Financial War over Oil Reshapes World, Will End with Much Higher Prices

Low oil prices are the wreckage from a war – a financial war.
Oil sell-off after OPEC makes even ECB look good. Better to have announced something, even if less than hoped for, than nothing at all… – tweeted by Capital Economics.
We have not begun a new era of low oil prices, fruits of new tech and a beneficent Fate. Low oil prices are the wreckage from a war – a financial war.
The verdict is in. Experts proclaim OPEC’s policies a failure. Here’s T. Homer Bonitsis, associate professor of finance at the New Jersey Institute of Technology:
OPEC is non-relevant in terms of its ability to affect the price of oil. So any decision by OPEC will not have a long-term effect on the oil market. There are too many OPEC quota-chiseler countries and non-OPEC production countries that cast a shadow over the effectiveness of OPEC maneuvers. … If history is any guide, there is a secular downward trend on real oil prices.
… The Saudi strategy of attempting to knock out competitors by using predatory pricing is not a game changer long-term … Some producers may shut down temporarily, but will reopen when prices recover again. Indeed, some producers may go bankrupt – only to have their assets sold at bargain prices. The new investors in these assets have a lower fixed cost structure to produce oil; in essence, creating a lower-cost competitor! The policy is doomed to failure long-term.’
This is an economist’s perspective: now is forever, economics is everything. It’s why they are so frequently astonished by events.

This post was published at Wolf Street by Larry Kummer – December 8, 2015.

The Next Bear Market May Have Begun Already

Draghi’s New Promise
Mario ‘Whatever It Takes’ Draghi came back strong on Friday. After disappointing investors on Thursday with limp and irresolute measures to juice up asset prices, the European Central Bank’s head honcho made it clear he would not be held back by common sense, sensible theory, or the cumulative experience of generations of central bankers.
arron’s has the report:
‘Draghi dismissed speculation that dissent among the ECB’s governing council (notably from the Germans) kept him from taking more forceful action.
Dissent is normal at central banks, including the Fed, but he added that lack of unanimity isn’t a constraint on his decisions. Neither is the size of the ECB balance sheet, which can be expanded as needed to meet its objectives.
‘We have the power to act. We have the determination to act. We have the commitment to act,’ the ECB president stated emphatically.’
Draghi’s goal is to force consumer price inflation levels higher in Europe. Why losing buying power is a worthy goal for a nation’s money has never been fully explained. Nor has it been demonstrated – either in practice or in Ph. D. theses – that buying crummy debts from banks at above-market prices (aka QE) is an effective way to boost consumer prices.

This post was published at Acting-Man on December 8, 2015.

In “Extraordinary” Turn, Brazil’s VP Pens Angry Letter To Rousseff: “I Should Have Vented This Long Ago”

‘I’ve always known about your and your people’s complete lack of trust in me and the PMDB. A lack of trust that is incompatible with what we’ve done to maintain personal and partisan support for your government.’
That’s from a letter penned by Brazilian VP Michel Temer and addressed to embattled President Dilma Rousseff. In what WSJ describes as ‘an extraordinary turn of events,’ the letter was published in its entirety by local media on Tuesday. Temer, like House Speaker Eduardo Cunha, is a member of the Brazilian Democratic Movement Party which WSJ notes ‘has provided crucial support and multiple ministers to Ms. Rousseff’s government since she was first elected in 2010.’

This post was published at Zero Hedge on 12/08/2015.

What The Charts Say: “Things Are Far From Well”

Next week will see the last Fed meeting and final OPEX of the year. Suffice to say it won’t be a boring week. We have a trade plan for it and I presume so do you. Whether you are bullish or bearish I think it’s fair to say that markets have a lot riding on not only next week, but how things are lining up for next year. Wall Street remains largely bullish although the risk of recession is rising at some investment houses and Janet Yellen is quick to dismiss these reports as they do not fit with the narrative of a rate hike.
Be that as it may, there are several charts that are continuing to raise major concerns and I wanted to take this moment to present these charts together in one post. And the primary concern is that markets are in the midst of a major topping process. But don’t take my word for it.
Let me just present the evidence and you can judge for yourself.

This post was published at Zero Hedge on 12/08/2015.

