Stage 2 Of Oil Price ‘Explanations’

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

Though they still refer to “supply” in almost every written piece about the recent oil price action, it is now more of a background note. Instead, the narrative is being forced by reality to adjust. Finally recognizing the role of demand in oil prices, the excuse morphs into “it’s only temporary.”

Global oil markets are experiencing “temporary” instability caused mainly by a slowdown in the world economy, Oil Minister Ali Al-Naimi said, according to comments published yesterday by the Saudi Press Agency. He reiterated the country’s intention to maintain output amid plunging prices.

That isn’t what “they” said only a few weeks ago, as again it was supply, supply, supply. The crashing in December of the eurodollar system has meant that there is no way to ignore or distort the role of falling (disintegrating, really) “demand” for crude regardless of who is supplying what.

Steady global economic expansion will resume, spurring oil demand, Al-Naimi said, leading him to be “optimistic about the future.”

Nothing to see here, move along? We should all be forgiven if we express doubts about the Saudi’s abilities toward global economic forecasting. Like orthodox economists, none of the bunch saw this now-admitted “demand” problem coming, as the expected “unexpected” leaves them in scrambling disarray yet again. The basis for this end to the “unexpected” temporary drop in demand is not drawn from any market prices but rather Janet Yellen’s now-considerable philological fluidity. Continue reading

Renewed Sanctions Against Russia

Submitted by Pater Tenebrarum  –  The Acting Man Blog

EU Backtracking, US Belligerent

The EU is recently backtracking somewhat from its confrontational stance against Russia. Not only has JC Juncker recently announced that he is actually forbuilding South Stream after all, the German language version of Reuters reports that “Berlin is sending conciliatory signals to Moscow”.

The reasons for this more conciliatory stance are easy to discern. For one thing, the truce in Eastern Ukraine is holding up quite well now. A complete split of Donetsk and Lugansk from the Ukraine is no longer on the agenda, at least it doesn’t appear to be. At the same time, we can be absolutely certain that Ms. Merkel has been getting more than an earful from German industrialists and bankers, all of whom are suffering Russia-related losses now and are afraid that more losses are in the pipeline. The sanctions have destroyed what was a major new market for many companies in Europe, and especially in Germany. German capitalists have been major investors in Russia during Czarist times already, and commercial relations have smoothly resumed and expanded greatly after the collapse of the Soviet Union.

The exact opposite is happening in the US, which isn’t suffering economically from Russia sanctions. We refer you to this report on how another round of sanctions has just been imposed due to actions taken by a mere three Congressmen:

Continue reading

Submitted by Bruce Krasting  –  The Bruce Krasting Blog

I think this man must be worried. He has a huge weight on his shoulders. This is Thomas Jordan, the head of the Swiss National Bank.


Mr. Jordan has excellent academic credentials.  He’s a scholar, and a ‘lifer’ at the SNB:

University of Berne, PHD Economics

Department of Economics at Harvard University,three-year post-doctoral research.

1997 SNB Economic Advisor in Department 1.

On 18 April 2012, appointed Chairman of the Governing Board of the SNB.

Unfortunately, Mr. Jordan’s academic prowess is not going to be of much help with the mess now on his desk. He needs to learn how to play – and win – heads up guts poker. In my experience that’s a skill one is born with, or never acquires.

Jordan is a General who has a war on his hands. It’s a currency war; only financial blood will flow. But the stakes are high. Mr Jordon understands that more than the Swiss economy is at risk. The idea of the “All Powerful Central Bank” is being called into question. General Jordon is on the front lines of a conflict that could spread throughout Europe, and then to Japan. Continue reading

