Natural Gas

The economy as we know it is facing a lethal confluence of four critical factors - the fall-out from the biggest debt bubble in history; a disastrous experiment with globalisation; the massaging of data to the point where economic trends are obscured; and, most important of all, the approach of an energy-returns cliff-edge. Through technology, through culture and through economic and political change, society is more short-term in nature now than at any time in recorded history. This acceleration towards ever-greater immediacy has blinded society to a series of fundamental economic trends which, if not anticipated and tackled well in advance, could have devastating effects. The relentless shortening of media, social and political horizons has resulted in the establishment of self-destructive economic patterns which now threaten to undermine economic viability.

• Fed Pushes Into ‘Uncharted Territory’ With Record Assets (BBG)
• Next up in the currency wars: Korea - Samsung Drops on $2.8 Billion Won Profit-Cut Prediction (BBG)
• China Warns ‘Hot Money’ Inflows Possible on Easing From Abroad (Bloomberg)
• BOJ Shirakawa affirms easy policy pledge but warns of costs (Reuters)
• Merkel Takes a Swipe at Japan Over Yen (WSJ)
• Wages in way of Abe’s war on deflation (FT)
• Italian PM under fire over bank crisis (FT)
• Senior officials urge calm over islands dispute (China Daily)
• Spain tries to peel back business rules (FT)
• Rifts Over Cyprus Bailout Feed Broader Fears (WSJ)
• Soros Says the Euro Is Here to Stay as Currency War Looms (BBG)

It looks like what may be good for the environment is actually bad news for the government.  

• Doubt Greets Bank of Japan's Easing Shift (WSJ)
• Japan hits back at currency critics (FT)
• Japan upgrades economic view for first time in eight months (Australian) - only to lower them in a few months again
• GOP critics get opportunity to grill Secretary Clinton on Benghazi (Hill)
• Global economy set for ‘slow recovery’ (FT)
• Obama to back short debt limit extension (FT)
• Unfinished Luxury Tower Is Stark Reminder of Las Vegas’s Economic Reversal (NYT)
• Draghi Says ‘Darkest Clouds’ Over Europe Have Subsided (BBG)
• High-Speed Dustup Hits a Clubby Corner (WSJ)
• U.S. Budget Discord Is Top Threat to Global Economy in Poll (BBG)
• Sir Mervyn King says abandoning inflation target would be 'irresponsible' (Telegraph)
• Spain Says It May Cover 13% of 2013 Funding in January (BBG)

Biggest loser? China.

It’s all a money game on Wall Street.

• Foreign Hostages Die in Algeria’s Battle With Terrorists (Bloomberg)
• The latest bank to soon join the currency wars: McCafferty Says BOE Must Keep Open Mind on New Policy Tools (Bloomberg)
• US debt talks complicated by timing (FT)
• BOJ eyes open-ended asset buying, agrees new inflation goal (Reuters)
• AmEx Says U.S. Card Income Fell 42% as Loss Provisions Increased (BBG)
• Call to raise age for US’s Medicare (FT)
• Obama Promise to Raise Middle Class Living Already Seen in Peril (BBG)
• China Exits Slowdown as Quarterly Growth Tops Forecasts (BBG) - actually, as new Politburo says to make it appear that way
• Britain to drift out of European Union without reforms (Reuters)
• Republicans weigh interim debt-limit hike (FT)
• Abe's aide says Japan shouldn't fret if yen falls to 100 vs dlr (Reuters) ... and it was 90 just a few days ago
• PBOC May Seek More Liquidity Operations (Dow Jones)

Today, Jeff Currie, Goldman Sachs chief commodity strategist said he wouldn’t be surprised if we woke up in summer with $150 oil. Well, I would, and here is why.

The situation in Malgeria^TM continues to remain uncertain but the following updates should provide some color as to where they stand currently (and a primer on the initial French intervention). Critically, Stratfor warns that the escalation in Algeria will possibly lead to further militants crossing the Mali border, further endangering Westerners and energy infrastructure (which is important as Algeria is one of the largest exports of light, sweet crude oil in the world and a significant natural gas exporter to Europe).

