History has been so fascinated with oil and its price movements that it is indeed hard to imagine our future without oil. The world is still myopic when it comes to energy. Yes, it wants to embrace renewables but not at the cost of oil. Whatever happens to oil prices in the coming years, one thing is certain: that the age of oil isn’t ending anytime soon, at least not in the next 30 years.
When it comes to our current pre-war, pre-revolutionary world (in Paul Tudor Jones' words) there are two social classes which are jockeying for the post positioning when it all comes crashing down: the Ultra High Net Worth, i.e., the 0.01%, those 211,275 individuals (and their families) who have a net worth over $30 million and who collectively control $30 trillion in wealth, and everyone else, with the countdown to extinction for the global middle class now getting louder by the day, leaving a world of a handful of uber-wealthy oligarchs and billions of, well, others. And nowhere is this distinction more vivid than when looking at their residential real estate holdings. But while the real estate of the 99.99% is boring (and increasingly in the form of rentals), when it comes to the dwellings of the 0.01% things get exciting, and are the topic of the latest joint report between Wealth-X and Sotheby's whose findings we summarize below.
- Hilsenrath: Fed Ushering in New Era of Uncertainty on Rates (WSJ)
- Is Supreme Court's chief justice ready to take down ObamaCare? (The Hill)
- Netanyahu arrives in U.S., signs of easing of tensions over Iran speech (Reuters)
- Nemtsov Murder Fuels Suspicion, Fails to Spur Russia Selloff (BBG)
- ECB uncomfortable with leading role in Greek funding drama (Reuters)
- Video shows Los Angeles police shooting homeless man dead (Reuters)
- Iraq Military Begins Campaign to Reclaim Tikrit (WSJ)
- How Billionaires in London Use Secret Luxury Homes to Hide Assets (BBG)
We don't get it, and we definitely don’t get why nobody is asking any questions. The IMF and EU make a lot of noise – through the Eurogroup – about all the conditions Greece has to address to get even a mild extension of support, while the same IMF and EU keep on handing out cash to Ukraine without as much as a whisper – at least publicly...
It took a while, but three months after we wrote "How The Petrodollar Quietly Died, And Nobody Noticed", someone finally noticed.
Following the disgusting images of a Jordanian pilot being burned (allegedly) burned alive by ISIS yesterday, the US coalition against the terrorists appears to be faltering. As The NY Times reports, The United Arab Emirates, a crucial Arab ally in the American-led coalition against the Islamic State, suspended airstrikes against the Sunni extremist group in December, citing fears for its pilots’ safety. The UAE made it clear its pilots will not return to the fight until the Pentagon improve its search-and-rescue efforts, shifting the base of support from Kuwait to Iraq, after foreign minister, Sheikh Abdullah bin Zayed bin Sultan Al Nahyan, "let [Barabara Leaf] have it over this," the new American ambassador, why Central Command, in his country’s view, had not put proper assets in northern Iraq for rescuing downed pilots.
Exxon Revenues, Earnings Tumble 21% From Year Ago, Sales Miss Expectations By $5 Billion; Stock Buyback Grinds To Near HaltSubmitted by Tyler Durden on 02/02/2015 09:28 -0400
Moments ago, following our chart showing the devastation in Q1 earning forecasts, Exxon Mobil came out with its Q4 earnings, and - as tends to happen when analysts take a butcher knife to estimates - beat EPS handily, when it reported $1.56 in EPS, above the $1.34 expected, if still 18% below the $1.91 Q4 EPS print from a year earlier. A primary contributing factor to this beat was surely the $3 billion in Q4 stock buybacks, with another $2.9 billion distributed to shareholders mostly in the form of dividends. However, while XOM did the best with margins and accounting gimmickry it could under the circumstances, there was little it could do to halt the collapse in revenues, which printed at $87.3 billion, well below the $92.7 billion expected, and down a whopping 21% from a year ago. And this is just in Q4 - the Q1 slaughter has yet to be unveiled!
Because nothing says "recovery" like the record-breaking surges in sales of Rolls-Royce luxury vehicles juxtaposed by the highest level of auto loan delinquency since the 2008 crisis peak...
