Baltic Dry Index. 709 -15 Brent Crude 49.29
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."
Hans F. Sennholz
Despite the Great Drama in Paris last week and yesterday, the big news
this morning is that the oil price crash seems to have resumed, after last week’s
pause at around $50 on Brent. If so, how much longer can the Great Disconnect
in global stock markets continue? My guess is only a matter of days, if that.
Last weeks “stabilisation” was partly down to discounted tanker rates and
storing oil and playing the contango, a new slide from 50, and I think we will
start getting a wave of oil sector redundancies and debt defaults in fast
order.
Below, “black gold” isn’t what it used to be. In commodities, prices
generally go down faster than they rose in the bull market. Something about
leverage, margin calls, fear, and getting out early beats getting out last.
Oil Producers Betting on Price Drop With OPEC Not Curbing Output
Jan 12, 2015 4:10 AM GMT
The oil industry was listening as OPEC talked down crude prices to a more
than five-year low. Drillers, refiners and other merchants increased bets on lower prices to the most in three years in the week ended Jan. 6, government data show. Producers idled the most rigs since 1991, with some paying to break leases on drilling equipment.
Companies are hedging more and drilling less amid concern that the biggest slump in prices since 2008 will continue. Oil dropped for a seventh week after officials from Saudi Arabia, the United Arab Emirates and Kuwait reiterated they won’t curb output to halt the decline.
“Producers are desperately hedging their production in a drastically falling market,” Phil Flynn, a senior market analyst at the Price Futures Group in Chicago, said by phone Jan. 9. “They’re trying to lock in prices because they are convinced that the market will stay down for a while.”
WTI slid $6.19, or 11 percent, to $47.93 a barrel on the New York Mercantile Exchange on Jan. 6, settling below $50 for the first time since April 2009. Futures for February delivery were down 71 cents at $47.65 in electronic trading at 12:10 p.m. Singapore time today.
More
UK oil firms warn Osborne: Without big tax cuts we are doomed
Chancellor admits more action needed to boost industry in wake of oil price collapse
North Sea oil and gas companies
are to be offered tax concessions by the Chancellor in an effort to avoid
production and investment cutbacks and an exodus of explorers.
George Osborne has drawn up a set
of tax reform plans, following warnings that the industry’s future of the
industry is at risk without substantial tax cuts.
But the industry fears he will
not go far enough. Oil & Gas UK, the industry body, is urging a tax cut of
as much as 30pc and an overhaul of what it says is a complex, unfriendly and
outdated tax structure.
Mr Osborne asked Treasury
officials to work on a new, more wide-ranging package than the 2pc tax cuts he
promised in the Autumn Statement last month.
The basic tax levy is currently
60pc but can run to 80pc for established oil fields. He plans to open talks
with industry leaders this week on new options for the pre-election March
Budget.
----Industry leaders have presented the Chancellor with a bleak picture of the North Sea outlook after the big falls in the price of crude since the summer, and particularly the impact on the Scottish economy.
Mike Tholen, the economics director at Oil and Gas UK, dramatically summed up the situation. “If we don’t get an immediate 10pc cut, then that will be the death knell for the industry,” he said. The industry sees the 10pc cut as a “down payment” to be followed by a further 20pc reduction to provide an investment incentive.
The speed and scale of the collapse in oil prices, down almost 60pc to below $50 a barrel over the past five months, has forced North Sea operators in a high-cost oil basin to take emergency action.
A modest recovery in exploration is almost at a standstill, some projects have been mothballed and cost-cutting programmes accelerated. Oil contract workers’ pay has been slashed by 15pc and redundancy programmes are under review.
More
For the rest of this month, the big other story is the David, as in Greece,
v Goliath, as in Germany and the ECB, epic rolling on to its outcome on Sunday
January 25th. In theory, whether tiny Greece stays in the euro, EU,
pays on its debts or defaults, shouldn’t much trouble Goliath. In practise it
might, and in ways not always easily discernable.
