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Crude Carnage Goes Contagious As Brevan Howard Liquidates Underperforming Commodity Fund

Tyler Durden's picture




 

The entire commodity complex is seeing major contagion-like price declines in early trading. WTI Crude is back below $65 for the first time since May 2010 - now down 16% since the initial leaks of OPEC's decision last Wednesday. Gold and Silver are getting whacked and copper has plunged below 300 - back at its lowest since June 2010. The news over the weekend that Brevan Howard is liquidating its $630 million commodity hedge fund following recent poor performance is also likely not helping as what looked like late-Friday margin call liquidations are extending notably this evening.

 

WTI is down 16% since the initial OPEC decision leaks last week by Venezuela...

 

And volume is heavier than normal for a Sunday night

 

As The Wall Street Journal reports,

Brevan Howard Asset Management LLP plans to close its commodity hedge fund following recent poor performance, according to two people familiar with the matter.

 

The fund, managed by Stephane Nicolas, has $630 million in assets. It lost 4.2% last year and is down 4.3% this year to the end of October, according to performance data reviewed by The Wall Street Journal.

 

It is not clear what Mr. Nicolas’s role might be following the commodity fund’s closure, a person familiar with the matter said. Attempts to reach Mr. Nicolas were unsuccessful.

 

Brevan Howard is among Europe’s largest hedge fund managers with about $37 billion in assets.

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Sun, 11/30/2014 - 21:49 | 5503154 El Vaquero
El Vaquero's picture

"DRILL BABY DRILL" is going to be replaced by "PRINT BABY PRINT!"

Sun, 11/30/2014 - 20:27 | 5502912 rqb1
rqb1's picture

I think 2008 replay maybe 1-2 years out, but your call on oil has been completely correct. Congratulations EKM.

Sun, 11/30/2014 - 23:38 | 5503446 BringOnTheAsteroid
BringOnTheAsteroid's picture

You've got to be kidding me, 1-2 years out?

Mon, 12/01/2014 - 00:36 | 5503556 TheReplacement
TheReplacement's picture

$3.5T in excess reserves.  It most likely won't be happening today.  Wait for it.

Sun, 11/30/2014 - 20:41 | 5502953 Ineverslice
Ineverslice's picture

 

ouch!

How strong is this tide going out, ekm?

Will the dow and nikkei reveal what they are not wearing...are they swimming in a different pool?

Sun, 11/30/2014 - 23:35 | 5503441 OMG
OMG's picture

This will be worse than 2008, all of the leverage in they system! they've created a liquidity crisis on top of the problems up to, and including the 2008 fiasco. Margin call indeed on a massive fucking scale. This will lead to a currency crisis PDQ!

Mon, 12/01/2014 - 01:38 | 5503668 Tall Tom
Tall Tom's picture

It is going to be one hell of a lot worse than 2008, ekm1.

 

I can hardly wait. There will be no possible restoration this time.

Sun, 11/30/2014 - 20:43 | 5502959 JPM Hater001
JPM Hater001's picture

I started wholesaling in 2001 and I recall walking into a smith Barney brokers office when he looked at me and said, "I can't talk right now, I have to make a margin call."

Welcome to the end game problem. It isn't so much oil as the margin moves it creates. Massive margin calls force liquidation of other commodity positions first. It'll cascade from here.

December 5 calls dead ahead.

Sun, 11/30/2014 - 20:15 | 5502861 kaa1016
kaa1016's picture

There is major deflation trade happening right now and as usual stocks are the last to catch on. I think this will be rectified over the next two weeks. 

Sun, 11/30/2014 - 21:54 | 5503163 El Vaquero
El Vaquero's picture

If not, we'll know for sure that there is likely some direct CB intervention in stocks.  I don't want to call it yet, so I won't.  Once everything bottoms out, if the stock market doesn't tank and UST yields don't go back up, CBs are the likely culbrits.  Right now, all of that money rushing out of commodities could be what is proping stocks up and pushing UST yields down. 

Sun, 11/30/2014 - 20:15 | 5502862 ukspreads
ukspreads's picture

Nikkei making new year highs, so can't be all bad eh? 

Sun, 11/30/2014 - 20:15 | 5502864 thatthingcanfly
thatthingcanfly's picture

This is too depressing to watch. I'm turning off Kitco for the night.

Sun, 11/30/2014 - 20:19 | 5502877 Philo Beddoe
Philo Beddoe's picture

Turn your screen upside down. Helps a bit. 

Sun, 11/30/2014 - 20:26 | 5502902 Beam Me Up Scotty
Beam Me Up Scotty's picture

Or stand on your head.

Sun, 11/30/2014 - 20:29 | 5502922 Philo Beddoe
Philo Beddoe's picture

But, never both at the same time. That would just look foolish and negate the desired effect. 

Mon, 12/01/2014 - 01:35 | 5503654 Tall Tom
Tall Tom's picture

You are looking at the wrong chart.

 

The price chart does not tell the story.

 

Scroll down and look at the Gold Lease Rate chart on the left hand side.

 

Note that both the One Month Lease Rate and the Two Month Lease Rate has crossed over the One Year Lease Rate.

 

The Central Banksters are not trusting one another. They have LOST TRUST AND CONFIDENCE.

 

This will cause a Credit Freeze just like in 2008. LMAO.

 

I am still laughing out loud. This is signaling the next Crash of the World Financial System. Inversion...Death Cross.

 

You are looking at the wrong chart...

 

Click on the link. It is one of the most beautiful and wonderful charts that I have ever seen.

 

http://www.kitco.com/charts/popup/au0030lr.html

 

That is Backwardation in action.

 

Damn that is a wonderful chart. Man...chart porn extravaganza!!! Look at those rates climb. I am loving it.

 

Crush that price and I can pull the trigger. Yeah. Love it. Bring this to fruition.

