Crude

Crude is at the lows of the day. Credit markets are at the lows of the day. Treasury yields are near the lows of the day. So it makes perfect sense that as Europe closed, "someone" would take the monkey-hammer to VIX ETFs (in particular UVXY - the Ultra-VIX ETF) and that rips stocks higher. What is most odd is that VIX (the underlying index) is not falling (as the ETFs appear driven more by futures out-months shifts and position-squaring).

After a Q1 collapse, the Dallas Fed Manufacturing Outlook managed a bounce for a few months (though never got back above zero). It appears, Dallas Fed's aptly-named 'Dick' Fischer was entirely wrong when he progonosticated that "on net, low oil prices are good for Texas." December's Dallas Fed print crashed to -20.1 (from -4.9) massively missing expectations of -7.0 and back at the lows not seen since June 2009.

The sustainable floor price for oil is a Brent price in the range of $30-35/bbl. Oil prices could temporarily fall below that level; however, companies would begin to shut-in production as variable production costs would exceed cash flow for some projects

Saudi Arabia has released its official budget numbers for 2015 as well as projections for next year. As it turns out, Riyadh is weathering the storm better than analysts expected, meaning the war of attrition with US producers is likely to continue for the foreseeable future, meaning "lower for longer" oil prices and even more shale defaults in the future.

The last trading week of 2015 begins on a historic precipice for stocks: as reported over the weekend, the U.S. stock market has not been lower for any year ending in a “5? since 1875. That streak is now in jeopardy, because following Thursday's shortened holiday session which ended with an abrupt selloff, the overnight session has seen continued weakness across global assets in everything from Chinese stocks which tumbled the most since November 27, to commodities (WTI  is down 2.5%) to European stocks (Stoxx 600 -0.4%), to US equity futures down 0.4% on what appears to be an overdue dose of Santa Rally buyers' remorse.

Q. Could oil prices collapse to $20?
A. The short answer is ‘yes.’ We believe that crude oil prices could fall further unless global oil production is reduced.  We believe that the weakness in crude oil prices reflects a combination of fundamental factors and financial flows. Fundamentally there is simply too much oil... the current supply-demand balance is not sustainable; something has to give.

“The [aerial] imagery was made in the vicinity of Zakho (a city in Iraqi Kurdistan), there were 11,775 tankers and trucks on both sides of the Turkish-Iraqi border. It must be noted that oil from both Iraq and Syria come through this [Zakho] checkpoint."

"We don't gloat or feel terribly excited about the economic conditions right now. We approach every single repo and seizure as an opportunity to help respect the dignity of the debtor."

Recently, former CIA deputy director Michael Morell told Charlie Rose on PBS that the reason the US had never actually gone after the lifeblood of the ISIS regime, its oil supply chain, infrastructure and products, was because "we didn’t want to do environmental damage, and we didn’t want to destroy that infrastructure." Luckily as the clip below shows, the Russian military has no such qualms.

"In the media they wrote that we were training in an FSA military camp, but in fact, all 60 of us were members of Daesh. We were Syrian nationals, many of whom in the beginning moved to Turkey to earn some money, and then joined Daesh."

"Oil and gas sector bankruptcies have reached quarterly levels last seen in the Great Recession. At least nine U.S. oil and gas companies, accounting for more than $2 billion in debt, have filed for bankruptcy so far in the fourth quarter."

"Erdogan's adventurism has been quite successful so far, but it amounts to an extraordinary departure for Turkish foreign policy, and maybe even risks the destruction of the country. How on earth could this happen? The background is an inferiority complex, and megalomania."

Goldman, Decembert 20, 2015: "We think the BoJ is closer to easing further to attempt to achieve a successful reflation than it is to giving up altogether, and so we continue to expect $/JPY higher. We recommend being long $/JPY as part of our 2016 top trade recommendation (along with short EUR/$) and forecast $/JPY at 130 in 12 months"... Three days later, the USDJPY is 100 pips lower.

Unleash 'The Andy Hall Algo'... it seems the quarter-, year-end mark-ups may just be required to maintain 'some' hedge funds and hold off liquidation for another quarter...