Archive - Oct 23, 2015 - Story

To be king implies preeminence, or lasting rule. In the Arctic, such oil and gas supremacy is still little more than a dream. That dream remains alive in Russia however, and the nation – through an unmatched stubbornness and a decidedly timid field of competitors – is making a strong bid for the throne.

Now that Mario Draghi has telegraphed more easing from the ECB come December, the question is what exactly the bank will announce. Will Draghi cut the depo rate further into negative territory? How long into 2017 will PSPP be extended? Given the scarcity of purchasable paper, will the ECB expand the universe of eligible assets and if so, will Draghi go full-Kuroda knowing full well that you never, ever go full-Kuroda?

Confirming once again that the U.S. has full devolved into banana republic, moments ago CNN reported that the US Department of "Justice" is closing its two-year investigation into whether the IRS improperly targeted tea party and other conservative groups. There will be no charges against former IRS official Lois Lerner or anyone else at the agency, the Justice Department said in a letter.

The circus is back in town in Washington D.C. (actually, it’s part of a permanent residency), as a congressional panel spent Thursday peppering presidential candidate Hillary Clinton with questions about her role in the Benghazi consulate attack. It’s pure political theater, but sadly, no one on this congressional panel will ask the real questions to which Americans deserve answers. And this is because the real scandal presents questions that can’t be asked, because the answers indict the entire U.S. government.

Far more importantly for arbitrageurs, there is now a direct way to profit from Oprah's weight gain, because if WTW surges simply on Oprah "losing" weight, then logically it has become the short of the century for every incremental pound in weight that Oprah gains.

With the biggest 2-day plunge in 9 months, EURUSD has broken back to a 1.09 handle this morning. It appears Mario Draghi has officially become US Corporate CEOs greatest nemesis (along with BoJ's Kuroda) as The USD Index surges to 3-month highs...

With Russia now in the driver's seat in terms of supplying crude to China, and with Iranian supply set to come back online with the lifting of economic sanctions, Saudi Arabia faces a serious threat to its dominance of the global oil market. Given the increased cooperation between Moscow and Tehran in Syria, it comes as no surprise that Ruusia and Iran are now in talks on some $40 billion in energy projects which the two countries say could lead to the formation of a new development bank.

There is no alternative except to take cover because the latest stock market rip is based on pure central bank hopium. Indeed, Mario Draghi has confirmed once again that the world’s central bankers have a monetary death wish. Unlike the gamblers who bought Cramer’s top 49 stock picks, the best course of action is to sell, sell, sell—–and do it now.

"A clever – if fairly ineffective – strategy"...

Overnight weakness on the back of 8-month highs in Chinese crude inventory (combined with the recent plunge in super-tanker rates - i.e. China is no longer refilling its SPR) sent WTI Crude towards the critical $44 level (which has acted as support for 2 months). The China rate cut weakened crude further as PBOC admitted it was needed because of the state of the economy. And then Baker Hughes reported a total rig count unchanged 787 (lowest since April 2002) and an oil rig count decline of just 1 to 594 (the 8th weekly drop in a row). WTI slipped on the news.

With crude prices still stuck in the doldrums, economists at Handelsbanken say the Norges Bank will soon be forced to cut rates to zero in order to stave off a looming recession. What we want to know is this: if the housing bubble that the Norges Bank has helped to inflate bursts, how does the central bank plan to deal with the fallout (which will be amplified by the economic drag from low oil prices) when it has exhausted its counter-cyclical capacity by cutting rates to zero?  

Much has been made about the impressive gains in efficiency and productivity in the shale patch, as new drilling techniques squeeze ever more oil and gas out of new wells. But the limits to such an approach are becoming increasingly visible. The U.S. shale revolution is running out of steam.

Never, in the history of man, has so much 'wealth' been created, by so few, for so few, by doing so little...

The mainstream view that central banks have suppressed tail risk is absurd and runs counter to common sense. Policy makers have done the opposite. Central banks have taken asset returns from the future and brought them to the present… they have taken tail risk from the present and shifted it into the future… that have turned private risk into public risk. The risk is not gone... do not fool yourself.

Did the age of central bank omnipotence just come to an end?