Fund manager who’s been right on oil has a depressing new prediction

http://www.marketwatch.com/story/fund-manager-whos-been-right-on-oil-has-a-depressing-new-prediction-2016-01-15

Opinion: Fund manager who’s been right on oil has a depressing new prediction

By Howard Gold

Published: Jan 16, 2016 10:43 a.m. ET

 

T. Rowe Price New Era’s Shawn Driscoll says the price for a barrel of oil could drop into the teens

Reuters

In November 2014, Shawn Driscoll, manager of the natural-resource-focused T. Rowe Price New Era Fund, told me he expected crude oil prices, then in the $80s-per-barrel range, to fall into the $50s within 10 years.

Ten weeks later, with crude in the $50s, I interviewed him again and he predicted crude would drop into the $30s.

This week, when oil was trading in the low $30s, I caught up with him once more. And if you’re looking for a so-called tradeable bottom in energy markets soon, you’re going to be disappointed.

Although Driscoll thinks crude oil will slip into the low- to mid-$20s within six months — at around $29.50 in late-Friday-afternoon NYMEX trading, we’re not far from that now — it ultimately could go lower as we spend the next decade digging out of a secular bear market in commodities and oil.

Why? Oil’s oversupply is profound and will last for at least two years, he said, and too many industry people still are in denial.

Another take: Why oil could plunge to $20 a barrel, but probably not $10

The oversupply, of course, stems from Saudi Arabia’s efforts to keep pumping to preserve market share from U.S. shale producers and other countries like Russia and Iran, which is chomping at the bit to free itself from international sanctions so it can pump oil again — at any price.

Commodities secular bear markets go on for years, fund manager Shawn Driscoll said — the last one took about 18 — and we’re only in the early stages of this one.

Given current demand — and without new Iranian production — “our model is saying we’re still oversupplied a million barrels a day in ’16,” said the manager of the $2.7 billion New Era mutual fund PRNEX, -2.31% “Our model for ’17 still shows oversupply with above-trend-line demand and without Iran.”

And the oversupply may be even worse than traders and investors acknowledge, because hundreds of thousands of barrels a day of new production are coming online in places like Brazil and Kazakhstan over the next couple of years.

“The piece that’s most overlooked by market participants … is the long-tailed projects, deepwater projects that take three to five years to come online. Those projects are still coming,” he told me. “There were decisions made in 2013 and 2014, the echo of those projects is still coming online this year and next year. 2018 is the first year you don’t see a lot of those projects coming.”

But despite massive production cutbacks, tens of billions of dollars in reduced investment and 250,000 layoffs and counting in the global energy industry, Driscoll sees, if not complacency, then a lack of fear among energy investors and decision makers.

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Another take: currency the source of fall: http://www.marketwatch.com/story/oil-could-fall-to-20-but-not-for-the-reason-you-think-2016-01-11?mod=MW_story_recommended_default&Link=obnetwork

https://www.washingtonpost.com/news/energy-environment/wp/2016/01/14/why-clean-energy-is-now-expanding-even-when-fossil-fuels-are-cheap/

Why clean energy is now expanding even when fossil fuels are cheap

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By Chris Mooney January 14 at 10:59 AM  

Solar panels are seen in the Palm Springs area, California, in this April 13, 2015 photo. Reuters/Lucy Nicholson

This story has been updated.

The latest evidence that 2015 was a breakout year for clean energy is in, and it’s particularly telling.

In a new analysis, Bloomberg New Energy Finance finds that 2015 was a record year for global investment in the clean energy space, with $ 329 billion invested in wind, solar panels, biomass plants and more around the world. (The number does not include investments in large hydroelectric facilities).

That’s 3 percent higher than the prior 2011 global investment record of $ 318 billion — and most striking is that it happened in a year in which key fossil fuels — oil, coal and natural gas — were quite cheap.

