Those of us who are libertarians have a tendency to speak frequently of “the New World Order.” When doing so, we tend to be a bit unclear as to what the New World Order is. Is it a cabal of the heads of the world’s governments, or just the heads of Western governments? Certainly bankers are included somewhere in the mix, but is it just the heads of the Federal Reserve and the IMF, or does it also include the heads of JPMorgan, Goldman Sachs, etc.? And how about the Rothschilds? And the Bundesbank—surely, they’re in there, too?
- Central Banks With Negative Rates Spur Question of How Low to Go (BBG)
- DHS to keep running: Congress edges toward domestic security funding patch (Reuters)
- Setbacks for Tsipras Stir Discord in Greek Ruling Party (BBG)
- Greece’s Challenge: Appeasing Its Creditors and Its Population (WSJ)
- Buffett, a cheerleader for America, takes his checkbook abroad (Reuters)
- Oil’s Big Swings Are the New Normal: Market has rarely been more volatile (WSJ)
- Ukraine Left Behind as Russian Stock Gains Are Unmatched (BBG)
- Brent rises to $61, set for first monthly gain since July (Reuters)
- Goldman Employees Reaped $2 Billion From 2008 Options Last Year (BBG)
- On Bush turf, Obama blames immigration woes on Republicans (Reuters)
- Tougher Internet rules to hit cable, telecoms companies (Reuters)
- Russia's Gazprom says can exempt rebel-held areas from Ukraine gas contract (Reuters)
- Allianz Says Pimco Seeing ‘Substantially’ Lower Outflows (BBG)
- Merkel Faces Stepped-Up Dissent on Greek Bailout in Party (BBG)
- SEC Probes Companies’ Treatment of Whistleblowers (WSJ)
- 2-Year Trek From Turf to Table Delays Cheaper U.S. Beef (BBG)
- Turkish jets violate Greek air space (Kathimerini)
Janet Yellen is very alarmed that some members of Congress want to conduct a comprehensive audit of the Federal Reserve for the first time since it was created. During testimony this week, she made “central bank independence” sound like it was the holy grail. Even though every other government function is debated politically in this country, Janet Yellen insists that what the Federal Reserve does is “too important” to be influenced by the American people. Does any other government agency ever dare to make that claim? If the Fed is doing everything correctly, why should Yellen be alarmed? What does she have to hide?
The trouble with the money printing madness in the Eccles Building is that it generates huge deformations, misallocations and speculative excesses in the financial markets. Eventually these bubbles splatter, as they have twice this century. The resulting carnage, needless to say, is not small. Combined financial and real estate asset markdowns totaled about $7 trillion after the dotcom bust and $15 trillion during the 2008-2009 financial crisis. The Wall Street casino is now festooned with giant deadweight losses waiting to happen. But perhaps none is more egregious than Tesla - a crony capitalist con job that has long been insolvent, and has survived only by dint of prodigious taxpayer subsidies and billions of free money from the Fed’s Wall Street casino.
It will get much worse.
At the start of Q4 2014, Appaloosa's David Tepper made a series of statements - dismissing Bill Gross as irrelevant (nope - turmoil caused by PIMCO unwinds roiled credit markets), calling the end of the bond bull market (nope - yields went on make lower and lower lows), and finally proclaiming that stocks were inexpensive and multiples not high. So, one wonders, if stocks were inexpensive and multiples not high, why did Appaloosa dump 40% of its US equity exposure in that quarter (only to end the quarter with even more exuberance proclaiming that stocks could rise another 10% in 2015)? It appears that when David Tepper says "buy", he means "buy... from me."
While so much has been made of the considerable decline in US rig counts as the driver behind the recent price bounce in oil, Goldman Sachs' Damien Courvalin pours cold water all over that narrative as he explains that the rig count decline is still not sufficient, in our view, to achieve the slowdown in US production growth required to balance the oil market. Worse yet, he concludes, with the producer hedging that has occurred over the past weeks and the recent wave of equity issuance, the risk that the US production slowdown will be delayed is high, meaning oil prices will need to remain lower in the coming quarters in order for the announced capex guidance and rig reduction to materialize into sufficiently lower production growth.
