Who Is Behind The Oil War, And How Low Will The Price Of Crude Go In 2015?

Who is to blame for the staggering collapse of the price of oil? Is it the Saudis? Is it the United States? Are Saudi Arabia and the U. S. government working together to hurt Russia? And if this oil war continues, how far will the price of oil end up falling in 2015? As you will see below, some analysts believe that it could ultimately go below 20 dollars a barrel. If we see anything even close to that, the U. S. economy could lose millions of good paying jobs, billions of dollars of energy bonds could default and we could see trillions of dollars of derivatives related to the energy industry implode. The global financial system is already extremely vulnerable, and purposely causing the price of oil to crash is one of the most deflationary things that you could possibly do. Whoever is behind this oil war is playing with fire, and by the end of this coming year the entire planet could be dealing with the consequences.
Ever since the price of oil started falling, people have been pointing fingers at the Saudis. And without a doubt, the Saudis have manipulated the price of oil before in order to achieve geopolitical goals. The following is an excerpt from a recent article by Andrew Topf…
We don’t have to look too far back in history to see Saudi Arabia, the world’s largest oil exporter and producer, using the oil price to achieve its foreign policy objectives. In 1973, Egyptian President Anwar Sadat convinced Saudi King Faisal to cut production and raise prices, then to go as far as embargoing oil exports, all with the goal of punishing the United States for supporting Israel against the Arab states. It worked. The ‘oil price shock’ quadrupled prices.
It happened again in 1986, when Saudi Arabia-led OPEC allowed prices to drop precipitously, and then in 1990, when the Saudis sent prices plummeting as a way of taking out Russia, which was seen as a threat to their oil supremacy. In 1998, they succeeded. When the oil price was halved from $25 to $12, Russia defaulted on its debt.

This post was published at The Economic Collapse Blog on December 31st, 2014.

Gold Daily and Silver Weekly Charts – And the First Runner Up Is….

There is certainly no doubt that 2014 was ‘the Year of the Dollar,’ as King Buck staged a rally, based on a comparison to some historically important currencies as embodied in the DX index.
I have shown this is the latest update of the US Dollar Very Long Term Chart here.
In fact, the greenback has hit levels not seen since the last financial crisis. You know, the one in 2008 that everyone has already forgotten, and which seems just as likely to reoccur as if we had done little or nothing about what had caused it in the first place.
I was amused to see a chart posted over at Zerohedge that shows that the next best performing currency in the world after the dollar was gold of all things. That chart is shown below. This presumes that one would count gold as a proper ‘currency.’
I would say not quite, since technically no sovereign will admit to it at this point. There is a patina of official sanction about a proper money. The central banks all hold it, and some are buying it quite vigorously especially since 2006. So it does have the character of a natural currency and enduring store of value, despite the blatherings and propaganda campaigns of its official detractors.
Perhaps propaganda is too strong a word for our polite society, all whitewash on the outside, with the bones of the brutally savaged carefully hidden within.. ‘Manufacturing consent’ and ‘molding perceptions’ is what we call the persuasion campaigns in our genteel era. Propaganda is an ugly word, so let’s put some icing on it and call it something else.

This post was published at Jesses Crossroads Cafe on 31 DECEMBER 2014.

2014 Greatest Hits: Presenting The Most Popular Posts Of The Past Year

A quick glance at the 20 most popular stories of 2014 as determined by you, our readers, shows something troubling: despite the just concluded 6th consecutive year of a rising S&P 500 – the longest such stretch since 1999 of what otherwise would be deemed optimism – despite what should be a steadily improving economy and improving social and economic conditions, what readers founds most fascinating, and troubling, was the increasing preponderance of social disobedience, of covert, proxy or outright wars, and of civil unrest: all phenomena that accompany a world sliding deeper into distress, not as most central banks and their puppet media would have us believe, a global recovery.
But before we get into the details of what has now become an annual tradition for the last day of the year, those who wish to jog down memory lane, can refresh our most popular articles for every year during our brief 6-year existence, starting with 2009 and continuing with 2010, 2011, 2012 and 2013: one for every year of the most artificial and fabricated “bull market” in history.
So without further ado, here are the articles that readers found to be the most popular of the past 365 days.
In 20th place, with over 143,000 reads, was the first hint that the second cold, and not so cold, war between Russia and the US was going to be not only fought in commodity terms – at least in the beginning – but would do all in America’s power to prevent the formation of a Russia-China axis of power, when back in paril we learned that the “US Threatens Russia Over Petrodollar-Busting Deal.” As noted above, conflict and its numerous variations, would be the driving feature of what readers were most fascinated by. The ever-escalating conflict between Russia and the US would be merely one of the numerous such developing plotlines that those who were not engrossed by whether Kim Kardashian’s ass would indeed break the internet, followed with great interest.

