Tag: finance

Authored by Mining.com via OilPrice.com,

After lining up for an entire day to get a plane ticket to visit her relatives in the western city of Mérida, Josefina García did not know if she and her octogenarian mother were going to reach their final destination on time for Christmas.

The airport is located 76 kilometers away from the city and when they tried to book a cab in advance to take them to the place where they were going to stay, the taxi company said they could not make bookings because there is a shortage of gas and management did not know if they were going to have enough fuel on the day of Josefina’s arrival.

Once they landed, the 61-year-old and her mother found a cab that had enough gas to take them to a certain part of the city where a cousin would pick them up. In the meantime, another cousin was lining up for gas. He was able to fill his sedan’s tank after waiting for more than six hours.

According to the Organization of the Petroleum Exporting Countries, the highest proven oil reserves in the world, including non-conventional oil deposits, are in Venezuela.

“Gentlemen: There is no more gasoline in Venezuela. In Venezuela, we are out of gas. In Venezuela, there is no gas oil. In Venezuela, there are no lube oils,” said Iván Freites in a televised press conference. Freites is the secretary of the professional and technician division of the United Federation of Venezuelan Petroleum Workers.

In his address, Freites said that poor management led to the stoppage of 80 per cent of the country’s refineries. “Only Amuay and Cardón refineries are operative and that is nothing. They produce 40,000 barrels per day and the national demand is over 200,000 barrels of gas per day,” he said.

Venezuela’s oil production has fallen to levels not seeing since the late-1980s. According to the latest OPEC report, which is based on information provided by the Nicolás Maduro government, the country is producing about 2.3 million barrels of oil per day. In October, it experienced the steepest fall in production of 2017, as only 1.9 million barrels were extracted, 130,000 barrels less than the previous month. The oil industry, however, is still the major source of income as it generates about 96 per cent of the foreign exchange.

“Can you imagine how much it would be to bring our refineries back to operation? To recover production in the Eastern Coast of the Lake (of Maracaibo)?” Iván Freites asked during the media brief. He blamed corrupt government officials for the fuel crisis and dismissed the theory that it is all due to the sanctions that Donald Trump imposed on some key figures in the Venezuelan cabinet.

He also expressed concern about the fact that Maduro’s administration pulled out of a partnership with Cuba in its Cienfuegos oil refinery, taking into account that all of Venezuela’s oil products have been unloaded on the island for the past 15 years before making their way to other markets.

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Bitcoin prices are soaring (following a disappointing start to the year) after reports that billionaire tech investor Peter Thiel has BTFD in recent months and amassed a massive position in the cryptocurrency.

 

The Wall Street Journal reports that Founders Fund, the venture-capital firm co-founded by Peter Thiel, has amassed hundreds of millions of dollars of the volatile cryptocurrency, people familiar with the matter said.

The bet has been spread across several of the firm’s most recent funds, the people said, including one that began investing in mid-2017 and made bitcoin one of its first investments.

Mr. Thiel made the decision to buy up bitcoin together with Founders’ other investment partners, a person familiar with the matter said.

The bitcoin bet is quickly showing promise. Founders bought around $15 to $20 million in bitcoin, and it has told investors the firm’s haul is now worth hundreds of millions of dollars after the digital currency’s ripping rise in the past year.

It isn’t clear if Founders has sold any of its holdings yet. The bet hasn’t been previously reported.

Bitcoin surges over $600 on the news, breaking back above $14,000…

 

Founders began buying in for its investors before the recent volatility, the people familiar with the matter said.

Notably, Mr. Thiel, who is an outspoken libertarian, co-founded digital payments service PayPal, perhaps adding further to his credibility with regard the cryptocurrency purchase.

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2017 was not a good year for Byron Wien predictions. While the traditionally bullish vice chairman of Blackstone’s Private Wealth Solutions group one year ago predicted – correctly – that the market would rise to 2,500, this is hardly remarkable as Wien has had a bullish stock forecast virtually every single year. The problem is with Wien’s other forecasts, most of which missed the mark by a mile.

