WTI-Brent Crude Spread Snaps After Forties Pipeline Closure

Following the discovery of a "small hairline crack" in The Forties Pipeline System – one of the most important oil conduits in the world – its operator Ineos has decided a total controlled shutdown is the safest option. This has sent the spread between WTI and Brent soaring

 

A “small hairline crack” was discovered during a routine inspection last week by Ineos contractors, just south of Aberdeen in Scotland. The pipeline’s pressure was reduced for a full assessment but during that time the crack extended.

As Bloomberg reports, Brent futures rose as much as $1.18 to $64.71 a barrel in London – the highest since June 2015…

“Despite reducing the pressure the crack has extended, and as a consequence the Incident Management Team has now decided that a controlled shutdown of the pipeline is the safest way to proceed,” Ineos said in a statement.

 

“This will allow for a suitable repair method to be worked up.”

The pipeline system feeds crude to the Hound Point export terminal near Edinburgh in Scotland.

At over 400,000 barrels a day, the supplies that flow through the link are the single largest constituent part of the Dated Brent grade that helps to settle more than half the world’s physical oil prices.

via http://ift.tt/2jtfIHP Tyler Durden

The Biggest Bubble Ever, In Three Charts

Authored by John Rubino via DollarCollapse.com,

Each quarter, Credit Bubble Bulletin’s Doug Noland posts a “flow of funds” report that analyzes the debt and securities markets data released by the Fed in its Z.1 Report. It’s always shocking to see the numbers we’re dealing with, but even more so lately as history’s biggest financial bubble starts to dwarf its predecessors.

Here’s some of the scarier data in chart form, with Noland’s commentary:

To the naked eye, percentage debt growth figures for the most part don’t appear alarming. But there’s several unusual factors to keep in mind. First, the outstanding stock of debt has grown so enormous that huge Credit expansions (such as Q3’s) don’t register as large percentage gains. Second, overall system debt growth continues to be restrained by historically low interest-rates and market yields. Debt simply is not being compounded as it would in a normal rate environment. And third, it’s a global Bubble and a large proportion of global Credit growth is occurring in China, Asia and the emerging markets. U.S. securities markets continue to be a big target of international flows.

 

With global Bubble Dynamics a dominant characteristic of this cycle, it’s appropriate to place Rest of World (ROW) data near the top of Flow of Funds analysis. ROW holdings of U.S. Financial Assets jumped $724 billion (nominal) during the quarter to a record $26.347 TN. This puts growth over the most recent three quarters at a staggering $2.124 TN (16% annualized). What part of these flows has been associated with ongoing rapid expansion of global central bank Credit? It’s worth recalling that ROW holdings ended 2007 at $14.705 TN and 1999 at $5.639 TN. As a percentage of GDP, ROW holdings of U.S. Financial Assets ended 1999 at 57%, 2007 at 100%, and Q3 2017 at a record 135%.

 

 

Meanwhile, the Fed’s Domestic Financial Sectors category expanded assets SAAR $2.841 TN during Q3 to a record $95.213 TN. In nominal dollars, the Financial Sector boosted assets a notable $5.085 TN over the past three quarters, almost 8% annualized growth. Notably, the sector’s holdings of Debt Securities surged a nominal $775 billion in three quarters to a record $25.425 TN. Pension Funds were a huge buyer of Treasuries during the quarter (SAAR $1.075 TN). Over the past three quarters, the Financial Sector boosted holdings of Corporate & Foreign Bonds by nominal $427 billion to $8.026 TN. More very big numbers.

 

One doesn’t have to look much beyond the booming Rest of World and Domestic Financial Sector to explain ongoing over-liquefied securities markets. The numbers confirm a historic financial Bubble.

 

Total Equities Securities jumped $1.229 TN during the quarter to a record $43.969 TN, with a one-year gain of $5.923 TN (16.4%). Equities jumped to a record 224% of GDP, compared to 181% at the end of Q3 2007 and 202% to end 1999. Debt Securities gained $171 billion during Q3 to a record $42.385 TN, with a one-year gain of $1.080 TN. At 217% of GDP, Debt Securities remain just below the record 223% recorded in 2013.

 

 

This puts Total (Debt & Equities) Securities up $1.400 TN during the quarter to a record $86.080 TN. Total Securities inflated $7.003 TN, or 9.1%, over the past year. Total Securities experienced cycle tops of $55.261 TN during Q3 2007 and $36.017 TN to end March 2000. Total Securities ended Q3 2017 at a record 441% of GDP. This outshines the previous cycle peaks of 379% for Q3 2007 and 359% at Q1 2000. One more way to look at post-crisis securities market inflation: Total Securities ended Q3 $30.819 TN, or 56%, higher than the previous cycle peak in Q3 2007.

 

 

There’s no doubt that financial sector leveraging and foreign flows (especially through the purchase of U.S. securities) continue to play an integral role in the U.S. Bubble. Inflating asset prices and resulting bubbling U.S. Household Net Worth are instrumental in fueling the overall U.S. Bubble Economy.

 

As we think ahead to 2018, the question becomes how vulnerable U.S. securities markets are to waning QE and reduced central bank Credit expansion. Inflating a Bubble creates vulnerability to any slowdown in underlying Credit and attendant financial flows. And it’s the final parabolic speculative blow-off that seals a Bubble’s fate. It ensures market dependency to unusually large and inevitably unsustainable flows. The Fed’s latest Z.1 report does a nice job of illuminating the historic scope of the U.S. securities Bubble. U.S. securities markets have been on the receiving end of extraordinary international flows, while inflating securities and asset prices have spurred rapid financial sector expansion.

Note that in the two “% of GDP” charts today’s numbers are compared to the previous two bubble peaks when things had gotten so far out of hand that the following year saw massive financial crises. So the fact that we’ve blown through those two previous records portends interesting times ahead.

