How Millennials Could Bring The Oil Industry To Its Knees

Maybe in better times, the staggering population of the millennial demographic would be a hurdle over which Big Oil could easily leap. But times are tough, and that isn’t our today.
Today, we have Saudi Arabia, Iran, and OPEC officials swaying the oil market with each strategic utterance. We have uber-low prices that have caused many to go under. Big Oil debt is soaring, and lenders are growing skittish. We have record production in Saudi Arabia, and Iran is again pumping at near-sanction levels. We have U. S. shale that is still producing at high rates, albeit with far fewer rigs in action, and with far fewer employees. U. S. shale survivors are leaner and meaner, and Saudi Arabia is desperately trying to keep its head above water, refusing to relinquish market share, no matter what the cost. It’s been a taxing time.
And now, enter the tax to the oil industry – the millennials.
Big Oil should take a note from other markets that have already had to address the impact millennials will have: ignoring this market segment – although a tricky to define market segment – would be a costly ignorance indeed.

This post was published at Zero Hedge on Sep 2, 2016.

California Just Passed A $1 Billion Tax On The Whole Country That No One Noticed

The California State Assembly recently passed a bill that received minimal recognition by the press, outside of the state, but has substantial negative consequences for basically everyone in the country. Once signed by Jerry Brown, the bill, known as AB 1066, will make California the only state in the entire country to provide overtime wages to ag workers after 8 hours a day or 40 hours per week. This change will add about $1BN annually to the cost of growing food in California which will ultimately be passed along to consumers. And since eating isn’t really optional, this is effectively a $1BN tax that California has decided to levy on the entire country. Worse yet, increasing food prices is essentially the most regressive form of “tax” possible given the disproportionate share of wages spent on food by low-income families. And, while you may not know it, California is an agricultural powerhouse that produces roughly 1/3 of all vegetables consumed in this country and 2/3s of the fruits and nuts.
Now, we know what you’re thinking…why would everyone be entitled to overtime pay at 40 hours per week except farm workers? Well, there is logic behind the exclusion and it has to do with the seasonality of farming. Unlike most industries, farmers are not able to spread their labor needs throughout the year due to harvest schedules and the perishable nature of their crops. But farm workers aren’t the only ones excluded from overtime pay. In fact, California has established special overtime rules for hourly workers in a number of other highly-seasonal sectors, including firefighters, actors and ski-resort employees, to name a few.
As you can see from the chart below, the total number of people working in the ag industry in California spikes by about 33% starting in May every year and remains elevated for about 6 months through October. We’ve only graphed 2015 but the seasonal ramp is very similar every year.

This post was published at Zero Hedge on Sep 2, 2016.

August Payrolls Loom: Futures Flat, Dollar Rises, Treasuries Slip

The much anticipated payrolls day, expected to provide at least some more clarity on future Fed policy, has arrived and heading into today’s report both price action and newsflow has been muted. U. S. equity index futures were fractionally higher, as European stocks rise 0.6% while Asia was flat. Gold fell as the dollar rose, while comments by Vladimir Putin which endorsed an OPEC oil production freeze while granting Iran an exemption, have pushed oil higher.
Federal Reserve Vice Chairman Stanley Fischer said this week that upcoming economic reports would determine the trajectory of interest-rate increases, having previously highlighted Friday’s payrolls update as being of importance. Odds of a rate increase at the Fed’s September meeting have swung between 34 percent and 36 percent this week amid conflicting data showing an improving jobs market and an unexpected contraction in manufacturing.

This post was published at Zero Hedge on Sep 2, 2016.

