Mailbag: Bear Trader Speaks of Iran and Inflation

On Sun, Oct 7, 2012 at 4:00 PM, The Evansville Observer wrote: Bear Trader--- The decline of the Iranian currency has been pretty shocking---like every morning they wake up and call to see what the exchange rate is. I think last month they lost 40%. Come to think of it, the precursor to this is when they give you 1%on your money when they used to give you 6%. Some thoughts on what could cause the currency to decline here so suddenly? Bear Trader Wrote:: First, as Milton Friedman put it, "Inflation is always and everywhere a monetary phenomenon" (approximate quote). So the Iranian inflation is caused by government printing and spending. Secondly, the Iranian government wants to spend all this newly printed money but have no inflation (they are having food prices riots), so they have instituted draconian price controls, up to and including execution. Price controls always fail because governments always figure that, since the price controls are working so slickly, we should print just a teensy, weensy bit more. A little leads to a lot. Everyone wants more money. Vote buying and nuclear weapons projects are expensive. Remember W.I.N. (Whip Inflation Now) under Nixon and the Carter - Volker era? The reason the Iranian inflation looked surprising is just you and I are so completely out of the loop. Kept in the dark and fed shit, like mushrooms. Actually I have been seeing reports of Iranian food riots, crackdowns on "speculators", rapid increases in the value of prime real estate, etc. for two or three years. Note that civil disturbances in Iran have been of the (by Iranian standards) middle class, a sure sign that the root cause is inflation. I was most surprised that the Iranian internal security types let this situation get out of hand, actually. Denial and delusion in the upper reaches of the power structure is tough to deal with for street cops though. That is probably what we are seeing. The Iranian market price controls exploded like any other bubble. People decide that they have to get out and get out now. Prices drop. Other people sell in panic.

Is now the time to build a bearish position to prepare for sell off?

It depends on what you mean by a "sharp sell off". The retail investor is 90%+ out of the market. A "sharp sell off" nowadays won't be the gentle descent of 2007 - 2008 but instead be an algo driven mad shark feeding frenzy. Not months, but hours long. Maybe minutes. Not a fan of SOXS, FAZ, or TZA. Those triple inverse ETFs only track correctly for a few days at a time, and, if held, loose you money compared to an option. Day Trade them only. The algos are all over these leveraged ETFs and will eat your lunch. The volume charts are enough evidence this is so. Remember that an hour for you is a million hours for them - one hour for you is 115 YEARS for them. Newmont is not a "weeks or months" buy yet, the Big Boys ran it up following QEInfinity but it looks like the trading trend ("hours" to "days") is negative to me. I think it is a good stock that is not yet a buy. If you are willing to hold it through thick and thin I think you could be nicely in the money in two or three years. Since QEInfinity was priced into the market it looks to me that Mr. Market is waiting for the other shoe to drop. The elections are too close for anyone to stick his neck out. Also QEInfinity will have simply terrible "unforeseen" consequences. ("Unforeseen" except by Peter Schiff, Marc Faber, Jim Rogers, Doug Noland, Michael Burry, lots and lots of other financial world big shots, and me, I guess.) Speaking of QEInfinity I was optimistic that the FED would not do anything so stupid in any case whatever. Whenever I make mistakes they are lulus. And usually my mistake is to hold human nature in too high regard. Arrogant, conceited, stupid fools. Oh, yeah, QE has made the rich much richer, and the rest of us poorer. Just another tax on the little guy. Whenever you buy food or gasoline remember that the high prices are caused by the diluted dollar. Bernanke and his posse are trying to put out a burning city with fire hoses charged with gasoline. Or maybe they know what they are doing? That is a truly terrible thought.

