Remember all those allegations that Obamacare would be an unmitigated disaster for businesses, especially smaller companies? Well, now we have some facts. A week ago we noted that the Philly Fed found that Obamacare was a disaster for business, and now no lessor entity than the Congressional Budget Office (CBO) is out with its latest forecasts, concluding "certain aspects of the Affordable Care Act will tend to reduce labor force participation."
...the CBO does write, though, is that one of the downward pressures on the labor force is Obamacare. As the report finds:
"Over the next few years, CBO expects that the rate of labor force participation will decline about 1/2 percentage point further... the most important of those factors is the ongoing movement of the baby-boom generation into retirement, but federal tax and spending policies will also tend to lower the participation rate. In particular, certain aspects of the Affordable Care Act will tend to reduce labor force participation, with the largest effect stemming from the subsidies that reduce the cost of purchasing health insurance through the exchanges. Because the subsidies decline with rising income (and increase with falling income) and make some people financially better off, they reduce the incentive for some people to work as much as they would without the subsidies."
We won't rehash the debate here over whether or not it's a good thing for the welfare state to provide so much that people will choose not to work - but it's pretty undeniable at this point that ACA is disincentivizing work for Americans in an era where we're wondering if the decline in labor force participation is the new normal.
* * *
While we already noted that 'work is punished' in America, it appears now that with Obamacare, non-work is actually incentivized.
Many commentators consider what the Fed has done to be akin to providing stimulus, morphine, juice to an ailing economy.
We believe Fed’s actions would be more appropriately described as permitted cancerous beliefs to spread throughout the financial system, thereby killing Democratic Capitalism which is the basis of the capital markets.
Today we’re going to explain what the “final outcome” for this process will be. The short version is what happens to a cancer patient who allows the disease to spread unchecked (death).
In the case of the Fed’s actions we will see a similar “death” of Democratic Capitalism and the subsequent death of the capital markets.
We are, of course, talking in metaphors here: the world will not end, and commerce and business will continue, but the form of capital markets and Capitalism we are experiencing today will cease to exist as the Fed’s policies result in the market and economy eventually collapsing in such a fashion that what follows will bear little resemblance to that which we are experiencing now.
The focus of this “death” will not be stocks, but bonds, particularly sovereign bonds: the asset class against which all monetary policy and investment theory has been based for the last 80+ years.
Indeed, basic financial theory has proposed that sovereign bonds are essentially the only true “risk-free” investment in the world. While history shows this theory to be false (sovereign defaults have occurred throughout the 20th century) this has been the basic tenant for all investment models and indeed the financial system at large going back for 80 some odd years.
The reason for this is that the Treasury (US sovereign bond) market is the basis of the entire monetary system in the US and the Global financial system in general. Indeed, US Treasuries are the senior most assets on the Primary Dealers’ (world’s largest banks) balance sheets. To understand why this is as well as why the Fed’s policies will ultimately destroy this system, you first need to understand the Primary Dealer system that is the basis for the US banking system at large.
If you’re unfamiliar with the Primary Dealers, these are the 18 banks at the top of the US private banking system. They’re in charge of handling US Treasury Debt auctions and as such they have unprecedented access to US debt both in terms of pricing and monetary control.
The Primary Dealers are:
- Bank of America
- Barclays Capital Inc.
- BNP Paribas Securities Corp.
- Cantor Fitzgerald & Co.
- Citigroup Global Markets Inc.
- Credit Suisse Securities (USA) LLC
- Daiwa Securities America Inc.
- Deutsche Bank Securities Inc.
- Goldman, Sachs & Co.
- HSBC Securities (USA) Inc.
- J. P. Morgan Securities Inc.
- Jefferies & Company Inc.
- Mizuho Securities USA Inc.
- Morgan Stanley & Co. Incorporated
- Nomura Securities International Inc.
- RBC Capital Markets
- RBS Securities Inc.
- UBS Securities LLC.
You’re bound to recognize these names by the mere fact that they are the exact banks that the Fed focused on “saving” thereby removing their “risk of failure” during the Financial Crisis.
These banks are also the largest beneficiaries of the Fed’s largest monetary policies: QE 1, QE lite, QE 2, etc. Indeed, we now know that QE 2 was in fact was meant to benefit those Primary Dealers in Europe, not the US housing market. The same goes for QE 3 and QE 4.
