Giant Sucking Sound of Capital Destruction in US Oil & Gas

Chesapeake Energy is a good example. The second largest natural gas producer in the US, after Exxon, reported its debacle yesterday.
Revenues plunged 49% from the quarter a year ago, when the oil bust had already set in. The company has been slashing costs and capital expenditures. In June, it eliminated its dividend. And yesterday, it recognized $5.4 billion in impairment charges, bringing impairments for the nine months to a staggering $15.4 billion.
Impairment charges are a sudden accounting recognition of accumulated capital destruction. These impairments pushed its losses from operations to $5.4 billion in Q3 and to $16 billion for the nine months.
Chesapeake currently gets 72% of its production from natural gas, 17% from oil, and 11% from natural gas liquids. The oil bust has been going on since the summer of 2014. The US natural gas bust has been going on since 2009! Two natural gas producers have already gone bankrupt this year: Quicksilver Resources and Samson Resources.

This post was published at Wolf Street by Wolf Richter ‘ November 5, 2015.

New Productivity Figures Remind That Manufacturing Matters

The new labor productivity numbers issued by the Labor Department this morning underscore why it’s so discouraging that domestic U. S. manufacturing is in the doldrums again – and in fact in a technical recession. Because the new figures show that manufacturing has regained its longstanding status as America’s labor productivity growth king after briefly losing it. Oddly, however, the same productivity report provides another reminder that manufacturing’s status as America’s king in pay growth is gone.
According to the new first look at labor productivity in the third quarter, by this measure of efficiency, all of America’s non-farm businesses (the Labor Department’s universe of American businesses) improved by 1.60 percent at an annual rate over the second quarter. That’s pretty low by historical standards, buttressing growing claims that the nation’s productivity performance has been lagging lately. But the second quarter growth figure was revised up from a much better 3.30 percent to a better still 3.50 percent.
(Remember – labor productivity is one of two productivity measures tracked by the government. It gauges output nationwide, and by different sectors of the economy, per total hours worked. The other productivity measure is multi-factor productivity. As its name suggests, it examines a much broader range of inputs, including capital, energy, and materials. Another big difference – the labor productivity numbers come out each quarter, but the multi-factor productivity data take a good deal longer to calculate.)

This post was published at Wall Street Examiner by Alan Tonelson ‘ November 5, 2015.

CRITICAL FACTOR: The Real Reason Behind Precious Metal Manipulation

Yes, its true. Precious metals manipulation has taken place, but the real reason may not be fully understood by either gold and silver investors or their critics. Lately, I have seen many articles written about this subject. Even though some articles offered some interesting insight and data, there’s also a lot of misinformation as well as name calling on both sides of the discussion.
While I enjoy using the term ‘POOR SLOB’ on occasion, I used it as a reference that a top ranking banker may see the typical middle class person. That being said, the personal attacks used on both sides of the aisle tend to make the rift even larger. This is why I try to focus on the information and data, and let individuals make up their own minds.
Before I get into the real reason for precious metal manipulation, I need to address the motivation behind this article. Let’s start with a quick update of the silver market.
Quick Silver Market Update
Concerned about a contagion stemming from a possible Greek Exit in June, the collapsing Chinese Stock Market in Jul-August and the forecasted crash of the U. S. markets in Sept-October, investors purchased a record amount of silver bullion including a surge in physical gold investment.
This surge in physical silver investment caused a shortage in many retail products pushing up premiums and delivery times to more than two months. I stated in several articles and interviews, that if we did see a continued crash in the markets or black swan event, the silver product shortage could extend into the broader wholesale market.

This post was published at SRSrocco Report on November 5, 2015.

‘Buy and Hold’ Fallacies – Does This 80/20 Portfolio Make Sense?

