http://www.zerohedge.com/fullrss2.xml en Exposed: The New American Way Of Life http://www.zerohedge.com/news/2015-08-31/exposed-new-american-way-life <p>It's enough to make you cry... <strong><em>or scream.</em></strong></p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_america.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_america_0.jpg" width="600" height="574" /></a></p> <p>&nbsp;</p> <p><a href="http://hopelesslysane.blogspot.com/2015/08/its-enough-to-make-you-cry_31.html"><em>Source: The Lonely Libertarian</em></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="180" height="39" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150831_scream.jpg?1441046457" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-31/exposed-new-american-way-life#comments Mon, 31 Aug 2015 21:00:00 +0000 Tyler Durden 512664 at http://www.zerohedge.com When Every Option In The Financial System Is Grounded In Absurdity, It's Time To Look Elsewhere http://www.zerohedge.com/news/2015-08-31/when-every-option-financial-system-grounded-absurdity-its-time-look-elsewhere <p>Submitted by Simon Black via SovereignMan.com,</p> <p><strong>If you&rsquo;ve ever picked up a copy of <em>The Economist</em> magazine, you&rsquo;ve probably heard of the Big Mac Index.</strong></p> <p>This is an interesting tool where a bunch of reporters from around the world are forced to go into McDonalds and find out the price of a Big Mac in local currency.</p> <p>In Santiago, Chile, for example, a Big Mac runs 2,100 Chilean pesos, which is around $3. Meanwhile the average price for a Big Mac in the United States is $4.79.</p> <p>This suggests that the US dollar is substantially overvalued against the Chilean peso.</p> <p>It&rsquo;s the same story across most of the world. In Russia, a Big Mac costs 107 rubles, which is just over $1.50.</p> <p><strong>The reason <em>The Economist</em> uses the Big Mac is because it&rsquo;s basically the same product no matter where you go in the world.</strong></p> <p>There are some subtle differences, but McDonalds generally serves the same pink foam disguised as beef wherever you go. So in theory it should all cost the same.</p> <p>When a Big Mac is too cheap or too expensive, this suggests that the currency is either undervalued or overvalued against the US dollar.</p> <p><span style="text-decoration: underline;"><strong>Now I&rsquo;d like to add a new way of comparing currencies: airfare.</strong></span></p> <p>As I travel around the world, I often buy what are known as round-the-world tickets (RTW).</p> <p>RTW tickets are issued by airline alliances like OneWorld or Star Alliance, and they&rsquo;re typically very cost effective.</p> <p>RTW is just like it sounds. You fly, for example, from London to Chicago to Shanghai to Dubai and back to London, all for one special fare.</p> <p>It&rsquo;s a cheap, easy way to see the world.</p> <p>But I&rsquo;ll let you in on a little secret that I&rsquo;ve picked up over the years: the price of a RTW ticket varies dramatically depending on the city where you start.</p> <p><strong>As an example, I just researched a OneWorld RTW ticket with the following itinerary:</strong></p> <p><strong>Los Angeles &ndash; Sydney &ndash; Bangkok &ndash; Hong Kong &ndash; Johannesburg &ndash; London &ndash; Los Angeles.</strong></p> <p>Six different cities around the world on five continents.</p> <p><span style="text-decoration: underline;"><strong>Now, if I start and stop that itinerary in Los Angeles, the price for a business class ticket is $14,164.60.</strong></span></p> <p>That&rsquo;s not a bad price for a business class experience. But if we experiment a little bit, something interesting happens.</p> <p>Starting and stopping the journey in Los Angeles means that OneWorld prices my ticket in US dollars.</p> <p>But it&rsquo;s also possible to fly the same route by shifting the cities. For example, instead of starting/stopping in LA, I can start/stop in Sydney.</p> <p>So the route becomes Sydney- Bangkok &ndash; Hong Kong &ndash; Johannesburg &ndash; London &ndash; Los Angeles &ndash; Sydney.</p> <p>It&rsquo;s the same flights to the same six cities, I just start/stop in a different place.</p> <p><strong>Here&rsquo;s what&rsquo;s crazy: if I start/stop in Sydney instead, the price changes. Now instead of $14,164.60, it&rsquo;s $15,272 Australian dollars, which is about $10,900 USD.</strong></p> <p><strong>So the same six flights now cost you 23% less.</strong></p> <p>Note that the RTW ticket is always priced in the local currency of the city where you start.</p> <p>And unlike the Big Mac Index where the results are skewed by the costs of ingredients, property, and labor, here you&rsquo;re comparing the exact same product.</p> <p>I did the same with each city on the list, and the most incredible difference came when I started and stopped the trip in Johannesburg.</p> <p>Johannesburg &ndash; London &ndash; Los Angeles &ndash; Sydney &ndash; Bangkok &ndash; Hong Kong &ndash; Johannesburg.</p> <p><strong>Flying to the exact same cities, the price is now 81,395 South African Rand.</strong></p> <p><strong>Based on current exchange rates, this is just barely over $6,000.</strong></p> <p>In other words, you pay over $14,000 by starting/stopping in LA, and just $6,000 to start/stop in South Africa, even though you&rsquo;re visiting the exact same six cities on the exact same flights in the exact same business class cabin.</p> <p>What&rsquo;s even more amazing is that if you do the exact same itinerary from LA in economy class, the price is $7,545.</p> <p>So that means that if someone flies from LA, they&rsquo;ll pay more to fly in coach than someone starting in Johannesburg pays to fly in business.</p> <p>Clearly, you&rsquo;d be better off buying a separate ticket to South Africa and beginning your RTW journey from there.</p> <p><strong>Or you could spend about $200 and get a ticket to Vancouver, and start a RTW from Vancouver, which costs about $10,000 in business class and gives you a $4,000 savings.</strong></p> <p>Now, I&rsquo;m not here to tell you about how to save money on airfare (though I hope you give it a try).</p> <p><span style="text-decoration: underline;"><strong>The bigger idea is that it&rsquo;s clear that the US dollar is painfully overvalued against nearly every currency in the world.</strong></span></p> <p><strong>Right now the dollar appears to be the &ldquo;safe&rdquo; place to put your money. However, this isn&rsquo;t based on anything.</strong></p> <p>The fundamentals for the US dollar are terrible, but people keep dumping money into it like trained monkeys simply because nothing else in financial markets makes any sense.</p> <p><strong>To be clear, I fully expect the dollar to get even stronger as even more trained monkeys pile into US dollar assets.</strong></p> <p><strong>But it&rsquo;s important to show that this perception of &lsquo;safety&rsquo; is based on a complete myth.</strong> Every credible fundamental suggests that the dollar is dangerously overvalued.</p> <p>In the long run these things tend to equalize, and the dollar&rsquo;s strength may end up being the biggest bubble of all.</p> <p>Of course, it raises the question&ndash;<em><strong> if not the US dollar, then which currency is the safe haven? The euro is garbage, the Chinese are fighting a depression, Japan is a disaster.</strong></em></p> <p>And that&rsquo;s precisely the point.</p> <p><span style="text-decoration: underline;"><strong>When every option in the financial system is grounded in absurdity, the only solution is to start looking for safety outside of it.