Baltic Dry Index. 753 +14 Brent Crude 48.33
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
In central banking as in diplomacy,
style, conservative tailoring, and an easy association with the affluent count
greatly and results far much less.
J. K. Galbraith.
We are in limbo today. Only the hard core gamblers are still active today
in 2015s casino “capitalism.” Sensible investors have joined the SNB in exiting
the markets ahead of tomorrow’s ECB Great Gamble. Having hyped up tomorrow’s
ECB QE ploy to the rafters, goosing gold back into a new bull market, anything
that results in a disappointment is all too likely to trigger a stock market
rout, an industrial commodity collapse, a new down leg in oil prices. The ECB
has painted itself into a corner of hitting the nuclear QE option, or taking
the international opprobrium for the giant swoon that follows if they fail to
deliver. Such is the outcome of the Great Nixonian Error of fiat money in its
death throes. In central banksterism, it’s now everyman for himself, women and
children last. The one percenters, don’t intend to be deprived of their just
deserts. On Sunday the Greek voters intend to ensure that they get them.
Below, the state of play ECB QE minus one.
If
all else fails, immortality can always be assured by spectacular error.
J. K.
Galbraith.
Central bank prophet fears QE warfare pushing world financial system out of control
Former BIS chief economist warns that QE in Europe is doomed to failure and may draw the region into deeper difficulties
The economic prophet who foresaw
the Lehman crisis with uncanny accuracy is even more worried about the world's
financial system going into 2015.
Beggar-thy-neighbour devaluations
are spreading to every region. All the major central banks are stoking asset
bubbles deliberately to put off the day of reckoning. This time emerging
markets have been drawn into the quagmire as well, corrupted by the leakage
from quantitative easing (QE) in the West.
"We are in a world that is
dangerously unanchored," said William White, the Swiss-based chairman of
the OECD's Review Committee. "We're seeing true currency wars and
everybody is doing it, and I have no idea where this is going to end."
Mr White is a former chief
economist to the Bank for International Settlements - the bank of central banks
- and currently an advisor to German Chancellor Angela Merkel.
He said the global elastic has
been stretched even further than it was in 2008 on the eve of the Great
Recession. The excesses have reached almost every corner of the globe, and
combined public/private debt is 20pc of GDP higher today. "We are holding
a tiger by the tail," he said.
He warned that QE in Europe is doomed to failure at this late stage and may instead draw the region into deeper difficulties. "Sovereign bond yields haven't been so low since the 'Black Plague': how much more bang can you get for your buck?" he told The Telegraph before the World Economic Forum in Davos.
"QE is not going to help at all. Europe has far greater reliance than the US on small and medium-sized companies (SMEs) and they get their money from banks, not from the bond market," he said.
"Even after the stress tests the banks are still in 'hunkering down mode'. They are not lending to small firms for a variety of reasons. The interest rate differential is still going up," he said.
The warnings come just as the European Central Bank prepares a blitz of bond purchases at a crucial meeting on Thursday. Most ECB-watchers expect QE of around €500bn now that the eurozone is already in deflation. Even the Bundesbank is struggling to come with fresh reasons to oppose it.
More
The end of the Chinese boom
The rest of the world will have to get used to demand from China increasing at a slower rate than previously expected
China’s slowdown is one of the
great economic stories of our time. Virtually every country in the world would
still do almost anything to grow as fast as the People’s Republic, which officially
expanded by 7.4pc last year. But China’s economy is now growing at the weakest
rate in 24 years; it grew by 7.8pc in 2013 and is set to expand by just 6.8pc
this year. The slowdown is then expected to intensify: the IMF is pencilling in
growth of just 6.3pc for 2015, a terrible outcome by Chinese standards. It
would also mean that it would be outclassed by its arch-rival India, which is
expected by the IMF to grow 6.5pc next year.
The exact numbers don’t matter;
they are undoubtedly approximations in China’s case. The point is that the
Beijing authorities are going to have to adapt to a more realistic rate of
economic growth and manage the political fallout; and the rest of the world,
including exporters of commodities, will have to get used to demand from China
increasing at a slower rate than previously expected. We are not talking of a
recession here, or even a reduction in demand and output, merely a slower rate
of growth.
But even that is coming as a shock to many, and serves as a partial
explanation for the decline in the price of oil and some other commodities.
