Thursday 9 April 2015

Grexit?



Baltic Dry Index. 580 -03      Brent Crude 56.18

LIR Gold Target in 2019: $30,000.  Revised due to QE programs.

It is the highest impertinence and presumption… in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expense… They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.

Adam Smith. The Wealth of Nations. 1776.

It is pay up day or default day for Greece. The day Greece is supposed to fork out 450 million euros to the IMF. Technically, if they really wish to play the Germans game of hardball back to the troika, now rebranded as “the institutions,” Greece won’t pay today and has 30 days to come up with the cash. Nothing much seems to have come from the Greek Prime Ministers trip to Moscow unless you are President Putin.

Europe's manhandling of Greece is a strategic gift to Russia's Vladimir Putin

'Greece is a sovereign country with an unquestionable right to exploit its geopolitical role,' says premier Alexis Tsipras in Moscow

The European Union has presented Vladimir Putin with an irresistible strategic prize, on a platter.
By insisting rigidly that Greece's radical-Left government repudiate its electoral pledges and submit to ritual fealty - even on demands of little economic merit, or that might be unwise in the particular anthropology of a post-Ottoman society - it has pushed the Greek premier into the arms of a revanchist Kremlin.

The visit of Alexis Tsipras to Moscow has been a festival of fraternity. On Wednesday he laid a wreath at the Tomb of the Unknown Soldier and spoke of the joint struggle against Fascism, and the unstated foe. The squalid subject of money was of course avoided. "Greece is not a beggar," he said.

"The visit could not have come at a better time,” said Mr Putin, purring like the cat who ate the cream.

EU sanctions against Russia will expire in June unless all 28 states agree to roll them over, and Mr Tsipras has already signalled his intent. "We need to leave behind this vicious cycle," he said.
"Greece is a sovereign country with an unquestionable right to implement a multi-dimensional foreign policy and exploit its geopolitical role," he added, for good measure.

A Greek veto on sanctions will embolden Hungary's Viktor Orban to join the revolt, this time in earnest. His country has just secured a €10bn credit line from Russia to expand its Paks nuclear power plant, a deal described as a "purchase of political influence" by a leading critic.

Slovakia is quietly slipping away from what was once a united (if fractious) EU front to deter further Kremlin moves into Ukraine. There is safety in numbers for this evolving constellation, what Mr Putin's foes would call the EU's internal "Fifth Column". Brussels can bring one to heel, but not a clutch of rebels. It is becoming powerless.
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While we await today’s instalment of the Greek v EUSSR marathon, we open today with “good news” from the oil patch. The Saudis are producing oil like there’s no tomorrow, clearly taking aim at America’s massively indebted frackers, meanwhile America’s oil glut is growing like Topsy. Something has to give and that’s all too likely tobe the crude oil price.

Oil plunges as supply glut grows

Published: Apr 8, 2015 3:09 p.m. ET
NEW YORK (MarketWatch)—Oil futures plunged Wednesday, erasing much of a two-day gain that had previously put the U.S. benchmark in positive territory for 2015, after data showed U.S. oil inventories posted the largest one-week jump since 2001.

The figures helped dash notions that the market was beginning to work through a supply glut that has helped drive oil down more than 50% from its mid-2014 peak.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in May CLK5, +1.17% fell $3.56, or 6.6%, to close at $50.42 a barrel. The U.S. benchmark had gained around 10% over the previous two days to end Tuesday at its highest level of the year.

With Wednesday’s drop, Nymex crude is down more than 5% since the end of 2014.
Brent crude for May delivery LCOK5, +1.12% on London’s ICE Futures exchange dropped $3.55, or 6%, to close at $55.55 a barrel.

----Oil extended losses after the U.S. Energy Information Administration said commercial crude inventories, excluding the Strategic Petroleum Reserve, jumped by 10.9 million barrels to 482.4 million in the week ended April 3, far exceeding the 3.2 million barrel rise forecast, on average, by analysts surveyed by The Wall Street Journal. The rise was the largest weekly jump since March 2001, according to the Journal.