Starting with Wien’s prediction that US GDP would rise above 3% (it did not), continuing to his forecast that Trump would move away from his more extreme positions “on virtually all issues” (one look at recent newspaper front pages clearly shows how off the mark this was), going to Wien’s dead wrong prediction that macro investors would “make a killing on currency fluctuations” – with the USDJPY rising to 130 and cable tumbling to 1.10 – when FX vol actually tumbled to near record lows in 2017; Wien’s expectation that inflation would move toward 3% and the 10Y would hit 4%, also both dead wrong, almost as wrong in predicting that populism would accelerate in Europe, resulting in a loss for Merkel in last year’s elections, not to mention active discussions to close down the EU and abandon the euro, then touching on Wien’s inaccurate forecast about warming of trade relations with China, and finally his prediction that the “Middle East cools down” (although he was right that Bashar Assad will remain in power), it was a one in ten batting average… two if being generous.

Which brings us to the latest forecast by the Blackstone veteran, who today issued his list of Ten Surprises for 2018.

This is the 33rd year Byron has given his views on a number of economic, financial market and political surprises for the coming year. And, as every other year, Byron defines a “surprise” as an event that the average investor would only assign a one out of three chance of taking place but which Byron believes is “probable,” having a better than 50% likelihood of happening.

Notably, for once Wien is less optimistic about the year ahead, and warns that stock speculation will get ahead of itself in 2018, leading to a short correction in the S&P 500, while oil will vault above $80 as “populism, tribalism and anarchy spread around the world.”

Wien however echoes Bank of America, and predicts that even with the decline to 2,300, the S&P will end the year above 3,000 as profits rise and economic growth approaches 4%.

Among his other calls for this year:

• A rehash of his FX call from last year, according to which the euro will drop to 1.10 versus the dollar and the yen will hit 120 against the U.S. currency.
• Another deja vu from last year: interest rates will climb, with U.S. Treasury yields moving toward 4%, as inflation becomes a bigger concern and the Federal Reserve tightens four times.
• Republicans will lose control of both chambers of Congress in November
• In the United Kingdom Jeremy Corbyn becomes the next prime minister.
• Catalonia remains turbulent in spite of repressive action by the Spanish government,
• And speaking of the UK, Wien predicts that despite the adverse economic consequences of the Brexit vote, the unintended positive consequence is that it brings continental Europe “closer together with more economic cooperation and faster growth.”

Wien started the practice over 30 years ago, in 1986, when he was the Chief U.S. Investment Strategist at Morgan Stanley, and continued into his current post after joining Blackstone in September 2009 as an advisor to both the firm and its clients in analyzing economic, political, market and social trends.

* *  *

Below is the full list of Byron’s Ten Surprises for 2018:

