Baltic Dry Index. 723 +14 Brent Crude 46.32
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"The history of paper money is an account of abuse, mismanagement, and financial disaster."
Richard M. Ebeling
With no one willing to cut crude oil production, and global demand still
falling from the drop off in demand in China and Europe, the oil price has
nowhere to go but down. But now the rout is spreading debt contagion far and
wide. Uncle Scam’s plot to take out Putin and Russia now threatens to take out
America, Canada and Scotland. And we haven’t seen anything yet if the oil price
halves again! The Great Nixonian Error of fiat money is sliding towards its end
in revulsion.
"Can't anybody here play this game?"
Casey Stengel.
Oil Extends Drop to Near $45 as U.S. Supply Seen Worsening Glut
Jan 13, 2015 5:58 AM GMT
Oil extended losses to trade near $45 a barrel amid speculation that U.S.
crude stockpiles will increase, exacerbating a global supply glut that’s driven
prices to the lowest in more than 5 1/2 years. Futures fell as much as 1.9 percent in New York, declining for a third day. Crude inventories probably gained by 1.75 million barrels last week, a Bloomberg News survey shows before government data tomorrow. The United Arab Emirates, a member of the Organization of Petroleum Exporting Countries, will stand by its plan to expand output capacity even with “unstable oil prices,” according to Energy Minister Suhail Al Mazrouei.
Oil slumped almost 50 percent last year, the most since the 2008 financial crisis, as the U.S. pumped at the fastest rate in more than three decades and OPEC resisted calls to cut production. Goldman Sachs Group Inc. said crude needs to drop to $40 a barrel to “re-balance” the market, while Societe Generale SA also reduced its price forecasts.
“There’s adequate supply,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone today. “It’s really going to take someone from the supply side to step up and cut, and the only organization capable of doing something substantial is OPEC. I can’t see the U.S. reducing output.”
More
Earnings Pessimism Jumps as Oil Threatens S&P 500 Growth
Jan
12, 2015 10:17 AM GMT
While stock investors wait for the benefits of cheaper oil to seep into the
economy, all they can see lately is downside. Forecasts for first-quarter profits in the Standard & Poor’s 500 Index have fallen by 6.4 percentage points from three months ago, the biggest decrease since 2009, according to more than 6,000 analyst estimates compiled by Bloomberg. Reductions spread across nine of 10 industry groups and energy companies saw the biggest cut.
Earnings pessimism is growing just as the best three-year rally since the technology boom pushed equity valuations to the highest level since 2010. At the same time, volatility has surged in the American stock market as oil’s 55 percent drop since June to below $49 a barrel raises speculation that companies will cancel investment and credit markets and banks will suffer from debt defaults.
“Either there is nothing to worry about and crude is going quickly back to $70 plus, or we have entered an earnings down cycle for an appreciable portion of the market,” said Michael Shaoul, who helps oversee $10 billion as chief executive officer of Marketfield Asset Management in New York. “I don’t see much room for a middle ground and I don’t think the winners will cancel out the losers.”
American companies are facing the weakest back-to-back quarterly earnings expansions since 2009 as energy wipes out more than half the growth and the benefit to retailers and shippers fails to catch up. Oil producers are rocked by a combination of faltering demand and booming supplies from North American shale fields, with crude sinking to $48.36 a barrel from an average $98.61 in the first three months of 2014.
----Profit is forecast to have grown 2 percent in the final three months of 2014 and increase 2.8 percent for the current quarter, down from analysts’ October estimates of 8.1 percent and 9.2 percent, respectively. Without energy companies, profit gains would have been 4.7 percent and 7.8 percent, the most recent projections show.
Except for utilities, every other industry has seen reductions in estimates. Profit from energy producers such as Irving, Texas-based Exxon Mobil Corp. (XOM) and Chevron Corp. in San Ramon, California, will plunge 35 percent this quarter, analysts estimated. In October, analysts expected the industry to earn about the same as it did a year ago.
More
Shale Debt Matters Most to Stock Investors as Oil Plunges
Jan 12, 2015 5:00 AM GMT
U.S. shale drillers may tout how much oil they have in the ground or how
cheaply they can get it out. For stock investors, what matters most is debt. The worst performers among U.S. oil producers in a Bloomberg index owe about 5.7 times more than they earn, before certain deductions, compared with 1.7 times for companies that have taken less of a hit. Operations, such as where the companies drill or how much oil versus gas they pump, matter less.
“With oil prices below $50 and approaching $40, we’re in survivor mode,” Steven Rees, who helps oversee about $1 trillion as global head of equity strategy at JPMorgan Private Bank, said via phone.
“The companies with the higher degrees of leverage have underperformed, and you don’t want to own those because there’s a fair amount of uncertainty as to whether they can repay that debt.”