</strong></span></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="169" height="158" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150831_usd.jpg?1441046182" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-31/when-every-option-financial-system-grounded-absurdity-its-time-look-elsewhere#comments Big Mac Index Dubai Hong Kong Japan McDonalds The Economist Mon, 31 Aug 2015 20:36:36 +0000 Tyler Durden 512663 at http://www.zerohedge.com Another Bit of Palo Alto For You http://www.zerohedge.com/news/2015-08-31/another-bit-palo-alto-you <p style="line-height: 1.714285714; margin: 0px 0px 1.714285714rem; color: #444444; font-family: 'Open Sans', Helvetica, Arial, sans-serif; font-size: 14px;">Well, it's been awhile since I've made you aware of a real estate offering in my fair city, so I present you now with&nbsp;<a href="http://catherinehendricks.com/IDX/221-Santa-Rita-AVE-PALO-ALTO-CA-94301/81511999_REIL/0004010" target="_blank" style="color: #21759b; outline: none;">221 Santa Rita Avenue here in Palo Alto</a>. For the low price of&nbsp;<strong>$3.4 million</strong>&nbsp;(well, that's the ask - - it'll surely go for a&nbsp;<strong>lot</strong>&nbsp;more with many offers) you can call this place your own personal palace:</p> <p style="line-height: 1.714285714; margin: 0px 0px 1.714285714rem; color: #444444; font-family: 'Open Sans', Helvetica, Arial, sans-serif; font-size: 14px;"><a href="http://data.mlslistings.com/GetMedia.ashx?Q=UmVzb3VyY2U9UHJvcGVydHkmU291cmNlSUQ9ODE1MTE5OTkmT2JqZWN0SUQ9MSZUeXBlPUhSUGhvdG8mVXNlcj1wcm9wbWluNA%3d%3d&amp;Hash=8acb57c0e55cc841e1804fecbcb41ddf" target="_blank" style="color: #21759b; outline: none;"><img src="http://data.mlslistings.com/GetMedia.ashx?Q=UmVzb3VyY2U9UHJvcGVydHkmU291cmNlSUQ9ODE1MTE5OTkmT2JqZWN0SUQ9MSZUeXBlPUhSUGhvdG8mVXNlcj1wcm9wbWluNA%3d%3d&amp;Hash=8acb57c0e55cc841e1804fecbcb41ddf" width="1440" height="814" style="border-radius: 3px; box-shadow: rgba(0, 0, 0, 0.2) 0px 1px 4px; max-width: 100%; height: auto;" class="alignnone" /></a></p> <p style="line-height: 1.714285714; margin: 0px 0px 1.714285714rem; color: #444444; font-family: 'Open Sans', Helvetica, Arial, sans-serif; font-size: 14px;">Need space? How does 994 square feet strike you? That's nearly&nbsp;<strong>1,000</strong>&nbsp;whole square feet for whatever parties, soirees, or other entertainment ideas you may have.</p> <p style="line-height: 1.714285714; margin: 0px 0px 1.714285714rem; color: #444444; font-family: 'Open Sans', Helvetica, Arial, sans-serif; font-size: 14px;">Of course, if you glance at Zillow, which I've found to be pretty reflective of market values, you may scratch your head over the 50% premium being asked for the place......</p> <p style="line-height: 1.714285714; margin: 0px 0px 1.714285714rem; color: #444444; font-family: 'Open Sans', Helvetica, Arial, sans-serif; font-size: 14px;"><img src="http://slopeofhope.com/wp-content/uploads/2015/08/0831-zillow.png" alt="0831-zillow" width="447" height="208" style="border-radius: 3px; box-shadow: rgba(0, 0, 0, 0.2) 0px 1px 4px; max-width: 100%; height: auto;" class="alignnone size-full wp-image-48426" /></p> <p style="line-height: 1.714285714; margin: 0px 0px 1.714285714rem; color: #444444; font-family: 'Open Sans', Helvetica, Arial, sans-serif; font-size: 14px;">Meh. Don't worry about it................it's Palo Alto! Jump on it! (And please take note that whatever price you pay will be the basis for your annual property taxes for as long as you own this stunning dwelling).</p> http://www.zerohedge.com/news/2015-08-31/another-bit-palo-alto-you#comments Real estate Mon, 31 Aug 2015 20:26:41 +0000 Tim Knight from Slope of Hope 512662 at http://www.zerohedge.com Economics 102: WalMart Cuts Worker Hours After Hiking Minimum Wages http://www.zerohedge.com/news/2015-08-31/economics-102-walmart-cuts-worker-hours-after-hiking-minimum-wages <p>This year, some American executives who heeded loud calls for across-the-board wage hikes for America’s lowest-paid workers received a complimentary refresher course in undergad economics courtesy of the free market.&nbsp;</p> <p>Take Dan Price for instance, the 31-year old CEO of Seattle-based Gravity Payments Systems who <a href="http://www.zerohedge.com/news/2015-08-02/ceo-hikes-minimum-wage-70k-capitalist-tragicomedy-ensues">found out the hard way</a> that setting the pay floor at $70K comes with all manner of unintended consequences.&nbsp;</p> <p>And then there’s Wal-Mart. </p> <p>Earlier this year, the retail behemoth became one of several corporate heavyweights to raise wages for its meagerly compensated workers, around 500,000 of which are now set to receive at least $9/hour and $10/hour by Q1 2016. <strong>The move will cost somewhere around $1 billion this year.&nbsp;</strong></p> <p>Now one thing that should have been abundantly clear from the start is that i<strong>f ever there were an employer that could ill-afford a $1 billion across-the-board pay raise without immediately making up the difference by either firing some employees, cutting hours, or squeezing the supply chain it’s Wal-Mart. </strong>After all, they’re the “low price leader”, and you don’t hold on to that title by passing labor costs on to customers. </p> <p>Predictably, the company moved to <a href="http://www.zerohedge.com/news/2015-04-01/what-happens-after-mega-corporation-raises-its-workers-wages">extract more “value”</a> from its suppliers and when that didn’t prove sufficient, the folks in Bentonville brought in the “<a href="http://www.zerohedge.com/news/2015-04-15/why-walmart-mysteriously-shuttering-stores-nationwide-plumbing-issues">plumbers</a>.”&nbsp;</p> <p>But the story didn’t stop there. Late last month <a href="http://www.zerohedge.com/news/2015-07-31/economics-101-wal-mart-hikes-minimum-wages-prepares-fire-1000">we highlighted</a> an internal memo circulated at Arkansas recruiting firm Cameron Smith &amp; Associates which looked to be an attempt to prepare the firm’s employees for layoffs at Wal-Mart’s home office. Then, not a week later, Bloomberg ran <a href="http://www.bloomberg.com/news/articles/2015-08-06/an-unintended-consequence-of-wal-mart-pay-raise-unhappy-workers">a story</a> detailing the grievances of <strong>some senior Wal-Mart employees who <a href="http://www.zerohedge.com/news/2015-08-07/wal-mart-wage-hikes-backfire-again-angry-employees-threaten-quit">suddenly realized</a> that although they may still be making more than their subordinates, the wage hierarchy had been distorted and that distortion had nothing to do with merit. </strong>As we put it, “higher paid employees don’t understand why everyone under them in the corporate structure suddenly makes more money and if people who are higher up on the corporate ladder don’t receive raises that keep the hierarchy proportional they may simply quit which means that, for Wal-Mart, <strong>raising the minimum for the lowest paid workers to just $9/hour will end up costing the company around $1.5 billion if you include the additional raises the company will have to give to higher paid employees in order to retain their 'talents'and avoid a mid-level management mutiny.”</strong></p> <p>Well, don’t look now, but undergrad economics is rearing its ugly again at Wal-Mart as&nbsp;<strong>the retailer cuts workers’ hours in a desperate attempt to offset wage hikes</strong>. Here’s Bloomberg <a href="http://www.bloomberg.com/news/articles/2015-08-31/wal-mart-cuts-some-workers-hours-after-pay-raise-boosts-costs">with more</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>Wal-Mart Stores Inc., in the midst of spending $1 billion to raise employees’ wages and give them extra training, has been cutting the number of hours some of them work in a bid to keep costs in check.</em></strong></p> <p>&nbsp;</p> <p><em>Regional executives told store managers at the retailer’s annual holiday planning meeting this month to rein in expenses by cutting worker hours they’ve added beyond those allocated to them based on sales projections.</em></p> <p>&nbsp;</p> <p><em>The request has resulted in some stores trimming hours from their schedules, asking employees to leave shifts early or telling them to take longer lunches, according to more than three dozen employees from around the U.S. The reductions started in the past several weeks, even as many stores enter the busy back-to-school shopping period.</em></p> <p>&nbsp;</p> <p><em>A Wal-Mart employee at a location near Houston, who asked not to be identified because she didn’t have permission to talk to the media, said her store had to cut more than 200 hours a week. <strong>To make the adjustment, the employee’s store manager started asking people to go home early two weeks ago, she said. On Aug. 19, at least eight people had been sent home by late afternoon, including sales-floor associates and department managers.</strong></em></p> <p>&nbsp;</p> <p><em>The employee said she’s covering an area once staffed by multiple people at one of the busiest times of the year -- the back-to-school season. On a recent weekday, she had a customer who had to wait 30 minutes for an employee to unlock a product the shopper wanted to purchase, she said.