Ever Greater Distortions Hint at Rising Crash Probabilities

The Poison of Central Planning
As is well known, central banks around the world have deployed a range of ‘unconventional policies’ in recent years, ranging from imposing zero to negative interest rates, to outright money printing (QE).
We have seen a number of people argue that ‘QE’ does not really involve ‘money printing’, but as we have explained at length, these arguments are misguided (see e.g. our in-depth discussion of the modus operandi of the Fed here: ‘Can the Fed Print Money?’).
As far as we understand it, the first error is the belief that only bank reserves are created, when in reality, both bank reserves and deposit money are created in QE operations (the latter is clearly ‘money’, as it can be used for the final payment of goods and services in the economy). The second error is to argue that because new money isn’t just dropped from helicopters (not yet, anyway), but involves asset purchases, it somehow doesn’t qualify as ‘printing’. However, it is important to keep in mind that the money used for these purchases is still created ex nihilo, at the push of a button.
As an aside, it has by now become clear that the ECB also creates both reserves and deposit money to the extent of its securities purchases, whereas Japan’s case still requires some digging on our part which we haven’t gotten around to yet (Japan e.g. excludes deposits held by securities companies from its money supply data; in some ways this is sensible, as it allows for a more fine-grained analysis of money and its potential uses, but it may also disguise how much money the BoJ is really creating).
The distortion of relative prices in the economy has become visible in a number of ways: obviously, there has been a bubble in titles to capital, a.k.a. ‘risk assets’, and previously there was also quite a bit of upward distortion in the prices of commodities (which was egged on additionally by credit expansion in China). One after the other of these bubbles has begun to fall apart (commodities and junk bonds being exhibits 1 and 2 so far), with only the stock market and certain government bonds left standing (especially on the short end of the curve, with many European sovereign bonds trading at negative yields to maturity, which is utterly perverse).

This post was published at Acting-Man on December 7, 2015.

The End is Near, Part 6: Individual Investors Rediscover Individual Stocks

Since their introduction in 1993, exchange traded funds (ETFs) have become a huge hit with retail (that is, small individual) investors, for a very good reason: As ‘passive’ funds that just match a given market or sector with minimal trading and extremely low fees, ETFs offer exposure to equities without requiring a lot of judgment. And after debacles like the 2008-2009 crash the one thing individual investors do not trust is their own stock-picking judgment.
Towards the end of bull markets, however, small investors tend to rediscover their inner stock-picker. Just in time to get creamed in the subsequent crash.
And here, apparently, we go again:

This post was published at DollarCollapse on December 8, 2015.

8/12/15: Irish Rents: A Longer Term View

Much has been written about the plight of renters in Ireland. Much of it is correct – there have been some atrocious rises in rents, primarily private rents, in recent years. Year on year, in the last 3 months (though October 2015), private rents rose 10.35% against local authority rents falling 1.11% and mortgage interest declining 8.88%. A year ago – over 3mo through October 2014, private rents inflation was running at 8.95% against local authorities rents rising 1.06% and mortgage interest falling 10.26%.
Which makes for a depressing reading for the renters. Actual rents paid by tenants were up 8.83% in 3mo period through October 2015 and they rose 7.93% y/y in the 3mo period through October 2014. So inflation rate in rents is going up.
However, rents inflation has to be taken over the longer period of time. And here, things are not as clear cut as in the short run. Comparable CSO data goes only back to January 2003. So we have no reliable benchmark for earlier periods, albeit some bootstrapped comparatives are possible. As the result, let’s consider 1Q 2003 as the starting point for inflation – with a host of caveats attached.

This post was published at True Economics on December 8, 2015.

Gold Daily and Silver Weekly Charts – Ol’ Man River

Ol’ Man River, that Ol’ Man River
He must know somethin’ but he don’t say nothin’
He just keeps rollin’, he keeps on rollin’ along.
Just like gold, which keeps rolling along, from West to East.
South African headquartered multinational mining company Anglo-American was taken out and beaten with an ugly stick in London on the news that they were suspending the dividend and laying off about 85,000 workers.
Anglo is a member of the FTSE 100. They are one of the world’s largest producer of platinum, and a major producer of diamonds, copper, nickel, iron ore and metallurgical and thermal coal.
So much for commodities that support the real economies of the world.
Gold held its value rather nicely, with silver given up just a few cents.
And surprise, there was an actual delivery of gold at The Bucket Shop yesterday, even though it was primarily a ‘house to house’ delivery of gold from GLD custodian HSBC to metals hump JPM. Let’s see if JPM is the big stopper as they were in the last active month, should anyone decide to try to take delivery of something in size.