To sum up Noland’s analysis, the US, along with the rest of the world, has entered full Ponzi, where credit has to continue to rise at unprecedented rates to keep the system from imploding. But the more credit we take on, the more fragile the system becomes. A sudden decline in equities or bonds, geopolitical tensions escalating, cryptocurrencies threatening fiat currencies, you name it, can crack the façade of normality that rising asset prices create.

via http://ift.tt/2BazKxp Tyler Durden

Near Record 5.6 Million Americans Were Hired In October, Most In Over 16 Years

After a burst of record high job openings which started in June and eased modestly in August, today’s October JOLTS report  – Janet Yellen’s favorite labor market indicator – showed a sharp drop in job openings across most categories now that hurricane distortions have cleared out of the system, with the total number dropping from 6.177MM to 5.996MM, well below the 6.135MM estimate, the biggest monthly drop and the lowest job openings number since May, resulting in an October job opening rate of 3.9% vs 4% in Sept.

After nearly two years of being rangebound between 5.5 and 6 million, the latest drop in job openings despite the alleged improvement in the economy is another inidication that an increasingly greater number of jobs may simply remain unfilled in a labor market where skill shortages and labor imbalances are becoming structural.

The number of job openings was down for total private and was little changed for government. Job openings increased in accommodation and food services (+94,000), construction  (+48,000), and real estate and rental and leasing (+40,000). Job openings decreased in wholesale trade (-90,000), finance and insurance (-47,000), information (-32,000), and nondurable goods manufacturing (-26,000). The number of job openings was little changed in all four regions. Now if only employers could find potential employees that can pass their drug test…

One notable change in this report was that despite the sharp drop in job openings, the number of hires in October soared by 232K to 5.552MM in October, the highest since March 2001, and further reducing the hiring rate from 3.8% to 3.6%. At the industry level, the number of hires increased in other services (+55,000) and health care and social assistance (+45,000). Hires decreased for state and local government, excluding education (-32,000). The number of hires increased in the Northeast region.

On an annual basis, the pace of hiring spiked in October, rising from 2.7% Y/Y in Sept., to 6.8% in October, the highest since February 2016.

The other closely watched category, the level of quits – which indicates workers’ confidence they can leverage their existing skills and find a better paying job – was unchanged in October, and was identical to the 3.18MM quits in September, suggesting little change to worker confidence about demand for their job skills. The number of quits was little changed for total private, for government, and in all industries. In the regions, the number of quits increased in the South and decreased in the Midwest.

And with a total 5.2 million separations (a 3.5% rate), this means that there were 1.6 million layoffs and discharges in October, little changed from September. The layoffs and discharges rate was 1.1 percent in Oct. The layoffs and discharges level increased in finance and insurance (+37,000) and in mining and logging (+7,000). Layoffs and discharges decreased in construction (-69,000) and in state and local government, excluding education (-15,000). The number of layoffs and discharges decreased in the Northeast region.

Putting all the data in context:

  • Job openings have increased since a low in July 2009. They returned to the prerecession level in March 2014 and surpassed the prerecession peak in August 2014. There were 6.0 million open jobs on the last business day of October 2017.
  • Hires have increased since a low in June 2009 and have surpassed prerecession levels. In October 2017, there were 5.6 million hires.
  • Quits have increased since a low in September 2009 and have surpassed prerecession levels. In October 2017, there were 3.2 million quits.
  • For most of JOLTS history, the number of hires (measured throughout the month) has exceeded the number of job openings (measured only on the last business day of the month). Since January 2015, however, this relationship has reversed with job openings outnumbering hires in most months.
  • At the end of the most recent recession in June 2009, there were 1.2 million more hires throughout the month than there were job openings on the last business day of the month. In October 2017, there were 444,000 fewer hires than job openings.

Finally, and perhaps most notably, the Beveridge Curve (job openings rate vs unemployment rate), appears to be gradually normalizing after a nearly decade-long “drift” from its conventional pattern. From the start of the most recent recession in December 2007 through the end of 2009, the series trended lower and further to the right as the job openings rate declined and the unemployment rate rose. In October 2017, the unemployment rate was 4.1 percent and the job openings rate was 3.9 percent.

via http://ift.tt/2jNEMWH Tyler Durden

Senate Tax Debacle: Certain Pass-Through Entities Face Marginal Tax Rates Over 100% Under Current Bill

As the House and Senate continue to try to reconcile their two versions of a tax plan, the taxing structure for pass-through entities (s-corps, LLC’s, etc.) continues to be somewhat controversial, if not completely nonsensical. As we pointed out last week, the Senate bill somewhat randomly chose to exclude pass-through entities organized as family trusts from tax cuts which would ultimately leave them on the hook for much larger tax bills due to the elimination of other deductions. It’s unclear whether this bizarre exclusion was just an oversight or an intentional political hit on an easy target that no one in Washington DC would dare defend publicly: rich families organized as trusts.

Now, a new note from the Tax Policy Center lays out some scenarios whereby the marginal tax rate for high-income pass-through entities could soar to over 100%.  Of course, while two rational people can debate the impact of a ~40% tax rate on a person’s desire to work, we’re almost certain that a taxing structure that takes more than 100% of your marginal income will be a slight disincentive.  Here’s an example of how it works from the Wall Street Journal:

Consider, for example, a married, self-employed New Jersey lawyer with three children and earnings of about $615,000. Getting $100 more in business income would force the lawyer to pay $105.45 in federal and state taxes, according to calculations by the conservative-leaning Tax Foundation. That is more than double the marginal tax rate that household faces today.

 

If the New Jersey lawyer’s stay-at-home spouse wanted a job, the first $100 of the spouse’s wages would require $107.79 in taxes. And the tax rates for similarly situated residents of California and New York City would be even higher, the Tax Foundation found. Analyses by the Tax Policy Center, which is run by a former Obama administration official, find similar results, with federal marginal rates as high as 85%, and those don’t include items such as state taxes, self-employment taxes or the phase-out of child tax credits.

