http://www.zerohedge.com/fullrss2.xml/news/italy-miss-gdp-forecast-sees-sub-1-gdp-growth en 60% Of China's Water "Too Polluted To Drink" http://www.zerohedge.com/news/2014-04-23/60-chinas-water-too-polluted-drink <p>Forget bank-runs, the <strong>water run has begun in China</strong>. Residents of the western city of Lanzhou rushed to buy mineral water earlier this month after local tap water was found to contain excessive levels of the toxic chemical benzene. But that is the tip of what is a massive problem facing the Chinese people. Not only do they suffer choking smog day after day, but, as The Business Times reports, <strong>sixty per cent of underground water in China which is officially monitored is too polluted to drink directly, state media have reported, underlining the country&#39;s grave environmental problems</strong>.</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_water.png"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_water_0.png" /></a></p> <p>&nbsp;</p> <p>As The Business Times reports,</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Sixty per cent of underground water in China which is officially monitored is too polluted to drink directly,</strong> state media have reported, underlining the country&#39;s grave environmental problems.</p> <p>&nbsp;</p> <p><strong>Water quality measured in 203 cities across the country last year rated &quot;very poor&quot; or &quot;relatively poor&quot; </strong>in an annual survey released by the Ministry of Land and Resources, the official Xinhua news agency said late Tuesday.</p> <p>&nbsp;</p> <p>Water rated &quot;relatively&quot; poor quality cannot be used for drinking without prior treatment, while water of &quot;very&quot; poor quality cannot be used as a source of drinking water, the report said.</p> <p>&nbsp;</p> <p><strong>The proportion of water not suitable for direct drinking rose from 57.4 per cent from 2012</strong>, it said.</p> </blockquote> <p><a href="http://www.zerohedge.com/news/2013-02-25/guest-post-coming-water-wars">As we noted previously,</a> <strong>The World Bank&#39;s Ismail Serageldin puts it succinctly: &quot;The wars of the 21<sup>st</sup> century will be fought over water.&quot;</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>That old axiom that the earth is 75% water... not quite. In reality, water constitutes only 0.07% of the earth by mass, or 0.4% by volume.</p> <p>&nbsp;</p> <p>This is how much we have, depicted graphically:</p> <p>&nbsp;</p> <p style="text-align: center;"><a class="lightbox-processed" href="http://www.caseyresearch.com/sites/default/files/image1_184.jpg" rel="lightbox"><img alt="" height="504" src="http://www.caseyresearch.com/sites/default/files/resize/image1_184-490x504.jpg" style="width: 490px; height: 504px;" width="490" /></a></p> <p align="center">&nbsp;</p> <p>What this shows is the relative size of our water supply if it were all gathered together into a ball and superimposed on the globe.</p> <p>&nbsp;</p> <p>The large blob, centered over the western US, is all water (oceans, icecaps, glaciers, lakes, rivers, groundwater, and water in the atmosphere). It&#39;s a sphere about 860 miles in diameter, or roughly the distance from Salt Lake City to Topeka. The smaller sphere, over Kentucky, is the fresh water in the ground and in lakes, rivers, and swamps.</p> <p>&nbsp;</p> <p>Now examine the image closely. See that last, tiny dot over Georgia? It&#39;s the fresh water in lakes and rivers.</p> </blockquote> <p>There&#39;s no doubt that this is a looming crisis we cannot avoid. Everyone has an interest in water. How quickly we respond to the challenges ahead is going to be a matter, literally, of life and death. Where we have choices at all, we had better make some good ones.</p> http://www.zerohedge.com/news/2014-04-23/60-chinas-water-too-polluted-drink#comments China Reality World Bank Thu, 24 Apr 2014 00:36:58 +0000 Tyler Durden 487643 at http://www.zerohedge.com The Middle Class In Canada Is Now Doing Better Than The Middle Class In America http://www.zerohedge.com/news/2014-04-23/middle-class-canada-now-doing-better-middle-class-america <p><em>Submitted by Michael Snyder of <a href="http://theeconomiccollapseblog.com/archives/the-middle-class-in-canada-is-now-doing-better-than-the-middle-class-in-america-is">The Economic Collapse blog</a>,</em></p> <p>For most of Canada&#39;s existence, it has been regarded as the weak neighbor to the north by most Americans.&nbsp; Well, that has changed dramatically over the past decade or so.&nbsp; Back in the year 2000, middle class Canadians were earning much less than middle class Americans, but since then there has been a dramatic shift.&nbsp; <strong>At this point, middle class Canadians are actually earning more than middle class Americans are.&nbsp;</strong> The Canadian economy has been booming thanks to a rapidly growing oil industry, and meanwhile the U.S. middle class has been <a href="http://theeconomiccollapseblog.com/archives/28-signs-that-the-middle-class-is-heading-toward-extinction" title="steadily shrinking">steadily shrinking</a>.&nbsp; If current trends continue, a whole bunch of other countries are going to start passing us too.&nbsp; The era of the &quot;great U.S. middle class&quot; is rapidly coming to a bitter end.</p> <p>In recent years, I have been up to Canada frequently, and I am always amazed at how much nicer things are up there.&nbsp; The stores and streets are cleaner, the people are more polite and it seems like almost everyone that wants to work has a job.</p> <p>But despite knowing all this, I was still surprised when&nbsp;<a href="http://www.nytimes.com/2014/04/23/upshot/the-american-middle-class-is-no-longer-the-worlds-richest.html?hp&amp;_r=1" target="_blank" title="the New York Times">the New York Times</a> reported this week that middle class incomes in Canada have now surpassed middle class incomes in the United States...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>After-tax middle-class incomes in Canada &mdash; substantially behind in 2000 &mdash; now <strong>appear to be higher</strong> than in the United States. The poor in much of Europe earn more than poor Americans.</p> </blockquote> <p>And things are particularly dire for those in the U.S. on the low end of the scale...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The struggles of the poor in the United States are even starker than those of the middle class. A family at the 20th percentile of the income distribution in this country <strong>makes significantly less money</strong> than a similar family in Canada, Sweden, Norway, Finland or the Netherlands. Thirty-five years ago, the reverse was true.</p> </blockquote> <p>Even while our politicians and the media continue to proclaim that everything is &quot;just fine&quot;, the U.S. middle class continues to slide toward oblivion.</p> <p>The biggest reason for this is the lack of middle class jobs.&nbsp; Millions of good jobs have been shipped overseas, and millions of other good jobs have been replaced by technology.</p> <p>The value of our labor is declining with each passing day, and this has forced millions upon millions of very qualified Americans to take whatever they can get.&nbsp; As&nbsp;<a href="http://www.cnbc.com/id/101597957" target="_blank" title="NBC News">NBC News</a> recently noted, this is a big reason why the temp industry has been booming...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>For Americans who can&#39;t find jobs, the booming demand for temp workers has been a path out of unemployment, but now many fear it&#39;s a dead-end route.</p> <p>&nbsp;</p> <p>With full-time work hard to find, these workers have built temping into a de facto career, minus vacation, sick days or insurance. The assignments might be temporary &mdash; a few months here, a year there &mdash; but labor economists warn that companies&#39; growing hunger for a workforce they can switch on and off could do permanent damage to these workers&#39; career trajectories and retirement plans.</p> <p>&nbsp;</p> <p>&quot;It seems to be the new norm in the working world,&quot; said Kelly Sibla, 54. The computer systems engineer has been looking for a full-time job for four years now, but the Amherst, Ohio, resident said she has to take whatever she can find.</p> </blockquote> <p>It has been estimated that one out of every ten jobs is now filled by a temp agency.&nbsp; I have worked for temp agencies myself in the past.&nbsp; Big companies like the idea of having &quot;disposable workers&quot;, and this is a trend that is likely to only grow in the years ahead.</p> <p>But temp jobs and part-time jobs don&#39;t pay as well as normal jobs.&nbsp; And those kinds of jobs generally cannot support middle class families.