Mon, 12/01/2014 - 10:50 | 5504365 Pseudonymous
Pseudonymous's picture

This is the kind of stuff I pay attention to too.

Futures indicate backwardation too, all the way to 6 months from now.

Keith Weiner provides this chart of cobases for different gold futures contracts in his Monetary Metals Supply and Demand Report (access requires free sign-up).

Silver futures are not in backwardation (yet?) though.

Sun, 11/30/2014 - 21:18 | 5503063 OMG
OMG's picture

I turned my sideways.....it looks like someone's getting fucked, looks like stick figures having an orgy!

Sun, 11/30/2014 - 20:16 | 5502866 Stoploss
Stoploss's picture

Kevin better be buying every single block of e mini's starting yesterday.

Sun, 11/30/2014 - 20:18 | 5502868 firstdivision
firstdivision's picture

Abe says "suck my boner, bitches" http://finviz.com/futures_charts.ashx?t=NKD&p=m5

Sun, 11/30/2014 - 20:19 | 5502874 ISEEIT
ISEEIT's picture

Damn.....

Everyone on the inside of this move is KILLING IT!!

Would be nice to have legit full disclosure made public.

 

I wonder really how many 'crosses' would appear in both this oil move and the designers behind 9/11?

 

Blah, Blah, Blah.....Correlation isn't causation?

Not necessarily. But causation's do tend to produce correlations.

 

Sun, 11/30/2014 - 20:22 | 5502887 jubber
jubber's picture

nikkei futures up 250 points now

Sun, 11/30/2014 - 20:25 | 5502900 EHM
EHM's picture

Everyone is focused on supply when it is demand...

Mon, 12/01/2014 - 05:00 | 5503850 The Wedge
The Wedge's picture

Yes, OPEC/Saudi kept production up in the face of falling demand. Why do you suppose they would do that?

Sun, 11/30/2014 - 20:27 | 5502905 q99x2
q99x2's picture

That guy doesn't know what he is doing. You can tell he even has his name mixed up.

Sun, 11/30/2014 - 20:26 | 5502907 razorthin
razorthin's picture

This shit is sane and lasts only if solar is the new oil.  You think that's the case?

Mon, 12/01/2014 - 04:57 | 5503848 The Wedge
The Wedge's picture

Ha aha ha aha aha ha ha ha aha ahu ahuu...uh no

Mon, 12/01/2014 - 05:40 | 5503874 cornflakesdisease
cornflakesdisease's picture

Can you plug in an airplane?

Sun, 11/30/2014 - 20:30 | 5502920 RMolineaux
RMolineaux's picture

Looks like Obama and Kerry shot themselves in the foot, trying to bust chops on Putin with the help of the Saudi polygamists.

Sun, 11/30/2014 - 20:30 | 5502923 holdbuysell
holdbuysell's picture

Here comes the deflation before The Big Print.

Sun, 11/30/2014 - 20:29 | 5502924 papaswamp
papaswamp's picture

Buh bye shale fields. Hope the Dakotas are ready for the unemployment claims. going to be some pissed off roughnecks in the morning.

Sun, 11/30/2014 - 20:52 | 5502963 cowdiddly
cowdiddly's picture

Yep, I worked in the Oil patch in the early eighties. Was working all you could stand up to and then one day we all broke and went to lunch. When we came back it was ooooooover. Happened that fast. Next month you could drive around West Texas and chose the color on near new chromed out 4 wheel drive pickups and welding trucks sitting on bank lots they were giving away .

Sun, 11/30/2014 - 22:01 | 5503187 Pareto
Pareto's picture

I remember seeing drilling rigs laying down in farmers fields - as if there was a mad exit that not even the trucks could hang around and wait for.  It was fucking eery as I recall.  Not long after you felt the ripple effects EVERYWHERE.  Like dominos - one at a time.   Housing, businesses closing, etc.  Then the depression - because thats what it was.  Good times/sarc.  About the only place that didn't feel the pain as much was agriculture.

Sun, 11/30/2014 - 22:21 | 5503240 cherry picker
cherry picker's picture

They keep saying 2008 was the worst, but the one in the eighties was no pansy.  Homes were boarded up in Calgary.  Unemployment was bad.  Lot of companies didn't make it.

Sun, 11/30/2014 - 22:31 | 5503270 Baby Eating Dingo22
Baby Eating Dingo22's picture

So ND can go back to being a barren wasteland, the mancamps become morgues, and the whores get to rest their snatches

Seems like just the other day ND was hailed as the quintessential financially stable state.

PA has probably spent so much time debating what to do with the fracking windfall, they probably never collected a cent

Sun, 11/30/2014 - 20:31 | 5502927 jubber
jubber's picture

WTF? Nikkei new 7 Y high

Sun, 11/30/2014 - 20:40 | 5502951 papaswamp
papaswamp's picture

Follow the yen...think Zimbabwe.

Mon, 12/01/2014 - 05:09 | 5503856 HardlyZero
HardlyZero's picture

Moody's downgrades third-biggest economy's credit rating to A1 from AA3.

http://www.cnbc.com/id/102226574?trknav=homestack:topnews:2

Sun, 11/30/2014 - 21:09 | 5503040 WTFUD
WTFUD's picture

jubber you sound surprised! They who own the Exchanges . . .

Sun, 11/30/2014 - 20:42 | 5502961 kowalli
kowalli's picture

ALL will rush to buy chip oil and its go even lower

Sun, 11/30/2014 - 20:50 | 5502967 falak pema
falak pema's picture

Stephane Nicolas, another product of France's elitist "quant" producing schools for financial dudes, now looking desperately Susaned, like dumb blondes in the nude. Remember Fabrice Toure and London Whale.

When the wrapping comes off, these HF's best and brightest look very plain as "oeufs à la coq" greedy egg heads, now getting grilled and scrambled.

