Category: zerohedge

Russia-24 (Россия-24), a state-owned Russian-language news channel from Moscow, spent five minutes on Tuesday advising its viewers how to prepare for a nuclear war amid the increasing tensions with the United States over Syria. The television anchor urged the country’s citizens to purchase essential items and emergency supplies to stock their bomb shelters.

The title of the television broadcast “Inviolable stock: what should I take with me to the bomb shelter?,” explains how a nuclear war with the United States would be “catastrophic,” as a TV anchor from Russia-24 informed citizens how to get ready for World War III.

“If some people did give in to the panic, and decided to spend all their savings on a survival kit, we’ll tell you how to not waste money on something you won’t need.”

He recommended that people purchase salt, oatmeal, and other products that have a long shelf life. He even said powdered milk, grains, and sugar could last for years in storage, as one video during the broadcast demonstrated how to cook pasta while hiding in a bunker. The special broadcast then transitions to the next TV presenter Alexey Kazako, who explains the number one rule of surviving a nuclear blast is “fewer sweets, more water.”

He said: “All chocolates, candies and condensed milk will have to be left behind.

“Glucose is an unrivaled energy source but sweets will make you thirsty, and water will be the most valuable resource for bomb shelter residents.”

Eduard Khalilov, a specialist in survival, explained to viewers about the importance of stocking fresh water.

He said, “people can only survive up to three days without water, but can go up to three weeks without food.”

The channel’s anchor recommended people buy gas masks, radiation tablets, and read nuclear war survival handbooks. The instructions are for “people who succumb to panic and decide to spend all their savings,” he added.

Tensions between both countries have never been higher, as a surge in war fears have flourished after the United States appears to be mobilizing for an attack on Syria. The special aired on the same day Russia’s ambassador to Lebanon said Moscow is prepared to shoot down any U.S. missiles.

“If there is a strike by the Americans, then the missiles will be downed and even the sources from which the missiles were fired,” warned Alexander Zasypkin, Russia’s ambassador to Lebanon, during an interview on Tuesday with a television station linked to Hezbollah.

#Russian ambassdor in beirut : “If there is a strike by the Americans on #Syria , then… the missiles will be downed and even the sources from which the missiles were fired,” Zasypkin told Hezbollah’s al-Manar TV, speaking in Arabic. pic.twitter.com/iMGKMLxWp4

— Nasser Atta (@nasseratta5) April 11, 2018

After Russia’s warning, Trump took to Twitter sparking fears that a conflict could break out between the two nuclear-armed superpowers.

Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and “smart!” You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!

— Donald J. Trump (@realDonaldTrump) April 11, 2018

Video: Inviolable stock: what should I take with me to the bomb shelter?

“While political scientists and military experts are discussing possible scenarios, someone is already in a hurry to inflate the hysteria. And not in Syria, but in Russia. The web is written almost for the forthcoming Third World War. If all of the sudden there were those who gave in to panic and decided to lower all their savings to the untold reserve, we will tell you how not to spend money in vain.”

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Authored by Chris Hamilton via Econimica blog,

Organic demand or population growth alone (absent surging debt) among the consumer base that consumes in excess of 90% of global oil, is collapsing.  I have detailed this previously; The Most Important Economic Charts…Aren’t Economic Charts , Trade Wars Just Beginning…The War Is a Fight Over an Indefinitely Shrinking Pie , and Global Growth in Energy Consumption (& Economic Growth) is All About China…Nothing but China ). 

This article focuses solely on the demand side of oil (but the situation is similar for most commodities or assets for that matter) and details the decelerating number of potential consumers versus forecasts of continued trend growth in consumption. 

However, I make no predictions regarding the oil price outlook as there are far too many other factors regarding; supply, currencies, geo-politics, cap-ex for exploration, depletion rates of existing fields, and far more.  My sole focus and point is that growth in demand is fast waning but that price is an amalgam of demand with many other factors that may result in a rising price despite declining and soon to be falling organic demand.

Two regions of the world represent nearly all population growth but consume relatively small quantities of oil.  I have grouped Africa and S. Asia (India, Pakistan, Afghanistan, Nepal, Bhutan, Sri Lanka, Bangladesh) as a single unit versus the remainder of the world.  These two regions are collectively slightly more than 40% of the total world population but consume just under 10% of the world oil output.

Neither Africa nor S. Asia have the relative income, savings, nor access to credit to consume anywhere near the levels seen in most of the rest of the world.  Given they are currently relatively minor consumers, even a relatively high rate of growth will not offset the decelerations and declines among the vast majority of oil consumers elsewhere.

