Category: zerohedge

Authored by Brian Cloughley via The Strategic Culture Foundation,

On June 26 two US special forces soldiers were killed in Afghanistan, bringing the total of US military personnel who have died in that useless war to 2429, according to iCasualties, an independent casualty tracker.

No matter what one might think about the rights and wrongs of the war in Afghanistan, it is sad to record such fatalities, and the question that comes to mind is: What did they die for?

According to the US State Department the military are there because “we continue to invest US resources to help Afghanistan improve its security, governance, institutions and economy,” and the Pentagon says “the principle goal… is to conclude the war in Afghanistan on terms favourable to Afghanistan and the United States.”

How?

Neither the current occupant of the White House nor any others aspiring to become president in 2020 have produced any workable proposals to end this disastrous conflict, and in an exchange of views on June 27 two of the Democratic contenders cast some light on the darkness of frustration and confusion. Members of Congress Tim Ryan and Tulsi Gabbard had a heated argument that involved Gabbard (who had served in Iraq) declaring that “The Taliban was there long before we came in; they’ll be there long before we leave. We cannot keep US troops deployed to Afghanistan thinking that we’re somehow going to squash this Taliban.” Even if she didn’t offer a solution, she is perfectly right — but it was the rejoinder of Congressman Ryan that was eye-opening. He said “I didn’t say squash them. When we weren’t in there, they started flying planes into our buildings.”

Gabbard was astonished, as well she might be, and replied “The Taliban didn’t attack us on 9/11; al-Qaeda did. That’s why I and so many other people joined the military — to go after al-Qaeda. Not the Taliban.”

Exactly. But Ryan’s demonstration of ignorance is disturbing to put it mildly. If a Member of Congress actually believes that the Taliban flew planes into New York buildings and the Pentagon on 9/11, then the Democratic Party has serious problems. Certainly, Mr Ryan will never be president, but the point is that his ignorance of history is reflected widely throughout America. (With one example being Trump’s observation in his Independence Day speech that there were airports in America in 1775.)

Fifteen of the 19 al-Qaeda hijackers were Saudis, two came from the United Arab Emirates and one each from Lebanon and Egypt. USA Today reported that they had “multiple links to associates of Saudi Arabian Prince Bandar, the former longtime ambassador to the United States. The documents show possible conduits of money from the Saudi royal family to Saudis living in the United States and two of the hijackers in San Diego. The documents also indicate substantial support to California mosques with a high degree of radical Islamist sentiment.” Not a Taliban in sight. In spite of the fact that the head man, the evil bin Laden, was in Afghanistan (and was later killed in Pakistan in a US special forces raid) the main 9/11 planning centre was in Hamburg.

And it was intriguing that Gabbard played the Afghanistan card, because as Jeffrey St Clair notes in Counterpunch, she “volunteered to go kill people in Iraq in 2004, a year after the massacre at Fallujah and the ‘casus belli’ of the war had been revealed to be a hoax, which is like signing up for a tour of duty in Vietnam after My Lai and the release of the Pentagon Papers.”

Neither of the presidential contenders had anything to say about the increasingly appalling human situation in Afghanistan, but we do get some indication from the New York Times which has a weekly ‘War Casualty Reportwhose record of events is sobering, although, as the NYT points out, understandably incomplete.

For the week June 28 to July 4, for example, it notes that “At least 264 pro-government forces and 58 civilians were killed in Afghanistan during the past week, the highest death toll of 2019. Attacks by the Taliban spiked around the country as American negotiators met with Taliban officials in the seventh round of peace talks in Doha.” In addition to roadside and car bombings, the Taliban mounted forty ground attacks on government forces. We’re approaching the end of Phase Two of Chairman Mao’s three phases of revolutionary war.

The Special Inspector General for Afghanistan Reconstruction (SIGAR), Mr John Sopko, reported to Congress on April 30 that, among other things, the NATO-run Resolute Support Mission in Afghanistan “is no longer producing its district-level stability assessment of Afghan government and insurgent control and influence.”

The Pentagon has refused to provide such information for over a year, and Mr Sopko was reported by the Military Times on 1 May 2019 as saying “I don’t think it makes sense. The Afghan people know which districts are controlled by the Taliban. The Taliban obviously know which districts they control. Our military knows it. Everybody in Afghanistan knows it. The only people who don’t know what’s going on are the people who are paying for all of this, and that’s the American taxpayer.”

