
months to verify that I was taking his warning seriously. I
am. Therefore, unlike Google's shareholders, I have
resolved to cease scorning prudence. Although the
occasional rare filet remains part of my dietary
repertoire, but I have culled "gratuitous cholesterol" from
my diet - no more ice cream sundaes, no more cheese and
almost no French fries. In a few more weeks, we'll learn
whether this episode of dietary austerity produced any
measurable result. If the next cholesterol reading tops 200, I'm not sure
whether I will respond with new resolve or an old
rationalization. Look at Google, after all. Didn't Wall
Street analysts warn that Google's share price should be
below 200? And yet, there it is every day, carrying its
300-point girth (and 77 PE) as daintily as a butterfly. In
theory, the stock could keel over at any moment. But so
far, it hasn't. Perhaps, therefore, another day or two of elevated
cholesterol readings will not prove disastrous…or so I
was telling myself as I embarked on my annual pilgrimage to
a party at the Harvest-on-Hudson restaurant in Hastings,
New York. Every Columbus Day, the owner invites about 400
of his closest friends to a grape-crush. Some of the
children in attendance do actually crush grapes. But the
rest of us simply eat…and eat…and eat some more. The restaurant serves up a scandalous quantity and variety
of Italian specialties - everything from marinated
mozzarella balls to fettuccine alfredo to marinated
anchovies to roasted lamb. Inconveniently, very few of
these delectable dishes would win praise from the American
Heart Association. But one day of backsliding shouldn't be a big deal,
right?…So what about one week of backsliding? Later
today, I'll be boarding a plane for France, a country that
does not lack for rich cuisine. However, despite the threat
this trip poses to my health, I accept the risk as an
unavoidable part of my job. When in France, I'll be interviewing Dr. Kurt Richebacher,
the learned and very insightful editor of "The Richebacher
Letter." Upon my return next week, I'll be sharing a few
highlights from the visit. Dr. Richebacher, for those of
you who may not have heard of the man, is an 80-something
economist who lives in Cannes, France. His insights are
always unique, always engaging and usually frightening.
That's why many of the finest investment minds in the
nation consider his monthly letter a must-read. They don't
always like what he has to say, but that's exactly what
makes his letter so valuable. Returning to cholesterol for a moment…My prior public
musings about cholesterol (in the September 27th edition
off the Rude Awakening) elicited two very entertaining
responses from readers. One of them advised: "Eric, Allow me to resolve the cholesterol conundrum. Only
animal foods contain cholesterol. (Your liver makes all
you need.) When you become more compassionate toward your
fellow creatures by replacing animal-origin foods with
plant foods, when you value kindness over gluttony, your
compassion will be rewarded with better health and longer
life. God wants you to be a 'vegan.' Visit
http://www.ahimsa.com." But another reader, Mr. David Turba, offered entirely
different advice:
"Dear Mr Fry, The whole cholesterol thing is nothing more than a myth! I
know, I know, this sounds like a crock. I was in the same
camp less than three years ago. I mean how could this be
true with all the 'studies' showing that it is THE cause of
heart disease. Well, the data doesn't exist. If you are
interested in the truth, I recommend reading "The
Cholesterol Myths" by Dr. Uffe Ravnskov. He is a Swedish
MD and PhD researcher. He lays out an open and shut case
showing that there is nothing there. He doesn't reinvent
the wheel, instead he looks at the landmark studies
supposedly proving the cholesterol theory, showing how
faulty and sometimes downright dishonest the results are. "I could go on and on, but you are already asking the right
questions. Why is there cholesterol in all the stuff we
crave? Because we NEED it. It is part of every cell in
our body. Your diet can only affect your cholesterol level
by 5-10% because we make most of it ourselves. Read the
book, then tell your readers about the hoax." Your editor appreciated the earnest advice of both
