With President Obama having bombed 7 mostly-Muslim nations in his reign as Nobel-Peace-Prize-Winner-in-Chief, we thought Pew Research's study on where the world's Muslims are would be useful context...
There is no doubt that fracking stopped the long-term decline in U.S. oil output. Since the all-time low output in 2006, daily oil production has increased by 30%. Natural gas production has soared even higher, but seems to have leveled off. Ignoring the environmental impacts of fracking, just the economics alone show that shale oil and gas are not the miracle that will save us from the perils of peak cheap oil. Fracking extraction of oil is extremely expensive. If oil prices were to fall to $80 per barrel, there would be no profits for frackers. They would stop drilling wells. So don’t plan on ever paying less than $3 per gallon for gasoline ever again. Don’t believe in miracles.
The composition of the force carrying out airstrikes in Syria highlights the logistical complexity of this kind of operation. Most of the U.S. aircraft taking part in the operations over northern Iraq and Syria are based in and around the Persian Gulf, meaning they are operating far from their origins. Bahrain, Jordan, Saudi Arabia, the United Arab Emirates and Qatar reportedly participated in the initial operations in Syria, adding further complexity and coordination issues.
For investors, Fed stimulus has trumped all other factors. It has lowered risk premia and inflated asset prices. The gig is soon up, but investors have yet to adequately adjust. Unfortunately, they will attempt to do so with significantly compromised market liquidity. The path to normalization is made even more challenging, because Japan and Europe are in recession, and China is slowing.
US equities suffered their biggest drop in 2 months today, with the S&P 500 closing a glaring 30-point divergence with high-yield credit markets which also sold off dramatically. The S&P 500 broke (and closed) below its 50DMA (as did the Nasdaq, Dow Industrials, and Transports). Russell 2000 dropped to beyond 4-month lows (-4.4% in 2014). Early USD strength gave way as stocks started to leak lower and closed unchanged (+0.5% on the week) led by JPY and EUR strength. Treasury yields plunged 4-6bps on the day (led by the long-end) with 10Y testing the critical 2.50% handle once again. VIX broke above 16, its 4th biggest rise of the year. Gold rose as stocks lost ground but silver, oil and copper slipped lower. HY Credit spreads closed at 8 month wides. Investors also piled into safe-haven short-squeeze 'camera-on-a-stick'. Stocks closed not "off the lows."
At the heart of the problem is the fact that the Federal Reserve’s manipulation of the money supply prevents interest rates from telling the truth: How much are people really choosing to save out of income, and therefore how much of the society’s resources — land, labor, capital — are really available to support sustainable investment activities in the longer run? What is the real cost of borrowing, independent of Fed distortions of interest rates, so businessmen could make realistic and fair estimates about which investment projects might be truly profitable, without the unnecessary risk of being drawn into unsustainable bubble ventures? All that government produces from its interventions, regulations, and manipulations is false signals and bad information.
Three are four developments in the fixed income markets that represent a clear and present danger for stocks.
ISIS, it appears, does not have a monopoly on 'executions'. As Amnesty notes, while there were no executions reported in Europe and Central Asia last year, executions were recorded in 22 countries during 2013, and increased 15% over 2012 (excluding the thousands of people executed in China that go unreported). Common to almost all executing countries was again the justification of the use of death penalty as an alleged deterrent against crime; but, as Amnesty believes, this position is becoming increasingly untenable and discredited. For once USA is 'happy' not be #1 (though 5th in the world, above Somalia and Sudan, still seems high).
While the saying "cash on the sidelines" is patently wrong as all cash represents is a form of risk, asset and liquidity preference (and yes, for every buyer of stock there is a seller: repeat as many times as necessary until it clicks), we are confident the fact that the world's record number of billionaires, 2,325 in 2014 up from 2,170 a year ago, holding a record $7,291 trillion in assets or a little under half of the US GDP, have a record $600 million in cash on average, up from $540 million the year before.
What's the opposite of government efficiency? In a double-take-instigating headline, the federal government’s Obamacare enrollment system has cost about $2.1 billion so far, according to a Bloomberg Government analysis of contracts related to the project. BGOV’s analysis shows that costs for both healthcare.gov and the broader reform effort are far greater than anything publicly discussed. However, that pales into insignificance when considering health reform has cost American taxpayers $73 billion in the last four years... and counting.
Beneath the surface wealth of bullet trains, cute robots and exuberant fashions, this is the Japan few outsiders understand: the one gripped by a deepening social depression. Japan is the global bellwether in social depression, and we can already see the same symptoms and official panic to mask these symptoms in Europe, China and the U.S.