Global markets hang on Germany's next move
The future path not just of the eurozone but also the UK and, in fact, the entire world economy will be impacted significantly by Angela Merkel’s next move, writes Liam Halligan
The German government is stuck on
the horns of an extremely nasty dilemma. Berlin’s decision will go a long way
towards determining whether or not we endure serious instability on global
financial markets over the coming months. The future path not just of the
eurozone but also the UK and, in fact, the entire world economy will be
impacted significantly by Angela Merkel’s next move. The German chancellor,
moreover, has just days to make up her mind.
Is Berlin to permit full-scale
quantitative easing? Will Germany’s coalition government allow money created ex
nihilo by the European Central Bank (ECB) to be used to buy the sovereign bonds
of otherwise insolvent eurozone nations? While this is an arcane, technical
question, the real-world implications are huge.
Stock markets surged across the
Western world last Wednesday, on new data showing eurozone prices were 0.2pc
lower in December than the same month in 2013. This “slip into deflation” puts
the ECB under pressure to address falling prices, and their potentially
debilitating effect on investment and growth, by implementing fully-blown
euro-QE – which is why the news saw equities rocket and sovereign bond yields
drop.
Indeed, the only reason eurozone
bond-markets have been relatively stable of late, with the danger of a
tumultuous break-up seemingly over, is that ever since his “whatever it takes”
speech of mid-2012, ECB president Mario Draghi has been hinting that QE
salvation is just around the corner. That’s allowed cash-strapped eurozone governments
to borrow at ultra-low interest rates even while presiding over moribund
economies and national balance sheets riddled with debt.
For a couple of years, then,
eurozone stock and bond markets, and their global counterparts, have been
pricing in, ever more enthusiastically, the idea the ECB will ride to the
rescue. Almost everyone is betting on the Frankfurt-based institution joining
its US and UK equivalents in using money-from-nothing to buy up vast swathes of
government debt, so “solving” Europe’s chronic state of indebtedness and
ensuring the eurozone remains intact.
While the ECB’s six-member
committee formally decides whether or not to wield the QE bazooka, the reality
is that Germany, the eurozone’s paymaster-in-chief, calls the shots. And the
trouble is that, for all Draghi’s promises, while Merkel has never ruled out
ECB sovereign bond purchases, she has never formally approved them either.
Thanks to Draghi, and the siren
calls of an army of economists working for financial institutions set to
benefit from a dose of eurozone funny-money, there’s a near-universal market
expectation that the ECB will announce a no-holds-barred QE programme at its
next meeting on January 22. Such is the hype that a weak announcement will
result in a serious lurch, as equities tumble and bond yields spike.
More
http://www.telegraph.co.uk/finance/economics/11337610/Global-markets-hang-on-Germanys-next-move.html
Today, a very timely warning on a Greek bank “bail-in” from “Mish.” His whole update is well worth the read.
Another Run on Greek Banks Begins; Get Out While You Still Can; Buy Gold
Friday, January 09, 2015 1:34 AM
In November, Greeks withdrew €220 million from banks. In December, the
figure soared to €3 billion.My advice to Greeks is simple: Get out while you still can. That means now!
Via translation from Libre Mercardo, please consider ECB Threatens to Unleash the 'Banking Yard'
The term "banking yard" is in reference to what happened to Cyprus depositors. What follows is my translation of the article.
According
to initial estimates, Greeks withdrew €3 billion from their bank accounts in
December. €600 million of that total came on December 29, when Greece failed to
elect a new president, thereby forcing national elections on January 25.
In comparison, November when net outflows totaled about €220 million.
The risk of bank runs in Greece is reactivated. In this sense, just remember that since 2010, when the crisis hit the euro, the Greek bank deposits dropped 37% but even after the rescue by the troika, deposits never recovered. This data demonstrates strong distrust by Greek depositors of the monetary union.
In comparison, November when net outflows totaled about €220 million.