1. China finally decides that a nuclear capability in the hands of an unpredictable leader on its border is not tolerable even though North Korea is a communist buffer between itself and democratic South Korea. China cuts off all fuel and food shipments to North Korea, which agrees to suspend its nuclear development program but not give up its current weapons arsenal.
2. Populism, tribalism and anarchy spread around the world. In the United Kingdom Jeremy Corbyn becomes the next Prime Minister. In spite of repressive action by the Spanish government, Catalonia remains turbulent. Despite the adverse economic consequences of the Brexit vote, the unintended positive consequence is that it brings continental Europe closer together with more economic cooperation and faster growth.
3. The dollar finally comes to life. Real growth exceeds 3% in the United States, which, coupled with the implementation of some components of the Trump pro-business agenda, renews investor interest in owning dollar-denominated assets, and the euro drops to 1.10 and the yen to 120 against the dollar.  Repatriation of foreign profits held abroad by U.S. companies helps.  
4. The U.S. economy has a better year than 2017, but speculation reaches an extreme and ultimately the S&P 500 has a 10% correction. The index drops toward 2300, partly because of higher interest rates, but ends the year above 3000 since earnings continue to expand and economic growth heads toward 4%.
5. The price of West Texas Intermediate Crude moves above $80. The price rises because of continued world growth and unexpected demand from developing markets, together with disappointing hydraulic fracking production, diminished inventories, OPEC discipline and only modest production increases from Russia, Nigeria, Venezuela, Iraq and Iran.
6. Inflation becomes an issue of concern. Continued world GDP growth puts pressure on commodity prices. Tight labor markets in the industrialized countries create wage increases. In the United States, average hourly earnings gains approach 4% and the Consumer Price Index pushes above 3%.
7. With higher inflation, interest rates begin to rise. The Federal Reserve increases short-term rates four times in 2018 and the 10-year U.S. Treasury yield moves toward 4%, but the Fed shrinks its balance sheet only modestly because of the potential impact on the financial markets. High yield spreads widen, causing concern in the equity market.
8. Both NAFTA and the Iran agreement endure in spite of Trump railing against them. Too many American jobs would be lost if NAFTA ended, and our allies universally support continuing the Iran agreement. Trump begins to think that not signing on to the Trans-Pacific Partnership was a mistake as he sees the rise of China’s influence around the world.  He presses for more bilateral trade deals in Asia.
9. The Republicans lose control of both the Senate and the House of Representatives in the November election. Voters feel disappointed that many promises made during Trump’s presidential campaign were not implemented in legislation and there is a growing negative reaction to his endless Tweets. The mid-term election turns out to be a referendum on the Trump Presidency.
10. Xi Jinping, having broadened his authority at the 19th Party Congress in October, focuses on China’s credit problems and decides to limit business borrowing even if it means slowing the economy down and creating fewer jobs. Real GDP growth drops to 5.5%, with, only minor implications for world growth. Xi proclaims this move will ensure the sustainability of China’s growth over the long term.

Then there are the “also-rans”, or as Wien explains “Every year there are always a few Surprises that do not make the Ten because either I do not think they are as relevant as those on the basic list or I am not comfortable with the idea that they are “probable.”

1. Investors recognize that the earnings of companies in Europe, the Far East and the emerging markets are growing faster than those in the United States while the price earnings ratios in those regions are lower than those in America. Global investments become more broadly represented in institutional portfolios.
2. The Mueller investigation of the 2016 presidential election fails to implicate any members of the Trump family in collusion with Russian operatives.
3. Artificial intelligence gains visible momentum. Service sector jobs are automated, particularly clerks in legal and finance professions, as well as workers in fast food outlets and healthcare. Economists begin to question the unemployment data because the rate drops below 4% while so many people still appear to be out of work and seeking government assistance.
4. Cyberattacks become more prevalent and begin to affect consumer confidence. A major money center bank suspends deposits or withdrawals for three days because its system is penetrated. Numerous retail organizations report that customer personal information has been obtained by hackers. Those invading corporate information systems appear to be smarter and more innovative than the internal employees protecting the computer data, suggesting that the systems themselves need to be upgraded.
5. The regulatory authorities in Europe and the United States finally get concerned about the creative destruction of Internet-related businesses.  As a result of pressure from retailers and traditional media companies, they begin an investigation of anti-competitive practices at Amazon, Facebook and Google.  The public begins to think these companies have too much power.
6. The risks in Bitcoin are so great that regulatory authorities restrict trading.  Among their concerns are: no regulatory overnight; no safety and soundness measures; no recourse in the event of mistaken or miscalculated transactions; high cyber risk; no deposit insurance. (Risk source: Morgan Stanley.)

Check back in one year for the smirk.

Source: Blackstone

 

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Authored by Albert Bates via Medium.com,

The transformation of México in the second half of the 20th century reads like a fairy tale. The country went from being a tinhorn dictator puppet colony of the Great Powers — a lampoon backdrop in the films of Cantinflas — to a prosperous and trendy middle class democratic socialist country with less absolute poverty than the United States.

 

 

In recent years nearly as many USAnians have flocked to the medical centers, second home sites and loan-free universities of México as there are would-be gardeners and tradesmen slipping North. Not that long ago it appeared as though the two countries were in the process of exchanging populations.

In Bottleneck: Humanity’s Impending Impasse, William R. Catton called our modern humans Homo colossus — those among our kind living in industrial countries and consuming massive amounts of fossil fuels to motivate and control machines that do orders of magnitude more work than humans or animals could do otherwise. Homo colossus is gradually replacing Homo sapiens as industrial development spreads like a cancer across the Earth.

