Archive - Apr 2015

Oil is our most-precious commodity as fuel for the global economy. It is also becoming a scarce commodity, as global production has flattened, while global demand continues to climb relentlessly, everywhere in the world except for the dying economies of Europe and North America. It is a classic “seller’s market.”

Wiping out creditors by inflation is the easy part. Re-establishing money to restart the world economy is the harder one.

ISIS, in possible cooperation with rival al-Nusra, has taken control of a strategic Syrian refugee camp in Damascus just miles from Bashar al-Assad's Presidential palace, prompting Palestinian militimen to rethink their allegiances and plunging the camp — where 18,000 people are trapped — into what the UN Secretary General calls "the darkest circle of hell."

"China’s military made history practically every day last week," FT notes, adding that Beijing may now be looking to establish a wider role for China's military on the world stage by ramping up defense spending and participating in international rescue efforts.

"The systematic destruction of the American way of life is happening all around us, and yet most people have no idea what is happening. Unfortunately, in our society the value that we place on individuals has a tremendous amount to do with how much money they have."

When even Jamie Dimon warns that "another crisis is coming", and points to the utter lack of market liquidity and the likelihood of another flash crash, it probably means that not only has he been reading this website, but that JPM's chief prop trading group, the Chief Investment Office, infamously long three years ago is already short and just waiting for the bottom to fall out of the market. One group, however, that is not be too worried about the next global financial crash - at least superficially - are the BRICs, because according to the Russian Prime Minister Dmitry Medvedev, "the creation of the BRICS reserve currencies pool worth $100 billion will allow member states to depend less on negative processes in the world economy and bypass market volatility."

Who’s dumb enough to buy this stuff—10-year debt at negative yields and 100-year debt in a doomed currency?  Institutional investors, of course—large pension funds and the like. You might look at news like that and think, well, that’s crazy, I’d never do that. But the fact is, it’s being done with YOUR MONEY. Just like Winston Churchill commented that it’s false to characterize the fighting at places like the Somme, Verdun etc. in WWI as battles, when they were actually more like prolonged sieges, what’s happening in the financial world today is similar. The financial world today is the same. Billion dollar stimulus packages. Quantitative Easing 1, 2, 3… Negative interest rates. Negative long-term debt yields. Cash withdrawal and transaction controls. Higher taxes. Capital controls...

"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," Bloomberg writes, noting that the very same Wall Street banks on the hook for the hedges also financed the shale boom.

"What does a government wanting its population to remain in fear so as to justify a total surveillance state, and a military-intelligence industrial complex hooked on billions in wasteful corporate welfare do in the absence of genuine terrorist plots? Create artificial plots, naturally."

As everyone settles down in anticipation of another session of parabolic Hong Kong euphoria driven by desperate housewife traders, or a manic plunge straight down, none other than the CEO of the Hong Kong Exchange, Charles Li, found some time to pen a blog post to give "a little advice to investors", providing vivid aphorisms "Investment is like swimming: if you do not enter the water, you will never learn to swim" and to caution speculators that the opportunity is "not to quickly make a  fortune, but ... to provide long-term wealth preservation and appreciation" and that there is also such a thing as risk as everyone scrambles to chase the latest bubble breakout. His blog post's punchline: "Do not worry!  Do not panic!" We doubt anyone will panic, at least not until the selling begins.

The Treasury flash crash and similar recent events in currency markets are "shots across the bow," Jamie Dimon says in his latest letter to shareholders. The JPM chief goes on to warn, as we have for years, that declining liquidity in credit markets is likely to exacerbate future crises: "The likely explanation for the lower depth in almost all bond markets is that inventories of market-makers’ positions are dramatically lower than in the past. For instance, the total inventory of Treasuries readily available to market-makers today is $1.7 trillion, down from $2.7 trillion at its peak in 2007. The trend in dealer positions of corporate bonds is similar."

With everyone's attention in recent months falling squarely on the US oil industry, and specifically how much longer various shale companies will be able to keep operating now that Saudi Arabia is openly on a war path with US marginal producers, we thought it may be an opportune time to remind readers just where America's Top 100 oil fields are located based on the EIA's most recent report. A recap, if you will, of the domestic oil theater of war with America's "closest ally" in the middle east.

"Children in 2015 should not be hungry and coming to school with no socks on and no coats - some children are living in Victorian conditions - in the inner cities," a UK teacher tells BBC. With the FTSE near all-time highs, we suspect this is yet another example of how the deliberate inflation of financial assets works to eradicate the middle class.

"NATO completed the first military drills for its new rapid reaction force. From Tuesday through Thursday, more than 1,500 troops took part in exercise 'Noble Jump,' designed to test whether troops assigned to NATO’s new Spearhead Force, or Very High Joint Readiness Task Force, could be ready to deploy 48 hours after receiving an order-to-move." In other words: NATO could deploy troops to counter Russian "aggression" within 2 days.

We know it will be next to impossible to wait until October when this book of toner repair and printer cartridge replacement wisdom comes out, here is a sampling of timeless soundbites by the former Fed Chairman and current blogger, that should be enough to hold readers over.