Baltic Dry Index. 911 -22 Brent Crude 64.67
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"The first requisite of a sound monetary system is that it put the least possible power over the quantity or quality of money in the hands of the politicians."
Henry Hazlitt
The oil rout deepens. If I didn’t know better I’d think that the Saudis
really want to punish America’s frackers. Whenever a price floor looks like
starting to emerge, out comes a new statement from the Saudis to set off
another collapse. And so it was again yesterday. Will the Fedster’s now print
up dollars to buy up US oil? I don’t think so either, but I suspect that the
Saudis will drive down oil until there’s a slam down bust in Texas and the
Dakotas.
Below, now the oil rout is starting to roil other markets.
"Increasingly, the wealth of the modern world has come to be represented by financial assets rather than real assets, and this to me is a very unhealthy situation, because financial assets are inherently unstable. Financial assets (currencies, bonds, mortgages, stocks, bank credit, etc.) can be quickly and violently reduced in value, or destroyed completely by either inflation or deflation."
Donald J. Hoppe
Oil Price Hit by OPEC Numbers as Saudis Stand Firm on Output
Dec 11, 2014 4:21 AM GMT
Crude took a fresh drubbing yesterday as OPEC reduced its estimate for 2015
demand, Kuwait offered new
discounts to Asian customers and the Saudi oil minister questioned the need for
an output cut. “Why should I cut production?” Ali Al-Naimi, Saudi Arabia’s oil minister, said in response to reporters’ questions yesterday in Lima, where he’s attending United Nations climate talks. “This is a market and I’m selling in a market. Why should I cut?”
The Organization of Petroleum Exporting Countries cut the forecast for how much crude it will need to produce next year by about 300,000 barrels a day to 28.9 million, the least since 2003. The group’s three largest members, Saudi Arabia, Iraq and Kuwait, are offering oil to Asian buyers at the deepest discounts in at least 6 years.
Brent crude, the international benchmark, increased 51 cents to $64.75 a barrel on the London-based ICE Futures Europe Exchange at 12:08 p.m. Singapore time. The contract yesterday closed at the lowest since July 2009. West Texas Intermediate oil added 0.9 percent to $61.47. An Iranian official warned on Dec. 9 that prices could drop to $40 a barrel should OPEC’s unity break down. Bonds issued by oil-exporting countries sank along with crude futures.
More
Global Stocks Drop as Oil Renews Selloff; Yen Strengthens
Dec 10, 2014 10:35 PM GMT
U.S. stocks led global equities lower for a third day, as a rout in energy
producers spread to the broader market after oil sank to a five-year low. The
yen strengthened with Treasuries as investors sought haven assets. The Standard & Poor’s 500 Index dropped 1.6 percent, extending losses in afternoon trading as all 10 main groups slid at least 1 percent. West Texas Intermediate crude plunged 4.5 percent to settle at $60.94 a barrel, while Brent fell below $65 for the first time since 2009. The yield on 10-year Treasury (USGG10YR) notes dropped five basis points to 2.17 percent. The yen had its biggest three-day gain in more than a year. New Zealand’s dollar soared 1.7 percent at 5:34 p.m. in New York as the central bank said future interest-rate increases can be expected after holding borrowing costs steady today.
----The S&P 500 has fallen 2.4 percent since closing at a record on Dec. 5. The gauge has advanced 9.6 percent in 2014, heading for a third year of gains, fueled by better-than-forecast economic data and corporate earnings.
Exxon Mobil Corp. and Chevron
Corp. sank at least 2 percent today to lead declines among energy shares.
Southwest Airlines Co. and United Continental Holdings Inc. rallied more than
1.8 percent as airlines advanced.
JPMorgan Chase & Co. plunged
2.8 percent after saying it will probably report a “high teens” percentage drop
in fourth-quarter trading revenue from a year ago.
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Oil-Driven Junk-Bond Selloff Spreads as Risk Gauge
Dec 10, 2014 9:46 PM GMT
The rout in junk bonds
driven by tumbling oil prices
is getting worse as one of the high-yield market’s largest sector weighs on
other industries. The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps index tied to the debt of 100 speculative-grade companies, jumped by the most in two months. BlackRock Inc.’s $13.8 billion exchange-traded fund that buys high-yield debt slid to the lowest level in more than two years.
Investors have been shunning speculative-grade debt as crude oil plunged to a five-year low, dragging down securities sold by energy companies, which make up one of the biggest components of the corporate-bond market. The extra yield investors demand to hold debentures sold by companies in that sector has doubled in the past three months.
“While
the energy sector has clearly led the high-yield market lower, the overall
global risk-off theme has effectively poisoned risk sentiment for speculative
grade bonds,” Adrian Miller, director of
fixed-income strategies at GMP Securities LLC in New York, wrote in an
e-mail. “While fundamentals for U.S. high-yield have remained solid, excluding
energy, investors are instead choosing to reduce exposure across nearly all
industry sectors.”
More
America Getting Rid of Oil Addiction as Price Plummets Amid Glut
Dec 11, 2014 12:00 AM GMT
The U.S. is producing the most oil in 31 years, economic growth is picking
up and crude prices are plunging.So why is Americans’ use of petroleum waning?
As the U.S. moves closer and closer to energy independence, greater fuel efficiency, changing demographics and an increase in renewables are altering the dynamic that in the past would have seen demand for gasoline climbing. Gross domestic product, the value of all goods and services produced in the U.S., grew at a 2.4 percent pace in the third quarter from the year-earlier period. Oil consumption fell 0.3 percent, government data show.