Fossil fuels artificially boosted carrying capacity for human occupancy, at least to outward appearances. It could never last.

Contrary to what Elon Musk, Peter Diamandis or other technoutopians might tell you, there is zero likelihood that current solar income can replace concentrates of ancient sunlight gathered and stored over millions of years. Nuclear power, with its dwindling supply-chain, nation-killing meltdowns, and Easy-Bake bomb potential, is a death wish. Renewables simply will not scale to a consumer society trying to fulfill the desires of seven billion Homo colossus. A reorganization is coming.

One thing is certain. While Homo sapiens, with a stable population under one billion, might have stood a reasonable chance of being around for another two or three million years, Homo colossus hasn’t a prayer.

In 2004, the Astronomer Royal in Britain, Sir Martin Rees, assigned humanity about a 50/50 chance of surviving through the 21st century. He was being generous. Earth has already passed tipping points in seven of ten essential life support systems for humans — biodiversity, climate change, nitrogen cycle, phosphorus cycle, ocean acidity, land fertility, and freshwater availability — and the other three — ozone, atmospheric aerosols and chemical/radioactive pollution — have yet to be fully quantified but may have already been exceeded as well.

In evolutionary biology a population bottleneck is where radical change to the environment causes a species to lose of all but the most hardy of its population; hardy, that is, in terms of the selection pressures arising from the change. If there are no sufficiently hardy individuals left, or the ones that manage to survive cannot reproduce sufficiently to repopulate, the species goes extinct. We are quickly approaching that reckoning but we have yet to understand what is happening, never mind change course.

Mexico is a poster child for the present schizophrenia. On November 3rd the national oil company, Petróleos Mexicanos (Pemex), made headlines across the world: “Pemex makes México’s biggest onshore oil find in 15 years. ” México’s President, Enrique Peña Nieto personally made that announcement, standing shoulder-to-shoulder with his energy minister, Pemex’ chief executive, and a range of other government and union officials at the Tula refinery in Veracruz. He proudly announced that Pemex made its historic discovery by drilling its onshore Ixachi well near the municipality of Cosamaloapan, and that the overall field is believed to hold some 350 million barrels of proven, probable and possible reserves.

Pause for a second and consider that number. True, it is the biggest find in 15 years. Equally true it represents less than one year of the oil México produced at its peak, in 2003, and perhaps 18 months worth at present rates of production. In the United States, its largest trading partner, it would keep the lights on and the filling stations operating for all of 17 days, 18 hours and 20 minutes, unless it arrived at a holiday travel time.

But even the number 350 million is suspect. First, that number is “proven, probable and possible;” three very different categories. If it was all proven reserves, bankers would be lining up to lend capital to develop the find. Instead, México has had to go to Big Oil looking for venture partners, and dropped its expectations from a majority holding, to 49% and now 40% and still no takers.

México has a long history of remaining independent of the oil giants, going back to the 1930s, when Lázaro Cárdenas refused to be extorted by Franklin Roosevelt and built his own refineries. The Mexican miracle came in 1972, when fisherman Rudesindo Cantarell Jiménez complained to the authorities that his nets were clogged with black tar.

By 1981 the Cantarell complex was producing 1.16 million barrels per day (180,000 m3/d). However, the production rate dropped to 1 million barrels per day (160,000 m3/d) in 1995. The nitrogen injection project, including the largest nitrogen plant in the world, installed onshore at Atasta Campeche, started operating in 2000, and it increased the production rate to 1.6 million barrels per day (250,000 m3/d), to 1.9 million barrels per day (300,000 m3/d) in 2002 and to 2.1 million barrels per day (330,000 m3/d) of output in 2003, which ranked Cantarell the second fastest producing oil field in the world behind Ghawar Field in Saudi Arabia. However, Cantarell had much smaller oil reserves than Ghawar, so production began to decline rapidly in the second half of the decade. Unfortunately, the nitrogen has migrated into the gas, lowering its heating value and thus, economic value, and soon will require treatment to remove the nitrogen from the gas, to be able to use the gas as a fuel.

