CBO Director Douglas Elmdorf testified that debt will exceed 100% of GDP within 25 years and continue to rise, a “trend that could not be sustained” and would eventually heighten “the risk of a fiscal crisis” before the House Budget Committee on Tuesday.
“Although the deficits in our baseline projections remain roughly stable as a percentage of GDP through 2018, as I noted, they rise after that. The deficit in 2025 is projected to be $1.1 trillion, or 4% of GDP, and cumulative deficits over the 2016 to 2025 period are projected to total $7.6 trillion. We expect that federal debt held by the public will amount to 74% of GDP at the end of this fiscal year, more than twice what it was at the end of 2007, and higher than in any year since 1950. By 2025, in our baseline projections, federal debt rises to nearly 79% of GDP. When CBO last issued long-term budget projections in the summer, we projected that, under current law, debt would exceed 100 percent of GDP 25 years from now, and would continue on an upward trajectory thereafter. That trend that could not be sustained. Such large and growing federal debt would have serious negative consequences, including increasing federal spending for interest payments, restraining economic growth in the long term, giving policymakers less flexibility to respond to unexpected challenges, and eventually heightening the risk of a fiscal crisis” he stated.
According to a copy of his prepared remarks released by the CBO, the revised economic projections “do not materially change” predictions that debt will exceed 100% of GDP in 25 years and “CBO’s current projection of debt as a percentage of GDP in 2024 is quite close to that used as the starting point for the projections in The 2014 Long-Term Budget Outlook [where the CBO also predicted that debt will be 100% of GDP in 25 years.]”
deflation has consumer putting off purchasing products because expect prices to go down... decreases demand so companies produce less, need less workers, potential spiking of unemployment... U.S. has a huge problem with labor force participation.
U.S. labor force participation rate is lowest since Jimmy Carter years. Harold do you remember how great things were under the Carter presidency?
Also the value of the U.S. dollar has been rising, the government needs weaker dollar to pay off all the debt...the idea is to pay off debt with inflated dollars to bond holders.
Harold TRGP raised dividend to .775/share.
Harold a couple of opinion pieces in NY Times on pipelines FYI, not sure they give you information that you don't already know.....
1) The Other Pipeline You Should Worry About It’s Not Just Keystone XL, It’s Also Line 61 by By DAN KAUFMAN
2) The Keystone XL Illusion by Joe Nocera
as of now holding the TEG and will take the shares in WEC along with cash payment. have the possibility (risk) of the deal not going through and getting no WEC shares.... time will tell how it all plays out.
appears to me a lot of fear in the markets. the utilities, food, REIT and some consumer non-durables (KMB, CL) had a really strong week. big market averages were down for the week and my portfolio was up...
have some cash on the side and a buy list of 23 companies, but I will sit and watch for a while....
Invenergy is seeing more interest from other large industrial users in powering their operations through dedicated cogeneration plants as natural gas costs remain cheap and electricity charges grow more volatile, Gordon said.
“We refocused some efforts on the cogen space,” he said. “We see it as an emerging opportunity.”
As for the UP, “The UP situation is unique and when we learned about the problem we thought, what a great opportunity to help provide a solution,” he said.
The deal would protect UP residents from paying hundreds more in electric bills annually by keeping the coal plant running, as transmission grid operators have determined it can't shut down for now in order to keep the lights on.
“The solution these agreements advance ensures reliability, rids the UP of years of unaffordable charges, improves the environment and most of all gives the UP the power and ability to adapt to the future,” Snyder said in a release.
Still to be worked out are numerous details, including the size of the Invenergy plant and how much it will charge for the electricity it generates.
The facility, the first cogeneration plant Invenergy is likely to construct in the U.S., will have a capacity between 200 and 280 megawatts, says Craig Gordon, vice president of sales and marketing. With capital costs for gas-fired cogen plants running around $1,200 per kilowatt, according to the U.S. Environmental Protection Agency, that would mean a cost of around $300 million for a 250-megawatt facility. Gordon in an interview said he couldn't yet comment on construction costs.
For Polsky, the deal is a return to his roots. The rags-to-riches immigrant from the Soviet Union started his energy career constructing unregulated natural gas power plants in the late 1980s and 1990s, including cogeneration facilities like the one proposed in this deal. Invenergy, his third energy-related startup and now a very sizeable player nationally, is predominantly a renewable energy provider, building wind and solar farms.