The risk of bank runs in Greece is reactivated. In this sense, just remember that since 2010, when the crisis hit the euro, the Greek bank deposits dropped 37% but even after the rescue by the troika, deposits never recovered. This data demonstrates strong distrust by Greek depositors of the monetary union.
The Greek financial system is artificially sustained by the ECB, the lender of
last resort. It survives because the ECB accepts junk debt (including Greek
state bonds) as collateral. If the ECB were to cut support, the Greek banking
simply would close and the government would set strict limits on the withdrawal
of deposits.
On Thursday, the ECB said that its funding to the Greek banking system depends on the success of the current bailout program and a subsequent agreement in Athens with the EU and the International Monetary Fund (IMF).
The rating agency Moody's also warned Thursday that the growing political uncertainty in Greece is damaging the liquidity of Greek banks, causing an outflow of deposits.
---- Get Out While You Still Can
ELA stands for Emergency Liquidity Assistance. It's not unlimited. Given the political environment, if the run on Greek banks picks up steam, the ECB may be unwilling to step in.
The important message to Greeks is get out now, while you still can. If this panic escalates, Greece may very well respond with capital controls, even before the election.
Those who do not get out while they can may suffer devastating consequences.
Read more at http://globaleconomicanalysis.blogspot.com/2015/01/another-run-on-greek-banks-begins-get.html#VTsEmumR7FBIkFIU.99
On Thursday, the ECB said that its funding to the Greek banking system depends on the success of the current bailout program and a subsequent agreement in Athens with the EU and the International Monetary Fund (IMF).
The rating agency Moody's also warned Thursday that the growing political uncertainty in Greece is damaging the liquidity of Greek banks, causing an outflow of deposits.
---- Get Out While You Still Can
ELA stands for Emergency Liquidity Assistance. It's not unlimited. Given the political environment, if the run on Greek banks picks up steam, the ECB may be unwilling to step in.
The important message to Greeks is get out now, while you still can. If this panic escalates, Greece may very well respond with capital controls, even before the election.
Those who do not get out while they can may suffer devastating consequences.
Read more at http://globaleconomicanalysis.blogspot.com/2015/01/another-run-on-greek-banks-begins-get.html#VTsEmumR7FBIkFIU.99
"Until government administrators can so identify the interests of government with those of the people and refrain from defrauding the masses through the device of currency depreciation for the sake of remaining in office, the wiser ones will prefer to keep as much of their wealth in the most stable and marketable forms possible - forms which only the precious metals provide."
Elgin Groseclose
At the Comex silver
depositories Friday final figures were: Registered 65.04 Moz, Eligible 108.55
Moz, Total 173.59 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Presented without comment. Our under reported PC world. Thank you team Bush, Cheney, Rumsfeld, Blair, Obama, Kerry, Nuland, Cameron. Change we can believe in.
Rex Murphy: We are not Charlie Hebdo
Saturday, Jan. 10, 2015
Following the butchery at the
Paris magazine Charlie Hebdo, we are in the middle of another blizzard
of post-facto hash-tag bravery. All over the Internet there are whole mobs
holding up little signs: “I am Charlie Hebdo,” “We are Charlie Hebdo.”
The idea, I presume, is to broadcast their commitment to the Western idea of
freedom of speech and the press. Let’s put it plainly: The solidarity would
have been a lot more impressive, more persuasive, some time before this
week’s mass butchery.
Indeed, at our universities,
newspapers and broadcasters, we have seen an ever-shrinking defence of free
speech, a timid reluctance to take on those who claim special privilege to shut
down those they simply don’t like. The great institutions of the West, the
press and the universities, have been at best complicit and at worst cowardly
when it comes up to defending freedom of speech — not from threats of Islamist
fanatics with guns, but in much less demanding circumstances.
Where was this “we” when a video
critical of Islam was mendaciously identified as the “cause” of the terror
attack on Benghazi? Where was “we” when Hillary Clinton went on Pakistani
television to declaim against this “reprehensible” video and revile its maker,
and at the Benghazi victims’ funerals said: “We’ve seen rage and violence
directed at American embassies over an awful Internet video that we had nothing
to do with.” Where was “we” when the filmmaker was arrested, while to this day
the butchers of Benghazi roam the Earth unmolested?