International Trading Indexes Signal Trouble

The Baltic Dry Index http://en.wikipedia.org/wiki/Baltic_Dry_Index "The Baltic Dry Index (BDI) is a number issued daily by the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the index provides "an assessment of the price of moving the major raw materials by sea. Taking in 23 shipping routes measured on a timecharter basis, the index covers Handysize, Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain." BDI is based on what it costs per ship day in $USD to move dry bulk cargo. The index is a very sensitive read on international bulk products trade rate changes. Think of it as a reliable and sensitive indicator of the way the world economy is going raw material flow rate wise. Another useful shipping indicator is the HARPEX http://www.harperpetersen.com/harpex/harpexVP.do which is based on the cost of moving the standard twenty foot long intermodal shipping container over various routes by various sized container ships. This index tracks the rate of change of the volume of finished goods being shipped by sea. As you can see by examining these indexes the world economy has slowed markedly since Q1 2011 and is now bumping along the bottom with no sign of rebounding. Yesterdays FedEx guidance and earlier UPS guidance shows decline in the flow rate of goods over this same time period. You realize that if the Federal Treasury and Federal Reserve had not diluted the $USD since 2000 so that the 2012 dollar is now worth sixty cents in 2000 dollars that gasoline would still be $2.25 a gallon at the pump? That means that the rise in the price of gasoline is not caused by "peak oil" but by money dilution? That that money dilution was making the Consumer Price Index over the past thirty years indicate inflation, as you would expect, but that the way this was fixed was by repeatedly redefining the CPI? That the situation is now so bad that the Federal Reserve ignores Energy and Food prices in inflation rate measurement, calling the resultant number "the core inflation rate"? That this mis-measured inflation rate means that when GDP and other aggregates are reported over time in "constant dollars" that "constant dollars" are not being used at all; when you do correct, as well as possible, for constant dollars, you find that the United States has been in recession for the last twelve years, somewhat masked by insanely low credit interest rates, which resulted in debts we cannot repay now and will be even less able to cope with in the future. So Bernanke tries to borrow his way out of this fix. If you are head over heels in debt more debt is not going to help but only hurt. Boy, is this ever going to get ugly.

Bear Trader "Technical Musings": August 23,2012

MOST RECENT NEWS: The recent previous S&P 500 highs: 1419.04 on April 2, 2012 1418.16 on August 17, 2012 1418.13 on August 20, 2012 Then we see an attempted breakout upward with a 1422.93 open on August 21, opening with a gap from the previous close above the April 2 high on moderate voume, rising to 1426.18 in an hour and ten minutes but on falling volume, the dropping for rest of day to 1413.31 and finishing on the higest peak volume for some time, at least a week (maybe several weeks as Yahoo Finance "forgets" the six minute charts after five days back). So here we have the "classic failed breakout", a bearish short and medium term pattern. Gaping up above resistance followed by a rise to new highs followed by a decline through the gap area to a close for the day at the low for the day (which is lower than the lows of the previous three days lows) on exceptionally high volume. The Wall Street boys are nothing if not superstitious, and this "classic failed breakout" is inauspicious, nay, downright menacing. So now "The Boys" are waiting for the other shoe to drop. MEDIUM TERM NEWS: "Seducing the fair (but shy) Bernanke" - or, "Oh, QE3, QE3, wherefore art thou, QE3?" "The Boys" had just about persuaded themselves that QE3 was coming on the First of September, but now doubts are rising; S&P 500 is too high to make the Fed "ease"; real inflation has dropped from 7% annual increase rate per quarter to 5%, still plenty of inflation but decreasing, whice is good; heavy food inflation is coming because of the drought so the Fed would rather not increase inflation sizeably, which QE3 would do; QE3 would cause a fall in the value of the dollar, making petroleum more expensive (causing inflation) and making the $USD weaker which discourages Chinese, Japanese, European, etc. cash flows into US financial assets, in particularly Federal Treasury and Agency paper, threatening rising rates instead of the declining rates the Fed expects and desires. I believe that we are at the point where attempts to lower US interest rates will instead make US interest rates go higher. Also a declining dollar will make the price of gold in dollars take off. QE3 would become a political football if begun on Sept. 1 as Wall Street hoped but would be ten times more so if triggered Nov. 1. The Fed's power and independence could easily decline, probably markedly, if they get in pissing matches with both the Dems and Pubs at once during a Presidential election. In balance, I don't expect QE3 this year, but the Big Boys are all "Strong Like Bull", sort of like Australian Rugby players, full of testosterone and piss and vinegar, so I am not sure about that. LONG TERM: Soros, Paulson, China, Russia, and the Oracle of Omaha: Soros on his latest SEC filing reports heavy buying of GLD. Paulson has been buying gold in various forms for some time now. (Paulson looks a bit of a loose cannon to me though.) Russian and Chinese national banks are supposed to be buying gold although I don't see anything special in the cash gold price. Berkshire Hathaway dropped a bomb shell Tuesday, reporting that they have bought back credit default swaps covering a collection of State and Municipal Federal income tax free bonds originally sold to Lehman in 2007. The CDS buy back nominal coverage was $8.25 Billion. Bershire still guarantees $8 Billion CDS in the same market for longer duration bonds (a less liquid market). Berkshire must have taken a sizeable loss on the deal as CDS on State and Municipal bonds are much more expensive these days. It seems that Buffett is saying that those bonds are much more risky than Joe and Martha Sixpack think; Joe and Martha have put nigh on to a $1 Billion a month in Fed Income Tax Free bond funds for some time now. Of course old Warren could just be senile. He is eighty one years old, after all. Or, of course, Meridith Whitney was right but early. Looks like a very dark cloud on the horizon. BOILS DOWN TO: Me, I see the S&P 500 stuck under resistance, and stuck good. Unless there is a convincing breakout, gap up, high volume, high above 1425, low and close above 1420 I think that the road is probably down. 1433 is still possible, gives some breathing room. There is good support at the lower bound of the channel that has been building since June 1st. Today that is 1375. There is more support in the 1300 - 1310 area. There is support from last fall around 1150 and Fibonacci support at 855. Uncle Ben would do something around 1300, at a guess. On Tue, Aug 21, 2012 at 12:42 PM, The Evansville Observer wrote: Bear Trader--- I thought I remember you telling me that 1433 was about the top. What does it look like to you.?