That sums it up: when the US military establishment knows that things are going downhill, they do their best to keep citizens in the dark. They refuse to admit that the situation in Afghanistan is out of control of the US and the Afghan government in Kabul, even when it is blindingly obvious that there is chaos and that, for example, as Mr Sopko points out, “As of March 11, 2019, most Afghan households faced acute food insecurity — meaning they were likely to suffer acute malnutrition or be forced to deplete assets to meet minimum needs.”

This is unlikely to cause concern in Washington, where official policy on treatment of illegal migrant children is inhumane to the point of criminality. New York magazine reported that in one prison camp in Texas 351 children had been separated from their families and “100 were under 13, and the youngest was just over 4 months… many of the kids had been held for three weeks or longer” in the most dreadful physical and mental state. So there won’t be much compassion for starving kids in Afghanistan.

Not that the Taliban are humane do-gooders. Far from it. They are barbaric and unthinkingly savage and have no regard for human rights. Their treatment of women is worse than mediaeval and their idea of governance is to install sharia law, which is a thoroughly retrogressive jurisprudence. But this is what eighteen years of war have brought to the top in that historically chaotic country.

The most significant recent indicator that the Taliban are ascendant has been their killing of these two US special forces soldiers in a classic firefight. Afghanistan isn’t supposed to be like this, because of the vast US airpower available to strike insurgents, wherever they may be. It is astonishing that the Taliban were able to attack in this fashion. No details of the firefight have been given, which is not surprising, given official policy of concealment of awkward facts, but that the engagement took place at all is a most serious sign that the Taliban have got the initiative.

The current series of negotiations might produce some sort of agreement between the US and the Taliban, but there is no representation of the Kabul government at the talks. Nobody knows whether President Ashraf Ghani will accept a US-Taliban agreement, but that is verging on the irrelevant because the Taliban only need to sit him out. They have already won in Afghanistan.

via ZeroHedge News https://ift.tt/2LdfMHL Tyler Durden

Apple Cofounder Steve Wozniak deleted his Facebook account last year and is now telling anyone willing to listen to do the same before it’s too late.

TMZ interviewed Wozniak at Reagan National Airport in D.C. last Friday and asked him if he’s troubled by Facebook, Instagram and other social media platforms infringing on his privacy. Woz responded by saying social platforms are eavesdropping on our private conversations, and sending personal data to advertisers. With the lack of privacy on social media, he said, most people should delete their accounts. 

“There are many different kinds of people, and some the benefits of Facebook are worth the loss of privacy,” Woz told TMZ.

“But to many like myself, my recommendation is—to most people—you should figure out a way to get off Facebook.”

Woz suggested, that at this point, there’s no way to stop the invasion of privacy by Big Tech.

“But, everything about you… I mean, they can measure your heartbeat with lasers now, they can listen to you with a lot of devices. Who knows if my cellphone’s listening right now. Alexa has already been in the news a lot,” he told TMZ.

“So I worry because you’re having conversations that you think are private… You’re saying words that really shouldn’t be listened to, because you don’t expect it. But there’s almost no way to stop it,” Woz said.

Woz’s solution: allow social media companies to give users a choice of premium subscription plans, one where they pay to have their data more secure.

“People think they have a level of privacy they don’t. Why don’t they give me a choice? Let me pay a certain amount, and you’ll keep my data more secure and private then everybody else handing it to advertisers.”

In an email response last April, Woz told USA Today that Facebook makes a lot of advertising money from personal information voluntarily shared with the company.

Woz said he’d rather pay for Facebook – adding that Apple “makes money off of good products, not off of you. As they say, with Facebook, you’re the product.”

What is far more fascinating to us is that it took years for brilliant people such as Wozniak to grasp what was obvious to most others, even if those “others” are what the dormant, quiet and largely daft majority, would call “conspiracy theorists.”

via ZeroHedge News https://ift.tt/2NJZM2g Tyler Durden

Authored by Joakim Book via The American Institute for Economic Research,

A gold standard is a monetary regime where the monetary unit, the base money of the banking system — the outside money or the high-powered money — consists of a defined amount of gold. Gold standards can come in all manners and versions and with particular institutional and historical quirks that affect their operations. The key characteristic that unites them is that an economy’s underlying money is ultimately based on an amount of gold. 

Using the language and the classification in the first reading session of our Harwood Graduate Colloquium, commodity monies such as a gold standard consist of objects that have alternative nonmonetary uses (for instance in production or ornament) and are absolutely scarce. That is, their scarcity is a fundamental aspect of the good itself — as opposed to fiat money, which can be expanded at the discretion of a central bank. 

