WTI is trading below $64 this afternoon and the long end of the UST curve is being bid rather starkly, the 30-year has dropped below 2.90%, there is an important element to consider about such “price discovery.” As my colleague Doug Terry points out, a 40% drop in oil prices is no longer strictly a matter of finance. In other words, the leveraged long players and even the one-way momentum “traders” have long since been vanquished. Speculation is no longer driving oil prices lower (acknowledging that aggressive shorts are certainly in this market now).
Crude oil is unlike stocks, for example, in that there is at some point an actual level of supply and demand for physical quantities. Futures trading sure cloud this distinction, but in the end physical demand and supply will take over against any aggressive move. If financial “traders” push the price down enough, shippers and storage facilities operators will bid because tankers are needed to flow somewhere (either today or, far more importantly, tomorrow, i.e., near future). That is why, as Doug points out, the price of oil may be highly volatile but typically courts a relatively stable range even in this age of currency free-for-alls. Continue reading
The international press is replete with reports of how London-based fund managers were spooked when they heard of SYRIZA’s views on the nature of Greece’s conundrum and on the party’s intention to work towards a debt restructure and a re-orientation of social and economic policies toward social cohesion and economic growth. Here is my reply…
In 2010 the European Union, with the IMF in tow, decided to apply, on a gigantic scale, the bankers’ usual trick when confronted with clients whose insolvency threatens their own position: Extend (non-performing loans) and pretend (that all is well). Only the EU ‘client’ in question was not some company or financial institution but the Greek state.
In cahoots with Greece’s political elite, Europe extended to the bankrupted Greek state the largest loan in human history on condition that it would shrink its national income – a recipe for averting a default by postponing it into an uncertain future. If this sounds outlandish it is because it was outlandish. Why did they do this? The answer is as simple as it is saddening: In order to transfer hundreds of billions of potential losses from the books of the private banks to the shoulders, first, of the Greek taxpayers and, after these shoulders buckled (uner the weight of an austerity-induced economic depression), to the shoulders of taxpayers from across Europe. Continue reading
Submitted by Bill Bonner – Chairman, Bonner & Partners
New York is filling up with holiday shoppers and tourists. On Saturday, we went to the Broadway show Jersey Boys.
It was not an especially complex or subtle storyline. But the music, of Frankie Valli and The Four Seasons, was lively and agreeable. It took us back to the early 1960s.
Those were the days!
Back then people had jobs… prices were fairly stable… and the GDP was growing at twice or three times today’s rates (and so were personal incomes).
How was it possible?
Back then, under chairman William McChesney Martin Jr., the Fed ran much tighter monetary policy. So America’s savers could earn a decent return on their money. And the Fed wouldn’t have even dreamed… let alone dared… to target higher stock market prices. Continue reading
Ron Paul wrote an eye opening article recently about some legislation that was just signed in Congress, namely H. Res. 758. In the article Dr. Paul explains the purpose of the resolution. It’s not a new law but provides a basis of facts that will be relied on for future action. So essentially the resolution purports that Russia behaved badly in various ways and by way of signing H. Res. 758 each congressman was indicating their agreement that the propositions contained therein are factual. Now just because a group of obnoxiously arrogant A-holes stand around in a tax-revenue financed chamber and say “yeah” to several assertions does not make those assertions factual, but here in the United Orwellian States of America it kinda does. Because those assertions that were voted to be fact (similar to the First Council of Nicaea) will now be written as factual history and taught to our children as having happened that way. The very same way we all attained our ideas of American superiority.
The dishonesty and ignorance it creates is reason enough not to do such things, however, the real stinker of it is, as Dr. Paul so clearly points out, the sole purpose of H. Res. 758 is simply a pouring of the legal foundation for something much more substantive. You see this is how wars begin. And the wheels for this particular war have been in motion for many years now. We’ve been told our actions heretofore are simply a necessary response to the Ukraine situation. However, those who can objectively look at the Ukraine situation will realize the US sponsored coup in Ukraine was simply a spark to light the fuse of a much larger detonation. Continue reading
Everyday I receive anguished emails from concerned citizens regarding the state of the economy, Wall Street, the political-financial system, and how their future stability is impacted by the powers that be. This one stood out for its clarity, as well as being indicative of one of the many ways in which the banking system regularly undermines people’s economic stability by targetting their savings accounts (which thanks to the Fed’s zero-interest-rate policy receive no interest, and thus, no relatively risk-free returns) for high-fee asset management services.
The Clinton administration’s 1999 repeal of Glass-Steagall, plus the two prior decades of various measures that weakened the intent of this 1933 Act that separated banks’ speculation activities from deposit and lending ones, has enabled big banks to engage in all manners of trading, leverage, and ill-concocted investment schemes, while holding trillions of dollars of individuals’ deposits.
It was Charles Mitchell, head of National City Bank (now Citigroup) back in the 1920s that realized if his bank could corner the deposits of ‘the Everyman’, it would be better positioned to engage in the bigger transactions that would catapult it to a financial superpower, as well as use the accounts for additive domestic gain. Nearly a century later, this aspect of converting depositor/savers to commission-providing risk-takers, provides fees to bankers, absent true responsibility for any related downside (as in the ‘past behavior is not indicative of future results’ small print.)
But people should not act upon the “guidance” of the investment advisors resident at the very big banks where they keep their savings and other money – this leaves too much room for manipulation of their trust and money. And if legislation and politicians won’t divide these two financial items, people must do so for themselves.
