Baltic Dry Index. 933 -19 Brent Crude 66.20
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“But it (the boom) could not last forever
even if inflation and credit expansion were to go on endlessly. It would then
encounter the barriers which prevent the boundless expansion of circulation
credit. It would lead to the crack-up boom and the breakdown of the whole
monetary system.”
Ludwig Von Mises
Have we already entered the breakdown of the crack-up boom? From London
this morning it looks ominously like we have. After six years of ZIRP and
umpteen iterations of QE by the global central banksters, our global economy is
heading into another 2008. A massive oil bust is about to unroll across North America’s
frackers and tar pits. High paying jobs across the back of beyond are about to
evaporate. A large part of a 500 billion energy mis-allocation in junk bonds is
about to evaporate too. As China, Japan, Russia, the dying EUSSR, swoon, the
great commodity exporting nations will swoon with them. OPEC grandees, Chinese
billionaires, and Russian oligarchs, will not be riding in to rescue the crack-up
boom in 2015. A soaring US dollar is about to sink an armada of ships. If the crack-up boom just blew up in 2014,
expect 2015 to be more like the 1930s.
Oil Resumes Drop as Iran Sees $40 If There’s OPEC Discord
Dec 10, 2014 5:04 AM GMT
Brent resumed its decline as an Iranian official predicted a further slump
in prices if solidarity among OPEC members falters. West Texas
Intermediate in New
York also erased yesterday’s gains. Futures slid as much as 1.6 percent in London after snapping a five-day losing streak. Crude could fall to as low as $40 a barrel amid a price war or if divisions emerge in the Organization of Petroleum Exporting Countries, said an official at Iran’s oil ministry. The 12-member group, which supplies 40 percent of the world’s oil, may need to call an extraordinary meeting in the first quarter if the drop continues, according to Energy Aspects Ltd.
Oil has collapsed more than 35 percent this year as OPEC agreed at a Nov. 27 gathering not to cut output to force a slowdown in U.S. production, which has risen to the highest level in three decades. Saudi Arabia and Iraq this month widened discounts on crude exports to their customers in Asia, bolstering speculation that group members are fighting for market share.
“With OPEC looking like a dysfunctional family, no pullback in U.S. production and a lack of geopolitical concerns, it’s all adding up to lower prices,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone today.
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Why Asia Traders’ Move to Texas Spells Trouble for OPEC
Dec 10, 2014 4:49 AM GMT
As U.S. lawmakers debate whether to free up more than the tiny amount of oil
output currently eligible for export, buyers from Asia are moving in. Mitsui & Co. (8031), Japan’s second-biggest trader, has doubled employees relocated to Houston to 50 over the past two years while Tokyo-based Cosmo Oil (5007) Co. opened an office in the oil hub in April and South Korea’s SK Innovation Co. is bolstering its presence in the region. They are now limited to buying a product called condensate, an ultra-light oil that accounts for about 8 percent of U.S. output, but are positioning themselves to purchase more if Congress ends export restrictions.
Their move into Houston illustrates the challenge for the Organization of Petroleum Exporting Countries as the highest American output in more than three decades lures the group’s traditional customers and benchmark prices tumble. OPEC members are responding by offering the deepest discounts in more than a decade, sparking speculation they’re embarking on a price war as demand slows.
“Asia has been dependent on the Middle East, but now refiners see more possibilities of importing U.S. crude,” Ehsan Ul-Haq, a senior market consultant at KBC Energy Economics in Walton-on-Thames, England, said by phone Dec. 8. “Although the U.S. is currently not exporting any oil with the exception of condensates, it’s going to be an opportunity.”
The ban was passed by Congress in 1975 in response to the Arab oil embargo that cut global supplies, quadrupled crude prices and created gasoline shortages in the U.S. at a time when the country’s own crude production was shrinking. Now that horizontal drilling and hydraulic fracturing are unleashing record volumes of light oil from U.S. shale formations, federal policy makers are facing increasing pressure to ease the restriction and Asian buyers are circling.
They’re already benefiting from regulation that allows lightly processed oil to be exported. Enterprise Products Partners LP and Pioneer Natural Resources Co. got approval earlier this year from the U.S. Commerce Department to ship some condensates overseas. BHP Billiton Ltd. is exporting without explicit approval, prompting speculation more companies will follow suit.
