Mapping The World's Muslims

With President Obama having bombed 7 mostly-Muslim nations in his reign as Nobel-Peace-Prize-Winner-in-Chief, we thought Pew Research’s study on where the world’s Muslims are would be useful context…

 

The world’s population of Muslims is estimated at 1.6 billion and the following 39 countries or territories with substantial Muslim populations represent two-thirds of them…

 

 

Source: Pew Research




via Zero Hedge http://ift.tt/1Bdwh6C Tyler Durden

Mapping The World’s Muslims

With President Obama having bombed 7 mostly-Muslim nations in his reign as Nobel-Peace-Prize-Winner-in-Chief, we thought Pew Research’s study on where the world’s Muslims are would be useful context…

 

The world’s population of Muslims is estimated at 1.6 billion and the following 39 countries or territories with substantial Muslim populations represent two-thirds of them…

 

 

Source: Pew Research




via Zero Hedge http://ift.tt/1Bdwh6C Tyler Durden

Fracked Up: Don't Believe In Miracles

Via Jim Quinn’s Burning Platform blog,

There is no doubt that fracking stopped the long-term decline in U.S. oil output. Since the all-time low output in 2006, daily oil production has increased by 30%. Natural gas production has soared even higher, but seems to have leveled off. Ignoring the environmental impacts of fracking, just the economics alone show that shale oil and gas are not the miracle that will save us from the perils of peak cheap oil. Fracking extraction of oil is extremely expensive. If oil prices were to fall to $80 per barrel, there would be no profits for frackers. They would stop drilling wells. So don’t plan on ever paying less than $3 per gallon for gasoline ever again.

 

 

Other inconvenient truths about fracking are self evident, but covered up by the MSM and Wall Street shysters.

  • To maintain production of 1 million barrels of oil a day from Iraq one needs to drill just 60 new wells a year. Extracting the same amount from the Bakken would require 2,500 new wells.
  • A typical fracked well poked in the ground in Oklahoma in 2009 debuted with an output of about 1,200 barrels of oil per day. Just four years later, however, output from the same well has fallen to just 100 barrels of oil per day.
  • To double that output from the Bakken, for instance, would require 5,200 new wells a year, and tripling it would require 7,800 and so on. Then, to the horror of all, less than a decade after all that was done, that additional million barrels of oil a day in production would be reduced to just 100,000, no matter what the oil companies do, because of the nature of the formation where the well was drilled.
  • California’s Monterey Shale, which the U.S. Energy Information Agency thought contained 13.7 billion barrels of oil in 2011, came up a little light in the loafers. Closer examination revealed the formation to be much more broken up underground than previously thought — so much so that only around 600 million barrels may ultimately be recovered with current technology. That’s a 97 percent downgrade, and there is no guarantee that other rosy predictions of shale oil riches both in the U.S. and elsewhere won’t have similar outcomes.

The best fracking locations were selected first. As time goes on, the new locations will be less productive. The existing locations deplete rapidly. The shale oil and gas boom will be peaking out over the next few years. Don’t believe in miracles.




via Zero Hedge http://ift.tt/1n4xLix Tyler Durden

Fracked Up: Don’t Believe In Miracles

Via Jim Quinn’s Burning Platform blog,

There is no doubt that fracking stopped the long-term decline in U.S. oil output. Since the all-time low output in 2006, daily oil production has increased by 30%. Natural gas production has soared even higher, but seems to have leveled off. Ignoring the environmental impacts of fracking, just the economics alone show that shale oil and gas are not the miracle that will save us from the perils of peak cheap oil. Fracking extraction of oil is extremely expensive. If oil prices were to fall to $80 per barrel, there would be no profits for frackers. They would stop drilling wells. So don’t plan on ever paying less than $3 per gallon for gasoline ever again.

 

 

Other inconvenient truths about fracking are self evident, but covered up by the MSM and Wall Street shysters.