As Joseph Rosenberg of the Tax Policy Center notes, the penalty is greatest for high-income pass-through entities in highly taxed states. 

Consider the example of a married couple whose entire income is “specified service” income generated by a pass-through entity and who claims the standard deduction. At an income of $524,000, the couple could take an $87,000 deduction (17.4% of the couple’s taxable income “without regard” to the deduction) that would reduce their taxes by $30,450 (since they are in the 35% tax bracket), but the deduction is entirely phased out at an income of $624,000. On average, that amounts to more than a 30% surtax on top of the 35% statutory tax rate over that range of income.

 

The actual phase-out is much more complicated, as the bill’s text released Monday night makes clear, because the deduction continues to apply even as its benefit is phased out. (If that sounds convoluted, it’s because it is.) The couple’s marginal income tax rate would jump to 61.375% at $528,541 of income. And it would rise to 73% until their income reaches $624,000 and the deduction is fully phased-out, at which point their marginal tax rate would return to the 35 percent ordinary income tax rate. (Note that these calculations do not include the additional 3.8 percent in self-employment payroll tax or the net investment income tax).

Here is how the overall tax rate schedule for pass-through income would look:

“This is a big concern,” said Scott Greenberg, a Tax Foundation analyst. “It would be unfortunate if Congress passed a tax bill that had the effect of making additional work and additional income not worthwhile for any subgroup of households.”

Of course, in the end, this type of taxing structure just raises the returns on “gaming” the tax system in every way possible.  “I would expect a huge tax-gaming response once people fully understand how it works,” said Mr. Gamage, a former Treasury Department official, who said business owners have an easier time engaging in such tax avoidance than salaried employees do. “The payoff for gaming is huge, within the set of people who both face these rates and have flexible enough business structures.”

Not surprisingly, lawmakers are looking at changes to prevent this debacle from happening as they attempt to reconcile Senate and House versions of the tax bill this week. The formal House-Senate conference committee will meet on Wednesday, and GOP lawmakers have said they may unveil an agreement by week’s end…though they seem to consistently miss their own self-imposed deadlines.

But you shouldn’t worry about these issues too much as a spokeswoman for the Senate Finance Committee assured the Journal that as “with any major reform, there will always be unusual hypotheticals delivering anomalous results…The goal of Congress’s tax overhaul has been to lower taxes on the American people and by and large, according to a variety of analyses, we’re achieving that.”

via http://ift.tt/2jxsQMb Tyler Durden

Bitcoin Vs Fiat Currency: Which Fails First?

Authored by Charles Hugh Smith via OfTwoMinds blog,

What if bitcoin is a reflection of trust in the future value of fiat currencies?

I am struck by the mainstream confidence that bitcoin is a fraud/fad that will soon collapse, while central bank fiat currencies are presumed to be rock-solid and without risk. Those with supreme confidence in fiat currencies might want to look at a chart of Venezuela's fiat currency, which has declined from 10 to the US dollar in 2012 to 5,000 to the USD earlier this year to a current value in December 2017 of between 90,000 and 100,000 to $1:

Exchange Rate in Venezuela:

On 1 December, the bolivar traded in the parallel market at 103,024 VED per USD, a stunning 59.9% depreciation from the same day last month.

Analysts participating in the LatinFocus Consensus Forecast expect the parallel dollar to remain under severe pressure next year. They project a non-official exchange rate of 2,069,486 VEF per USD by the end of 2018. In 2019, the panel sees the non-official exchange rate trading at 2,725,000 VEF per USD.

If this is your idea of rock solid, I'll take my chances with bitcoin, which currently buys more than 1 billion bolivars. Of course "it can't happen here," which is precisely what the good people of Venezuela thought a decade ago.

Gordon Long and I discuss Fiat Currency Failure (The Results of Financialization – Part IV) in a new 31-minute video. The bottom line is that fiat currencies are debt-based claims on future profits, energy production and wages, claims that are expanding far faster than the real economy and the productivity of the real economy.

In effect, fiat currencies and debt are like inverted pyramids resting on a small base of actual collateral.

If you look at the foundations of fiat currencies, you find loose sand, not bedrock. Massive mountains of phantom wealth have been created by central-bank inflated bubbles, bubbles based not on actual expansion of net income earned from producing goods and services, but on financialization, the pyramiding of debt and leverage on a small base of real assets.

"Free money" that accrues interest isn't free. Eventually the interest eats debtors alive, regardless of the debtor's size or supposed wealth.

Creating "free money" in unlimited quantities impoverishes everyone who holds the currency. In the initial boost phase, the issuance of "nearly free money" to borrowers, qualified or not, generates the illusion of prosperity. But once the boost phase ends, reality sets in and marginal borrowers default, inflation moves from assets (good inflation) to real-world essentials (bad inflation), and creating more "free money" ceases to be the solution and becomes the problem.

Yes, cryptocurrencies are risky–but so are fiat currencies. Illusory "wealth" evaporates, and expanding credit-based "risk-free money" at rates that exceed the rate of expansion of the real economy reduces the purchasing power of all those holding the currency. Eventually trust in the currency, and in the authorities who control its issuance, erodes, and a self-reinforcing feedback loop turns the rock-solid currency into sand.

What if bitcoin is a reflection of trust in the future value of fiat currencies? Those dismissing bitcoin as a fad might be missing the point: trust in the authorities who control the expansion of fiat currencies might be eroding fast in a certain segment of the populace.

And more importantly, they might be right, and everyone who placed their trust in the authorities who control the expansion of fiat currencies ends up holding a handful of sand.