readers…He has resolved, therefore, to consume fewer
"animal-origin" foods, solely for the sake of compassion,
since he has now come to understand that the supposed
hazards of high cholesterol are nothing more than a cruel
hoax. Oil shale may seem like a kind of hoax as well. 1.5
trillion barrels of oil have been trapped in America's
shale deposits since the days when saber-tooth tigers
roamed the hills of Hollywood. And the stuff continued to
sit there throughout the Arab oil embargo of the
1970s…and it continues to sit there still. But as Dan Denning, editor of Strategic Investments,
explained in the two prior editions of the Rude Awakening,
some of the oil from Colorado's shale is beginning to see
the light of day. Maybe, Dan speculates, a shale oil boom
is - finally - beginning. And if a new boom is beginning,
who will cash in on it? Determining the winners of a boom that has not yet begun is
no small task. But Dan is on the case… --- Advertisement --- "Why Didn't You Want to Turn $1,000 into $1,001,527,933?" I won't waste your time with a yarn about Warren Buffett or
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Please look here: http://www.agora-inc.com/reports/RTA/WRTAFA03 ------------------------- Stinky Water, Sweet Oil…The Last Word
By Dan Denning Last week, I paid a visit to Royal Dutch Shell's oil shale
project in Colorado. The visit left me with more questions
than answers, but I came away from the place with the sense
that this opportunity is very real…or, at least, it soon
will be. After driving across a vast expanse of "Nowhere," Colorado,
my brother and I met up with a few geologists from Shell.
Of course it's just those large, unpopulated tracts of high
desert that make the area so appealing from a geopolitical
point of view. Tapping into the oil shale 2,000 feet
underground isn't going to bother too many people. And
there are no spotted owls around either. If the technology
to turn shale into oil works, the entire area will become a
new American boom patch. Soon after we arrived, the geologists escorted us around
the facility, chatting all the while about the successes
and challenges of their venture. The two trickiest aspects of oil shale development, as the
geologists and engineers explained, are heating the shale
to extreme temperatures, while simultaneously surrounding
the heated area with a subterranean ice wall. Shell doesn't
know, or isn't saying, which part of the project will be
the most challenging. If you were about to change the world
by making it economic to tap into as much as 2 trillion
barrels of oil under the Colorado plateau, you'd be pretty
careful about showing your competitors how you were going
to do it. First, anything that heats up rock around it to around 600
or 700 degrees Fahrenheit has to conduct electrically
generated heat well. The most conductive metals on the
Periodic Table of Elements are, in order, silver, copper,
and gold. Naturally, the number of heaters you put in a
place affects the amount of time it takes to turn the shale
goo into API 34 crude. The more heaters, the more cost,
though. And given the fact that Shell does not know yet if the
heaters will be recoverable, you can see that sticking
silver, copper, or gold heaters 2000 meters underground and
then leaving them there once the kerogen has been pumped
has a serious effect on the economics of your operation. At the moment, Shell is not sure what the optimal size of
production zones ought to be. The big issue here is how big
can a freeze-wall be to be effective and freezing the
groundwater surrounding a shale deposit? The test projects,
as you can see, were quite small. Shell doesn't know, or
isn't saying, what the optimum size is for a each "pod" or
"cell". That's what they'll have to figure out at the next
stage…and the picture with the dirt is a football field
sized project….where rather than creating the freeze-wall
at 50 meters down…they will do it at 1,000 ft. down….
with 2,000 being the desired and necessary depth for
commercial viability. I'm not sure anyone has ever created
a freeze-wall at that depth….neither is shell. But we'll
find out. The oil itself that comes from the process looks
like…oil. No heavy refining needed.