France's top romantic poet when posted as Envoy to post Napoleonic London produced a Chateaubriand steak and sauce bernaise, it took Beau Brummel's London by storm.

Its nice to see the Brits love the cooking these french bankstas make in their shardy City that never sleeps; now being emptied by its under 30s in droves !

Sun, 11/30/2014 - 21:07 | 5502978 ukspreads
ukspreads's picture

Gas / Petrol prices are falling nowhere in line with crude, so someone is making excess huge $$$$ on the widening disparity between the two

I don't understand how the average Joe can't figure this out and rise up against it, especially with the social media tools now at everyone's disposal

Sun, 11/30/2014 - 21:58 | 5503176 El Vaquero
El Vaquero's picture

There are probably two things going on here, though I haven't looked for the price breakdown in this particular instance:

 

1) Gas stations often work on fairly thin margins, and when the price of oil goes up, it makes those margins even thinner.  They're probably making up for the crunch that they were feeling.

2) The price of oil is not the only contributing factor to the cost of a gallon of gasoline.  Don't forget about refining, shipping, any additives, etc... 

Mon, 12/01/2014 - 00:18 | 5503512 Bay of Pigs
Bay of Pigs's picture

Gasoline prices have only dropped 2 cents a liter on Van Island, BC in the last month. I shit you not. Still almost $4.80 a gallon.

Mon, 12/01/2014 - 01:48 | 5503684 falconflight
falconflight's picture

I can buy gasoline in NC at 2.85 or travel over the border to GA and pay 2.65.

Mon, 12/01/2014 - 04:52 | 5503843 The Wedge
The Wedge's picture

It has hit $2.49 a gallon in upstate SC for the last couple of weeks. Allied Petroleum (Spartanburg, SC) supply's much of the South East and it's proximity is helpful.

Mon, 12/01/2014 - 05:38 | 5503872 cornflakesdisease
cornflakesdisease's picture

$2.32 in Houston in some spots.

Mon, 12/01/2014 - 04:46 | 5503841 The Wedge
The Wedge's picture

Van Island, BC

Hmm, wonder why. Location location location

Mon, 12/01/2014 - 00:23 | 5503529 Troll Magnet
Troll Magnet's picture

Doesn't matter how much gas they sell. Gas stations typically are paid 5-10 cents per gallon. So whether they sell $1 million per month at $4 a gallon or $500k a month at $2 a gallon makes no difference to these gas station owners. They're still nickled and dimed by their distributor.

Mon, 12/01/2014 - 00:46 | 5503575 TheReplacement
TheReplacement's picture

Anyone know how long it takes from the time a barrel of oil is pumped out of the ground and sold until the time a consumer pays for the same oil, refined to gasoline, at the pump?  There's the bit about crossing oceans and stuff.  I think it takes a few hours before the price comes down.

Mon, 12/01/2014 - 01:34 | 5503662 TurdOnTheRun
TurdOnTheRun's picture

There are some fields in proximity to refineries, so the travel is through pipeline and oil pump to gas pump can be quick. No trans ocean tankering. Operators pump the oil and refiners make gas - its a continuous process.

Mon, 12/01/2014 - 04:45 | 5503840 The Wedge
The Wedge's picture

US imports oil from Canada and Mexico not the middle east. Not to mention it's domestic production. The price lag varies from 2 weeks to a month.

Mon, 12/01/2014 - 04:42 | 5503838 The Wedge
The Wedge's picture

Actually on average gas price is falling in line with crude. Gas is subject to supply and demand on regional and local basis as well as exotic blends in some markets. There is always a lag in gasoline prices to crude and it is more pronounced when crude is volatile and falls or rises suddenly and it has swung wildly in the last couple of months.

Sun, 11/30/2014 - 20:51 | 5502982 exartizo
exartizo's picture

right on cue:

gold down $47.

WAIT to buy gold.

GOLD = $900
SILVER = $13

Sun, 11/30/2014 - 20:56 | 5502993 TalkToLind
TalkToLind's picture

$15, $14, $13...it's all good; I'm dollar averaging in on the physical like a mad hatter.  I am loving THIS Black Friday sale.      

Sun, 11/30/2014 - 20:59 | 5502998 falak pema
falak pema's picture

Will oil hit 12 and gold hit 110?

We'll be back to pre Reagan days, circa 1976.

Tighten your belts gold bugs! 

Deflation looks like race to bottom, and I'm being tongue in cheek on the numbers game! 

Sun, 11/30/2014 - 21:16 | 5503057 kowalli
kowalli's picture

oil can't go below 40 - no one will sell it at this price.

Mon, 12/01/2014 - 00:26 | 5503535 Troll Magnet
Troll Magnet's picture

Somebody will sell it at any price if they're desperate enough.

Sun, 11/30/2014 - 21:55 | 5503169 Pareto
Pareto's picture

If gold were to hit $110, I would jump off the roof of the house and do snow angels butt naked - then run to the store (still naked), and buy hand over fist, and forward orders if I had to.  Holy fuck there is a Santa Claus!!

Sun, 11/30/2014 - 22:13 | 5503219 kowalli
kowalli's picture

you should record this and upload to youtube

Mon, 12/01/2014 - 00:48 | 5503577 TheReplacement
TheReplacement's picture

Only if he is a she but we know she is not so no we do not want.

Mon, 12/01/2014 - 05:48 | 5503887 Rigger
Rigger's picture

The naked guy standing next to him at the store, chuckling and giggling like a schoolgirl? That'd be me...

Mon, 12/01/2014 - 13:35 | 5505003 Pareto
Pareto's picture

he he heeeeee

Sun, 11/30/2014 - 20:58 | 5502999 Ness.
Ness.'s picture

Merry Chirstmas to us.  I wish snowblowers would crash in price during snow storms.  Funny, that never happens.  

Say, that reminds me..?