The Primary Dealers are the firms that buy US Treasuries during debt auctions. Once the Treasury debt is acquired by the Primary Dealer, it’s parked on their balance sheet as an asset. The Primary Dealer can then leverage up that asset and also fractionally lend on it, i.e. create more debt and issue more loans, mortgages, corporate bonds, or what have you.
Put another way, Treasuries are not only the primary asset on the large banks’ balance sheets, they are in fact the asset against which these banks lend/ extend additional debt into the monetary system, thereby controlling the amount of money in circulation in the economy.
When the Financial Crisis hit in 2007-2008, the Fed responded in several ways, but the most important for the point of today’s discussion is the Fed removing the “risk of failure” for the Primary Dealers by spreading these firms’ toxic debts onto the public’s balance sheet and funneling trillions of dollars into them via various lending windows.
In simple terms, the Fed took what was killing the Primary Dealers (toxic debts) and then spread it onto the US’s balance sheet (which was already sickly due to our excessive debt levels). This again ties in with my “cancer” metaphor, much as cancer spreads by infecting healthy cells.
When the Fed did this it did not save capitalism or the Capital Markets. What it did was allow the “cancer” of excessive leverage, toxic debts, and moral hazard to spread to the very basis of the US, indeed the entire world’s, financial system: the US balance sheet/ Sovereign Bond market.
These actions have already resulted in the US losing its AAA credit rating. But that is just the beginning. Indeed, few if any understand the real risk of what the Fed has done.
The reality is that the Fed has done the following:
1) Set itself up for a collapse: at $4.4 trillion, the Fed’s balance sheet is now larger that the economies of Brazil, the UK, or France. And with capital of only $63 billion, the Fed is leveraged at over 69 to 1 (Lehman was at 30 to 1 when it failed).
2) Called the risk profile of US sovereign debt into question: foreign investors, now fully aware that the US’s balance sheet is suspect (the US has lost its AAA credit rating), are dumping Treasuries (see China and Russia).
3) Put the entire Financial System (not just the private banks) at risk.
The Financial System requires trust to operate. Having changed the risk profile of US sovereign debt, the Fed has undermined the very basis of the US banking system (remember Treasuries are the senior most asset against which all banks lend).
Moreover, the Fed has undermined investor confidence in the capital markets as most now perceive the markets to be a “rigged game” in which certain participants, namely the large banks, are favored, while the rest of us (including even smaller banks) are still subject to the basic tenants of Democratic Capitalism: risk of failure.
This has resulted in retail investors fleeing the markets while institutional investors and those forced to participate in the markets for professional reasons now invest based on either the hope of more intervention from the Fed or simply front-running those Fed policies that have already been announced.
Put another way, the financial system and capital markets are no longer a healthy, thriving system of Democratic Capitalism in which a multitude of participants pursue different strategies. Instead they are an environment fraught with risk in which there is essentially “one trade,” and that trade is based on cancerous policies and beliefs that undermine the very basis of Democratic Capitalism, which in the end, is the foundation of the capital markets.
In simple terms, by damaging trust and permitting Wall Street to dump its toxic debts on the public’s balance sheet, the Fed has taken the Financial System from a status of extremely unhealthy to terminal.
The end result will be a Crisis that makes 2008 look like a joke. It will be a Crisis in which the US Treasury market and sovereign bonds in general implode, taking down much of the US banking system with it (remember, Treasuries are the senior most assets on US bank balance sheets).
We cannot say when this will happen. But it will happen. It might be next week, next month, or several years from now. But we’ve crossed the point of no return. The Treasury market is almost entirely dependent on the Fed to continue to function. That alone should make it clear that we are heading for a period of systemic risk that is far greater than anything we’ve seen in 80+ years (including 2008).
The Fed is not a “dealer” giving “hits” of monetary morphine to an “addict”… the Fed has permitted cancerous beliefs to spread throughout the financial system. And the end result is going to be the same as that of a patient who ignores cancer and simply acts as though everything is fine.
That patient is now past the point of no return. There can be no return to health. Instead the system will eventually collapse and then be replaced by a new one.a
This concludes this article. If you’re looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://phoenixcapitalmarketing.com/special-reports.html.
This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.