Physical Gold Delivery Failure By German Banks

The physical gold delivery failure to clients of Deutsche Bank who own Xetra-Gold, the gold exchange traded commodity, was confirmed yesterday by Deutsche Bourse who said that the inability to deliver gold was not limited to Deutsche Bank and that other German banks were having ‘problems’ delivering gold.
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This is yet another example of a bank not making good on promises to redeem their gold investment products, as seen with ABN Amro in 2013 and indeed Julius Baer in recent months as we pointed out yesterday (see here). It is the latest example of the unappreciated risk of owning gold exchange traded commodities (ETCs), exchange traded funds (ETFs) and indeed most institutional gold investment offerings.
Xetra-Gold filed an official response yesterday regarding the physical gold delivery failure, one which can be read in German on the following page and was reported and commented on by Zero Hedge overnight:
What is notable is that instead of immediately refuting the story – as it should have done if there is no breach of prospectus covenants – and declaring that any and all physical gold demands have and will be satisfied, Xetra took a very circular approach to responding, one which in effect confirmed our concerns, that the issue was not so much with Xetra, but with the sponsor bank, in this case Deutsche Bank.

This post was published at Gold Core on September 2, 2016.

Can The “Rig” Survive An Economic War?

I did not plan to write another public article so soon after the last one but today’s topic(s) are very important and very connected in my opinion. I apologize for the length but I can’t make this stuff up, I just try to tie it together. First, we have been hearing the word ‘rigged’ on a daily basis and pertaining to many facets of our life. We hear the word regarding markets, politics (specifically elections), our rule of law and judicial system, and even when it comes to lawmakers and bribery.
Bill Gross formerly of PIMCO, at one point managed the largest pool of money on the planet, he is no fool. I would also believe because of his fame, tenure and reputation, he would not lightly claim that markets are ‘rigged’. Not only has he claimed this for several months, he now says THE FED ‘has mastered market manipulation’! Please understand this is a VERY BIG statement on his part as he is (was?) a member of a very exclusive club (and we ain’t in it). Do you suppose he would risk his reputation and inclusion in ‘the club’ lightly on just a suspicion? Or do you believe he is a man who firmly believes what he says and does so out of a steadfast conscience?
Speaking of ‘rigged’, there are those out there who will agree that ALL markets are rigged …except of course for gold and silver because ‘they would never do this’ or ‘central banks could care less’ about gold. It was just last week where we saw $1.5 billion worth of gold sold in just seconds …today we witnessed another $4.7 billion dumped all at once. These two trades combined represent over 6% of global annual production or about 3 weeks’ worth. As I have said 20 times before, no one has this amount of gold to sell and no trader who wanted to keep his job would ever sell like this, period. You have again witnessed IN YOUR FACE MANIPULATION!

This post was published at JSMineSet on September 1st, 2016.

Political Business Cycle and Gold

Many economists ask why economic activity fluctuates. Among many theories of business cycles, there is the politicalbusiness cycle, formulated in the 1970s. According to it, incumbents try to juice up the economy during election years to improve their chances of re-election. They use fiscal or monetary policy to stimulate the economy just before an election to increase their odds of remaining in office. However, although expansionary monetary and fiscal policies are politically attractive in the short run (due to increased spending), they might lead to some unpleasant consequences in the long term (like high inflation or excessive budget deficits). Therefore, after the election is over and the next election is far away, politicians reverse the course and restrict the fiscal and monetary stimuli. Thus, major elections produce economic booms and busts, as politicians try to create an artificial boom before everyelection and take advantage of voters’ short-sightedness.
Indeed, some data seem to confirm this theory, e.g., Achen and Bartels (2004) from Princeton University found that in the period from 1947 to 2003, the average income growth rate was 1.4-1.5 percentage points (or 80 percent) higher in presidential election years than in other years.
Researchers point out that stimulation comes from the fiscal policy rather than from the monetary policy, as the Fed is an independent central bank. Indeed, Drazen (2001) sees no evidence of opportunistic expansion of monetary policy before elections, but of pre-electoral increases in transfers and other fiscal policy instruments. However, the Fed passively accommodates fiscal policy in an election year to avoid any critique.
How does it all relate to the gold market? Well, history shows that the U. S. central bank tries to avoid, if possible, any major monetary actions as an election approaches. Therefore, the Fed is unlikely to raise interest rates until December. It would imply a flatter expected path of the federal funds rate, which would be positive for the gold market (however, the expectations of a federal funds rate change may fluctuate due to hawkish FOMC members’ comments or strong economic data).