  • To maintain production of 1 million barrels of oil a day from Iraq one needs to drill just 60 new wells a year. Extracting the same amount from the Bakken would require 2,500 new wells.
  • A typical fracked well poked in the ground in Oklahoma in 2009 debuted with an output of about 1,200 barrels of oil per day. Just four years later, however, output from the same well has fallen to just 100 barrels of oil per day.
  • To double that output from the Bakken, for instance, would require 5,200 new wells a year, and tripling it would require 7,800 and so on. Then, to the horror of all, less than a decade after all that was done, that additional million barrels of oil a day in production would be reduced to just 100,000, no matter what the oil companies do, because of the nature of the formation where the well was drilled.
  • California’s Monterey Shale, which the U.S. Energy Information Agency thought contained 13.7 billion barrels of oil in 2011, came up a little light in the loafers. Closer examination revealed the formation to be much more broken up underground than previously thought — so much so that only around 600 million barrels may ultimately be recovered with current technology. That’s a 97 percent downgrade, and there is no guarantee that other rosy predictions of shale oil riches both in the U.S. and elsewhere won’t have similar outcomes.

The best fracking locations were selected first. As time goes on, the new locations will be less productive. The existing locations deplete rapidly. The shale oil and gas boom will be peaking out over the next few years. Don’t believe in miracles.




via Zero Hedge http://ift.tt/1n4xLix Tyler Durden

The Logistical Challenge Of Air Operations In Syria

From Stratfor

The Logistical Challenge Of Air Operations In Syria

The composition of the force carrying out airstrikes in Syria highlights the logistical complexity of this kind of operation. Most of the U.S. aircraft taking part in the operations over northern Iraq and Syria are based in and around the Persian Gulf, meaning they are operating far from their origins. Bahrain, Jordan, Saudi Arabia, the United Arab Emirates and Qatar reportedly participated in the initial operations in Syria, adding further complexity and coordination issues.

While U.S. aircraft are spread around several bases in the region, the USS George H.W. Bush aircraft carrier, currently located in the Persian Gulf, has one of the highest concentrations of air assets. Carrier Wing 8 comprises 48 F/A-18 multirole aircraft as well as EA-6B Prowler electronic warfare aircraft. Elements of this strike force took part in the third wave of operations over Syria on Sept. 22. These carrier-based aircraft would have been operating more than 850 miles from their point of origin, which is beyond their combat radius.

This extended range makes aerial refueling assets necessary to conduct operations in Syria, just as they have been for operations over northern Iraq in recent weeks. These assets can extend the operational range of aircraft significantly. Yet, the dependence on aerial refueling tanker aircraft for the execution of these airstrikes is a major constraint. U.S. sources have already hinted at a lack of capability for aerial refueling, and Washington has called upon its allies to assist in building capacity for ongoing operations. Previously, when airstrikes were still limited to northern Iraq, aerial refueling aircraft enabled other aircraft to conduct long-range combat patrols and surveillance flights in a third of the air sorties conducted.

With U.S. allies in the region taking a more active role in the airstrikes, the prospect of flying more U.S. aircraft from bases in Gulf countries increases. Along with the possibility of using Turkish air bases, the potential to deploy air assets from locations in neighboring countries would simplify the logistics that go into running long-range combat patrols and airstrikes assisted by aerial refueling. A further problem to overcome, however, is the obstacle of domestic politics and the potential for regional friction as a result of involvement in a U.S.-led air campaign.




via Zero Hedge http://ift.tt/1svfH3e Tyler Durden

"The Gig Is Up"

Via Scotiabank’s Guy Haselmann,

In a switch from what are typically only one-sidedly dovish comments, NY Fed President Dudley was balanced this week, even citing reasons for why the Fed would want to hike rates.

Dudley stated that “being at the zero-lower-bound is not a very comfortable place to be”, because it “limits” flexibility and has “consequences for the economy”. He said it “hurts savers”, and while acknowledging “what is happening” to financial markets, he avoided directly citing risks to financial stability.  Anxiety-riddled conversations about financial instability are probably implicitly restricted to a ‘behind-closed-doors-only’ rule.

FOMC members are slowly and carefully trying to change the conversation.  Yellen completely diluted away any meaning behind “considerable period” to make it all but meaningless.  Bullard said to that he still “sees the first tightening at the end of the first quarter”.