“Oil demand and GDP growth used to go hand in hand,” Christopher Knittel, a professor of applied economics at Massachusetts Institute of Technology’s Sloan School of Management, said by phone from Cambridge, Massachusetts, Dec. 8. “Now, they’re in some ways almost independent of each other because of investments in fuel economy that tended to break the link.”
----Here’s
an easier way to see how Americans are relying less on oil: 1,178 barrels were
consumed a day for every $1 billion of GDP in September, down 33 percent from
1,760 barrels a day 20 years ago.
More
"We are in a world of irredeemable paper money - a state of affairs unprecedented in history."
John Exter
At the Comex silver
depositories Wednesday final figures were: Registered 64.48 Moz, Eligible 111.72
Moz, Total 176.20 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
2008 when the roof fell in, and what it means now. Time to pay the
piper.
"Were we to be directed from Washington when to sow and when to reap, we should soon want bread."
Thomas Jefferson
Duck And Cover——-The Lull Is Breaking, The Storm Is Nigh
by David Stockman •
September 15, 2008 is the day
that Lehman died and the moment that the world’s central banks led by the
Fed went all-in. As it has turned out, that was an epochal leap into the most
dangerous monetary deformation that the world has ever known.
It needn’t have
been. What was really happening at this pregnant moment was
that the remnants of honest capital markets were begging for a purge and
liquidation of the speculative rot that had built up during the Greenspan
era. But the phony depression scholar running the Fed, Ben Bernanke,
would have none of it. So he falsely whooped-up a warning
that Great Depression 2.0 was at hand—-sending Washington, Wall Street and
the rest of the world into an all-out panic.
The next day’s AIG
crisis quickly became ground zero—the place where the entire
fraudulent narrative of systemic “contagion” was confected. Yet that
needn’t have been, either. In truth, AIG was not the bearer of a
mysterious financial contagion that had purportedly arrived on a comet
from deep space.
----Yet
this scandalous fact was not a world crisis, nor really any crisis at all. Yes, the several hundred billions of CDS
contracts sold by the Cassano London operation were bogus and could not be paid
off—–since the holding company had no available liquid capital. Nevertheless,
they had been purchased almost entirely by a dozen or so of
the largest banks in the world, including Deutsche Bank, Barclays, Societe
Generale, Bank of America/Merrill Lynch and Goldman Sachs, to name a few of the
usual suspects. And as I documented in The Great Deformation,
these banks could have readily afforded the hit on the
underlying CDOs—– and they deserved it,too.
----But
this calamity of stupidity and negligence has turned out to be a
really big thing in the history of the modern financial era; it was indeed the
Rubicon. By falsely transforming a negligible hit to the balance sheet of
the world’s mega-banks—-most of which were quasi-socialist institutions in
Europe and would have been bailed out by their governments anyway—-into the alleged
collapse of the mighty AIG, Secretary Paulson, Bernanke and their
cabal of Wall Street henchman opened the door in one fell swoop to
the present global monetary madness.
----The rest is history, as they say. And what a fantastic, but lamentable history it was. Owing to the cursed recency bias that now animates the mainstream narrative, it has already been forgotten that today’s elephantine central bank balance sheets did not remotely exist just six years ago. Indeed, they could not have been imagined back then—not even by Bernanke himself.
But upon the eruption of the AIG
catalyst, the mad money printing dash was on. As shown below, it had taken the
first 94 years of the Fed’s existence to grow its balance sheet footings to
$900 billion—-something achieved by steadily plucking new credits out of
thin air over the years and decades. But within six weeks of the so-called
AIG meltdown, Bernanke had replicated what had taken his predecessors nigh on
to a century to accomplish.
And then he didn’t stop. Fighting
the fabricated enemy of “contagion” and thereby thwarting Wall Street’s
desperate need for a cleansing financial enema, he had nearly tripled the
Fed’s historic balance sheet by year-end 2008, and on it went from there.
----And of course it was not just the Fed running the printing presses red hot. Owing to both Keynesian ideology and defensive necessity, the other major central banks of the world followed suit. At the time of the crisis, the combined balance sheet of the Fed, ECB and BOJ was $3.5 trillion or about 11% of GDP. In short order that number will reach $11 trillion and 30% of the combined GDP of the so-called G-3.
Throw in the BOE, the People’s
Printing Press of China, the bloated central banks of the oil exporters
and Russia and assorted others like the reserve banks of India and
Australia and you have total central banks footings in excess of $16 trillion
or roughly triple the pre-crisis level.
----This tsunami of central bank credit did little for the real economy in places where the private sector was already at “peak debt” such as the US and Europe; and it did fuel one final blast of the malinvestment boom in places that still had balance sheet runway available like China, Brazil and much of the rest of the EM world.
But what it did do universally
and thunderously was to fuel a financial asset inflation the likes of which the
world had never before seen.
Prior to their recent stumble,
the combined equity markets of the world had reached a capitalization of nearly
$75 trillion compared to barely $25 trillion at the dark bottom in March 2009.
And, yes, $50 trillion of gain in a comparative historical heartbeat did
wonders for the net worth of the global 1%.
But it also did something else;
it destroyed the remaining vestiges of financial market stability and honest
price discovery. After 6-years of the central bank tsunami, two-way
markets were gone; the shorts were dead; skeptics were out of business;
greybeard investors had retired; speculators
regularly bought downside “protection” (i.e. puts on the S&P 500)
for chump change; and the law of “buy the dips” became unassailable.
----Stated
differently, there are financial time bombs planted everywhere in the
world economy because central bank financial repression has caused drastic
mispricing of nearly every class of financial asset, which is to say, every
layer of collateral which has ratcheted-up the entire edifice.
More
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F. A. von Hayek
The monthly Coppock Indicators finished November.
DJIA: +136 Down. NASDAQ: +262 Down. SP500: +204 Down.
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