Sun, 11/30/2014 - 20:58 | 5503005 loveyajimbo
loveyajimbo's picture

Only down 4%?!!?!?!  Guy must be a genius... albiet a nutless faggot coward genius.  Hope the investors burn him at the stake when silver hits $50 again...

Sun, 11/30/2014 - 20:58 | 5503006 razorthin
razorthin's picture

Sell low, assholes!

Sun, 11/30/2014 - 21:02 | 5503013 papaswamp
papaswamp's picture

So $61 for crude and yen at 122 by the end of the week? I think the $64-62 price range will get heavily defended. The yen/Japanese economy is just plain fucked.

Sun, 11/30/2014 - 21:29 | 5503104 kowalli
kowalli's picture

122 today

Sun, 11/30/2014 - 21:51 | 5503160 Pareto
Pareto's picture

If they defend it, it will be short lived - the last legs on a decline are the most violent.  In my opinion, crude's cursmudging is just getting wearmed up.  You're right though, it will be defended as it marks the 2010 swoon. And +1000 for "The yen/Japanese economy is just plain fucked."  Couldn't have said it better.

Sun, 11/30/2014 - 21:02 | 5503015 Fix It Again Timmy
Fix It Again Timmy's picture

Hold tight folks, it's beginning to look like a "Chinese Deflationary Drill"....

Sun, 11/30/2014 - 21:06 | 5503033 papaswamp
papaswamp's picture

Looks like the officials are trying to control the word as best as possible. 50.3 PMI isnt pretty considering all the intervention.

Sun, 11/30/2014 - 22:52 | 5503335 JD59
JD59's picture

You are 100% right. The only place inflation is occuring is in Ovomit care & beef prices. Meat is going bad in the stores.

Sun, 11/30/2014 - 21:02 | 5503016 Quinvarius
Quinvarius's picture

The Fed and the Treasury are going to knock the crud out of the USD.  It is pretty clear they pushed it up way too high for the fake financial system to handle.  It doesn't matter what it means to the economy.  The bankers and traders the Fed works for can't handle it. 

Sun, 11/30/2014 - 21:03 | 5503023 california chrome
california chrome's picture

On the weekly chart, Copper is gonna ride the lower Bollinger Band until the 1.61% Fib Extension at $2.70 and then next target is 200% Fib Extension at $2.40.  

Sun, 11/30/2014 - 21:04 | 5503024 yogibear
yogibear's picture

Looks like the oil cash share buybacks were not great after all as oil crashes and a need for cash is important.

Sun, 11/30/2014 - 21:14 | 5503053 WTFUD
WTFUD's picture

Help me i'm drowning, my wife lost her cunt in a fanny .com bubble.

Sun, 11/30/2014 - 21:22 | 5503082 Yen Cross
Yen Cross's picture

  Shit ! At this rate we don't need no stinking "holiday sales".  Where can I trade in some of my skittle shitting unicorns for new Tesla?

Sun, 11/30/2014 - 21:26 | 5503094 gatorengineer
gatorengineer's picture

Lets have a little fun for the Friday close....  JPY north of 120, Euro 122.xx, Dow over 18k, Gold 1060, Silver 13.50....... Unemployment 5.6........  post your picks and we see how week one of the fantasy world works out.

Sun, 11/30/2014 - 21:33 | 5503114 kowalli
kowalli's picture

JPY north of 125, Euro 1.24, Dow over 18k, Gold 1200, Silver 15.00....... Unemployment 5.6.

Sun, 11/30/2014 - 21:46 | 5503145 Pareto
Pareto's picture

Feels like price is right......JPY leans on 130.  Dow 18,300, Gold 1090, Silver 12.90, Unemployment 6.9 (hence more QE).

Mon, 12/01/2014 - 05:00 | 5503851 HardlyZero
HardlyZero's picture

Moody's downgrades third-biggest economy's credit rating to A1 from AA3.

http://www.cnbc.com/id/102226574?trknav=homestack:topnews:2

Sun, 11/30/2014 - 22:25 | 5503252 himaroid
himaroid's picture

10 yr = 1.5%

No time for the rest.

I am busy tuning up my precious metal dump truck sized PICK UP truck.

Sun, 11/30/2014 - 22:57 | 5503340 HardlyZero
HardlyZero's picture

Yes of course.  

But if Putin starts a war then Oil and Gold might shoot up again.

and Iran/Russia/China 'buddy up'.

Sounds like a dismal economic plan.

Sun, 11/30/2014 - 23:29 | 5503420 tarabel
tarabel's picture

 

 

JPY 118

Euro 1.24

Dow 17,800

Gold 1165

Silver 15.80

FSA recruits 5.5

Ruble down but don't know how much

Pound hanging tough

WTI (get your kicks on Route 66)

While I agree with most everybody's trends in general, somebody has to be out to make a buck off of the herd before they let it go further.

Sun, 11/30/2014 - 21:26 | 5503095 Cautiously Pess...
Cautiously Pessimistic's picture

If gasoline keeps dropping in price, I will just leave my car running in the parking garage at work all day.  That way the car is nice and toasty when I come out at the end of the day!

 

Wait ZH'ers .. my wife is yelling something at me from the other room.........            

 

What is that honey?  Somebody from the EPA on the phone for me?

 

 

 

Sun, 11/30/2014 - 22:15 | 5503225 kowalli
kowalli's picture

run

Sun, 11/30/2014 - 21:47 | 5503146 assistedliving
assistedliving's picture

had no idea.  asa one turns on CNBS one's Ag turns immediately into Pb.  and to think

i was hoping it would turn to Au.  boy am i dumb.  so stupid i'm thinking i might even

buy more...

please 

somebody 

shoot me 

know what i mean?  https://www.youtube.com/watch?v=fymw5ie9Zd4

 

Sun, 11/30/2014 - 22:01 | 5503188 rsnoble
rsnoble's picture

Oil was this cheap just a few years ago.  Why was it not a problem then and now it is?  Who ARE the assholes making money and losing money in other words?