Shell thinks the whole thing is economic at a crude price
of $30. So barring a major reversal of geopolitical trends,
they're forging ahead. Since the Bureau of Land Management owns about 80% of the
oil shale acreage in Colorado, there is no investment play
on private companies that might own land with rich shale
deposits. Although, if Shell and the DOE are right that you
can recover a million barrels of oil per acre…it wouldn't
take much land to make a man rich out here. The Bureau of Land Management recently received ten
applications (by eight companies) for a pilot program to
develop Colorado's shale reserves. The program allows the
companies access to public lands for the purpose of testing
shale-extraction technologies. You see below an interesting
mix of large, publicly traded oil giants and small,
privately held innovators. Natural Soda, Inc. of Rifle, Colorado. EGL Resources Inc. of Midland, Texas. Salt Lake City-based Kennecott Exploration Company. Independent Energy Partners of Denver, Colorado Denver-based Phoenix Wyoming, Inc. Chevron Shale Oil Company. Exxon Mobil Corporation. Shell Frontier Oil and Gas Inc There is dispute within the industry over how long, if
ever, demonstration extraction technologies can become
commercially viable. I've spoken with some of the smaller
companies that have applied for leases from the BLM. Some
of them will have to raise money to conduct the project.
And some of them have been less than forthcoming about how
exactly their extraction technology is different or better
than previous methods. How will it all unfold? Well, for starters, it could all
utterly fail. To me, Shell's in-situ process looks the most
promising. It also makes the most sense economically. There
may be a better, less energy-intensive way to heat up the
ground than what Shell has come up with. But Shell,
Chevron, and Exxon Mobil clearly have the resources to
scoop up any private or small firm that makes a
breakthrough. And there are a host of smaller firms involved with the
refining and drilling process that figure to play a key
role in the development of the industry, should that
development pick up pace.
The Energy Policy Act of 2005, otherwise known as a
listless piece of legislation without any strategic vision,
does, at least, make provision for encouraging research
into the development of shale. But government works slow,
when it works at all. It's going to take an external shock
to the economy to really ratchet up interest and
development of the nation's energy
reserves…say…something like a nuclear Iran. In upcoming issues of Strategic Investments, I hope to
report on the companies helping Shell out with its pilot
project on BLM lands. I'll also write to you about the
refiners and pipeline companies that could help move
refined oil out of Colorado and to nearest cities and
ports. [Joel's Note: Make sure you don't miss the bus on Dan's
Strategic Options Alert. All indicators (including his
impressive track record) point to a stellar month ahead.
You can check it out here before the plays are run and the
money is made: http://www.agora-inc.com/reports/STA/WSTAF420 Oh, and here are some free websites to check out afterwards
for all your oil-soaked reading pleasure: http://en.wikipedia.org/wiki/Oil_shale www.peakoil.com www.dieoff.com www.oilcrisis.com Enjoy and, as always, all comments flood my email box at:
aussiejoel@rudeawakening.com Cheers! jOEL --- Advertisement --- A CD made of Gold. Invest by October 20th. Diversify, seek higher yields, and safely invest in Gold
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http://www.everbank.com/main.asp?idpage=pro_mscd&affid=eb&referID=11925 ------------------------- And the Markets… | Tuesday | Monday | This week | Year-to-Date | DOW | 10,253 | 10,239 | -39 | -4.9% | S&P | 1,185 | 1,187 | -11 | -2.2% | NASDAQ | 2,061 | 2,079 | -29 | -5.3% | 10-year Treasury | 4.39 | 4.36 | 3.00 | 4.35 | 30-year Treasury | 4.60 | 4.57 | 3.00 | 4.55 | Russell 2000 | 630 | 638 | -14 | -3.3% | Gold | $475.60 | $475.25 | $0.75 | 8.7% | Silver | $7.81 | $7.80 | $0.09 | 14.6% | CRB | 330.46 | 325.96 | 5.25 | 16.4% | WTI NYMEX CRUDE | $63.79 | $62.18 | $1.95 | 46.8% | Yen (YEN/USD) | JPY 114.49 | JPY 114.12 | -0.70 | -11.6% | Dollar (USD/EUR) | $1.1997 | $1.2068 | 129 | 11.5% | Dollar (USD/GBP) | $1.7464 | $1.7562 | 143 | 9.0% |
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