</p> <p>At this point, nine out of the top ten occupations in the United States pay an average wage of <a href="http://theeconomiccollapseblog.com/archives/9-of-the-top-10-occupations-in-america-pay-an-average-wage-of-less-than-35000-a-year" title="less than $35,000 a year">less than $35,000 a year</a>.</p> <p>That is absolutely stunning.</p> <p>These days most families are barely scraping by, and they don&#39;t have much extra money to go shopping with.</p> <p>This is a big reason for the &quot;<a href="http://theeconomiccollapseblog.com/archives/two-more-victims-of-the-retail-apocalypse-family-dollar-and-coldwater-creek" title="retail apocalypse">retail apocalypse</a>&quot; that we are now witnessing.&nbsp; This week we learned that retail stores in the United States are closing at the fastest pace that we have seen <a href="http://www.zerohedge.com/news/2014-04-21/retail-store-closures-soar-2014-highest-pace-lehman-collapse" target="_blank" title="since the collapse of Lehman Brothers">since the collapse of Lehman Brothers</a>.&nbsp; But you won&#39;t hear much about that on the mainstream news.</p> <p>You can find lots of &quot;space available&quot; signs and empty buildings in formerly middle class neighborhoods all over the country.&nbsp; For example, one of my readers recently shot the following&nbsp;<a href="https://www.youtube.com/watch?v=Wu35WgGsR_k" target="_blank" title="YouTube video">YouTube video</a> in Scottsdale, Arizona.&nbsp; As you can see, empty commercial buildings are all over the place...</p> <p>As the middle class shrinks, more families are being forced to take in family members that can&#39;t find decent work.&nbsp; I have written previously about the huge rise in the number of young adults that are <a href="http://theeconomiccollapseblog.com/archives/29-percent-of-all-u-s-adults-under-the-age-of-35-are-living-with-their-parents" title="moving back in with their parents">moving back in with their parents</a>.&nbsp; But this is not just happening to young people.&nbsp; As&nbsp;<a href="http://www.latimes.com/business/la-fi-adults-in-parents-home-20140421,0,2293806.story?page=1&amp;fb_action_ids=10152355970744507#axzz2zfLl5gVJ" target="_blank" title="the Los Angeles Times">the Los Angeles Times</a> recently detailed, the number of Americans 50 and older that are moving in with their parents has absolutely soared in recent years...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>For seven years through 2012, the number of Californians aged 50 to 64 who live in their parents&#39; homes swelled 67.6% to about 194,000, according to the UCLA Center for Health Policy Research and the Insight Center for Community Economic Development.</p> <p>&nbsp;</p> <p>The jump is almost exclusively the result of financial hardship caused by the recession rather than for other reasons, such as the need to care for aging parents, said Steven P. Wallace, a UCLA professor of public health who crunched the data.</p> <p>&nbsp;</p> <p>&quot;The numbers are pretty amazing,&quot; Wallace said. &quot;It&#39;s an age group that you normally think of as pretty financially stable. They&#39;re mid-career. They may be thinking ahead toward retirement. They&#39;ve got a nest egg going. And then all of a sudden you see this huge push back into their parents&#39; homes.&quot;</p> </blockquote> <p>The U.S. economy is slowly but steadily falling apart, and more people fall out of the middle class every single day.</p> <p>A recent <a href="http://www.gallup.com/poll/168563/job-loss-quickly-lead-hardship.aspx?utm_source=alert&amp;utm_medium=email&amp;utm_campaign=syndication&amp;utm_content=morelink&amp;utm_term=All%20Gallup%20Headlines" target="_blank" title="Gallup survey">Gallup survey</a> found that 14 percent of all Americans would experience &quot;significant financial hardship&quot; within one week of a job loss.</p> <p>An additional 29 percent of all Americans would experience &quot;significant financial hardship&quot; within one month of a job loss.</p> <p>That means that 43 percent of the entire country is living right on the edge.</p> <p>It is no wonder why only <a href="http://www.pollingreport.com/right.htm" target="_blank" title="about 30 percent">about 30 percent</a> of all Americans believe that we are moving in the right direction as a nation.</p> <p><strong>Most people know deep down that something is seriously wrong.&nbsp; But most people can&#39;t explain exactly what that is or how to fix it.</strong></p> <p><strong>Meanwhile, the politicians and the media keep telling us that if we just keep doing the same old things that everything will work out okay somehow.&nbsp; The blind are leading the blind, and we are rapidly marching toward disaster.</strong></p> http://www.zerohedge.com/news/2014-04-23/middle-class-canada-now-doing-better-middle-class-america#comments Finland Gallup Lehman Lehman Brothers NBC Netherlands New York Times Norway Ohio Recession Unemployment Thu, 24 Apr 2014 00:05:52 +0000 Tyler Durden 487642 at http://www.zerohedge.com Mugabe Considers Revival Of "Hyperinflated" Zimbabwe Dollar http://www.zerohedge.com/news/2014-04-23/mugabe-considers-revival-hyperinflated-zimbabwe-dollar <p><em>It seems every bubble is coming back.</em> 5 Years after Zimbabwe abandoned the Zim Dollar (in favor of the US Dollar) after inflation surged to 500 billion percent the year before (according to the IMF), Bloomberg reports that <strong>Robert Mugabe's ruling party is considering reintroducing the local currency as it struggles to meet its monthly wage bill</strong>. "If they bring back the [Zim] dollar it will quickly deteriorate to worse than then, we’ll have nothing," warns one businessman as the appeal of reviving the Zimbabwe Dollar - allowing the government to print money to meet its needs - is surely outweighed by the lessons of the past. <strong>"We'll just die - we can't go back to 2008," but it seems governments never learn and memories are short</strong>. <em>Get long wheel-barrows.</em></p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_zim.png"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_zim.png" width="366" height="352" /></a></p> <p>&nbsp;</p> <p><em>As Bloomberg reports,</em> Zimbabwe is weighing the reintroduction of the national currency it abandoned in 2009 in favor of the U.S. dollar as it struggles to meet its monthly wage bill, three members of the ruling party’s decision-making body said.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>While the revival of the Zimbabwe dollar would allow the government to print money to meet its needs it could damage the popularity of President Robert Mugabe’s Zimbabwe African National Union-Patriotic Front</strong>, said the people, who asked not be identified because the discussions are private. Patrick Chinamasa, the country’s finance minister, didn’t answer calls made to his mobile phone.</p> <p>&nbsp;</p> <p><strong>Zimbabwe abolished its national currency in 2009 after inflation surged to 500 billion percent the year earlier, </strong>according to International Monetary Fund estimates, and the party lost its parliamentary majority in elections while retaining the presidency.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>The party’s politburo is trying to decide whether it will do more harm to its image by reintroducing the currency and meeting its wage commitments or continuing to use foreign exchange,</strong> protecting the country’s citizens against inflation, the people said. A majority of politburo members are currently against its reintroduction, they said.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>"We’ll just die, we can’t go back to 2008,” </strong>said Jehosephat Dambadza, a furniture-maker in Harare, the capital, said in a telephone interview. <strong>“If they bring back the dollar it will quickly deteriorate to worse than then, we’ll have nothing.”</strong></p> <p>&nbsp;</p> <p>This year the economy has slowed with sales of consumer goods falling as much as 30 percent in February and revenue collection declining by a 10th, according to the Treasury. Consumer prices fell for a second month in March, while <strong>wages accounted for 58 percent of government expenditure in February. </strong>Pay increases agreed to by the government earlier this year were delayed.</p> <p>&nbsp;</p> <p>Together with soldiers and police Zimbabwe has about 285,000 government workers.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>“Zimbabwe has big economic problems. They have a huge current account-deficit and a fiscal shortfall,”</strong> Viljoen said. “<strong>They need money from somewhere and they’re running out of options</strong>. Reintroducing the Zimbabwe dollar could be an option.”</p> </blockquote> <p>Is that really an option? It seems governments never learn or care to learn...