Saudi Arabia

Following yesterday's budget (deficit) and the 'sacrifice-the-people's-comfort-for-the-death-of-US-Shale' plan that we detailed here, it appears market concerns about Saudi Arabia's forward-looking health are rising. As Bloomberg reports, USDSAR 12-month forwards jumped 250pts (the most since December 2007) to 725bps (the highest level since March 1999) implying expectations of a looming de-pegged, devaluation. Perhaps just as worrying is this is the same pattern that played out in August as Yuan weakness sparked HIBOR stress, leading to SAR forward weakness and then US equity market collapse.

2015 was the year of considerable FX drawdown as desperate EM central banks attempted to rescue themselves from reality. As Barry Eichengreen noted, "Intervening to support an exchange rate that’s fundamentally overvalued is a fool’s game and a no-win situation, akin to a sovereign attempting to sustain an unsustainable debt burden rather than yielding to inevitable restructuring."

Even though the odds are never in our favor, there is still hope. Not everyone has to make the extreme sacrifice in order to contribute to the revolution. There are thousands of small acts which will weaken the establishment: "Don’t be a slave to debt. Live beneath your means and accumulate some physical silver and gold. Don’t vote for candidates selected by the vested interests. Spread the message of liberty and freedom to anyone who will listen. Think critically. Do not trust your government. Prepare for the inevitable collapse of this rotten, fetid, corrupt paradigm."

In a bid to shore up its finances in the face of self-inflicted oil wounds, Saudi Arabia is shaking up the welfare state by raising prices on everything from domestic fuel to water. Apparently, persisting in the war of attrition against the US shale complex is paramount - even if it means making life harder for everyday Saudis so the monarchy can buy itself some budget breathing room.

The sustainable floor price for oil is a Brent price in the range of $30-35/bbl. Oil prices could temporarily fall below that level; however, companies would begin to shut-in production as variable production costs would exceed cash flow for some projects

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• Shale's Running Out of Survival Tricks as OPEC Ramps Up Pressure (Reuters)
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If ever there was a clearer indication of America's "need for war" it was the latest Durable Goods orders data, which confirmed, absent defense spending, the US economy is in a tail-spin. However, as NYTimes reports, foreign arms sales by the United States jumped by almost $10 billion in 2014, about 35 percent, even as the global weapons market remained flat and competition among suppliers increased, thanks to multibillion-dollar agreements with Qatar, Saudi Arabia and South Korea.

"I've got Star Wars on Sunday, maybe later"...

Q. Could oil prices collapse to $20?
A. The short answer is ‘yes.’ We believe that crude oil prices could fall further unless global oil production is reduced.  We believe that the weakness in crude oil prices reflects a combination of fundamental factors and financial flows. Fundamentally there is simply too much oil... the current supply-demand balance is not sustainable; something has to give.

Now that the gold-trading company at the nexus of what may have been the world's biggest gold smuggling ring in history has imploded seemingly overnight, vaporizing countless tons of physical gold and unknown amounts of client cash, even more questions remain.

“For sure it will cause a big delay and it may kill the whole process. Whoever committed this crime is pushing for a military solution, not a political process solution.”

101 years after the Christmas truces along the Western Front there is still no peace on earth. And the long suffering American taxpayers, who foot the massive bills generated by the War Party’s demented and destructive policies, have no clue that Imperial Washington is the principal reason.

"Be confident that God will grant victory to those who worship him, and hear the good news that our state is doing well. The more intense the war against it, the purer it becomes and the tougher it gets."

Following the yellow brick road leads us deep, very deep inside the rabbit hole...