Australia

Cry if you want to, but the dollar is stronger.  Deny it if you want to, but the US economy is more vibrant now than the Europe or Japan.   This is what is shaping the investment climate, if you are interested. 

"We’ve read a lot of silly articles since oil prices started falling about how U.S. shale plays can break-even at whatever the latest, lowest price of oil happens to be. Doesn’t anyone realize that the investment banks that do the research behind these articles have a vested interest in making people believe that the companies they’ve put billions of dollars into won’t go broke because prices have fallen? This is total propaganda."

Things in risk land started off badly this morning, with the worst start to a year ever was set to worsen when European equities came under early selling pressure following news of German unemployment falling to record low, offset by a record high Italian jobless rate, with declining oil prices still the predominant theme as Brent crude briefly touched its lowest level since May 2009, this consequently saw the German 10yr yield print a fresh record low in a continuation of the move seen yesterday. However, after breaking USD 50.00 Brent prices have seen an aggressive bounce which has seen European equities move into positive territory with the energy names helping lift the sector which is now outperforming its peers. As a result fixed income futures have pared a large majority of the move higher at the EU open. But the punchline came several hours ago courtesy of Eurostat, when it was revealed that December was the first deflationary month for the Eurozone since the depths of the financial crisis more than five years ago, when prices dropped by -0.2% below the -0.1% expectation, and sharply lower than the 0.3% increase in November, driven by a collapse in Energy prices.

Some are thinking that 2015 will be a repeat of 2014 with a few incremental changes, However, the interesting question to ask is, how has the ground shifted in 2014, if indeed it has? To our mind, the really interesting development of 2014 is that the world as a whole (with a few minor exceptions) has become quite lucid on the topic of what the United States, as a global empire, is and stands for. Another major shift we have observed is that a significant percentage of the thinking people in the US no longer trusts their national media. In case somebody out there in the media realm is tired of playing it safe and printing stuff that's only fit for wiping your Kardashian with, here are a some points for you to try to refute...

At the start of the New Year, there are increasing signs that the recovery seen in property prices in many cities in western countries -- namely New York and other U.S. cities, and Dublin, London and other UK cities -- is beginning to peter out ... 

You only get these kinds of moves when the STUFF IS HITTING THE FAN. And this mess has only just begun.

2014 may go down as the year when gold and silver conspiracy “theories” became conspiracy “facts” as banks globally were found to have conspired to rig the prices of gold, silver, currency and many other markets.

The worldwide economic and industrial boom since the early 1990s was not indicative of sublime human progress or the break-out of a newly energetic market capitalism on a global basis. Instead, the approximate $50 trillion gain in the reported global GDP over the past two decades was an unhealthy and unsustainable economic deformation financed by a vast outpouring of fiat credit and false prices in the capital markets. In short, when the classical Austrians talked about “malinvestment” the pending disasters in the global steel and iron ore industries (and also mining equipment and other supplier industries) are what they had in mind.

The mystery of the disappearance of Malaysian flight MH-370 may remain forever, but at least the families of the 162 victims of AirAsia Flight QZ8501 will get some closure when a few hours ago, Indonesian rescuers pulled wreckage and bodies from the sea off the coast of Borneo on Tuesday.  While the plane has yet to be found, and the possibility of finding survivors is slim, the Indonesian navy said some 40 bodies had been recovered as dusk fell.

However desirable it may be to protect the Earth from the dire consequences of a runaway climate the chances that the world will agree to cut its emissions quickly enough to stay below the 2C threshold are somewhere between zip, zilch and zero. (There’s also the question of whether cuts of the magnitude necessary would be politically, economically and technologically achievable if the world does agree, but we’ll leave it aside here.) Now imagine that you are one of the prominent politicians – Obama, Kerry, Merkel, Ban Ki-moon, Hollande, Cameron, Davey, whoever – who have publicly and repeatedly stated that climate change is the greatest threat facing the world, that the world is in serious trouble if nothing is done to stop it but that a solution is still within our reach. What do you tell people when next year’s make-or-break Paris climate talks show that it isn’t?

In what we suspect will be the first of many, Houston-based Civeo (which provides workforce accomodation to the oil industry) has crashed over 20% after-hours (after being down over 65% since September already) following the total carnage of its earnings report.

• *CIVEO HAS CUT U.S., CANADA HEADCOUNT BY 45%, 30% FROM EARLY '14
• *CIVEO SEES 2015 REV $540M-$600M, EST. $817.3M

Apparently having not only (Jana) but two (Einhorn) activist hedge funds is not nearly sufficient to send a stock soaring to all time highs, especially when said stock can no longer afford to buy back its own stock.

About 12 hours after AirAsia flight QZ8501 with 162 people on board disappeared and lost all contact with Jakarta air traffic control at 6:17 am local time (11:17 pm GMT Saturday), the aircraft searching for any clue of what may happened to the second unexplained disappearance of an airplane flying in the region, have been called off due to nightfall even as ships will continue their search through the night. As Sky News reported, "Rescuers scouring the Java Sea have halted their search because it is getting dark, Indonesia's transport ministry said.  Hadi Mustofa said: "We ended at 5:30 pm (1030 GMT) because it was getting dark. The weather was also not too good as it was getting really cloudy. "Tomorrow we will begin at 7 am, or even earlier than that if the weather is good."

The ability of oil exporters to trigger a short-term collapse in price does not automatically translate into an ability to control the financial conflagration such a crash ignites.

As the following snapshot from January 2009 shows, the 12 month, $25 contango back then was without precedent, and as a result there was an epic scramble by hedge funds, banks and various other speculators to store about 100 million barrels on tankers with the intention to sell later. Since the contango was so wide one could easily lease any number of VLCCs and still be profitable on the trade. In fact, a big reason for the renormalization of the crude curve back then was because so many funds jumped on this arb. Fast forward to today, because the "risk-free" contango trade is back.