More
http://www.bloomberg.com/news/2014-12-10/why-asia-traders-move-to-texas-spells-trouble-for-opec.html
China Deflation Risk Deepens Signaling Room for Easing: Economy
Dec 10, 2014 4:05 AM GMT
China’s factory-gate deflation deepened and consumer prices
climbed at the slowest pace since 2009, signaling room for further monetary
easing. The producer-price index dropped 2.7 percent in November from a year earlier, a record 33rd-straight decline and the biggest fall since mid last year. Consumer prices rose 1.4 percent, compared with the 1.6 percent increase in October.
Falling oil and metals prices have cut costs for China’s factories, leading to lower export prices and adding to dis-inflation threats across the world. The rising risk of deflation drives up real borrowing costs, making it harder for China’s indebted companies to service debts and increasing pressure on the central bank to follow up last month’s surprise interest-rate cut with further monetary easing.
“China has entered into a rapid dis-inflation process, and faces the risk of deflation,” said Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. “As the PBOC has exhausted its newly invented and ineffective policy tools, we believe the next move will have to be a RRR cut in order to regain policy effectiveness and credibility.”
Factory-gate prices of coal products fell 11.6 percent from a year earlier, oil and gas products slumped 13 percent and ferrous metal products declined 16.6 percent, according to a statement on the National Bureau of Statistics website.
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This Time Is The Same: Like The Housing Bubble, The Fed Is Ignoring The Shale Bubble In Plain Sight
by David Stockman •
We are now far advanced into the
third central bank generated bubble of the last two decades, but our monetary
politburo has taken no notice whatsoever of its self-evident leading wave. Namely,
the massive malinvestments and debt mania in the shale patch.
Call them monetary bourbons. It
is no exaggeration to say that inhabitants of the Eccles Building
deserve every single word of Talleyrand’s famous epithet: “They learned nothing
and forgot nothing.”
To wit, during the last cycle
they claimed to be fostering the Great Moderation and permanent full employment
prosperity. It didn’t work. When the housing and credit bubble blew-up, it
washed out all the phony gains from the Greenspan/Bernanke printing spree. By
the time the liquidation was finished in early 2010, there were 2
million fewer payroll jobs than there had been at the turn of the century.
----So, too, our monetary bourbons learn nothing. ZIRP, QE, wealth effects, stock market puts and all the rest of the Fed’s toolkit of financial market repression and manipulation have one principle effect: they generate unnatural, unsustainable and unconscionable financial bubbles.
Yet the Eccles Building once
again sees no bubbles when they are again palpable throughout the
financial system. Consider the forgotten lessons of last time around.
Right up until the 11th hour, the Fed and all its spokesman and magicians
denied the possibility of a housing bubble. Bernanke famously said that it was
“contained” as late as March 2007. And contrary to the fibs of her
apologists, Yellen was sitting right there cautioning against monetary
sobriety even as the following chart relentlessly unfolded.
----So now we come to the current screaming evidence of bubble finance—–the fact that upwards of $500 billion of junk bonds ($200B) and leveraged loans ($300 B) have surged into the US energy sector over the past decades—–and much of it into the shale oil and gas patch.
Folks, you don’t have to know
whether the breakeven for wells drilled in the Eagleville Condy portion of the
great Eagle Ford shale play is $80.28 per barrel, as one recent analysis
documents, or $55 if you don’t count all the so-called “sunk costs” such as
acreage leases and oilfield infrastructure. The point is, an honest free market
would have never delivered up even $50 billion of leveraged capital—let alone
$500 billion— at less than 400bps over risk-free treasuries to wildly
speculative ventures like shale oil extraction.
The fact is, few North
American shale oil fields make money below $55/barrel WTI on a full
cycle basis (lease cost, taxes, overhead, transport, lifting cost etc.). As
shown below, that actually amounts to up to $10 less on a netback to the
wellhead basis—–the calculation that drives return on drillings costs.
More
We end with the dying EUSSR. This
is an insane asylum that deserves to die. Unfortunately, it’s its hapless serfs
that get to die and not the asylum that mistreats them.
Nanny-State Gone Nuts: Brussels To Ban Energy-Wasting Two-Slice Toasters
by Pater Tenebrarum • December 8,
2014
First
they came for your shower
heads and your toilet tanks. Then they came for your olive oil
jugs,
your incandescent
light bulbs and your vacuum cleaners. And you thought your toasters were
safe?
Think again! The planet needs saving, even if that means we must destroy the achievements of human civilization, bit by bit. Or, as it were, one slice at a time. Another round of regulatory monstrosities is about to hit the long-suffering EU citizenry, as the EU nannycracy now wants to make virtually every home appliance less useful than it once was. Among the proposals: making one slot of the classical two-slot toaster nonfunctional by decree, so as to “save energy”.