This post was published at GoldSeek on 2 September 2016.

“August Curse” Continues As Payrolls Miss, Rise By Only 151,000; Hourly Earnings Disappoint

With Wall Street expecting another solid month of payroll growth, following multiple-sigma outlier prints in June and July, the whisper expectations was for a miss on the back of the previously discussed “August Curse” which has seen a consistent miss in the month of August for the past decade, and that is precisely what happened when moments ago the BLS reported that in the month of August only 151K jobs were added, missing the consensus of 180K job growth by nearly 30,000 jobs.
The household survey did not bring any offsetting good news either as reported employment rose only 97,000 in August to 151.614 million.
The birth-death adjustment added 106K “jobs” to the unadjusted number.
The unemployment rate remained flat at 4.9%, despite expectations of a decline to 4.8%, while hourly earnings rose just 0.1%, also missing expectations of 0.2% increase, and down sharply from last month’s 0.3% rebound.
The labor force participation rate remained flat at 62.8% as the number of people not in the labor force rose by 58,000.

This post was published at Zero Hedge on Sep 2, 2016.

It Starts: Rents Drop in 10 of the Top 12 US Markets

Check out the rental trends in your own city. The construction boom of apartment and condo buildings around the US, especially in high-priced metro areas on the East Coast and the West Coast, is now colliding with the reality of squeezed household incomes and soaring rents. As a consequence, in many of the hottest markets – including San Francisco, where the explosion in rents is called ‘The Housing Crisis’ – rents have started to drop.
Landlords are competing with a surge of new supply from new apartment and condo developments. Incentives, such as one month free rent, a rarity in hot markets like San Francisco, have reappeared. And in some of the neighborhoods with new apartment towers, the ‘now leasing’ banners are everywhere.
On a month-to-month basis, median asking rents of one-bedroom apartments fell in 10 of the top 12 rental markets in August, according to the Zumper National Rent Report, which analyzes rental data from over 1 million active rental listings in the US.

This post was published at Wolf Street on September 2, 2016.

Mike Kosares: Gold’s strong summer may be harbinger of things to come

We are now wrapping up one of the stronger summers in memory at USAGold and heading into the strongest time of year seasonally for gold and silver — September through February.
Normally the summer months are the quiet part of the year, but 2016 has been an exception. The price of gold is up 9 percent since the beginning of June and silver over 18 percent.
ETF gold inventories reached highs in July and August not seen since 2009, the year after the collapse of Lehman Brothers and the launch of the so-called credit crisis. Some see the stronger than usual summer showing for the precious metals markets as a harbinger of things to come.

This post was published at USA Gold

The whole game is about containing Russia and China — Pepe Escobar

The next BRICS summit, in Goa, is less than two months away. Compared to only two years ago, the geopolitical tectonic plates have moved with astonishing speed. Most BRICS nations are mired in deep crisis; Brazil’s endless political/economic/institutional debacle may yield the Kafkaesque impeachment of President Dilma Rousseff.
BRICS is in a coma. What’s surviving is RC: the Russia/China strategic partnership. Yet even the partnership seems to be in trouble – with Russia still attacked by myriad metastases of Hybrid War. The – Exceptionalist – Hegemon remains powerful, and the opposition is dazed and confused…or is it?
Slowly but surely – see for instance the possibility of an ATM (Ankara-Tehran-Moscow) coalition in the making – global power continues to insist on shifting East. That goes beyond Russia’s pivoting to Asia; Germany’s industrialists are just waiting for the right political conjunction, before the end of the decade, to also pivot to Asia, conforming a BMB (Berlin-Moscow-Beijing) coalition.
Germany already rules over Europe. The only way for a global trade power to solidify its reach is to go East. NATO member Germany, with a GDP that outstrips the U.K., Canada, Australia and New Zealand, is not even allowed to share information with the ‘Five Eyes’ secret cabal.