When it comes to fossil fuels, “prices have been low, continue to stay low, and yet we continue to see strong growth of wind and solar, and it speaks to the fact that again, these technologies are becoming more cost competitive,” says Ethan Zindler, an analyst with Bloomberg New Energy Finance.

[Wind, solar power soar in spite of bargain prices for fossil fuels]

As BNEF notes, the price of oil — which is burned to generate a fair amount of electricity around the world, though this is rare in the U.S. — tanked in 2015. Coal prices and U.S. natural gas prices also got considerably cheaper over the second half of 2014 and the 12 months of 2015. Nonetheless, China and the UK invested in massive multibillion-dollar offshore wind farms, even as other nations, from the U.S. to Brazil, saw near billion-dollar expenditures on new solar farms and biomass plants.

Fully one-third of the 2015 clean energy investment occurred in China — a punchline we’ve come to expect by now. That country saw investments of $ 110.5 billion last year. The United States was second with $ 56 billion.

Total global investment in clean energy by year, in billions of dollars. (Bloomberg New Energy Finance)

Notably, India — perhaps the most watched energy nation in the world at the moment, due to expectations of major demand growth — invested $ 10.9 billion, a total that Bloomberg New Energy Finance calls “a far cry for the figures needed to implement the Modi government’s ambitious plans” in the clean energy space. India plans to install 175 gigawatts of clean energy generating capacity by 2022.

[Why India is about to move to the ‘center stage’ of world energy]

Measured in terms of electricity generating capacity, the world saw an additional 64 gigawatts of wind capacity added and 57 gigawatts of solar capacity, BNEF estimates. The most striking figure here is that while 2015 only saw about 4 percent more clean energy investment than 2014 (when $ 316 billion was invested), the growth in renewable energy generating capacity was much higher at 30 percent. This, again, signals declining cost, says Zindler.

Obama: U.S. must transition away from dirty energy

 

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In his final State of the Union address, U.S. President Barack Obama said the U.S. must stop subsidizing fuels of the past. (Reuters)

“The technologies have reached an important tipping point in a number of markets in the world,” he says. “They are now, in a growing number of locations, becoming cost competitive.” It doesn’t hurt, of course, that government policy also favors them in many regions, a trend that will surely only continue in the wake of the late 2015 Paris climate agreement.

Overall, the addition of 121 gigawatts of solar and wind globally (also a record) means that roughly half of new electricity generating capacity installed last year was in these two technologies. In the U.S., solar appears to have seen a record year for installed capacity, at over 7 gigawatts.

From an industry perspective, too, the clean energy space seems to be thriving in lately. For instance, and as our own Joby Warrick reported recently, leading wind turbine maker Vestas saw its stock price double in 2015.

The solar business is also strong, says Tom Werner, the CEO of SunPower, which is one of the largest U.S. based solar companies with a recent market capitalization of $ 3.24 billion — and which is active in both the U.S. and China, where Werner says “we’re seeing very large projects.”

“We’re past the threshold point, now we’re to the point where it’s mainstream, and I think ’16 will be bigger than ’15, globally,” Werner says. He points to three recent developments to back that conclusion — the Paris climate agreement (which gives a market signal in favor of solar), the extension of solar investment tax credits in the U.S., and recent positive developments for solar net metering in California.

At the same time, clean energy jobs are also booming. The Solar Foundation recently released a report finding that the U.S. solar industry added some 35,000 jobs in 2015 alone, for nearly 209,000 overall now in the U.S. That total is expected to approach 240,000 by the end of this year.

Indeed, by all signs, 2016 will see more of the same in the clean energy arena. Already, it has held some pretty bad news for coal.

New York governor Andrew Cuomo announced, in his latest state of the state address Wednesday, plans to “eliminate all use of coal in New York State by 2020.” That came one day after President Obama, in his State of the Union speech, suggested plans to “change the way we manage our oil and coal resources so that they better reflect the costs they impose on taxpayers and our planet,” suggesting possible policy moves to limit coal leasing on public lands in the U.S.