This means we can focus on the 60% of the world population that consume 90%+ of the global oil output.  The chart below shows the total under 65 year old population excluding Africa/S. Asia (blue line) and the annual change (red columns).  Growth among this cadre continues decelerating and by about 2026 will begin declining for an indefinite period.

Using EIA data and UN data, I want to focus on the change per five year periods in two variables:

1. Change in global oil consumption (MBPD)

2. Change in the under 65 year old population that consumes in excess of 90% of the worlds oil (world under 65 year old population growth minus under 65 population growth among collective Africa/S. Asia).

The chart below shows the cumulative growth per five years of the consuming population versus the global growth in oil consumption from 1985 through 2020 and estimates (dashed circle) through 2035.

While the growth of the under 65 year old global consumer base has slowed 75% from peak growth in the late eighties compared to the current ’15-’20 period, the growth in oil consumption has been relatively consistent over the same period.  This has been achieved by the concurrent cheapening of interest rates to incent massive increases in personal, corporate, and governmental debt.  This substitution of higher debt and leverage for slowing organic growth has artificially maintained a higher growth rate than otherwise organically possible.

However, from 2020 through 2025, the EIA forecasts oil consumption will continue trend growth while population growth among the consumer base has decelerated 90% compared to peak growth (and turns to outright declines within the decade), global interest rates simply can’t get much cheaper, debt levels continue climbing beyond sustainable levels (resulting in large overcapacity absent further interest rate cuts and utilization of greater debt), and innovation / conservation / alternative sources of energy marginally reducing oil consumption.

Some will suggest the surging 65+ year old population will offset the soon to be declining under 65 year old population.  However, as the chart below shows, US (and worldwide) household income / spending significantly decline as the head of household ages.  Peak income and spending takes place around 50 years old.  By age 75, both earnings and spending fall in half and this group is highly credit averse (little to no multiplier absent the willingness to “charge it”).  So, while there is some marginal growth that should be expected from the surge in 65+ year olds, it is relatively weak.

Simply put, even with continued ludicrous levels of debt creation and misallocation taking place, I’ll take the under against the EIA’s forecast for continued trend growth of global oil consumption…way under.  But again, this does not necessarily mean the price of oil in dollars or Yuan or Euros will be declining as there are far too many other factors which are simultaneously affecting supply or the value of “money” and what backs them (Near Record Treasury Issuance… But Who The Buyers Are May Surprise ).

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We detailed yesterday the fact that satellite images showed 11 Russian warships leaving the Syrian port of Tartus. The market initially kneejerked higher on the basis of the belief this was a ‘withdrawal’ or backing-down of tensions, but, as we noted, it was anything but – and now a Russian lawmaker has confirmed this was more offense than defense.

A snapshot of the port of Tartus, shows the Russian warships at anchor before, according to ISI:

And after: a single Russian submarine remains at Tartus.

 

Interfax now reports that Vladimir Shamanov, the head of the Defense Committee at Russian State Duma, told lawmakers that Russian military ships left Tartus naval base in Syria to ensure their security..

Confirming what we pointed out yesterday, Shamanov noted that it is usual practice for ships to leave naval base and disperse when there’s risk of attack.

This is done to ensure that one enemy munition round doesn’t damage more than one vessel at a time.

Additionally, a Russian lawmaker has confirmed that Moscow is in direct contact with US military staff for Syria.

All of which seems to suggest that the chance of a US (or allies) missile attack is increasing, not decreasing, as Russia’s foreign ministry warned that Washington’s statements threatening use of force are “extremely dangerous.”

 

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SSDD…

No matter what is happening, when 0930ET strikes, the machines start buying…

But there is another pattern too…

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CIA Director and former Indiana Congressman Mike Pompeo will face off against Senate Democrats Thursday morning during his confirmation hearing to succeed Rex Tillerson as Secretary of State.

Watch it live below:

According to excerpts leaked to CBS, Pompeo is trying to communicate to lawmakers that he will be a very different Secretary of State than Tillerson.

At the outset, Pompeo will offer assurances that he will be a very different secretary of state than Rex Tillerson. Pompeo will, according to excerpts of his opening statement, promise to keep in regular contact with lawmakers, will “do my best to pick up your calls on the first ring” and “be a regular visitor to the Capitol.” He’ll also tell lawmakers that he’s already met with hundreds of State Department staffers, whom, he said “shared how demoralizing it is to have so many vacancies and, frankly, not to feel relevant.” He’ll aim to help the State Department culture “find its swagger once again.”

