Baltic Dry Index. 1137 -16 Brent Crude 72.08
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.
Walter Bagehot. Lombard Street. 1873
Did the Great Commodity Super Cycle Bubble finally burst under an oil
market glutted with oil. Commodities have been under retreat for several
months, with Dr. Copper, iron ore, and the Baltic Dry Index signalling an
arriving global downturn, but it’s the sudden, unexpected collapse in the oil
price that’s more noticeable to the ordinary man in the street. In theory, if
the oil price collapse gets passed on by the oil mafia, ordinary consumers,
travel and logistics companies (formerly called transport companies,) should
all get a wealth effect from falling oil prices. In the long run oil demand
should start to rise again. The trouble as always is how long is a short piece
of string? How do we get from here to there, and how many oil and gas frackers,
and their junk bonds, will blow up along the way? How many petro-economies will
detonate, and how bad will the defaults be?
Since it’s impossible to forecast at this stage of the commodities rout,
I will err on the side of caution. In commodity trading Refcos and MF Global’s
seem to be the new norm. Who is going to be the next Lehman?
Oil Resumes Drop With Commodities; Asia Stocks, Won Rise
Dec 2,
2014 4:14 AM GMT
Oil resumed declines after jumping from a five-year low and metals retreated
amid the highest commodity-price volatility in two years. Asian stocks
rebounded and South Korea’s won led
emerging-market currencies higher. West Texas Intermediate crude retreated 0.5 percent by 1:04 p.m. in Tokyo, after yesterday’s 4.3 percent surge from its lowest settlement since September 2009. Gold, which rallied 3.8 percent yesterday, slid 0.5 percent. BHP Billiton Ltd. (BHP), the world’s largest mining company, climbed 3.8 percent and was the biggest support to the MSCI Asia Pacific Index (MXAP) today. The won strengthened 0.6 percent and Malaysia’s ringgit added 0.3 percent after capping its steepest two-day retreat since the Asian financial crisis.
The Bloomberg Commodity Index (BCOM), which rebounded off a five-year low yesterday, is swinging the most since October 2012, according to a 60-day measure of historic volatility. Prices for materials and energy plunged, fueling deflation concerns, on concern that supply is outstripping demand as estimates for global growth are downgraded. Australia held rates steady, with India are projected to do the same before the euro region reviews monetary policy later this week.
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Billionaire Shale Pioneer Sees Drilling Slowdown on Oil Price Drop
Dec 2, 2014 5:00 AM GMT
Billionaire wildcatter Harold Hamm, a founding father
of the U.S. shale boom whose personal fortune has fallen by more than half in
the past three months, said U.S. drilling will slow as producers cut back amid
falling oil prices. Declining activity from Texas to North Dakota won’t be as harmful to the industry as some have feared, the chairman and chief executive officer of Continental Resources Inc. said. OPEC’s refusal to curb output last week bodes well for U.S. producers that can outlast countries in the cartel, which depend on higher oil prices.
“Will this industry slow down? Certainly,” Hamm said yesterday in a telephone interview. “Nobody’s going to go out there and drill areas, exploration areas and other areas, at a loss. They’ll pull back and won’t drill it until the price recovers. That’s the way it ought to be.”
----Hamm’s wealth, which is largely tied to the fate of Oklahoma City-based Continental (CLR), has fallen by more than $12 billion in three months, according to the Bloomberg Billionaires Index.
Hamm, who helped discover the potential of North Dakota’s Bakken formation, predicted a swift recovery in oil prices, which have declined more than 36 percent since June as Saudi Arabia and its allies in the Organization of Petroleum Exporting Countries refused to cut production last week to help re-balance the market.
The company said last month it’s sold nearly all its hedges through 2016, in a bet on a recovery in prices. West Texas Intermediate, the U.S. benchmark, fell below $65 a barrel yesterday before settling up 4.3 percent to $69.
Drillers from Texas to North Dakota are pumping the most in three decades, with many betting they can outlast Venezuela, Iran and other nations that need higher oil prices to fund government budgets.
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Exclusive - October oil shale permits drop: is the slowdown here?