A March 18th hike seems reasonable to me, since US economic improvement appears to remain on track (at least for the moment) and since the FOMC seems more anxious to begin the normalization process.  Actually though, by waiting even until March, it is possible that the FOMC risks missing its window of opportunity in terms of using US economic momentum as its cover (what irony).

Financial markets are becoming agitated and disturbed by shifting government and central bank policies, mounting geo-political tensions, and rising nationalist fervor.  QE has not yet ended and the Fed is likely still months away from hiking for the first time, but markets are using these factors to adjust portfolio exposures.  These are hints that a larger market reaction is likely to unfold as the Fed’s policy transition approaches. 

Macro signs are currently evident with steep commodity price declines, rising FX volatility, rallying global bond markets (long end), and sagging prices for low quality credits.  Some investors are clearly getting out of the Fed-generated “herd” trades of recent years and saying that they are doing so because “the Fed’s balance sheet is set to stop expanding next month”.

The strengthening dollar is one consequence and it has already had an impact on commodities and Emerging Markets.  In turn, weakening currencies in EM countries are starting to trigger capital outflows. It may lead toward domestic central bank hikes (again) which weaken those economies and cause second-order effects.

The prolonged period of zero rates has enabled many EM-based corporations to issue debt in USD, so a weakening currency raises their liabilities and lowers the value of their assets.  Such a dynamic was a source of past crises.

Any anti-globalization actions, such as protectionism, will further act as global economic headwinds. Nationalistic momentum could become disruptive via social unrest or via surprises in the voting booth.  Extreme nationalist parties continue to gain in popularity in numerous European countries. Religious, ethnic and tribal conflicts are spilling across borders.  Putin’s annexation of Crimea was a bold nationalistic action that hid behind a veil of protecting Russian speakers.  China, Japan and India all have new nationalistic leaders who use patriotic jargon to spur structural and economic reform.

For investors, Fed stimulus has trumped all other factors.  It has lowered risk premia and inflated asset prices.  The gig is soon up, but investors have yet to adequately adjust. Unfortunately, they will attempt to do so with significantly compromised market liquidity.  The path to normalization is made even more challenging, because Japan and Europe are in recession, and China is slowing.

Note: Pentagon comments this week about foiling an “imminent attack” was negative for risk assets as were Treasury Department efforts to clampdown on “inversion”.

I maintain that one of the best places to hide remains in 30-year Treasury bonds.

“No one told you when to run, you missed the starting gun.”  – Pink Floyd




via Zero Hedge http://ift.tt/1BdcGU0 Tyler Durden

“The Gig Is Up”

Via Scotiabank’s Guy Haselmann,

In a switch from what are typically only one-sidedly dovish comments, NY Fed President Dudley was balanced this week, even citing reasons for why the Fed would want to hike rates.

Dudley stated that “being at the zero-lower-bound is not a very comfortable place to be”, because it “limits” flexibility and has “consequences for the economy”. He said it “hurts savers”, and while acknowledging “what is happening” to financial markets, he avoided directly citing risks to financial stability.  Anxiety-riddled conversations about financial instability are probably implicitly restricted to a ‘behind-closed-doors-only’ rule.

FOMC members are slowly and carefully trying to change the conversation.  Yellen completely diluted away any meaning behind “considerable period” to make it all but meaningless.  Bullard said to that he still “sees the first tightening at the end of the first quarter”.

A March 18th hike seems reasonable to me, since US economic improvement appears to remain on track (at least for the moment) and since the FOMC seems more anxious to begin the normalization process.  Actually though, by waiting even until March, it is possible that the FOMC risks missing its window of opportunity in terms of using US economic momentum as its cover (what irony).

Financial markets are becoming agitated and disturbed by shifting government and central bank policies, mounting geo-political tensions, and rising nationalist fervor.  QE has not yet ended and the Fed is likely still months away from hiking for the first time, but markets are using these factors to adjust portfolio exposures.  These are hints that a larger market reaction is likely to unfold as the Fed’s policy transition approaches. 

Macro signs are currently evident with steep commodity price declines, rising FX volatility, rallying global bond markets (long end), and sagging prices for low quality credits.  Some investors are clearly getting out of the Fed-generated “herd” trades of recent years and saying that they are doing so because “the Fed’s balance sheet is set to stop expanding next month”.

