Editor’s Note:
Yesterday the U.S. Geological Survey released its long-awaited report on the Bakken oil formation… and it shows a 25-fold increase in the amount of oil that can be recovered compared to the agency’s 1995 estimate of 151 million barrels of oil.
According to the report, the Bakken is the largest "continuous" accumulation of oil ever studied by the USGS. Its assessment estimates 3.6 to 5.3 billion barrels of recoverable oil in the formation.
But what the USGS study doesn’t include are the massive reserves already discovered… and currently being drilled… as well as the rest of the formation that stretches into Saskatchewan. The total recoverable oil could be 10x that, at a minimum.
The Bakken story is heating up.
We believe the Bakken provides an unprecedented investment opportunity, but the chance to get in early is dwindling.
You can read more about the Bakken by visiting www.energyandcapital.com/bakken.
We’ve also put together a light-hearted video about this behometh oil formation, and urge you to check it out at https://www.youtube.com/watch?v=ou_aFtvGGhM. You can also visit www.youtube.com and search: bakken oil.
Good investing,
Brian Hicks
Publisher, Energy and Capital
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Today’s Wealth Daily
It was February 2007 when subprime lenders began their rapid descent. Alt-A, prime lenders and banking institutions followed suit. Yet, at the time, no one was talking about the credit defaults, bankruptcies, and asset write offs that’d impact credit card companies for years to come.
In early October 2007 I reported:
"While tighter lending standards discourage excessive mortgage lending, banks and consumers alike are turning to aggressive credit card use. Banks are already raising credit limits and lowering lending standards to any Joe that needs credit. And now that consumers can’t readily borrow against homes, they’re borrowing more against plastic.
This’ll end the way subprime lending ended — the hard way. The only question is just how painful and economically debilitating will the crash be. As home equity balances dwindle, credit card balances are up 17% over the last six months. Defaults are up. The average American holds seven credit cards at once. Americans owe more than $500 billion in credit card debt. Household debt levels are at a staggering 5.9%. Home debt payments are nearing all-time highs. And, oh yeah, there’s that pesky subrprime debt."
The Fall of Capital One Stock
So it was no surprise when Capital One stock plunged from a $70 high to less than $40 months after dismal earnings.
There’s not much to get excited about when a Q3 2007 loss of $81.6 million, or 21 cents a share, as compared to a year earlier $750.4 million, or $1.89, is reported.
By January 10, 2008, the company warned again because of loan delinquencies. Shortly thereafter the company posted a 42% drop in Q4 profit.
Short Capital One Stock Ahead of Q1 2008 Earnings
There’s not much to get excited about with credit card companies, unless you’re buying Visa or MasterCard. Unlike Capital One, Discover, and American Express, Visa and MasterCard are card processors, not lenders.
The Capital Ones have to be concerned that as of November 2007, credit card debt "soared at an 11.3 percent annual rate in November following an 8.5 percent rate of increase in October" and is still on the rise. They’re the ones where share values are being beaten stilly because of charge-offs, payment delays, and higher delinquencies.
Meanwhile, the American Bankers Association is telling us that Q4 consumer credit delinquencies are at 16-year highs, predicting that delinquencies will continue to rise in the first half of 2008, and warning that there’s "no relief for consumers in sight" thanks to higher food and gas prices, and poor income growth.
More than 2.6% of all bank loans are 30-day delinquent… and that was just in Q1 2008. It’s the highest since 1992. Home equity loan delinquencies nailed a two-year high. And delinquencies on lines of credit just hit levels not seen in 11 years.
So where’s the upside for the credit lenders? There is no upside.
Most recently, credit card write offs have reportedly soared 24% in a year. Late payments are up a staggering 16%. Think about this. As of December 2007, Americans held $944 billion in revolving debt, most falling on credit cards.
Worse, Greenspan admitted to the Recession
Months after claiming 33% chance of recession, and just days after claiming 50% chance, former Fed chief Alan Greenspan admitted that a recession has begun.
Interestingly, the comment comes days after telling the Spanish El Pais:
"The US had not yet entered the recessionary state which would be marked by sharp falls in orders, strong rises in unemployment and intensive weakening of the economy."
Even the International Monetary Fund said the "US economy is likely in a ‘modest recession’ and will stagnate through much of 2009 as housing prices slide further and credit conditions remain difficult."
As if that wasn’t scary enough, we’ll begin seeing a larger switch to credit card use, and the very real possibility of higher credit delinquencies. I’m already hearing stories of mortgage payments made on credit cards.
Worse, despite the coming economic stimulus plan, employment trends will dictate the recovery of credit card payment sources. But with unemployment expected to rise, there’s no near-term relief in sight.
Again, tell me where the upside is for credit issuers. I’ll wait.
Truth told, the credit card time bomb is ticking… And we’re not the only ones that believe credit issuers are coming down. In early February 2008, UBS downgraded AXP, COF and Discover on concerns of higher 2008-2009 unemployment.
If you want to make money in this market, consider shorting the credit lenders, like Discover, Capital One, and American Express. They’re all overdue for a bigger sell-off.
Take care,
Ian L. Cooper
http://www.wealthdaily.com