When money is gold, it can be increased only by extracting more gold from mines and minting it into monetary circulation. This process, expanding supply through the incentives provided by the price mechanism, subjects the supply of money to market forces rather than to discretionary policy making as is the case under our current monetary regime. That carries with it a few remarkable characteristics:

• The opportunity for price inflation is — by present standards — very limited, as the total amount of money in the economy is limited by the amount of gold. This need not be strictly so, as monetary theories going back at least to Wicksell’s pure credit economy have bank credit (and money velocity) remedying the scarcity of a commodity money. Free banking under a fractional-reserve gold standard, can, in other words, mitigate this strict supply schedule somewhat. 

• Credible anchor: Monetary economists often speak of a gold standard as “tying down” the price level. Yes, prices may move to accommodate short-term changes in gold supply (California Gold Rush; invention of cyanidation to extract gold) or money demand, but over longer time periods, an economy’s price level is strictly tied to its production of gold. When that regime is trusted, uncertainty — reflected, for instance, in interest rates on long-term nominal debt contracts — falls. 

• Interventionist monetary policies, intending to lower interest rates to boost the economy or increase employment, are circumscribed. They’re not completely ruled out, as historical gold standard regimes have shown — for instance, the 19th-century Bank of England’s banking department could use its reserve to sterilize the inflow of gold so as to decouple the money supply from gold. The Federal Reserve, during the 1920s gold-exchange standard, similarly sterilized the effect of inflow of gold on domestic prices. Nevertheless, a gold standard removes much of the discretion of today’s monetary policy makers — and the uncertainty and anticipatory changes in behavior that come with it. 

In chapter 2 of his book The Theory of Monetary Institutions, George Mason University professor and long-time private-money researcher Lawrence White lays out the ins and outs of the workings of a commodity standard. He presents the intuition behind the impersonal market forces that, under commodity standards, let the money supply expand and contract with the economy: the price incentives that lead gold miners to extract more (less) gold when the purchasing power of gold in terms of other goods is high (low) — that is, when the economy demands it. 

Walking through the various scenarios of shifting supply/demand curves allows White to demonstrate (and historically illustrate) how a gold standard works in theory and how it operated in the 19th century. Its flexibility and the fact that the money supply is provided by market-tested price incentives are among its main benefits.  

The second reading in this Harwood Graduate Colloquium session is a much more empirically minded article exploring how the gold standard operated in practice under what we call the classical gold standard era (1880-1913). McCloskey and Zecher’s (1985) article explains how many of the theories we have about the gold standard did not in fact apply historically. 

For instance, the domestic and international price levels under a gold standard are usually believed to align through the so-called price-specie-flow (PSF) mechanism — where a price discrepancy between what gold buys in England and what it buys in America is eliminated through arbitrage. That is, speculators take gold out of England, reducing its money supply and price level, and employ it in America, which increases American money supply and price levels. 

Studying actual gold flows across the Atlantic indicates a much lower amount of gold actually shipped than would be needed to play this role. And the correlations were often of the wrong sign. In 18th-century economist David Hume’s PSF model, an outflow of gold should be associated with high prices and incomes to cover a trade deficit (higher prices all else equal increase imports while reducing exports), since the same gold could buy more stuff elsewhere. Gold flows are moving inversely with prices. Empirically we rather find that prices and incomes increased in tandem with gold flowing in.  

McCloskey and Zecher’s preferred mechanism for explaining this phenomenon is a money-demand argument; as incomes and/or prices rose, consumers wanted to hold more money — think of it as money holding for precautionary or transactional purposes. If that extra money could not be satisfied by the domestic monetary authorities, it could be imported, flipping the signs around; high incomes/prices increase money demand, which in turn attracts gold from abroad.

Moving on to normative arguments over policy, the last reading of the session is White’s short briefing paper for the Cato Institute providing us with a balanced response to the most common objections for a gold standard. The spirit is not one of gold utopianism, but of comparing like with like (“warts and all”). White’s brief overview and response to common counterarguments to a gold standard leads him to conclude that while a gold standard, like every monetary regime, suffers from certain shortcomings, it is “far from a crazy idea” (p. 7) and ought to be a serious contender for the next monetary regime. 

Together, these three articles bring you up to speed on the workings, the history, and the arguments surrounding commodity money such as a gold standard. 

via ZeroHedge News https://ift.tt/2NLnYRT Tyler Durden

The Trump administration has over the past months taken more aggressive sanctions measures on Hezbollah leadership amid the ongoing heightened tensions with Iran, given the Lebanese Shia paramilitary group has long been seen as an arm of the Ayatollahs on the Mediterranean. 