Looking out still further, the International Energy Agency said last year that between now and 2020, renewable energy will be the largest area for growth, and predicts 700 gigawatts of added generating capacity.

In other words, while half of new generating capacity in 2015 was in the clean energy space, in coming years we may see that percentage grow even higher. Granted, there is still a ways to go before wind, solar, and other renewable energy sources are dominant in generating our electricity. Wind and solar provide about 5 percent of U.S. electricity right now, for instance. Here as across much of the world, electricity generation is still largely dominated by fossil fuels.

Adding it all up, the takeaway is that the race to switch off of fossil fuels — before too much carbon accumulates in the atmosphere and the planet warms by more than 2 degrees Celsius — is really starting to, um, heat up.

http://news.yahoo.com/fed-announces-historic-rate-increase-first-since-2006-191248404.html

Fed raises interest rate for first time in nearly a decade

By Paul Handley 3 hours ago

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Washington (AFP) - The Federal Reserve announced Wednesday its first interest rate increase in more than nine years in a landmark move signaling the US has finally moved beyond the 2008 crisis.

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• [$$] Economists See Growth Rising, Unemployment Falling in 2016 The Wall Street Journal

The move, which has repercussions across the global financial system, also imprinted Janet Yellen's personal stamp on US monetary policy after nearly two years as Fed chair spent plotting to reverse course from the easy-money stance bequeathed by predecessor Ben Bernanke.

The Fed raised its benchmark federal funds rate, locked near zero since the financial crisis, by a quarter point to 0.25-0.50 percent, saying the world's biggest economy is growing solidly and should accelerate next year to a respectable 2.4 percent pace.

"This action marks the end of an extraordinary seven-year period during which the federal funds rate was held near zero to support the recovery of the economy from the worst financial crisis and recession since the Great Depression," Yellen said.

"It also recognizes the considerable progress that has been made toward restoring jobs, raising incomes, and easing the economic hardship of millions of Americans."

The move was widely expected and marked the end of an era in which the Fed pumped trillions of cheap dollars into the devastated US economy to fuel what turned out to be an unexpectedly long rebound.

It kicks off a likely series of rate increases which the Federal Open Market Committee, the Fed's policy board, promised would be "gradual" and follow the pace of the economy.

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The Federal Reserve raised the benchmark federal funds rate, locked near zero since the Great Recess …

FOMC projections showed they expect the rate will rise to about 1.4 percent by the end of 2016, suggesting four more increases over the coming 12 months.

"The important question is how far, how fast," said economist Edwin Truman at the Peterson Institute for International Economics.
- Markets react positively -
The announcement, and the Fed's positive outlook for US growth, pushed Asian and US stocks higher, with the S&P 500 finishing with a 1.5 percent gain, most of which came after the Fed's announcement.

Stocks in Australia, Tokyo and Hong Kong were all up, and the dollar rose slightly against the euro.

The rate increase came amid some criticism from prominent economists that the economy was still vulnerable to slower global growth and that there was no compelling reason -- like surging inflation and a tight jobs market -- to justify it.

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Federal Reserve Chair Janet Yellen speaks during a press conference following the announcement of an …

But FOMC support for the decision was unanimous. The committee pointed to "considerable" improvement in the labor market and said it is "reasonably confident" in inflation rising over the medium term, to its two percent objective.

"The first thing that Americans should realize is that the Fed's decision today reflects our confidence in the US economy," Yellen told a press conference.

"While things may be uneven across regions of the country, and different industrial sectors, we see an economy that is on a path of sustainable improvement."
Yellen predicted the challenges of ultra-low inflation and continued slack in the labor market would both diminish significantly over the coming year.
"What we would like to avoid is a situation where we have waited so long that we are forced to tighten policy abruptly, which risks aborting what I would like to see as a very long-running and sustainable expansion," she explained.
- 'Source of strength' -

Analysts said the immediate policy change was only modest and were focused on how the Fed will move in the next year.

