Will Our Grandchildren Wonder Why We Didn’t Build a Renewable Power Grid When It Was Still Affordable?

In the logic of the market, it makes no sense to sacrifice trillions of dollars in current energy and income to build something we don’t yet need.
Anyone seeking clarity on the energy picture a decade or two out is to be forgiven for finding a thoroughly confusing divide. On the one hand, we have reassuring projections from the U. S. Energy Information Administration (EIA) that assume current production of fossil fuels will remain steady for decades to come. Coal will continue to decline as a share of total energy consumption, and renewables will rise modestly. In other words, everything’s hunky-dory, there’s nothing to worry about.
The EIA’s Annual Energy Outlook 2017 (64-page PDF) lays out the all-is-well, no-worries projections.
If you want to really dig deep into energy consumption, then the EIA has a treat for you: a detailed 390-page PDF report: Energy Perspectives 1949 – 2011 (link to 390-page PDF).
But just when you conclude fossile fuels will remain cheap and abundant until 2040 and beyond, you read this: Civilization goes over the net energy cliff in 2022, which references a 65-page PDF report that details a much different view of energy that will actually be available to us, as opposed to estimates of reserves awaiting extraction: Depletion: A determination for the world’s petroleum reserve (65-page PDF)
Here’s an excerpt:
Determining the depletion state of a resource is, however, not merely a matter of determining how much of the resource remains in the ground. A resource’s depletion state has as much to do with the efficiency with which it can be extracted and used as it has to do with the quantity of resource remaining in the ground. To define oil’s depletion state it is necessary to look at the efficiency with which crude oil can be extracted, processed, and used. Therefore it is necessary to understand why petroleum is produced, and then be able to analysis the entire production process; not just the extraction portion. The Quality Control Engineer defines this as determining “fitness for use”. To define crude oil’s depletion state we must first determine the quantity of it that is “fit for use”.

This post was published at Charles Hugh Smith on JANUARY 15, 2017.

Millennials are worse off than their parents: Millennials earn 20% less than baby boomers at same stage in life.

It is now official that Millennials are worse off than their parents. The Federal Reserve released a study showing that Millennials are as broke as we suspected. According to the figures released Millennials earn 20% less than baby boomers did at the same stage in life. This is a major reason why so many Millennials are living at home but are also unable to save for retirement. What compounds this issue even more is that the Millennial generation is the most educated ever in the United States. What we also know is that Millennials carry the vast majority of the $1.4 trillion in student debt outstanding. This information puts our society at a fundamental crossroads in addressing the challenges faced by the young. Do we care if the next generation is worse off than the previous one?
Millennials not doing as financially well as parents
Being young and broke seems to be a common stage in life. The only difference is that Millennials are now getting into older adulthood and many are still struggling.
‘(USA Today) Baby Boomers: your millennial children are worse off than you.
With a median household income of $40,581, millennials earn 20 percent less than boomers did at the same stage of life, despite being better educated, according to a new analysis of Federal Reserve data by the advocacy group Young Invincibles.

This post was published at MyBudget360 on Jan 15, 2017.

Nomi Prins: Big Banks Already Failing Stress Tests

Nomi Prins joined Jason Burack on the Wall Street For Main Street Podcast to discuss the impact of a strong US Dollar on the global economy and what kind of damage it could cause big banks that are already failing stress tests. Wall Street For Main Street takes on themes of finance, investing and the economy and offer a natural setting for important, independent discussions from economic insiders offered from Nomi Prins and others. The conversation delves into what to expect in the political and economic year ahead for 2017.
When asked what type of damage could a strong U. S dollar do to the global economy she noted, ‘First, the fact that the U. S dollar is as strong given how long the Federal Reserve has completed quantitative easing (QE) policies and bought securities is very troubling in general because it indicates that the rest of the world is far weaker on a relative basis.’
‘It also indicates that is it not necessarily a policy that drives dollars stronger. What’s occurring is, outside of the U. S for example, in emerging market countries, they have had funding that has been denominated in dollars over the years.’

This post was published at Wall Street Examiner on January 13, 2017.