A Reflection on Power

Yeah, on the politicians being allowed to inside trade. That law was signed on April 2 (as I recall) of this year but does not go into effect until September 1st, next month. Got to have time to unwind all those insider deals, I guess. Most of the big ones are not in securities nowadays anyway, too easy to track, but in real estate and arranged as payoffs. That is how the Senate Majority leader Harry Reid made his bundle. Or the Obamas getting their Kenwood District house with the "help" of Tony Rezko and his wife. The Clinton magic $100,000 cattle future payoff. People do not "seek" power unless they want power. Power is the ability to have your own way at the margin. More power means more having your own way. Most people want money. Most power seekers want money. This has been going on forever. Even George Washington went after real estate in the Ohio and Shenandoah river valleys (many hundreds if not thousands of square miles) during and after the secession war with the British Empire using his "political connections" extensively. Power is getting what you want. People want money. "Good Government" is an oxymoron. People who want power but not personal wealth are much worse than the personal wealth seeking kind. Antoine Saint-Just, Hitler, Stalin, Richard Speck, Charley Manson, the Batman shooter. There are millions and millions of them. A person trying to get rich is harmless compared to those who are willing, no, eager, to kill to further their ends. Killing at will is the real stuff of power.

2012: A little bit about gold

I was going to talk about gold as a hedge and hedges in general. Forgot to. Gold is money. If government scrip declines in value a unit of scrip will buy less gold than it would have before the decline. Gold will probably continue being an effective hedge against loss of the value of the dollar. The stock market, to an extent, and of course depending on stock, sector, etc., also is a hedge against the dollar. The Federal Reserve does QE, money volume increases, and the value of the dollar drops through dilution (just like a stock). The stock market goes up because the new money chases the market up, hedging the loss in the dollar's value. That is why Wall Street loves QE. Remember that the dollar today is worth what sixty cents was worth in 2000. If you look at the S&P 500 monthly chart from 1995 to present you will see two highs very close to 1500 (1498 in Jan. 2000 then 1525 in July 2007). In July 2012 the monthly was 1418. A cyclic view is that we can expect a high 7.5 years after the July 2007 high (as 7.5 years is the time between Jan. 2000 and July 2007). That would be Jan. 2014 and followed by a monthly low about 800 after two and a half years (with no TARP, QE, trillion dollar treasury raid, etc.) to six months (with full bore intervention). Another way to look at this is that as compared to the January 2000 dollar our current dollar is worth 60 cents of Jan 2000 money, then the current S&P 500 is not 1418.16 but instead 851 in Jan 2000 dollars. So what we have, in constant dollars, is a succession of lower highs and lower lows dating back twelve and a half years. The only asset that worked, in constant dollars, over this entire time period, has been gold. If enough people decide that the modern fiscal and monetary system is crooked then the good old modern monetary and fiscal world is history. This will cause really bad stuff like vaporizing every last bank deposit in the world, all the derivatives, all the underlying, the whole thing. The modern world will be stopped in two minutes after all bank accounts become simultaneously valueless. Probably the only institutions to make the transition to the New World will be military. This is why the "establishment" is so hostile to gold. So, hey, I don't know what the price of gold will be. The dollar has strengthened sizeably against various currencies, the Chinese and Indians have stopped importing gold for personal use, new gold production is coming on line fast, and the changes are not well reflected in the various indexes. You just gotta take any authoritative didactic proclamation with a big pinch of salt. Heavy support for gold about $1500 per ounce. If the Fed lays off the QE gold should trend very slowly upward. QE would cause a return to the trend line of Jan 2009 - July 2011. Notice that the gold price line during this period exactly inverted the declining dollar. Gold was holding constant value, that is. The dollar was losing value. One requirement of good money is that it be a reliable store of value. During this period (Jan '09 - Jul '11) gold was a reliable store of value while the dollar was not. Marc Faber likes gold. So does George Soros although he won't say so. As it becomes time to escape the Euro dollars are bought. This is happening now at an increasing rate. If faith is lost in the dollar then really all that is left is gold. The USA is actually in worse financial situation than is the Euro zone, but the USD will still buy you oil, if at a ridiculous price. By the way, the only reason OPEC still accepts dollars for oil purchases is that Saudi, UAE, Qatar, Sudan etc. won't last a minute without American military cover. That means, quid pro quo, that either the USA is willing and able to go to war with Iran and defeat Iran utterly, or a new Persian Empire controls the oil countries and the USA won't be able to buy fuel or sell government bonds. Americans would die in large numbers. Elections would be cancelled for the "duration of the emergency". The "emergency" would end up lasting a long time, longer than you or I have to live. No way to make better estimates of the human costs than the 14th Century Black Death, the Seventeenth Century Thirty Years War, or the American Indian's Sixteenth Century European plagues (smallpox, bubonic plague, typhus, typhoid, cholera). Could also be easier, could also be harder.