Time to Be in Stocks?
POITOU, France – It is wet, but not cold, in this area of France this morning. Rain splashes on the copper flashing. The windowpanes fog over. We have made some tea and settled in to our library for a long day’s study.
One of the pleasures of life is having a good place to work. The library is an old octagonal building, with a cement floor and brick walls, that had been used for laundry. We replaced the windows, put in a gas fireplace, and lined the walls with bookshelves.
You never know how these projects are going to turn out. We have been building and remodeling all our lives; this is one of the successes. It is warm, cozy, richly decorated with books and old guitars… and a delight to be in. We look forward to opening the door in the morning. We regret having to close it at night. Onward!
Yesterday, we learned from Wall Street Journal reporter Brett Arends that this is the best time to invest in the stock market:
‘The best estimates argue that over the long term, stocks have beaten bonds, cash and deposits by an average of about 4 to 5 percentage points a year. Compounded over time, that has amounted to an enormous difference. After 30 years, someone who invested in stocks has often ended up with three times as much money as someone who kept it all in cash and bonds.
Meanwhile, those gains have typically all come during the winter months. Peculiar, but apparently true. The most recent academic study, which has looked at stock markets around the world and went back in some cases more than 100 years, has found that winter has beaten summer pretty consistently in almost every country and almost every period.’

This post was published at Acting-Man on November 5, 2015.

We’re All Hedge Funds Now, Part 3: Even The Swiss Are Gambling

Let’s start with the latest on the global descent into negative interest rates:
Fed would consider negative rates if economy soured – Yellen (Reuters) – The Federal Reserve would consider pushing interest rates below zero if the U. S. economy took a serious turn for the worse, Fed Chair Janet Yellen said on Wednesday.’Potentially anything – including negative interest rates – would be on the table. But we would have to study carefully how they would work here in the U. S. context,’ Yellen told a House of Representatives committee.
This would happen if the economy were to ‘deteriorate in a significant way,’ she said, adding that she believed negative rates ‘would have some at least modest favorable effect on banks’ incentives to lend.’
Janet Yellen is now firmly in the central banking ‘whatever it takes’ mainstream. And since – if the ongoing contraction in manufacturing is any indication – the economy is indeed ‘deteriorating in a significant way,’ the US is now likely to join Europe in pushing rates down (or allowing rates to fall) to negative territory.
But already, the impact of zero and near-zero rates has been seismic. Virtually every class of financial entity, from retiree to central bank, has, driven by a need for yield, begun taking the kinds of chances that used to be associated with gambling addiction or drug abuse. See the previous two entries in this series: We’re All Hedge Funds Now and We’re All Hedge Funds Now, Part 2: Tech Startups And Nigerian Bonds.
The latest bit of surreal news on this front concerns the Swiss National Bank, once upon a time the virtual definition of rock-solid risk aversion, and its growing and highly volatile – get this – equity portfolio:

This post was published at DollarCollapse on November 5, 2015.

FedSpeak & Fireworks Day Leave Crude Crushed, Copper Clubbed, Stocks Soft, & Bonds Bruised

With The Fed now on 24 hours a day jawboning expectations up for a rate-hike in December (which has suddenly spooked assets) and Fireworks Day (Guy Fawkes may have been on to something after all) across the pond, stocks, bonds, and commodities all leaked lower ahead of tomorrow’s “most important ever” payrolls…
Stocks started the day off with the usual pre-eopn ramp

With Trannies somehow outperforming today…

This post was published at Zero Hedge on 11/05/2015.

The Financial Disaster Is Dead Ahead And You Need To Prepare For It – Episode 810a

The following video was published by X22Report on Nov 5, 2015
2.1 million Greek people might have their electric shutoff. Initial jobless claims tick up a bit as layoffs continue, someone is lying. Bloomberg comfort level is in decline. US economic output is terrible. David Stockman warns if the economy is collapsing and its going to be horrific when it completely crashes. Chairman is stocking up and making sure his employees are ready for the collapse of the economy.

US Economy – Not Getting Better

An Update in Light of Recent Data Releases
Since our last updates on the manufacturing sector of the US economy (in chronological order: ‘Is the US Economy Close to a Bust?’ and ‘More Ominous Data Points’), new data have been released and our friend Michael Pollaro has mailed us updated versions of his charts, so we decided to provide another update. So far, there is no sign that the emerging downtrend in manufacturing activity is stopping or reversing. The recent manufacturing ISM has barely clung on to the 50 level, but this masks quite a bit of underlying deterioration.
In light of this, it is also noteworthy that the trend in business sales and orders is diverging ever more strongly from the stock market’s trend. The deterioration in economic activity is evindently masked by the inflationary policies instituted all over the world. Experience suggests that this divergence will end and that these trends will eventually become synchronized again. Given the growing gap, the eventual reassessment could be unpleasantly violent (we did get another warning shot this summer). This is however not completely independent of central bank actions. The cries for even more lunatic money printing exercises are becoming ever louder, which we plan to discuss in a separate article. In the meantime on to the charts. The first three charts are the updates Michael sent us:

This post was published at Acting-Man on November 6, 2015.

