Shale War Full Frontal

Despite Saudi prince bin Talal's explanations of the imbalances between supply and demand being the prime driver of lower oil prices, we thought a look at just where that over-supply is coming from might provide some context into the 'shale oil war'. As the following chart shows, since the start of 2014, rig counts in Saudi Arabia, Kuwait, and UAE have surged (just as they did in the mid-2000s). As of this week, US rig counts are now at 14 month lows as it appears clear that the core OPEC producers are intent on drowning the shale oil industry in excess supply.

2015: The Year Of The Slump?

There is compelling evidence that 2015 will see a global slump in economic activity. This being the case, financial and systemic risks will increase as evidence of the slump accumulates. It can be expected to undermine global equities, property and finally bond markets, which are currently all priced for economic stability. Even though these markets are increasingly controlled by central bank intervention, it is dangerous to assume this will continue to be the case as financial and systemic risks accumulate. Precious metals are ultimately free from price management by the state. Furthermore, they are the only asset class notably under-priced today, given the enormous increase in the quantity of fiat money since the Lehman crisis. In short, 2015 is shaping up to be very bad for fiat currencies and very good for gold and silver.

Since QE Ended, Stocks Are Unchanged, Treasury Yields Down 60bps

Today's extension of Friday's losses has erased all the post-End-QE3 gains for stocks as the S&P 500 catches back down towards the Fed's flat balance sheet. During the last 2 months, however, 30Y Treasury yields have plunged almost 60bps (back below 2.50% today)...

ISDA Determinations Committee’s "External Review", An Inside Job

Last week we focused on potential manipulations of the opaque and self-regulated process by which the conflicted members of ISDA’s Determinations Committee (“DC”) determine whether a triggering event has occurred. This week we will focus on the inherent problems in the External Review process, as set out in the Determinations Committee’s rules.

Gold Hits $1235 As Commodities Crash To 12-Year Lows Amid $45 Oil

The only other times that Bloomberg's broad-based (i.e. not all OPEC's fault) Commodity Index has fallen so far so fast was in 1999 (before stocks crashed) and 2008 (before stocks crashed). At 12-year lows, the raw material of the world's economies is flashing a big fat red warning signal that all is not well (despite stocks being a 'smidge' off record highs). WTI traded with a $45 handle... but apart from that, everything's great (oh wait and the 230 pip USDJPY roundtrip). Amid all this turmoil, gold just broke to $1235 - its highest in a month.

The Scariest Chart For America's Shale Industry

Here is the chart which we affectionately call the scariest chart for the US shale industry - namely the US rig count drop, which as Goldman notes, "is faster and larger than in any other bear market."
That's not why it is scary. The reason why is that the current rate of rig collapse is nowhere near enough. In other words, before the new pricing equilibrium can be established, virtually the entire US energy sector in its current appearance will have to be wiped out!

Hollande Furious After Netanyahu Participates In Paris March, Disobeying French President's Request

There was one world leader who was out of step with the rest of political elite during yesterday's theatrical procession of world leaders for French unity and for press freedom (even as the bulk of them engage in prosecution of freedom of speech across their own nations): Israel's prime minister Benjamin Netanyahu. In fact, as Reuters reports, he managed to "ruffle a few feathers while taking part in the "Charlie Hebdo" rally in Paris on Sunday" because this was an event his office initially said he would not be attending following a specific request form French president Hollande not to come to Paris, but ultimately ended up participating in much to the Chagrin of the French president.

Greeks Stop Paying Taxes Ahead Of Elections As Central Bank Scrambles To Halt Bank Run Rumors

In what appears to be a desperate attempt to boost confidence in a failing financial system taken right out of the 2011/2012 playbook, over the weekend the National Bank of Greece had its latest "subprime is contained" moment and loudly announced that "the situation with deposit outflows from the country was under control" as it tried to reassure markets ahead of a Jan. 25 snap election, reports Kathimerini. And while Greek deposits may or may not be "running" one thing is certain: with an increasing probability they may not have a "continuity-promoting" government in less than two weeks, Greeks tax remittances to the government, which were almost non-existent to begin with, have ground to a halt!

Stocks Post Steepest Post-Open Crash In Two Years

Well that escalated quickly: This is the biggest drop in the S&P during the first few minutes of trading since at least 2012, a move which has all but erased the gains from Charlie Evans' "catastrophe" call last week.

Even Warren Buffett Must Be Getting Concerned At This Market

Adjusting Warren Buffett's favorite indicator for 'the giant con that America is still enjoying growing economic prosperity - predicated on debt being the bridge between rising GDP and a declining economy' suggests today’s true market valuation is more than twice the previous all time high in 2000.

Slain Paris Terrorist Claims He Was Working For ISIS In Posthumous Video, Explains Reasons For Attack

Two days after the dramatic and tragic events from Friday, Amedy Coulibaly, who in coordination with the two brothers who attacked a satirical newspaper and said they were affiliated with al-Qaeda, killed four hostages at a Paris supermarket Friday before he was slain by police appeared in a new posthumous video released on Sunday, on which he pledging allegiance to the Islamic State group and explained the planning and the reasoning behind the attacks that sowed terror across France.

Commodity Carnage Continues - Copper & Crude Crushed

Despite calls for a bottom all the way down from $90, $85, $80, $75, $70, $65, $60, $55, and then $50... crude oil prices (both Brent and WTI) are now below that crucial level (and as Kyle bass notes, even very wealthy nations like Saudi Arabia and Norway are going to have to tap into their sovereign wealth funds to support their annual budgets this year or next). WTI is trading with a $46 handle once again (at fresh cycle lows), and Brent is trading oince again at fresh cycle lows with a $48 handle.  Just as worrying away from the apparently OPEC-over-supplied (and nothing to do with demand) oil complex, copper prices just broke below $6000/mt for the first time in 5 years (which 'over-supplier' will get the blame for that? Or is it really about demand after all, just as Saudi Prince bin Talal warned). And don't mention Iron ore, Steel, Aluminum... which all hit new cycle lows...

Frontrunning: January 12

  • Earnings Pessimism Jumps as Oil Threatens S&P 500 Growth (BBG)
  • It’s Amateur Hour in the Booming Chinese Stock Market (BBG)
  • France mobilizes 10,000 troops at home after Paris shootings (Reuters)
  • European Stocks Gain With S&P 500 Futures While Oil Drops (BBG)
  • Nasdaq Looks to Operate Dark Pools for Banks (WSJ)
  • This Guy Called Bonds in ’14. You Listening This Time? (BBG)
  • Paris attacks boost support for Dutch anti-Islam populist Wilders (Reuters)
  • OPEC price war in Asia intensifies as oil falls below $50 (Reuters)

Stocks Bounce On Daily ECB QE Rumor Regurgitation, Oil Plunges On Goldman Downgrade

If you, like the BIS, are sick and tired of central bankers, and in this case the ECB's endless jawboning and now daily QE threats, determining the level of stocks, well then today is a good day as any to take your blood pressure medication. Because first it was ECB Governing Council member Ignazio Visco who told German newspaper Welt am Sonntag that the risk of deflation in the euro zone should not be underestimated and urged the bank to buy government debt, and then, yet another regurgitated story, came from CNBC whose "sources" reported that the ECB QE would be based on contributions from national central banks and paid in capital. And while otherwise the cross-correlation trades would have at least pushed the crude complex modestly higher, today it was Goldman's energy analyst Jeffrey Currie finally throwing up all over oil, with a report in which he said that "because shale can rebound quickly once capital investments return, we now believe WTI needs to trade near $40/bbl for most of 1H15 to keep capital sidelined."