Friday, January 20, 2012

An Insider's View of the Keystone Caper

The following article was penned by "Tyler Durden", alias for my favourite Wall Street insider who prefers, for various reasons, to keep his/her/their real identity a secret.  (Tyler Durden was a Brad Pitt character in "Fight Club", I believe.)  That said, I have learned more about the inner workings of global finance by reading his/her/their Zero Hedge website than any other ten websites put together, and I highly recommend it to followers of this space.  (I only reproduce an edited version of ZH's work here because I know my audience, and their preference for brevity.)  "Keystone Aftermath Arrives: Canada Pledges To Sell Oil To Asia, As US Becomes Source Of "Uncertainty":  America's loss is China's gain. In the aftermath of the Keystone XL fiasco, which will see not only a number of jobs "uncreated" but a natural source of crude lost, Canada is already planning its next steps - which will benefit Shanghai directly and immediately. "Prime Minister Stephen Harper, in a telephone call yesterday, told Obama “Canada will continue to work to diversify its energy exports,” according to Harper’s office. Canada's Natural Resource Minister Joe Oliver said relying less on the U.S. would help strengthen the country’s “financial security.” The “decision by the Obama administration underlines the importance of diversifying and expanding our markets, including the growing Asian market,” Oliver told reporters." Ironically, it is diversifying away from the US, with its ever soaring, politically-predicated uncertainty, that is a source of stability and diversification. But it is not only crude. Wonder why no jobs are being created? Wonder why despite record low mortgage rates there is no bottom in sight for housing? Simple - nobody can plan one month, let alone one year, ahead for any US-based venture or business. The political risk is simply too great - whether it is contract law (see GM and Chrysler) or simple solvency (see record high levels of cash hoarded by companies), it is there, and as long as it is there, there will be no hiring, no capex spending, no growth, and no real improvement in the economy, the real economy, not that defined by where the Russell 2000 closes on any given day. More from the Keystone XL aftermath: ... Harper has said building the capacity to sell the country’s oil to Asian markets is in the national interest, and the government will review regulatory- approval rules for new energy projects so they can be done more quickly. Harper has also said he will look more closely into complaints that “foreign money” is being used to overload the regulatory process. Then there are those who have pointed out that in recent years the equity risk premium has soared to multi-year highs. There is a reason for that. It is called America. Yesterday’s rejection “certainly introduces new uncertainties into the economic relationship,” said David Pumphrey, deputy director of the energy and national security program at the Center for Strategic and International Studies in Washington. “This is a cornerstone of economic development for the country.” And as pertains to this story, it is a good thing that the American Strategic Petroleum Reserve is safe and untapped for every eventuality. Oh wait ..." [emphasis added]  So Obama's totally transparent political expediency is not just a shock to Canadians, but also to those Americans in the know.  Did I mention gutless?