This post was published at Zero Hedge on 12/31/2014.

The Most Bearish Bear You’ll Find Anywhere: The FED

In a new economic letter recently released by the Federal Reserve Bank of San Francisco (h/t @dvolatility), a pair of researchers forecast a price-to-earnings ratio for the S&P 500 of a mere 8 in the year 2025 (due to retiring baby boomers’ waning risk appetites). This compares to 17 at the end of last year.
Let’s take this prediction out to its fullest conclusion. Assuming 3.8% earnings growth over the next decade (the long-term historical average according to Robert Shiller) we would achieve an earnings number of 156.76 for the S&P 500 in the year 2025.
Applying the 8.23 multiple to those earnings we get a price level of 1290 for the S&P 500. Yesterday the index closed at 2090. Ultimately, this research concludes then that stocks could very well witness a decline of 800 points over the coming decade, or about 40%, as baby boomers retire and shift their portfolios to a more conservative stance.
Have you heard a more dire prediction from ANYONE?

This post was published at Wall Street Examiner by Jesse Felder ‘ December 30, 2014.

What’s Really Going on Inside the Latest GDP Number

Sit down before you read this.
It’s going to make your head spin and, worse, change the way you think about what’s real in America.
Christmas came early this year, for the market that is, by way of a gift from the U. S. Bureau of Economic Analysis.
However, this branch of the U. S. Department of Commerce didn’t put its gift under anybody’s tree. They put it over all of us.
The gift was headline news that the ‘third revision’ of the third-quarter gross domestic product (GDP) number showed the U. S. economy grew at a whopping 5% annualized rate, not the 3.9% rate posted in the ‘second revision.’
That sounds like good news, right?
Well, here’s what’s scary…
The Bureau of Economic Analysis Is the ‘Bad Santa’ ‘Ho! Ho! Ho!’ said the stock market. Good news is now good news on top of bad news being good news for stocks.
And so, with just enough time before Christmas for the stock markets to react, we got a 5% ‘print’ from the BEA, which pushed the Dow Jones Industrial Average above 18,000 while the S&P 500 made yet another all-time high.
Too bad the BEA is lying. The latest revision was a ‘put-on.’ The folks at the BEA put it over on all of us.
What they did to get to that 5% number – to make us all feel gifted by a robustly recovering economy, to get us to go out and spend spend spend, to get stocks to soar – was pure prestidigitation. It was pure legerdemain.
It was pure BS.

This post was published at Wall Street Examiner on December 30, 2014.

Keep Your Eyes On The Prize

This article initially appeared on Nov 19, 2014 and was only available to Peak Prosperity’s enrolled users. Many of them thought it important enough that it should be made available to the general public, which we are now doing here.
At the essential center of the framework of the Crash Course is the almost insultingly simple idea that endless growth on a finite planet is an impossibility.
It is so simple it could be worked out by a clever 4 year-old. And yet it must not be so simple because the main narrative of every economy in every corner of the globe rests on the idea of endless, infinite growth.
Various rationalizations and mental dodges are made in people’s minds to accommodate the principle of endless growth. Some avoid thinking of it all together. Some think that perhaps we will escape into space, and continue our growthful ways on some other yet-to-be named planet(s). Most simply assume that some new wondrous technology will arise that can allow us to avoid pesky limits.
Whatever the rationalization, none stand up well to simple math and cold logic.
At the very heart of endless growth lies the matter of energy. To grow forever requires infinite amounts of energy. Growth and energy are linked in a causal way.
If you want mountains to grow higher you need tectonic forces to push them there. If you want a child to grow taller, food energy is absolutely required. If you want more people building more houses, driving more cars, and wearing more clothes, you need energy, energy and more energy.
Perhaps because long-term thinking is not one of humanity’s greatest gifts, very few can appreciate just how we’ve fashioned an entire economy and related set of belief systems around fossil fuel energy that has only been with us for a scant few hundred years.
Even more importantly, because we are consuming a few percent more of it with every passing year, 75% of all fossil fuel energy has been consumed in just the past 50 years. And we’ve been burning coal and drilling for oil for well over 150 years…boy, those stadiums fill up quick towards the end, don’t they?
The mistake is to think that those past 50 years are just the new normal and the even bigger mistake is to overlook the central and essential role of fossil fuel energy in creating the world we see around us.