The hearing was set to begin at 9:30, but has been delayed. It should be starting any minute.

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Authored by Lawrence Thomas via GoldTelegraph.com,

As the anticipation for a US and China trade war continues, market participants are beginning to plan accordingly.

As initially reported by Bloomberg, investors are starting to flock to gold as holdings in all bullion-backed exchange traded funds is at its highest level since 2013.

The bullion-backed exchange traded funds have risen for four straight days which is the longest run since January. As a side note, the third largest commodity-linked ETF (Xetra-Gold) now has 177 million shares outstanding, which is the most since the fund started trading in 2007.

Other notable gains from gold ETF’s include:

China’s Bosera Gold ETF which is on track to see its most significant returns since being listed in 2014. The ETF has added $610.8 million this year. Also, iShares Gold Trust ETF has seen the addition of $1.49 billion in 2018.

Clearly, the market is beginning to price in a trade war between two of the world ’s largest economies, and many fear the aftermath could be rampant inflation.

Most notably, the head of world’s largest hedge fund Ray Dalio recently laid out his concerns about this trade war on LinkedIn:

I’m worried and forced to look harder at the question of where Donald Trump is leading us. What is his real agenda? Right now, I don’t think it’s clear to anyone, including some of the people closest to Donald Trump, what exactly his strategic objectives are – Ray Dalio

Dalio has also issued his concern with the fact that China could retaliate with its $1.2 trillion of U.S. Treasury bonds.

If China begins to unwind its treasury position then interest rates would be pushed much higher, so not only is Dalio worried about a trade war he signed off by warning  about the potential for a “capital war.”

We should think beyond trade wars to consider the possibility of other types of wars. to whatever extent anyone believes that the US has the advantage in a trade war because it has a big deficit (so it has more to gain) one could say the same for China in a capital war because it has the bigger deficit.  – Ray Dalio

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With war likely set to break out in Syria at any moment, a question many Americans are asking is… where is Syria? Geographical challenges aside, it is safe to say that the situation in Syria is extremely fluid, and changing on an almost daily basis, which is why we have shown several strategic and tactical snapshot maps of Syria as of this moment.

The first and most useful one, courtesy of Turkey’s Omran Dirasat think tank, shows updated areas of control and influence in Syria by international military forces with reference to the most prominent international military sites in Syria.

The second map, from Dirasat employee Nawar Sh. Oliver lays out the control and influence zone in Syria as of April 2018, revealing the relative % of gains and losses in the last 24 days.

Finally, from the regional political journal, Suriye Gündemi English, here is a map showing the latest military situation as well as location of key military bases in Syria ahead of the expected US strikes.

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Echoing findings by UK government scientist Gary Aitkenhead, the Organization for the Prohibition of Chemical Weapons (OPCW) said Thursday that its investigators had “confirmed the findings of the UK relating to the identity of the toxic chemical that was used in Salisbury”

Effectively the lab confirmed that the military grade nerve agent used to poison Sergei Skripal and Yulia Skripal during an attack which reportedly took place at a public shopping center was, in fact, Novichok – a nerve agent developed by the Soviet Union, even if the OPCW did not explicitly name it. But crucially, like the scientists at Porton Down, the OPCW was unable to identify the origins of the nerve agent, per the Associated Press.

The news is the latest hit to the UK government’s “official” narrative that Russia masterminded the attack on the Skripals without a shadow of a doubt. UK Foreign Minister Boris Johnson was adamant that the government had incontrovertible evidence that Russia masterminded the attack – most likely with the explicit approval of Russian President Vladimir Putin.

Johnson had even threatened to pull the UK from the World Cup in retaliation. Ultimately, the UK government’s accusations led to more than 25 countries expelling one or more Russian diplomat, with Russia retaliating in kind.

This despite the UK Foreign Office backpedaling in the weeks after the escalation, going so far as to deny that it had ever claimed that the nerve agent used on the Skripals had come from Russia – and even deleting a tweet where it claimed the Novichok nerve agent had been produced in Russia.

Now, it appears the OPCW has come to the same conclusion as Aitkenhead & Co., who had reportedly faced significant pressure to confirm the origins of the agent used in the attack – a pressure they resented.

The international chemical weapons watchdog has confirmed Britain’s finding that a former spy and his daughter were poisoned with a nerve agent.

The report Thursday says Organization for the Prohibition of Chemical Weapons investigators “confirm the findings of the United Kingdom relating to the identity of the toxic chemical that was used in Salisbury.”

It says the chemical was “of high purity.” The summary does not name Novichok – the name that was previously given by British Prime Minister Theresa May – but says the details of the toxin are in the full classified report.