Does sub $3 gas hurt you?  Do you give a rats ass about chrsitina ill suck your cock in  Venezula? The answer? No and no.

Fuck you exxon cum belchers!

Sun, 11/30/2014 - 22:13 | 5503214 rsnoble
rsnoble's picture

And not only that, if oil TRULY represents the US economy then let's let the likes of Obama's retarded ass explain why we're paying less at the pump!   "My fellow American People(a joke in itself),gas prices aren't really a good indicator of our illustrious economy,no, it's more so the number of high paying jobs and support of the (non) middle class lifestyle that this (sorry ass) country are all about.  Once reality catches up to our current situation, gas should be $4+ a gallon and you'll have more fucking money than every before to pay for it!!

If that sounds fucked up..........it's because it was. Just like the shit spewed out of Bush's mouth. just like the fucking clown's shit the spews forth after Obama.

I've had with these clowns.  Wake the goddamn fuck up!

Mon, 12/01/2014 - 00:53 | 5503588 TheReplacement
TheReplacement's picture

You should post like this on Yahoo.  ZH'ers are the choir.

Mon, 12/01/2014 - 04:09 | 5503816 The Wedge
The Wedge's picture

The garbage coming out of politicians mouths have got nothing to do with nothing. Maybe read about how the markets work and not repeat political rhetoric, you'll blow a gasket!

 

Sun, 11/30/2014 - 22:14 | 5503224 rsnoble
rsnoble's picture

Ok Mr. negative 1..............please explain to me why oil at this level in 2014 is BAD, and was NOT bad in 2010? We all fucking knew talk of recovery was BS in 2010 and that the rise to this price in 2014 was all make believe bullshit.  Were you  left in the fucking dust retard?

Sun, 11/30/2014 - 23:53 | 5503477 NoPension
NoPension's picture

So much cash borrowed in the last couple of years for new drilling operations. The game only works for them if oil is over $70-75 a bbl.
And the whole game is levered up the wazoo. At these prices, they shut down and walk away, go bankrupt. And that's being polite.

Mon, 12/01/2014 - 05:33 | 5503869 cornflakesdisease
cornflakesdisease's picture

Wall Street steps in and buys them up for pennies on the dollar.

Mon, 12/01/2014 - 03:59 | 5503811 The Wedge
The Wedge's picture

The dip in oil price in 2009 was because world demand fell off a cliff after 2008. Supply and demand forces drug the price lower, briefly. As production was cut price began to stabilize and continued to rise due to devaluation of the dollar, the unit most oil is traded in. There is always a rubber band effect. Now, demand has fallen again and Saudi Arabia has kept up production in the face of lower demand creating an increased supply which is the price deflation you see. Their reasons for this??? Feel free to speculate.

Now, as this article is illustrating, the price rout is spreading to other commodities. This deflation will leak into durable goods next. This, in monetary terms, is whats known as core price deflation. This is great for you and me, at least for a time. It is a realized gain that cannot be taxed. Some assholes will call it a tax cut as though it's given to you by the government. But for the central banks and government, deflation is a bad thing. In our debt based system, at the point it's at, deflation means default and possibly some other really bad side effects (hyperinflation etc.). They must continually inflate to pay off the debt (keep up with) with devalued money.

This is why the Chinese and other major US debt holders hedge with gold. They know the repayment will be worth far less that what they originally loaned. Borrow $1000 dollars with 20% interest and pay back $1200 that's really only worth $500. This allows for creating massive debt loads and assures the central banks get their money until it all falls apart. It's more complicated than what I have illustrated but this is the problem.

No one is saying it's bad that you save a little money, at least for a short time. Deflationary events usually precede inflationary events. So good, bad it depends on who you are and your circumstances and how all this plays out. Good luck!

Sun, 11/30/2014 - 22:10 | 5503209 JDFX
JDFX's picture

$40 Oil . 

Sun, 11/30/2014 - 22:15 | 5503226 HardlyZero
HardlyZero's picture

Oil only 'ran up' after the loose monetary policy began after .com collapse in 2000.

So really,,,,no QE = $20 Oil.

Makes sense.

At some point tangibles (Gold and Silver) will have worth as fiat collapses.

Sun, 11/30/2014 - 22:19 | 5503233 rsnoble
rsnoble's picture

Well golly gee, unless you pump the shit out of the ground and store it at sea in mass tankers that's all the shit is worth.  The world is awash with fucking oil. Don't let the clown from "
"IT" convince you otherwise.

Sun, 11/30/2014 - 22:18 | 5503235 rsnoble
rsnoble's picture

Well golly gee, unless you pump the shit out of the ground and store it at sea in mass tankers that's all the shit is worth.  The world is awash with fucking oil. Don't let the clown from "
"IT" convince you otherwise.

Sun, 11/30/2014 - 22:26 | 5503258 stormsailor
stormsailor's picture

looks like its hanging around 65.00 after plunging to 64.10.  it never tested that price again.  will get pretty interesting if it does.

Sun, 11/30/2014 - 23:09 | 5503362 HardlyZero
HardlyZero's picture

Brent $68.51

WTI $64.74

...and dropping.   Look at the 5-day chart ... near 12% drop in last few trading days.

http://data.cnbc.com/quotes/%40CL.1/tab/2

Sun, 11/30/2014 - 22:36 | 5503283 JD59
JD59's picture

S hit just think of all the money the sheeple will have to go out and spend in this booming economy! NOT! Except at your local gun stores, where sales really are booming!

Sun, 11/30/2014 - 22:42 | 5503299 JD59
JD59's picture

I can hear all of the libtards on CNBS, saying how Christmas sales will be up this year, because the sheeple will have more money in their pockets from the "tax cut" of lower gas prices.  Tax cut my azz!

BULLSHIT!