Phoenix Capital Research
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Attending costly games is on the margins of the household budget. When the credit card gets maxed out, attending is no longer an option.
Please understand I'm not suggesting professional sports isn't the greatest thing since sliced bread: I'm simply asking if attending pro sports games has become unaffordable to the average American.
Who cares as long as we can watch the games for free on television, right? That raises another issue: in the next recession, will advertisers still pay billions of dollars for broadcast TV ads on sports channels when ads on mobile devices distributed via Big Data analysis can directly target the (shrinking) populace who still has disposable income to spend?
Before we look at the money side of pro sports, let's note the glorious shared experience of "our team" winning and hated rivals losing. Sports is one of the few experiences that unites a remarkably diverse populace, and one of the few spheres of life that isn't politicized to ruination.
We all get to live vicariously through sports, and the stranger cheering beside us is suddenly a "friendly" in a largely hostile world.
With apologies to Dallas Cowboys fans: Joe Montana to Dwight Clark-- The Catch in January 1982: (Cowboys fans have many memorable moments to savor, including a number in this game)
Montana to Clark - The Catch (2:24)
The problem is that attending a game is prohibitively expensive. A seat in the nosebleed section might only be $15, but there's parking (or train fare), and the $10 beer and the $10 hotdog. That's $40 - $50 for one fan or $80 for two people.
Given that the average wage is $44,000, $80 for "cheap seats at the game" is not inconsequential. Given that many clubs are now pricing tickets by demand, it's easy for two people to spend $200 to attend a game.
How many people can afford to attend games on a regular basis without maxing out a credit card or drawing on a home equity line of credit (assuming there's home equity to tap)?
Cities desperate to retain pro franchises are on the hook for hundreds of millions of dollars spent building $1+ billion stadiums. Many claim that they'll recoup the money from hotels and shopping malls built adjacent to the stadium, but this gargantuan cash flow has yet to actually materialize.
The winner take all dynamic of our pop culture has driven salaries and team overhead costs into the stratosphere. This pushes costs so high that teams literally can't afford a losing season. Alas, not every team can win the conference, much less the championship.
The assumption that TV ad revenues will continue to support the enormous costs of the system is rarely questioned. The ads have to work to make sense, and in an economy in which the average wage earner is making less money every year (measured by purchasing power rather than nominal dollars), and more and more of the dwindling income is devoted to healthcare, taxes, debt service and essentials, there are two questions here:
1. What good is an ad if the viewers have no disposable money to spend?
2. Rather than pay to broadcast an ad to every viewer, few of whom are in the market for whatever item you're selling, why not target the core audience directly with mobile ads?
If an advertiser is marketing beer that (in Mike Royko's memorable phrase) tastes like it's been strained through a horse, where's the most bang for the ad buck--a broadcast ad to sports fans who have seen hundreds of beer ads and are either already fans of the swill being advertised or consumers who will never buy the product, regardless of ads, pricing, etc.?
The typical ad-industry justification is that if Swill A can capture 1% of market share from SWill B, spending tens of millions of dollars on TV network ads is a wise investment.
But does this argument hold up when advertisers can target beer buyers with a history of buying Swill A and B directly via their mobile phones as they enter the supermarket? Which ad do you reckon has a higher probability of modifying consumer choice, another beer ad that viewers mute/ignore, or a coupon delivered to the beer buyer at the point of purchase?
In short, the mobile ad revolution has barely begun, and while broadcast ads on TV, radio and the Internet will all still attract advert money, it seems highly likely we've reached Peak Broadcast TV Advertising income.
Take a glance at this chart of household income: every sector from wealthy to low-income is bringing home less money. What does that tell you about the future of advertising?
Based on anecdotal evidence submitted by readers and correspondents, it seems that much of the discretionary spending on things like attending sports events and concerts is being funded with debt or drawdowns of savings/equity. In other words, people are charging big-bucks tickets on their credit card, not paying for them out of weekly earnings.
There may be a generational component as well. Most of the people in the top 10% of household income are Baby Boomers in their peak earning years. On the face of it, they can easily afford to pay for costly tickets, parking, beer, etc. at one of the sports industry's new secular cathedrals (i.e. stadiums).
