The Massive Decline In Crude Oil Reserves

I spent a lot of time in 2015 warning that at year-end we would see a huge decline in crude oil reserves. As I have explained in the past, the reason I expected this is because of the relationship between proved oil reserves and oil prices. This relationship is important for understanding oil reserves. Some articles that recently began making the rounds made certain conclusions from this paper – A global energy assessment – in which some subtleties about oil reserves have been lost. So let’s review.
An oil resource refers to the total amount of oil in place in the particular area. Generally, most of a resource can’t be technically recovered, but the resource refers to the amount that could potentially be recovered. These estimates can go up and down, but the resource is what could be recovered at 100% recovery based on current estimates.
As an example, it is estimated that the Bakken Shale centered under North Dakota contains several hundred billion barrels (bbl) of oil (the resource). However, what is technically and economically recoverable in the Bakken has been estimated at less than 10 billion barrels (<10% of the resource).
The portion that is technically AND economically recoverable at prevailing oil prices may be classified as proved oil reserves. (The same concept applies for natural gas). This means that proved reserves are a function of prevailing oil prices. This qualifier is often misunderstood.

This post was published at FinancialSense on 05/11/2016.

Market Talk – May 12, 2016

With the US markets having provided the momentum for the opening it was not surprising that Asian equity markets opened with a reluctant bid. Earlier in the day we had heard from the IEA regarding oil supplies and although this was still a discussion point in Tokyo it needed additional enthuses to lift markets higher. This was eventually found in the JPY when again, weakness led to movement and eventually we were back trading with a 109 handle. Eventually, we saw the Nikkei back in the black closing 0.4% higher on the day. Sentiment alone was insufficient to lift the Hang Seng and that market closed down 0.7%. Shanghai was to close almost unchanged with the currency being marked a little weaker (at 6.4959).

This post was published at Armstrong Economics on May 12, 2016.

Turkey Moving Close to Civil War

Kemal Kilicdaroglu, the Turkish opposition leader of the social democratic CHP, has sharply criticized the push by the Turkish government to remodel Turkey into a presidential system. The CHP chief expressed concern about the future of the country. He warned that the rising discontent may lead to a civil war. ‘What a presidential system that supposed to be, where one talks and Turkey is condemned to silence. The judge will then create according to his ideas deputies lists, from which emerges the legislature. Such a presidential system can not be implemented without the blood flows,’Kilicdaroglu warned.

This post was published at Armstrong Economics on May 15, 2016.

The Poverty of GDP

The Economist recently ran a piece criticizing the suitability of GDP as a measure of economic development and material progress. In the past, the publication has touched on various other weaknesses of this aggregate measure – including the fact that it is not a timely and reliable indicator that can guide economic policy – as well as suggesting new measures for prosperity.
As expected, none of these articles discuss one main drawback of the GDP aggregate – the inclusion of government spending. In America’s Great Depression, Rothbard removed the G component to suggest the Gross Private Product (or the netted version, the Private Product Remaining) as a better gauge of the material progress of a nation. Professor Herberner has also pointed out various important economic aspects that GDP, as a rough aggregate measure, leaves out. Moreover, professor Salerno has also shown that a reduction in the GDP – as it is calculated today – via a reduction in government budgets and taxation would in fact be underlined by an increase in the capital stock, a rise in the economic welfare of producers, and a higher real standard of living for the entire population.

This post was published at Ludwig von Mises Institute on May 14, 2016.


When the ‘Fight for $15′ movement was first sweeping the country, none of its proponents had any idea what a higher minimum wage would truly entail. They live in a fantasy world where everyone should be paid a wage based on their needs rather than their skills, and where businesses and entrepreneurs can provide an endless supply of money (they’re just too greedy to do so willingly).
But now their chickens are coming home to roost. Companies that once provided cheap labor for unskilled workers are being forced to cut hours and benefits. Or in the case of Wendy’s, they’re forced to automate some of their services to make up the money they’re expected to lose from a higher minimum wage.

This post was published at The Daily Sheeple on MAY 14,.