Sun, 11/30/2014 - 23:06 | 5503367 Amerikan Patriot
Amerikan Patriot's picture

Well, whatever the case, they'll certainly be able to spend their gas money on gifts now that oil's been eviscerated.

Sun, 11/30/2014 - 22:37 | 5503289 himaroid
himaroid's picture

It has been a good ride.

Playing the U.S. long bond. Nice interest payments and steady cap gains.

Time to begin average down in precious. The dollar/bond thingy is feelin' weezy.

Thanks Antal Fekete. "When the speculators sell the tbonds and buy commodities, you will know the jig is up." (paraphrase)

Feels close to me.

Want to be down there by the proverbial theatre exit door when the hysterical bitch screams "FIRE!".

Sun, 11/30/2014 - 22:42 | 5503313 TalkToLind
TalkToLind's picture

It's time to re-introduce the V10 Ford Excursion!  What good is cheap gas if you can't drive a land barge?

Mon, 12/01/2014 - 01:11 | 5503622 Rusty Shorts
Rusty Shorts's picture

TRITON V-10, 6 mpg, man those were the good 'ole days!

Sun, 11/30/2014 - 22:57 | 5503344 cart00ner
cart00ner's picture

http://www.sfgate.com/business/article/Natural-gas-to-1-gasoline-5701521...

Siluria reported Wednesday that its latest, $30 million fundraising round was led by Saudi Aramco, the world's largest oil company. These guys are making petrol/diesel cheaply out of natural gas without all the toxic chemicals.

Could be the reason for the sell-off.

Mon, 12/01/2014 - 00:19 | 5503520 Ginsengbull
Ginsengbull's picture

I wonder how much helium Linde will recover.

 

That's where the real bubble will be.

Mon, 12/01/2014 - 01:01 | 5503603 Rusty Shorts
Rusty Shorts's picture

lmao 

Sun, 11/30/2014 - 23:01 | 5503349 Psquared
Psquared's picture

This drop in oil coincided with the end of QE and economic sanctions against Russia over the Ukraine. It is a currency and trade war meant to break the back of Russia.

Sun, 11/30/2014 - 23:03 | 5503361 Amerikan Patriot
Amerikan Patriot's picture

Who knows, but with most of Vlad's authoritarian regime's revenue coming from oil, it sure will be fun to watch!

Sun, 11/30/2014 - 23:01 | 5503357 Amerikan Patriot
Amerikan Patriot's picture

"Oh boo-hoo-hoo, my oil empire has almost run its course!"

- Vlad

 

Sun, 11/30/2014 - 23:12 | 5503384 HardlyZero
HardlyZero's picture

Yes.  Recall before WWII the US supplied Japan a great deal of Oil and Gasoline.  When the US stopped selling to Japan was when they became enemies, and Japan had to go find or take-over countries for energy resources.

History repeats or rhymes ?

Sun, 11/30/2014 - 23:04 | 5503363 dot_bust
dot_bust's picture

Perhaps the reason that prices for commodities are being smashed is that the U.S. Dollar is in grave danger. One of the few ways left to prop the Dollar is to suppress the price of oil and gold.

Sun, 11/30/2014 - 23:05 | 5503368 Spungo
Spungo's picture

M M M M M M MONSTER KILL
This will be a fantastic buying opportunity for oil companies. I mean real oil companies. Not these shitty fake oil companies that have negative cash flow even when oil is $100. 

Mon, 12/01/2014 - 06:31 | 5503867 medium giraffe
medium giraffe's picture

M&A orgy already underway.  Oil will probably find decent demand around $40 if it continues to slide - but if not we charge across the Rubicon.  Long popcorn.

Sun, 11/30/2014 - 23:18 | 5503397 847328_3527
847328_3527's picture

Fundamentals coming home to roost with painful reversion to the mean.

Sun, 11/30/2014 - 23:19 | 5503401 Downtoolong
Downtoolong's picture

If you think this is bad, wait until the after Christmas sales.

 

Sun, 11/30/2014 - 23:24 | 5503417 sandiegoman
sandiegoman's picture

It's funny all of the back the truck up comments as gold fell and fell and fell. Then the conspiracy spigot started. Now it's bullshit comments like you don't lose until you sell. This place is full retard.

Sun, 11/30/2014 - 23:24 | 5503418 sandiegoman
sandiegoman's picture

It's funny all of the back the truck up comments as gold fell and fell and fell. Then the conspiracy spigot started. Now it's bullshit comments like you don't lose until you sell. This place is full retard.

Mon, 12/01/2014 - 00:06 | 5503495 Amerikan Patriot
Amerikan Patriot's picture

Ain't that the truth.

Sun, 11/30/2014 - 23:39 | 5503444 Amerikan Patriot
Amerikan Patriot's picture
Ruble Crashes Past Historic 50 to U.S. Dollar as OPEC Lets Oil Price Fall

The ruble plunged on Friday, falling past 50 versus the U.S. dollar after OPEC's refusal to implement production cuts caused oil prices to nosedive.

The Russian currency reached 50.4 against the dollar in after-hours trading, extending a dramatic week-long tumble that raises the possibility of intervention by the Central Bank to steady the market. Against the euro the ruble ended the day at 62.85.

The ruble, which is at its lowest level since the currency was redenominated in 1998, has lost over 11 percent against the dollar since Monday, one of the worst performing weeks on record.

The Organization of Petroleum Exporting Countries (OPEC) said Thursday that it would not curb output to shore up prices, prompting oil to shed over $5 in a day to trade at four-year lows.

The price of Brent crude, the international oil benchmark, plummeted below $70 a barrel during late trading on Friday, despite stabilizing earlier in the day at about $73 a barrel.

Russian President Vladimir Putin said Friday that he saw nothing surprising in OPEC's decision, nor the subsequent oil price fall.