"The Reality Facing Us": August 5, 2012

As I have pointed out before, the ACTUAL GDP has been declining steadily since last half of the year 2000, with only one quarter of growth (in 2004) since this "contraction" started. In real GDP there has been a GDP decline of about 30% since the year 2000. The USA population has increased more than 10% in this time, so GDP per capita has decreased to about 63% of what it was in the year 2000. If you use a reasonable figure of 40 million "immigrants" during this time the GDP per capita is 54% of what is was in the year 2000. So if you are wondering why you are suddenly so much poorer, well, this is the reason. And, unfortunately, the really can be no realistic expectation of the situation improving. I expect GDP per capita to continue to decline at the present rate until conditions change and the rate of decline increases, probably markedly. And certainly the mainstream media and the political class will be of no help. The reason I write is to suggest the attached link, which leads to a Power Point like slide show that neatly describes the situation we are all caught up in, which offers a real, but not easy, way out of this ugliness. The first step is to get past the "denial" stage of grief, then the "anger", to "resignation". We must face reality with courage and without illusion and delusion. http://www.businessinsider.com/jon

"More About Spain"

Like I said some weeks back Spain needs about 400,000,000,000 Euros to recap the banks. A loan of 100,000,000,000 Euros has been promised. Three times that much is still needed, and not as a loan - unless it is a loan "in name only" - because Spain couldn't pay back that much money at 5% interest in a million years. Maybe the ECB (run by Mario Draghi, by the way; Mario Monti is prime minister of Italy) will just buy Spanish bonds and just never redeem them, just vaporize, incinerate, or put them in a drawer and forget them forever, etc. Spain needs cash to pay off loans, not loans to pay off loans. The ECB will intervene in Spanish bond markets for sure, now, with massive buys that will just murder the shorts, like driving the interest rates of Spanish bonds down from 7.5% to less than five percent long enough, a day or so, to kill the shorts, and then say they will do it again whenever they feel peckish. The message is "you might want to be careful, boys and girls". The Germans are listening now to European "reason" because Greece owes Germany Target2 funds of 692,000,000,000 Euro (which are part of German bank "assets"). As well Germany holds Greek, Spanish, and Italian debt in unknown amounts, probably over 5 trillion Euros, maybe two or three times that amount. Greece leaves the EU, Germany is out 692 Billion Euro in Target2 funds, plus whatever the Greek government owes, plus what all Greek private citizens owe. Call it a round Trillion Euro. A loss of this size would make every German bank, insurance company, and pension fund bankrupt. Throw in Spain and the loss would be something like 7 Trillion Euros. Add Italy and it would be maybe 17 Trillion Euros. The EU would explode into space.