Mauled by Peso Crash & Inflation, Mexico to Cut its Dependence on US Food Producers

It’s not all NAFTA’s fault, however.
The price of tortilla, a staple in Mexico that is consumed in myriad forms, flavors and colors, is on the rise. The country’s federal consumer association Profeco has already warned of price rises across the country, with the most pronounced increases in the states of Baja California, Colima, Quintana Roo, Guerrero, Yucatn, Nayarit, Ciudad de Mxico, Tabasco and Oaxaca.
It’s the latest spike in an ongoing trend. In the last 10 years, average tortilla prices have soared by over 90%. Early last year prices reached as high as 16 pesos per kilo in some regions. Since then the Mexican peso has accentuated its slide against the U. S, dollar, slumping 17% in 2016 and close to 5% in the first two weeks of this year.
It was only a matter of time before the traditional bugbear of inflation began to rear its ugly head. Even before the government ushered in the new year with a brutal 20% hike in fuel prices, inflation had already accelerated from historic lows to a two-year high. In January it’s expected to surpass 1% on a monthly basis, its fasted increase since 2000. And there are already rumors of further gas price spikes in February.
As the FT warns, if the cost of mainstays of the Mexican diet such as tortillas, eggs, milk and chicken start to soar, an already unpopular government can expect snowballing protests in a country where nearly half the population lives in absolute poverty.

This post was published at Wolf Street on Jan 15, 2017.

‘Gold Is Money – And Nothing Else’

– JP Morgan on December 18, 1912 in testimony to Congress
Crush The Street’s Kenneth Ameduri invited to discuss why I believe the current stock market is the most overvalued in history. We also chatted about the movement by western Governments to a digital currency system and, of course, the precious metals market. It’s my view that the pullback in the precious metals sector that began in late July was over by the end of December. I also believe that there’s good probability that the next move in the sector will be more powerful than the 2016 move.
You can listen to our conversation here:

This post was published at Investment Research Dynamics on January 16, 2017.

Is the Bond Rout Over?

While the Trump-fueled rally continues, the Fed’s been keeping a relatively low profile lately.
Maybe it’s the New Year or maybe it’s just analyzing the incoming data to determine whether last meeting’s hike did the trick. Or maybe it just doesn’t want to rock the boat ahead of the president-elect’s inauguration since the Fed’s not all that popular with him. In any case, since its last meeting and rate hike in December, the Fed and Janet Yellen have been pretty quiet.
Don’t get me wrong, Fed officials are still making scheduled speeches. In fact, just this past week, there were nine of them! It’s just that they seem to be extra guarded.
Perhaps Yellen and her colleagues know they’re mostly powerless when it comes to regime change at the Fed. Waiting is their only play for the time being. Whether they sit on their hands or not, there are movements to keep track of, because those fluctuations can mean big profits.
Not only did the president-elect launch attacks on the Fed and Janet Yellen specifically during his campaign, but earlier this month, Senator Rand Paul (along with eight co-sponsors) reintroduced his Federal Reserve Transparency Act. The legislation is widely known as the ‘Audit the Fed’ bill aimed at preventing the Fed from concealing vital information on its operations from Congress. Fed Chair Yellen believes the Fed will lose independence (and perhaps some power) with passage of the bill.

This post was published at Wall Street Examiner on January 13, 2017.

Goldman Is Concerned: “The S&P Has Surged 6% Since The Election But 2017 EPS Forecasts Haven’t Budged”

Goldman is starting to get concerned.
As chief strategist David Kostin writes in his latest weekly kickstart, while stocks have surged by 6% since the election on the prospect of higher earnings under potential Trump policies, consensus bottom-up 2017 EPS forecasts for S&P 500 have been unchanged. While Goldman explains that “the surge in equity prices to investor optimism about potential policy changes under President-elect Trump; the hope is that new business-friendly legislation will increase EPS and drive shares higher” it then admits that “if new policies eventually lead to upward EPS revisions, it would be a rare occurrence. Since 1984, there have been just six years with materially positive EPS revisions: 1988, 1995, 2004-06, and 2011.”
Not to make a too fine point of it, Goldman also notes that as of this moment, the S&P trades at 20.3x times its 2017 operating EPS forecast, and a vertigo-incuding 18.6x 2018 operating earnings.
Ok, but somehow the delta has to be bridged – how to make up the difference? How about lots of adjustments and addbacks, and hope that Trumpforia will lead to results. In fact, when factoring those two components alone, 2017 EPS surges from 116 to a whopping $130.