“It's an inevitable reaction,” Putin said, according to a transcript on the Kremlin's website. He added that he expected the Russian economy to crater as the New Year begins and for ordinary Russians to alternate between begging in the streets and asking for his head on a platter.

Russia depends for about half its budget revenues on energy exports, so the falling price of crude has an immediate knock-on effect on the Russian currency and stocks.

The ruble has lost almost 35 percent of its value against the dollar this year in the face of weakening oil and Western sanctions on Moscow over the Ukraine crisis.

The Central Bank implemented a free floating currency earlier this month after spending over $70 billion to defend the ruble since January, but has said that it retains the right to sell foreign currency reserves on the market if there is a threat to financial stability.

“Perhaps given the dreadful geopolitical setting the strategic importance of the Central Bank's currency reserves has increased and they want to conserve these at all costs,” Timothy Ash, an emerging markets analyst at Standard Bank, said in a note Friday.

“This may well suggest that the ruble will continue to take the strain as long as oil prices remain under downside pressure.”

The Central Bank said in a statement Friday that it would limit ruble liquidity via its foreign-currency swaps in an effort to bring stability to the currency market.

“The key is the mindset of the Central Bank, and what would be required for it to intervene,” chief currency strategist at Sberbank CIB Tom Levinson said in a note Friday. “Collapsing oil prices justify the ruble's weakness. However, it is the pace of ruble's declines and the public's behavior that we think will govern its decision.”

The dollar-denominated RTS index, which is particularly badly hit by ruble weakness, sank to five-year lows of 969 points in Friday morning trading.

Mon, 12/01/2014 - 01:01 | 5503600 TheReplacement
TheReplacement's picture

So you are saying that it takes more rubles to buy an ounce of gold now but you always harp about people here being fools for gold...

You just proved the point against yourself.  Congrats, that is not as easy as it looks I am sure.

Check back soon when AP repeats the above post talking about the US Dollar dumping in its pants.

Mon, 12/01/2014 - 05:22 | 5503861 HardlyZero
HardlyZero's picture

Japan gets Moody's downgraded credit rating to A1 from AA3.

http://www.cnbc.com/id/102226574?trknav=homestack:topnews:2

 

It's all in motion.

Sun, 11/30/2014 - 23:41 | 5503447 Laughing Sawfish
Laughing Sawfish's picture

Maybe the Swiss gold referendum was the black swan event we have been waiting for?

Sun, 11/30/2014 - 23:43 | 5503456 Amerikan Patriot
Amerikan Patriot's picture

Oil is down

Ruble is down

Gold is down

Russian economy is down

Russian currency fund is down

Vlad is officially on suicide watch

Sun, 11/30/2014 - 23:49 | 5503471 scrappy
scrappy's picture

Urgent 3:00 am memo - Tomorrow will be a great time for some GULF.

 

Mon, 12/01/2014 - 01:29 | 5503647 IridiumRebel
IridiumRebel's picture

I wish your computer was down.

Mon, 12/01/2014 - 01:32 | 5503651 Boogity
Boogity's picture

Yawn..  And the wet dream of American energy independence is almost over with the shale oil revolution just about flushed with barely a skid mark left. 

Mon, 12/01/2014 - 01:42 | 5503677 Rock On Roger
Rock On Roger's picture

ziotroll

Mon, 12/01/2014 - 00:13 | 5503506 GittyUP
GittyUP's picture

It's a perfect storm for gold to get slammed down.. Huge deflationary forces at work. The biggest physical bid in the market (Russia) just lost 20% purchasing power as it's currency is getting pummeled and it's oil income slashed by 40%. I'm sure as it struggles to pay bills and is basically shut off from the international capital markets (can't sell bonds) it's going to continue to buy gold....NOT. Russia is going to pull its physical bid and the nail in coffin to see gold in triple digits. Possibly by end of the year.

Been saying if for years gold is dropping big time. All you gold bugs should drop your prepping for dummies book and do some actual research. If you really believe moeny printing will lead to hyper inflation and loss of dollar value then you would know that all hyperinflation is preceded by massive DEfLaTION first!! Weep could possibly be in act 3 as deflation is starting. Only when deflation gets so bad (and gold is down down down) does the government have no choice but to print like crazy. Only then does the loss of confidence in currency lead to hyper inflation rather the the actual money being printed. Gold then would sky rocket.

Mon, 12/01/2014 - 00:17 | 5503509 NoWayJose
NoWayJose's picture

Russia might buy less but India, China, and the rest of the world is smacking their lips -- and buying moar!

Mon, 12/01/2014 - 02:57 | 5503763 The Wedge
The Wedge's picture

"Only when deflation gets so bad (and gold is down down down) does the government have no choice but to print like crazy".

The thing to remember is not just money printing it's what they do with it in a deflationary scenario like the one we are headed into. If you listen closely you can hear the helicopter warming up for the direct money drop. There is no other tool left. The velocity of money has gone off a cliff, went off in 2009 and hasn't come back, so clearly their efforts to inflate have failed. But I don't think direct pumping will work nor will increased subsidies. But they cannot let deflation take hold because the debt will swallow everyone. A big giant cluster fuck set in motion by the Saudi's.

Mon, 12/01/2014 - 06:00 | 5503893 desirdavenir
desirdavenir's picture

I believe that the current rounds of money printing are more deflationary than inflationary : this printed money is immediately employed (multiple times) to buy stuff. Stuff being here mostly financial assets in a direct way, a non-financial assets (e.g. houses through loan packaged and sold as a financial asset) indirectly. But given that these buyings do not create any wealth (no new money flow, just changes in money flow direction, such as a mortage that just earmarks a part of an individual's income towards paying down a debt) and instead reduce the free cash flow of individuals for the duration of the mortage, hence less money available in the future, hence deflation in the future. And this just to provide price stability now. 