"What's In Their Coffee on Wall Street?"

On 7/13/12, The Evansville Observer wrote: > Bear Trader > On the Squak on the Street this morn prior to the opening, Jim Cramer > commented on the announcement by JPMOrgan that their loss was 4.4 billion up > from two, that when one considered that the final net PLUS the losses was a > huge number if applied by the multiple, then the valuation of the stock was > much higher....huh? thus he was positive on the stock for the future. > Lets all not discount our losses and apply the multiple and then be wildly > positive hUH? what is the new math..or is it new meth? > > Bear Trader Answers: As I said earlier Wall Street is totally hot to Buy, Buy, Buy. I didn't use those words, exactly, as I recall. I recall saying they acted like manic bipolars off their meds. The problem is that the world central banks including the Federal Reserve have printed so much money since 2008 ($15 Trillion in 2008 and 2009, as much as the US GDP) that Wall Street is awash with cash, drowning in it, and the money is burning holes in every pocket in the financial world. Even JPMorgan-Chase is throwing money around like a coke head. Dimon even says their $5,000,000,000 trading loss don't mean nothing. Did you know that Greenberg of Bear Stearns bragged about his coke use to an underling once, and showed him his stash? About 60 or 100 grams, it appears, costing several thousand dollars. Who do you think bought, buys, all that coke up in Harlem? It is not local residents as they don't have enough money. It is easy to snort $1000 a day worth (assuming you have the cash). Too bad I can't borrow a few trillion at 0.5% and get 0.6% from soon maturing Treasuries. I would get, for each trillion dollars borrowed, ten basis points per year, or one billion dollars per year. Not bad for no work and no risk, eh? Just call

The Short Squeeze---Point, Counterpoint

The Question: On 7/5/12, The Evansville Observer wrote: > Bear Trader > Please review how the commodities spiked up prior to the 4th of July. Oil > spikes up 8 dollars in one day, coffee spikes from 1.65 to 1.80. > Question: This seems to defy the fundamentals. Was this just the program > guys trying to spook the shorts and force them to cover? What is your take > on it. > China is slowing....this should slow demand for oil...coffee is > aplenty....why why why The Answer: Date: Sunday, July 8, 2012, 2:53 AM I don't know, Observer. A short squeeze is as good an explanation as any. I think it was the HFT guys. Some sort of algorithmic interaction amongst the the machines, a bit like the Flash Crash, maybe. The machines can't dance together, they are just like assembly line robots, skilled humans must intervene when they start bumping each other. Maybe the algos were programed to anticipate a short squeeze last Tuesday. Robots are very damned dangerous to be around.

"Spain, Spain, Spain"

For Spain to be really rescued would be tough. What Spain wants is the same thing that Greece wants, that is, all the free money it desires. Actually "rescuing" Spain requires putting adults in charge of government spending at all levels, that is, cutting politics and voters totally out of the fiscal loop. Spain has shown itself incapable of self government. Spain's banks are deeply insolvent. They have to be recapitalized. I don't mean that they need loans because the last thing they need is to be deeper in debt They need cash (and right now), not loans, and about 400 Billion Euros worth. Like the Spanish government the Spanish banks have shown themselves feckless and completely irresponsible, not capable of acting like bankers, who make prudent loans, but instead like drunken sailors or the guys who caused the American S&L debacle in the late '80s and the 2008 crash. You would be amazed to see the garbage Spanish banks wrote loans on. Spain won't accept that German bankers should have line item veto power over the budgets of every level of government or that German bankers be put in charge of each and every Spanish bank. Germany doesn't want to give Spain 400 Billion Euros just to watch them piss it away and come back for more. The Question: On 6/8/12, The Observer wrote: > Bear Trader > The press the past three days has had the two parties blaming each other in > advance for the coming collapse--- > Can Germany rescue Spain? or just with smoke and eurobond games... > I see a long slow hot summer and decline into the election. What is your > forecast? >