This post was published at Jesses Crossroads Cafe on 08 DECEMBER 2015.

These Are The Biggest Hedge Fund Casualties From The ECB’s “Shocking” Disappointment

When last Thursday morning the ECB, widely expected to unleash an epic bazooka, instead revealed the tiniest of water pistols, it did not only impair its own credibility and “forward guidance”, it sent a shockwave through the markets by not only slamming European equity markets, but by send the Euro currency soaring by 3% or the most since 2009. To be sure, Mario Draghi did try to engage in some unprecedented market jawboning, when he admitted he was trying to talk markets up (“Not really… well of course“) but by then it was too late and the damage had been done.
How much damage?
Considering that virtually every macro hedge fund had fallen to Draghi’s hypnotic spell that the EUR was going lower, further abetted by Goldman’s confident call that the EURUSD would see a 300 pip move lower on Thursday, it is safe to say that everyone was on the same side of the boat.
CFYC Commitment of Traders data confirm this, showing that bets by hedge funds on the euro falling outnumbered bets on the euro rising by 4.7 to 1 as of Nov. 24. Which explains the violent, almost unprecedented market response to the ECB’s disappointing announcement.
“Everyone and their mother were short the euro,” one London-based hedge-fund investor told the WSJ.
And, as the WSJ adds betting on a weaker euro and a stronger dollar has been one of the most popular positions for macro hedge funds, if only until Thursday when things… changed.

This post was published at Zero Hedge on 12/08/2015.


Gold: $1076.30 down $.10 (comex closing time)
Silver $14.09 down 31 cents
In the access market 5:15 pm
Gold $1075.00
Silver: $14.16
At the gold comex today, we had an extremely poor delivery day, registering 120 notices for 12,000 ounces. And this is the biggest delivery month of the year for gold? Silver saw only 1 notice for 5,000 oz.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 196.47 tonnes for a loss of 106 tonnes over that period.
In silver, the open interest rose by a smallish 512 contracts despite the fact that silver was down 19 cents with respect to Monday’s trading. The total silver OI now rests at 162,910 contracts In ounces, the OI is still represented by .815 billion oz or 116% of annual global silver production (ex Russia ex China).
In silver we had 1 notice served upon for 5,000 oz.
In gold, the total comex gold OI rose by a large 5,288 contracts as the OI rose to 394,401 contracts despite the fact that gold was down by $8.10 with respect to Monday’s trading. Today the bankers provided the initial HFT and the specs longs continued their assault on the short side but this failed as the bankers continued their assault on the specs by continually buying.
We had no changes in gold inventory at the GLD, / thus the inventory rests tonight at 634.63 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. Our 670 tonnes of rock bottom inventory in GLD gold has been broken. 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, after they deplete the GLD will be the FRBNY and the comex. In silver, we had no change in silver inventory at the SLV/Inventory rests at 321.507 million oz
First, here is an outline of what will be discussed tonight:

This post was published at Harvey Organ Blog on December 8, 2015.

And Now Harry Potter Author Chimes In, Says Trump Is Worse Than Voldemort

While Donald Trump has been compared to some of history’s worst people, it appears his latest diatribe has pushed Harry Potter author J. K. Rowling too far…
How horrible. Voldemort was nowhere near as bad. — J. K. Rowling (@jk_rowling) December 8, 2015

As The BBC reports, Donald Trump’s comments on “total and complete shutdown” of Muslims entering America, which he said were “common sense”, have sparked uproar with The White House proclaiming his comments “contrary to US values,” and Jeb Bush exclaiming Trump is “unhinged.” But social media has found a different meme… no longer are comparisons to Hitler severe enough, now it’s Voldemort…

This post was published at Zero Hedge on 12/08/2015.