The prospect of more increases of the Fed's rate will have a broad impact on the global financial system.
It means a higher cost of borrowing for everyone from foreign governments and companies to home and car buyers, while also better rewarding savers on their bank accounts.
The Fed argues that US businesses can continue to invest and hire with a modestly tighter dollar policy.
As for foreign economies, especially emerging markets which have already seen capital outflows and falling currencies due to the expected shift by the Fed, Yellen says they had been forewarned and are in better shape than in the crises of the 1990s.

"This action takes place in the context of a US economy that is doing well, and is a source of strength to the emerging markets and other economies around the globe," she said.

Kathy Lien of BK Asset Management noted that "the most important monetary policy event of the year proved to be a dud for market volatility.

"This muted reaction to a historic change in monetary policy is exactly what the Federal Reserve likes to see and despite all of their critics, we see this as a credit to their proper management of market expectations."

Monopolization cases in Antitrust Division of Department of Justice

http://www.justice.gov/atr/antitrust-case-filings?field_case_date_value%5Bvalue%5D%5Byear%5D=&field_case_type_value=All&field_brief_federal_court_value=All&field_case_violation_tid=7141&industry-code=

http://money.cnn.com/2015/11/19/news/economy/more-mexicans-leaving-us-than-coming/index.html?sr=twmoney112015more-mexicans-leaving-us-than-coming0158AMVODtopLink&linkId=18901278

More Mexicans seen leaving the US than arriving

By Octavio Blanco   @CNNMoney

Dorsey unfazed by Square's lower IPO price

More Mexicans are now leaving the U.S. than are coming into the country.

While tougher enforcement of immigration laws has been a significant factor in the reversal, most of the departing Mexicans are leaving on their own, a Pew Research Center report said Thursday.

Citing Mexican census figures, the report found that 1 million Mexicans and their families (including U.S.-born children) left the U.S. for Mexico from 2009 to 2014. It said that U.S. census data for the same period shows an estimated 870,000 Mexicans entered the U.S.

Pew's findings accounted for both documented and undocumented immigrants.

Among the most common reasons Mexicans are saying adiós to the USA are a slow economic recovery here and the fact that they miss their families back home, the study found.

In the past it was easier for immigrants to visit their families and return to the U.S. But with increased border enforcement, they remain in the U.S. until family ties pull them back home, said Ana Gonzalez the author of the report.

Tougher enforcement at the border may be keeping some immigrants from entering.

Related: How one Mexican company keeps its workers from crossing the border

Another factor that may be discouraging northern migration is tougher enforcement of immigration laws at the border and inside the U.S.

"U.S. border apprehensions of Mexicans have fallen sharply, to just 230,000 in fiscal year 2014 -- a level not seen since 1971," the report said.

The number of Mexicans deported through heightened ICE enforcement has spiked. The Obama administration has deported more Mexicans than any other president.

Despite the deportations, the majority of Mexicans who returned to Mexico between 2009 and 2014 have done it of their own volition. The Pew study found that only 14% of those who returned to Mexico in that time period did so because they'd been deported.

While a majority of Mexicans living in Mexico still believe that life is better north of the border, a growing proportion is less impressed with the American Dream.

"Today, a third (33%) of adults in Mexico say those who move to the U.S. lead a life that is equivalent to that in Mexico," the report said.

Mexicans have long represented the largest proportion of immigrants in the United States, but migrants from Asia are now neck and neck with them, according to the study.

Related: How Koreans energized this Maryland city

The report also found that some of the characteristics of Mexican immigrants currently living in the United States have changed. It found that they are more settled, older and better educated than they were 10 years ago.

Education, Poverty and Terrorism: Is There a Causal Connection?

http://www.uvm.edu/~wgibson/PDF/kruger_mal.pdf