This is a completely insane policy, and it will go on *without inflation*. I still remember someone telling me in 2007 (after BNP started the game in august) that first the central bank will print 10 billions, then 100, then 1000, ... The shit with exponential is that to provide the same growth (the temporary uptick of inflation at the arrival of the new money, soon compensated by a long down trend to compensate) you have to use ever bigger numbers, until your money doesn't make sense at all. But for a while, I am confident that central bankers can obtain price stability (and thus no durable deflation) through ever increasing QE. Until the time the money they print is not accepted anymore as real, and then there will be hyperinflation in fiat money terms. This is a dead end, and all the central bankers can do is either let the house fall, accept deflation now, deal a death blow to all things financials that prospered during the debt binge of the past 40 years, or walk the dead end, trying to keep the charade going as long as possible, each step making the alternative worse, until the money isn't worth anything. 7 years ago I thought it would be impossible for intelligent central bankers (because let's admit one must be intellectually brilliant to reach such a position) to choose the dead end, but now I came to admit that they and politicians will do anything to have the shit happening not during their time, and fuck the future generations.

Mon, 12/01/2014 - 10:16 | 5504180 falak pema
falak pema's picture

Those intelligent CBs in France went to the same "Doing God's work" school as your avatar holder (assuming you are one of her minions posting this doomerist conclusion).

And, the Voltaire promotion of that school is rampant in running those CB shenanigans and aiding and abetting it with the instruments of France's NEW statist BASTILLE : The BERCY complex (have mercy on the tax payers); as arbitrary as the Bastille was under Richelieu and his "lettres de cachet", that glorious role model of absolutist tradition and Machiavellian intelligence.

Some things never change while France's coterie of elitist "non rulers" wring their hands in frustration. 

Victory has many fathers but defeat is an orphan...Start looking for scapegoats; its always a first step.

On the extreme right they sing the song of Chateaubriand "memoires d'outre-tombe", to express their melancholic spleen; forgetting that the Chateaubriand steak, if sauced with such toxic language, is a road to national Lepenist purgatory.

What new fangled french sauce do you propose? 

PS /...(because let's admit one must be intellectually brilliant to reach such a position) to choose the dead end, but now I came to admit that they and politicians will do anything to have the shit happening not during their time, and fuck the future generations....

Does this mean that some bright minds of France's great class are preparing to leave the Hollande ship now chartered via Bercy/BNP towards that "dead end" ?

Mon, 12/01/2014 - 00:14 | 5503507 NoWayJose
NoWayJose's picture

A real good chance we are seeing the lows in silver right now at just under $15. They trashed it hard the end of last week, taking advantage of the light holiday trading, to also drive it down for the end of November closing price. They don't really want to drop the price to let the little guys buy phyzz so they will play tonight but will close up their positions before the US opens.

They might play with it during Monday's trading to see if the Swiss vote algo headlines draw out some sellers, but they will want to ring their cash registers soon.

Mon, 12/01/2014 - 00:26 | 5503533 holdbuysell
holdbuysell's picture

At times like these, one wonders what the direct leverage is (20x) and then the indirect leverage (50x?) as the collateral chains start popping.

Speaking of popping...popcorn's ready.

Mon, 12/01/2014 - 03:03 | 5503710 devo
devo's picture

They wants de outperforming fiats.

Mon, 12/01/2014 - 02:45 | 5503754 viedoklis_lv
viedoklis_lv's picture

You won't read in ZH

"Putin’s Health Care Disaster"

www.thedailybeast.com/articles/2014/11/30/putin-s-health-care-disaster.html

Mon, 12/01/2014 - 07:20 | 5503921 blabam
blabam's picture

Who gives a fuck about healthcare in Russia? 

Mon, 12/01/2014 - 03:23 | 5503786 ivana
ivana's picture

this is a full blown financial war against putin ... and the winner is ????

Mon, 12/01/2014 - 04:28 | 5503829 The Wedge
The Wedge's picture

Not just Putin!!!! Central banks cannot allow deflation to run. The winner will likely be China who coincidentally have made major investments in Saudi Arabia. Dangerous games they play for sure.

Mon, 12/01/2014 - 05:26 | 5503865 HardlyZero
HardlyZero's picture

West vs. East (China/Russia)

Japan is in-play.

Mon, 12/01/2014 - 03:28 | 5503790 ivana
ivana's picture

paper against scissors & rocks :-)

until nukes start flying around :-(

Mon, 12/01/2014 - 04:06 | 5503814 The Shape
The Shape's picture

After a few months time when there's been consolidation and the oil tiddlers have been run out of business we'll find out supply wasn't as high as we were told and China was buying more to fill their reserves blah blah, up she shoots

Mon, 12/01/2014 - 04:26 | 5503828 viedoklis_lv
viedoklis_lv's picture

If you support US oligarch regime and/or Putin oligarch regime - than you are supportin NWO, because they are playing wit you.

I guess you are awere about how US oligarch regime is connected with masonic rule, so start to think this about Putin oligarch regime.  Start investigating. Start thinking that both regime uses same tactics: lies, manipulation, force, no respect to international law, oppres own people by taking away their rights "for their own interest & security" etc.

Here ... start at least with symbolism:

http://www.knightstemplar.org/KnightTemplar/articles/20140727.htm

http://www.theforbiddenknowledge.com/symbology/2o5.htm

http://1.bp.blogspot.com/-dqeEL5lwOXc/Td6HJASyG-I/AAAAAAAAA38/bCILijG2je...

 

Start hinking with your own head!

Mon, 12/01/2014 - 15:28 | 5505542 TeethVillage88s
TeethVillage88s's picture

viedoklis_lv

I heard the Catholic Church is like a Mafia. What about in Russia?

Does either the Orthodox or Catholic Churches have big guys involved in Mafia Type Activity.

See Melissa Rossi Book, What Every American Should Know About Who's Really Running the World

Do NOT follow this link or you will be banned from the site!