This post was published at Sputnik News

Sweden’s latest six-hour work day experiment was a complete failure

After year-long trial at the retirement home Sjjungfrun in Ume, Sweden, it is apparent that the six-hour work day didn’t achieve any of what was hoped for.
Similar to the experiment at the Svartedalen retirement home in Gothenburg, which was also completed this year, nurses at Sjjungfrun in Ume had six-hour days on eight-hour salaries for a year.
Proponents of shorter work days in Sweden, like the sociologist Roland Paulsen of Lund University, argue that the ever increasing productivity of society means that in the long run there wont be enough employment to go around for eight hours per person per day, and a that on average two hours of any person’s work day is filled with unproductive labor anyways.
The Ume experiment was motivated by (political) expectations that reduced working hours would lead to increased personal health and well-being, compensating increased costs – and any productivity losses – by savings on sick leave and health-related expenses in the long-run.
The results leave little hope of any such beneficial effects even in the short-run. Sick leave did not decrease over the year but actually rose, from 8% to 9.3%, reports Sundsvalls Tidning.

This post was published at Business Insider

Trade wars: Why the central pillar of global order is in danger of collapse as TTIP disintegrates

The Transatlantic pact intended to unite Europe and North America in a vast free trade zone is close to collapse after France called for a complete suspension of talks, accusing the U.S. of blocking any workable compromise.
‘Political support in France for these negotiations no longer exists,’ said Matthias Fekl, the French commerce secretary.
Mr Fekl said his country would request a formal decision by E.U. ministers at a summit in Bratislava to drop the hotly-contested deal, known as the Transatlantic Trade and Investment Partnership (TTIP).
‘The Americans are offering nothing, or just crumbs. That is not how allies should negotiate. There must be a clear and definite halt to these talks, to restart them later on a proper basis,’ he said.

This post was published at The Telegraph

Doug Casey: The U.S. Global RoboCop Is Going to Self-Destruct

Nick Giambruno: Doug, I know you’ve been thinking about how the Greater Depression will unfold. It’s no secret the government has created the biggest credit bubble in history through endless money printing – euphemistically called QE – and now ‘NIRP’ (negative interest rates). But I understand you’ve had a different ‘bubble’ on your mind lately…
Doug Casey: Yes. I’ve been thinking about the gigantic bubble in military spending in the U.S. And how it’s one of the worst things that can happen, and at the absolute worst time. The U.S. Government is bankrupt, we’re about to go into the trailing edge of a monumental economic hurricane, and both of the presidential candidates are talking about vastly increasing military spending.
From an economic point of view, money spent on the military is almost totally wasted. It’s worse than money spent to dig holes during the day and then fill them in again at night – at least that does no actual damage. The ‘product’ of the military is killing people and destroying property. And the amount of money the U.S. spends is provocative to other powers, who feel they have to counter with their own spending. Arms races never end well.
I’m going to say some unflattering things about the military, and realize it will probably shock most Americans to hear them. Americans still have a high regard for the military – far too much. They see it as one of the few American institutions that still ‘works.’ They see it as something defending them from evil outside the borders of the ‘homeland’ – which, by the way, is a very recently coined term. But the military is actually just another government bureaucracy, like the Post Office. Albeit much more heavily armed.

This post was published at International Man

Small Business Defaults Rise, Borrowing Drops: “What Scares Us Is The Rise In Delinquencies”

Yesterday, we pointed out something disturbing when we looked at the latest NACM Credit Manager Index report: over the past year it had declined steadily, hitting the lowest print since 2009, or as the National Asscoiation of Credit Managers’ economist Chris Kuehl said ‘Overall, it was fun while it lasted – the trends had been up and now they aren’t” adding that ‘the best that can be said about the decline is that it was bad and hasn’t gotten much worse…. The sales collapse is consistent with what has been appearing in the Purchasing Managers’ Index and other statistics, so it is unlikely to be an anomaly, not good timing as far as the retail community is concerned.’
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Today, we got a validating, and equally concerning, perspective on how small businesses are doing, courtesy of the latest Thomson Reuters/PayNet Small Business Lending Index, which fell to 121.5 in July, the lowest level since January and down from an upwardly revised 139.2 in June.