— Wikipedia

Pemex spent US$6 billion in 2017 to arrest Cantarell’s decline at around 325,000 nitrogen-contaminated barrels per day but nothing can prevent eventual collapse of the field. The shortfall is having a negative effect on México’s annual government budget, its sovereign-credit rating, and the exchange rate of the peso (it dropped 25% just this week). México’s trade balance was 10.7 billion dollars in the red after the first 11 months of 2017, 50.6 percent of that from imported petroleum, which explains why the small discovery in Veracruz was so important to Peña Nieto. Earlier in the year an attempted auction of offshore leases — a political football punted away by every president prior to Peña Nieto — failed when no buyers showed up for the plays being offered. Another auction is scheduled for January.

The billions of pesos México had been receiving for crude export revenue once contributed as much as 40 percent of its budget. It paved roads, built parks and schools, and allowed still more exploration for new reserves. Now that figure has dropped to under 20 percent and the pinch is being felt at every level of society. The public has lost confidence in police and only 7 out of 100 crimes are reported. Of those reported , only 4.46 percent are caught and convicted. Police are unable or unwilling to stem gang violence.

“The high levels of violence not seen in years and the impunity with which crimes are treated put investment at risk,” a spokesman for the Mexican wine industry told the Financial Times of London. The director of the National Association of Private Transportation, which includes the main users of road freight transport, told the newspaper that it is not only the robberies, but that criminals “are selling these products in illegal markets below the price of production and compete with our products.”

Gang violence hurts tourism, México’s second cash cow. Rising petroleum prices will kill tourism, and not just in México. As one big field after another goes into terminal decline, and the best technology in the world cannot find more, squeeze more, or make more at a price anyone can afford, the airline industry will be one of the first to feel the higher prices. Bargain flights from Paris to Cancun may be replaced by train trips to mountain castles in Bavaria.

It is hard not to notice that all of México’s most popular tourist destinations lie closer to the sea than New York City or Miami. The most intense Atlantic Basin storm ever measured, Hurricane Wilma, hit the Mayan Riviera in 2005, dropping beachfront high-rises like dominoes.

How is the Mexican government responding? Drill, baby, drill.

When Peña Nieto beat populist Andres Manuel Lopez Obrador by less than one percent in the election of 2006, he ended the long-running feud between national oil company champions and bankers by siding with the bankers. He introduced reforms to denationalize parts of Pemex and sell them off to the highest bidder. These reforms temporarily reinflated state revenues that had begun to falter after the 2003 peak and drove Peña Nieto’s popularity to a 6 percent lead over Lopez Obrador in the election of 2012.

In 2018, the two meet again in a grudge match with Obrador and his National Regeneration Movement (MORENA) now the favorite. Peña Nieto has become deeply unpopular for a series of conflict of interest scandals, the discredited investigation into the mass murder of 43 student protesters, a collapsing economy, a tepid response to major earthquakes, and general mistrust of police and other authorities’ abilities to keep people safe or provide even the most basic services. When the government stopped regulating retail oil prices in May, 2017, pump prices spiked 20 percent over the course of a weekend. Looting and riots followed.

Peña Nieto is betting the next election on scoring some big gains in the energy sector in 2018 and redeeming his bet to de-nationalize and de-regulate. But in 2013, a month before the Mexican Congress passed the constitutional changes that paved the way for the landmark opening of México’s reserves to foreign ownership, Lopez Obrador sent letters to chief executives at 10 international oil companies, ExxonMobil and Chevron among them, warning them against signing new contracts in México. If the recent failed auctions are any indication, oil company executives can read presidential polls as well as anyone. Why buy a former state asset that could be re-nationalized a few months later?

Ultimately, the differences are a matter of degree, rather than direction. Peña Neto’s projected reforms would increase net output by soliciting investment in unconventional sources. Obrador would do the same, but without foreign ownership. Both candidates act as if they are ignorant of the Paris Agreement and the legal commitment México made to decarbonize its economy by 2050.

It is as if two thieves are standing outside a jewelry store. One says the best way to rob it is to break the window and stuff as much in your bag as you can before the police arrive. The other says the best way is to cut the alarm, sneak in the back and be quiet, then take your time filling your bag. Either way, the robbery is still going down. And both thieves are wrong if they think they will get away with it.