This post was published at PeakProsperity on December 31, 2014.

Forget Toasters & Spiderman Towels, Chinese Banks Lure New Deposits With iPhones & Mercedes

Amid the European crisis in 2012, European banks reached deep deep down to encourage depositors to lodge their savings in these highly levered financial institutions. Most notably, now defunct Bankia, which offered no lesser gift than a Spiderman Towel in exchange for a EUR300 deposit. So, one wonders just how desperate they are – and just how close to total collapse – when Chinese banks are offering Mercedes Benz, iPhones, or a gold pendant to encourage cash as Bloomberg reports one analyst warns, “Chinese banks are hemorrhaging their deposits.”

This post was published at Zero Hedge on 12/31/2014.

SP 500 and NDX Futures Daily Charts – Not with a Bang, But a Whimper

Having served its purpose, the paint was peeling off the tape with some vigor today.
Mr. Market shed some of its recent water weight, from the watering of its stocks indices, for the purposes of improving the bonuses of the financial class for the end of the year.
The first week of January may have an upward bias, depending on what happens. We may see some follow through selling on Friday, but the markets will be abnormally quiet most likely.
It is the whole of January that may likely set the tone for the new year, and not the first week. So we should watch this next month rather closely, so see what the themes might be, and how speculators, I would not dignify what they do by calling them investors, take the economic news as ‘good’ or ‘bad’ for certain classes of financial instruments.

This post was published at Jesses Crossroads Cafe on 31 DECEMBER 2014.

As Greek Default Risk Soars To 66%, Morgan Stanley Warns ECB May Be Unable To Launch QE

While the Santa-rallying markets have been suspiciously sanguine in the aftermath of the failed Greek presidential election on Monday and the ad hoc vote scheduled for late January which could – if left unchecked – lead to an unraveling of the Greek bailout and the expulsion of Greece from the Eurozone, events are now in motion that would end with the unwind of the world’s biggest and most artificial currency and political union. In fact, the bond market is already starting to sniff out what the next, and well-known, source of contagion may be, when earlier today the probability of a Greek default jumped and, now suggest a 66% probability of default.

This post was published at Zero Hedge on 12/31/2014.

Bluff of the Day: Germany Warns “Greece is No Longer of Systemic Importance For the Euro”

In the obvious bluff of the day, Euro zone No Longer Obliged to Rescue Greece, Merkel Ally Says.
Actually, the eurozone was never obliged to rescue Greece, and in fact did not rescue Greece. Rather the EU and Troika rescued European banks holding Greek bonds.
Here’s the actual bluff.
In an interview with Rheinische Post newspaper published on Wednesday, Michael Fuchs also said Greek politicians could not now “blackmail” their partners in the currency bloc.
“If Alexis Tsipras of the Greek left party Syriza thinks he can cut back the reform efforts and austerity measures, then the troika will have to cut back the credits for Greece,” he said.
“The times where we had to rescue Greece are over. There is no potential for political blackmail anymore. Greece is no longer of systemic importance for the euro.”
Blackmail Potential
Curiously, there was little potential for blackmail years past when Greece ran a primary account deficit (Greece needed money from Europe to stay afloat), but now Greece has a tiny current account surplus (not counting interest payments).
Countries with current account surpluses are not dependent on foreigners to finance debt. This makes it all the more likely Greece can tell the Troika “go to hell”.

This post was published at Global Economic Analysis on December 31, 2014.