The nearly 50 percent plunge in the price of oil during the past six months is expected to leave oil-rich Saudi Arabia with its first budget deficit since 2011 and the largest in its history. Oil is the principal, if not the only, resource in Saudi Arabia, so it’s clear that the price of oil has a strong influence on how the country’s annual budget is drawn up. Different analyses, however, provide different answers to how Riyadh has forecast the commodity’s value. Four of these reports say the Saudi budget is predicated on oil averaging $55 to $63 per barrel in 2015.
As even Reuters observes this morning when discussing the ongoing crude rout, "the market slide has triggered conspiracy theories, ranging from the Saudis seeking to curb the U.S. oil boom, to Riyadh looking to undermine Iran and Russia for their support of Syria." It appears said theories will continue raging for a long time, because as Saudi Arabia's oil minister who has been extensively in the news in the past couple (that means "two" as per Janet Yellen) of month explained, the biggest OPEC oil producer said on Sunday it would not cut output to prop up oil markets even if non-OPEC nations did so, in one of the toughest signals yet that the world's top petroleum exporter plans to ride out the market's biggest slump in years, and that the price of crude is not going up any time soon.
Dubai's Financial Market General Index is now down 40% since the peak in oil prices in June this year. For now, only Qatar is clinging to gains year-to-date as the rest of the Middle Eastern equity markets give up 30-60% gains from mid-year and tumble to negative. Dubai and Abu Dhabi alone are down over 8% since Friday. Saudi Arabia is down 7.3% today - the biggest drop in 6 years.
Following Friday's US weakness and UAE's hint that $40 oil is coming next, the crude carnage continues as Middle East markets are crashing. As WSJ reports, the bearish direction of oil prices again spooked investors in Dubai where the DFM General Index finished down 7.6%, extending Thursday’s 7.4% rout. The bloodbath extended across the entire region with Abu Dhabi down 3.6%, Qatar slid 5.9%, Kuwait fell 2.9%, and Saudi Arabia’s market, the largest bourse in the region, retreated 3.3%. As one analyst warned, "the severity of this decline could very well be explained by investors covering margin calls as leverage was used on the way up over the past year."
While it took a few hours for people (and machines) to realize exactly what China did last night, the fallout in risk markets is now clearly evident when a central bank decides enough-is-enough for speculative wealth creation bubble-followers. As we described last night, China's tightening has dramatically influenced the carry trade (USDJPY back under 120) and thus global stocks (from Abu Dhabi to Greece), global corporate bonds (all significantly wider) and European peripheral bonds (cracking wider) all face pressure. The beneficiary safe havens so far are precious metals (Gold > $1315) and US Treasuries (30Y at 2014 low yields). For now the mainstream media's narrative is that this oil-driven (which is fantasy as oil prices are up today) - this is the fallout from the marginal removal of $80bn of leverage collateral from the world's carry trades...
It wasn't just China's long overdue crash last night. In addition to the Shanghai Composite suffering its biggest plunge since August 2009, there has been a sharp slide in the USDJPY which has broken its uptrend to +∞ (and hyperinflation), and around the time Chinese gamblers were panicking, the FX pair tumbled under 120, although since then the 120 tractor beam has been activated. Elsewhere, the Athens stock exchange is also crashing by over 10% this morning on the heels of news that the Greek government has accelerated the process to elect the next president and possibly, a rerun of the drama from the summer of 2012 when the Eurozone was hanging by a thread when Tsipras almost won the presidential vote and killed the world's most artificial and insolvent monetary union. And finally, the crude plunge appears to have finally caught up with ground zero, with ADX General Index in Abu Dhabi plunging 3.5%, also poised for the biggest drop since 2009. In fact the only thing that isn't crashing (at least not this moment), is Brent, which did drop to new 5 year lows earlier under $66, but has since staged a feeble rebound.
“A Luxembourg structure is a way of stripping income from whatever country it comes from,’’ said Stephen E. Shay, a professor of international taxation at Harvard Law School and a former tax official in the U.S. Treasury Department. The Grand Duchy, he said, “combines enormous flexibility to set up tax reduction schemes, along with binding tax rulings that are unique. It’s like a magical fairyland.”