“Fed To The Rescue” – The Plunge Protection Team Makes The Front Page

Submitted by Tyler Durden  –  ZeroHedge

In October it was Jim Bullard’s “QE4” hint that sent the stock market on an all-time record-breaking run of gains, which no lesser institution than the central banker’s central bank – The BIS – lamented “the markets’ buoyancy hinges on central banks’ every word and deed.” And then just two days ago, The Fed did it again: by the mere appearance of grandma Yellen (and the words “patient” and “considerable”), US stocks explode to their greatest back-to-back gains in almost six years. So it is perhaps ironic that no more mainstream media publication than USA Today has finally realised, there are no fundamentals anymore…

h/t @Not_Jim_Cramer Continue reading

The Biggest Economic Story Going Into 2015 Is Not Oil

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

Arthur Rothstein “Quack doctor, Pittsburgh, Pennsylvania” May 1938

Isn’t it fun to just watch the market numbers roll by from time to time as you go about your day, see Europe markets up 3%+, Dubai 13%, US over 2% (biggest two-day rally since 2011!), and you just know oil must get hit again? Well, it did. WTI down another 3%+. I tells ya, no Plunge Protection is going save this sucker.

And oil is not even the biggest story today. It’s plenty big enough by itself to bring down large swaths of the economy, but in the background there’s an even bigger tale a-waiting. Not entirely unconnected, but by no means the exact same story either. It’s like them tsunami waves as they come rolling in. It’s exactly like that.

That is, in the wake of the oil tsunami, which is a long way away from having finished washing down our shores, there’s the demise of emerging markets. And I’m not talking Putin, he’ll be fine, as he showed again today in his big press-op. It’s the other, smaller, emerging countries that will blow up in spectacular fashion, and then spread their mayhem around. And make no mistake: to be a contender for bigger story than oil going into 2015, you have to be major league large. This one is.

The US dollar will keep rising more or less in and of itself, simply because the Fed has ‘tapered QE’, and much of what happened in global credit markets, especially in emerging markets, was based on cheap and easily available dollars. There’s now $85 billion less of that each month than before the taper took it away in $10 billion monthly increments. The core is simple. Continue reading

The Housing Bubble Explained in One Little Gem of an Excerpt…..

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

For some reason I feel like this is a good time to review what we can expect when our government and its agencies attempt to create wealth out of thin air.  We can see the absurdity and hubris of our policymakers who believe they can circumvent economic laws in the following excerpt from the “The National Homeownership Strategy: Partners in the American Dream”.  This is a document that was put together by HUD and some other private and public stakeholders at the request of President Clinton way back in 1995.  Isn’t it amazing how poor policies that seem so right at the time, to some, end up kicking us in the ass for decades.  And as much as the government has gotten comfortable with the storyline suggesting banks are responsible for the entire mortgage bubble mess of the mid 2000′s, it was, in fact, all started by government agenda.  Have a look at this little gem which I am suggesting is the document that led us to the economic devastation from which we are yet to crawl out.

For many potential homebuyers, the lack of cash available to accumulate the required downpayment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial barriers to homeownership. Continue reading

The Monetary Politburo and the Markets – A Game of Chicken

Submitted by Pater Tenebrarum  –  The Acting Man Blog

December FOMC Decree

Prior to the announcement of the FOMC decision on Wednesday, it was widely expected that the verbiage in the statement would be changed so as to convey an increasingly hawkish stance. Specifically, it was expected that the following phrase, which has been a mainstay of FOMC statements for many moons, would finally be given the boot and no longer appear:

“…it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time”  

It is inter alia this bizarre focus on little turns of phrase in the FOMC statement that has caused us to compare the analysis of the actions of the monetary bureaucracy with the art of “Kremlinology” of yore. The Committee is indeed reminiscent of the Soviet Politbureau in many respects. It is unelected, it is engaged in central planning, and its pronouncements are cloaked in an aura of mysticism, akin to decrees handed down from Olympus.

While it is fairly easy (and in our opinion, absolutely necessary) to make fun of this, it is unfortunately affecting the lives of nearly everyone on the planet. The only exceptions that come to mind are Indian tribes in remote areas of the rain forest, since they don’t use money and possess no capitalistic production structure.


Fed chair Janet Yellen: “A couple. You know, a pair. What the Russians call “dva”, although I hear the Russians are no longer as familiar with such low numbers as they once used to be. My dictionary says it means “two”. One less than the number one is supposed to count to before throwing the holy hand grenade of Antioch after its pin has been removed. Not one, definitely not five, absolutely not four and not three either. Two.”