*  *  *

I'm offering my new book Money and Work Unchained at a 10% discount ($8.95 for the Kindle ebook and $18 for the print edition) through December, after which the price goes up to retail ($9.95 and $20). Read the first section for free in PDF format.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

via http://ift.tt/2z1BU0L Tyler Durden

Putin Orders Withdrawal Of Russian Troops During Surprise Syria Visit

Drawing a stark contrast between himself and his counterpart in the US, Russian President Vladimir Putin made a surprise appearance at Khmeimim Airbase in Syria – which has traditionally been used by the Russian air force – on Monday morning, where he ordered the withdrawal of Russian troops from Syria, now that the ISIS insurgency that once controlled roughly one-third of the country’s land area has been effectively dismantled.

The Russian president was met by his Syrian counterpart, Bashar al-Assad, and Russian Defense Minister Sergey Shoigu at the airbase. Russian forces fighting with the Syrian Army during the country's civil war were stationed at the base. Putin ordered the withdrawal of Russian troops to begin immediately, according to Russia Today.

“I order the defense minister and chief of the general staff to start the withdrawal of Russian troops to the site of their permanent deployment," Putin said, speaking to a crowd of Russian soldiers. The Russian leader said that during the span of two years, the Russian and Syrian militaries have “defeated the most battle-hardened grouping of international terrorists,” adding that he’s decided a significant portion of the Russian troop contingent should return to Russia.

Putin warned that if ISIS tries to “rear their heads” in Syria again, Russia will retaliate with a level of force that “they have never seen before.” The Russian leader added that the conditions for a political settlement under the auspices of the United Nations had been created in Syria, and that refugees were returning home.

Putin was told that about 70,000 square kilometers (about 43,500 square miles) of Syrian territory has been liberated and 32,000 terrorists killed in the last seven months of the operation. Russian special forces, military police and 25 aircraft will leave Syria, and a field hospital will be removed, according to the commander of the Russian forces in Syria, Colonel-General Sergey Surovikin.

The Russian president said that the Russian Reconciliation Center for Syria would continue its work, and that Russia would continue to use the Khmeimim Airbase and the Syrian port of Tartus, which provides technical support for the Russian Navy.

Putin is now headed to Cairo, where he is scheduled to meet with Egyptian President Abdel Fattah al-Sisi.

It’s worth noting that Putin’s decision to withdrawal Russian personnel stands in stark contrast to the US, which appears to be moving toward a semi-permanent air presence in the battle-torn, Iran-allied country.

Last month, US Defense Secretary Jim Mattis told reporters at the Pentagon that the US is preparing for a long term military commitment in Syria to fight ISIS "as long as they want to fight." Mattis indicated that even should ISIS loose all of its territory there would still be a dangerous insurgency that could morph into an "ISIS 2.0" which he said the US would seek to prevent. “The enemy hasn’t declared that they’re done with the area yet, so we’ll keep fighting as long as they want to fight,” Mattis said. “We’re not just going to walk away right now before the Geneva process has traction.”
 

via http://ift.tt/2A9Qmls Tyler Durden

Key Events In The Coming Week: Yellen’s Swan Song And Final Rate Hike; Draghi’s Silence, US Inflation

After last week’s payrolls report, the year is starting to wind down for economic events and capital markets, but not before one last hurrah for central banks: indeed, it is a very busy week dominated by central bank meetings for the FOMC, ECB, BOE, SNB and Norges Bank. We will also observe the controversial Alabama Senate elections and the EU Council summit on the state of Brexit negotiations. Data-wise, the most important economic update will be Wednesday’s US CPI print, as well as industrial production releases in a number of countries including the US and China.

Wednesday will bring the release of November’s CPI data with analysts looking for a headline 2.0% Y/Y, while the core release is expected to moderate to 1.7% Y/Y from 1.8% last time out. HSBC suggest that “that are signs that owners equivalent rent has stabilised following some recent softness,” which could bode well for the print going forwards. Thursday will bring the release of November’s retail sales data with consensus looking for the headline to rise by 0.3% M/M from last month’s 0.2%, the core print is expected to rise by 0.6% M/M from 0.1%, while the control group is expected to rise by 0.4% M/M against last month’s 0.3%. There are suggestions that the dip in auto sales could offset the pop in gasoline prices in the upcoming release.

However, the week’s biggest event is Wednesday’s FOMC meeting, which is also Janet Yellen’s last address to the broader public as FOMC chair (the Jan 31, 2018 FOMC meeting will have no press conference) when everyone, and the market, now expects the Fed to hike rates by 25bp to a range of 1.25%-1.50%. In the Summary of Economic Projections economists expect a slightly more positive tone with an upward revision to growth (2.3%), downward revision to long run unemployment (4.5%) and slight shift higher in the dots starting in 2019. At the press conference Yellen will likely address the hiking cycle, tax reform and flattening of the yield curve.

Some more details from RanSquawk:

The final Federal Reserve monetary policy decision of 2017 will occur on Wednesday. Money markets have been pricing a 25bps hike at the upcoming meeting for some time, which would take the Federal Funds Rate target to 1.25-1.50%. Minneapolis Fed President Kashkari is likely to continue to express his dissent over the tightening of monetary policy, while there will also be attention on Chicago Fed’s Evans, who has recently cautioned on hikes. “The Minutes for the November meeting and recent Fedspeak show growing concern about inflation, but not enough to stay their hand at this meeting,” writes UBS. UBS believes that the ongoing recovery in inflation from its transitory weakness will be reflected in the statement. The FOMC is due to update its economic projections, and there may be scope for upward revisions. Presently, analysts are more optimistic than the Fed regarding growth and inflation; with regards to the rate of joblessness, the market and the Fed’s views are more-or-less in-line from 2018 onwards. The post-meeting press conference with Chair Janet Yellen will be her last, and she is expected to strike a balanced tone regarding future policy, reiterating her view that the FOMC will tighten policy gradually (as the incoming Fed Chair Powell recently endorsed in his confirmation hearing).