Where is this We of the Hash-tags
when whole swathes of the press, and some political leaders, refuse to call
acts that are plainly terroristic by their proper name? Can those who refuse to
say the word “terrorism” after a terrorist act now claim they are Charlie
Hebdo?
And where was We of the Hash-tags
when President Obama made the inexplicable declaration at the United Nations
that “the future does not belong to those who slander the Prophet?” More than
anything else, that sounds like a fulsome statement of accord with those who
denounce cartoons and videos and editorials about the “Prophet,” who riot after
he is “traduced” by someone in the West. There is no “We are Charlie Hebdo” in
that statement. There is surrender instead.
And what about our prophets, of
the Enlightentment and democracy, who made free speech the core of our lives
and politics? We are notoriously timid in defending them, and almost tumid with
the desire to speak up for those who despise them. Why do we wallow in some
shallow hollow of factitious guilt, moaning over our failings to “understand”
after 9/11, after Mumbai, after London, after Ottawa, after Paris this week,
rather than laying the guilt on the real perpetrators and the ideology that fires
them?
Our universities bleat about
inquiry and free speech, but they are feeble and craven, caving in to
protestors and special interests, pleading “sensitivity” and the “wish not to
offend” any time some topic or speaker threatens to “hurt” the professionally
agitated on campus. Where was “we” when a band of fatuous progressives
protested former U.S. Secretary of State Condoleezza Rice giving a convocation
address at Rutgers University? She worked for Bush, so free speech be dammed.
Where was We of the Hash-tags
when Ann Coulter was pre-emptively cautioned about what she could or should say
by officials at the University of Ottawa? Where was “we” when Ayaan Hirsi Ali
was humiliated and an honourary degree invitation revoked after campus
activists at Brandeis University — faculty and students — protested? Brandeis
mounted a defence of free speech that would have Patrick Henry drooling with
envy: “[Ali] is a compelling public figure and advocate for women’s rights. …
That said, we cannot overlook certain of her past statements that are
inconsistent with Brandeis University’s core values.” A Presidential Medal of
Freedom for that wonderful “that said.”
There are more examples closer to
home: Christie Blatchford howled from the stage at the University of Waterloo,
a pro-life speaker at St. Mary’s University in Halifax met with the feverish
chant of “No hate speech in our school!” — and the administration, of course,
shutting down the talk.
More
What Radicalized The Charlie Hebdo Terrorists—–Try Abu Ghraib
by Contributor • January 9, 2015
First, a hat tip to Elias Groll, assistant editor at Foreign Policy,
whose report just a few hours after the killings on
Wednesday at the French satirical magazine Charlie Hebdo, included
this key piece of background on the younger of the two brother suspects:“Carif Kouachi was previously known to the authorities, as he was convicted by a French court in 2008 of trying to travel to Iraq to fight in that country’s insurgent movement. Kouachi told the court that he wished to fight the American occupation after viewing images of detainee abuse at Abu Ghraib prison.”
The next morning, Amy Goodman of Democracynow.org and Juan Cole (in his blog) also carried this highly instructive aspect of the story of the unconscionable terrorist attack, noting that the brothers were well known to French intelligence; that the younger brother, Cherif, had been sentenced to three years in prison for his role in a network involved in sending volunteer fighters to Iraq to fight alongside al-Qaeda; and that he said he had been motivated by seeing the images of atrocities by U.S. troops at Abu Ghraib.
An article in the Christian Science Monitor added: “During Cherif Kouachi’s 2008 trial, he told the court, ‘I really believed in the idea’ of fighting the U.S.-led coalition in Iraq.” But one would look in vain for any allusion to Abu Ghraib or U.S. torture in coverage by the Wall Street Journal or Washington Post. If you read to the end of a New York Times article, you would find in paragraph 10 of 10 a brief (CYA?) reference to Abu Ghraib.