The strengthening dollar is one consequence and it has already had an impact on commodities and Emerging Markets.  In turn, weakening currencies in EM countries are starting to trigger capital outflows. It may lead toward domestic central bank hikes (again) which weaken those economies and cause second-order effects.

The prolonged period of zero rates has enabled many EM-based corporations to issue debt in USD, so a weakening currency raises their liabilities and lowers the value of their assets.  Such a dynamic was a source of past crises.

Any anti-globalization actions, such as protectionism, will further act as global economic headwinds. Nationalistic momentum could become disruptive via social unrest or via surprises in the voting booth.  Extreme nationalist parties continue to gain in popularity in numerous European countries. Religious, ethnic and tribal conflicts are spilling across borders.  Putin’s annexation of Crimea was a bold nationalistic action that hid behind a veil of protecting Russian speakers.  China, Japan and India all have new nationalistic leaders who use patriotic jargon to spur structural and economic reform.

For investors, Fed stimulus has trumped all other factors.  It has lowered risk premia and inflated asset prices.  The gig is soon up, but investors have yet to adequately adjust. Unfortunately, they will attempt to do so with significantly compromised market liquidity.  The path to normalization is made even more challenging, because Japan and Europe are in recession, and China is slowing.

Note: Pentagon comments this week about foiling an “imminent attack” was negative for risk assets as were Treasury Department efforts to clampdown on “inversion”.

I maintain that one of the best places to hide remains in 30-year Treasury bonds.

“No one told you when to run, you missed the starting gun.”  – Pink Floyd




via Zero Hedge http://ift.tt/1BdcGU0 Tyler Durden

Central Banking Is The Problem, Not The Solution

Submitted by Richard M. Ebeling via Ludwig von Mises Institute,

Since the economic crisis of 2008-2009, the Federal Reserve — America’s central bank — has expanded the money supply in the banking system by over $4 trillion, and has manipulated key interest rates to keep them so artificially low that when adjusted for price inflation, several of them have been actually negative. We should not be surprised if this is setting the stage for another serious economic crisis down the road.

Back on December 16, 2009, the Federal Reserve Open Market Committee announced that it was planning to maintain the Federal Funds rate — the rate of interest at which banks lend to each other for short periods of time — between zero and a quarter of a percentage point. The Committee said that it would keep interest rates “exceptionally low” for an “extended period of time,” which has continued up to the present.

Federal Reserve Policy and Monetary Expansion

Beginning in late 2012, the then-Fed Chairman, Ben Bernanke, announced that the Federal Reserve would continue buying US government securities and mortgage-backed securities, but at the rate of an enlarged $85 billion per month, a policy that continued until early 2014. Since then, under the new Federal Reserve chair, Janet Yellen, the Federal Reserve has been “tapering” off its securities purchases until in July of 2014, it was reduced to a “mere” $35 billion a month.

In her recent statements, Yellen has insisted that she and the other members of the Federal Reserve Board of Governors, who serve as America’s monetary central planners, are watching carefully macro-economic indicators to know how to manage the money supply and interest rates to keep the slowing general economic recovery continuing without fear of price inflation.

Some of the significant economic gyrations on the stock markets over the past couple of months have reflected concerns and uncertainties about whether the Fed’s flood of paper money and near zero or negative real interest rates might be coming to an end. In other words, borrowing money to undertake investment projects or to fund stock purchases might actually cost something, rather than seeming to be free.

When the media has not been distracted with the barrage of overseas crises, all of which seem to presume the need for America to play global policeman and financial paymaster to the world at US taxpayers’ expense, the presumption by news pundits and too many economic policy analysts is that the Federal Reserve’s manipulation of interest rates is a good, desirable and necessary responsibility of the central bank.

As a result, virtually all commentaries about the Fed’s announced policies focus on whether it is too soon for the Federal Reserve to raise interest rates given the state of the economy, or whether the Fed should already be raising interest rates to prevent future price inflation.