But these same people are often also paying for kids' college and funding care for their aging parents. $200,000 a year looks great until you subtract taxes, college costs, assisted living costs for a parent, a big mortgage and rising costs for essentials.
My point is: going to games is now like going to concerts or a fancy restaurant: each consumes a major chunk of dwindling discretionary income. As credit and income tighten, it's getting easier to decide to forego the concert, game or high-end dining experience.
In other words, attending costly games is on the margins of the household budget. When the credit card gets maxed out, attending is no longer an option.
I haven't found any studies on this question, but I also wonder if Gen Y is as committed to the idea of investing so much time and money in sports as their elders. If they are indeed less invested, this adds additional weight to the idea that we've reached Peak Pro Sports.
I confess I'm jaded. I don't have the time or emotional surplus to invest in following sports, and I tend to see the sports industry as just another bloated cartel that rips off its customers because it can, enriching a handful of super-wealthy owners who bask in the reflected glory of a secular religion.
Put the trends together and it certainly looks like the sports cartel has already sucked up all the oxygen in the room. In the next recession, we may find that pro sports will no longer be able to support the sky-high costs of its overhead and secular cathedrals.
Just call it “peak gun”…
Yes, the gun bubble is finally popping. After years of backorders, heated debates, and fears over strict new laws, the assault rifle binge is beginning to sputter…
“Assault-rifle sales stopped in their tracks,” Jim Hornsby, owner of Mainstreet Guns & Range in Atlanta tells Bloomberg. Hornsby estimated sales of assault rifles are off by a staggering 70% from last year.
“It’s hard to give an AR away,” he says.
Part of the reason for the sharp drop in gun sales is the subsiding fear of new gun control legislation. Despite several high-profile mass shootings taking place over the past few years, lawmakers have not passed any laws that could potentially devastate the American gun industry.
According to Bloomberg, criminal background checks for gun purchases averaged 1.75 million a month in 2014 through July. That’s down nearly 4% from last year—and a good indication that gun sales will continue to thaw.
As a result, gun makers are sitting on huge stockpiles of rifles that were at one point nearly impossible to come by. That hasn’t exactly aided share prices of gun stocks this year, either…
Smith & Wesson Holding Corp. (NASDAQ:SWHC) shares are down more than 15% just this week after the company cut its sales estimates. That lands the stock at new 2014 lows. Its main publically traded competitor, Sturm Ruger & Co. (NYSE:RGR), is also feeling the heat. Its shares are down about 4% on the week, bringing its losses to a staggering 31% year-to-date.
As you’ve probably already guessed, the huge gun boom we’ve experienced over the past couple of years has run its course. Those who have wanted to purchase assault rifles and other firearms have already done so. With demand receding and supplies piling up, I suspect gun makers (and their respective shares) will have a lot of trouble impressing investors over the next several quarters.
P.S. Guns aren’t the only investments out there in the self-defense industry. Stay away from these stocks. There are plenty of other opportunities in this market without trying to catch these falling pistols. Sign up for my Rude Awakening e-letter for FREE today to see how you can trade these trends for huge gains…
This is probably one of the most important interviews that we’ve done to date.
Pierre Lassonde is one of the really big characters in the industry. He also talks about how the analysts constantly misjudge the value of his business. That’s why he sold it to Newmont for over $3 billion and later bought it back for around $1 billion. Today, he just raised another $500 million and Franco-Nevada is worth around $9 billion. He’s also on the board of 3 other companies.
Mr. Lassonde says timing isn’t nearly as important as recognizing great business models – like Franco-Nevada or NewGold — and being patient.
Franco-Nevada is currently the top holding of Sprott’s new ETF, the Sprott Gold Miners ETF (NYSE:SGDM).
I’m a long-term investor, and when you have a great CEO, a great business model, and a great balance sheet, you just need to be patient.
Hello, Mr. Lassonde. Before we get into your success with Franco-Nevada, what is the most important thing you’ve learned about making money in resources?
Well, I could give you a very ‘tart’ answer – like ‘buy low, sell high’ – but anyone could tell you that. I think that the answer is different depending on whether you’re talking about bullion or stocks. I don’t deal much in bullion, even though I do own some.
For the stocks, it’s a whole different ballgame. I’ve been very fortunate – the four companies that I helped create and whose boards I’m on have all done very, very well. One is a 100-plus bagger; I’ve got another 100-bagger coming; and I’ve got two others that are very solid. So I freely tell what I see as the most important keys to investing.