• Obama's Gun Curbs Face a Slog in Congress (BBG)
• Euro Area Seen Stalling as Draghi’s Pessimism Shared (BBG)
• China Begins to Lose Edge as World's Factory Floor (WSJ)
• EU Car Sales Slump (WSJ)
• Fed Concerned About Overheated Markets Amid Record Bond-Buying (BBG)
• Australia Posts Worst Back-to-Back Job Growth Since ’97 (BBG)
• Abe Currency Policy Stokes Gaffe Risk as Amari Roils Yen (BBG)
• Japan Opposition Party Won’t Back BOJ Officials for Governor (BBG)
• Fed Reports Point to Subdued Economic Growth (WSJ)
• China Set to Exit Slowdown by Boosting Infrastructure (BBG)
• Greece not out of woods, must stick to reforms: finance minister (Reuters)
• Russian Rate Debate Flares Up as Cabinet Seeks Growth (BBG)

There has been a very strong and concerted public-relations effort to spin the recent shale energy plays of the U.S. as complete game-changers for the world energy outlook.  These efforts do not square up well with the data and are creating a vast misperception about the current risks and future opportunities among the general populace and energy organizations alike.  The world remains quite hopelessly addicted to petroleum, and the future will be shaped by scarcity – not abundance, as some have claimed.

Just because the endless Israel vs Iran foreplay seems to no longer be exciting the world as much as it did all throughout 2010, 2011 and 2012 when military action seemed imminent over and over, it appears the world has a new geopolitical tension point: the recent incursion into Mali by French (and soon many other) forces, to protect "European interests" against "extremists" operating in the North, and as a corollary - the retaliation by the locals against Western Democratic powers. At least such is the simplistic plot line. Sure enough moments ago Reuters reported that islamist militants attacked a gas field in Algeria on Wednesday, claiming to have kidnapped up to 41 foreigners including seven Americans in a dawn raid in retaliation for France's intervention in Mali, according to regional media reports. The raiders were also reported to have killed three people, including a Briton and a French national. Subsequent reports indicate that the Algerian captives have been let go, and that this is purely an escalation against the invaders, an act which the US state department will harshly condemn at a 1pm press conference, and likely use as a catalyst to unleash US forces in the air or on the ground, to support the French campaign which at last check was going horribly.

Count on technology to bring the world into a new Oil [and Gas] Renaissance.

The December CPI is out, and according to the BLS, or more specifically, it's X-12 Arima reality processors, there was no inflation in the past month, with headline CPI printing at 0.0%, as expected, and up from a 0.3% deflation in November. Excluding food and gas, CPI rose 0.1%, less than the expected 0.2%. Compared to a year ago, inflation was a tame 1.7%, the BLS would like you to believe, and 1.9% ex food and energy. Luckily these numbers exclude such soaring in price items as education, and it certainly excludes a proxy for reserve inflation such as the stock market, which while certainly not a part of staple purchased goods, shows just where the free Fed money is going. As such, the S&P is as good a proxy of real, free money generated "inflation", as anything else. Naturally, once the stock market bubble pops, things will change, but for now why buy food when one can buy FUD and pray there is a greater fool to sell it to in a day or to. The biggest reported change in inflation Y/Y is in the price of medical care services which increased 3.7% compared to December 2011, and Utility gas service, which in turn declined by -2.9% from a year earlier. Finally, for those confused why producers see the need to dilute coffee and bear, and add just a little more than the RDS of horse meat to burgers, the reason is that food at home prices increased by 1.3% in 2012, while dining out has gotten a whopping 1.8% more expensive. That's right: the price of the food you eat at home has increased by 1.3% in the past year - so says the BLS which apparently like the Fed, only eats hedonically adjusted iPads.

• White House delays 2014 budget after "fiscal cliff" standoff (Reuters) - And Senate will pass this... never?
• Amari Signals Limits to Abe’s Campaign to Weaken Yen (BBG)
• Draghi’s Bond Rally Masks Debt Doom Loop Trapping Spain (BBG)
• Obama backs gun limits, concedes tough fight ahead (AP)
• Bernanke to Weigh QE Costs as Fed Assets Approach Record (BBG)
• Japan to Sell Debt Worth 7.8 Trillion Yen to Pay for Stimulus (BBG)
• France more than doubles forces in Mali (FT) and yet...
• Malian Rebels Take Town and Vow to Avenge French Attack (NYT)
• China’s Li Calls for Patience as Government Works to Reduce Smog (BBG)
• EU berates China over steel subsidies (BBG)
• Number of working poor families grows as wealth gap widens (Reuters)