</em></p> <p>&nbsp;</p> <p><strong><em>The staff at a location in Fort Worth, Texas, were told that the store needed to cut 1,500 hours, according to a worker who asked not to be named for fear of being reprimanded.&nbsp;</em></strong></p> </blockquote> <p>So there you have it. Further proof that across-the-board wage hikes - like socialized medicine and free college - is a concept that sounds good when considered in a vacuum, but when implemented is subject to economic realities that conspire to make the end result look far less desirable than proponents might have imagined.</p> <p>And therein lies the problem. Projecting how these "experiments" might turn out isn't difficult, which makes one wonder how policymakers and corporate management teams seem to get them wrong on a fairly consistent basis. Then again, when you live in a world governed by the principle that the cure for debt is still more debt, it's easy to see why some still believe, despite all the evidence to the contrary, that you can have your cake and eat it too.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="595" height="322" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/WalMartGreeter.png?1441034148" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-31/economics-102-walmart-cuts-worker-hours-after-hiking-minimum-wages#comments Mon, 31 Aug 2015 20:20:58 +0000 Tyler Durden 512644 at http://www.zerohedge.com Stocks Suffer Biggest Monthly Drop In Five Years As Oil Spikes Most Since 1990 http://www.zerohedge.com/news/2015-08-31/stocks-suffer-biggest-montly-drop-five-years-oil-spike-most-1990 <p>Only one thing for it really...</p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/AG7LjVCj50Y" width="560"></iframe></p> <p>&nbsp;</p> <p><strong>Forget stocks, today was all about crude oil again...</strong></p> <p>WTI pushed into the green for August!!!</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD2.jpg"><img height="376" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD2_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>3 Bear markets and 3 Bull markets now in 2015 so far... perfectly tagging the 50-day moving-average today...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD1.jpg"><img height="304" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD1_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>This is the biggest 3-day rise in WTI since 1990!!</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_WTI_1.jpg"><img height="305" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_WTI_1_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>Oil Volatility and credit markets were not squeezed into euphoria at all...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD3_0.jpg" style="width: 600px; height: 622px;" /></a></p> <p>Trade accordingly!!</p> <p>*&nbsp; *&nbsp; *</p> <p><strong>Having got that out of the way...<u>Dow&#39;s worst monthly drop since May 2010.. </u></strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD20.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD20_0.jpg" style="width: 600px; height: 541px;" /></a></p> <p>&nbsp;</p> <p><strong><u>and had an ugly close...</u></strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD19.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD19_0.jpg" style="width: 600px; height: 401px;" /></a></p> <p>&nbsp;</p> <p>Stocks got some lift from the momo-igniters -but once NYMEX closed, it was over. Stocks traded in a relatiovely narrow range glued to VWAP after the overnight plunge...<strong> Small Caps outperformed as Nasdaq Underporformed...</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD14.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD14_0.jpg" style="width: 600px; height: 418px;" /></a></p> <p>&nbsp;</p> <p>Futures markets giveus a better idea of the moves...NOTE -0 this is from the beginning of Friday&#39;s pathetic EOD ramp...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD13.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD13_0.jpg" style="width: 600px; height: 495px;" /></a></p> <p>&nbsp;</p> <p>Once again complete chaos on VIX ETFs...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD15.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD15_0.jpg" style="width: 600px; height: 987px;" /></a></p> <p>&nbsp;</p> <p><u><strong>VIX had its biggest monthly jump in history...</strong></u></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD17.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD17_0.jpg" style="width: 600px; height: 303px;" /></a></p> <p>&nbsp;</p> <p>For the month, it&#39;s been a wild ride!! but just look at how clustered the moves were...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD11.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD11_0.jpg" style="width: 600px; height: 386px;" /></a></p> <p>&nbsp;</p> <p>Finacials &amp; Enmergy and Healthcare (Biotech) were worst performers in August...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD16.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD16_0.jpg" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p><strong>For all the excitment over FANG - August was a mixed bunch for them with FB and AMZN notably red...</strong></p> <p>With all the craziness in stocks, Treasury yields at the long-end ended the month practically unch... 2Y rose 8bps...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD8.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD8_0.jpg" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>With some more notable weakness today (which was also seen in Bunds)...note once again selling weas in US session, buying in Asia and Europe...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD7.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD7_0.jpg" style="width: 600px; height: 314px;" /></a></p> <p>&nbsp;</p> <p>The USD ended the day lower with some major swings in CAD...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD9.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD9_0.jpg" style="width: 600px; height: 317px;" /></a></p> <p>&nbsp;</p> <p>As August&#39;s USD Index drop was the biggest in 4 months...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD10.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD10_0.jpg" style="width: 600px; height: 314px;" /></a></p> <p>&nbsp;</p> <p>Commodities were insane today - led obviously by crude!</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD6.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD6_0.jpg" style="width: 600px; height: 311px;" /></a></p> <p>&nbsp;</p> <p>And on the month... perhaps most notably, the perfect recoupling of crude and gold on the month!!??</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD4_0.jpg" style="width: 600px; height: 307px;" /></a></p> <p>&nbsp;</p> <p>But we note that Gold (+3.5%) had its best month since January even as Silver dropped</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD5.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD5_0.jpg" style="width: 600px; height: 887px;" /></a></p> <p>&nbsp;</p> <p><strong>Finally - amid all the chaos in August, it appears there is a safe-haven... Gold outperforms</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD18.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_EOD18_0.jpg" style="width: 600px; height: 308px;" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</em></p> http://www.zerohedge.com/news/2015-08-31/stocks-suffer-biggest-montly-drop-five-years-oil-spike-most-1990#comments Crude Crude Oil NASDAQ NYMEX Recoupling Volatility Mon, 31 Aug 2015 20:06:22 +0000 Tyler Durden 512661 at http://www.zerohedge.com Guest Post: Stanley Fischer Speaks - More Drivel From A Dangerous Academic Fool http://www.zerohedge.com/news/2015-08-31/stanley-fischer-speaks-more-drivel-dangerous-academic-fool <p><a href="http://davidstockmanscontracorner.com/stanley-fischer-speaks-airballs-from-a-dangerous-academic-fool/"><em>Submitted by David Stockman via Contra Corner blog,</em></a></p> <p><strong>With every passing week that money markets rates remain pinned to the zero bound by the Fed, the magnitude of the financial catastrophe hurtling toward main street America intensifies.</strong> That&rsquo;s because 80 months&mdash;&ndash; and counting&mdash;&ndash;of zero interest rates are fueling the most stupendous gambling&nbsp;frenzy that Wall Street has ever witnessed or even imagined. Sooner or later, therefore, this mother of all financial bubbles will splatter, bringing untold harm to millions of households which have been lured back into the casino.