Market Talk – Close of Week May 13, 2016

A disappointing end of the week for core Asian equity markets. The Nikkei opened firmer but by mid-morning had started to crumble as profit-taking and a firmer JPY weighed on prices. We eventually closed the day down 1.4% with Hang Seng not far behind (-1%. The Shanghai index tried desperately to hold on to gains for the majority of the day but by the close drifted into negative territory and eventually closed down 0.3%. The Yuan had slipped marginally to fix at 6.5225. The BOJ remains ready to do what it can but sees moderate growth at best. We saw a mixed bag of data from Europe which really could have been interpreted either way but eventually the market decided it was positive and all core indices closed firmer. Germany’s GDP was slightly better than expected ( 0.7% QOQ) whilst Europe (estimated 0.6% against actual 0.5%) was not! US numbers at lunchtime were better than forecasted and so helped Europe to close the week stronger than expected given Europe’s data. By the close all core had performed from FTSE, CAC and IBEX at 0.6% up to the DAX at 0.9% firmer.

This post was published at Armstrong Economics on May 14, 2016.

Recession Watch: Freight Volume Drops, Worst Level since 2010

Inventory glut, lousy consumer demand, the global economy…
Freight shipments by truck and rail in the US fell 4.9% in April from the beaten-down levels of April 2015, according to the Cass Transportation Index, released on Friday. It was the worst April since 2010, which followed the worst March since 2010. In fact, shipment volume over the four months this year was the worst since 2010.
This is no longer statistical ‘noise’ that can easily be brushed off.
The Cass Freight Index is based on ‘more than $26 billion’ in annual freight transactions by ‘hundreds of large shippers,’ regardless of mode of transportation, including by truck and rail. It does not cover bulk commodities, such as oil and coal and thus is not impacted by the collapsing oil and coal shipments. The index is focused on consumer packaged goods, food, automotive, chemical, OEM, heavy equipment, and retail.

This post was published at Wolf Street by Wolf Richter ‘ May 14, 2016.

The Dismal Retirement Picture For America’s Older Generation

As we have pointed out many times in the past (most recently here), the jobs “recovery” has gone disproportionately to older workers at the expense of younger workers.
In fact, as Bloomberg points out, the employment-to-population ratio for those 65 and over is at its highest level since the early 1960’s.
This creates a bottleneck for younger workers who are looking to move up from their current roles, and also those that are trying to gain entry level employment but can’t until the current occupiers of those seats can move up. The situation doesn’t appear to be on the verge of getting any better either, as 27% of Americans say they will “keep working as long as possible” according to a 2015 Federal Reserve study – and to make matters worse (for younger generations), 12% of Americans say they don’t plan to retire at all.

This post was published at Zero Hedge on 05/14/2016.

China’s Debt Bomb: No One Really Knows the Payload

The ramp up in Chinese debt accumulation has been a leading concern of investors for years. The average total debt of emerging market economies is 175% of GDP, and skyrocketing corporate non-financial debt has launched China far beyond that number. The real question is: by how far?
The answer is disconcerting, because nobody really knows.
If the Chinese debt bomb is detonated, the impact on markets is anybody’s guess. Kyle Bass says the losses would be 5x that of the subprime mortgage crisis, while Moody’s says the bomb will be safelydisarmed by authorities far before it goes off.
In today’s chart, we look at various estimates to the size of China’s debt bomb, its payload, and what might spark the fuse.
China’s Debt Bomb: The Payload
Mckinsey came out with a widely-publicized estimate of China’s debt at the beginning of 2015. Using figures up to Q2 2014, they estimated that total Chinese debt was 282% of GDP, an increase from 158% in 2007.
Since then, various trusted organizations have come up with follow-up estimates.

This post was published at The Burning Platform on 14th May 2016.

How The Baby Boomers Blew Up The Stock Market

Authored by Jesse Felder of The,
In my last piece, I openly worried about a few very smart investment minds who have recently attempted to rationalize or justify the persistently high equity valuations we have seen over the past 25 years. I don’t believe that, ‘it’s different this time.’ The modern economy doesn’t have any new magical component that makes a standard stream of cash flows any more valuable than they were 50 or 100 years ago. Nor have investors become generally more intelligent.
I think there’s a very simple explanation for the high stock market valuations since 1990: demographics. From 1981-2000, the baby boom generation came into their peak earning and investing years. Is it just coincidence that during that very same time we witnessed the largest stock market valuation bubble in history? No. In fact, there is a statistically significant correlation between demographic shifts like this and stock market valuations.