</p> http://www.zerohedge.com/news/2014-04-23/mugabe-considers-revival-hyperinflated-zimbabwe-dollar#comments Consumer Prices International Monetary Fund Wed, 23 Apr 2014 23:38:52 +0000 Tyler Durden 487641 at http://www.zerohedge.com The Gap Betweeen GAAP And Non-GAAP In Two Charts http://www.zerohedge.com/news/2014-04-23/gap-betweeen-gaap-and-non-gaap-two-charts <p>By the magic of pure accounting gimmickry, one-off tom-foolery, non-GAAP shenanigans, and the sterling work of its now-retiring CFO; <strong>Facebook has &#39;managed&#39; to <em>produce </em>twice as much non-GAAP net income as GAAP net income in the last 2 years...</strong></p> <p>&nbsp;</p> <p>Straight from the social horse&#39;s mouth, here is Facebook&#39;s Net Income on a GAAP and non-GAAP basis...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/FB%20Net%20Income%20Gaap%20vs%20Non%20GAAP.JPG"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/FB%20Net%20Income%20Gaap%20vs%20Non%20GAAP_0.JPG" style="width: 600px; height: 448px;" /></a></p> <p>&nbsp;</p> <p><strong>Which means, summed across the last 2 years, non-GAAP magic has created 100% more &#39;pretend&#39; Net Income than real Net Income...</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_FB1.png"><img height="529" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_FB1_0.png" width="600" /></a></p> <p>&nbsp;</p> <p><strong>We are sure we do not need to tell you which one of these is used to &quot;value&quot; the company as &quot;cheap&quot;!</strong></p> <p>And yet is amazing how &#39;stable&#39; Facebook has managed to keep its non-GAAP operating margins when the real GAAP margins have been so volatile...</p> <p><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/FB%20Margin%20GAAP%20nonGAAP_0.JPG" style="width: 600px; height: 447px;" /></p> <p>&nbsp;</p> <p>But - as we told numerous times on mainstream media channels - you are not buying Facebook on valuations... you are buying growth (or the fact that there is another greater fool with no actual accounting skills willing to buy the stock $0.00001 higher than you are)...</p> http://www.zerohedge.com/news/2014-04-23/gap-betweeen-gaap-and-non-gaap-two-charts#comments GAAP Wed, 23 Apr 2014 23:05:35 +0000 Tyler Durden 487640 at http://www.zerohedge.com Eight Energy Myths Explained http://www.zerohedge.com/news/2014-04-23/eight-energy-myths-explained <p><em>Submitted by Gail Tverberg of <a href="http://ourfiniteworld.com/2014/04/23/eight-energy-myths-explained/">Our Finite World blog</a>,</em></p> <p>Republicans, Democrats, and environmentalists all have favorite energy myths. Even Peak Oil believers have favorite energy myths. The following are a few common mis-beliefs, &nbsp;coming from a variety of energy perspectives. I will start with a recent myth, and then discuss some longer-standing ones.</p> <p><strong>Myth 1. The fact that oil producers are talking about wanting to export crude oil means that the US has more than enough crude oil for its own needs.</strong></p> <p>The real story is that <em>producers want to sell their crude oil at as high a price as possible</em>. If they have a choice of refineries A, B, and C in this country to sell their crude oil to, the maximum amount they can receive for their oil is limited by the price the price these refineries are paying, less the cost of shipping the oil to these refineries.</p> <p>If it suddenly becomes possible to sell crude oil to refineries elsewhere, the possibility arises that a higher price will be available in another country. Refineries are optimized for a particular type of crude. If, for example, refineries in Europe are short of light, sweet crude because such oil from Libya is mostly still unavailable, a European refinery might be willing to pay a higher price for crude oil from the Bakken (which also produces light sweet, crude) than a refinery in this country. Even with shipping costs, an oil producer might be able to make a bigger profit on its oil sold outside of the US than sold within the US.</p> <p>The US consumed 18.9 million barrels a day of petroleum products during 2013. In order to meet its oil needs, the US imported 6.2 million barrels of oil a day in 2013 (netting exported oil products against imported crude oil). Thus, the US is, and will likely continue to be, a major oil crude oil importer.</p> <p>If production and consumption remain at a constant level, adding crude oil exports would require adding crude oil imports as well. These crude oil imports might be of a different kind of oil than that that is exported&ndash;quite possibly sour, heavy crude instead of sweet, light crude. Or perhaps US refineries specializing in light, sweet crude will be forced to raise their purchase prices, to match world crude oil prices for that type of product.</p> <p>The reason exports of crude oil make sense from an oil producer&rsquo;s point of view is that they stand to <em>make more money</em>&nbsp;by exporting their crude to overseas refineries that will pay more. How this will work out in the end is unclear. If US refiners of light, sweet crude are forced to raise the prices they pay for oil, and the selling price of US oil products doesn&rsquo;t rise to compensate, then more US refiners of light, sweet crude will go out of business, fixing a likely world oversupply of such refiners. Or perhaps prices of US finished products will rise, reflecting the fact that the US has to some extent in the past received a bargain (related to the <a href="http://ourfiniteworld.com/2011/11/21/more-thoughts-on-wti-and-brent-oil-prices/">gap between European Brent and US WTI oil prices</a>), relative to world prices. In this case US consumers will end up paying more.</p> <p>The one thing that is very clear is that the desire to ship crude oil abroad does not reflect too much total crude oil being produced in the United States. At most, what it means is an overabundance of refineries, worldwide, adapted to light, sweet crude. This happens because over the years, the world&rsquo;s oil mix has been generally changing to heavier, sourer types of oil. Perhaps if there is more oil from shale formations, the mix will start to change back again. This is a very big &ldquo;if,&rdquo; however. The media tend to overplay the possibilities of such extraction as well.</p> <p><strong>Myth 2. The economy doesn&rsquo;t really need very much energy.</strong></p> <p>&nbsp;</p> <p>We humans need food of the right type, to provide us with the energy we need to carry out our activities. The economy is very similar: it needs energy of the right types to carry out its activities.</p> <p>One essential activity of the economy is growing and processing food. In developing countries in warm parts of the world, food production, storage, transport, and preparation accounts for the vast majority of economic activity (<a href="http://www.amazon.com/Food-Energy-Society-Third-Edition/dp/1420046675">Pimental and Pimental, 2007</a>). In traditional societies, much of the energy comes from human and animal labor and burning biomass.</p> <p>If a developing country substitutes modern fuels for traditional energy sources in food production and preparation, the whole nature of the economy changes. We can see this starting to happen on a world-wide basis in the early 1800s, as energy other than biomass use ramped up.</p> <div class="wp-caption aligncenter" id="attachment_16901" style="width: 650px"><a href="http://gailtheactuary.files.wordpress.com/2012/03/world-energy-consumption-by-source.png"><img alt="Figure 1. World Energy Consumption by Source, Based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects and together with BP Statistical Data on 1965 and subsequent" class="size-full wp-image-16901" height="384" src="http://gailtheactuary.files.wordpress.com/2012/03/world-energy-consumption-by-source.png?w=640&amp;h=384" width="640" /></a><br /> <p class="wp-caption-text">Figure 1. World Energy Consumption by Source, Based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects and together with BP Statistical Data on 1965 and subsequent</p> </div> <p>The Industrial Revolution began in <a href="http://www.history.com/topics/industrial-revolution">the late 1700s in Britain</a>. It was enabled by coal usage, which made it possible to make metals, glass, and cement in much greater quantities than in the past. Without coal, deforestation had become a problem, especially near cold urban areas, such as London. With coal, it became possible to use industrial processes that required heat without the problem of deforestation. Processes using high levels of heat also became cheaper, because it was no longer necessary to cut down trees, make charcoal from the wood, and transport the charcoal long distances (because near-by wood had already been depleted).