5/11/15: Grifols: At Last in Irish Media Spotlight

Two weeks ago I wrote about the tax-linked Spanish pharma Grifols move to Ireland (see link here) at the time when all Irish media was gushing on about jobs and investment, forgetting – conveniently and patently – the pesky issue of Why did a Spanish company decided all of a sudden to relocate major operations and international billing into Ireland?
Well, good to know that with a good week-and-a-half delay, the Irish Times woke up to the problem, covering it (albeit with usual ‘diplomatic’ caveats) here: One important aspect indirectly highlighted by the Irish Times article on the matter is the problem we are having with ‘Brand Ireland’ – the brand that is now visible across Europe and the U. S., as well as Australia and Canada as being linked with ‘beggar thy neighbour’ economics.

This post was published at True Economics on November 5, 2015.

Saudis Bring Oil War To Europe With Largest Price Discount Since 2009

With oil exports to Europe having slipped from 13% of Saudi’s total to just 10% in the last six months, The FT reports, the de facto leader of OPEC has slashed its Official Selling Price (OSP) to Europe in an effort to regain market share. Saudi lowered its OSP for its Arab light crude grade in Europe by $1.30 a barrel for December, taking its discount to the weighted average of the North Sea Brent benchmark to $4.75 a barrel – the largest discount since February 2009.
The move, as we detailed previously, is basically going after Russia’s customer base, has raised heckles in Moscow, with Rosneft CEO Igor Sechin complaining last month about Saudi “dumping” after he revealed the kingdom was selling oil to refineries in Poland.

This post was published at Zero Hedge on 11/05/2015.

2016: The Scene Is Set

A good rule of thumb to live by is to believe nothing you’re told and only half of what you see with your own eyes. That might sound cynical, but it’s kept me out of trouble more than once.
This is particularly relevant today when considering inflation. We’re constantly told there isn’t any inflation or it’s so low the Federal Reserve could not possibly raise interest rates.
What a load of bunk!
For those of us who live in the real world, we know this is bogus. We’re getting our clocks cleaned by higher prices and stagnant wages. And Social Security recipients are being outright cheated with their 0% inflation increase for next year.
Gas prices are down, but food prices are through the roof! (That’s why one of our recent short targets in Forensic Investor is a food producer. It’s seen prices skyrocket but its profitability dwindles by out-of-control costs.)

This post was published at Wall Street Examiner by John Del Vecchio ‘ November 5, 2015.

3 Things: Market, Trade, Volatility

Strong October Leads To…
Following the sharp August and September correction, the markets have advanced roughly 17% in less than three months. Which is pretty incredible considering that the Fed is discussing tightening monetary policy while the rest of the world loosens it amid fears of a global slowdown.
I have discussed over the last couple of weeks the entrance of the markets into the seasonally strong time of the year, to wit:
“”The table below shows the statistics of the seasonally strong/weak periods of the S&P 500 from 1957 to present using the data from the Federal Reserve (FRED).

As noted above, there is a statistical probability that the markets will potentially try and trade higher over the next couple of months particularly as portfolio managers try and make up lost ground from the summer.
However, it is important to note that not ALL seasonally strong periods have been positive. Therefore, while it is more probable that markets could trade higher in the few months ahead, there is also a not-so-insignificant possibility of a continued correction phase.
Furthermore, the probability of a continued correction is increased by factors not normally found in more “bullishly biased” markets:

This post was published at StreetTalkLive on 04 November 2015.


