Budget Deficit

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Saudi Aramco Confirms "World's Most Valuable Company" May Go Public





"Saudi Aramco confirms that it has been studying various options to allow broad public participation in its equity through the listing in the capital markets of an appropriate percentage of the Company’s shares and/or the listing of a bundle its downstream subsidiaries."

 
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Trader Psychology Is Reversing, Scotiabank Warns Market Is "Ripe For Volatility Spikes"





Market psychology established in recent years is reversing. Market volatility is rising and will remain pervasive for a while as psychology, the change in direction of Fed policy, and the increases in general uncertainties, will all conspire to shape an environment ripe for sharp spikes in volatility which will be further amplified by rickety market liquidity.

 
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Saudi Default, Devaluation Odds Spike As Mid-East Careens Into Chaos





On the heels of a tumultuous weekend that saw Saudi Arabia cut diplomatic ties with Iran after the Saudi embassy was torched by protesters angry at the execution of a prominent Shiite cleric, CDS spreads for the kingdom have blown out to six-year wides while the implied odds of the riyal peg finally breaking are hitting new record highs.

 
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The Bail-Ins Are Back! Portugal Slaps Senior Bank Bondholders With €2 Billion Loss





If you are an institutional investor and you bought Novo Banco bonds, you just had a bad morning...

 
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Oil Slumps As Saudis "Won't Change" Policy, Russia Rethinks 2016 Price Forecast





“We will satisfy the demand of our customers. We no longer limit production. If there is demand, we will respond. We have the capacity to respond to demand," Saudi oil minister Ali al-Naimi told reporters on Wednesday, underscoring the kingdom's belligerent stance as "lower for longer" heads into 2016. Meanwhile, Russia's Finance Ministry may reconsider its forecast for $50/bbl crude, a move which could inflate Moscow's budget deficit.

 
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The Russian Economy Is Cracking, "Social Unrest" Coming In "A Few Months", Official Warns





As the ruble plunges to record lows against the dollar, we take a close look at the outlook for inflation and GDP growth in 2016 in the context of The Kremlin's budget, which assumes $50/bbl crude. We also ask whether the deficit - expected to balloon to 4.4% of GDP in the event oil hovers around $35/bbl - will grow as a result of a planned bailout for insolvent state lender VEB. 

 
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Frontrunning: December 29





  • The World's Richest People Got Poorer This Year (BBG)
  • Oil hovers near 11-year lows on abundant supply, slowing demand (Reuters)
  • Oil-Producing States Battered as Tax-Gushing Wells Are Shut Down (BBG)
  • A Bold Few Traders Earn Billions Flouting Rivals (WSJ)
  • Islamic State ruling aims to settle who can have sex with female slaves (Reuters)
  • Winter Storm Snarls Republican Presidential Traffic (BBG)
  • Donald Trump Urges Supporters to the Polls (BBG)
 
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Something Just Snapped In 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.

 
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Saudis Boost Gas Prices by 40%, Dismantle Welfare State To Wage War With U.S. Shale





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.

 
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More Bad News For Oil: Saudis Are Handling Crude Crash Better Than Expected





Saudi Arabia has released its official budget numbers for 2015 as well as projections for next year. As it turns out, Riyadh is weathering the storm better than analysts expected, meaning the war of attrition with US producers is likely to continue for the foreseeable future, meaning "lower for longer" oil prices and even more shale defaults in the future.

 
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Frontrunning: December 23





  • Oil up after U.S. crude stocks drop, still close to 11-year lows (Reuters)
  • Global Stocks Rally; Mining, Metals Shares Lead Gains (WSJ)
  • OPEC Sees Demand for Its Crude Oil Falling for Rest of Decade (BBG)
  • The Trouble With Sovereign-Wealth Funds (WSJ)
  • U.S. Calls for 256% Tariff on Imports of Steel From China (BBG)
  • Iraqi troops expected to drive ISIS from Ramadi in days (Reuters)
 
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"The Cost Is Very High": Portugal Taxpayers Face €3 Billion Loss After Second Bank Bailout In 2 Years





Because the Novo Banco auction process went so smoothly, Portugal has decided to throw billions more in taxpayer dollars at a failed lender. This time it's Banif, which will be split into a "good" and "bad" bank just weeks ahead of new EU rules that would have seen uninsured depositors take a haircut as part of the wind down process.

 
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OPEC Members In Jeopardy, How Long Can They Hold Out?





The Saudi strategy has yet to bear itself out, but early indications suggest it is generating returns. Non-OPEC supply is expected to suffer its steepest decline in two decades in 2016, at a drop of nearly 0.5 mbpd. Moreover, U.S. shale producers are among the hardest hit. Oil production across the seven most prolific shale plays is expected to plummet a combined 116,000 bpd in January 2016. Still, the strategy is not without sacrifice, and several OPEC members are struggling to find – and, more importantly, endure – that magical balance between non-OPEC pain, market share retention/growth, and self-inflicted damage. Their tipping points are nearly impossible to predict, but there will be more losers than winners in this game of brinksmanship.

 
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