One day later, the ECB can afford to be boring on Thursday, as the important decisions were taken in October. No rate hike or taper will be announced, so focus will be on new forecasts, extended to 2020. Expect ECB confidence in its policy decisions to be high, reflected in core and headline inflation remaining on target (1.8%) in 2020. Looking ahead, however, the ECB will likely be forced into steeper inflation forecasts as we inflation prints remain stubbornly low next year. Focus will be on the Q&A session and whether Draghi will comment on the apparent disconnect between markets and the ECB (given the low level of rates). More from RanSquawk:

The European Central Bank (ECB) will issue its latest monetary policy decision on Thursday. After the ECB set out its short-term platform at its most recent decision, the upcoming meeting is set to be a rather low-key affair. With analysts looking for no change to the Bank’s monetary policy settings following the recently issued guidance, focus will fall on the staff’s macroeconomic projections. HSBC suggest that “the main news since September is a higher oil price (up around 20%), which we expect will raise the ECB’s 2018 inflation forecast from 1.2% to 1.5% add 0.1% to its 2019 projection. It will also publish a 2020 forecast for the first time, which we expect to be 1.8% and therefore close to, but less than, 2% and consistent with the ECB’s aim. Growth may be nudged up by 0.1% in 2017 and 2018, reflecting ongoing strength in leading indicators since September.” It is also worth noting that the Bank’s assumed EURUSD for projections currently stands at 1.18. Of course, focus will fall on the post-decision press conference, with market participants on the lookout for fall on any notable shift in rhetoric.

The BOE will be likewise boring, and will keep its rate at 0.5%, with the asset purchase target at 435bn and the corporate bond target at 10bn.

Monetary policy meetings will also be held in Russia, Mexico, Turkey, Indonesia, Chile, Colombia, Peru, Ukraine and the Philippines. Russia’s CBR will likely cut 25bp while Mexico’s Banxico will likely hike 25bp.

In other data:

  • In the US, it is a busy week with CPI, PPI, retail sales, industrial production, empire manufacturing and capacity utilization.
  • In the Eurozone, we have PMIs and industrial production. We also highlight the European Council’s meeting with Brexit in the agenda.
  • In the UK, we have CPI, RPI, PPI, labor market report and retail sales.
  • In Japan, money supply, PPI, PMI Mfg., core machine orders, final print of industrial production and Tankan survey.
  • In China, we have CPI, PPI, money supply, retail sales, financing data, industrial production and fixed assets investments.

A breakdown of key daily events from RanSquawk:

  • Tuesday: UK Inflation Data (Nov)               
  • Wednesday: FOMC MonPol Decision, US CPI (Nov), UK Labour Market Report (Nov/Oct)
  • Thursday: EU Summit, ECB, BoE & SNB MonPol Decisions, US Retail Sales (Oct) Australian Labour Market Report (Nov) 
  • Friday: Japanese Tankan Survey (Q4)

Summary snapshot courtesy of Bank of America:

A detailed preview of the week ahead from Deutsche Bank:

  • Monday: A pretty quiet start to the week with the only data release of note being the October JOLTS job openings report in the US. Away from that, chief technical negotiators for the US, Mexico and Canada are due to meet for more talks on NAFTA. Also worth highlighting is a scheduled meeting of EU diplomats to discuss the state of Brexit negotiations.
  • Tuesday: Inflation releases highlight the data docket on Tuesday with the November CPI/RPI/PPI prints due in the UK, and November PPI due in the US. The December ZEW survey will also be released in Germany while the November NFIB small business optimism and November monthly budget statement data are also out in the US. Away from the data, ECB President Draghi is scheduled to speak in Frankfurt while in the US a special general election will be held in Alabama to fill the US Senate seat which has been vacated by Attorney General Jeff Sessions.
  • Wednesday: All eyes will be on the US on Wednesday with both the November CPI report due out, and also the conclusion of the two-day FOMC meeting with a 25bp hike likely to be announced. Fed Chair Yellen will follow with a press conference. Also of significance is a scheduled discussion between European parliamentarians and European Commission President Juncker and European Council President Tusk around the state of Brexit negotiations. Other data releases on Wednesday include the final November CPI revisions in Germany, October and November employment data in the UK, and October industrial production data for the Euro area. Finally, the BoJ’s Kuroda is due to make a brief speech in the morning. President Trump may speak on tax reforms today and Germany’s Merkel and SPD will also start formal coalition talks.
  • Thursday: A packed day from start to finish. The highlight is the scheduled European Council meeting in Brussels which continues into Fri day. We’ve also got two central bank meetings due with both the BoE and ECB set to hold their last monetary policy meetings of the year. Datawise we’ll get the flash December PMIs in both Europe and the US, as well as the November retail sales data for the UK and US. Other notable data prints include the November retail sales, fixed asset investment and industrial production data in China, final November CPI revisions in France, November import price index reading and weekly initial jobless claims data in the US, and finally the Q4 Tankan survey late in the evening for Japan.
  • Friday: The conclusion of the EU Council summit will be the main focus for markets on Friday. Away from that it should be fairly quiet with October trade data for the Euro area, along with the December empire manufacturing and November industrial production prints in the US the only data due.

Finally, here is Goldman with a focus on only the US along with consensus estimates: The key economic releases this week are the CPI report on Wednesday and retail sales on Thursday. The December FOMC statement will be released on Wednesday at 2:00 PM EST, followed by Fed Chair Yellen’s press conference at 2:30 PM.