- Greece will do 'whatever it can' to reach deal with EU (Reuters)
- ECB Urges Greek Political Deal as Emergency Cash Is Tight (BBG)
- Fighting rages in run-up to Ukraine ceasefire (Reuters)
- Eurozone GDP Picks Up, Thanks to Germany (WSJ)
- Two J. P. Morgan Executives Connected to Asia Hiring Probe Pushed Out (WSJ)
- Putin's High Tolerance for Pain and Europe's Reluctance to Inflict It (BBG)
- Indigestion Hits Top U.S. Food Firms (WSJ)
- Alibaba's Jack Ma seeks to reassure employees over U.S. lawsuits (Reuters)
- 'Glimmer of hope' for Ukraine after deal at Minsk peace summit (Reuters)
- Ruble Rebounds, Russian Stocks Surge on Ukraine Cease-Fire Deal (BBG)
- Greek PM Tsipras in Brussels as clock ticks on EU bailout (Reuters)
- Emerging-Market Currencies Rout Not Over for Traders (BBG)
- Little noticed, new Saudi king shapes contours of power (Reuters)
- In Wake of Financial Crisis, Goldman Goes It Alone (WSJ)
- AmEx Is Losing Its Millionaires (BBG)
- Thousands to Lose Health Insurance Over Residency Questions (WSJ)
With WTI back under $50 once again (the mainstream media's new Maginot Line for oil complex stability - just like $80, $70, and $60 was), it appears more investors are waking up to the reality of an over-supplied, under-demanded global energy market. The 'squeeze bounce manipulation' that we saw over the last week - very reminiscent of the bounce seen mid-collapse in 2008/9, was predicated on falling rig counts (and capex). However, Goldman pours freezing cold fracking water all over that thesis as they explain that the decline in the US rig count remains well short of the level required to achieve a sufficient slowdown in US oil production growth to balance the global market. Simply put, they conclude, lower oil prices will be required over the coming quarters to see the US production growth slowdown materialize with risk to their already low price forecast to the downside.
We remarked on the first notable casualty of the collapse of global trade and with it the cost of shipping freight last week when the first of the bulk shipping bankruptcies occurred, but as The South China Morning Post reports, over the past 10 years, shipping lines have endlessly invested in newer, larger vessels - flooding the market with additional capacity - yet the industry's profitability and return on capital have remained pitiful. This supply-demand imbalance has lowered the cost of ocean shipping, but has raised concerns among vessel operators, insurers and regulators about the potential for catastrophic accidents, as "cost cutting measures such as reducing crew numbers, overworking and lack of training” have exacerbated the risks.
The worldwide rig count ended January at 3,309, down 261 from December but it is the US and Canada that is dominating that collapse. Following last week's all-time record absolute drop of 94 rigs (over 7%, most since APR09), the oil rig count dropped for the 9th week in a row (down another 83 to 1140 rigs - down 27% in last 9 weeks) as it tracks the 4-mo lagged oil price perfectly. The Permian basin saw the biggest cut in rig count. This is the lowest oil rig count since Dec 2011 (down 19.5% YoY) and lowest total rig count in the US since March 2010 - down 25% in the last 9 weeks). Hopes of production cuts are simply wrong as the last 4 times that rig counts have dropped, no production cuts have occurred.
There’s a fairly easy way to tell if a firm is a marketing firm or an investment firm. Do you see its advertising on buses, cabs and posters? Do they have a practically limitless range of funds? This is not to denigrate marketing firms entirely. But as the financial markets lurch between unprecedented bouts of bad policy, and achieve valuations that we strongly suspect are unlikely to persist, it may be worthwhile to consider the motives of the people charged with managing your money. Are they asset managers, or asset gatherers?
Six years on from the financial crisis and central banks are still hacking away at interest rates. Australia and Romania's did this week and while Poland and India held off, both are expected to prune rates later in 2015.