The emasculation of household appliances continues with a verve that betrays the utter tone-deafness of the EU bureaucracy, a neo-feudal administrative apparatus that taxes its citizens into penury and is seemingly dead set on regulating all fun and convenience out of their daily lives.
Not surprisingly, the UK press is having a field day over this (here is another example):
“Campaigners last night rallied round to vent their fury as Brussels bureaucrats unveiled their latest plan to erode the “lifestyles and choices of ordinary people”. It follows the banning this week of vacuum cleaners which have motors above the new EU limit of 1,600 watts in a bid to cut energy usage. The permitted wattage will be almost halved again from September 2017 as the limit is reduced to 900 watts.
Dozens of other everyday appliances could have the power sucked out of them too and some scrapped altogether if new rules around climate change are brought in. A report published by Deloitte and commissioned by the European Commission, the EU’s executive body, sets out plans to look at the energy usage of a range of items and whether they could be made more efficient.
As well the staples of the kitchen the kettle and the toaster, the list of around 30 appliance categories in the EU’s sights includes heated greenhouses, power tools, aquarium lights and filters and gym equipment. Mixers, rice cookers, blenders and deep fat fryers are also under threat although meat slicers and popcorn machines are to be spared the chop as they are “niche markets”.
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“Those who don't know history are destined to repeat it.”
Edmund Burke
At the Comex silver
depositories Tuesday final figures were: Registered 64.48 Moz, Eligible 112.23
Moz, Total 176.71 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, yet another confirmation of our new lawless
age. They were just following orders from the decider, apparently.
The keystone of the Fascist doctrine is its conception of the State, of its essence, its functions, and its aims. For Fascism the State is absolute, individuals and groups relative.
Benito Mussolini.
What The Senate Torture Report Reveals: A Systematic Regime Of Officially-Sanctioned Brutality
One of the worst myths official Washington and its establishment media have told itself about the torture debate is that the controversy is limited to three cases of waterboarding at Guantánamo and a handful of bad Republican actors.
In fact, a wide array of torture techniques were approved at the highest levels of the U.S. Government and then systematically employed in lawless US prisons around the world – at Bagram (including during the Obama presidency), CIA black sites, even to US citizens on US soil. So systematic was the torture regime that a 2008 Senate report concluded that the criminal abuses at Abu Ghraib were the direct result of the torture mentality imposed by official Washington.
American torture was not confined to a handful of
aberrational cases or techniques, nor was it the work of rogue CIA agents. It
was an officially sanctioned, worldwide regime of torture that had the
acquiescence, if not explicit approval, of the top members of both political
parties in Congress. It was motivated by far more than interrogation. The evidence for
all of this is conclusive and overwhelming.
And the American media bears much of the blame, as they refused for years even to use the word
“torture” to describe any of this (even as they called these same techniques “torture” when
used by American adversaries), a shameful and
cowardly abdication that continues literally to this day in
many of the most influential outlets.
None of this has been in any plausible doubt
for years. Recall that Gen. Antonio Taguba, who led an official
investigation into prisoner abuse, said in 2008: “There is no longer any doubt as to whether the
current administration has committed war crimes. The only question that remains
to be answered is whether those who ordered the use of torture will be held to
account.” Gen. Barry McCaffrey said : “We tortured
people unmercifully. We probably murdered dozens of them during the course of
that, both the armed forces and the CIA.” Nobody needs this Senate report to
demonstrate that the U.S. government became an official squad of torture (with
the American public largely on board).
---- To see how little accountability there still is for
national security state officials, recall that the CIA got caught spying on the
Senate Committee and then lying about it, yet
John Brennan kept his job as CIA Director (just as James Clapper is still
Director of National Intelligence despite getting caught lying about NSA
domestic spying). Any decent person, by definition, would react with
revulsion to today’s report, but nobody should react with confidence that its
release will help prevent future occurrences by a national security state that
resides far beyond democratic accountability, let alone the law.
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“The [your nation here] outside looked from America
to Russia, [China, Nazi Germany] and
from Russia to America, and from America to Russia again; but already it was
impossible to say which was which.”
With apologies to George Orwell and
Animal Farm.
The monthly Coppock Indicators finished November.
DJIA: +136 Down. NASDAQ: +262 Down. SP500: +204 Down.
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