Strong 3 Year Auction Surprises Bond Watchers As Shorts Rush To Cover

With the Fed’s first rate hike in nearly a decade set to take place next Wednesday, and a move up from the lower bound precisely 7 years after the Fed cut rates to zero for the first time, there was some trepidation that today’s 3 Year auction could turn nasty. That did not happen, and instead the Treasury managed to sell $24 billion in 3 year paper on quite reasonable terms, with the high yield printing at 1.255%, stopping through the When Issued by 0.9 bps.
The internals were also solid, with the Bid to Cover rising from last month’s 2.824 to a respectable 3.14, while the Primary Dealer take down of just 34% was the lowest since May of 2010. The other demand came from Indirects who accounted for 47.4% of the final placement, fractionally below the TTM average of 48.4%, while Direct demand surged from 15.1% to 18.6%, well above the TTM average of 10.7% and the highest since September of 2014.

This post was published at Zero Hedge on 12/08/2015.

SP 500 and NDX Futures Daily Charts – It’s a Small World After All

US stocks slumped hard this morning on the overnight news which was posted here that the Chinese import/export figures for November were simply awful.
If Chinese exports were down sharply, what does that say about US domestic demand and likely retail sales?
Let’s see if the US can strike a trend here ahead of the big events of next week.

This post was published at Jesses Crossroads Cafe on 08 DECEMBER 2015.

Here Are HSBC’s Top Risks For 2016

With the end of the fiscal and calendar year upon us, sellside research rushes to put to print its latest forecasts about the coming year, and HSBC – which recently made headlines when it slashed its 2016 year-end forecast on 10-Year yields from 2.8% to 1.5% – is no exception.
Earlier today, the firm’s research team issued a report laying out the top 10 risks for 2016, which had a peculiar caveat suggesting some at the bank is not in a rush to get arrested…

This post was published at Zero Hedge on 12/08/2015.

Late Morning Post

Behind the 8-ball a bit this morning in terms of time. Therefore, just this quick post.
We had a bit of miscommunication today. I thought I was scheduled to be on with John B. Wells next Tuesday. Instead, we recorded today. And now it’s quite late and after noon in NY.
Craziness again today that has subsided a bit as I type. Crude saw a low earlier of $36.64 but it’s now about a dollar off of those lows. Stocks opened down and then rallied. Now the Dow is back down 160 points so we’ll see what the afternoon brings.
Glencore and DoucheBank are making new lows. GLEN got all the way down to 76.32 before closing at 80, which was still down 5.36 on the day. DB has made new multi-year lows at 24.45, down over 3% today.
All of this but gold is hanging in there. The same guy who got me the updated GOFO rates last week says that one-week GOFO just made a new low earlier today at -0.55%. If that’s the case, that certainly helps explain why gold has rebounded and held in there today, down just $2 at $1073.
This is obviously pretty big news in the mining sector:
More on the extreme CoT positioning here: And this is just getting more dangerous by the day: Lastly, I’d like to draw you attention to something which was sent to me earlier. I have a long history with this particular blogger and here’s what I know. He is a former DoucheBank gold trader and he’s always been desperate to prop up the current paper derivative pricing structure and, by extension, his former employer (which teeters in insolvency, as noted above). To that end, he repeatedly blasts many of us in the gold blogosphere as know-nothing “charlatans” and “con men”. However, it is HE who is disingenuous and HE is the one who uses half-truths and falsehoods in his assertions…and this latest is full of examples. Here’s the link:

This post was published at TF Metals Report on December 8, 2015.

Collapse Of U.S. Shale Oil Production Has Begun

We no longer have to wait for the collapse of U. S. shale oil production, it already has begun. Unfortunately, this is bad news for the U. S. Government and domestic economy. Falling U. S. oil production will put severe stress on the highly leveraged debt based financial system over the next several years.
According to the U. S. Energy Information Agency (EIA) recent Drilling Productivity Report, shale oil production from the top fields is forecasted to decline 116,000 barrels per day in January 2016. Even though overall U. S. shale oil production is forecasted to be down 12% from its peak in March 2015, one of the largest fields in Texas is down a whopping 30%:

This post was published at SRSrocco Report on December 8, 2015.