31/12/2014: Irish Ghost Estates: The March of Zombies

An interesting recent article from the Irish Independent on the sad state of Irish ghost estates:Interesting, from my perspective, not just in the fact that 226 ghost estates saw no work activity in 2014, despite the uplift in property prices and Government prioritising completion of ghost estates. But interesting due to numbers it revealed.
Take a deep breath: seven years after the crisis set in, and nine years after building activity contraction set in, Ireland (a country of 4.8 million inhabitants) still has 992 estates (as in multiple dwellings developments) unfinished. And of these, 776 estates have people residing on the site of abandoned construction. But that is not all, 271 more (on top of 992 above) are not completed, but deemed to have been ‘substantially completed’ (which can mean pretty much anything).
Good news, 1,854 ghost estates have been completed. Bad news is that the Year Four of Our Government’s Recover Turnaround, only 271 ghost estates have been completed, which means that at current rate we are looking at 2017 or later before we are rid of the ghost estates. That is a decade of physical scars reminding us about less than a decade of excesses. Of course, given growth in homelessness, the rising spectre of banks repossessions, the social housing lists explosion and other fine mess, non-physical scars will be with us much longer.

This post was published at True Economics on December 31, 2014.

Why Is The Fed Hiring An “Emergency Preparedness Specialist Familiar With DHS Directives”

A few weeks ago, we reported that for some still unexplained reason, the US Treasury is ordering “survival kits” to its employees overseeing the federal banking system. To wit:
The Department of Treasury is spending $200,000 on survival kits for all of its employees who oversee the federal banking system, according to a new solicitation. As FreeBeacon reports, survival kits will be delivered to every major bank in the United States and includes a solar blanket, food bar, water-purification tablets, and dust mask (among other things). The question, obviously, is just what do they know that the rest of us don’t? We still don’t know why. But what makes things even more surprising, and confusing, is that two days before the survival kit RFP soliciation became public on December 4, 2014, a just as curious notice was blasted by the Fed’s recruiting Twitter account:
#Hiring an emergency preparedness specialist familiar w/ Department of Homeland Security directives. #Job ID:10185 — Fed Careers (@Fed_Careers) December 2, 2014

This post was published at Zero Hedge on 12/31/2014.

How Wall Street Wins Its No-Lose Trades

The madness of the manipulation machinery on Wall Street knows no bounds.
Remember credit default swaps (CDS)? They’re the risky financial derivatives traded among Federal Deposit Insurance Corp. (FDIC)-insured banks that, during the 2007-2008 financial crisis, took down Lehman Bros. and almost bankrupted giant insurer AIG Inc. (NYSE: AIG).
Well, they never went away. And now they’re making a comeback, and Wall Street is using them in ever more maniacal ways.
They’re back partly because the recently passed federal spending bill reversed a Dodd-Frank rule that said big gambling banks had to separate CDS into units not guaranteed by the FDIC (aka taxpayers).
While I may come back to that, I’m not writing about Congress’ latest gift to Wall Street today.
Today, I’m going to show you how Wall Street manipulators are using CDS and a false front of ‘activism’ to make huge profits from troubled companies – and why that’s becoming routine.

This post was published at Wall Street Examiner by Shah Gilani, courtesy of Money Morning – December 31, 2014.

Hugh Hendry Embraces The Central-Planning Matrix: “I Am Taking The Blue Pills Now”

Hugh Hendry’s Eclectica Fund has had a great Q4 (up 3.3%, 4.0%, and 5.0% in the last 3 months) despite portfolio risk being quadruple his ‘old normal’. How did he achieve this? He begins… “There are times when an investor has no choice but to behave as though he believes in things that don’t necessarily exist. For us, that means being willing to be long risk assets in the full knowledge of two things: that those assets may have no qualitative support; and second, that this is all going to end painfully. The good news is that mankind clearly has the ability to suspend rational judgment long and often… He who hangs on to truth has lost. The economic truth of today no longer offers me much solace; I am taking the blue pills now.”
Via Hugh Hendry’s Eclectica Fund’s Letter to Investors,
Apples are not the only fruit
There are times when an investor has no choice but to behave as though he believes in things that don’t necessarily exist. For us, that means being willing to be long risk assets in the full knowledge of two things: that those assets may have no qualitative support; and second, that this is all going to end painfully. The good news is that mankind clearly has the ability to suspend rational judgment long and often.