Most Mexicans, like most USAnians, are unconcerned about climate change, and assume it affects someone else. Mexican mass media is as silent on the subject as CNN, Fox or MSNBC. That is because Mexican mass media is CNN, Fox and MSNBC.

Rather than do what must be done, close the wells and pipelines altogether and take advantage of its extraordinary solar resource, México has chosen to buck international scorn, keep pumping like there is no tomorrow and wait out the apocalypse. It won’t be pretty.

 

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One of the Trump administration’s most colorful supporting characters says he might have a second chance at a West Wing job now that the new year has arrived.

The Daily Beast reported Tuesday that former White House Communications Director Anthony Scaramucci has privately told friends and associates that he might make his triumphant return to the West Wing early this year.

The former White House communications director has privately told friends and associates that the president and other members of the Trump family, including White House adviser and first daughter Ivanka Trump, miss him and want him back in the West Wing. Three sources close to Scaramucci have independently told The Daily Beast that the Mooch continues to brag that he and President Donald Trump talk on the phone, and that the Mooch believes his resurrection in Trump-world could be imminent. One of these sources said that the Mooch claimed he was flying out to either Washington, D.C. or Mar-a-Lago early this month to meet Trump to talk about it.

After initially serving as an adviser on the Trump transition team, Scaramucci was memorably fired by Chief of Staff John Kelly just 10 days after accepting the communications director job. Scaramucci, who was reportedly responsible for the firing of his palace rival, former Chief of Staff Reince Preibus, was allegedly sacked after delivering an expletive laden interview to New Yorker reporter Ryan Lizza (who has since been fired from the magazine over allegations of sexual harassment). Scaramucci claimed he didn’t realize Lizza intended to publish the rant, but sources inside the White House said the president was pleased with Scaramucci’s brash approach, while Kelly immediately saw Scaramucci – who reported directly to the president, circumventing the typical White House power structure – as a threat.

 

According to the Beast, there’s still one major obstacle to Scaramucci rejoining the administration: Trump himself doesn’t appear to be on board. It’s unclear whether Scaramucci has been in constant contact with Trump himself – or his daughter, Ivanka.

The story also comes with an important caveat: Virtually no one inside or outside the White believed the Mooch’s claims. This included several of the Mooch’s friends and also several Trump aides.

“It would amaze and shock me if the president still talks to [Scaramucci] or is considering re-hiring him after what happened,” one senior White House official said. “And that is coming from someone who works in a place where nothing surprises me anymore.”

Scaramucci unsurprisingly denied the story, and the White House communications department declined to comment.

“[T]his is absolute nonsense,” Scaramucci said in text messages to The Daily Beast. “Happy new year [and] be well. I have said nothing like that at all…Don’t believe BS.”

Laura Goldman, a friend of Scaramucci’s, told The Daily Beast that she’s been in touch with him and that while he does “still speak to both President Trump and Ivanka” he doesn’t have plans to return to the administration.

“His future plans are exciting and offer an extremely lucrative payday,” Goldman added. “They will launch Anthony in a different career. Stay tuned for a January announcement.”

Trump does have a habit of staying in contact with—and even relying on—advisers whom he has fired. Long after Corey Lewandowski kicked off the 2016 team, the former campaign manager still visits the White House and regularly dishes out advice to the president. Trump’s former chief strategist Steve Bannon was deposed in August—and yet he still often advises his former boss on the phone and remains a top outside advocate.

Reports about Trump’s reaction to Scaramucci’s now infamous New Yorker rant are varied. While some said Trump found it amusing, the Daily Beast reported that the president polled aides in the White House, inquiring about the Mooch’s mental state during the interview.

“Is he on drugs?” Trump earnestly asked those around him, according to two White House officials and another Trump confidant.

Days later, Scaramucci was out, one of nearly two dozen high profile personnel to depart the Trump administration during its first year.