If that wasn’t enough, market bulls had also looked for a second consecutive weekly drop in domestic oil production only to see output rise by 18,000 barrels a day to 9.404 million barrels. Also, supplies at Cushing, Okla., the delivery hub for Nymex futures, rose to 60.2 million barrels from 58.9 million
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Saudi Arabia crude output at record high in March

Published: Apr 8, 2015 4:45 a.m. ET
Saudi Arabia raised its crude output to 10.3 million barrels a day in March, its oil minister Ali al-Naimi said, signalling an unexpected strong demand from its customers.
Mr. Naimi did not give a reason for the increase in output, according to the official Saudi News Agency.

The Kingdom's previous record peak was 10.2 million barrels a day in August 2013. It told the Organization of the Petroleum Exporting Countries that it produced 9.64 million barrels a day in February.

Mr. Naimi said that the kingdom's production will continue at around 10 million barrels a day, signalling that his country is determined to ride out the price slide without making any output cut.
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For every oil job lost, up to four more may go, analyst says

Published: Apr 8, 2015 10:47 a.m. ET
WASHINGTON (MarketWatch) — The hemorrhaging of oil prices isn’t just going to cost jobs on rigs and fracking sites.

Every job lost in the oil and gas sector may result in another three to four jobs lost outside the industry, according to a research note from Goldman Sachs’s Alec Phillips.

Phillips came up with his estimate by examining past energy-related downturns and comparing employment in the oil sector to employment in other industries in key energy-focused states such as Texas, Oklahoma and Louisiana.

In 1986, for example, payrolls excluding the oil sector in states with diversified economies grew by 2.6%, but they fell 1.1% in oil-heavy states. That resulted in 550,000 fewer jobs in the energy-intensive states compared to what would have existed had those areas matched the national average. Oil and gas employment fell by 150,000 in those states.

The Goldman Sachs analyst also looked at sector-level results nationwide in a few segments such construction and manufacturing, particularly machinery and fabricated-metal products. That research also shows a loss of about three to four non-energy jobs for every energy job lost.


One sobering fact is that the decline in oil and gas jobs has just started. Phillips estimates a total drop in energy employment of around 50,000, which will depress U.S. payroll growth by around 200,000 to 250,000 in the coming year.

At least early on, the damage to the U.S. economy from slowing oil production could be “more front-loaded” and outweigh the benefits of cheaper gas, Phillips said.
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We end for today in oil, with the magic of central bankster QE and ZIRP fuelled casino capitalism. In this bizarre world where the billions of fiat money morphed into the trillions, en-route to the quadrillions, everyone’s in the oil patch is a winner according to Bloomberg below. Something about “serious” and “lying” comes to mind, except this isn’t the EUSSR.

The Oil Industry's $26 Billion Life Raft

12:00 AM BST April 9, 2015
For U.S. shale drillers, the crash in oil prices came with a $26 billion safety net. That’s how much they stand to get paid on insurance they bought to protect themselves against a bear market -- as long as prices stay low.

The flipside is that those who sold the price hedges now have to make good. At the top of the list are the same Wall Street banks that financed the biggest energy boom in U.S. history, including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co.

While it’s standard practice for them to sell some of that risk to third parties, it’s nearly impossible to identify who exactly is on the hook because there are no rules requiring disclosure of all transactions.
The buyers come from groups like hedge funds, airlines, refiners and utilities.

“The folks who were willing to sell it were left holding the bag when prices moved,” said John Kilduff, partner at Again Capital LLC, an energy hedge fund in New York.

The swift decline in U.S. oil prices -- $107.26 on June 20, $46.39 seven months later -- caught market participants by surprise. Harold Hamm, the billionaire founder of Continental Resources Inc., cashed out his company’s protection in October, betting on a rebound. Instead, crude kept falling.

Other companies purchased insurance. The fair value of hedges held by 57 U.S. companies in the Bloomberg Intelligence North America Independent Explorers and Producers index rose to $26 billion as of Dec. 31, a fivefold increase from the end of September, according to data compiled by Bloomberg.

Though it’s difficult to determine who will ultimately lose money on the trades and how much, a handful of drillers do reveal the names of their counterparties, offering a glimpse of how the risk of falling oil prices moved through the financial system. More than a dozen energy companies say they buy hedges from their lenders, including JPMorgan, Wells Fargo, Citigroup and Bank of America.

Danielle Romero-Apsilos, a Citigroup spokeswoman, said the bank actively hedges and manages its risk. Representatives of JPMorgan, Wells Fargo and Bank of America declined to comment.