Monday, December 11

  • 10:00 AM JOLTS job openings, October (consensus 6,100k, last 6,093k)

Tuesday, December 12

  • 06:00 AM NFIB small business optimism, November (consensus 104.0, last 103.8)
  • 08:30 AM PPI final demand, November (GS +0.2%, consensus +0.3%, last +0.4%); PPI ex-food and energy, November (GS flat, consensus +0.2%, last +0.4%); PPI ex-food, energy, and trade, November (GS +0.2%, consensus +0.2%, last +0.2%): We expect a 0.2% increase in the headline PPI in November, reflecting some deceleration in core producer prices and firmer energy prices. The October report showed a sizeable increase in the volatile trade services component, and we expect some retrenchment in the November report. We estimate a 0.2% increase in the PPI ex-food, energy and trade services category.
  • 02:00 PM Monthly budget statement, November (consensus -$134.5bn, last -$136.7)

Wednesday, December 13

  • 8:30 AM CPI (mom), November (GS +0.40%, consensus +0.4%, last +0.1%); Core CPI (mom), November (GS +0.21%, consensus +0.2%, last +0.2%); CPI (yoy), November (GS +2.24%, consensus +2.2%, last +2.0%); Core CPI (yoy), November (GS +1.80%, consensus +1.8%, last +1.8%): We estimate a 0.21% increase in November core CPI (mom sa), which would leave the year-over-year rate unchanged at +1.8%. Our forecast reflects post-hurricane strength in new and used car prices, energy-price related strength in airfares, and a modest rise in apparel prices reflecting solid holiday shopping trends, colder weather, and leaner retailer inventories. On the negative side, we expect a pullback in the lodging away from home category. We estimate a 0.40% increase in headline CPI, primarily reflecting a boost from energy prices. This would leave the year-over-year rate two-tenths higher at 2.2%.
  • 02:00 PM FOMC statement, December 12-13 meeting: As discussed in our preview, a third rate increase this year from the FOMC is extremely likely next week, and market attention will likely focus on the 2018 outlook and how the Fed will respond to tax reform. The economic data since the November meeting have been reassuring, with strong GDP and employment reports and firmer inflation data. The statement will likely include modest changes to reflect this news. We expect the FOMC to revise up their GDP projections slightly and lower their unemployment rate projections, which appear quite dated. While our own forecast is for quarterly hikes in 2018 and 2019, we expect the median fed funds rate projection to remain at 3 hikes for 2018 and move up to 3 hikes for 2019. Further upward revisions to the economic and funds rate projections are likely to occur at the March meeting if tax reform is ultimately passed, in our view.

Thursday, December 14

  • 08:30 AM Retail sales, November (GS +0.4%, consensus +0.3%, last +0.2%); Retail sales ex-auto, November (GS +0.7%, consensus +0.7%, last +0.1%); Retail sales ex-auto & gas, November (GS +0.4%, consensus +0.4%, last +0.3%); Core retail sales, November (GS +0.4%, consensus +0.3%, last +0.3%): We estimate core retail sales (ex-autos, gasoline, and building materials) rose at a brisk 0.4% pace in November, reflecting solid online sales results and some sequential improvement in brick and mortar trends. The timing of the iPhone launch (iPhone X on November 3) also appears poised to boost Census sales growth in the upcoming report. Given the sharp increases in gas prices but sequential pullback in auto SAAR, we estimate 0.4% and 0.7% respective increases in the headline and ex-auto measures.
  • 8:30 AM Initial jobless claims, week ended December 9 (GS 235k, consensus 239k, last 236k); Continuing jobless claims, week ended December 2 (consensus 1,905k, last 1,908k): We estimate initial jobless claims declined 1k to 235k in the week ended December 9, continuing its gradual downtrend in recent weeks. Hurricane-related claims in Puerto Rico appear to have peaked, and we note that filings are currently somewhat elevated in California and Texas. Continuing claims – the number of persons receiving benefits through standard programs – pulled back sharply in the previous week, an encouraging confirmation that the extent of job loss has remained low.
  • 08:30 AM Import price index, November (consensus +0.7%, last +0.2%)
  • 09:45 AM Markit Flash US Manufacturing PMI, December preliminary (consensus 53.6, last 53.9)
  • 09:45 AM Markit Flash US Services PMI, December preliminary (consensus 54.2, last 54.5)
  • 10:00 AM Business inventories, October (consensus -0.1%, last flat)

Friday, December 15

  • 08:30 AM Empire manufacturing survey, December (consensus +18.3, last +19.4)
  • 09:15 AM Industrial production, November (GS +0.8%, consensus +0.3%, last +0.9%): Manufacturing production, November (GS +0.5%, consensus +0.2%, last +1.3%); Capacity utilization, November (GS 77.5%, consensus 77.2%, last 77.0%): we estimate industrial production rose 0.8% in November, as the mining production category rebounds and the manufacturing production category strengthens further. We expect manufacturing production rose 0.5%, reflecting a combination of stronger auto production and general improvement in other manufacturing categories.
  • 04:00 PM Total net TIC flows, October (last -$51.3bn)

Source: BofA, DB, Goldman

via http://ift.tt/2AKBV8u Tyler Durden

The Process Through Which the First Major Central Bank Goes Bust Has Begun

In the aftermath of the Great Financial Crisis, Central Banks began cornering the sovereign bond market via Zero or even Negative interest rates and Quantitative Easing (QE) programs.

The goal here was to reflate the financial system by pushing the “risk free rate” to extraordinary lows. By doing this, Central Bankers were hoping to:

1)   Backstop the financial system (sovereign bonds are the bedrock for all risk).

2)   Induce capital to flee cash (ZIRP and NIRP punish those sitting on cash) and move into risk assets, thereby reflating asset bubbles.

In this regard, these policies worked: the crisis was halted and the financial markets began reflating. 

However, Central Banks have now set the stage for a crisis many times worse than 2008. 

Let me explain…

The 2008 crisis was triggered by large financial firms going bust as the assets they owned (bonds based on mortgages) turned out to be worth much less (if not worthless), than the financial firms had been asserting.

This induced a panic, as a crisis of confidence rippled throughout the global private banking system.