This post was published at Zero Hedge on Jan 15, 2017.

Nuclear Energy Sector Turns in Taxpayer-Sinkhole

Given the difficulty of accurately gauging nuclear capital expense, how can we infer if these enterprises can ever be profitable?
When a utility stock pays a dividend that yields 11 percent it is either an overlooked steal or the equity of a company with big problems – and a dividend that’s soon to be either eliminated or reduced. EDF, France’s state controlled nuclear energy giant, looks more the latter than the former. But never underestimate the determination of French politicians – right, left and center to protect and subsidize their civilian nuclear power establishment.
To understand this byzantine story of French public and private partnerships, let’s start with EDF’s current stock price. It’s priced in Paris this morning at about 9.60, slightly above the 52 week low. And down from a high of 28.78 more than two years ago.
To compound its woes, EDF’s stock sells at about 63 percent of its book value. This typically indicates the market’s view that either current earnings provide a below-cost-of-capital return or that investors don’t believe the assets are worth the value carried on EDF’s books. By way of contrast, a financially sound electric utility in the U. S. sells at about 1.5 times its book value and its shares offer investors a yield of less than 4 percent. In February, shareholders of EDF and Areva, the state controlled nuclear engineering and mining company will vote on a monumental reorganization. The reported terms would raise serious questions in Wall Street’s finest minds.

This post was published at Wolf Street on Jan 15, 2017.

Is The Biggest Treasury Drawdown In History Imminent? The “Bond Shock” Story Refuses To Go Away

While currency and fixed-income traders are having second thoughts about the extent of the Trump reflation trade just days before the inauguration of the 45th U. S. president as Bloomberg’s Vincent Cignarella writes, most readily observed in the recent 50% drop in 10Y real yields, which have slid from 0.74% in mid-December to just 0.38% in the past month, it is still far too early to call the time of death on the Trump rally.
Which brings us to the Icarus trade, laid out by Bank of America, which we pointed out last week. As a reminder, BofA’s tactical view is that after a Jan/Feb wobble, stocks & commodities will have one last 10% melt-up in H1. Call it the ‘Icarus trade’. The current melt up, which started back in Feb 2016, will be followed by a meltdown later in ’17 BofA’s Michael Harnett predicts.
This is how it will play out according to the BofA strategist. The current rally started in Feb 2016 with…
bearish Positioning (BofAML Bull & Bear indicator = 0, cash = 5.6%, big >2SD underweights in Emerging Markets & energy) excessively bearish Profits (credit spread blowout, PMI’s crashing toward 45, global EPS negative) and Policy impotence (“Quantitative Failure”). Thus the rally is likely to end with…

This post was published at Zero Hedge on Jan 15, 2017.

A wide-angle view of the US stock market

Until the S&P500 Index (SPX) broke out to the upside in early-July of 2016 we favoured the view that an equity bear market had begun in mid-2015. Supporting this view was the performance of NYSE Margin Debt, which had made what appeared to be a clear-cut downward reversal from an April-2015 peak.
As we’ve explained in the past, leverage is bullish for asset prices as long as it is increasing, regardless of how far into ‘nosebleed territory’ it happens to be. It’s only after market participants begin to scale back their collective leverage that asset prices come under substantial and sustained pressure. For example, it was a few months AFTER leverage (as indicated by the level of NYSE margin debt) stopped expanding and started to contract that major stock-market peaks occurred in 2000 and 2007. That’s why, during the second half of 2015 and the first few months of this year, we considered the pronounced downturn in NYSE Margin Debt from its April-2015 all-time high to be a warning of an equity bear market.
As at the end of November-2016 (the latest data) NYSE Margin Debt still hadn’t exceeded its April-2015 high, but the following chart from Doug Short shows that it is close to doing so. Furthermore, given the price action in December it is likely that NYSE Margin Debt has since made a new all-time high.

This post was published at GoldSeek on 16 January 2017.