But on Tuesday the US Treasury Department took the historically unprecedented step of placing two Hezbollah representatives in Lebanon’s parliament on its sanctions blacklist. 

Starting in 2018 Hezbollah and parties considered aligned with Hezbollah vastly increased their presence and power in parliament — which created an awkward and delicate situation given limited US military aid to the Lebanese Army, which itself maintains a quietly cooperative stance the country’s most powerful militia, especially in anti-ISIS operations of the past years related to the war in Syria. 

The political backlash following the new sanctions is sure to put US-Lebanon relations further on edge. According to the AFP: 

The Treasury named MPs Amin Sherri and Mohammed Hasan Raad to a terror-related blacklist, saying that Hezbollah uses its parliamentary power to advance its violent activities.

Also placed on the blacklist was Wafiq Safa, a top Hezbollah official close to Hezbollah Secretary General Hassan Nasrallah.

Announcing the sanctions, the Under Secretary of Treasury for Terrorism and Financial Intelligence, Sigal Mandelker, said, “Hezbollah uses its operatives in Lebanon’s parliament to manipulate institutions in support of the terrorist group’s financial and security interests, and to bolster Iran’s malign activities.” 

The White House has further accused Hezbollah of running a major global drug trade, which reaches deep into Latin America, allegedly fueling its pro-Iranian and anti-Israeli agenda around the globe, according to past claims from the State Department. 

Further unprecedented is that the move for the first time makes no distinction between the “purely political” wing of Hezbollah and is paramilitary activities: 

“It is time, we believe, for other nations around the world to recognize that there is no distinction between Hezbollah’s political and military wing,” a senior administration official who insisted on anonymity told journalists.

“To any member of Hezbollah considering running for office, know that you will not be able to hide beneath the cover of political office,” the official said.

The newly sanctioned Lebanese politicians and Hezbollah members have been lawmakers in Beirut for years: 

Raad, 64, is the head of the parliamentary bloc of the party and an MP since 1992.

Sherri, 62, is a 17-year Hezbollah veteran of parliament representing Beirut. A Treasury official said Tuesday that Sherri had threatened violence against officials of a Lebanese bank and their families last year after the bank froze the accounts of a US-sanctioned Hezbollah financier.

This is part of the broader “maximum pressure” campaign the White House has been waging against Iran over the past month, and following the recent US drone shoot down by Iran’s military.

Iran’s Foreign Minister Mohammad Javad Zarif was expected to be placed under sanctions as well, however, the US Treasury has yet to name him as on the blacklist. 

via ZeroHedge News https://ift.tt/2Jop8yr Tyler Durden

Authored by Paul Joseph Watson via Summit.news,

“Something much bigger is behind this”

Conservative commentator Ann Coulter says that sex trafficker Jeffrey Epstein had a “state sponsor” backing him and that his operation was a way to blackmail powerful men.

During an appearance on 790 KABC, Coulter suggested that Epstein is merely the front man for a far more powerful network.

“Epstein according to both the girls accounts, he wanted them to have sex with powerful men, come back to him and report on it, describe what they wanted what their fetishes were and he had cameras throughout the house so this is obviously for blackmailing purposes,” said Coulter.

“It just seems to me something much bigger is behind this — perhaps a state sponsor — powerful enough people…

…it just seems to me there’s something a very powerful force behind what’s going on here and I am still nervous about this not coming to a conclusion, somehow this getting compromised,” she added.

Coulter said that it remained a mystery as to how Epstein became a billionaire and that the source of his money should be investigated.

Former President Bill Clinton attempted to distance himself from Epstein last night, claiming he only flew on the infamous ‘Lolita Express’ private jet four times despite flight logs showing at least 26 trips.

As we reported yesterday, speculation is swirling that Epstein may give up names of influential people who used his network in order to secure a maximum prison sentence of no more than five years.

*  *  *

There is a war on free speech. Without your support, my voice will be silenced. Please sign up for the free newsletter here. Donate to me on SubscribeStar here. Support my sponsor – Turbo Force – a supercharged boost of clean energy without the comedown.

via ZeroHedge News https://ift.tt/2NLVlE2 Tyler Durden

China’s economic slowdown and heavy debt load is affecting everybody in the country – even it’s “jewelry queen”, Zhou Xiaoguang, according to the Wall Street Journal.

Zhou, who went from selling trinkets on city streets to taking a seat in China’s parliament and becoming Ernst & Young‘s “Entrepreneur of the Year” was faced with the reality of being unable to pay her company’s billions of dollars in debt while in a bankruptcy court in April.

She is just one example of a massive debt burden taking its toll on China.