During the next crisis, this same development will unfold (a crisis in confidence induced by the underlying assets being worth much less than anyone believes), only this time it will be CENTRAL banks (not private banks) facing this issue.

The consensus view is that a Central Bank can never go bust because it can always print money to remain solvent.

However, this is misguided.

Central Banks are currently sitting atop over $10 TRILLION in bonds, courtesy of nine years of QE programs.

These bonds trade based on inflation.

If inflation rises, these bonds will drop in value as their yields rise to accommodate the move in inflation.

When a Central Bank is sitting atop trillion of dollars in bonds, an inflationary spike inducing those bonds to drop could very quickly wipe out $100 billion or more in capital.

Now, you might argue that the same Central Bank could simply print more money to prop up the bond markets… but doing so would only increase inflation … which in turn would force bonds prices lower… inducing greater losses.

You get the point.

Policies like QE and ZIRP only work as long as the financial system maintains confidence in the currency a Central Bank is printing. The minute that currency begins to devalue rapidly due to inflation, the whole game is over.

This process has already started. The explosion of Bitcoin and other cryptocurrencies is just one way in which the system is losing confidence in primary currencies.

The recent spike in bond yields is another. Across the globe, the $100+ trillion bond market is begin to lurch towards an inflationary future. Below you can see these moves in Germany’s 10-Year Government bonds, Japan’s 10-Year Government bonds, and the US’s 10-Year Treasuries.

The time to prepare for this is NOW before the carnage hits.

On that note, we are putting together an Executive Summary outlining all of these issues as well as what’s to come when The Everything Bubble bursts.

It will be available exclusively to our clients. If you’d like to have a copy delivered to your inbox when it’s completed, you can join the wait-list here:

http://ift.tt/2zOZC2f

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

via http://ift.tt/2AtdsYq Phoenix Capital Research

NRA-Republican Backed Bill Makes It Easier For Feds To Disarm Citizens

Authored by Tho Bishop via The Mises Institute,

On Wednesday, the Republican controlled house voted to further federalize gun laws in this country.

While Ryan McMaken has noted the danger in further centralizing gun legislation, there is another deeply troubling aspect to this bill: it expands the ability of the Federal government to restrict Americans’ right to bear arms.

During the legislative process, the NRA supported merging the bill aimed at nationalizing concealed carry permits with another piece of legislation aimed at “fixing” the National Instant Criminal Background Check System (NICS.) Obviously this legislation was inspired by the failure of the US Air Force to report the criminal record of Devin Kelley, who went on to commit a horrific shooting in Sutherland Springs, Texas. While the motivation to do something after this atrocity is entirely natural, unfortunately this bill is simply another example of the Federal government using its own failure to justify expanding its own power.

After all, the “Fix NICS” bill doesn’t seek to punish the US Air Force for its failure to properly process paperwork. Instead, it provides $760 million in additional funding for the Department of Justice to establish new guidelines to ensure compliance among Federal agencies. That funding can also be used “to ensure maximum coordination” between State government and Indian tribes with the NICS.  

While the idea of bolstering the already existing Federal gun registry may strike some as relatively benign, it’s important to understand how it has been used in the past.

As Congressman Thomas Massie noted in his own criticism of the bill:

When President Obama couldn’t get Congress to pass gun control, he implemented a strategy of compelling, through administrative rules, the Veterans Administration and the Social Security Administration to submit lists of veterans and seniors, many of whom never had a day in court, to be included in the NICS database of people prohibited from owning a firearm. Only a state court, a federal (article III) court, or a military court, should ever be able to suspend your rights for any significant period of time.

While Republicans and supporters of the NRA may not fear the Trump Administration coming after their guns, it is obviously reckless to grant additional power and resources to future administrative states that may be quite hostile to the right to gun ownership. To put it simply, there is never a good reason to give Federal agencies the power the revoke an individual's ability to lawfully purchase a weapon without due process. 

Further, if one needed an example of how dangerous it is to centralize gun legislation in Washington DC, look no further to what gun owners in states like Ohio and Hawaii are currently facing. Both states, having recently legalized the use of medical marijuana, have placed those who need it with the choice of either owning a gun or receiving life-improving medicine.

In 2011, the Federal government sent a letter to licensed gun dealers reiterating that marijuana users were prohibited from owning a gun – even if it they have a medical prescription. The 9th U.S. Circuit Court of Appeals upheld this decision last year. Hawaii, which requires gun registration, has gone as far as to sending letters to permitted gun owners with marijuana prescriptions requiring they turn over their weapon. While the state is currently asking for “voluntary cooperation,” it could be a matter of time before it turns into compulsory compliance.

While the simplicity provided by nationalizing laws is an understandable appeal, especially if you’re a gun owner who frequently travels, political centralization is never the answer. By supporting this flawed attempt at “National Concealed Carry Reciprocity,” the NRA and their supporters in the House have sided with the power of Federal agencies over the Second Amendment rights of Americans. 

via http://ift.tt/2AKCUp3 Tyler Durden

Frontrunning: December 11

  • Hotly anticipated bitcoin futures ease off after 22 percent surge (Reuters)
  • Bitcoin Futures Debut With 26% Rally, Trigger Cboe Trading Halts (BBG)
  • Powell faces early test of policy view as tax cuts near approval (Reuters)
  • Small Investors Face Higher Taxes Under Senate Proposal (WSJ)
  • US, Japan and South Korea host joint missile tracking drills (DW)
  • Bakers, farmers struggle to make any dough on poor wheat crop (Reuters)
  • Fund Managers’ Great 2017 Comeback Almost Blew Up (BBG)
  • Hospital Giants in Talks to Create U.S.’s Largest Operator (WSJ)
  • Catalan protesters clash with police over ‘plunder’ of religious artefacts (Reuters)
  • EU tells Netanyahu no support for Trump’s Jerusalem move (Reuters)
  • Another Sign of Frothy Markets: Blank-Check Boom (WSJ)
  • Small Banks, Big Worry (BBG)
  • The Middle Class Might Not Even Notice If the GOP Cuts Their Taxes (BBG)
  • Russian military chief criticizes U.S., Japan and South Korea drills (Reuters)
  • Palestinian stabs Israeli in Jerusalem; anti-Trump protest flares in Beirut (Reuters)
  • A Fight in Afghanistan That America Is Winning (WSJ)
  • Investors Told to Brace for Steepest Rate Hikes Since 2006 (BBG)
  • U.S. citizen on the run after busting out of Bali prison (Reuters)
  • Mobile-Wireless Offers Insight Into Post Net-Neutrality World (WSJ)