What is being ignored is the more fundamental question of whether the Fed should be attempting to set or influence interest rates in the market. The presumption is that it is both legitimate and desirable for central banks to manipulate a market price, in this case the price of borrowing and lending. The only disagreements among the analysts and commentators are over whether the central banks should keep interest rates low or nudge them up and if so by how much.

Market-Based Interest Rates Have Work to Do

In the free market, interest rates perform the same functions as all other prices: to provide information to market participants; to serve as an incentive mechanism for buyers and sellers; and to bring market supply and demand into balance. Market prices convey information about what goods consumers want and what it would cost for producers to bring those goods to the market. Market prices serve as an incentive for producers to supply more of a good when the price goes up and to supply less when the price goes down; similarly, a lower or higher price influences consumers to buy more or less of a good. And, finally, the movement of a market price, by stimulating more or less demand and supply, tends to bring the two sides of the market into balance.

Market rates of interest balance the actions and decisions of borrowers (investors) and lenders (savers) just as the prices of shoes, hats, or bananas balance the activities of the suppliers and demanders of those goods. This assures, on the one hand, that resources that are not being used to produce consumer goods are available for future-oriented investment, and, on the other, that investment doesn’t outrun the saved resources available to support it.

Interest rates higher than those that would balance saving with investment stimulate more saving than investors are willing to borrow, and interest rates below that balancing point stimulate more borrowing than savers are willing to supply.

There is one crucial difference, however, between the price of any other good that is pushed below that balancing point and interest rates being set below that point. If the price of hats, for example, is below the balancing point, the result is a shortage; that is, suppliers offer fewer hats than the number consumers are willing to buy at that price. Some consumers, therefore, will have to leave the market disappointed, without a hat in hand.

Central Bank-Caused Imbalances and Distortions

In contrast, in the market for borrowing and lending the Federal Reserve pushes interest rates below the point at which the market would have set them by increasing the supply of money on the loan market. Even though savers are not willing to supply more of their income for investors to borrow, the central bank provides the required funds by creating them out of thin air and making them available to banks for loans to investors. Investment spending now exceeds the amount of savings available to support the projects undertaken.

Investors who borrow the newly created money spend it to hire or purchase more resources, and their extra spending eventually starts putting upward pressure on prices. At the same time, more resources and workers are attracted to these new investment projects and away from other market activities.

The twin result of the Federal Reserve’s increase in the money supply, which pushes interest rates below that market-balancing point, is an emerging price inflation and an initial investment boom, both of which are unsustainable in the long run. Price inflation is unsustainable because it inescapably reduces the value of the money in everyone’s pockets, and threatens over time to undermine trust in the monetary system.

The boom is unsustainable because the imbalance between savings and investment will eventually necessitate a market correction when it is discovered that the resources available are not enough to produce all the consumer goods people want to buy, as well as all the investment projects borrowers have begun.

The Central Bank Produces Booms and Busts

The unsustainability of such a monetary-induced investment boom was shown, once again, to be true in the latest business cycle. Between 2003 and 2008, the Federal Reserve increased the money supply by at least 50 percent. Key interest rates, including the Federal Funds rate, and the one-year Treasury yield, were either zero or negative for much of this time when adjusted for inflation. The rate on conventional mortgages, when inflation adjusted, was between two and four percent during this same period.

It is no wonder that there emerged the now infamous housing, investment, and consumer credit bubbles that burst in 2008-2009. None of these would have been possible and sustainable for so long
as they were if not for the Fed’s flood of money creation and the resulting zero or negative lending rates when adjusted for inflation.

The monetary expansion and the artificially low interest rates generated wide imbalances between investment and housing borrowing on the one hand and low levels of real savings in the economy on the other. It was inevitable that the reality of scarcity would finally catch up with all these mismatches between market supplies and demands.

This was, of course, exacerbated by the Federal government’s housing market creations, Fannie Mae and Freddie Mac. They opened their financial spigots through buying up or guaranteeing ever more home mortgages that were issued to a growing number of high-risk borrowers. But the financial institutions that issued and then marketed those dubious mortgages were, themselves, only responding to the perverse incentives that had been created by the Federal Reserve and by Fannie Mae and Freddie Mac.