</p> <p>The availability of coal allowed the use of new technology to be ramped up. For example, <a href="http://en.wikipedia.org/wiki/Steam_engine">according to Wikipedia</a>, the first steam engine was patented in 1608, and the first commercial steam engine was patented in 1712. In 1781, James Watt invented an improved version of the steam engine. But to actually implement the steam engine widely using metal trains running on metal tracks, coal was needed to make relatively inexpensive metal in quantity.</p> <p>Concrete and metal could be used to make modern hydroelectric power plants, allowing electricity to be made in quantity.&nbsp;Devices such as light bulbs (using glass and metal) could be made in quantity, as well as wires used for transmitting electricity, allowing a longer work-day.</p> <p>The <a href="http://www2.census.gov/prod2/decennial/documents/41667073v5p6ch4.pdf">use of coal also led to agriculture changes</a>&nbsp;as well, cutting&nbsp;back on the need for farmers and ranchers. <span style="color:#333333;">New devices such as <a href="http://www.iwest.k12.il.us/schools/thawville/projects/1800/index_017.html">steel plow</a>s and reapers and hay rakes were manufactured, which could be pulled by horses, transferring work from humans to animals. </span><a href="http://inventors.about.com/od/bstartinventions/a/BarbedWire.htm">Barbed-wire fence</a><span style="color:#333333;">&nbsp;allowed the western part of the US to become cropland, instead one large unfenced range. With fewer people needed in agriculture, more people became available to work in cities in factories.</span></p> <p>Our economy is now very different from what it was back about 1820, because of increased energy use. We have large cities, with food and raw materials transported from a distance to population centers. Water and sewer treatments greatly reduce the risk of disease transmission of people living in such close proximity. Vehicles powered by oil or electricity eliminate the mess of animal-powered transport. Many more roads can be paved.</p> <p>If we were to try to leave today&rsquo;s high-energy system and go back to a system that uses biofuels (or only biofuels plus some additional devices that can be made with biofuels), it would require huge changes.</p> <p><strong>Myth 3. We can easily transition to renewables.</strong></p> <p>On Figure 1, above, the only renewables are hydroelectric and biofuels.&nbsp;While energy supply has risen rapidly, population has risen rapidly as well.</p> <div class="wp-caption aligncenter" id="attachment_16906" style="width: 650px"><a href="http://gailtheactuary.files.wordpress.com/2012/03/world-population-1820-to-2010.png"><img alt="Figure 2. World Population, based on Angus Maddison estimates, interpolated where necessary." class="size-full wp-image-16906" height="385" src="http://gailtheactuary.files.wordpress.com/2012/03/world-population-1820-to-2010.png?w=640&amp;h=385" width="640" /></a><br /> <p class="wp-caption-text">Figure 2. World Population, based on <a href="http://www.ggdc.net/MADDISON/oriindex.htm">Angus Maddison estimates</a>, interpolated where necessary.</p> </div> <p>When we look at energy use on a per capita basis, the result is as shown in Figure 3, below.</p> <div class="wp-caption aligncenter" id="attachment_16902" style="width: 650px"><a href="http://gailtheactuary.files.wordpress.com/2012/03/per-capita-world-energy-by-source.png"><img alt="Figure 3. Per capita world energy consumption, calculated by dividing world energy consumption (based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects together with BP Statistical Data for 1965 and subsequent) by population estimates, based on Angus Maddison data." class="size-full wp-image-16902" height="385" src="http://gailtheactuary.files.wordpress.com/2012/03/per-capita-world-energy-by-source.png?w=640&amp;h=385" width="640" /></a><br /> <p class="wp-caption-text">Figure 3. Per capita world energy consumption, calculated by dividing world energy consumption (based on Vaclav Smil estimates from <a href="http://www.amazon.com/Energy-Transitions-History-Requirements-Prospects/dp/0313381771/ref=sr_1_3?s=books&amp;ie=UTF8&amp;qid=1335461865&amp;sr=1-3">Energy Transitions: History, Requirements and Prospects</a> together with BP Statistical Data for 1965 and subsequent) by population estimates, based on <a href="http://www.ggdc.net/MADDISON/oriindex.htm">Angus Maddison data</a>.</p> </div> <p>The energy consumption level in 1820 would be at a basic level&ndash;only enough to grow and process food, heat homes, make clothing, and provide for some very basic industries. Based on Figure 3, even this required a little over 20 gigajoules of energy per capita. If we add together per capita biofuels and hydroelectric on Figure 3, they would come out to only about 11 gigajoules of energy per capita. To get to the 1820 &nbsp;level of per capita energy consumption, we would either need to add something else, such as coal, or wait a very, very long time until (perhaps) renewables including hydroelectric could be ramped up enough.</p> <p>If we want to talk about renewables that can be made without fossil fuels, the amount would be <em>smaller yet.</em>&nbsp;As noted previously, modern hydroelectric power is enabled by coal, so we would need to exclude this.&nbsp;We would also need to exclude modern biofuels, such as ethanol made from corn and biodiesel made from rape seed, because they are greatly enabled by today&rsquo;s farming and transportation equipment and indirectly by our ability to make metal in quantity.</p> <p>I have included wind and solar in the &ldquo;Biofuels&rdquo; category for convenience. They are so small in quantity that they wouldn&rsquo;t be visible as a separate categories, wind amounting to only 1.0% of world energy supply in 2012, and solar amounting to 0.2%, according to BP data. We would need to exclude them as well, because they too require&nbsp;fossil fuels to be produced and transported.</p> <p>In total, the biofuels category without all of these modern additions might be close to the amount available in 1820. Population now is roughly seven times as large, suggesting only one-seventh as much energy per capita. Of course, in 1820 the amount of wood used led &nbsp;to significant deforestation, so even this level of biofuel use was not ideal. And there would be the additional detail of transporting wood to markets. Back in 1820, we had horses for transport, but we would not have enough horses for this purpose today.</p> <p><strong>Myth 4. Population isn&rsquo;t related to energy availability.</strong></p> <p>If we compare Figures 2 and 3, we see that the surge in population that took place immediately after World War II coincided with the period that per-capita energy use was ramping up rapidly. The increased affluence of the 1950s (fueled by low oil prices and increased ability to buy goods using oil) allowed parents to have more children. Better sanitation and innovations such as antibiotics (made possible by fossil fuels) also allowed more of these children to live to maturity.</p> <p>Furthermore, the <a href="http://en.wikipedia.org/wiki/Green_Revolution">Green Revolution</a>&nbsp;which took place during this time period is credited with saving over a billion people from starvation. It ramped up the use of irrigation, synthetic fertilizers and pesticides, hybrid seed, and the development of high yield grains. All of these techniques were enabled by availability of oil. Greater use of agricultural equipment, allowing seeds to be sowed closer together, also helped raise production. By this time, electricity reached farming communities, allowing use of equipment such as milking machines.</p> <p>If we take a longer view of the situation, we find that a &ldquo;bend&rdquo; in the world population occurred about the time of Industrial Revolution, and the ramp up of coal use (Figure 4). Increased farming equipment made with metals increased food output, allowing greater world population.</p> <div class="wp-caption aligncenter" id="attachment_38148" style="width: 650px"><a href="http://gailtheactuary.files.wordpress.com/2013/05/world-population-0-to-2011.png"><img alt="Figure 4. World population based on data from &quot;Atlas of World History,&quot; McEvedy and Jones, Penguin Reference Books, 1978 and Wikipedia-World Population. " class="size-full wp-image-38148" height="385" src="http://gailtheactuary.files.wordpress.com/2013/05/world-population-0-to-2011.png?w=640&amp;h=385" width="640" /></a><br /> <p class="wp-caption-text">Figure 4. World population based on data from &ldquo;Atlas of World History,&rdquo; McEvedy and Jones, Penguin Reference Books, 1978<br />and Wikipedia-World Population.