China has relied on borrowing to fuel its expansion for at least a generation. In 2018, the country was known for creating four billionaires a week and is number one globally in self-made fortunes. But this quick pace of growth, with many borrowing heavily in the process, also masked companies’ strategic mistakes.

Fueled by debt, many over-expanded into crowded sectors and now those mal-investments and mis-allocations of resources are coming back to bite them.

Over the past decade, the overall debt of the country has quadrupled to about three times the value of last year’s national output. Corporate debt makes up 2/3 of the total, amounting to more than $26 trillion last year. Most of the money is owed by government-run companies, but the stress is starting to surface also at private companies, who have less wiggle room with creditors and less support from the government.

For instance, Chenxi Group was decimated by lenders last year when they suddenly decide to call in loans. Earlier that year, the founder of machine maker Zhejiang Jindun Group committed suicide, leaping to his death, leaving the company to later reveal that it owed about $1.4 billion to loan sharks.

This year, Dong Wenbiao’s jet-maintenance to elder-care conglomerate, China Minsheng Investment Group, missed debt payments several times by days or weeks before making good on its obligations. In other words, the cracks in the surface of starting to show.

Joseph P.H. Fan, a professor of finance and accounting at Chinese University of Hong Kong said:

“Many Chinese entrepreneurs tend to borrow as much as possible, even if the core business doesn’t need it.”

Fan called Zhou’s company, Neoglory, a “textbook example” of the country’s misallocation of financial resources.

Neoglory fueled its evolution into a conglomerate through borrowings that ballooned to $6.8 billion even though cash was tight and profits were weak. The company took on new risks to borrow as it progressed, including tighter covenants and shorter payback schedules. When the company defaulted on a bond payment in mid September, its troubles became very evident.

Zhou commented:

 “Though winter may be tough to live through, it’s a good time to do introspection.”

Chinese courts have now ordered Zhou’s assets frozen. 

Starting in 2017, Beijing started to dial back an excess of lending by the financial sector – this became a deleveraging that caused shortages at many private companies. This crunch exposed egregious fundamental problems. At the same time, China’s broader economy was losing momentum. Its expansion maxed out at 10.6% in 2010 and now economists are hardly optimistic that the government’s bottom line 6% target will be achieved this year.

The country desperately needs companies that might lead China to a new stage of development that’s less dependent on construction and exports. The debt load is making it difficult for business owners to reinvest in the economy and the trade dispute with the United States continues to wear away at the country’s confidence.

And the cracks continue to show: last month, a government takeover of Baoshang Bank, sparked problems for other small banks and headaches for customers. It was the first bank takeover by regulators in decades and caused near panic.

The corporate bond market is a small part of the puzzle but is relatively transparent compared to lending. Chinese companies last year had $1.72 trillion in debt securities outstanding, which was the second highest after American companies, who carry $5.81 trillion.

Economists say the acceleration of the borrowing is worrisome. This acceleration has often proceeded recessions in other countries, and happened right before the 2008 crisis. Corporate bond demand weakened in 2018 and Beijing has now reversed its stance on lending and is encouraging banks to lend more. 

More than 18,000 companies filed bankruptcy petitions in Chinese courts last year, which is about twice as many as the previous year. Bankruptcy had previously been a rare action to take in China. Bond defaults also hit record numbers last year at 125, which was five times the number in 2015. Defaults are running at an even faster pace in 2019 so far.

via ZeroHedge News https://ift.tt/2G2ZvRA Tyler Durden

A few weeks ago we reported that around $1 billion worth of cocaine (15,500 kilos) was seized from a container ship at a Philadelphia port after having stopped in Colombia, Chile, Peru, Panama and the Bahamas (subsequently it turned out that it was a record $1.3 billion, or 18,000 kilos worth). 

Today we learn that the vessel, the MSC Gayane, is owned by JP Morgan, and has been seized by US authorities according to the Wall Street Journal.  The Gayane is the world’s second-largest container ship – operated by Switzerland-based Mediterranean Shipping Co, MSC. 

“A seizure of a vessel this massive is complicated and unprecedented—but it is appropriate because the circumstances here are also unprecedented,” said US Attorney William McSwain in a statement. “When a vessel brings such an outrageous amount of deadly drugs into Philadelphia waters, my office will pursue the most severe consequences possible against all involved parties in order to protect our district—and our country.” 

The Gayane was raided on June 17 by U.S. Customs and Border Protection agents who found about 20 tons of cocaine with a street value of $1.3 billion stashed in several containers. The ship had sailed from Freeport in the Bahamas and before that it called in Panama and Peru after starting its voyage in Chile. It was due to sail on to Europe after the U.S. stop.