Photo credit: Agence France-Presse / Getty Images Continue reading


Submitted by Jim Quinn  –  The Burning Platform

Russia not attacking west, just defending its interests – Putin

Russia is protecting its national interests, but it not attacking any western nations politically, Russian President Vladimir Putin said.

Putin said that the only contribution Russia made toward the current period of tension “is an increasingly strong stance in defending its national interests.”

“We are not attacking anyone in the political sense,” he said. “We are only defending our interests… The displeasure of our Western partners, particularly the Americans, comes from that.”

Russia’s actions, described as aggressive in the West, are a response to what Western nations are doing, Putin said.

“Russia in the 1990s completely stopped the long-range bomber flights that the Soviet Union used to carry out,” he said. “But American strategic bombers with nuclear weapons still flew. Why? Against whom? Who was being threatened?” Continue reading

Bye-Bye, Shale-Oil Boom!

Submitted by Bill Bonner – Chairman, Bonner & Partners

The days left to us in 2014 are dwindling to a precious few. It gets darker and darker. The Fed doesn’t seem to be able to do anything about it.

Yesterday, the Dow fell another 112 points. Gold is stuck at under $1,200 an ounce.

Less than a week from today: the shortest day in the Northern Hemisphere. Then Sol Invictus (“Unconquered Sun”) will have its day… growing day by day until June 21.

But today is the first day of the ancient Roman festival of Saturnalia; the sun fades.

In Rome, it was a time for free speech and role reversals. Masters served their slaves and all enjoyed gambling and drunkenness.

Master and Slave

Meanwhile in Washington a group of suits at a nearby breakfast table:

“We’ve got a much better shot now.”

“Yeah, I talked to Mitchell. I think we can get it through. But we have to be patient.”

“Christ, we’ve been waiting three years for this thing.”

“Yeah, but that was before November… we’ve got a much better shot now.”

We are sitting in the lobby of our hotel, our feet on a footstool. We are waiting for a GS-13 to wash them for us.

So far, none has presented himself or seemed interested in the task. Saturnalia’s role reversal has not made its mark on the nation’s capital – yet.

That is part of the problem with our modern democracy. Master and slave: It’s hard to tell who is who. The slaves go into the voting booth and think themselves masters. Pulling the levers, they think they command their “public servants.”

But the bureaucrats, politicians and lobbyists know who is boss.

We are interrupting our crash course on money. So much is going on in the world, we need to keep up with it. Most interesting, from a financial point of view, is the crash in the price of crude oil.

“Plunging crude prices threaten the axe for $1 trillion of energy projects,” screams a headline in the Financial Times.

Lower on the front page:

“Russia ramps up interest rate to 17% in ‘shock and awe’ bid to shore up the ruble.”

Stripper wells, offshore wells, shale wells, the Russian economy – all are in danger. Prices are not high enough to justify further investment or operations.

But imagine you have borrowed heavily for expensive oil extraction. You have to service your debt, whether the price falls or not.

What do you do? You pump all you can! And the increased supply further depresses oil prices. Continue reading

Central Banks Are Now Uncorking The Delirium Phase

Virtually every day there is an eruption of lunacy from one central bank or another somewhere in the world. Today it was the Swiss central bank’s turn, and it didn’t pull any punches with regard to Russian billionaires seeking a safe haven from the ruble-rubble in Moscow or investors from all around its borders fleeing Mario Draghi’s impending euro-trashing campaign. The essence of its action was that your money is not welcome in Switzerland; and if you do bring it, we will extract a rental payment from your deposits.

For the time being, that levy amounts to a negative 25 bps on deposits with the Swiss Central bank—-a maneuver that is designed to drive Swiss Libor into the realm of negative interest rates as well. But the more significant implication is that the Swiss are prepared to print endless amounts of their own currency to enforce this utterly unnatural edict on savers and depositors within its borders.

Yes, the once and former pillar of monetary rectitude, the SNB, has gone all-in for money printing. Indeed, it now aims to become the BOJ on steroids—-a monetary Godzilla. Continue reading