</p> </div> <p>Furthermore, when we look at countries that have seen large drops in energy consumption, we tend to see population declines. For example, following the collapse of the Soviet Union, there were drops in energy consumption in a number of countries whose energy was affected (Figure 5).</p> <div class="wp-caption aligncenter" id="attachment_38677" style="width: 650px"><a href="http://gailtheactuary.files.wordpress.com/2013/12/population-as-pct-of-1985-population.png"><img alt="Figure 6. Population as percent of 1985 population, for selected countries, based on EIA data." class="size-full wp-image-38677" height="385" src="http://gailtheactuary.files.wordpress.com/2013/12/population-as-pct-of-1985-population.png?w=640&amp;h=385" width="640" /></a><br /> <p class="wp-caption-text">Figure 6. Population as percent of 1985 population, for selected countries, based on EIA data.</p> </div> <p><strong>Myth 5. It is easy to substitute one type of energy for another.</strong></p> <p>Any changeover from one type of energy to another is likely to be slow and expensive, if it can be accomplished at all.</p> <p>One major issue is the fact that different types of energy have very different uses. When oil production was ramped up, during and following World War II, it added new capabilities, compared to coal. With only coal (and hydroelectric, enabled by coal), we could have battery-powered cars, with limited range. Or ethanol-powered cars, but ethanol required a huge amount of land to grow the necessary crops. We could have trains, but these didn&rsquo;t go from door to door. With the availability of oil, we were able to have personal transportation vehicles that went from door to door, and trucks that delivered goods from where they were produced to the consumer, or to any other desired location.</p> <p>We were also able to build airplanes. With airplanes, we were able to win World War II. Airplanes also made international business feasible on much greater scale, because it became possible for managers to visit operations abroad in a relatively short time-frame, and because it was possible to bring workers from one country to another for training, if needed. Without air transport, it is doubtful that the current number of internationally integrated businesses could be maintained.</p> <p>The passage of time does not change the inherent differences between different types of fuels. Oil is still the fuel of preference for long-distance travel, because (a) it is energy dense so it fits in a relatively small tank, (b) it is a liquid, so it is easy to dispense at refueling stations, and (c) we are now set up for liquid fuel use, with a huge number of cars and trucks on the road which use oil and refueling stations to serve these vehicles. Also, oil works much better than electricity for air transport.</p> <p>Changing to electricity for transportation is likely to be a slow and expensive process. One important point is that<em> the cost of electric vehicles needs to be brought down to where they are affordable for buyers, if we do not want the changeover to have a hugely adverse effect on the economy</em>. This is the case because salaries are not going to rise to pay for high-priced cars, and the government cannot afford large subsidies for everyone. Another issue is that the range of electric vehicles needs to be increased, if vehicle owners are to be able to continue to use their vehicles for long-distance driving.</p> <p>No matter what type of changeover is made, the changeover needs to implemented slowly, over a period of 25 years or more, so that buyers do not lose the trade in value of their oil-powered vehicles. If the changeover is done too quickly, citizens will lose their trade in value of their oil-powered cars, and because of this, will not be able to afford the new vehicles.</p> <p>If a changeover to electric <em>transportation vehicles</em> is to be made, many vehicles other than cars will need to be made electric, as well. These would include long haul trucks, busses, airplanes, construction equipment, and agricultural equipment, all of which would need to be made electric. Costs would need to be brought down, and necessary refueling equipment would need to be installed, further adding to the slowness of the changeover process.</p> <p>Another issue is that even apart from energy uses, oil is used in many applications as a raw material. For example, it is used in making herbicides and pesticides, asphalt roads and asphalt shingles for roofs, medicines, cosmetics, building materials, dyes, and flavoring. There is no possibility that electricity could be adapted to these uses. Coal could perhaps be adapted for these uses, because it is also a fossil fuel.</p> <p><strong>Myth 6. Oil will &ldquo;run out&rdquo; because it is limited in supply and non-renewable.</strong></p> <p>This myth is actually closer to the truth than the other myths. The situation is a little different from &ldquo;running out,&rdquo; however. The real situation is that oil limits are likely to disrupt the economy in various ways. This<em> economic disruption</em> is likely to be what leads to an &nbsp;abrupt drop in oil supply. One likely possibility is that a lack of debt availability and low wages will keep oil prices from rising to the level that oil producers need for extraction. Under this scenario, oil producers will see little point in investing in new production. There is <a href="http://ourfiniteworld.com/2014/02/25/beginning-of-the-end-oil-companies-cut-back-on-spending/">evidence that this scenario is already starting to happen</a>.</p> <p>There is another version of this myth that is even more incorrect. According to this myth, the situation with oil supply (and other types of fossil fuel supply) is as follows:</p> <p><strong>Myth 7. Oil supply (and the supply of other fossil fuels) will start depleting when the supply is 50% exhausted. We can therefore expect a long, slow decline in&nbsp;fossil fuel use.</strong></p> <p>This myth is a favorite of peak oil believers. Indirectly, similar beliefs underly climate change models as well. It is based on what I believe is an incorrect reading of the writings of <a href="http://en.wikipedia.org/wiki/M._King_Hubbert">M. King Hubbert</a>. Hubbert is&nbsp;a geologist and physicist who foretold a decline of US oil production, and eventually world production, in various documents, including&nbsp;<a href="http://www.hubbertpeak.com/hubbert/1956/1956.pdf">Nuclear Energy and the Fossil Fuels</a>, published in 1956. Hubbert observed that under certain circumstances, the production of various fossil fuels tends to follow a rather symmetric curve.</p> <div class="wp-caption aligncenter" id="attachment_2202" style="width: 481px"><a href="http://gailtheactuary.files.wordpress.com/2011/04/hubbert_world-crude-oil-1250-billion-barrels.png"><img alt="Figure 7. M. King Hubbert's 1956 image of expected world crude oil production, assuming ultimate recoverable oil of 1,250 billion barrels." class="size-full wp-image-2202" src="http://gailtheactuary.files.wordpress.com/2011/04/hubbert_world-crude-oil-1250-billion-barrels.png?w=640" /></a><br /> <p class="wp-caption-text">Figure 7. M. King Hubbert&rsquo;s 1956 image of expected world crude oil production, assuming ultimate recoverable oil of 1,250 billion barrels.</p> </div> <p>A major reason that this type of forecast is wrong is because it is based on a scenario in which some other type of energy supply was able to be ramped up, before oil supply started to decline.</p> <div class="wp-caption aligncenter" id="attachment_2044" style="width: 650px"><a href="http://gailtheactuary.files.wordpress.com/2011/04/hubbert-_nuclear_fossil-fuel-to-50001.png"><img alt="Figure 8. Figure from Hubbert's 1956 paper, Nuclear Energy and the Fossil Fuels." class="size-full wp-image-2044" height="347" src="http://gailtheactuary.files.wordpress.com/2011/04/hubbert-_nuclear_fossil-fuel-to-50001.png?w=640&amp;h=347" width="640" /></a><br /> <p class="wp-caption-text">Figure 8. Figure from Hubbert&rsquo;s 1956 paper, <a href="http://www.hubbertpeak.com/hubbert/1956/1956.pdf">Nuclear Energy and the Fossil Fuels</a>.</p> </div> <p>With this ramp up in energy supply, the economy can continue as in the past without a major financial problem arising relating to the reduced oil supply. Without a ramp up in energy supply of some other type, there would be a problem with too high a population in relationship to the declining energy supply. Per-capita energy supply would drop rapidly, making it increasingly difficult to produce enough goods and services. In particular, maintaining government services is likely to become a problem. Needed taxes are likely to rise too high relative to what citizens can afford, leading to major problems, even collapse, based on the research of Turchin and Nefedov (<a href="http://www.amazon.com/Secular-Cycles-Peter-Turchin/dp/0691136963">2009</a>).