The biggest drop in oil prices since 2008 has spared few energy companies. The Bloomberg Intelligence North America Independent Exploration & Production Index, which includes 57 U.S. companies in the analysis as well as 17 Canadian ones, lost 53 percent since crude peaked in June, wiping out $346 billion in market value. The most-indebted producers suffered most, suggesting investors are concerned with their ability to pay back borrowers and fund future drilling.
Because shale wells deplete more quickly than conventional wells, producers need to keep drilling to maintain output. That takes debt. The companies in the index owe a combined $247.1 billion, an 85 percent increase from three years ago. Including some overseas assets, total production rose 60 percent to 13.3 million barrels a day in that time, data show.
More
America's Going to Lose the Oil Price War
Jan 12, 2015 12:40 PM EST By Leonid Bershidsky
The financial debacle that has befallen Russia as the price of Brent crude
dropped 50 percent in the last four months has overshadowed the one that
potentially awaits the U.S. shale industry in 2015. It's time to heed it,
because Saudi Arabia and other major Middle Eastern oil producers are unlikely
to blink and cut output, and the price is now approaching a level where U.S.
production will begin shutting down.Representatives of the leading members of the Organization of Petroleum Exporting countries have been saying for weeks they would not pump less oil no matter how low its price goes. Saudi Arabian Oil Minister Ali Al-Naimi has said even $20 per barrel wouldn't trigger a change of heart. Initial reactions in the U.S. were confident: U.S. oil producers were resilient enough; they would keep producing even at very low sale prices because the marginal cost of pumping from existing wells was even lower; OPEC would lose because its members' social safety nets depends on the oil price; and anyway, OPEC was dead.
That optimism was reminiscent of the cavalier Russian reaction at the beginning of the price slide: In October, Russian President Vladimir Putin said "none of the serious players" was interested in an oil price below $80. This complacency has taken Russia to the brink: On Friday, Fitch downgraded its credit rating to a notch above junk, and it'll probably go lower as the ruble continues to devalue in line with the oil slump.
It's generally a bad idea to act cocky in a price war. By definition, everybody is going to get hurt, and any victory can only be relative. The winner is he who can take the most pain. My tentative bet so far is on the Saudis -- and, though it might seem counterintuitive, the Russians.
For now, the only sign that U.S. crude oil production may shrink is the falling number of operational oil rigs in the U.S. It was down to 1750 last week, 61 less than the week before and four less than a year ago. Oil output, however, is still at a record level. In the week that ended on Jan. 2, when the number of rigs also dropped, it reached 9.13 million barrels a day, more than ever before. Oil companies are only stopping production at their worst wells, which only produce a few barrels a day -- at current prices, those wells aren’t worth the lease payments on the equipment. Since nobody is cutting production, the price keeps going down; oday, Brent was at $48.27 per barrel and trends are still heading downward.
All this will eventually have an impact. According to a fresh analysis by Wood Mackenzie, "a Brent price of $40 a barrel or below would see producers shutting-in production at a level where there is a significant reduction in global oil supply. At $40 Brent, 1.5 million barrels per day is cash negative with the largest contribution coming from several oil sands projects in Canada, followed by the U.S.A. and then Colombia."
That doesn't mean that once Brent hits $40 -- and that is the level Goldman Sachs now expects, after giving up on its forecast that OPEC would blink -- shale production will automatically drop by 1.5 million barrels per day. Many U.S. frackers will keep pumping at a loss because they have debts to service: about $200 billion in total debt, comparable to the financing needs of Russia's state energy companies.
More
Elsewhere, more sign of rising distress in China. German, American and
Japanese motor manufacturers under threat. Their days of easy street in China are
over. One hell of a time for Germany to
have joined in an American imposed sanctions war on Russia, once German auto
makers fastest expanding new market. It’s over for the dying, wealth and jobs
destroying EUSSR. A Chinese iron ore puzzle.
Chinese Car Dealers Find Days of ‘Printing Money’ Ending
Jan 12, 2015 10:00 PM GMT
China’s car dealers are in
open revolt over industry practices that have slashed profits, threatening
growth prospects for companies such as General Motors Co. and Volkswagen AG in
the world’s biggest auto market. Retailers are banding together under the state-backed China Automobile Dealers Association to demand lower sales targets and a bigger share of profit from vehicle sales. Bayerische Motoren Werke AG’s agreement last week to pay 5.1 billion yuan ($820 million) to its dealers has emboldened distributors for VW and Toyota Motor Corp. to demand similar concessions.
The rising tensions means companies like VW and GM will face the choice of narrower profit margins or slower growth in China, a market that increasingly determines the fortunes of global automakers. China vehicle sales in 2014 rose at half the pace of the preceding year, a “new normal” according to BMW after surging growth in past years triggered by government subsidies.
“We can’t just keep on sucking it up,” said Richard Li, 40, a Toyota dealership owner who lost about 300,000 yuan last year after offering markdowns of as much as 16 percent on some models. “We have to negotiate with them and defend our rights. I will stop buying cars from them unless they step up their financial support.”