This post was published at Zero Hedge on Sep 2, 2016.

Apple May Send Cash Back to USA Thanks to EU Commission

Tim Cook, the head of Apple, said that the company may send billions of dollars back to the US next year in 2017 in response to the EU Commission retroactively changing tax deals. Apple struck a deal with Ireland and agreed to locate there for taxes. Now the EU Commission is saying individual member states may not undercut anyone else on taxes to gain jobs for their own population. Apple entered into the agreement and paid the taxes to Ireland. Now the EU Commission says Apple must pay almost $15 billion more in taxes because Ireland undercut other members. Bureaucrats do not understand human nature and assume that people must obey and cannot see that this may destroy their own economy. The EU Commission cannot see reality. What they have done with Apple is set in motion a race to now exit Europe.
Cook made the comments in an interview with Irish media expressing the blunt fact that Apple may now simply repatriate cash back to the USA. He did not specifically say how much cash Apple might take home from foreign countries. Nevertheless, Cook’s comments are a direct response to the arbitrary position of the European Commission demanding Apple needs to pay Ireland $14.5 billion in additional tax penalties because the deal was less that they would have charged. Cook has publicly stated that this EU demand was ‘total political crap.’

This post was published at Armstrong Economics on Sep 2, 2016.

Deutsche Boerse Responds To Deutsche Bank’s Failure To Deliver Physical Gold

In the latest stunning development involving a documented failure of a bank to deliver physical gold when demanded, yesterday we reported that according to German website godmode-trader.de, a client of the Xetra-Gold Exchange-Traded Commodity was told the fund’s designated sponsor, Deutsche Bank, would be unable to deliver the requested gold. This was contrary to the explict reps and warrantiesmade explicitly in the Xetra-Gold’s prospectus, which said that investors are entitled to the delivery of the certified amount of physical gold at any time, and proudly added that “since the introduction of Xetra-Gold in 2007, investors have exercised this right 900 times, with a total of 4.5 tons of gold delivered.”
As the German article concluded: anyone who wants to easily convert their Xetra-Gold holdings into physical gold – at least for clients of Deutsche Bank – can do so only by selling their shares, and then buying gold coins or bars directly elsewhere. Which leads the author to the logical question: what is the worth of the Xetra-Gold service, which certifies the right to redeem physical gold, if said delivery is no longer possible? In other words, what was supposedly an ETC which promised physical delivery upon demand, is nothing more than yet another “paper only” play.
We asked another, more nuanced question: is the inability to deliver physical gold an issue with Xetra-Gold, or with the company’s “designated sponsor“, Deutsche Bank, and if the latter is suddenly unable to satisfy even the smallest of delivery requests by retail clients, just how pervasive is the global physical gold shortage?
Our report has stirred a significant response, both at Deutsche Bank, and at Xetra-Gold, which today filed an official response, one which can be read in German on the following page.
What is notable is that instead of immediately refuting the story – as it should have done if there is no breach of prospectus covenants – and declaring that any and all physical gold demands have and will be satisfied, Xetra took a very circular approach to responding, one which in effect confirmed our concerns, that the issue was not so much with Xetra, but with the sponsor bank, in this case Deutsche Bank.

This post was published at Zero Hedge on Sep 2, 2016.

Payrolls Preview: Brace For Disappointment (But Expect The Fed To Shrug It Off)

As we noted earlier, August Non-farm Payrolls have been weaker than consensus expectations in each of the last 5 years and in 14 of the last 18 years of available data.
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Note: This data compares the initial data print with the consensus expectations at the time of the print.
And furthermore, going back 25 years, no month has produced less jobs than August…

This post was published at Zero Hedge on Sep 2, 2016.