The Third World War is currently being fought. How long before it moves into its hot stage?
An economic and financial system premised on perpetual growth was bound to run into trouble. What happens as population growth turns to population decline is honestly and literally a complete and total game changer. A flat to declining number of buyers and consumers opposite ramping elderly sellers plus their unfunded liabilities is a problem with no happy resolutions. Currencies (what will constitute "money"), "free-markets", and perhaps the basis of civilization hang in the balance of the transition from high population growth to potential outright depopulation.
One Chart Shows Where The World's Record Surplus Oil Has Gone
After meandering steadily higher for the past week, and completely ignoring the negative newsflow out of the Doha meeting, today oil took an unexpected leg lower to 4-day lows, leaving many stumped: what caused this drop? The answer: it looks increasingly likely that the Kingdom is targeting another 0.5-m b/d of sales, bringing its production up to a steadier 11-m b/d or higher as it scramble to regain Chinese market share lost in recent months to Russia.
Futures are currently unchanged, but the E-mini was down as much as 12 points less than two hours earlier after the European open when this time it was up to the PBOC to intervene in global markets by pushing the Yuan higher (selling USDCNY via intermediary banks) sending global stocks sharply higher off session lows and leaving the S&P futures virtually unchanged. As Bloomberg reported, there has been increasing USD/CNY selling in afternoon session as Dollar Index edged lower. This is the PBOC entering the building and levitating stocks.
A story of sinking moral, economic hazard, ballooning debt debt, runaway inflation and scandals!
So Wall Street, US Big Oil and the proverbial “American interests” win this round at the circus – thanks to the, once again proverbial, vassal/comprador elites. Chevron execs are already salivating with the prospect of laying their hands on the pre-salt oil deposits; that was already promised by a trusted vassal in the Brazilian opposition. The coup goes on. The real hyenas haven’t yet pounced. So it's far from over.
Mind the terminal growth assumption. The warning signs are everywhere that what lies on the other side is not a world of 24.3X valuations.
With feces-infested waterways, Zika-carrying mosquitoes, a collapsing economy, and political corruption that runs from top to bottom, Brazil is in trouble. But just a few short weeks ahead of The Olympics, the people are revolting as Sao Paulo state governor Geraldo Alckmin warns "Rio de Janeiro is close to social collapse" after state payments to retirees have not been made. Of course, none of this matters as long as Ibovespa is soaring and Real is strengthening.
Almost exactly two years ago, in April 2014, Greece issued €2.5 billion in 5 year bond yielding around 5%, which was met with huge investor interest and ended up being 8x oversubscribed. Fast forward to today when another former shutout from global bond markets, Argentina, is in the FT's words, "on the cusp of one of the most anticipated comebacks in recent history, as the Latin American country ends a 15-year exile from the international debt market with a multibillion-dollar sale." This issue is likewise oversubscribed, and according to Reuters there are already $40 billion in roders for the $15 billion offering.
The news of Dilma's impeachment vote kneejerk'd stocks and the real higher overnight as the almost unbelievable gains in the circling-the-economic-drain nation's stock and FX markets extended among the "blood on the streets" dip-buyers. However, things have turned around rather quickly and it appears investors are aggressively selling the news as the collapse of government is suddenly seen as a negative...
Failure to proceed with crude output freeze plan seen as a "serious blow" to oil-market sentiment by Energy Aspects; Barclays expects mounting tensions between Saudi Arabia and Iran to boost volatility. Separately, Kuwait oil workers strike viewed as price-supportive. Here, courtesy of Bloomberg, is a summary of what analysts have said so far on meeting’s outcome as well as comments on Kuwait:
Following yesterday's OPEC "production freeze" meeting in Doha which ended in total failure, where in a seemingly last minute change of heart Saudi Arabia and specifically its deputy crown prince bin Salman revised the terms of the agreement demanding Iran participate in the freeze after all knowing well it won't, oil crashed and with it so did the strategy of jawboning for the past 2 months had been exposed for what it was: a desperate attempt to keep oil prices stable and "crush shorts" while global demand slowly picked up. And whether it is central banks, or chronic BTFDers, just 12 hours after oil opened for trading with a loud crash, the commodity has nearly wiped out all losses, and both brent and WTI were down barely 2%, leading to both European stocks and US equity futures virtually unchanged on the session.
Relentless deterioration meets stunning overcapacity.