This post was published at Zero Hedge on 05/14/2016 –.

Liquidity Problems? Deutsche Bank Offers 5% Yields If Depositors Lock Up Their Money For Three Months

One of the reasons why central banks around the globe have flooded the financial system with trillions in excess reserves is to make sure that banks no longer have to rely on potentially fleeting short term deposits (and is also why negative interest rates have become the norm in so many part of the world, that $10 trillion in bills and bonds now trade with a negative yield). As a result of years of such central bank policy, banks – mostly in Europe – no longer need to compete with each other for deposits: after all why offer tempting deposit rates in an age of NIRP when banks can get all the liquidity they need straight from the ECB and in some cases even get paid on it.
Furthermore, the whole point of NIRP is to slowly unleash negative, not positive, interest rates in order to discourage savings.
Which is why we were surprised to find that in a promotional offer by Europe’s biggest, and by many accounts most insolvent, bank, Germany’s Deutsche Bank is not only not rushing to penalize depositors, on the contrary it is offering its Belgian clients a 5% gross return for new 10,000 – 50,000 deposits if this money is locked up for the next three months. The offer is only valid for the next 40 days, until June 24.
Why the offer? All else equal it would appear as if Deutsche Bank suddenly needs liquidity quite urgently (but only enough per person so that in a worst case scenario the amount is fully insured by the government) with a 3 month lock up; so urgently it is willing to pay sn interest which is higher than on some European junk bonds.

This post was published at Zero Hedge on 05/14/2016 –.

German Study: USA is the Top Tax Haven in the World

A new study by the Green Party in Germany places the USA at the top of the list of tax havens for foreign investors. They have highlighted the key states in their study. I have written about this before. The strong capital flows coming into the USA from overseas have been stunning, to say the least. Some 3,000 millionaires from Greece, 10,000 millionaires from France, 6,000 millionaires from Italy, 2,000 millionaires from Spain, and about 2,000 millionaires from Russia have all migrated to the USA.
This is confirming what we see on capital flows. The dollar haters are incapable of looking at international news, and they only focus on the Fed and the Treasury. They seem incapable of objective analysis or looking at the entire world.
Armstrong Economics

This post was published at Armstrong Economics on May 14, 2016.

Which Countries Will Be Tomorrow’s Winners & Losers?

The dictum ‘demographics is destiny’ proposes that all the complexities of finance, society and politics are ultimately guided by demographics: the relative size of each generation, birth rates, death rates, etc.
For example, an oversized generation of retirees and an undersized generation of workers to support them has far-reaching consequences that can’t be legislated away.
The influence of demographics isn’t limited to pension costs. Some analysts have made the case that oversized generations of young men align all too well with the launching of wars.
The point is that birth/death rates – low and high–have consequences that impact national destinies for decades.
Another school holds that geography is destiny: if a nation’s geography is favorable, the barriers to prosperity and stability are low, while the barrier is high for nations with unfavorable geography.
Peter Zeihan, author of the 2014 book, The Accidental Superpower: The Next Generation of American Preeminence and the Coming Global Disorder, lists the core geographic attributes that are either favorable or unfavorable in ways that influence a nation’s long-term prosperity and built-in geopolitical challenges.
What does geography have to do with prosperity, stability and geopolitical risks?
Navigable rivers that reach deep into productive interior regions lower costs of transport dramatically, while natural harbors enable low-cost access to international markets via ships.

This post was published at PeakProsperity on Friday, May 13, 2016,.

For The American Farmer “It’s Death By A 1,000 Knives’- US Farmland Values Plunge Most In 30 Years

Not so long ago, US farmland – whose prices were until recently rising exponentially – was considered by many to be the next asset bubble. Then, exactly one year ago, the fairytale officially ended, and as reported in February, US farmland saw its first price drop since 1986. It was also about a year ago when looking ahead, very few bankers expected price appreciation and more than a quarter of survey respondents expect cropland values to continue declining.
They were right.
According to several regional Fed reports released last Thursday, real farmland values in parts of the Midwest fell at their fastest clip in almost 30 years during the first quarter.