But it also has a significant portfolio of gas-fired plants in North America, totaling 2,245 megawatts. None of those, however, are cogeneration facilities like the one that would serve Cliffs, which operates two large iron ore mines in the UP.
From Crain's Chicago Business
How a Chicago energy entrepreneur is resolving Michigan's power crisis
By Steve Daniels
Chicago energy entrepreneur Michael Polsky is playing an improbably instrumental role in resolving a power crisis threatening to financially cripple Michigan's Upper Peninsula and derail the acquisition of a Chicago-based utility holding company.
Polsky's Invenergy has agreed in concept to build a natural gas-fired power plant serving a mining concern that is by far the UP's largest employer. Invenergy's role, hammered out in a multi-party deal announced Jan. 13 by Michigan Gov. Rick Snyder, will allow for the phaseout of a nearly 60-year-old coal-fired power plant on the shores of Lake Superior in Marquette, Mich.
The Presque Isle coal plant is owned by Milwaukee-based Wisconsin Energy, which has agreed to buy Chicago-based Integrys Energy Group for $5.7 billion. The acquisition is subject to approval by states with utilities owned by Integrys, including Illinois (Peoples Gas and North Shore Gas) and Michigan.
Wisconsin Energy's decision to shutter the coal plant triggered the threat of steep rate hikes in the Upper Peninsula. State regulators wanted a solution to the problem before green-lighting the buyout of Integrys.
Under the agreement, Wisconsin Energy will sell the coal plant along with its electric utility operations in the Upper Peninsula to Upper Peninsula Power Co. The plant then would stay open for five years, and the mining firm, Cliffs Natural Resources, would continue to buy power from it for that period.
That's where Polsky comes in. Invenergy will build a new plant to serve Cliffs, powered by natural gas and repurposing waste heat for industrial uses. That facility then would power Cliffs beginning in 2020 and potentially could provide power to other UP customers as well.
don, government has on purpose for years funding government with short-term debt rather then locking in debt in out years (30 yr bond) at these low rates....
1) shows U.S. government has no real intention of ever paying off national debt
2) U.S. government will have to inflate currency to begin even trying to pay debts in future (pay old obligations with inflated dollars - those holding the debt will be getting dollars worth less) - as an aside probably should only buy inflation protected u.s. debt
3) the huge debt run-up over the last 12 years is one of the reasons I feel the Fed is hesitant to raise interest rates, to raise rates would cause federal budgetary troubles... increased interest payments will squeeze transfer payments from the welfare state created by the political class to help them get votes....
don Very few people understand government is run on short-term borrowings.... my feeling this house of cards will collapse at some point, I think Ron Paul had a piece on this posted at zero-hedge site - via drudge's linked page....
Harold another way to backdoor an investment in MLP's is through OGE Energy (OGE) or Centerpoint Energy (CNP). They have MLP investment via Enable Midstream (ENBL).
OGE is yielding 2.9% and is electric utility in OK.
Centerpoint yielding 4.1% is out of Houston and has gas utility also. CNP doesn't generate power, I think just distributes to customers.
because of the MLP both OGE & Centerpoint stock price has been a bit more volatile....
I think much of the MLP pipe is in Oklahoma and probably some in TX...
Harold thanks for all that information.
I am long WMB and OKE. OKE had a bad week down $6/share, gives off current yield now of 5.4%. latest OKE presentation showed that planned dividend increases in '15. Sold off small amount of OKE a few years ago and took some profit. so if price and markets stabilize I might go back and add some OKE.
TRGP closed the week at $92.82, still above that Dec low of around $88/share. my guess is TRGP goes back under $88.
WMB came close to touching $60/share now its close to $40/share. this gives WMB current yield of 5.37%.
Goes back to my question can these companies hold dividend payout? If yes get 5% and price upside when commodity markets stabilize.
another one I started to watch is BKH. BKH (about $50/share) has current yield of around 3%, way to low for market risk now. BKH has regulated electric/gas utility and small oil/nat gas exploration side business. BKH price dropped in '14 when the utilities were strong, because of E&P business. If BKH drops in price a lot more from oil and interest rate risk, this will give a larger current yield. I've had good luck with utils that have both electric and nat gas business.
as I typed before, I am waiting it out....I still feel a big price drop (capitulation) will happen.... to much risk at some point will be a run out of stocks from fear....
i also like the pipe plays to move product, the recurring revenue stream, however I don't play the LP's like you do. I found good returns with the regulated utilities that have part of business in pipelines, kinda play both sides of fee/volume growth, with the dividend income stream from regulated business... NFG, STR, UGI, ATO. The one I own that has struggled is MDU, sits in bakken and can't build-out a pipeline system to get gas to the markets out of the region.