Why not extend more and more loans to questionable homebuyers when the money to fund them was virtually interest-free thanks to the Federal Reserve? And why not package them together and pass them on to others, when Fannie Mae and Freddie Mac were subsidizing the risk on the basis of the “full faith and credit” of the United State government?

More Monetary Mischief in the Post-Bubble Era

What was the Federal Reserve’s response in the face of the busted bubbles its own policies helped to create? Between September 2008 and June 2014, the monetary base (currency in circulation and reserves in the banking system) has been increased by over 440 percent, from $905 billion to more than $4 trillion. At the same time, M-2 (currency in circulation plus demand and a variety of savings and time deposits) grew by 35 percent during this time period.

Why haven’t banks lent out more of this huge amount of newly created money, and generated a much higher degree of price inflation than has been observed so far? Partly, it is due to the fact that after the wild bubble years, many financial institutions returned to the more traditional credit-worthy benchmarks for extending loans to potential borrowers. This has slowed down the approval rate for new loans.

But more importantly, those excess reserves not being lent out by banks are collecting interest from the Federal Reserve. With continuing market uncertainties about government policies concerning environmental regulations, national health care costs, the burden of the Federal debt and other government unfunded liabilities (Social Security and Medicare), as well as other possible political interferences in the marketplace, banks have found it more attractive to be paid interest by the Federal Reserve rather than to lend money to private borrowers. And considering how low Fed policies have pushed down key market lending rates, leaving those excess reserves idle with first Ben Bernanke and now Janet Yellen has seemed the more profitable way of using all that lending power.

Even under the heavy-handed intervention of the government, markets are fundamentally resilient institutions that have the capacity to bounce back unless that governmental hand really chokes the competitive and profit-making life out of capitalism. Any real recovery in the private sector will result in increased demands to borrow that would be satisfied by all of that Fed-created funny money currently sitting idle. Once those hundreds of billions of dollars of excess reserves come flooding into the market, price inflation may not be far behind.

Central Banking as the Problem, Not the Solution

At the heart of the problem is the fact that the Federal Reserve’s manipulation of the money supply prevents interest rates from telling the truth: How much are people really choosing to save out of income, and therefore how much of the society’s resources — land, labor, capital — are really available to support sustainable investment activities in the longer run? What is the real cost of borrowing, independent of Fed distortions of interest rates, so businessmen could make realistic and fair estimates about which investment projects might be truly profitable, without the unnecessary risk of being drawn into unsustainable bubble ventures?

Unfortunately, as long as there are central banks, we will be the victims of the monetary central planners who have the monopoly power to control the amount of money and credit in the economy; manipulate interest rates by expanding or contracting bank reserves used for lending purposes; threaten the rollercoaster of business cycle booms and busts; and undermine the soundness of the monetary system through debasement of the currency and price inflation.

Interest rates, like market prices in general, cannot tell the truth about real supply and demand conditions when governments and their central banks prevent them from doing their job. All that government produces from its interventions, regulations, and manipulations is false signals and bad information. And all of us suffer from this abridgement of our right to freedom of speech to talk honestly to each other through the competitive communication of market prices and interest rates, without governments and central banks getting in the way.




via Zero Hedge http://ift.tt/1suYOWn Tyler Durden

Gavekal Warns Of "Clear And Present Danger" For Stocks

Via Gavekal's Capital blog,

There are four developments in the fixed income markets that represent a clear and present danger for stocks.  

First,  high yield spreads continue to widen, diverging from the upward movement in stocks prices.  In the chart below we plot high yield spreads against the S&P 500 over the last ten years. Until today the equity market seemed unfazed by the widening in spreads.

image

Second, inflation expectations derived by comparing 10-tear nominal US Treasuries against the 10-year TIPS show a recent big drop.  This is likely due to the recent strength in the USD, but regardless of the reason, the drop in inflation expectations is undoing much of the reflationary work the Fed has tried to achieve.  Should inflation expectations fall below 2%, the danger signal would intensify.

image

Third, 10-year bonds around the global are taking another leg down.

image

Fourth, the spread between 30-year and 10-year US Treausry bonds is narrowing tonew five year lows.  The last time the long end of the yield curve was this flat was in the first few months of 2009.

image

 

*  *   *

Trade accordingly.




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