Gold: $1104.40 down $2.10 (comex closing time)
Silver $14.99 down 7 cents
In the access market 5:15 pm
Gold $1104.00
Silver: $15.00
Remember tomorrow is the jobs (FOMC report) and expect massive volatilty.
First, here is an outline of what will be discussed tonight:
At the gold comex today, we had a very poor delivery day, registering 0 notices for nil ounces. Silver saw 0 notices for nil oz.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 208.24 tonnes for a loss of 95 tonnes over that period.
In silver, the open interest fell by only 144 contracts despite silver being down 18 cents in Wednesday’s trading. The total silver OI now rests at 166,798 contracts In ounces, the OI is still represented by .834 billion oz or 119% of annual global silver production (ex Russia ex China).
In silver we had 0 notices served upon for nil oz.
In gold, the total comex gold OI rose by a rather large 2482 contracts to 446,382 contracts despite the fact that gold was down $7.70 yesterday. We had 0 notices filed for nil oz today.
We had a monstrous withdrawal in gold inventory at the GLD to the tune of 14.53 tonnes / thus the inventory rests tonight at 671.77 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. It sure looks like 670 tonnes will be the rock bottom inventory in GLD gold. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold will be the FRBNY and the comex. In silver, no change in silver inventory / Inventory rests at 313.817 million oz.
We have a few important stories to bring to your attention today…

This post was published at Harvey Organ Blog on November 5, 2015.

Breadth Breaking Bad – Where It All Went Wrong For The Fed

With the S&P 500 just over 1% from its all-time record-high, it is perhaps shocking that only just over 50% of the index members are trading above their 200-day moving average. Worse still, the divergence between index price performance and underlying component performance has never been greater as The Fed’s last money-printing effort drove a wedge between the have-nots and the have-yachts…

This post was published at Zero Hedge on 11/05/2015.

Gold Daily and Silver Weekly Charts – Walking on the Sun

‘Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better.’
Nassim Nicholas Taleb, Antifragile
As I have noted previously, at times the precious metals trade as currencies, without regard to their significant supply and demand conditions as commodities.
The forex market is notorious for overextending trends, and as acknowledged of late by some, of instances of price rigging.
The Fed and the central banks do own a printing press.
But these days the gold in which their Banks traffic often has merely the appearance of solidity, appearance magnified and leveraged by paper.
Tomorrow we will have a look at Non-Farm Payrolls for October.
These things develop slowly over time, and forecasting their ebbs, flows, and break points is not possible.

This post was published at Jesses Crossroads Cafe on 05 NOVEMBER 2015.

JPM Head Quant Is Back: The Rally Drivers Are Gone With “Downside Risk” Ahead, But No Flash Crash Unless…

Over the past 3 months, the name Marko Kolanovic, head of JPM’s Quant Team, has become one of the most loved, or feared (depending on which way he is leaning) and respected on all of Wall Street for one simple reason: think Dennis Gartman, only correct every time.
The reason, as we have profiled before, is simple: he has somehow succeeded in calling every single market inflection point since the August 24 flash crash, and we have documented them all:
August 21, just before the Black Monday flash crash: “Why The Market Is Crashing Into The Close: JPM Explains“ August 27: “JPM Head Quant Warns Second Market Crash May Be Imminent: Violent Selling Could Return On Thursday“ September 3, before the next leg lower in stocks: “Home JPM Head Quant Is Back With New Warning: “Only Half The Selling Is Done; Expect More Downside“” But his most prodigious call came on September 24 when we wrote “Bears Beware, JPM’s Head Quant Just Flipped To Bullish: “The Technical Buying Begins.” So it did, leading to the biggest market ramp in history, and biggest monthly point gain ever.

This post was published at Zero Hedge on 11/05/2015.

The Fed’s 2-Percent Inflation Fairytale

KINGSTON, NY, 4 November 2015 – Once upon a time, not too long ago, central bank wizards began telling a fairytale that economies need inflation. But not just any inflation. In their Goldilocks make-believe world, the not too hot, not too cold, just right dose of two percent is needed to keep an economy healthy.
While there is absolutely no quantifiable data or economic model that proves or supports this oft-cited fairytale, the business media keep repeating it, selling the fiction that a two-percent inflation rate will somehow create jobs and spur economic growth.
‘Worry Over Low Inflation Kept Fed at Bay,’ screeched the Wall Street Journal, 9 October headline, following the release of Federal Reserve minutes in which they decided not to raise interest rates.
Who made this up? How is inflation – paying more for goods and services – the perfect financial tonic for working people to swallow?
In the United States, for example, with wages trending between decline and stagnation, more inflation means paying more to get less. With median household income below 1999 levels, how can higher inflation stimulate more spending? How can higher inflation be beneficial when, according to new Social Security data, 63 percent of Americans make less than $40,000 per year?

This post was published at Lew Rockwell on November 5, 2015.