Total vehicle sales are forecast to rise 7 percent this year, little changed from 2014, because of cooling growth and as more cities impose purchase restrictions to fight pollution, according to the China Association of Automobile Manufacturers.
More
http://www.bloomberg.com/news/2015-01-12/chinese-car-dealers-find-days-of-printing-money-ending.html
Iron Ore Holdings at China’s Ports Drop Below 100 Million Tons
Jan 13, 2015 12:53 AM GMT
Iron ore inventories at ports in China fell below 100 million metric tons for the first time
since February as the holdings in the world’s largest buyer dropped for a
seventh week to post the longest run of declines in two years. The stockpiles shrank 0.8 percent to 99.85 million tons as of Jan. 9, according to data in an e-mailed report by Shanghai Steelhome Information Technology Co. Inventories shrank 12 percent since peaking at 113.7 million tons in July, data show.
The steel-making ingredient collapsed 47 percent in 2014 as BHP Billiton Ltd. (BHP), Rio Tinto Group and Vale SA (VALE5) raised low-cost output in Australia and Brazil, spurring a global surplus. Some mines in China are shuttered over the winter months, increasing mills’ reliance on port holdings. The country is the world’s largest steelmaker.
More
Iron Ore Imports by China Surge to Record as Prices Collapse
Jan 13, 2015 6:32 AM GMT
Iron ore imports by China rebounded to an all-time high last month, capping
record annual purchases, as slumping prices boosted demand for overseas
supplies in the biggest user and some local mines were shuttered over winter. Shipments climbed 29 percent to 86.85 million metric tons from 67.4 million tons in November and 73.4 million tons a year earlier, according to customs data today. Imports last month were the highest level on record, according to data compiled by Bloomberg dating back to 1990. Over 2014, they totaled 932.5 million tons from 820.3 million tons in 2013, the data showed.
More
We end for the day with yet more fallout from Uncle Scam’s ill judged,
rash coup in Kiev. With Russia no longer importing milk and milk products from
the EUSSR, the world is now glutted with milk.
Dairy crisis: farmers facing ‘blow after blow’ as milk becomes cheaper than water
First Milk, the UK's largest dairy company, says it will delay payment to farmers following a year of falling prices
Milk is now cheaper to buy than
bottled water, and the squeeze on margins has led the UK's largest dairy
company to withhold payments to its farmers.
First Milk, a Glasgow-based
co-operative owned by British farmers, said that payment to 1,000 suppliers
would be delayed for two weeks, following a “year of volatility that has never
been seen before.”
"We don't know how long this
current market downturn will last, and we are aware that hundreds of UK dairy
farmers are unlikely to find a home for their milk this spring,” said its
chairman, Conservative MP Sir Jim Paice.
"Our priority is to make the
business and our processing assets as secure as possible in order that we can
continue to process and market every litre of our members' milk."
Returns from globally traded
dairy products have fallen by more than 50pc in the past 12 months, leading to
a steep fall in milk prices around the world.
----When bought in a four-pint bottle, the price per litre of milk has dipped to 43p, compared to 44p for bottled still water.
In a speech today, the president
of the National Farmers Union, Meurig Raymond, will warn that the dairy
industry is being crippled by price cuts.
The fierce supermarket price wars
have led to a steep drop in the number of dairy farmers in the UK, with 60
leaving the industry in December alone, the NFU will say.
There are now 9,960 dairy farmers
left in England and Wales, half the number since 2002. That could fall to 5,000
in the next 10 years.
More
“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”
“Adam Smith” aka George Goodman.
At the Comex silver
depositories Monday final figures were: Registered 65.04 Moz, Eligible 109.14
Moz, Total 174.18 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
A Murdoch newspaper
is a device for making the ignorant more ignorant and the crazy crazier
With apologies to
H. L. Mencken.
The truth about Birmingham - #foxnewsfacts
Twitter hits back at Fox News expert who claims Birmingham is populated entirely by Muslims
Steve Emerson, supposedly a terrorism expert, can have had no idea who he was dealing with when he went on Fox News and declared Birmingham to be populated entirely by Muslims."In Britain, it's not just no-go zones, there are actual cities like Birmingham that are totally Muslim where non-Muslims just simply don't go in," he said.
To be fair, he did apologise... But not before the damage was done.
At first it was disgruntled Brummies who took to Twitter to express their outrage and disbelief at his ignorance.
And then everyone else joined in under the hashtag #foxnewsfacts, with their own hilarious Birmingham factoids.
More + video
If
all else fails, immortality can always be assured by spectacular error.
J. K.
Galbraith.
The monthly Coppock Indicators finished December.
DJIA: +138 Up. NASDAQ:
+247 Down. SP500: +198 Down.
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