More
We close with America, officially
“booming” but it looks all too likely to be yet another QE malinvestment
bubble. Ask disgraced fallen guru “Bubbles” Greenspan how they end up.
Honda Warns Against ‘Stupid’ Auto Loans Driving U.S. Sales Gains
Jan 20, 2015 11:00 AM GMT
A top U.S. executive at Honda Motor Co. (7267) said competitors are doing “stupid
things” to boost auto sales, including making seven-year-long car loans that
harm buyers. Automakers are increasingly selling vehicles with 84-month loans that reduce monthly payments while making it tougher to repay faster than cars lose value, John Mendel, Honda’s U.S. sales chief, said in an interview. The Tokyo-based company will avoid longer-term loans even as Nissan Motor Co. (7201) tries to supplant it as the fifth-biggest automaker in the U.S., he said.
“You’re ringing the bell on a new-car sale, but that customer is saddled -- they’re stretched so thin,” Mendel said at the North American International Auto Show last week. Extended-term loans are “stupid not just for us, but for the industry.”
The comments by Honda’s Mendel were a rare show of caution during the auto show in Detroit, as car-industry executives cheered the best year of U.S. sales since 2006. Deliveries are projected to rise to 16.7 million this year, which would be a sixth straight increase and extend the longest streak of gains since World War II.
Sales will keep growing as the Federal Reserve’s zero-interest-rate policy encourages investors to collect yield from auto loans, said Tom Webb, chief economist at Manheim Consulting. While not in a bubble, the industry is taking on more risk by extending longer loans with smaller down payments to buyers with blemished credit scores, he said.
“We’ve seen this movie before, we know how it ends, and it’s not pretty,” Webb told reporters at an event before last week’s show. “But I say that it has longer to run, and we have already paid the price of admission. So we might as well stay to the end. You just keep your eyes on the exit door.”
More than one in four new-car loans in October and November were 73 to 84 months long, according to Experian Plc. The share of new-car loans at those term lengths was less then 10 percent in 2009 and 2010.
More
"In
economics, hope and faith coexist with great scientific pretension."
J. K.
Galbraith.
At the Comex silver
depositories Tuesday final figures were: Registered 66.41 Moz, Eligible 108.65
Moz, Total 175.06 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
In oil news, the pain just goes on and on for US
frackers and strippers. Layoffs continue to mount. Now mild weather in North
America adds to the pain. Iraq pumps up a record. In the UK oil sector, the
bust deepens. Would the last one out of Scotland turn off the lights.
"When paper money systems begin to crack at the seams, the run to gold could be explosive."
Harry Browne
Price Collapse Hits Scavengers Who Scrape the Bottom of Big Oil's Barrel
Jan 20, 2015 5:00 AM GMT
In the $1.6 trillion-a-year oil business, there are global titans like Exxon Mobil
Corp. (XOM) that wield more economic might than most of the nations on
Earth, and scores of wildcatters scouring land and sea for the next treasure
troves of crude. Then there are the strippers. For these canaries in the proverbial coal mine, the journey keeps going deeper and darker.
Strippers are scavengers who make a living by resuscitating once-prolific oil fields to coax as little as a bathtub full of crude a day from each well. Collectively, the strippers operate almost half-a-million oil wells that produced more than 730,000 barrels a day in 2012, the most recent year for which figures were available.
That’s one of every 10 barrels produced in the U.S. -- equivalent to the entire output of Qatar, or half the crude Royal Dutch Shell Plc (RDSA), Europe’s largest energy company, pumps worldwide every day. With oil prices down 57 percent since June, these smallest of producers will be the first to succumb to the Great Oil Bust of 2015.
“This is killing us,” said Todd Shulman, a University of Colorado-trained geologist who ran fracking crews in the Rocky Mountains before returning to Vandalia, Illinois, in 1984 to help run the family’s stripper well business.
Stripper wells -- an inglorious moniker for 2-inch-wide holes that produce trickles of crude with the aid of iconic pumping machines known as nodding donkeys -- were a vital contributor to U.S. oil production long before the shale revolution.
Though a far cry from the booming shale gushers that have pushed American crude production to the highest in a generation, stripper wells are a defining image of the oil business, scattered throughout rural backwaters abandoned by the world’s oil titans decades ago.