“MSC remains grateful to the government officials in the U.S. for their proactive work and has offered its continued support, building on a longstanding track record of good cooperation with the authorities,” an MSC spokesman said in a statement. “MSC is assisting and cooperating with the authorities as required and the company is not the target of any investigation.” –Wall Street Journal

The $90 million ship that can carry around 10,000 containers remains anchored at the Delaware River near the Philadelphia port, and will stay there for quite some time according to the Journal. 

Eight crew members from Samoa and Serbia were arrested, while many others have been charged in the scheme according to those interviewed. The ship’s second officer and another crew member were also charged, and have been accused of helping to bring the contraband aboard. 

In February, Customs agents also seized 1.6 tons of cocaine on another MSC vessel, the Carlotta, upon entry into the Port of Newark, NJ. 

As a result of the two busts, MSC’s Customs-Trade Partnership certification has been temporarily suspended, meaning that the company’s cargo will be subject to enhanced scrutiny and can no longer be classified as “low risk.” MSC says it expects minimal disruption from the suspension. 

“Historically, ships involved in criminal activity are older and beaten up,” said Basil Karatzas, CEO of New-York-based Karatzas Marine Advisors & Co. “It is strange that such a modern and expensive vessel is involved in such a blatantly criminal case, like moving 20 tons of cocaine.” 

via ZeroHedge News https://ift.tt/2xDneTI Tyler Durden

The Trump administration was denied a request to swap out its legal team handling a lawsuit which blocked the US from adding a citizenship question to the 2020 census, according to Bloomberg. 

The request was deemed “patently deficient” by US District Judge Jesse Furman, who added that the US Government had provided “no reasons, let alone ’satisfactory reasons,’ for the substitution of counsel.”

The Trump administration has been scrambling to add the citizenship question back onto the census after it was removed by the Obama administration for the first time in US history, however their efforts were hobbled last week by the Supreme Court after Chief Justice John Roberts joined the liberal justices in a 5-4 ruling in the Dept. of Commerce v. New York. 

The Trump administration initially accepted the Supreme Court’s ruling and said it had begun printing forms without the question. But in a tweet, Trump subsequently ordered the government to re-examine the issue, prompting the Justice Department to seek alternative ways to proceed.

The Trump administration hasn’t detailed why it sought to replace the U.S. lawyers handling the lawsuit. The Washington Post, citing a person familiar with the matter, said that some of the original lawyers on the case had concerns about the way the government was handling it. –Bloomberg

According to Judge Furman, the Justice Department’s “mere expectation that withdrawal of current counsel will not cause any disruption is not good enough.” 

via ZeroHedge News https://ift.tt/2JnXn8Z Tyler Durden

Class 8 heavy duty truck orders were down for the eighth month in a row, falling a stunning 70% in June to 13,000 units, according to FTR data. The figure was up 20% sequentially, but still follows a 71% decimation in May. Jefferies’ Stephen Volkmann wrote in a note that the figures indicate a SAAR of ~178,000 Class 8 trucks and noted that the sequential growth compares to a sequential drop of 27% in May, when SAAR estimates were 139,000 units. 

Kenny Vieth, ACT’s President and Senior Analyst said: “Fraying freight market and rate conditions along with a still-large Class 8 order backlog contributed to the worst NA Class 8 net order performance since July of 2016. May saw NA Class 8 orders fall below the 15,900 units averaged through the year’s first trimester, and year-to-date Class 8 net orders have contracted 64% compared to the first five months of 2018.”

The industry has been dealing with bloated backlogs as a result of aggressive ordering in 2018, coupled with headwinds from the ongoing trade war and the onset of a recession. 

The good – and bad – news is that the backlog is starting to decline, and is expected to continue eroding until late summer. However, there is still downside risk for the industry in 2020 as a result of a slowing manufacturing, coupled with recessionary caveats.

On the medium duty market, Vieth commented: “While the US manufacturing/freight economy has been droopy since late 2018, the medium-duty market continues to benefit from the underlying strength in the consumer economy. In May, NA Classes 5-7 net orders were 19,300 units, down 21% year-over-year and 19% from April. One has to look back 22 months to find a weaker medium-duty order month on an actual basis or just 2 months when looking at the data on a seasonally adjusted basis.”

