Davos

Billionaires may live in a world untroubled by such petty concerns as rising costs of living and declining real wages, but like everyone else they have to eat. And pay. The picture below shows what the menu prices, in Swiss Francs, are for various meals offered for sale to the billionaires and other upper class "luminaries" currently congregating in Davos.  Some examples converted to USD: Hot Dog: $43; Burger: $47; Caesar salad: $55.

The 7-month-old plunge in oil prices will force Moscow to cut its budget for 2015 by 10 percent, perhaps even 15 percent, a senior Russian government official told a panel discussion at the World Economic Forum in Davos Switzerland, adding that Russia may find itself reducing oil production by as much as 1 million barrels per day, but he stressed that such a cut would not be made in coordination with OPEC.

• Saudi Arabia’s New King Probably Will Not Change Current Oil Policy (BBG)
• Saudi King’s Death Clouds Already Tense Relationship With U.S. (WSJ)
• Oil Pares Gains as New Saudi King Says Policies Stable (BBG)
• Kuroda Says BOJ to Mull Fresh Options in Case of More Easing (BBG)
• U.S. pulls more staff from Yemen embassy amid deepening crisis (Reuters)
• Putin Said to Shrink Inner Circle as Hawks Beat Billionaires (BBG)
• A Few Savvy Investors Had Swiss Central Bank Figured Out (WSJ)

As reported earlier, several hours ago Saudi Arabia announced that its 91-year-old King Abdullah had passed away, in the process setting off what may be a fascinating, and problematic, Saudi succession fight which impacts everything from oil, to markets to geopolitics, especially in the aftermath of the dramatic political coup in neighboring Yemen. As a reminder, it is Saudi Arabia whose insistence on not cutting oil production with the intent of hobbling the US shale industry has led to the splinter of OPEC, and to a Brent price south of $50. Which is why today's event and its implications will be analyzed under a microscope by everyone: from politicians to energy traders. Here, courtesy of Ecstrat's Emad Mostaque, is an initial take at succession, the likely impact on oil, then the Saudi market & currency and finally regional politics.

Billionaire Jeff Greene - who flew his wife, children and two nannies on a private jet plane to Davos for the week - has some words of wisdom for the average American: "America’s lifestyle expectations are far too high and need to be adjusted so we have less things and a smaller, better existence. We need to reinvent our whole system of life."

"Davos Man... derives most of his income, directly or indirectly, from state patronage. Davos is a place where you see, in Marxist terms, is a gang of rentiers coming together to devise new means to live off the sweat of the workers... It’s like an Ayn Rand novel, where lobbyists reach cosy arrangements with each other in elliptical language."

A crashing Yen failed to help Japan or fix its economy, but while Japan may now be a lost cause, the Keynesian masterminds of the world will give it another try, and following today's Draghi's announcement, the EURUSD has crashed to the lowest level since 2003, tumbling over 200 pips, and printing below 1.14 moments ago. However, in a clear indication that the party for the USD-bulls may be ending, none other than the US commerce secretary moments ago said the impact of a rising dollar on exports and economic growth bears monitoring.

With less than two hours until the ECB unveils its first official quantitative easing program, the markets appear to be in a unchanged daze. Well, not all markets: the Japanese bond market overnight suffered its worst sell off in months on a jump in volume, although for context this means the 10Year dropping from 0.25% to 0.32%. Whether this is a hint of the "sell the news" that may follow Draghi's announcement is unclear, although Europe has seen comparable weakness across its bond space as well and the US 10 Year has sold off all the way to 1.91%, which is impressive considering it was trading under 1.80% just a few days ago. Stocks for now are largely unchanged with futures barely budging and tracking the USDJPY which after rising above 118 again overnight, has seen active selling ever since the close of the Japanese session.

After 6+ years of deepening poverty and rising stock markets, of creative accounting, of QE and ultra-low interest rates, of extend and pretend and outright propaganda and of what have you, all of which have led us to where we are today, facing yet more rounds of stumbling from crisis into multiple crises, it would seem clear that the model, if not the mold, is broken. In order to fix it, let alone replace it altogether, we need to understand to what extent it is broken. And to do that, we first need to know what exactly the model is. However, the rich-and-powerful in Davos believe in one model only, the one of ever increasing centralization and globalization, because that’s the model that got them where they are.

Because nothing says 'stability' like a Central Bank in charge of things, the smartest richest men in the world have proclaimed in Davos this week that "we need a central bank of oil, like the central bank in financial world." As long as they are not Swiss, of course. Oil has been volatile today amid these calls for stability after Saudi Aramco comments on cutting projects (supply) sent prices higher, and was then talked back by the CEO bringing prices lower. Oman - the largest non-OPEC Middle East oil producer - blasted that "we have created volatility," noting it was having a "really difficult time," and that's "bad for business," demanding OPEC slow production. But it was The IMF that sparked the greatest concerns as it warned oil producers to treat this oil price drop as permanent noting that they expect these economies to lose $300 billion. only to be contradicted by OPEC's al-Badri who noted "oil prices will rebound back to normal soon."

This year's theme: Canceled NWO

With the western world facing high terror alerts, the biggest meeting of top CEOs and world leaders comes at a delicate time. As Bloomberg's Tom Gibson exclaims in this brief clip, "it feels like half the Swiss army is here," but officials play down the security presence as 'business as usual'. With a special no-fly-zone and snipers overhead, Davos is protected by 3,000 military personnel for these few days... no wonder the billionaires aren't worried about leaving their private jets unlocked on the Davis runways.

• Obama Targets Income Gap in Address That Shapes 2016 Election (BBG)
• Republicans Reject Obama’s Main Economic Proposals (WSJ)
• Senate’s Shelby Says White House Bank Tax Is Dead on Arrival (BBG)
• Is Dollar Next? Investors Reassess After Swiss Shock: Currencies (BBG)
• Bank of Japan Cuts Price Forecast, Maintains Record Stimulus (BBG)
• Pound Weakens After BOE Policy Makers Drop Call to Raise Rates (BBG)
• Putin not flinching on Ukraine despite economic crisis (Reuters)
• Indonesia will not make public full preliminary AirAsia crash report (Reuters)
• Party Hasn't Stopped for Russians at Davos Even With Ukraine Sanctions (BBG)

Three days after Chinese stocks suffered their biggest plunge in 7 years, the bubble euphoria is back and laying ruin to the banks' best laid plans that this selloff will finally be the start of an RRR-cut, after China's habitual gamblers promptly forget the market crash that happened just 48 hours ago and once again went all-in, sending the Shanghai Composite soaring most since October 9, 2009.  It wasn't just China that appears confused: so is the BOJ whose minutes disappointed markets which had been expecting at least a little additional monetary goosing from the Japanese central bank involving at least a cut of the rate on overnight excess reserves, sending both the USDJPY and US equity futures lower. Finally, in the easter egg department, with the much-anticipated ECB announcement just 24 hours away, none other than the ECB's Ewald Nowotny threw a glass of cold water in the faces of algos everywhere when he said that tomorrow's meeting will be interesting but one "shouldn’t get overexcited about it."