This post was published at Zero Hedge on 12/31/2014.

The Federal Reserve is Hiring an Emergency Preparedness Specialist

As if the sphincter factor isn’t high enough with the recent stories about the US Treasury putting a solicitation out for ‘survival kits’ the Federal Reserve Bank of the United States has this eye opening job to fill:
Emergency Preparedness Specialist The full description direct from the Federal Reserve website:
Job ID #: 10185 Location: Washington, DC Functional Area: Security Administration Department: Emergency Planning & Safety Employment Status: Temporary Education Required: Bachelor’s or Equivalent Exp. Position Type: Full-Time Relocation Provided: Yes Experience Required: 5 years Salary Grade Low: 25 Salary Grade High: 26

This post was published at John Galt Fla on December 31, 2014.

Ironman: Iron Ore, Crude Oil and Labor Share of National Income Keep Declining As Consumer Credit Keeps Rising (Along With House Prices)

Fortunately, 2014 is grinding to a halt if you are long in certain commodities. While some cheer falling commodity prices, they is little reason to cheer if the cause if declining demand (e.g., a global economic slowdown).
Major commodities lost ground in 2014, particularly energy and silver.

And for vegans, plunging commodity prices is excellent news! Soybeans and rice are both down over 20% for the year. But for us omnivores, cattle prices are UP over 20% for the year.

This post was published at Wall Street Examiner on December 30, 2014.

Energy Crisis As Early As 2016

Low oil prices today may be setting the world up for an oil shortage as early as 2016. Today we have just 2% more crude oil supply than demand and the price of gasoline is under $2.00/gallon in Texas. If oil supply falls too far, we could see gasoline prices doubling within 18 months. For a commodity as critical to our standard of living as oil is, it only takes a small shortage to drive up the price.
On Thanksgiving Day, 2014 Saudi Arabia decided to maintain their crude oil output of approximately 9.5 million barrels per day. They’ve taken this action despite the fact that they know the world’s oil markets are currently over-supplied by an estimated 1.5 million barrels per day and the severe financial pain it is causing many of the other OPEC nations. By now you are all aware this has caused a sharp drop in global crude oil prices and has a dark cloud hanging over the energy sector. I believe this will be a short-lived dip in the long history of crude oil price cycles. Oil prices have always bounced back and this is not going to be an exception.
To put this in prospective, the world currently consumes about 93.5 million barrels per day of liquid fuels, not all of which are made from crude oil. About 17% of the world’s total fuel supply comes from natural gas liquids (‘NGLs’) and biofuels.
One thing that drives the Bears opinion that oil prices will go lower during the first half of 2015 is that demand does decline during the first half of each year. Since most humans live in the northern hemisphere, weather does have an impact on demand. I agree that this fact will play a part in keeping oil prices depressed for the next few months. However, low gasoline prices in the U. S. are certain to play a part in the fuel demand outlook for this year’s vacation driving season.

This post was published at FinancialSense on 12/31/2014.

RBS Goes Medieval, Dares To Suspend Bonuses Of 18 FX-Rigging Traders

Ouch! 80% government-owned Royal Bank of Scotland is daring to go there… In the wake of a comprehensive review of more than 50 current and former traders who worked at the bank (and a $634 million fine), Bloomberg reports that RBS is suspending the bonuses of 18 FX traders. ‘We are undertaking a robust and thorough review into the actions of the traders that caused this wrongdoing and the management that oversaw it,’ Jon Pain, RBS’s head of conduct and regulatory affairs, said, adding “no further bonus payments will be made or unvested bonus awards released to those in scope of the review until it has concluded.”
As Bloomberg reports,
Royal Bank of Scotland suspended bonuses of 18 traders as part of a review of its foreign-exchange business in the wake of a $634 million fine.
The bank is reviewing the conduct of more than 50 current and former traders who worked at the investment bank, it said in a statement today. Six employees face disciplinary action, with three of them suspended pending investigations.

This post was published at Zero Hedge on 12/31/2014.