Overnight Media Digest

WSJ

– Two hospital systems Ascension and Providence St. Joseph Health are in talks about a possible merger as a series of deals shape up to further consolidate control of the healthcare landscape. on.wsj.com/2AtiZyb

– The government of Qatar and British weapons maker Bae Systems Plc have finalized a multi-billion deal for 24 combat jets, continuing a weapons buying spree by the Middle East country. on.wsj.com/2AsKvMb

– JP Morgan Chase & Co has hired Barclays Plc card executive Matthew Massaua to oversee the popular rewards card and other Sapphire cards. on.wsj.com/2ArX7mx

– The White House is preparing to roll out a long-delayed infrastructure rebuilding plan in January, as U.S. President Donald Trump’s advisers bet that voters want a $1 trillion road-and-bridge-building plan, even though it is opposed by some lawmakers. on.wsj.com/2Atabbu

– Three people have been arrested for allegedly throwing fire bombs at a synagogue in the Swedish city of Goteborg, the second anti-Jewish attack in the Nordic nation in two days. on.wsj.com/2At6tyt

 

FT

– Ensuring UK production of the combat aircraft into the mid-2020s, BAE Systems and Qatar finalised a 5 billion pound deal for 24 Typhoon fighter jets.

– Bob Kerslake, the chairman of one of the UK’s biggest and busiest NHS trusts, resigned from his post at King’s College Hospital over the government’s approach to the “enormous challenges” around funding.

– UK’s Financial Conduct Authority’s total fines for the year stand at 229.4 million pounds compared with the 22.2 million pounds levied in 2016, a tenfold increase in the level of fines meted out by the UK’s financial watchdog.

– Labour party’s John McDonnell and Jeremy Corbyn are joining a campaign for the 612 million pounds parliamentary pension fund to drop its investments in fossil fuels.

 

NYT

– Matthias Muller, the chief executive of Volkswagen AG , said the German government should consider phasing out the subsidies that encourage Europeans to buy diesel cars, a startling change of position by the company largely responsible for diesel’s popularity in Europe. nyti.ms/2jLGlVr

– Britain’s best-known publicist, Max Clifford, died on Sunday after collapsing in prison, where he was serving an eight-year sentence for indecently assaulting teenage girls in the 1970s and 1980s. nyti.ms/2Aa1oqR

– U.S. President Donald Trump called for a Washington Post reporter named Dave Weigel to be fired over a misleading tweet about the size of the crowd at a rally for the president on Friday in Pensacola, Florida. nyti.ms/2jNJHHx

 

Canada

** The launch of bitcoin futures on the Chicago-based Cboe Global Markets exchange has accelerated the race among ETF providers in both Canada and the United States to be first to market with products that track the digital currency. tgam.ca/2ye01Wa

** The Chief Executive of Lundin Mining Corp Paul Conibear says the base-metals miner has “some work to do to get confidence back” after the recent sharp selloff in its stock. But Conibear is also shrugging off any suggestions that the company was slow to disclose a damaging rock slide at its flagship mine. tgam.ca/2yeoB9C

** Alberta is set to unveil successful bidders for 400 megawatts of renewable energy projects in a major step by the oil-rich province toward transforming its power grid. tgam.ca/2yeuh38

 

Britain

The Times

– Qatar’s defence minister signed a deal yesterday to purchase 24 Typhoons to be built at BAE System’s Warton factory in Lancashire, securing hundreds of production-line jobs for several years and marking the biggest order for the aircraft in a decade. bit.ly/2C13wT6

– The economy will slow sharply next year as trade continues to disappoint despite the fall in sterling since the Brexit vote, the British Chambers of Commerce has warned. bit.ly/2C26tmr

The Guardian

– Four Seasons Health Care is on course for a stay of execution before a crunch debt deadline, after its major creditor offered to drop demands rejected by directors. bit.ly/2C3xjdW

– The European Investment Bank has come under fire for moving towards approving a 1.5 billion euros ($1.77 billion) loan for a gas pipeline from Azerbaijan to western Europe as campaigners said the bank was acting against the EU’s climate change commitments. bit.ly/2C3NOqb

The Telegraph

– Government officials have admitted the plan to put a cap on standard energy prices could scupper growing competition in the energy market, unless the regulator keeps bills high enough to make it worthwhile for consumers to switch. bit.ly/2C14lLG

– Uber will head to court on Monday to fight its London ban, kicking off the first of two crucial legal battles over the next fortnight. bit.ly/2BYWfDc

Sky News

– UK’s pensions lifeboat is weighing whether to reject a restructuring proposal for Toys R Us’s British operations amid questions about a big loan write-off and bonuses awarded to company bosses. bit.ly/2BYWluy

– David Cumming‎ is in advanced discussions about a senior role running the equities division of Aviva Investors, which manages assets worth more than 350 billon pounds. bit.ly/2C0wceR

The Independent

– The UK’s financial watchdog has defended its handling of a report into Royal Bank of Scotland’s treatment of small business customers following claims it failed to publish the document over fears of being sued. ind.pn/2C0UcOU

via http://ift.tt/2z1vGhd Tyler Durden