I am now down almost 2% for the year. I took a moment to celebrate this lunacy by nibbling on yet more BAS, for $13.50.

All thanks and praise to the mighty Saudi’s for the wondrous occasion…

No, really though, who do you think Saudi Arabia’s super speculative intentions are going to hurt more? The United States? Or Venezuela, Syria, Russia, Iran, Iraq, Brazil, Nigeria, Algeria, Libya, Egypt, or Yemen?

Cool story: if you’re a country even close to revolutionary upheaval (or just strangled by an ill thought out safety net), the actions of Saudi Arabia are a death knell. And if there’s one thing we’ve seen pretty conclusively, it’s that countries that get tipped into a state of open revolution or political upheaval see their oil production drop…sometimes all the way to ZERO.

So let’s play chicken, you little shits.

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There is a tale floating around that Saudi Arabia is somehow single handedly collapsing the price of oil to destroy Western reserve development. And it is total nonsense.

Reports last month show Saudi Arabia is actually cutting production to maintain pricing.

Meanwhile, Saudi Arabia, the biggest oil producer in the Organization of the Petroleum Exporting Countries finally appears to be responding to the lower demand outlook.

According to the IEA, Saudi Arabia cut its oil output by 330,000 barrels a day last month, apparently in response to lower demand from its customers and a shift in the oil producer’s focus toward Asian markets. The Kingdom’s oil exports are likely to have run below 7 million barrels a day for the last four months, their lowest level since September 2011, as domestic consumption ratcheted up over the summer and supply to the U.S. fell, the IEA said.

I would have called bull on this sooner, but I was a little out of the loop and figured the oil selloff was just a correction anyway.

As for demand concerns, IEA reports have demand for oil growing every year for the foreseeable future. They cut the steepness of this growth and now there’s a jockeying move in markets to price out certain projects. But correcting the plunge in oil is going to be as easy as some field development getting publicly mothballed.

There is absolutely no credibility to this tall tale. Saudi Arabia is not going to be able to single handedly destroy the Bakken’s. They probably wouldn’t want to anyway. The US fields need expensive oil to justify development. Expensive oil plays directly into Saudi Arabia’s hand, since they have very low cost extraction.

If Saudi Arabia insists on meeting the demand that the US fields otherwise would have provided, they’re going to do so at a price per barrel closer to $60. Up until recently, they were getting $100 just by leaving some room on the field. That means Saudi Arabia was getting the same revenue for almost half the production levels, geniuses.

What do you think that does for Saudi Arabia’s oil field life expectancy?

The Saudi’s need the fracking oil because it justifies high prices. High prices buy Saudi Arabia vastly more time. Saudi Arabia would be stupid to try and beat down newer methods of extraction because they would exhaust themselves quicker and ultimately those sources would just come back on line anyway down the line.

Hmmm…step aside for newer extraction methods, get the same revenue for half the effort (weighs the one hand)…try and physically drive these methods out of business, exert double the effort with nothing extra to show for it (weighs the other).

Quit trying to be so cute with these conspiracy theories. Jimmy can go fuck himself.

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In what will unquestionably become the “Hubris Top Tick” post, I will go on the record and admit that yesterday, my account crossed 20% gains this year for the first time.

CCJ sealed the deal for me. After taking a nasty selloff, it exploded over the last week and a half, up 14%, which accounted for half the push from my prior 15%. The other half got picked up here and there.

I’m unsure how long I’ll be hanging out here. HCLP, which is without a doubt the hero of 2014, is reporting earnings first thing in August. The partnership has come a hell of a long way. Will this lead to a pullback? It wouldn’t surprise me, although I’ve decided to hold fast and keep the faith.

The coal trade isn’t working yet; but then again I did decide to forgo a quick entry, opting for steady accumulation. So a slow start is actually better for me.

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Over the past week or so, I raised cash to 25%. This was good fortune, as HCLP, my mantelpiece position, has dropped 8% since I let up.

Today, I repurchased half of those shares, which I sold at $64.19 each, for $59.39.

It seems like good enough of a bet to me. HCLP is growing so fast… it’s trading at just over 17x Q3 2014 earnings estimates. I have no good way to guess what HCLP’s earning’s potential is over time; but 17x doesn’t seem unreasonable, particularly with a steady announcement of 5 year supply agreements being announced and 200% revenue growth last year. When you’ve managed to get in on the ground floor of such a high flying position, it just makes sense to hold long a core stake, and ride the waves.

This 8% drop is just another opportunity to make extra money, until such time as that logic is challenged. For the moment, HCLP just managed to touch its 20 day moving average for the first time since early June.

Next earnings announcement is in August. So tell me, who wants to stand in the way of this thing?

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Short term cautions not withstanding, we are on the precipice of something great.

The entire structure of the global economy is shifting, slightly and slowly. But like all great change, the most striking of the movement comes all at once, at the end.

The United States is driving this assault of the balances of power, globally, as the energy revolution progresses on our shores. This country is set to become the biggest oil producer in the world – and we are now slowly removing the export restrictions that are the last remaining barrier to this end.

This isn’t just about US trade balances and deficits. Those numbers games matter, but they always matter less than you think.

This game is about power. Oil has been the source of power to our enemies for too long. Russia and the Middle East have fed well on global consumption of this product, erecting their cartels around the flow oil to global industry. It has made them powerful and a threat.

The move by the US to become the world’s largest producer of oil and gas can be viewed through a different lens than financial gain alone: this is also going to completely upend our adversaries. What wars and weapons and diplomacy and cooperation could not possibly have accomplished, given the entrenched interests we faced, this one mighty push on our part will quickly bring about.

This is a once in a lifetime opportunity. You must get invested in it, and stay invested in it. All US leadership sees the goal, and no one objects to it. The days of getting beat about by monarchies in Saudi Arabia, needing to cut backroom deals that undermine our own morals with foreign militant groups, having to sit through endless meetings while Russian oligarchs threaten our allies with gas supply shortages…these days are coming to an end.

As the US increasingly becomes energy independent, the argument to even have relations with half these villains becomes non sequitur. We can marginalize them while circling around our true allies and real friends.

I can’t see everything that is going to come from this. Naturally US power will follow. And the North and South American continents should improve, swinging towards democracy and capitalism. Outside of that, while I think US energy independence is a good thing, I wouldn’t be surprised if war also follows. Revolutions surely, but also open war between foreign, former energy exporters who find themselves being boxed into a corner. The Saudi’s days are surely numbered, in particular.

My bet is that Russia will not change much, but they will also have to cut less lucrative deals with China to make it. So at least they will be a less powerful, less interfering Russia. Good riddance there.

Suffice to say, this is unpredictability at its best. While I think I see the theme, I do not yet hear the notes. But I’ll take my chances with it anyway. The old order of things was repulsive. I won’t be crying any tears for OPEC, or for Russia.

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HCLP just blew through $60, as analysts raise targets in response to the HAL announcement.

BAS is back above $27. I guess I could have held onto all of those shares, but I have no regrets. Retaining a 15% position in BAS is more than reasonable.

SLW is pushing its way to $26.

My only position that is down noticeably today is UEC. And that remains my smallest position at 5% of assets.

Fracking investments remain the place to be. Oil names are doing well by extension (and a high price per barrel). I’m telling you, coal will be the next thing to run.

Have a wonderful afternoon.

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