</p> <p><strong>Myth 8. Renewable energy is available in essentially unlimited supply.</strong></p> <p>The issue with all types of energy supply, from fossil fuels, to nuclear (based on uranium), to geothermal, to hydroelectric, to wind and solar, is <em>diminishing returns</em>. At some point, the cost of producing energy becomes less efficient, and because of this, the cost of production begins to rise. It is the fact wages do not rise to compensate for these higher costs and that cheaper substitutes do not become available that causes financial problems for the economic system.</p> <p>In the case of oil, rising cost of extraction comes because the cheap-to-extract oil is extracted first, leaving only the expensive-to-extract oil. This is the problem we recently have been experiencing. Similar problems arise with natural gas and coal, but the sharp upturn in costs may come later because they are available in somewhat greater supply relative to demand.</p> <p>Uranium and other metals experience the same problem with diminishing returns, as the cheapest to extract portions of these minerals is extracted first, and we must eventually move on to lower-grade ores.</p> <p>Part of the problem with so-called renewables is that they are made of minerals, and these minerals are subject to the same depletion issues as other minerals. This may not be a problem if the minerals are very abundant, such as iron or aluminum. But if minerals are lesser supply, such as rare earth minerals and lithium, depletion may lead to rising costs of extraction, and ultimately higher costs of devices using the minerals.</p> <p>Another issue is choice of sites. When hydroelectric plants are installed, the best locations tend to be chosen first. Gradually, less desirable locations are added. The same holds for wind turbines. Offshore wind turbines tend to be more expensive than onshore turbines. If abundant onshore locations, close to population centers, had been available for recent European construction, it seems likely that these would have been used instead of offshore turbines.</p> <p>When it comes to wood, overuse and deforestation has been a constant problem throughout the ages. As population rises, and other energy resources become less available, the situation is likely to become even worse.</p> <p>Finally, renewables, even if they use less oil, still tend to be <em>dependent on oil</em>. Oil is &nbsp;important for operating mining equipment and for transporting devices from the location where they are made to the location where they are to be put in service. Helicopters (requiring oil) are used in maintenance of wind turbines, especially off shore, and in maintenance of electric transmission lines. Even if repairs can be made with trucks, operation of these trucks still generally requires oil. Maintenance of roads also requires oil. Even transporting wood to market requires oil.</p> <p>If there is a true shortage of oil, there will be a huge drop-off in the production of renewables, and maintenance of existing renewables will become more difficult. Solar panels that are used apart from the electric grid may be long-lasting, but batteries, inverters, long distance electric transmission lines, and many other things we now take for granted are likely to disappear.</p> <p>Thus, renewables are not available in unlimited supply. If oil supply is severely constrained, we may even discover that many existing renewables are not even last very long lasting.</p> http://www.zerohedge.com/news/2014-04-23/eight-energy-myths-explained#comments Crude Crude Oil Geothermal High Yield Natural Gas Uranium Wed, 23 Apr 2014 22:35:28 +0000 Tyler Durden 487639 at http://www.zerohedge.com Banker Death 'Epidemic' Spreads To China http://www.zerohedge.com/news/2014-04-23/banker-death-epidemic-spreads-china <p>Until now, the terrible trail of dead bankers has been only among US and European financial executives. However, <a href="http://finance.caixin.com/2014-04-23/100669319.html">as Caixin reports</a>, the increasing pressures on the Chinese banking system appear to have take their first toll. <strong>Li Jianhua, director of China&#39;s Banking Regulatory Commission (CBRC), died this morning due to a &quot;sudden heart attack&quot; - he was less than 49 years old</strong>. Li was among the main drafters on new &quot;caveat emptor&quot; market-based rules on China&#39;s shadowy banking system and recently said in an interview that <em>&quot;now is not only a time to control risk, but to transform the trust industry.. if it&#39;s too loose, it&#39;s a big problem.&quot;</em> Li was found by his wife.</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_death.png"><img height="257" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_death.png" width="235" /></a></p> <p><a href="http://finance.caixin.com/2014-04-23/100669319.html"><em>Via Caixin,</em></a></p> <p><strong>Li Jianhua, director of the CBRC AfDB died due to heart attack, still less than 49 years old.</strong> As planned, Li Jianhua this morning to attend a major industry conference.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>According to several sources close to the CBRC said, Li Jianhua was revising to 12 o&#39;clock at night.</p> <p>&nbsp;</p> <p><strong>Unexpectedly around 6:00 this morning, his wife found him passed away, due to sudden heart attack.</strong></p> <p>&nbsp;</p> <p>Both inside and outside China Banking Regulatory Commission expressed sorrow and regret.</p> </blockquote> <p>Li was well-known as the author of major China Trust regulations...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Li Jianhua was born in July 1965, Hunan Yongxing, graduated from Wudaokou Finance Institute.</p> <p>&nbsp;</p> <p>Li Jianhua was the<strong> main drafter of &quot;one law two rules&quot; or &quot;People&#39;s Republic of China Trust Law,&quot; &quot;Trust management approach&quot; &quot;Trust Capital Trust scheme management approach,&quot;</strong></p> </blockquote> <p>It seems clear that <strong>Li was somewhat anti-bailout, preferring market forces to fix the trust industry</strong>...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Li Jianhua has made it clear for the new financial reporters that this understanding is wrong. No. 99 Wen emphasized that &quot;sellers responsible&quot; <strong>does not mean that the buyer can zero-risk, high-yield.</strong></p> <p>&nbsp;</p> <p>Now China has not yet Trustee Ordinance, <strong>if the trustee&#39;s duty to strengthen and plug loopholes flaws, accordingly, &quot;caveat emptor&quot; is also strengthened. This is the market rules.</strong></p> <p>...</p> <p>For the <strong>trust industry has experienced many ups and downs rectification</strong>, Li Jianhua was believed that this industry is still promising, but trust industry needs to find new profit model, there is also the process of transformation...</p> <p>&nbsp;</p> <p><strong>&quot;if too loose, I&#39;m afraid to be a big problem.&quot;</strong></p> </blockquote> <p>This brings the sad list of senior financial services exectives who have died in the last few months to 13:</p> <p><strong>1 - William Broeksmit</strong>, 58-year-old former senior executive at Deutsche Bank AG, was found dead in his home after an apparent suicide in South Kensington in central London, on January 26th.</p> <p><strong>2 - Karl Slym,</strong> 51 year old Tata Motors managing director Karl Slym, was found dead on the fourth floor of the Shangri-La hotel in Bangkok on January 27th.</p> <p><strong>3 - Gabriel Magee</strong>, a 39-year-old JP Morgan employee, died after falling from the roof of the JP Morgan European headquarters in London on January 27th.</p> <p><strong>4 - Mike Dueker</strong>, 50-year-old chief economist of a US investment bank was found dead close to the Tacoma Narrows Bridge in Washington State.</p> <p><strong>5 - Richard Talley,</strong> the 57 year old founder of American Title Services in Centennial, Colorado, was found dead earlier this month after apparently shooting himself with a nail gun.</p> <p><strong>6 - Tim Dickenson</strong>, a U.K.-based communications director at Swiss Re AG, also died last month, however the circumstances surrounding his death are still unknown.</p> <p><strong>7 - Ryan Henry Crane</strong>, a 37 year old executive at JP Morgan died in an alleged suicide just a few weeks ago.&nbsp; No details have been released about his death aside from this small obituary announcement at the Stamford Daily Voice.</p> <p><strong>8 - Li Junjie</strong>, 33-year-old banker in Hong Kong jumped from the JP Morgan HQ in Hong Kong this week.