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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Commentary Of The Month
November 3, 2014
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THE TOXIC MIX OF HIGH DEBT AND PLUNGING OIL PRICES

By Wolf Richter

The oil and gas sector is capital intensive. Drillers have borrowed phenomenal amounts of money, which was nearly free and grew on trees, to acquire leases and drill wells and install processing equipment and infrastructure. Even as debt was piling up, the terrific decline rates of fracked wells forced drillers to drill new wells just to keep up with dropping production from old wells, and drill even more wells to show some kind of growth. One heck of a treadmill. Funded in part by junk bonds. 

Now that the bottom is falling out, it is getting more expensive for these companies to borrow. Newly awakened investors are demanding to be compensated at least a little for the risk, and that risk has now been exacerbated by the collapse of the price of oil. That’s the toxic mix.

If the money stops growing on trees, the jig is up for many of these over-indebted companies, and the American fracking boom may well do what other oil booms have done before, and what OPEC would like it to do: grind to a halt. And investors who’ve done what the Fed had wanted them to do – take on risks with their eyes closed – would lose their oil-stained shirts.