</p> <p>The truth is, zero&nbsp;cost in the money market is irrelevant to main street. As we have repeatedly demonstrated the household sector is stranded at &ldquo;peak debt&rdquo; and, consequently, there is no interest rate low enough to elicit a spree of&nbsp;pre-crisis style consumer&nbsp;borrowing and spending.&nbsp; Based on the clueless jawing that occurred this weekend at Jackson Hole, the following&nbsp;simple chart that I laid out last week bears repeating:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>On the eve of the financial crisis in Q1 2008, total household debt outstanding&mdash;including mortgages, credit cards, auto loans, student loans and the rest&mdash;&mdash;&ndash; was <em><strong>$13.957</strong> </em>trillion.&nbsp;That compare to <em><strong>$13.568</strong> </em>trillion outstanding&nbsp;at the end of Q1 2015.</p> <p>&nbsp;</p> <p><img src="http://research.stlouisfed.org/fredgraph.jpg?hires=1&amp;type=image/jpeg&amp;chart_type=line&amp;recession_bars=on&amp;log_scales=&amp;bgcolor=%23e1e9f0&amp;graph_bgcolor=%23ffffff&amp;fo=verdana&amp;ts=12&amp;tts=12&amp;txtcolor=%23444444&amp;show_legend=yes&amp;show_axis_titles=yes&amp;drp=0&amp;cosd=1987-03-01&amp;coed=2015-01-01&amp;height=550&amp;stacking=&amp;range=Custom&amp;mode=fred&amp;id=CMDEBT&amp;transformation=lin&amp;nd=&amp;ost=-99999&amp;oet=99999&amp;lsv=&amp;lev=&amp;scale=left&amp;line_color=%234572a7&amp;line_style=solid&amp;lw=2&amp;mark_type=none&amp;mw=2&amp;mma=0&amp;fml=a&amp;fgst=lin&amp;fgsnd=2007-12-01&amp;fq=Quarterly%2C+End+of+Period&amp;fam=avg&amp;vintage_date=&amp;revision_date=&amp;width=670" style="width: 600px; height: 493px;" /></p> <p>That&rsquo;s right. After 80 months of ZIRP and an&nbsp;unprecedented&nbsp; incentive to borrow and spend,&nbsp;households have actually liquidated nearly $400 billion or 3% of their pre-crisis debt.</p> </blockquote> <p>Likewise, zero money market rates are irrelevant to legitimate business finance.&nbsp;That&rsquo;s because no sane executive would finance the life blood of his enterprise&mdash;&ndash;the working stock of raw, intermediate and finished goods&mdash;&mdash;in the overnight money market; and, self-evidently,&nbsp;free overnight money is beside the point when it comes to funding long-term, illiquid but&nbsp;productive assets such as plant, equipment and software.</p> <p><em><strong>In fact, the only impact that free money market funding has on&nbsp;corporate America is round-about and perverse</strong></em>.&nbsp;To wit, it flushes money managers into a desperate quest for yield and&nbsp;provides stock speculators with endless opportunities to load up their trucks with&nbsp;zero cost&nbsp;carry trades, thereby driving the stock averages to lunatic heights.</p> <p>As a result of this double-whammy, the C-suites of corporate America have&nbsp;been turned into&nbsp;glorified gambling parlors. The stock option obsessed executives domiciled there are endlessly and overpoweringly presented with the opportunity to sell&nbsp;cheap corporate credit to yield-hungry fund mangers and use the proceeds&nbsp;to buyback their own over-priced stock or to acquire at a hefty premium the equally over-priced stock of their competitors, suppliers and customers, or any other company that Wall Street bankers happen to be peddling.</p> <p>Again, as I demonstrated last week, after 80-months of the absurd proposition that money has no natural and inherent&nbsp;economic cost the pettifoggers who held forth at Jackson Hole betrayed no clue whatsoever that they are aware of the obvious:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>On the margin, all of the gains in business debt since 2008 has been flushed right back into Wall Street in the form of stock buybacks and debt-financed takeovers.</p> <p>&nbsp;</p> <p><a class="image-anchor" href="http://davidstockmanscontracorner.com/wp-content/uploads/2015/03/Capture2.png" target="_blank"><img alt="Non Financial Business Net Debt- Click to enlarge" class="size-medium wp-image-45702" src="http://davidstockmanscontracorner.com/wp-content/uploads/2015/03/Capture2-480x284.png" style="width: 600px; height: 355px;" /></a></p> <p>&nbsp;</p> <p>The evidence that zero interest rates have not promoted business borrowing for productive investment&nbsp;is also plain to see. During the most recent year (2014), US business spent $431 billion on plant, equipment and software after depreciation. <em><strong>That was 7% less than net business investment in 2007</strong></em>.</p> <p>&nbsp;</p> <p>And these are nominal dollars! So all other things being equal, net business debt could have fallen over the past 7 years. The actual gain in net debt outstanding&nbsp;shown above self-evidently went into financial engineering&mdash;-that is, back into the Wall Street casino.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><img src="http://research.stlouisfed.org/fredgraph.jpg?hires=1&amp;type=image/jpeg&amp;chart_type=line&amp;recession_bars=on&amp;log_scales=&amp;bgcolor=%23e1e9f0&amp;graph_bgcolor=%23ffffff&amp;fo=verdana&amp;ts=12&amp;tts=12&amp;txtcolor=%23444444&amp;show_legend=yes&amp;show_axis_titles=yes&amp;drp=0&amp;cosd=1999-01-01&amp;coed=2014-01-01&amp;height=445&amp;stacking=&amp;range=Custom&amp;mode=fred&amp;id=A593RC1A027NBEA&amp;transformation=lin&amp;nd=&amp;ost=-99999&amp;oet=99999&amp;lsv=&amp;lev=&amp;scale=left&amp;line_color=%234572a7&amp;line_style=solid&amp;lw=2&amp;mark_type=none&amp;mw=2&amp;mma=0&amp;fml=a&amp;fgst=lin&amp;fgsnd=2007-12-01&amp;fq=Annual&amp;fam=avg&amp;vintage_date=&amp;revision_date=&amp;width=670" style="width: 600px; height: 399px;" /></p> <p>&nbsp;</p> <p>Here&rsquo;s the thing. You don&rsquo;t need fancy econometric regression analysis or DSGE models to see that ZIRP is an macroeconomic dud. Simple empirical data trends show that it hasn&rsquo;t goosed household borrowing and consumption spending, nor has it stimulated&nbsp;business investment.</p> </blockquote> <p><strong>So this is how it boils down. The only thing zero money market interest rates are good for is to subsidize financial market speculation. ZIRP means that the speculator&rsquo;s cost of goods (COGS) is essentially zero whenever yielding or appreciating assets are&nbsp;funded in the repo market or its equivalent in the options pits and Wall Street confected OTC trades.</strong></p> <p>Accordingly, after 80 months of showering Wall Street with what is a wholly unnatural and perverse financial&nbsp;windfall&mdash;-that is,&nbsp;zero cost in the money market&mdash;&ndash;the Fed has ignited a rip-roaring inflation. But the inflation is in the financial market, not the supermarket.</p> <p>Needless to say,&nbsp;there was not even a faint trace of recognition of this fundamental reality in Stanley&nbsp;Fischer&rsquo;s much heralded Jackson Hole speech on inflation. As usual,&nbsp;it was&nbsp;an empty bag of quasi-academic wind about utterly irrelevant short-term twitches in various inadequate measures of consumer inflation published by the Washington statistical mills. Indeed, Fischer went&nbsp;so far as to acknowledge that one of the more plausible consumer prices indices&mdash;&ndash;the Dallas Fed&rsquo;s &ldquo;trimmed mean&rdquo; measure&nbsp;of the PCE deflator&mdash;&ndash;was up 1.6% in the past year.</p> <p>Here&rsquo;s the thing. No one except the modern equivalent of medieval theologians counting angels on the head of a pin could think that the difference between this reading and the Fed&rsquo;s arbitrary 2.0% inflation target is of significance to any economic actor in the real world. That fleeting and miniscule difference would never in a thousand years impact the wage and price behavior of firms competing in the world market for tradable goods where cheap labor and mercantilist FX and subsidy policies drive the competition for customers.</p> <p>Nor would it alter the behavior of the overwhelming share of purely domestic service firms that inherently face an elastic supply curve owing to low entry barriers. There is an unlimited supply of nail salons and yoga studios because folks need work and the Fed&rsquo;s financial repression policies have fueled a fantastic over-expansion of strip mall real estate.