Friday, May 23, 2008

Bakken Be Thy Name

I used to have a Merrill Lynch broker that would call me every week. He was just itching to sell me some goodies.

It didn't faze him for me to explain that my duty as a fiduciary prevented me from taking any risk with the funds under my care. It wasn't his problem if I got sued for Breach.

I could have told him to buzz off and just send me the monthly statements but I humored him and found it intriguing listening to his "hot tips."

He was a "stock picker." You know the type. Always hyped up on something.

I used to meet a lot of stock pickers when I was jumpseating around the world. You might be surprised how many pilots claim to have the latest dope and the hot tip of the century. Or the business dudes waiting for their flights. Kinda like getting tips from a New York City cab driver. Maybe George Soros' chauffeur would be a reasonable source but never yesterday's news from some amateur. How about getting a tip from some big talker in the locker room at the gym? Too funny. It's good entertainment but doesn't constitute an investment strategy.

I like technical investing just fine. Reading the charts. Memorizing the patterns. The new software packages give the individual investor some good tools.

I like fundamental investing just fine also. Ordering the annual reports. Doing the Free Edgar thing. Picking apart the financials and insider trades. I dig the Bill O'Neill momentum investing and enjoy reading IBD. It's all lovely. I get to hear about all the latest wall street stuff when "investors" come to the world of real estate and we help them out with a strategy.

It's been a real hoot the last couple of months with all the activity happening on the Bakken formation. I get lots of newsletters. Some are authoritative. Some are whacky, just for perspective. It has been real amusing hearing all the media hype about the "billions of barrels."

Been there, done that. That applies to the Williston Basin and the Dakotas for me. I punched some holes up there way back in the day. And I'm as happy as any oilhand that there is a mini boom going on up there again. Great. Every lil bit helps. Too bad we didn't pay more attention to US stripper wells over the last ten years...but that is a subject for another post.

Bakken is the new God. Bakken be thy name. Bakken this, Bakken that. It reminds me of that Merrill trader squawking at me with his hot tips. Did they sacrifice any virgins yet?

I got one newsletter that had this real simple graphic that showed the 260 Billion barrels in Saudi and the 20 Billion in the USA and then they just magically tagged on another 200 Billion barrels.

200 billion barrels! Do they have any idea how much magic go-go juice that would make?

It just shows how totally off base their thinking is.

I got another newsletter that claimed 500 Billion Bakken Barrels and suggested that the US could completely eliminate oil imports! This seemed really amazing to me until I thought about the snake oil salesmen that have been ripping people off throughout the centuries. My great grandmother told me some stories that have helped keep me out of trouble over the years.

If I remember right the USGS report discussed 3 billion. I guess it's all relative right? Nope, that's not even what Mr. Einstein said, it was space and time. But hey, 3 billion, 200 billion, what's a few billion here and there when it comes to rebalancing a portfolio?

It is sad really that all the stock tipper boys have to resort to such ridiculous tactics to squeeze some more fees out of their shrinking clientbase.

The sheer scale of the fraud is one thing but then there is the "new technology" fantasy angle as well. The idea that some "new" technology like horizontal drilling and frac-ing will come to the rescue and magically suck blood out of the stone. Unbelievable. Sort of a modified pump and dump scheme, huh?

I guess that goes with the times. Last month I had two new real estate clients get caught up in the drama just before they got to me. One got into a pyramid and the other into a ponzi. Unfortunately they were successful business people who never happened to get any education on those basic scams and couldn't recognize them. At least they didn't get taken by the stock pickers yet.

So there you go. The Church of the Bakken Formation. Hallelujah! Bakken be thy name. God bless all of them. I think it is neat that some of those ranchers who inherited grandad's spread are going to get some nice royalty checks. I always enjoy getting those things in the mail.

Maybe there is water or methane on the moon and Bill Stone will pull it out of there, maybe not. Maybe Mr. Putin will snag the Arctic, maybe he won't. But inventing a new Saudi Arabia just to avoid dealing with the Peak is pretty weak, even for wall street.

But I hope the parishioners of the Church of Bakken will think carefully before tithing too much of their net worth to the holy men.

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