With the price of crude dipping so low, there’s no way Shulman will be able to drill a new well that regulators have already permitted. Nor is he even going to turn on a well finished last month that’s ready to start production.
----The economics of most stripper wells stop making sense when Brent crude, the benchmark for more than half the world’s oil, drops under $50 a barrel, U.K.-based Wood Mackenzie Ltd. said in a Jan. 9 note to clients.
---- “Once the oil price reaches these levels, producers have a sometimes complex decision to continue producing, losing money on every barrel produced, or to halt production, which will reduce supply,” said Robert Plummer, a corporate research analyst at Wood Mackenzie. “U.S. onshore ultra-low production volume stripper wells could be the first to be cut.”
----For stripper-well operators like Shulman and thousands of others across the U.S., the situation is especially dire: unlike shale fields that can be quickly shut down and restarted in response to price swings, stripper operations are geologically and technically delicate.
Shut a stripper well down and chances are the bottom of the hole will fill with water or permanently clog with sand and you’ll never see another barrel of oil, said Brad Gessel, who operates 200 stripper wells in fields formerly owned by the likes of Shell near Whittington, Illinois.
More
Oil Falls as Record Iraqi Output Seen Compounding Surplus
Jan 20, 2015 8:14 PM GMT
Oil dropped after Iraqi crude production surged to a record and the International
Monetary Fund cut its global growth outlook. Crude fell 4.7 percent in New York and 1.7 percent in London. Iraq is pumping 4 million barrels a day and will boost exports, Oil Minister Adel Abdul Mahdi said at a news conference in Baghdad.
The IMF made the steepest reduction to its global-growth outlook since January 2012 in its quarterly global outlook issued yesterday. Projections for the euro area, Japan, China and Latin America were trimmed.
Oil has fallen by more than half since June as the U.S. pumped at the fastest pace in more than three decades and the Organization of Petroleum Exporting Countries resisted calls to reduce production. Goldman Sachs Group Inc. and Societe Generale SA were among banks to reduce their price forecasts last week.
“We continue to get news of rising supplies and a shaky economy,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “The surge in Iraqi production is going to add barrels to an oversupplied market. The IMF report was lousy and further crimps the demand outlook.”
More
BHP Cuts U.S. Shale Rigs as Oil to Iron Ore Prices Slip
Jan 21, 2015 5:41 AM GMT
BHP
Billiton Ltd. (BHP), the biggest overseas investor in U.S. shale, will cut
the number of its rigs there by about 40 percent as plunging petroleum prices
add to concerns about lower iron ore earnings. Drilling and development spending on U.S. onshore oil and gas fell to $1.9 billion in the six months to Dec. 31 from $2.1 billion a year ago, the Melbourne-based company said today in a statement.
BHP will cut the number of active rigs to 16 from 26 by July, it said.
Brent crude, a benchmark for more than half of the world’s oil, declined 48 percent last year as increasing output in the U.S. contributed to a global glut. The price of iron ore, the biggest earner at BHP, slumped 47 percent in 2014 as the largest miners raised volumes amid weaker demand from China, the largest buyer.
“Their plans to cut oil drilling rigs in the U.S. is a pointer to what’s to come in the oil market,” Ric Spooner, chief strategist at CMC Markets in Sydney, said today by phone. “We will eventually see a supply response to the drop in the oil price from the U.S. onshore producers.”
U.S.
drillers have cut the number of oil rigs in service by 209 since Dec. 5, the
steepest six-week decline since Baker Hughes Inc. began tracking the data in July 1987. The count was down 55 to 1,366 in the week
to Jan. 16, the data show.
More
Natural Gas Drops Most in 11 Months on Milder Weather Forecasts
Jan 20, 2015 8:35 PM GMT
Natural gas futures fell by the most in 11 months in New York on
speculation that moderating U.S. weather will limit demand for the heating
fuel. Prices slid 9.5 percent, the biggest decline since Feb. 24. Temperatures from the Great Plains through Florida will be above normal over the next five days, with seasonal or higher readings through Jan. 29, said Commodity Weather Group LLC. An inventory surplus to year-earlier levels widened to a 28-month high, according to a government report last week.
“We are not going to see sustained cold over the next two weeks,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut. “The market is reflecting the idea that without really bitter cold weather, and with production levels ramping back up to record levels, we can’t really hold gains in a rally.”