</p> <p>Likewise, firms with deep brand equity everywhere and always try to raise prices to capture the heavy marketing and other investments which&nbsp;go into creating their brands&rsquo; value and consumer franchises. But only clueless academic modelers like Fischer would ever think that 40 basis points of shortfall in the short-run consumer inflation trend would impact the pricing strategy of brand name service firms&mdash;&mdash;-such as Amazon and Wal-Mart,&nbsp;for example.</p> <p>In short, Fischer&rsquo;s entire meandering discourse on this and that inflation index and his speculations about immeasurable &ldquo;inflation expectations&rdquo; was irrelevant drivel. It could have been delivered by any student who had passed Economics 101&nbsp;at Podunk College.</p> <p>And besides that, the man has the gall to cite the &ldquo;Survey Of Economic&nbsp; Projections&rdquo; (SEP) as one key indicator showing that inflation expectations have remained &ldquo;anchored&rdquo;. For crying out loud, the SEP is the quarterly stab in the&nbsp;dark about the inflation outlook concocted by the 19 members of the Federal Reserve itself!</p> <p>In fact, the only real value of Fischer&rsquo;s pretentious bloviation&nbsp;was that it&nbsp;was a&nbsp;reminder that the financial system of the world is in thrall to a tiny,&nbsp;insuperably arrogant posse of Keynesian academics who have invented&nbsp; from whole cloth a monetary theory of plenary control. They have effectively ended free market capitalism in the financial system and beyond and made democratic fiscal governance essentially irrelevant.</p> <p>Here&rsquo;s why. It all starts&nbsp;with the Fed&rsquo;s specious mantra that the&nbsp;&ldquo;Humphrey-Hawkins&rdquo; dual mandate&nbsp;makes&nbsp;them do it.</p> <p>No it doesn&rsquo;t!&nbsp;&nbsp;Nowhere does it instruct the Fed to keep&nbsp;its fat&nbsp;foot on the neck of liquid savers and depositors for 80 months running.</p> <p>In fact, Humphrey-Hawkins is a content-free expression of Congressional sentiment crafted under the far different economic conditions of the mid-1970&rsquo;s. It essentially says price stability and fulsome employment are devoutly to be desired national objectives ranking right up there with motherhood and apple pie.</p> <p>Indeed, the Humphrey-Hawkins Act, which I voted against in 1977, is no more meaningful than the plethora of &ldquo;captive nations&rdquo; resolutions, which I voted for that same year&mdash;&mdash;-and just as archaic, too.</p> <p>In today&rsquo;s globalized economy, the&nbsp;Fed&rsquo;s ballyhooed 2% inflation target is no more warranted by the statute&rsquo;s&nbsp;rubbery language on &ldquo;price stability&rdquo; than is 3%, 1% or 0%. And the Fed&rsquo;s preference for the PCE deflator index&nbsp;of consumer inflation, as measured over&nbsp;a never explained or defined period of time, is no more mandated by the Act than is use of the Cleveland trimmed median or the indices of the MIT&nbsp;Billion Prices Project, as measured monthly, quarterly, yearly or for any other arbitrarily defined period.</p> <p><em><strong>In short, the Fed&rsquo;s 2% target as practiced in the Eccles Building&nbsp;and gummed about by Fischer last Saturday is nothing more than the arbitrary&nbsp;concoction of one demonstrably erroneous and obsolete&nbsp;school of economics.</strong></em>&nbsp;Over the past two decades these Keynesian statist throwbacks to the 1930s&nbsp;have&nbsp;infiltrated the boards and staffs of most of&nbsp;the world&rsquo;s&nbsp;central banks&mdash;&mdash;and have&nbsp;used their unlimited resources to hire most of the worlds so-called &ldquo;monetary economists&rdquo; to write self-justifying studies and perform &ldquo;research&rdquo; that is more in the nature of what used to be called &ldquo;agit prop&rdquo;.</p> <p>At the same time, how could the legions of financiers, fund managers, economists, strategists and traders who inhabit Wall Street possibly object&mdash;&mdash;-even if they have no use whatsoever for the Keynesian religion of Fischer and his sidekicks?</p> <p>The answer is in the chart below. Under the guise of its silly and arbitrary Humphrey-Hawkins targets the academic fools and crony capitalist opportunists who inhabit the Fed have been delivering a relentless&nbsp;drip of monetary heroin to the casino gamblers 80% of the time over the last 25 years.</p> <div class="wp-caption alignnone" id="attachment_50251" style="width: 490px;"><a class="image-anchor" href="http://davidstockmanscontracorner.com/wp-content/uploads/2015/04/easybutton.png" target="_blank"><img alt="The Fed's Addiction To The 'Easy Button': Rates Falling Or Flat 80% Of The Time Since 1990 - Click to enlarge" class="size-medium wp-image-50251" src="http://davidstockmanscontracorner.com/wp-content/uploads/2015/04/easybutton-480x286.png" style="width: 601px; height: 358px;" /></a><br /> <p class="wp-caption-text">The Fed&rsquo;s Addiction To The &lsquo;Easy Button&#39;: Rates Falling Or Flat 80% Of The Time Since 1990 &ndash; Click to enlarge</p> </div> <p>So with academia on its payroll and Wall Street on its gift list, there is no one left to state the obvious. Namely, that by fueling the most fantastic inflation of financial assets in world history the Fed and its convoy of global central banks have sown its opposite in the real main street economy.</p> <p>To wit, there&nbsp;is now&nbsp;a massive deflationary tidal wave cresting on the planet, and it was manufactured entirely by the central banks. In the DM world, consumers and governments are stranded at &ldquo;peak debt&rdquo; and can no longer live beyond their means by leveraging their balance sheets to the breaking point, as they did in the 30 years leading to the financial crisis.</p> <p>Likewise, the EM world has buried itself in &ldquo;peak investment&rdquo;. This condition is&nbsp;owing to the massive repression of capital costs instituted over the last three decades by their mercantilist central banks in the process of buying dollars and euros to peg their exchange rates, thereby flooding their economies with cheap domestic credits.</p> <p>As a consequence, the world economy is drowning in malinvestment and&nbsp;excess capacity for virtually every commodity from oil to iron ore and for every stage of downstream industrial&nbsp;production from refineries to blast furnaces, pipe and tube mills, ship-building facilities, car plants and container ships, ports and warehouses.</p> <p>Moreover, two decades of lunatic money printing have also drastically roiled the global capital and currency markets.&nbsp; During the last 20 years of financial inflation, the Keynesian central bankers have forced DM world money managers to scour the globe looking for yield regardless of risk&mdash;&mdash;a toxic form of malinvestment which is now violently reversing.</p> <p>That is, credit-saturated EM economies are now imploding, causing their exchange rates to crash, as in Brazil; or is forcing&nbsp;their governments to dump massive amounts of dollar assets&mdash;&mdash;accumulated over the long decades of monetary inflation&mdash;&ndash;in desperate efforts to prop-up their currencies, as is now happening in China.</p> <p>Yet the clueless academic who has spent a&nbsp;lifetime contributing to this disaster&mdash;&ndash;first at MIT where he superintended&nbsp;Bernanke&rsquo;s misbegotten thesis&nbsp;claiming that the Fed&rsquo;s failure to massively crank up the printing presses during 1930-1932 was the&nbsp;cause of the Great Depression, through his work as a certified monetary apparatchik at the IMF, the Israeli central bank and now the Fed&mdash;&mdash;effectively confessed in his Jackson Hole speech that he can&rsquo;t see the forest for the trees.</p> <p>Well, goodness, gracious.&nbsp;Yes, tumbling commodity prices and the on-going scramble to cover the massive global &ldquo;dollar short&rdquo; is roiling the sundry US consumer prices indices. But that is simply the feedback loop of central bank monetary repression and systematic falsification of financial asset prices.</p> <p>Yet central banker obliviousness to these self-created interferences with and repudiation of their Keynesian bathtub models of macroeconomics knows no bounds.&nbsp;So they continue to equivocate, bloviate and insist that they will&nbsp;keep subsidizing the casino&mdash;&mdash;presumably until it finally blows sky high so that they can resume tilting at &ldquo;contagion&rdquo;, which is to say, the&nbsp;violent re-pricing of asset bubbles that they caused in the first place.