</p> <p><strong>9 - James Stuart Jr, </strong>Former National Bank of Commerce CEO, found dead in Scottsdale, Ariz., the morning of Feb. 19. A family spokesman did not say whatcaused the death</p> <p><strong>10 - Edmund (Eddie) Reilly, 47, </strong>a trader at Midtown&rsquo;s Vertical Group, commited suicide by jumping in front of LIRR train</p> <p><strong>11 - Kenneth Bellando, 28</strong>, a trader at Levy Capital, formerly investment banking analyst at JPMorgan, jumped to his death from his 6th floor East Side apartment.</p> <p><strong>12 - Jan Peter Schmittmann, 57,</strong> the former CEO of Dutch bank ABN Amro found dead at home near Amsterdam with wife and daughter.</p> <p><strong>13 - Li Jianhua, 49,</strong> the director of China&#39;s Banking Regulatory Commission died of a sudden heart attack</p> http://www.zerohedge.com/news/2014-04-23/banker-death-epidemic-spreads-china#comments China Deutsche Bank Hong Kong Tata Wed, 23 Apr 2014 21:52:17 +0000 Tyler Durden 487638 at http://www.zerohedge.com Guest Post: Investors Are "Whistling Past The Graveyard" Over Global Geopolitics http://www.zerohedge.com/news/2014-04-23/guest-post-investors-are-whistling-past-graveyard-over-global-geopolitics <p><em>Submitted by John Browne of <a href="http://www.europac.net/commentaries/investors_ignore_frightful_geopolitics">Euro Pacific Capital</a>,</em></p> <p><strong>When the former Soviet Union collapsed almost 25 years ago, most global strategic forecasters assumed that the U.S. would adapt pragmatically to her new status of sole world superpower. Instead she has pursued a variety of misguided nation-building adventures and has largely shrunk from her primary responsibility of neutralizing the ambitions of petty dictators around the world. </strong>From this perspective, America&#39;s multi-generational expenditures on military personnel and equipment has become more of a stealth economic stimulus program rather than an insurance policy for global stability.&nbsp;</p> <p><strong>The massive failures of U.S. intervention in Vietnam, Iraq and Afghanistan have caused the Western Allies to fear the future deployment of troops.</strong> Instead they have resorted to preserving an impression of strength by pressing their agenda with minor nations like Serbia, Libya and Syria through a combination of endless diplomacy and relatively riskless air power. In doing so, they exposed not just a reduced military capability, but also far worse, a lack of will. This vital fact was not lost on America&#39;s potential enemies.</p> <p><em>Sensing this weakness, President Vladimir Putin of Russia, who is likely the continent&#39;s most aggressive power player since the Second World War, felt free to redraw the map of Europe when political events in Ukraine did not go his way. </em><strong>On the economic front, the crisis has vividly illuminated the differing interests of the European Union (EU) and the U.S.</strong> According to Eurostat, the EU imported 212 billion euros ($293 billion USD) worth of goods from Russia in 2012, while the U.S. imported a mere $29 billion. Furthermore, eight of the EU member nations are in trade surplus with Russia and the adverse trade balances of the remaining nineteen EU nations are relatively small. The difference in relative costs between the U.S. and these European nations that would arise from isolating Russia with major sanctions, let alone military action, are clear.</p> <p><strong>Thus far the Western response to his power grab has been underwhelming in the extreme.</strong> The minor financial sanctions placed on Russian oligarchs tied to Putin&#39;s inner circle, and the few guided missile destroyers that have been deployed to the Black Sea will do little to change the trajectory of the Kremlin. It should then come as no surprise that Russian pressure on Ukraine did not stop with its fast motion annexation of Crimea, but has been steadily increasing in the last few weeks. In early April, cities throughout eastern Ukraine experienced the occupation of government buildings and police stations by &#39;unidentified&#39; protestors, whom many suspect are Russian special forces in plain clothes. By mid-April, speculation was rife that Ukraine might be headed for civil war, providing an excuse for Russian intervention to &#39;keep the peace&#39; and, like Hitler in the late 1930&#39;s, to protect his own countrymen living in a bordering nation.</p> <p><strong>In Iraq and Afghanistan, the U.S. and its NATO Allies squandered large quantities of blood and treasure in fruitless experiments to alter the political and sociological realities of the Muslim world.</strong> However, in the Ukraine, which yearned for western-style democracy, the West offered merely money and rations. In doing so, they eroded drastically the age-old force multiplier of international prestige.</p> <p><strong>President Putin appears set on a clear strategy to re-colonize Russia&#39;s old &#39;empire&#39; by means of so-called salami tactics</strong> in which he takes small slices of territory too minor to spark a conflict. But the slices ultimately pile high enough to provide a satisfying meal. If Putin&#39;s victory in the Crimea is followed by success in the Ukraine, his next targets likely will be the so-called &#39;Baltics&#39; of Estonia, Latvia and Lithuania. All of which are NATO countries possessing the guarantee of mutual defense from other NATO members including the U.S., UK, Canada and Germany. <strong>The potential for Putin to prove false this myth of guaranteed defense could usher the world into a world of much higher uncertainty.&nbsp;</strong></p> <p><strong>On the other side of the globe, China is building its military,</strong> exerting increasing influence and extending its territorial claims in the eastern Pacific. Worse still, China and Russia appear intent on destroying the U.S. dollar&#39;s privileged role as the international Reserve currency. Any major loss of this role could threaten severe declines for the U.S. dollar and spikes in U.S. interest rates. In short, a loss of U.S. dollar&#39;s Reserve status would create a sudden and massive strategic change in a world to which entire populations have grown accustomed since WWII.</p> <p><strong>Despite the considerable risks created by the situation in eastern Europe, most western stock, bond and property markets, fed on massive central bank fiat liquidity, continue to flirt with new highs. (See an explanation of this in our latest report <a href="http://r20.rs6.net/tn.jsp?e=0011mJ8-jev0n0-sx8sSJx0zfVvxGJKvA0fZuCK8XhqB6_SOUHLc02x7fz-R5AWJjPxnb2nTBUTQURxjzBpUj-L4N1tZt2UPyHT0LAu9QsvRhXqrR1IH5galcbf3fxyQtI7" style="color: rgb(0, 0, 255); text-decoration: underline;" target="_blank">Taxed by Debt</a>) This strikes me as an exercise in whistling past the graveyard.</strong> In the short term, investors may continue to profit from risk-taking in financial markets. However, as recessionary forces mount, commodity prices can be expected to drop, even exerting some downward pressure on precious metals. In the longer term however, as realization that serious threats exist, including the possibility of armed conflict in continental Europe, precious metals once again may shine as a safe haven asset.</p> <div><strong>In the larger picture, much of the geopolitical balance of power that has been in place for much of the past 25 years will be tested on the banks of the Black Sea. Investors should take a few minutes from their daily technical chart analysis to consider these major developments.</strong></div> http://www.zerohedge.com/news/2014-04-23/guest-post-investors-are-whistling-past-graveyard-over-global-geopolitics#comments Afghanistan Bond China Eastern Europe Estonia European Union Germany Guest Post Iraq Latvia Lithuania Precious Metals Reserve Currency Ukraine United Kingdom Vladimir Putin Wed, 23 Apr 2014 21:20:30 +0000 Tyler Durden 487637 at http://www.zerohedge.com Apple's Total Cash Holdings Decline For The First Time Since Before Lehman http://www.zerohedge.com/news/2014-04-23/apples-total-cash-holdings-decline-first-time-lehman <p>Of all the charts from Apple&#39;s just released earnings&#39; report, in which the company beat handily on both Revenue and EPS, driven exclusively by iPhone sales which came at 43.7 million units compared to 37.7 expected as iPad sales missed wildly at 16.4 million compared to the 19.7 million expected, such as this one showing the quarterly revenue...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/AAPL%20Q1%20Revenue.jpg"><img height="329" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/AAPL%20Q1%20Revenue_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>... the margin breakdown</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/AAPL%20gross%20profit.jpg"><img height="324" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/AAPL%20gross%20profit_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>... and the unit sakes.