For the evolution of institutionalized, government and central bank supported speculation has left populations footing the bill for bets taken beyond their knowledge and certainly, control. Even those people that believe they are taking the prudent steps with respect to their own financial situations as they approach old-age, are victims of a churn-and-burn mentality that incurs unnecessary fees and bonuses for the perpetrators, at their expense. Continue reading
Like the initial or preliminary GDP report in Japan for Q3, the first revision caught almost every economist totally the wrong way. Expectations were for upward re-figuring which should have been taken as a contrarian signal. And sure enough, December’s revisions to Q3 GDP were in the opposite direction as expected, and for all the reasons that economists are “experts” in something other than the economy.
In recent days, though, many economists had predicted that the third-quarter contraction would actually turn out to be smaller than initially estimated—or perhaps be revised to flat or a slight expansion—after the Ministry of Finance reported late last month that according to its survey capital spending by businesses rose 3.1% during the quarter, compared with a previous estimate of a 0.2% decline. Business investment accounts for around 14% of GDP.
But capital spending turned out to be weaker than the ministry’s estimate when taking into account smaller businesses, declining 0.4%, indicating that even as Japan Inc. reports record profits and the stock market hits multi-year highs, the benefits of Abenomics haven’t reached everyone.
Instead of being revised from -1.6% to about 0%, the latest estimate is for GDP (seasonally adjusted annual rate of Q/Q) worse at -1.9%; not a small miss. Continue reading
Gold is hated more than ever by both governments and the financial services community. This is because it has now become imperative to keep the illusion of confidence in sovereign debt and paper currencies. To that end, a gentleman by the name of Willem Buiter, Citigroup’s chief economist, shot into the media spotlight by writing a note on the day before Thanksgiving stating his belief that gold is in a six thousand year-old bubble.
Citi’s chief economist penned this “brilliant” commentary in the days just prior to the Swiss referendum on increasing the percentage of gold reserves held by its central bank. In a clear attempt to influence the gold vote, Mr. Buiter also stated on November 26th that, “The Swiss vote is ridiculous and no self-respecting central bank should ever be putting a large chunk in a single commodity.”
This hatred for gold spurs from his belief that gold has no intrinsic value. But how can one individual have the hubris to believe he can erase thousands of years of human experience and knowledge that has maintained gold’s intrinsic value stems from the fact it is the perfect store of wealth? Continue reading
Submitted by James Howard Kunstler – www.kunstler.com
The Beauty Shop had barely stopped smoldering in Ferguson, Missouri, when the Eric Garner grand jury decision came down on Staten Island — no probable cause to indict one particular cop for something — manslaughter? — in his choke-hold take-down of the 300-pound cigarette-seller. For my money, they should have indicted the whole gang of cops who were there that day, including the black female NYPD sergeant on the scene ostensibly “supervising” the action, at least for something like negligent homicide, since the infamous video shows them acting cruelly, stupidly, and indifferently as the poor guy just lay dying on the sidewalk.
Worse, the decision only muddied the public’s view of several events in recent years involving black people, police, and standards of behavior so that now a general opinion prevails that all black people are always treated badly for no reason. That was the same week, by the way, that a white Bosnian immigrant named Zemir Begic was bludgeoned to death by three black teenagers wielding hammers who were out beating on stopped cars on a St Louis street — a crime that was barely covered in the news media, and went unprotested outside the immigrant neighborhood where it occurred. It’s hard to blame the public for being confused about what may or may not be happening across the nation, but history will surely judge this as a tragic time for America. Continue reading
Friday’s payroll jobs report is another government fairy tale or, to avoid polite euphemisms, another packet of lies just like the House of Representatives Resolution against Russia and every other statement that comes out of Washington.
Washington is averse to truth. Washington can only lie.
First let’s pretend that the 321,000 new jobs that the government claims the economy created in November are true, and let’s see where these jobs are.
Specialty trade contractors, which I think are home and office remodelers, accounted for 20,000 jobs. I doubt that people are putting money into houses and buildings that are worth less than the mortgage.
Manufacturing accounted for 28,000–a very high monthly figure for recent years, one that is unbelievable in view of the rise in the trade deficit and declines in consumer spending on furniture (-3.8%), major appliances (-8.3%), women’s apparel (-17.7%), and household textiles such as towels and sheets (-26.5%), and when US business investment consists of corporations repurchasing their own stocks. Continue reading
John Vachon Big Four Cafe, Cairo, Illinois May 1940
The wider impact of plummeting oil prices is just now starting to be considered. Just about all ‘experts’ are way behind the curve. There’s still people insisting it’s all be a big boon to all of our economies. Not here, as you know if you follow TheAutomaticEarth.com, or as you can find out by retracing us over the past 1-2 months. I said from the get go that this cannot end well. Oil is too large a part of the economy to let a 40% price drop be reason to party.
And now both the Federal Reserve and the Bank for International Settlements have clued in, with urgency, to leveraged loans, their role in CDOs, AND their link to the energy industry. And whatever we may think of either institution, when both hoot the red alarm horn at the same time, we should pay attention.
Two articles from very different sources paint the – essentially same – picture. One is from Wolf Richter, easily one of my favorite writers at the moment in this narrow financial niche of ours, and his article today does a lot to confirm that. The other is from my ‘friend’ against all odds (we never met nor communicated), Ambrose Evans-Pritchard, who proves once more what makes him, despite all else, an interesting journalist to read. Continue reading