</p> <p>Here is Fischer&rsquo;s concluding paragraph. It leaves no doubt that he is oblivious to the financial firestorm brewing everywhere in the world, and that he is one of the most dangerous academic fools every to gain immense power over the fate of millions of ordinary citizens:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The Fed has, appropriately, responded to the weak economy and low inflation in recent years by taking a highly accommodative policy stance. By committing to foster the movement of inflation toward our 2 percent objective, we are enhancing the credibility of monetary policy and supporting the continued stability of inflation expectations. To do what monetary policy can do towards meeting our goals of maximum employment and price stability, and to ensure that these goals will continue to be met as we move ahead, we will most likely need to proceed cautiously in normalizing the stance of monetary policy&hellip;&hellip;&hellip;</p> </blockquote> <p><strong>When the next financial bubble crashes it can only be hoped that this time the people will grab their torches and pitchforks. Stanley Fischer ought to be among the first tarred and feathered for the calamity that he has so arrogantly helped enable.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="199" height="165" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150831_stan.jpg?1441042690" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-31/stanley-fischer-speaks-more-drivel-dangerous-academic-fool#comments Apple Brazil Central Banks China Consumer Prices Corporate America Dallas Fed Federal Reserve Free Money Gambling Great Depression Guest Post Main Street Monetary Policy OTC Real estate Reality Repo Market Student Loans Mon, 31 Aug 2015 19:51:41 +0000 Tyler Durden 512660 at http://www.zerohedge.com Citi Slams Today's Historic Oil Surge: "Another False Start, Time To Fade The Rally" http://www.zerohedge.com/news/2015-08-31/citi-slams-todays-historic-oil-surge-another-false-start-time-fade-rally <p>Earlier today we were wondering how long it would take the big banks - many of whom are short the commodity - to jump in the path of the oil momentum train, and we didn't have long to wait for the answer. </p> <p>Just before the NYMEX close, Bank of America revised its year end and 2016 oil forecasts lower, from $58 and $62 to $55 for 2015 and $61 for 2016. But the real downgrade came moments ago from Citi's Ed Morse who, together with Goldman, has been bearish on oil for a good part of the past year, just slammed today's crude breakout and doubled down on his double-dead cat skepticism, when he released a report titled "<strong>Another False Start…Time to Fade the Rally</strong>" whose punchline is that <strong>"Citi foresees that WTI and Brent prices should post another fresh leg lower—perhaps making new 2015 lows—before year-end."</strong></p> <p><em>More from Morse:</em></p> <p><span style="text-decoration: underline;"><strong>The Oil Price Surge</strong></span></p> <p><em><strong>Another False Start…Time to Fade the Rally</strong></em></p> <p>The bullish c20-25% crude oil price spike since late last week looks driven more by sentiment than by reality. </p> <p><strong>Bottom Line: </strong>Citi foresees that WTI and Brent prices should post another fresh leg lower—perhaps making new 2015 lows—before year-end.</p> <p><strong>In Citi’s view, it’s time to “sell the news and buy the facts.” This is reinforced by today’s strong intra-day gains around 8%, which appear driven by a misread of market data and financial headlines.</strong></p> <p>Notably, nearby timespreads are lagging the move higher in flat price, which is consistent with weak fundamentals.</p> <p><em><strong>Sharp gains over the past three trading sessions <span style="text-decoration: underline;">were driven by a combination of short covering and chart-readers again looking to call a bottom falsely</span>.</strong></em></p> <p>As recently as last Wednesday, both WTI and Brent were hovering at YTD lows of $38/bbl and $42/bbl, respectively. Combined futures and options net length held by money managers on NYMEX and ICE was also near record lows of 225-k contracts, matching the nadir in category positioning in 4Q’14.</p> <p>The continuation of the rally was further buttressed today by (1) EIA reports showing US production was overstated; (2) non-agency reports that Saudi production had fallen by c60-k b/d m/m; (3) news chatter (CNBC, Reuters, Bloomberg, etc.) that highlighted the most recent OPEC Bulletin which, with no independent reporting, stated the producer group was willing to talk to non-OPEC producers to get ‘fair prices.’ In our judgment, this was a gross misrepresentation of the Bulletin’s editorial which was wistful about such a dialogue. </p> <p><strong>Almost all OPEC officials are still on holiday and the lack of further reporting suggests none actually were involved in suggesting there was a change in policy.</strong></p> <ul> <li><strong>The <a href="https://www.citivelocity.com/t/eppublic/o8UR">EIA data should be treated with caution</a>.</strong> The old EIA data were a fiction coming out of modeling; the new EIA data are coming out of sampling techniques that are untested and difficult to call reliable. Given the structurally unique nature of the US shale industry, whereby separating the durability of good and bad wells needs the test of time, further complicates matters.</li> <li><strong>60-k b/d of Saudi production on a 10.3-10.5-m b/d base is a rounding error</strong>. Furthermore, there is no credible sign as yet of any change in Saudi market share policy, which is why Citi noted pre-open today that Saudi OSPs (official sale prices) would be of particular importance to monitor this month. </li> <li><strong>It is unclear as to why any non-OPEC producer would want to commit to a target with OPEC.</strong> 2015 is not like 1998 when both Mexican and Russian production were surging and when both countries participated in a supply cut. Russian production is growing this year because of a significantly weaker ruble cost of oil while Mexico is trying to push through energy reform. Neither country is in a position to really commit to a production cut, in our view.</li> </ul> <p>Neither would the US, Canada or Brazil – the three main non-OPEC parties – willingly participate or agree to curtailing output, in our view; nor would they constitutionally be able to do so.</p> <p><strong>A (global) production cut today would mostly benefit US producers who can react quickly to price changes. </strong>The rig count increase in 3Q’15 following the (temporary) oil price rebound in 2Q’15 seems indicative of the resiliency of the US shale industry. For OPEC and other major oil states to meaningfully slow the shale juggernaut, low prices might need to be in place for perhaps a few years, so that there is enough labor forced out of the sector and equipment scrapped, making any rebound in supply more difficult. For now, there is enough talent still on staff and equipment in place across all the major shale plays to allow for a quick return to drill for oil and gas. In addition, a partial price recovery now could reopen the capital markets to the sector, giving funding to producers to keep drilling, particularly as hedge flows would increase in a higher price environment just as the Northern Hemisphere comes-off peak demand season.</p> <p><strong>On top of all of this, OPEC has a problem internally – who is going to cut? In </strong>our view, it certainly would not be Iran and Iraq, which combined might be adding over 1.5-m b/d of incremental supply over the next twelve to eighteen months. <strong>While entirely plausible for the Saudis to cut this fall, that might be more a function of its own internal consumption waning seasonally. </strong>The Kingdom burns up to 1-m b/d of crude during the peak summer months for power generation, though that begins fading in September.</p> <p><strong>For Moscow and Riyadh to reach an agreement, it would essentially mean a Saudi cut – but what quid pro quo could be achieved any time soon? </strong>A change in Iranian and Iraqi behavior? A change in the Syrian regime? This seems unlikely, in our view.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/08/citi%20crude%20slam.