Perhaps those sub-$50 Bakken prices tell us pretty much where global prices are ahead. And then we’ll take it from there. With 1.8 million barrels “that nobody needs” added to the shale industries growth intentions, where can prices go but down, unless someone starts a big war somewhere? Yesterday’s news that US new oil and gas well permits were off 40% last month may signal where the future of shale is really located. But oil is a field that knows a lot of inertia, long term contracts, future contracts, so changes come with a time lag. It’s also a field increasingly inhabited by desperate producers and government leaders, who wake up screaming in the middle of the night from dreaming about their heads impaled on stakes along desert roads.
Once again the internals of the market (advancers vs decliners, new highs vs new lows and trends) triggered a Hindenburg Omen as today's dump-and-pump on the European close and Draghi 'mis-characterization and clarification' headlines left stock green with an hour to go. Then came headlines from Die Welt that appeared to show Draghi has no majority and stocks tumbled into the close (with a small bounce late to get S&P green on the week). For the 2nd day in a row, Treasury yields fell 1-4bps (short to long-end), notably decoupling from stocks after Europe closed. HY Credit also pressed to wider wides after Europe closed even as stocks surged. The USD lost ground as EUR strengthened giving back half the week's gains (USDJPY broke 120 early but faded). Copper and Silver gained modestly, gold was flat, but oil prices slipped 1% lower back below $67. VIX briefly tested below 12.2 but ended the day barely higher at 12.6.
“Can a debt crisis be cured with more debt?” it is difficult to envision a return to normalcy within my lifetime (shorter than it is for most of you). I suspect future generations will be asking current policymakers the same thing that many of us now ask about public smoking, or discrimination against gays, or any other wrong turn in the process of being righted. How could they? How could policymakers have allowed so much debt to be created in the first place, and then failed to regulate their own system accordingly? How could they have thought that money printing and debt creation could create wealth instead of just more and more debt? How could fiscal authorities have stood by and attempted to balance budgets as opposed to borrowing cheaply and investing the proceeds in infrastructure and innovation? It has been a nursery rhyme experience for sure, but more than likely without a fairytale ending.
Wondering why stocks suddenly found a soft patch in the last few minutes of trading? Here is the reason: according to a report in German Die Welt, the ECB's president and former Goldman Sachs employee, Mario Draghi, has just lost the majority on the ECB Executive Board.
In any economy, nothing works in isolation. For every dollar increase that occurs in one part of the economy, there is a dollars worth of reduction somewhere else. The real issue is what the fall in commodities in general, including oil, is telling us about the real state of the economy.
DOJ Finds Cleveland Police Use Excessive Force, As NY Judge Orders Release Of Grand Jury Material In Garner CaseSubmitted by Tyler Durden on 12/04/2014 15:49 -0400
Less than a day after New York had its own Ferguson moment when a grand jury decided not to indict the police officer involved in the chocking death of Eric Garner, in a mirror image of events that took place a week earlier in Ferguson, the tide seems to be turning when moments ago a Justice Department probe concluded that the Cleveland Division of Police "has a pattern and practice of using excessive force, both in firing weapons and in using non-deadly techniques." And completing today's angry social snapback, also moments ABC reported that a judge on Thursday granted Staten Island District Attorney Dan Donovan's request to allow the release of limited grand jury material in the Eric Garner case Thursday.
Who could have seen that coming!!??? Apparently Draghi could not clarify exactly what he meant in 90 minutes, 3 hours ago!!!!
*ECB SAID TO PREPARE BROAD-BASED QE PACKAGE FOR JANUARY MEETING
So, despite telling us earlier than not January and not ready, we get this spurious headline just as EURUSD crossed 1.2450... Fun-durr-mentals indeed. And now Bloomberg is retracting!!
The ECB left its policy rates unchanged at today’s meeting and made no announcement of further non-conventional measures. The main innovation in today’s press conference was the shift in the language regarding the expansion of the ECB's balance sheet: an increase towards the size of its balance sheet at the beginning of 2012 is now “intended”, rather than simply an “expectation” of the Governing Council (as in the November statement). We read this as implying a higher degree of commitment to balance sheet expansion and thus as a further signal towards additional asset purchases. As made clear by ECB President Draghi, some members of the Governing Council remain sceptical about the introduction of further measures. An assessment of whether further stimulus is needed will be made “early next year”. Having emphasised that he does not need to achieve unanimity on the Governing Council to proceed with further easing (including purchases of sovereign debt), we expect Mr Draghi to announce and implement a sovereign debt QE programme during the first half of next year.
With the Fukushima disaster having disappeared from all media coverage in recent months (and with the plan to encapsulate the radioactive plant in an ice sarcophagus recently scrapped, Japan has still to reveal what its plans are for dealing with the disaster area), the world occasionally needs a reminder of the waste land that follow when nuclear power goes horribly wrong. For that we go back to the original nuclear disaster, Chernobyl, and US photographer Phillip Grossman who, while having taken numerous pictures of the radioactive sarcophagus and its surroundings in the past, has produced his most amazing work yet courtesy of a camera-equipped drone. It allowed him to use a high powered camera and get a bird’s eye view of the surrounding landscape. The stunning result is shown in the video below.
The increasing use of technology to replace human capital is a trend that will not reverse anytime soon and will continue to proliferate areas where unskilled, repetitive labor can be automated. This is the risk that fast food workers take by lobbying for higher wages; an ordering kiosk can be quickly employed to take orders and deliver those to an automated production line. Or better yet, why not allow customers to simply place orders on the way to the restaurant through an "app." The next time you go out take a moment to realize the impact of technology on everything you do. Also, notice how many individuals have the faces stuck into their phones being truly unproductive.
US Treasury Warns Investors Underestimate "Potential For A Market Reversal", Take "Low Volatility For Granted"Submitted by Tyler Durden on 12/04/2014 14:26 -0400
"Investors may have taken low volatility for granted and underestimated the potential for a reversal. While quantitative easing policies are intended to encourage investors to buy risky assets, there is also a risk that the perceived reversal of such policies will lead investors to turn the other way, triggering market instability.... Similarly, investors may have become too sanguine about the availability of market liquidity — the ability to transact in size without having a significant impact on price — during both good times and bad. Accommodative global monetary policy, coupled with the Federal Reserve’s purchases of large amounts of low-risk assets and changes in risk sentiment, helped to compress volatility and risk premiums. "
Venezuela "Boosts" Reserves With Rocks, Other "Easily Converted To Cash" Stuff; Suffers Major BlackoutSubmitted by Tyler Durden on 12/04/2014 14:05 -0400
With its bonds trading at 50% of face value, CDS implying an 84% chance of default, a black-market FX rate that signals massive devaluation is likely, and a teetering-on-the-brink of social unrest population entirely dependent on President Maduro's generosity (and the military junta), it is perhaps not entirely surprising that they are trying any trick in the book to bolster reserves. The Venezuelan Central Bank issued a statement today (akin to Europe's hookers-and-blow GDP adjustment) that enables them to count a whole new set of 'assets' as potential international reserves including "stones" and "precious metals held in their vaults on behalf of foreign financial institutions." Hey presto... new reserves. And if that wasn't enough, a massive blackout just hit Caracas...