Mario Gabelli is trying to get NFG management to break apart. NFG has ownership of large chunks of land in Marcellus and isn't handcuffed by leases. They can drill as feasible. I hope management ignores Gabelli and keeps the company whole. NFG currently trades at $68.47 with a 2.3% yield. I got in at $25 and around 4.5% yield. If I'd known I would of bought many more shares.....
I think at some point in '15 I'd like to buy into TRGP. Worth putting $$'s in it. Time will tell if I can get an entry point and have funds available.....
I wanted to check to see what CS reported this was from 11/4/14 report so a bit dated.... its PDF so I am retyping the line item...
Targa is moving to de-risk the business model with over 60% fee base in the mix and expectations to be 60 - 65% in 2014 as it has added more fee based projects.... I will have to go online and review the presentations as well as look at the newer research reports from my online broker to see what '15 will do..... I think Targa is one of the companies exporting product... this is a big + for its business...
today TRGP closed at $97.86 on Dec. 11th was at a low of like $88... like I typed the other day, I still am wondering if energy stocks will see some major capitulation? yahoo showing oil at $48/barrel today...
i was using my brokers research online looking up TRGP a couple of weeks ago, i think it was credit suisse the comment was TRGP is trying to increase its mix of business to more fee based rather then variable commodity based..... I wish i had the exact wording.....
I am happy with my holdings and the returns.... I am in no hurry to reinvest the dividends and cash set aside.....
with the hedges in place for many companies through 2015, getting price stabilization in oil may take quite a while.....
By my calculation Harold the increase gives PAGP a current yield of 3.1%. I am still going to sit on the sidelines, these large swings up and down do not give me any feel for where markets are going…..
Harold if you have time or are interested I saw a few articles in the last day or two worth reading. If you haven’t already seen any of these try Google searching FYI.
In no particular order they are…
From WSJ Oil Firms’ New Dilemma: Save, or Borrow More? By Justin Scheck (This is a story answering my question about what big oil intends to do with dividend payout).
The next two articles answer Mr. Boudreaux’s question’s on storage and where product is going. I was fairly correct in that most of the production is going through Cushing and is being exported. These articles give detail.
From WSJ, Oil-Product Prices Fall as Supplies Climb By Nicole Friedman
From Bloomberg, U.S. Oil Exports Jump to Record as Shale Production Booms By Dan Murtaugh and Brian Wingfield
just saw this Reuters story online, we had a few messages about it yesterday..... apparently Mr. Hamm is still optimistic about CLR stock check out the copy and paste below....he decided to pay out the cash rather then the CLR stock....ha ha....
Harold Hamm, chief executive of oil driller Continental Resources who is embroiled in a bitter divorce, offered to pay his former wife $974.8 million, but she rejected a hand-written check delivered to her legal team, his lawyer said on Tuesday.
Harold one other thing that has me vexed, you've commented on it.... what is up with the U.S. bond yields dropping?
so much written about expanding 4th Qtr GDP and now this deflation threat and dropping of interest rates.
with the expansion of the currency (printing money by FED) and huge borrowings by U.S. Government I expected big inflation not deflation....go figure??
I am waiting out any moves on the market, I think if the price for barrel keeps dropping, stock prices will have to fall...
big question to me is how long does the barrel price stay low and will the big paying dividend companies (CVX, OXY, etc) be forced to cut dividends.....most started with CAP-EX being cut for now.
LINE cut dividend what/when are other companies going to do?? I haven't seen any stories in the media analyzing this.
while I am not a Kilduff groupee, he has seemed over the last quarter to have some real feel for what is going on...
Harold, I was just going to post you a question before I saw this last post of yours
stating the obvious oil is now $47.92 Down $2.12 (4.24%)
but why haven't DNR now trading at $6.98 not gone below the recent low of $6.04
or as another example TRGP is at $95.56 still above the $88 price it hit like Dec 11 or about....
what I am asking is price capitulation in the oil/energy stocks hasn't hit yet or it seems.... will we see real price capitulation if Mr. Kilduff is correct and the $40 floor is broken under??