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/08/citi%20crude%20slam_0.jpg" width="600" height="230" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="2999" height="1799" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/citi%20oil%201.png?1441049392" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-31/citi-slams-todays-historic-oil-surge-another-false-start-time-fade-rally#comments B+ Bank of America Bank of America Brazil Capital Markets Crude Crude Oil ETC headlines Iran Iraq Market Share Mexico None NYMEX OPEC Reality recovery Reuters Mon, 31 Aug 2015 19:31:00 +0000 Tyler Durden 512659 at http://www.zerohedge.com Saudi Arabia's Stock Market Just Logged Its Worst Month Since Lehman http://www.zerohedge.com/news/2015-08-31/saudi-arabias-stock-market-just-logged-its-worst-month-lehman <p>If someone asked you what the worst performing stock market in the world was in August, you might well be tempted to say the SHCOMP or the ASE, considering the fanfare around China’s equity turmoil and the fact that Greek stocks plunged after coming off a five-week halt.&nbsp;</p> <p>But <strong>what you might be surprised to learn is that in fact, Saudi stocks fared worse than Chinese equities for the month and one more Sunday <a href="http://www.zerohedge.com/news/2015-08-23/gulf-markets-melting-down-saudi-arabia-plunges-7-dubai-sold">like 8/23</a> could well have brought the total slide to more than 20%, just a shade better than Greek shares.</strong> </p> <p>Of course the comparison is distorted by the fact that the ASE was halted until August 3 and also by the fact that were it not for the efforts of China’s plunge protection "national team" there’s no telling where the SHCOMP might be today, but nevertheless, <strong>it serves to underscore how nervous investors are getting about what is an increasingly perilous financial situation in the kingdom.&nbsp;</strong></p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/08/GRECHISAU_0.png" width="600" height="314" /></p> <p>As <a href="http://www.zerohedge.com/news/2015-08-23/saudi-arabia-faces-another-very-scary-moment-economy-fx-regime-face-crude-reality">detailed here</a> on a number of occasions of late, the country is staring down a current account/ fiscal account deficit outcome that makes Brazil look favorable by comparison, and although FX reserve draw down <a href="http://www.zerohedge.com/news/2015-08-28/heres-how-long-saudi-arabias-us-treasury-stash-will-last-under-30-40-and-50-crude">slowed in July</a>, it came at the cost of reentering the bond market - i.e. raising debt to offset the petrodollar burn.&nbsp;</p> <p><strong>"A cloudy fiscal policy along with unattractive economic data and oil prices continuing to decline fueled negative sentiment about the market which exaggerated fears among investors,"</strong> Mohammed Al-Suwayed, Riyadh-based head of capital and money markets at Adeem Capital <a href="http://www.bloomberg.com/news/articles/2015-08-31/saudi-stocks-set-for-worst-month-in-7-years-as-oil-resumes-drop">told Bloomberg</a>. "There hasn’t been any official statement from King Salman on his fiscal policy or its direction, but all indications point toward a possible contractionary fiscal policy."</p> <p>"Indications" like the fact that Saudi Arabia is conferring with advisers on how to rein in spending without triggering social unrest.&nbsp;</p> <p>Meanwhile, intervention in Yemen - which recently escalated meaningfully - doesn’t come cheap and indeed, Saudi airstrikes on supposed Houthi targets have at times served to do reputational damage, something which also does nothing to shore up investor confidence. Case in point, <a href="http://www.reuters.com/article/2015/08/30/us-yemen-security-idUSKCN0QZ09P20150830">from Reuters on Sunday</a>:&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>An air strike by warplanes from a Saudi-led coalition, which said it targeted a bomb-making factory, killed 36 civilians working at a bottling plant in the northern Yemeni province of Hajjah on Sunday, residents said.</em></p> <p>&nbsp;</p> <p><em>In another air raid on the capital Sanaa, residents said four civilians were killed when a bomb hit their house near a military base in the south of the city.</em></p> <p>&nbsp;</p> <p><em>The attacks were the latest in an air campaign launched in March by an alliance made up mainly of Gulf Arab states in support of the exiled government in its fight against Houthi forces allied to Iran.</em></p> <p>&nbsp;</p> <p><em><strong>"The process of recovering the bodies is finished now. The corpses of 36 workers, many of them burnt or in pieces, were pulled out after an air strike hit the plant this morning,"</strong> resident Issa Ahmed told Reuters by phone from the site in Hajjah.</em></p> </blockquote> <p>The Saudi response: "We got very accurate information about this position and attacked it. <strong>It is not a bottling factory."&nbsp;</strong></p> <p>Ultimately, one gets the idea that the Saudis have yet to fully accept the gravity of the situation.&nbsp;<span style="font-size: 1em; line-height: 1.3em;">They're running a budget deficit that amounts to 20% of GDP and it certainly looks as though the only saving grace - in the absence of a sustained rally in crude which the Saudis are apparently determined to single-handedly prevent - is the fact that debt-to-GDP is negligible, meaning there's plenty of room to tap the bond market for cash and relieve the pressure on the SAMA stash. </span></p> <p><span style="font-size: 1em; line-height: 1.3em;">Even so, this situation, like that facing a host of other commodity-dependent emerging markets, is getting quite precarious, and for the Saudis it's complicated by participation in two regional proxy wars and the absolute necessity of maintaining social order.</span></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="956" height="500" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/GRECHISAU.png?1441048092" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-31/saudi-arabias-stock-market-just-logged-its-worst-month-lehman#comments Bond Brazil Budget Deficit Crude Iran Lehman Reuters Saudi Arabia Mon, 31 Aug 2015 19:10:31 +0000 Tyler Durden 512658 at http://www.zerohedge.com Three US Citizens Sentenced For Conspiracy To Start A Revolution Using WMDs http://www.zerohedge.com/news/2015-08-31/three-us-citizens-sentenced-conspiracy-use-wmds-start-revolution <p>While the US has had a surge in violence over the past several years, its defining feature was the generally chaotic and uncoordinated nature of each such - usually lethal - act.</p> <p> That changed over the weekend when the FBI announced three US citizens - Brian Cannon, 37, Terry Peace, 47, and Cory Williamson, 29, - were sentenced to 12 years in prison for "<strong><span style="text-decoration: underline;">conspiring to use weapons of mass destruction in attacks against federal government agencies</span>. The defendants planned to attack critical infrastructure while motivating militia groups in other states to rise up and join them in removing government officials who they believed had exceeded their Constitutional power</strong>."</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/08/guilty%20fbi%20revolution.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/08/guilty%20fbi%20revolution_0.jpg" width="500" height="280" /></a></p> <p>Specifically, the three sentenced men "<strong>participated in Internet chat rooms frequented by militia members and others with a shared anti-government ideology. During the chat room conversations, Cannon, Peace and Williamson discussed starting a revolution against the federal government by conducting an attack aimed at the infrastructure supporting the Transportation Security Administration, the Department of Homeland Security and the Federal Emergency Management Administration</strong>." The complaint further notes that "according to their conversations, their goals included <strong>forcibly removing government officials who the defendants believed acted beyond the scope of the U.S. Constitution."</strong></p> <p>And this is how the FBI summarized the bust...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“In this case, anti-government ideology and rhetoric morphed into dangerous extremism and led these defendants to arm themselves and travel to a meeting to pick up pipe bombs and other explosives intended for attacks,” said U.S. Attorney John Horn of the Northern District of Georgia. “The attacks planned by the defendants, while rare, posed a serious threat to not only the safety of our public servants, but also all other members of the community.”