Hedging----The Reflection

(Ed.note; The "Bear Trader's" Comments are Reflection and not market advice) You asked, "After all the hedging such as AIG etc....after the writedown of bonds of Greece by almost 80% and yet NO calling of the hedges to make the owner WHOLE? HUH? How could this be?" Have been thinking about this also. Very much "the dog that didn't bark", eh? Since there is a total media blackout on this one, and without a peep from the hedgies that were supposing to be holding all those Greek CDS, I suspect we are seeing "official government diplomacy" here. The hedgies got the "carrot and stick" treatment with enough "carrot" in the mix that they promised to keep their mouths shut. Most of the money on the other side of those CDS is European Bank money, and as the European Banks are solvent only through "smoke and mirrors" any actual payout had to be, in the end, from the ECB, that is, part of the Euro 850,000,000 recently created by the ECB and loaned to the banks. If the hedgies got a lot of money, and word got out, the Eurozone would come under drastic political pressure. You think the various electorates of Greece, Spain, Italy, Netherlands, etc. facing austerity would be happy to hear that "their" money and social benefits were going to the hedgies? Or in Germany, for that matter? The hedgies probably took an offer of big haircuts but no perp walks on their CDS. The money probably has been payed out by the banks from loans recieved from the ECB. We shall see if there is any media coverage of this to follow. You asked about FAZ and if hedging were baloney. FAZ according to their prospectus promises only to "attempt" a three times inverse of the Russell 1000 financial firms, mostly insurance companies. There are lots of reasons why this is hard to accomplish. The first is FAZ has high ongoing expenses. Secondly as FAZ gets bought and sold FAZ has to radically change it's hedging strategy buying and selling complicated custom contracts with counterparties who cut FAZ no slack of course. Options become more expensive instantly as options change like lightning these days thanks to HAL and his kindred. The result is just when more people buy FAZ it becomes less likely FAZ will perform as the buyer expects. FAZ would work better for the share buyer as a closed end fund except for Joe and Martha Sixpack would wait to long and buy high. They better hope they can beat out HAL to the punch, hah hah. Hedges are possible. Thinking and working on this. The most important thing is that any hedge that works can't have too big a following, too much herd enthusiasm, to much money invested, for it to be effective as a hedge. That is the present hazard in precious metals. In hindsight an effective hedge will look obvious but will be deeply scorned when it should have been bought.

On Coal...Natural Gas...and LNG....The long View

The future of coal. People are not going to give up coal on the long term. The "renewable energy" cant is bogus. Windmills are a 14th Century technology even with modern aerodynamic redesign. Solar is bogus because covering the USA with solar cells and storage batteries wouldn't begin to supply the amount of energy required while the cost of installation and upkeep would be totally ruinous. The same applies to windmills. On the long haul the "anthropogenic global warming" hysteria will blow over since it is faith, not science. Coal will be back and in a very big way. From an investor's viewpoint I suspect we will never live to see it happen. Coal in the ground is another matter, but only the Big Boys can play in this game. Lots of action in this play in Australia lately. Natural gas has always been a feast or famine affair caused by regulator action and changing extraction technology. The current low natural gas prices can't last because the drillers need $4 gas to break even. Right now the drillers owe a tremendous amount of money and must service their debt so they maximize sales even when this looses them money. This cannot last for ever. That this is even possible now is a product of Federal Reserve manipulation of interest rates to absurdly low levels (so the gas guys can service the debt). When you see a full court bull press in the media you have to remember that when you are playing poker if you don't know who is the sucker the sucker is you. (Sorry about that.) Right now there is a glut of gas, the greatest gas glut of all time. Not impossible we will see gas well below $2. Lots of talk about liquid natural gas. To make a difference in the US gas market LNG export capacity will have to be greatly increased. This means new large gas pipelines, liquification plants, tankers, and port facilities. We are talking about a lot of natural gas here. This means years, some real money, and regulatory support. There are plans for a very large new gas pipeline in Alaska parallel to the existing oil pipeline from the north shore to Anchorage with construction of liquification plants and port facilites for LNG tankers. The Canadians are planning a similar project from their arctic fields to a Pacific port. Negotiations are underway between Canada, the US, and Alaska to rationalize these two projects. Qatar has a major LNG liquification plant under construction. Lots of natural gas in the area, this could prove a big deal. A lot of Russian gas reserves in Western Siberia are underutilized and the Russians are mulling exporting LNG from Vladivostok. They can get a lot more for LNG in Japan (since Japan is shutting down its' nuckear plants) than they are getting for pipeline gas from the Chinese. The Chinese are building a very large gas pipeline from Iran into southwest China. India is mad for being cut out of the deal. Lots of gas in the Arctic. Really a bunch. Lots of oil, too, but more gas. This will probably lead to war, perhaps in our lifetimes. Lots of geopolitics here.