It does not identify the source.

The tests were carried out by four independent laboratories affiliated with OPCW and samples were transported under a “full chain of custody”, according to the report.

According to Sky News, tests carried out by experts from the Organization for the Prohibition of Chemical Weapons (OPCW) showed the ner ve agent was found in environmental samples collected in Salisbury.Blood tests also revealed that the chemical was found in blood samples taken from the Skripals and Detective Sergeant Nick Bailey, the police officer who first attended the scene.

Still, Johnson didn’t hesitate to call the results “conclusive”.

“There can be no doubt what was used and there remains no alternative explanation about who was responsible – only Russia has the means, motive and record.” Or, anyone else with an organic chemistry lab for that matter.

“We will now work tirelessly with our partners to help stamp out the grotesque use of weapons of this kind and we have called a session of the OPCW executive council next Wednesday to discuss next steps,” the UK foreign secretary added. “The Kremlin must give answers.”

We doubt the Kremlin, which is about to engage in a hot war with the US in Syria, will care to give answers.

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Despite a modest disappointment in import prices MoM (and beat in MoM export prices)…

Under the hood:

• Import prices ex-fuels rose 0.2% after rising 0.5% in Feb.

• Import prices ex-petroleum rose 0.1% after rising 0.4% in Feb.

• Industrial supplies prices fell 0.1% after no change in Feb.; first decline since July

• Capital goods prices rose 0.2% after rising 0.4% in Feb.

• Auto prices fell 0.2% after rising 0.2% in Feb.

• Consumer goods prices fell 0.1% after rising 0.6% in Feb.

But, Import and Export prices both accelerated in year-over-year gains in March (import from +3.4% to +3.6%, and exports from +3.2% to +3.4%).

 

And of course, the big global driver is China, which has started to export deflation again…

Interestingly, the broad trade-weighted dollar was down 6% year-on-year in March, twice as fast as the rate of decline six months earlier.

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The euro has slumped to session lows following the release of the latest ECB Minutes, which were unexpectedly dovish and echoed the Fed’s worries about growing trade war, noting “widespread concern” about the the potential impact of protectionism. In other words, the more aggressive Trump is with China on trade, the fewer rate hikes and less tightening to come.

More specifically, addressing the recent rise in the Euro, the ECB said that FX is a source of uncertainty, although “past appreciation has not had a marked impact on demand” and added that euro strength was not fully due to macro environment, and worse, “may have a more negative impact on inflation.” Draghi’s henchmen also toed the party line saying that “gradual communication adjustments are required.” The minutes also revealed that the inflation path close to sustained adjustment, but “majority say it is not sufficient” and as a result “Monetary support still required after the end of bond purchases.”

A detailed breakdown:

While the text was largely token, one reason for the dovish read was the following headline:

• ECB SAID REMOVAL OF EASING BIAS ‘SHOULD NOT BE MISUNDERSTOOD’

… although the full context was more neutral than the initial read: “it was also remarked that the removal of the easing bias should not be misunderstood as restricting the Governing Council’s capacity to react to shocks and contingencies, if necessary.”

However, the initial reason for the slump in the Euro was the ECB’s assessment that inflation still isn’t there. Indeed, unlike the Fed which is clearly comfortable that reflationary pressures have taken hold, the ECB was nowhere near as convinced.

“The view was put forward that the Governing Council’s criteria for a sustained adjustment in the path of inflation could be assessed as close to being satisfied over a medium-term horizon. However, the broadly agreed conclusion was that the evidence for a sustained rise in inflation towards levels consistent with the Governing Council’s inflation aim was still not sufficient.”

The ECB also voiced concerns of the Euro:

“Some caution was voiced, as the more recent developments in the euro exchange rate and in financial conditions in part reflected changing perceptions about monetary and fiscal policies, domestically and globally, as well as rising risks of protectionism and heightened market sensitivity to communication, rather than further improvements in domestic economic fundamentals.”

Finally, going back to the key topic, the ECB’s worries about trade and wider global risks:

“the balance of risks to the global economic expansion was still assessed to be tilted to the downside, as geopolitical uncertainties and uncertainty regarding the policy outlook in some major economies – including the risk of increased trade protectionism and the uncertain impact of the United Kingdom’s withdrawal from the EU – continued to constitute downside risks.”

“There was widespread concern that the risk of trade conflicts, which could be expected to have an adverse impact on activity for all countries involved, had increased…”

In response to the unexpectedly dovish ECB minutes, the euro quickly slumped to session lows.

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