</p> </blockquote> <p>... confirming yet again that when the NSA has to "get involved", it does so admirably.</p> <p>Meanwhile, any aspiring revolutionaries may want to consider avoiding cell phone communication and certainly never discussing plans for the second American revolution on public chat rooms that can be hacked by even 10 year-old "North Korean" hackers, not to mention the most sophisticated electronic communication interception system ever created.</p> <p><em>The full FBI complaint is below (<a href="https://www.fbi.gov/atlanta/press-releases/2015/men-sentenced-for-conspiracy-to-use-weapons-of-mass-destruction">link</a>):</em></p> <p><strong>Men Sentenced for Conspiracy to Use Weapons of Mass Destruction </strong></p> <p>WASHINGTON—Brian Cannon, 37, Terry Peace, 47, and Cory Williamson, 29, have been sentenced for conspiring to use weapons of mass destruction in attacks against federal government agencies. The defendants planned to attack critical infrastructure while motivating militia groups in other states to rise up and join them in removing government officials who they believed had exceeded their Constitutional power.</p> <p>“In this case, anti-government ideology and rhetoric morphed into dangerous extremism and led these defendants to arm themselves and travel to a meeting to pick up pipe bombs and other explosives intended for attacks,” said U.S. Attorney John Horn of the Northern District of Georgia. “The attacks planned by the defendants, while rare, posed a serious threat to not only the safety of our public servants, but also all other members of the community.”</p> <p>“This case illustrates the FBI’s commitment in preventing attacks instead of responding to their aftermath,” said Special Agent in Charge J. Britt Johnson for the FBI’s Atlanta Field Office. “The convictions and now federal sentencing of these individuals on conspiracy charges again represents that the juries and courts understand this shift in the law enforcement mindset in dealing with individuals or groups that wish to bring harm to the public or those who serve the public.”</p> <p>According to U.S. Attorney Horn, the charges and other information presented in court: In January and February 2014, Cannon, Peace and Williamson participated in Internet chat rooms frequented by militia members and others with a shared anti-government ideology. During the chat room conversations, Cannon, Peace and Williamson discussed starting a revolution against the federal government by conducting an attack aimed at the infrastructure supporting the Transportation Security Administration, the Department of Homeland Security and the Federal Emergency Management Administration.</p> <p>According to their conversations, their goals included forcibly removing government officials who the defendants believed acted beyond the scope of the U.S. Constitution. During one of the online conversations, Peace said that they would launch the attack between February 1, and Feb. 15, 2014. He encouraged the militia members to review guerilla warfare tactics, accumulate supplies and prepare their families. By Feb. 1, 2014, Cannon and Williamson had moved to Georgia and were living with Peace at his Rome, Georgia residence.</p> <p>Cannon, Peace and Williamson targeted the infrastructure supporting their federal agency targets because they believed this would reduce the amount of unnecessary casualties and make it difficult for the government to respond to their attack. The men decided to launch the first attack in Georgia to prompt militia members in other states to begin attacks in their respective states.</p> <p>Unbeknownst to the defendants, another participant in the chat rooms became alarmed at their plans, informed the FBI of the attack against the government, and agreed to assist in this investigation.</p> <p>On Feb. 8, 2014, Peace asked the cooperating witness to provide twelve pipe bombs and two thermite devices for use in their attack. Peace said he wanted the pipe bombs designed for “maximum fragmentation” and thermite devices capable of penetrating the engine block of a military-grade armored vehicle. Peace, Cannon and Williamson then made plans to meet with the cooperating witness after the pipe bombs and thermite devices were constructed.</p> <p>On Feb. 15, 2014, the defendants, armed with numerous firearms, drove from Peace’s residence to meet with the cooperating witness at a location in Cartersville, Georgia, to pick up the pipe bombs and thermite devices. Prior to their arrival, the cooperating witness was provided with 12 inert pipe bombs and two inert thermite devices. The three defendants were arrested as they were taking possession of the items. While their online conversations reflected attacks on federal targets, the defendants planned to use the thermite device at a local police department.</p> <p>Cannon has been sentenced to 12 years in prison to be followed by five years of supervised release and perform 100 hours of community service.</p> <p>Peace has been sentenced to 12 years in prison to be followed by five years of supervised release and perform 100 hours of community service.</p> <p>Williamson has been sentenced to 12 years in prison to be followed by five years of supervised release and perform 100 hours of community service.</p> <p>Cannon, Peace and Williamson were convicted of the charges on May 26, 2015 after pleading guilty.</p> <p>This case was investigated by the FBI. Assistant United States Attorneys Tracia M. King and Ryan K. Buchanan prosecuted the case.<em><br /></em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="300" height="220" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/conspirators.jpg?1441046060" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-31/three-us-citizens-sentenced-conspiracy-use-wmds-start-revolution#comments FBI Federal Sentencing Mon, 31 Aug 2015 18:50:36 +0000 Tyler Durden 512657 at http://www.zerohedge.com Rewriting The Rules - Trump's Rise Is Unprecedented http://www.zerohedge.com/news/2015-08-31/rewriting-rules-trumps-rise-unprecedented <p><strong>In May, </strong>when the Register last polled, <strong>27 percent of likely Iowa GOP caucus-goers viewed Trump favorably</strong> while 63 percent regarded him unfavorably. </p> <p><strong>In the new poll, which was released Saturday night, Trump's favorable number is at 61 percent</strong> and his unfavorable at 35 percent.</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_trump.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/08-overflow/20150831_trump.jpg" width="317" height="525" /></a></p> <p>&nbsp;</p> <p><a href="http://www.washingtonpost.com/news/the-fix/wp/2015/08/30/this-iowa-poll-shows-just-how-amazing-donald-trumps-rise-has-been/?postshare=8391441029559429">As The Washington Post's Chris Cillizza exclaims,</a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>"In the almost 20 years I have spent following politics closer than<br /> close, I've never seen anything like the total reversal in how Trump is<br /> perceived by Republican voters.<strong> It is, quite literally, unprecedented.</strong>"</em></p> <p>&nbsp;</p> <p><em><strong>The Trump candidacy has rewritten - or at least smudged - lots of the rules of conventional politics. </strong>He says things that would derail other peoples' candidacies. His shyness about specifics on, well, anything would be seen as a lightness bordering on cluelessness in other candidates. His pick-a-fight-a-day mentality would be seen as overly aggressive and tonally off if anyone else in the field did it.</em></p> <p>&nbsp;</p> <p><em>But, of all the amazing things that Trump is doing - whether he realizes what it is he is actually doing - <strong>his ability to totally turn around his image is the most remarkable. </strong>It's not something we've seen before.</em></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>It's different this time...<em><br /></em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="162" height="153" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150831_trump1.jpg?1441041348" /> </div> </div> </div> http://www.zerohedge.com/news/2015-08-31/rewriting-rules-trumps-rise-unprecedented#comments Mon, 31 Aug 2015 18:30:23 +0000 Tyler Durden 512656 at http://www.zerohedge.com