By Edward
McAllister NEW YORK
(Reuters) - U.S. oil producers have been racing full-speed ahead to drill
new shale wells in recent years, even in the face of lower oil prices. But new
data suggests that the much-anticipated slowdown in shale country may have
finally arrived. Permits for new wells dropped 15 percent across 12 major shale formations in October, according to exclusive information provided to Reuters by DrillingInfo, an industry data firm, offering the first sign of a slowdown in a drilling frenzy that has seen permits double since last November.
“Currently, the market is focused on U.S. shale as the place where spending and production must be curtailed," Roger Read, a Wells Fargo analyst, said in a note Friday. "There is little doubt, in our view, that lower oil and gas prices will result in lower spending and lower shale production in 2015 to 2017.”
A cutback of U.S. production could play into the hands of Saudi Arabia, which has suggested over the past few months that it is comfortable with much lower oil prices.
Most analysts predict U.S. oil producers can maintain their healthy production rates in the first half of 2015 - thanks in part to investments made months ago.
Some oil service companies have suggested that a slowdown might be held off, as they continue to buy key drilling components.
But, the data suggests that production is likely to eventually succumb to lower prices.
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Oil at $40 Possible as Market Transforms Caracas to Iran
Nov 30, 2014 10:38 PM GMT
Oil’s decline is proving to be the worst since the collapse of the financial
system in 2008 and threatening to have the same global impact of falling prices
three decades ago that led to the Mexican debt crisis and the end of the Soviet
Union. Russia, the world’s largest producer, can no longer rely on the same oil revenues to rescue an economy suffering from European and U.S. sanctions. Iran, also reeling from similar sanctions, will need to reduce subsidies that have partly insulated its growing population. Nigeria, fighting an Islamic insurgency, and Venezuela, crippled by failing political and economic policies, also rank among the biggest losers from the decision by the Organization of Petroleum Exporting Countries last week to let the force of the market determine what some experts say will be the first free-fall in decades.
“This is a big shock in Caracas, it’s a shock in Tehran, it’s a shock in Abuja,” Daniel Yergin, vice chairman of Englewood, Colorado-based consultant IHS Inc. and author of a Pulitzer Prize-winning history of oil, told Bloomberg Radio. “There’s a change in psychology. There’s going to be a higher degree of uncertainty.”
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Can cost-cutting break Rio Tinto's link with iron ore price?: Russell
By Clyde Russell LAUNCESTON, Australia
(Reuters) - Rio Tinto launched a stirring defense of its iron ore strategy
last week, with the basic message that it will still make huge profits even as
the price slumps to five-year lows.Leaving aside, for the moment, that some of Rio Tinto's price and demand assumptions for the steel-making ingredient still look heroic, the real question to be answered is can the company convince the market that it's on the right path?
To do so, Rio Tinto will have to break the shackles of the strong correlation of its share price to that of Asian spot iron ore.
Since the 2008 recession the Australian-listed shares of the world's second-biggest iron ore miner have moved pretty much in lockstep with the price of the steel-making ingredient, although this year the correlation has shown signs of breaking down.
Iron ore has fallen a dramatic 48 percent this year, with the close on Nov. 28 of $69.80 a tonne only marginally above the $68 reached on Nov. 26, which was the weakest since June 11, 2009.
Rio Tinto's shares ended at A$59.10 ($49.64) on Nov. 28, down just 13.3 percent for the year.
The question is whether the nexus between the share price and iron ore has broken or whether the relationship is likely to be restored, most probably by the shares losing value since the prospect of iron ore rebounding is slim given the huge supply overhang in the market.
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In European news, the agony of
the unloved, wealth destroying euro shows no sign of ending. As German
manufacturing and exporting slumps, who is going to pay to bailout all the
rest?
German Manufacturing Slump Pulls Euro Area Near Stagnation
Dec 1, 2014 9:10 AM GMT
German manufacturing unexpectedly shrank last month in a slump that dragged
factories in the euro area to the brink of stagnation. A Purchasing Managers Index for Germany fell to 49.5 from 51.4, London-based Markit Economics said today. That’s below an Nov. 20 estimate of 50, which is the dividing point between expansion and contraction. Manufacturing in France and Italy also shrank and a euro-area gauge was revised to 50.1 from 50.4.