This post was published at Zero Hedge on 05/14/2016 –.


Jeff interviews Mises Institute member Daniel from the barrios of Caracas, Venezuela. Topics include: Anarcho-capitalism in Venezuela, the trouble with socialism, the Mises Institute in Venezuela, $1 a day maximum withdrawal limit, long lines for the supermarket, anarchism is unknown in Venezuela, armed private security is not allowed greatly adding to the danger, only criminals have guns, murder rates skyrocket in gun free zones, hyperinflation with more to come, very dangerous to speak up against the government.

The Dollar Vigilante

This post was published at Dollar Vigilante on MAY 13, 2016.

The ECB Met With Goldman, Other Banks At Shanghai G-20 Meeting, Allegedly Leaking March Stimulus

On May 18, 2015, the ECB’s Benoit Coeure held a closed-door speech under “Chatham House” rules in which he leaked to an audience of hedge funds in London that “the central bank would moderately front-load its purchases in its quantitative easing program because of the seasonal lack of market liquidity in the summer.” The reaction was an instant 50 pips drop in EURUSD as one or more funds decided to ignore the “rules”, and promptly traded on the material, market moving leak.
The problem for the ECB is that it had just disclosed material, non-public, was inside information to a group of market professionals fully aware they would trade on the news. It wasn’t released to the trading public until around 8am the next day (London time) when it resulted in a further 150 pip plunge. This, for lack of a better word, was criminal.

This post was published at Zero Hedge on 05/14/2016 –.

The Week in Review: May 14, 2016

The Bureau of Labor Statistics released the latest job numbers last week and the results were disappointing. Mark Thornton described the numbers as ‘disturbing,’ noting that, outside of the service sector, many ‘sectors of the American economy are negative in terms of job growth.’ Going through the numbers, Ryan McMaken highlighted the troubling stat that 1 in 6 young American men are either jobless or in jail – the tragic consequences of minimum wage hikes and the absurd war on drugs. Of course an additional source of pressure comes from the relentless manipulation of our monetary system, contributing directly to current declines in median income.
In addressing the Fed, it seems that Hillary Clinton and Bernie Sanders have found common ground: the biggest problem with the Fed is simply the demographic makeup of central bank officials. Of course, as Jonathan Newman notes, the low interest rate policies both Clinton and Sanders advocate are directly responsible for hindering the various communities the two want to see better represented within the halls of the Fed. But this absurd logic is what we have come to expect from our well-paid ‘public servants.’

This post was published at Ludwig von Mises Institute on May 14, 2016.

Maduro’s Last Stand: Venezuela Declares State Of Emergency

From extending the weekend, to rationing electricity, to running out of money to print money, we’ve been covering the real-time events that have occurred in Venezuela as it devolved into a completely failed state.
Sadly, last night as starving citizens looted marketplaces in search of food, we predicted that a civil war was almost inevitable, and that Nicolas Maduro would do what he could to hang on for dear life (literally). Today we learn, with his entire socialist utopia literally crumbling beneath him, Venezuelan president Maduro has declared a 60-day state of emergency.

This post was published at Zero Hedge on 05/14/2016 –.

Venezuela: this is what a financial collapse looks like – apocalyptic social meltdown, no food, and violent crime

May 2016 – VENEZUELA – The United States is increasingly concerned about the potential for an economic and political meltdown in Venezuela, spurred by fears of a debt default, growing street protests and deterioration of its oil sector, U. S. intelligence officials said on Friday. In a bleak assessment of Venezuela’s worsening crisis, the senior officials expressed doubt that unpopular leftist President Nicolas Maduro would allow a recall referendum this year, despite opposition-led protests demanding a vote to decide whether he stays in office.
But the two officials, briefing a small group of reporters in Washington, predicted that Maduro, who heads Latin America’s most ardently anti-U. S. government and a major U. S. oil supplier, was not likely to be able to complete his term, which is due to end after elections in late 2018. ‘You can hear the ice cracking. You know there’s a crisis coming,’ one U. S. official said. ‘Our pressure on this isn’t going to resolve this issue.’

This post was published at UtopiatheCollapse on May 14, 2016.