Trump Team Responds: May Move White House Briefings To Accommodate More Than Just “Media Elite”

The overnight report by Esquire magazine that the incoming Trump administration is “seriously considering” a plan to evict the press corps from the White House prompted a frenzied response by the White House Correspondents Association, and led to a scramble among Washington’s press elite to demand if this report was accurate. As it turns out, Trump’s intentions may be just the opposite of what was reported, because according statements by Priebus, Pence and Spicer, the incoming Trump administration is actually considering expanding the number of journalists who have access to Trump, not limiting it.
As a result, the Trump admin is now considering moving White House press briefings out of the West Wing to accommodate more than the ‘Washington media elite,’ incoming White House Chief of Staff Reince Priebus said on Sunday, cited by Bloomberg.
VP-elect Mike Pence said any change would be made for logistical reasons, in response to heavy demand from media organizations. ‘There’s such a tremendous amount of interest in this incoming administration that they’re giving some consideration to finding a larger venue on the 18 acres in the White House complex, to accommodate that extraordinary interest,’ Pence said on CBS News’ ‘Face the Nation.’

This post was published at Zero Hedge on Jan 15, 2017.

Professors Pledge To “Use Regular Class Time” To Protest Trump

A national ‘teach-in’ movement is asking professors to set aside class time between Martin Luther King, Jr. Day and the presidential inauguration to ‘protest’ oppression and challenge ‘Trumpism.’
As CampusReform’s Anthony Gockowski reports, so far, 17 American colleges and universities have signed on to participate in the campaign originating out of UCLA, including such prestigious institutions as Princeton and UC-Berkeley.
The movement, known as ‘Teach, Organize, Resist,’ is set to kick-off on January 18, strategically ‘poised between Martin Luther King Jr. Day and the presidential inauguration’ as an explicit means of ‘challenging Trumpism.’
‘Transform your classrooms and commons into spaces of education that protest policies of violence, disenfranchisement, segregation, and isolationism,’ the organizers urge educators on the movement’s homepage, clarifying elsewhere on the site that participation ‘is an opportunity to affirm the role of critical thinking and academic knowledge in challenging Trumpism.’

This post was published at Zero Hedge on Jan 15, 2017.


On Wednesday, a Virginia man livened things up at everyone’s favorite place to spend the day – the Department of Motor Vehicles.
Nick Stafford decided to give the Lebanon, VA, DMV his 2 – er, 298,745 – cents regarding an issue he had with the agency.
The Bristol Herald Courier reports:
Stafford’s version of the story goes like this: Back in September, he wanted to know which of his four houses spanning two Virginia counties he should list when licensing his son’s new Corvette. He attempted to call the Lebanon DMV, but was routed to a call center in Richmond.

This post was published at The Daily Sheeple on JANUARY 13, 2017.

Danger Lurks As ‘Extremes’ Become The Norm

Extremes Become The Norm
There have been a litany of articles written recently discussing how the stock market is set for a continued bull rally. While Trump was initially expected to be extremely bad for the market, post-election he somehow became extremely good for it. The are some primary points in common among each of these articles which are: 1) interest rates are low, 2) corporate profitability is improving, 3) oil prices are rising, and; 4) Trump’s fiscal policies will supplant the Fed’s monetary policies.
While the promise of a continued bull market is very enticing it is important to remember, as investors, that we have only one job: ‘Buy Low/Sell High.’ It is a simple rule that is, more often than not, forgotten as ‘greed’ replaces ‘logic.’ It is also the simple emotion of greed which fosters exuberance and extremes which ultimately reverts into devastating losses.
Therefore, if your portfolio, and ultimately your retirement, is dependent upon the thesis of a continued bull market you should at least consider the following charts which are a collection of current ‘extremes’ in the market.
Extreme Valuations
It is often stated that valuations are still cheap. The chart below shows Dr. Robert Shiller’s cyclically adjusted P/E ratio. The shaded area is the current deviation of P/E’s above or below their long-term median P/E.

This post was published at Zero Hedge on Jan 15, 2017.

Higher Interest Rates Good for Stocks

Until 1981 interest rates had risen for 4 decades and since then yields are in their 4th decade of decline and ironically rates are back near 2% where they began in the 1940’s. Rising interest rates pump fear through the veins of stock market forecasters and wealth managers, but do rising bond yields really indicate doom for this equity Bull market? Money managers are often stuck in the past, in an era like the 1970’s when the world converted to free floating currencies and battled the painful arthritis of double-digit inflation and falling real stock market returns. The fiat currency shock and inflation of the ’70’s gave us 20% interest rates in order to kill our monetary addiction. Adjusting to a free floating dollar currency in the 1970’s was more the exception than the rule where stocks and bond yields had an inverse relationship. Rising rates should not be feared as yields and stocks often move in unison. We just have to get used to the fact that prior to this massive 35-year decline in bond yields we had an equally massive secular rise in rates where stock prices rose throughout both periods.
Interest rates are a measure of the cost of money and economic conditions.