The weakness in the 18-nation region, coupled with the lowest inflation in five years, is pushing the European Central Bank closer to expanding unconventional stimulus to revive price growth and the economy. President Mario Draghi will lead a meeting of policy makers on Dec. 4 after signaling that they’re working to get new tools, including full-scale quantitative easing, ready as soon as possible.
“The situation in euro-area manufacturing is worse than previously thought,” said Chris Williamson, chief economist at Markit. “Not only is the performance of the sector the worst seen since mid-2013, there is a risk that renewed rot is spreading across the region from the core.”
----The manufacturing gauge for Italy remained at 49 in November, falling short of the reading of 49.4 forecast by economists in a Bloomberg survey. While the French gauge was revised higher from the initial estimate, the reading of 48.4 still marked a seventh month of contraction.
In Germany, Europe’s largest economy, export orders fell for the first time in 16 months, with survey respondents reporting weaker demand from China, the U.S. and other European nations. A Chinese factory index published earlier today fell to 50 in November from 50.4 in October, the lowest since May.
“Germany’s export engine has stalled,” Williamson said. “New business is also falling in both France and Italy, boding ill for production in coming months.”
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At the Comex silver
depositories Monday final figures were: Registered 65.20 Moz, Eligible 112.79
Moz, Total 177.99 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
In EUSSR news, the fat cats are getting fatter at
the serfs expense. Austerity is only for little people, apparently. Herman Van
Who gets a golden goodbye for doing what exactly?
Herman Van Rompuy will be paid more than £500,000 by the EU to do nothing
Generous golden goodbye and pension means the retired former EU president will earn £578,000 over the next three years
Herman Van Rompuy will be entitled to more than £500,000 for doing nothing at the taxpayer’s expense over the next three years, after finishing his term as president of Europe.After standing down on Monday, the former president of the European Council will be paid £133,723 a year, 55 per cent of his basic salary, until December 2017 - to ease him back into life outside the world of Brussels officialdom.
The Telegraph has established that Mr Van Rompuy will also receive a one off payment of £21,000 and, aged 67, he will be able draw a lifetime EU pension worth £52,000 a year, taking his earnings to £578,000 over the next three years.
The "transitional allowance" does not require Mr Van Rompuy to do any work at all and the cash will be paid under reduced rates of EU "community" tax, which are far lower than taxation in his native country of Belgium.
The allowances are defended as "the price for the total independence" of senior European Union officials who must also "ask permission for any job they would like to do for 18 months after leaving”.
Mr Van Rompuy, a former Belgian prime minister, is retiring from a life in frontline politics to concentrate on his hobby of writing Haiku poetry while giving occasional lectures at the College of Europe, a training school for EU officials in Bruges.
While self-effacing in public, Mr Van Rompuy has not been a stranger to controversy over the perks of EU officialdom since he took the post in December 2009.
He was widely criticised four years ago for using his official motorcade of five limousines as a taxi service to take his family on 325-mile round trip to Paris airport en route to a private holiday in the Caribbean.
Nigel Farrage, the leader of Ukip who was fined £2,700 by the European Parliament in 2010 for describing Mr Van Rompuy as having the "charisma of a damp rag”, attacked the payments.
"Van Rompuy's term in office has seen millions driven into poverty and unemployment by the eurozone crisis but he himself has hit the jackpot. The EU is a racket which looks after its own,” he said.
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Any
sudden event which creates a great demand for actual cash may cause, and will
tend to cause, a panic in a country where cash is much economised, and where
debts payable on demand are large. In such a country an immense credit rests on
a small cash reserve, and an unexpected and large diminution of that reserve
may easily break up and shatter very much, if not the whole, of that credit.
Walter Bagehot. Lombard Street. 1873
The monthly Coppock Indicators finished November.
DJIA: +136 Down. NASDAQ: +262 Down. SP500: +204 Down.
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