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/AAPL%20sales%20breakdown.jpg"><img height="340" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/AAPL%20sales%20breakdown_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>Perhaps this one is the most important: Apple&#39;s total cash and cash equivalents, for the simple reason that for the first time since before the Lehman collapse, Apple actually burned through cash, or $8.2 billion to be precise, which brought the company&#39;s cash hoard to just over $150 billion.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/aAPL%20CASH.jpg"><img height="309" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/aAPL%20CASH_0.jpg" width="600" /></a></p> <p>Why? Because of the very generous corporate dividend and buyback program, which is now about to increase by another 50% as AAPL just announced it would increase the amount of stock bought back from $60 billion to $90 billion.</p> <p>And now, watch as Apple has no choice but to issue more and more debt to satisfy its investor dividend and stock buyback demands.</p> <p>+++++++++++++++</p> <p>At a glance:</p> <p>The Earnings Headlines:</p> <ul> <li><strong>*APPLE 2Q SALES $45.65B , EST. $43.53B</strong></li> <li><strong>*APPLE 2Q EPS $11.62 , EST. $10.17</strong></li> <li><strong>*APPLE 2Q GROSS MARGIN 39.3%, EST. 37.7%</strong></li> <li><strong>*APPLE SEES 3Q TAX RATE 26.1%</strong></li> <li><strong>*APPLE SEES 3Q REV. $36B-$38B, EST. $37.88B</strong></li> <li><strong>*APPLE SEES 3Q GROSS MARGIN 37%-38%, EST. 37.3%</strong></li> </ul> <p><u>The Capital Structure Shift:</u></p> <ul> <li><strong>*APPLE SETS 7 FOR 1 STOCK SPLIT, BOOSTS BUYBACK TO $90B</strong></li> <li><strong>*APPLE BOOSTS QUARTERLY DIVIDEND TO $3.29-SHR FROM $3.05</strong></li> <li><strong>*APPLE EXPECTS TO ACCESS PUBLIC DEBT MARKETS DURING 2014</strong></li> <li><strong>*APPLE SEES ACCESSING PUBLIC DEBT MARKETS DOMESTICALLY, INTL</strong></li> <li><strong>*APPLE SEES TERM DEBT SIMILAR TO AMOUNT RAISED IN 2013</strong></li> </ul> <p>We suspect that they will not be pricing this at 2.4% yield like the last one... (unless the ECB promises to provide 0% haircuts on it)...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_AAPL1.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_AAPL1_0.png" /></a></p> <p>&nbsp;</p> <p>The Unit Sales:</p> <ul> <li><strong>*APPLE SOLD 43.7M IPHONES IN 2Q, EST. 37.7M</strong></li> <li><strong>*APPLE 2Q IPHONE ASP $596.2, EST. $610</strong></li> <li><strong>*APPLE SOLD 16.35M IPADS IN 2Q, EST. 19.7M</strong></li> <li><strong>*APPLE 2Q IPAD ASP $465.4, EST. $430</strong></li> <li><strong>*APPLE SOLD 4.1M MACS IN 2Q, EST. 4.03M</strong></li> </ul> <p>&nbsp;</p> <p>Apple stock bounces - for now - just into the green for 2014...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_AAPL.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_AAPL_0.png" style="width: 600px; height: 491px;" /></a></p> <p>&nbsp;</p> http://www.zerohedge.com/news/2014-04-23/apples-total-cash-holdings-decline-first-time-lehman#comments Apple European Central Bank headlines Lehman Wed, 23 Apr 2014 20:53:22 +0000 Tyler Durden 487636 at http://www.zerohedge.com Where Facebook's User Growth And Revenue Generation Is http://www.zerohedge.com/news/2014-04-23/where-facebooks-user-growth-and-revenue-generation <p>In the aftermath of Facebook's "blockbuster" Q1 report, the one thing everyone is talking about is the explosive, 15% growth, in Monthly Active Users to 1.28 billion. There is one problem: where said user growth is taking place. </p> <p>The chart below shows MAU growth broken down by geography...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/FB%20MAU%20Q1.JPG"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/FB%20MAU%20Q1_0.JPG" width="600" height="396" /></a></p> <p>And this chart shows how much revenue Facebook generates in those specific geographies:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/FB%20revenue%20growth.JPG"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/FB%20revenue%20growth_0.JPG" width="600" height="393" /></a></p> <p>So yes, just 1 million users added in the US. Still, considering Facebook somehow counts 202 million monthly active users in the US, that is a phenomenal achievement considering there are 137.9 million working people. Oh well, those 62 million users who are unemployed - they will just grow into the labor force eventually and be able to buy all those products whose ads they click on.</p> http://www.zerohedge.com/news/2014-04-23/where-facebooks-user-growth-and-revenue-generation#comments Wed, 23 Apr 2014 20:33:16 +0000 Tyler Durden 487635 at http://www.zerohedge.com Facebook Beats But CFO Leaving http://www.zerohedge.com/news/2014-04-23/facebook-beats-cfo-leaving <p>Moments ago Facebook reported its GAAP <strong>and </strong>non-GAAP results (a very important distinction). Here is the Non-GAAP (i.e., we enjoy keeping our head in the sand) summary:</p> <ul> <li>Q1 revenue $2.5 billion, beats expectations of $2.36 billion</li> <li>Q1 revenue from advertising $2.27 billion</li> <li>Q1 EPS $0.34, beat expectations of $0.24</li> <li>Free cash flow - Free cash flow for the first quarter of 2014 was $922 million.</li> <li>Capital expenditures - Capital expenditures for the first quarter of 2014 were $363 million.</li> <li>Cash and marketable securities - Cash and marketable securities were $12.63 billion at the end of the first quarter of 2014.</li> <li>Monthly active users (MAUs) were 1.28 billion as of March 31, 2014, an increase of 15% year-over-year. Unclear how many of these are bots originating out of Egypt and India.</li> <li>Daily active users (DAUs) were 802 million on average for March 2014, an increase of 21% year-over-year.</li> <li>Mobile DAUs were 609 million on average for March 2014, an increase of 43% year-over-year.</li> <li>Mobile MAUs were 1.01 billion as of March 31, 2014, an increase of 34% year-over-year.&nbsp; </li> </ul> <p>The results in a nutshell:</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/04/FB%20Q1_0.JPG" width="600" height="352" /></p> <p>&nbsp;</p> <p>Far more important than FB Non-GAAP results was the announcement that the CFO is leaving:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>CFO Transition - <strong>Facebook today also announced that David Ebersman has informed the company of his intention to step down as chief financial officer after serving in the position for almost five years. </strong>On June 1, 2014, he will be succeeded as CFO by David Wehner, currently Facebook's Vice President, Corporate Finance and Business Planning. Ebersman will remain with the company through September to ensure a seamless transition of his responsibilities.</p> <p>&nbsp;</p> <p><strong>Wehner joined Facebook in November 2012 from Zynga, where he served as CFO. </strong>Earlier, he spent nine years at Allen &amp; Company where he was a managing director. Wehner has a B.S. in Chemistry from Georgetown University, and an M.S. in Applied Physics from Stanford University.</p> <p>&nbsp;</p> <p>"David has been a great partner in building Facebook, and I'm grateful for everything he's done to help make the world more open and connected," said Zuckerberg. "David set us up to operate efficiently and make the long term investments we need, and built an incredibly strong team including Dave Wehner, our next CFO. I look forward to working with Dave in his new role."</p> <p>&nbsp;</p> <p>"<strong>This has been a tough decision because Facebook is such a great company and has such a bright future ahead, but I've decided to move back into healthcare where I spent my career before Facebook</strong>," Ebersman said. "It's been a privilege working at Facebook and being part of such a great team. We have an incredibly talented finance organization, and I have complete confidence in Dave Wehner and his ability to lead the team going forward."</p> </blockquote> <p>One wonders what exactly it is that Ebersman may have "cooked up" to be promptly leaving the world's "greatest" social media stock. We will find out soon. </p> <p>In the meantime, it is also worth pointing out the vast gap, pardon the pun, between Facebook GAAP and non-GAAP results:</p> <ul> <li>GAAP Q1 Net Income: $642MM, Non-GAAP: $885MM</li> <li>GAAP Q1 EPS: $0.34, Non-GAAP: $0.25</li> <li>GAAP Q1 Operating Margin: 43%; Non-GAAP: 55%.</li> </ul> <p>For now, the stock is very much confused what it wants to do on these "blowout" earnings.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_FB.png"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/04-overflow/20140423_FB_0.png" width="600" height="371" /></a></p> http://www.zerohedge.com/news/2014-04-23/facebook-beats-cfo-leaving#comments Capital Expenditures Corporate Finance GAAP India Wed, 23 Apr 2014 20:16:30 +0000 Tyler Durden 487634 at http://www.zerohedge.com