These companies have four things in common:
One – they have a great CEO. They know how to execute, and they know how to deal with a problem when they see one. They just have a great CEO, whether it’s Randall Oliphant or David Harquail in the mining business. These two guys are simply two of the best CEOs around.
Two – they have great business models. Franco-Nevada, for instance, has a wonderful business model. One of the best, I think, that I’ve ever seen in any business. When you think about it, it’s a bullet-proof ‘Warren Buffet-plus-plus’ business model. They don’t come any better. NewGold’s business model has also been very solid; the company is delivering. One of the other two companies is in high-tech and the other is a gas company, and they each have their own niche. The high-tech company will be my second 100-bagger. It’s another one of those great business models with a fabulous CEO.
The third thing is that they should have bullet-proof balance sheets. Look at Franco, with the financing we’ve done today [Franco-Nevada just announced a raise for $500 million] we’re going to have over $1.3 billion in cash, no debt and we’ve got tremendous free cash-flow. And I’d say that’s an absolutely vital ingredient — bullet-proof balance sheets and free cash-flow with low cash costs. The low cash costs are very, very important.
My final thing is to be in companies who are able to seize opportunities when others don’t even see them or aren’t able to seize them. Those are the four things.
As to the price you pay – well, timing is something that I find very difficult, and I prefer not to dwell on. It’s not always as important as it seems. Let’s look at an example. We did a Franco-Nevada issue near the all-time high. A lot of people were sort of worried about the timing here, but you know something? Anyone who’s ever bought a Franco-Nevada issue, at any time in the last 25 years, has made money. Since the last time we issued stock, the share price is up 53%. Prior to that, it was up 45 or 47%. We’ve never issued stock at less than 42% higher from the previous issue, ever.
I’ve been fortunate a few times to have the right timing, but what’s most important is buying companies that have fundamentals and buying them over six months, a year, or two years. I’ve been in New Gold since ’93. Franco-Nevada I’ve been in since ’85, in one form or another. I’m a long-term investor, and when you have a great CEO, a great business model, and a great balance sheet, you just need to be patient.
Unfortunately, it doesn’t apply to 100%, or even 80% of the mining business – exploration, for instance, is Russian roulette. That’s not investing, it’s speculating. There are around 3,000 companies that are in exploration. A lot of them have almost nothing but a prayer. There’s not a whole lot where you would put your money for the long run.
So do you avoid early-stage exploration stocks?
Mostly, yes – though I do have people looking for the next Hemlo, or the next Voisey’s Bay. Whoever finds one of those, the premium they get to their share price will be beyond belief, because it’s been way too long since we’ve had a really significant new discovery – a Hemlo, at like 20 million ounces of gold, or a GoldStrike, with around 40 million ounces, a Voisey’s Bay or a Diamond Fields. It’s been over 20 or 25 years since we’ve had one of those discoveries. The world is just panting for one and I think it would be helpful to bring back the risk-taking attitude that’s completely gone from that sector.
But those companies I look at are 1 in a 1,000. You can look at 999 dogs before you find one. It’s very difficult.
In 2007, you left major miner Newmont Mining and went back to Franco-Nevada, a royalty & streaming company. Is that because Franco-Nevada’s model of owning streams and royalties is a better model than owning and operating mines?
I left Newmont simply because I didn’t want to be in the grave at 62 — the youngest millionaire in the grave. I didn’t want that. I took a year’s sabbatical and was going to do something else with my life. Then the new CEO of Newmont decided that the Franco-Nevada they owned didn’t provide any value to them and just wanted to realize on it. We put our hands up and said “look, I think we can do something with it and we’d love to buy it back.” When you look at the purchase price of $1.2 billion and what it’s worth today, at around $9 billion, I don’t have to draw a picture.
About your business model at Franco-Nevada: you spent $2 million in ’83 on a deal that has generated over $800 million. You’ve acquired many more royalties since then. How were you able to make deals with miners that gave you such impressive upside?