And according to a note by JP Morgan, forward looking indicators are still mixed:

According to our analysis, the New Orders component of the ISM Manufacturing Index tends to be the best leading indicator of future freight trends and truck demand. Specifically, the year-over-year change in New Orders has historically led the year-over-year change in the Cass Freight Index (our preferred broad-based indicator of freight trends) by 6-9 months. The ISM New Orders index was 50.0 in June, down 20.6% YoY. The Cass Freight Index was down 6.0% YoY in May (the latest month available). We note though that the Cass Freight Index includes rail freight and may be less of an indicator of overall freight, so we also look at the ATA Total Loads SA Index, which increased 0.8% YoY to 108.6 in May (vs. up 4.4% YoY in April). Additionally, the Cass Truckload Linehaul Index (which measures the changes in linehaul rates) was up 1.2% YoY in May.

Last month, order data from ACT Research showed that the industry booked just 10,800 units in May, down 27% sequentially, but also lower by a staggering 70% year-over-year. YTD orders are down 64% compared to the first five months of 2018.

via ZeroHedge News https://ift.tt/2JunHgI Tyler Durden

Authored by Simon Watkins via OilPrice.com,

Last week saw Japan’s Mitsui and Japan Oil, Gas and Metals National Corporation agree to buy a 10% stake in Novatek’s Arctic LNG (liquefied natural gas) 2 project for an officially undisclosed price, although Russia’s President Vladimir Putin independently stated that the investment would be around US$3 billion. The fact that Putin himself commented on the deal underlines how important the exploration and development of the Arctic region is for the Russian state as a source of potentially vast new oil and gas resources and the accretion of further geopolitical influence, akin to the game-changing shale industry for the U.S..

Russia’s current development of the Arctic region is centred around the Yamal Peninsula and led principally Novatek but further developments are in the offing from Gazprom and Gazprom Neft, even in the face of current and future U.S. sanctions.

Novatek’s main Arctic project, the Yamal LNG (unofficially referred to as ‘Arctic 1’) last week announced that it produced 9.0 million tons of LNG and 0.6 million tons of stable gas condensate in the first half of this year, with all three LNG trains running above the 5.5 million tons per annum (mtpa) nameplate capacity over that period. This resulted in 126 LNG tanker shipments being dispatched in the six month period via trans-shipment from the ice-class LNG carriers to conventional vessels in Norway and delivered onto the global markets, mostly to Russia’s key target markets in Asia. Overall, the Yamal LNG project consists of a 17.4 mtpa natural gas liquefaction plant comprised of three LNG trains of 5.5 mtpa each and one LNG train of 900 thousand tons per annum, utilising the hydrocarbon resources of the South-Tambeyskoye field in the Russian Arctic.

“Novatek is the exception in terms of global LNG companies in that it has always been very accurate in terms of delivering its projects on time and on budget, as it is a very Western-style operation run by a very capable CEO, Leonid Mikhleson,” Andrey Polischuk, senior oil and gas analyst from Raiffeisenbank, in Moscow, told OilPrice.com last week.

“Additionally supportive of success for further developments is that the Arctic is an absolute priority for the government, aimed at bringing Russia’s LNG standing in the world market into line with its status as a global gas superpower, as its LNG capability has always been way behind what its gas production power would warrant,” he said.

In this context, U.S. sanctions imposed after Russia took over Crimea in 2014 only made Putin more determined that the Arctic LNG program would not fail. Moscow not only initially bankrolled Yamal LNG from the beginning with money directly from the state budget but also later in 2014 supported it again by selling bonds in Yamal LNG (the program began on 24 November 2015, with a RUB75 billion 15-year issue). It further provided RUB150 billion of additional backstop funding from the National Welfare Fund. After that, and months of wrangling, April 2016 saw two Chinese state banks agree to provide US$12 billion to the Yamal LNG project in euros and roubles. The project was helped by a tumble in the rouble in late 2014 that effectively cut the cost of Russia-sourced equipment and labour at a key moment in the construction.

Having insulated itself from U.S. financial sanctions, Novatek is busy doing the same for its technology requirements. Novatek has already indigenised as much of the technology and machinery involved with the Yamal LNG project as it can and last year received a federal patent for its ‘Arctic Cascade’ natural gas liquefaction technology. This is based on a two-stage liquefaction process that capitalises on the colder ambient temperature in the Arctic climate to maximise energy efficiency during the liquefaction process and is the first patented liquefaction technology using equipment produced only by Russian manufacturers. The overall goal of Novatek, as the company itself has stated more than once, is to localise the fabrication and construction of LNG trains and modules to decrease the overall cost of liquefaction and develop a technological base within Russia, so that the Arctic LNG operations are not subject to the whims of other countries and future sanctions.