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Drone Rules in Afghanistan Go Unchanged, And Other Reasons the War Isn't Really Over
Despite the official end of the U.S. war in Afghanistan, our involvement goes on
John Knefel |
January 7, 2015
Though many Americans may not have realized it, December 28th marked what
the U.S. government called the official end of the war in Afghanistan. That war
has been the longest in U.S. history – but despite the new announcement that
the formal conflict is over, America's war there is far from finished. In fact,
the Obama administration still considers the Afghan theater an area of active
hostilities, according to an email from a senior administration official – and
therefore exempts it from the stricter drone and targeted killing guidelines
the president announced at a major speech at the National Defense University in
2013."Afghanistan will continue to be considered an 'area of active hostilities' in 2015," the official tells RS. "The PPG does not apply to areas of active hostilities." (PPG stands for Presidential Policy Guidelines, the formal name for the heightened drone rules.)
That perplexing distinction – that formal combat operations are over but that the U.S. still remains in an armed conflict – in many ways exemplifies the lasting legacy of Obama's foreign policy. From Yemen to Pakistan to Iraq and Syria and Afghanistan, the administration has consistently downplayed its actions – some acknowledged and some covert – saying that the wars are (almost) over while retaining virtually all the powers of a country at war. Or, as the Kabul-based journalist and RS contributor Matt Aikins put it, referring to Afghanistan: "a 'formal' end to the war means the beginning of an 'informal' war, without aim or end, founded on the lie that we are no longer at war."
No change to the drone war
The announcement from the White House that despite the formal end to the war the stricter drone rules won't apply in Afghanistan – which hasn't been previously reported – isn't entirely unexpected.
In October, I reported that the Obama administration wasn't planning on announcing any changes to the policy, but, regardless, the news that the administration will continue to take a wide aperture for selecting targets to kill runs counter to the spirit of their rhetoric that the war is over.
Drone strikes in Afghanistan have been a major part of the US occupation, though they receive less media attention than strikes in Pakistan and Yemen. In July of 2014, the Bureau of Investigative Journalism issued a report attempting to track drone and other airstrike in Afghanistan, and claimed that "the country has seen more than 1,000 drone strikes, carried out by U.S. and U.K. forces." A recent suspected drone strike in Afghanistan killed 9 alleged members of the Pakistani Taliban.
The White House announcement also means the semi-covert, CIA-run drone war in Pakistan will likely continue unchanged as well. The drone strikes in Pakistan are closely linked with the U.S. occupation of Afghanistan, as part of the legal rationale behind the drone strikes is "force protection." That is, using drones to kill suspected militants in Pakistan before they have an opportunity to kill U.S. troops. Drone strikes in Pakistan continued at a steady pace in the final months of 2014, and there has already been at least one suspected U.S. air strike in 2015.
More than 10,000 US troops – and countless more contractors – will remain in country
This is perhaps the clearest and most obvious signal that the U.S. will continue its war. As part of a bilateral security agreement signed between the new Ashraf Ghani administration in Kabul and the Obama administration, roughly 10,600 U.S. troops will remain in Afghanistan for at least the coming months. U.S. troops are currently scheduled to leave the Afghanistan entirely by 2016, but the agreement authorizes troops to remain until 2024 if conditions change.
Originally, the U.S. and coalition forces were only going to stay in the country to train Afghan security forces. But as The New York Times reported in November, Obama widened the military's authority from a training-only mission to include counterterrorism operations. That decision "ensures American troops will have a direct role in fighting in the war-ravaged country for at least another year," the Times reported.
Beyond the remaining troops, as of October the Pentagon had over 45,000 contractors in Afghanistan on its payroll (as the Council on Foreign Relations' Micah Zenko has noted). Slightly over 2,000 of that total are private security contractors, both armed and unarmed, a number that's likely to increase as U.S. troops gradually depart.
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 December.
DJIA: +138 Up. NASDAQ:
+247 Down. SP500: +198 Down.
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