At the end of 2014, JPMorgan had about $671.5 million worth of derivatives exposure to five energy companies, including Pioneer Natural Resources Co., Concho Resources Inc., PDC Energy Inc. and Antero Resources Corp., according to company records. That’s the amount JPMorgan would have owed if the contracts were settled Dec. 31, not including any offsetting trades the bank made.

It’s a similar story for Wells Fargo, which was on the hook for $460.9 million worth of oil and natural gas derivatives for companies including Carrizo Oil & Gas Inc., Pioneer, Antero, Concho and PDC, according to regulatory filings.
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Shell to buy BG for £47bn in largest ever British deal

The second-biggest oil and gas deal ever on record will ignite a wave of deals

Royal Dutch Shell’s dramatic £47bn bid for smaller rival BG Group on Wednesday is expected to trigger a fresh wave of deals in the oil and gas sector.

Shell is paying a 50pc premium to BG’s market valuation before the deal was announced in a bid to become the world’s largest producer of liquefied natural gas, as well as gaining access to BG’s valuable deep-water drilling operations in Brazil and its large gas field in Australia.

The takeover, which will create a £200bn oil and gas giant, is the biggest takeover in the sector for 17 years and the largest deal between two British companies ever on record.

It has emerged that Shell’s chief executive, Ben van Beurden, approached Andrew Gould, BG’s chairman, on March 15 to see if they could work together “constructively”. It came at at time when BG’s share price had dropped almost 30pc in a year, in the wake of a global collapse in the oil price that had in turn exacerbated a string of problems at company.

After the blockbuster deal was announced on Wednesday, shares in BG rocketed by almost 40pc, lifting rivals Tullow Oil, Genel and Gulf Keystone higher on hopes they could be next on an oil major’s shopping list.
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Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.

Adam Smith. The Wealth of Nations.

At the Comex silver depositories Wednesday final figures were: Registered 62.70 Moz, Eligible 113.53 Moz, Total 176.23 Moz.  

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.

Today, a warning of catastrophe ahead from a most unlikely source. JP Morgan Chase’s Dimon gets it on the record that he told us so. The Great Nixonian Error of fiat money which spawned Keynesian central banksterism is deep into the end game. Barring an unlikely late Hail Mary pass, “this sucker’s going down,” to slightly misquote the Greatest American, alive or dead. Stay long fully paid up physical gold and silver. For most of our lives we never really need either, except for that unexpected day that we suddenly do. Sadly as the Great Nixonian Error of fiat money nears its end, that day is rapidly approaching.

Dimon Says Once-in-3-Billion-Year Treasury Move Warning Shot

10:36 PM BST April 8, 2015
JPMorgan Chase & Co. head Jamie Dimon said last year’s volatility in U.S. Treasuries is a “warning shot” to investors and that the next financial crisis could be exacerbated by a shortage of the securities.

The Oct. 15 gyration, when Treasury yields fluctuated by almost 0.4 percentage point, was an “unprecedented move” that would have serious consequences in a stressed environment, Dimon, the New York-based bank’s chairman and chief executive officer, said in a letter Wednesday to shareholders. Treasuries are supposed to be among the most stable securities.

Dimon, 59, cited the incident as he waded into a debate about whether bank regulations implemented after the 2008 financial crisis exacerbate price declines by limiting the ability of Wall Street banks to make markets. It’s just a matter of time until some political, economic or market event triggers another financial crisis, he said, without predicting one is imminent.

The Treasuries move was “an event that is supposed to happen only once in every 3 billion years or so,” Dimon wrote. A future crisis could be worsened because there “is a greatly reduced supply of Treasuries to go around.”

New regulations have resulted in diminished liquidity across bond markets, which could result in higher volatility during a crisis, Dimon wrote.

 “Inventories are lower -- not because of one new rule but because of the multiple new rules that affect market-making, including far higher capital and liquidity requirements and the pending implementation of the Volcker Rule,” Dimon wrote. Conceived by former Fed Chairman Paul Volcker, the rule aims to let banks handle client trades without making additional bets with their own money on the direction of asset prices.

While banks’ ability to buffer clients and consumers during the next crisis may be reduced, the industry is much stronger now because of higher capital requirements, Dimon wrote.

To widen the market and to narrow the competition, is always the interest of the dealers…The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.

Adam Smith. The Wealth of Nations.

The monthly Coppock Indicators finished March

DJIA: +118 Down. NASDAQ: +209 Down. SP500: +161 Down.  

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