This post was published at FinancialSense on 01/13/2017.

Mad As Hell

Fair warning, my family just received a 61.5% increase in our healthcare insurance premium of 2017, on top of last year’s 24.8% increase, so I am quite annoyed at the moment. For my non-US readers, perhaps what follows will interest you as a means of understanding how and why Donald Trump came to be elected President. I am going to be channeling some of my inner crank today.
If you want to understand why Trump won the recent US presidential election, you can’t overlook the economic data. If you do, his victory may look mighty confusing, alarming even. But once you understand the degree to which the average US family and the entire Gen-X and Millennial generations are being completely hosed economically, everything starts to take shape.

This post was published at PeakProsperity on Friday, January 13, 2017.

Why Everyone Is Complacent: “2016 Saw The Fewest S&P 500 Drawdowns Ever”

One week ago we were surprised to read that, in Tom Lee’s 2017 market outlook, Wall Street’s formerly most vocal cheerleader and its most prominent permabull had unexpectedly turned into one of the most skeptical bears. As a reminder, at a time when virtually every other Wall Street strategist, even the quasi skeptics, are convinced the market is going nowhere but higher, Lee now expects that the S&P 500 will finish the year virtually unchanged at 2,275, and roughly 3% lower than the median sellside forecast. His caution is the result of concerns about policy risk and a yield curve adjustment, which he sees translating into an S&P 500 decline to 2,150 by mid-year before a modest second half rebound.
“The bond market is signaling inflation confusion and a flattening long-term yield curve” Lee said, adding that this generally leads to a 5 to 7% selloff. He warned, however, that while “the bond market is less enthusiastic about the reflation trade than equities – since 1977, a flattening of the long-term yield curve sees equities weak over next 6 months – given the potential for a large rotation into stocks, equities could rally throughout 1H.”

This post was published at Zero Hedge on Jan 15, 2017.

Peter Thiel May Run For California Governor In 2018

Outspoken Trump supporter and Silicon Valley billionaire Peter Thiel is reportedly considering a 2018 bid for California governor. While Politico reports close Thiel friends are skeptical, the deeply-private entrepreneur’s rare interview with the New York Times’ Maureen Dowd raised eyebrows and Thiel has conspicuously yet to rule out a bid.
As Politico reports, Thiel, who co-founded PayPal and was an early investor in Facebook, has been discussing a prospective bid with a small circle of advisers, including Rob Morrow, who has emerged as his political consigliere.
Those who have been in touch with the 49-year-old entrepreneur are skeptical that he’ll enter the race. He is a deeply private figure, and California is unfriendly territory for a Republican – particularly a pro-Trump one. The president-elect won just over 30 percent of the vote there.
But they add that Thiel has conspicuously yet to rule out a bid and that those around him continue to discuss it.

This post was published at Zero Hedge on Jan 15, 2017.

Commercial Traders Continue To Pare Back Short Positions in Gold

The price of gold has begun 2017 on more solid footing, posting a 1.9% gain in the first trading week of the new year. The bears came out of the woodwork this weekend to warn us that last week’s move was simply an oversold bounce. They cheered on the slight pullback in gold prices Friday, and all of them are in consensus that $1,200/oz will be a brick wall of resistance. While the trend is still in the bears’ favor, they seem to be ignoring the COT data.
The COT (Committment of Traders) data is one of my favorite indicators I use when trading commodities, and I am the most interested in the positioning of the Commercials. The Commercials are the largest powers in the marketplace, and are the users and producers of the commodity. They do not use the markets to speculate, but instead use it to sell forward/hedge their production or demand. The ability to study the Commercials movements is a huge asset, as their footprints are like those of elephants. When the commercials are at heavy net short levels you want to be cautious with your long positions. Conversely, when the commercials are heavily net long, you want to have a tight leash on short positions, and begin position yourself to the long side.

This post was published at GoldStockBull on January 9th, 2017.