Given this backdrop, Novatek’s second Yamal LNG project – officially ‘Arctic LNG 2’ – aims for three LNG trains of 6.6 mtpa each, based around the oil and gas resources of the Utrenneye field, which has at least 1,138 billion cubic metres of natural gas and 57 million tons of liquids in reserves. Novatek plans to commission the first train in 2023, the second train in 2024, and the third train in 2025, before reaching full capacity in 2026. To this end, it has already secured three other partners in the venture, aside from the Japanese. Two are from the key target market of China itself – the China National Petroleum Corporation subsidiary China National Oil and Gas Exploration and Development, and China National Offshore Oil Corporation, with a joint 10% stake – and France’s supermajor, Total, also with 10%. Novatek has said that it plans to keep 60% for itself, with the remaining 10% likely to go shortly to Saudi Aramco, OilPrice.com understands form various Russia analysts. Novatek will make the final investment decision on the project in the third quarter of this year.

In the same vein, Russian gas giant, Gazprom, recently announced the full scale development of the giant Kharasavey gas field in the Bovanenkovo production zone on the northern Yamal peninsula. This is part of the company’s continuing shift in its production base northward, in line with Russia’s other major tangential strategy of building out the gas capacity of Yamal to compensate for reserves depletion in West Siberia. Kharasavey is estimated to hold 2 trillion cubic metres of gas and is set to produce first gas in 2023 with plateau output of 32 billion cubic metres per year. Given the outlook for gas demand in the key markets of Europe and Asia, and the geopolitical ramifications of being the major gas supplier to these regions, Gazprom’s oil producing subsidiary, Gazprom Neft, is also looking at producing its own LNG from its Arctic operations.

Monetising its gas resources in the Arctic would be a relatively straightforward task for Gazprom Neft, allowing the company to recoup more of the RUB400 billion (US$6.4 billion) that it plans to spend on developing its Novoportovskoye field (estimated to have recoverable reserves of more than 320 bcm of gas) over the next five years earlier than would otherwise be the case. Part of this development cost is planned to go on the construction of a key gas pipeline to run from Novy Port across the Gulf of Ob to Yamburg, which will carry at least 10 billion cubic metres of gas per year from the Novoportovskoye oil and gas field into Gazprom’s main gas delivery system.

This infrastructure is also likely to be utilised by the third of Novatek’s own Arctic projects – Ob LNG – which commenced development in June. Based on the resources of the Verkhnetiuteyskoye and Zapadno-Seyakhinskoye fields, located in the central part of the Yamal Peninsula, the two fields hold a total of 157 billion cubic metres of natural gas and the projected new plant will produce up to 4.8 mtpa of LNG. The main plant, built exclusively with Russian-made technology in Sabetta, will cost US$5 billion and is set to come into operation in 2023. That a key point in adding such production from this the Arctic region is to dominate the Asian markets, particularly that of China, was tacitly acknowledged by Novatek’s Mikhelson recently when he stated that he expected at least 80% of Novatek’s future LNG production to go to the Asian market. This was further highlighted by the fact that Novatek is moving forward with the trans-shipment LNG facility on the Russian Far East coast in Kamchatka, Anna Belova, senior Russia and FSU oil and gas analyst for GlobalData, in New York, told OilPrice.com.

Even more tellingly, perhaps, Mikhelson added that future sales to China denominated in renminbi is under consideration. This is in line with his recent comment that U.S. sanctions accelerate the process of Russia trying to switch away from U.S. dollar-centric oil and gas trading and the damage from potential sanctions that go with it. “This has been discussed for a while with Russia’s largest trading partners such as India and China, and even Arab countries are starting to think about it… If they do create difficulties for our Russian banks the all we have to do is replace dollars,” he said. “The trade war between the U.S. and China will only accelerate the process,” he added.

Such a strategy was tested in 2014 when Gazprom Neft tried trading cargoes of crude oil in Chinese yuan and rubles with China and Europe.

“This idea of an alternate principal trading currency for oil and gas, away from the U.S. dollar was also discussed for the BRIC [Brazil, Russia, India, and China] countries, and was work-shopped again recently by Iran, Iraq, Russia, and China, and China’s launch of the yuan-denominated Shanghai International Exchange can be seen as a move in this direction,” Mehrdad Emadi, head of risk analysis and energy derivatives markets consultancy, Betamatrix, in London, told OilPrice.com.

“The more the U.S. uses the US dollar sanction against major suppliers in the oil market, like Iran, Venezuela, and Russia, and major buyers, like China, then the more momentum will build to replace the oil market with a new currency benchmark,” he concluded.

via ZeroHedge News https://ift.tt/2XDRf0e Tyler Durden