Natural gas for February delivery fell 29.6 cents to $2.831 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Jan. 12. Volume for all futures traded was 52 percent above the 100-day average at 2:34 p.m. Prices have dropped 27 percent since the end of October.
More
UK hit by more oil job cuts as Talisman lays off staff
Sinopec-Talisman is the latest North Sea oil company to respond to falling prices
Aberdeen was hit by more job cuts after Talisman-Sinopec said it would slash 300 jobs from its operations in the North Sea.The cuts come a week after BP informed staff in the Scottish oil hub that it was planning to reduce its headcount of 3,500 in the North Sea by 300 workers.
Talisman Sinopec managing director Paul Warwick said: "Our industry is operating in a mature environment, against a backdrop of a declining oil price and ever-increasing operating costs, alongside falling production levels, reduction in exploration and asset integrity and maintenance issues.”
The cuts will be split between permanent staff and contractors.
Job losses are mounting across the entire global oil and gas industry after Opec triggered an all-out price war in November that has seen prices tumble by almost 50pc. Brent crude was trading below $49 per barrel for most of Tuesday after the International Monetary Fund slashed its global economic forecasts.
---- Meanwhile, oil and gas engineering company Halliburton has said that it may cut thousands of jobs. Once led by former US vice-President Dick Cheney, Halliburton said that it would make cuts in line with its major competitors. Baker Hughes, which is to be acquired by Halliburton in a multi-billion-dollar deal, said it would slash several thousand positions from its headcount. Schlumberger, which has a significant presence in the UK, has said it will have to cut 9,000 jobs to remain profitable.
Last week, Royal Dutch Shell and
its partner Qatar Petroleum shelved its first major development this year when
it decided not to go ahead with a $6.5bn petrochemicals plant near Doha, partly
due to falling oil prices.
Total to cut capital spending by 10% amid oil price rout
Christopher Adams and Michael Stothard in Paris and Ed
Crooks in New York
January 20, 2015 5:42 pm
Total, the French oil and gas giant, plans to reduce group-wide capital spending by 10 per cent this year and speed up billions of dollars in asset disposals, under an accelerated cost-cutting plan led by new chief executive Patrick Pouyanné.
The move comes as thousands more job cuts were announced in
the energy industry on Tuesday, with Baker Hughes, the oilfield
services provider being acquired by Halliburton in a $26.8bn deal,
saying that it would lay off 7,000 employees.
In a Financial Times interview, Mr Pouyanné — appointed to the top role at Total after the death last year of Christophe de Margerie in a Moscow plane crash — said the majors, the world’s biggest energy companies, could emerge as “the winners” from the market turmoil because they have greater flexibility to respond by using strong balance sheets to borrow more while interest rates were at historic lows.
Total, he
said, would first make deeper and swifter cuts to this year’s spending. These
would include cuts to exploration and development in the UK region of the North
Sea, Canada’s oil sands and mature fields in west African states such as Gabon
and Congo.
More
"We need only take our heads out of the sand to see clearly that interventionism not only has failed to provide the promised something-for-nothing, but has led to all sorts of undesirable consequences. Indeed, many are just beginning to realize that we are moving towards disaster even though we have been on a wrong heading for decades."
Leonard Read
The monthly Coppock Indicators finished December.
DJIA: +138 Up. NASDAQ:
+247 Down. SP500: +198 Down.
The reported news is that The European Central Bank will pump Euro into market periodically till about September 2016 to strengthen the eurozone economy. The duration of need to strengthen is significant here. One view could be that ECB foresees that strengthening for a longer period between now and September 2016 could be competitive. It is noteworthy that duration of strengthening is matching approximately with the duration this writer had predicted as early as May 2014 published on 2 June 2014 in article - Stressful times ahead for world economy in 2015 and 2016 - at www.astrologyweekly.com. It was identified by this writer that a turmoil in , among others, "EU" economy was likely to come up from November 2014 and on due to, among other factors, oil and gas. It was also predicted that the likely trend could perhaps continue, in one shape or other, till about July 2016 unless remedial measures are taken. Having said that , it may be emphasised here that these predictions of likely trends are indicative and not deterministic meaning thereby that , in view of natural scheme of happenings in human life, there is always room for reform, salvaging and improvement through a renewed, sufficient and appropriate strategy. This writer can guess that the ECB seems to have taken recourse to said strategy. Good luck.
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