As a matter of fact, over its lifetime, cash flows from that deal will probably be around $1.2 billion total. Here’s the thing – why the Franco business model is so incredibly powerful – and very few people understand this. None of our competitors do. They don’t understand what we have when we create a royalty. I’m not talking about a stream; I’m talking about a royalty — like the GoldStrike royalty or the Detour royalty. We get a free perpetual option on the discoveries made on the land by the operators, and we get a free perpetual option on the price of gold. Think about this – if someone hands you a free perpetual option on 6 million acres of land, and you don’t have to put up a penny, don’t you think that at some point, you’re going to get lucky?
That’s what it is. We have put together a land package by purchasing and creating royalties where we end up with a free perpetual option. It’s the optionality value of the land, the value of the operator spending money on our land, and the optionality to higher gold prices. And that is worth so much money. And yet, when the analysts calculate an NAV, none of them ever look at the optionality that we have in our portfolio. Frankly, it’s what’s worth the most. It’s absolutely what’s worth the most, and it’s what’s given us the GoldStrike billion dollar royalty, the Detour billion dollar royalty, the Tasiast royalty, and so on.
When you buy a stream, on the other hand, you get price optionality. You’re buying, say, 100,000 ounces of gold for the next 25 years. So you get optionality on the price of the commodity, but you don’t get much optionality on the land. In the case of Cobre Panama streaming deal, they’re going to start milling around 200,000 tonnes a day. That’s already so big, it’s not like it could be expanded. And there’s already 50 years of reserves. Even if they find another 20 years of reserves, it doesn’t matter. The optionality is worth something maybe 50 years down the road. But for the next 50 years, it’s not worth a great deal. And that’s the problem with streaming. You don’t get much optionality.
With royalties you get a lot of optionality, and that’s the strength of the Franco-Nevada business model. That’s why it’s so powerful.
At its core, are you simply taking advantage of a need for capital? Why do these companies agree to hand over so much upside?
Well, the plain reality, Henry, is that 99% of the royalties that we have were bought from prospectors who created those royalties when they found the ore bodies. We just offered to buy them. These people had never owned an option, they needed money — maybe they were getting a divorce, or whatever it was — and we created a market to sell these royalties. That’s how we got the GoldStrike royalty. The people who owned it were going into bankruptcy; they needed money.
In the case of Detour, we created the royalty ourselves. The junior company wanted to buy the land and they didn’t have any money. We agreed to give them the capital to buy the land and said “give us our money back and give us a 2% royalty forever.” And they agreed. They needed the money and nobody else wanted to give them any.
So these royalties occurred through various circumstances, but the majority of the royalties we own were existing royalties – we didn’t create them. The downside of royalties is that their average size is only 2 to 4% of a project. We wouldn’t want to create anything any bigger. So it’s difficult to put big amounts of money into that kind of royalty. That’s why Franco-Nevada also does streaming; you can put up to a billion dollars in a streaming deal where you agree to purchase several hundreds of thousands of ounces of gold over many years. You can do far larger deals, but, like I said, you don’t get very big optionality on the land.
What types of deals are you looking at? Are these companies that are looking for project finance in order to bring their mine into production? Or are they very early exploration, looking for the next big gold deposit?
We do deals spanning the entire spectrum. We do $2 million deals where we think we can get a small land package with a royalty on it, if we believe it’s in the right place and it’s got the right ‘smell.’ At the other end of the scale, we finance construction and production. Of course, you can put the most money in financing the final stages of a construction project.
We used to do exploration at Franco – we had three or four geologists and we would spend our own money in search of new deposits. That’s how we found the Midas deposit. Nowadays, we’d rather fund really good geologists. We buy some stocks; we buy royalties; and then let them run with the project.
With Detour, for example, we helped fund an acquisition. There was something on the property – though it couldn’t yet be called an ore body. Placer Dome had drilled part of it, so we knew that there was something there. It wasn’t economic at $400 gold. But we’re very happy with how that has turned out for us.
Are you seeing any more big opportunities out there?
Oh yeah, we do. We just raised another $500 million. Don’t you think we saw opportunity out there when we decided to raise all that money? There are still opportunities out there. But, to be truthful, we need the exploration companies to get back to making discoveries. Otherwise the whole industry, particularly the gold mining industry, is going to go very flat production-wise. Even if the gold price starts to go up, it could take five or six years before production increases in response. So there’s a real need for venture capital. Otherwise, we’re going to see a really flat production profile for the next five or six years.
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