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One day after Trump, in his first tweet of 2017,  slammed Pakistan claiming the US “has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years, and they have given us nothing but lies & deceit, thinking of our leaders as fools” the furious Pakistani government summoned the U.S. ambassador to protest against Trump’s angry tweet which Foreign Minister Khawaja Asif dismissed as a political stunt, while also calling an emergency cabinet meeting to establish the “difference between facts and fiction.”

In the tweet, in addition to accusing Pakistan of providing “lies and deceit” also accused the government in Islamabad of providing “safe haven to the terrorists we hunt in Afghanistan, with little help.”

The United States has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years, and they have given us nothing but lies & deceit, thinking of our leaders as fools. They give safe haven to the terrorists we hunt in Afghanistan, with little help. No more!

— Donald J. Trump (@realDonaldTrump) January 1, 2018

In response, the Pakistan foreign office summoned US ambassador David Hale to explain Trump’s tweet, Reuters reported. The ministry could not be reached for comment but the U.S. Embassy in Islamabad confirmed on Tuesday that a meeting had taken place.

Foreign Minister Asif dismissed Trump’s comments as a political stunt born out of frustration over U.S. failures in Afghanistan, where Afghan Taliban militants have been gaining territory and carrying out major attacks. “He has tweeted against us and Iran for his domestic consumption,” Asif told Geo TV on Monday.

“He is again and again displacing his frustrations on Pakistan over failures in Afghanistan as they are trapped in dead-end street in Afghanistan.” Quoted by Reuters, Asif added that Pakistan did not need U.S. aid.

Speaking to local media, he accused the US of aiding and abetting terrorists that were making incursions into Pakistan. “US forces based in Afghanistan also overlooked safe havens of the banned Tehreek-e-Taliban Pakistan (TTP) which has killed thousands of Pakistanis,” he told a private TV channel, referring to a Taliban-affiliated militant group based in Pakistan’s volatile region bordering Afghanistan, as cited by the newspaper.

Asid also took to Twitter to fire back at Trump’s outburst, saying that Pakistan would soon respond. “We will reveal the truth to the entire world. We will separate fact from fiction.”

We will respond to President Trump’s tweet shortly inshallah…Will let the world know the truth..difference between facts & fiction..

— Khawaja M. Asif (@KhawajaMAsif) January 1, 2018

On Tuesday, Pakistan Prime Minister Shahid Khaqan Abbasi chaired a National Security Committee meeting of civilian and military chiefs, focusing on Trump’s tweet. The meeting, which lasted nearly three hours, was brought forward by a day and followed an earlier meeting of army generals.

* * *

As we reported previously, on Monday the U.S. National Security Council said the White House did not plan to send an already-delayed $255 million in aid to Pakistan “at this time” and that “the administration continues to review Pakistan’s level of cooperation”.

The spat immediately reverberated across the region, with Pakistan’s regional enemies praising Trump’s angry  tweet.

Afghan defense spokesman General Dawlat Waziri said Trump had “declared the reality”, adding that “Pakistan has never helped or participated in tackling terrorism”.

Jitendra Singh, a junior minister at the Indian prime minister’s office, said Trump’s comment had “vindicated India’s stand as far as terror is concerned and as far as Pakistan’s role in perpetrating terrorism is concerned”.

But Chinese Foreign Ministry spokesman Geng Shuang, asked during a briefing about Trump’s tweet, did not mention the United States.

“We have said many times that Pakistan has put forth great effort and made great sacrifices in combating terrorism,” he said. “It has made a prominent contribution to global anti-terror efforts.”

Meanwhile, Pakistani officials rightfully say tough U.S. measures threaten to push Pakistan further into the arms of China, which has pledged to invest $57 billion in Pakistani infrastructure as part of its vast Belt and Road initiative.

To this point, two weeks ago we reported  that Pakistan is considering replacing the dollar with yuan in bilateral trade with China. Speaking to journalists, Pakistani interior minister Ahsan Iqbal said China desired bilateral trade should take place in yuan instead of dollars, in yet another push to de-dollarize what China considers its sphere of influence.

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The Dow is notably lower since the US cash market opened (though still higher from Friday) but Nasdaq is soaring unilaterally today…

As VIX is crushed back below 10 for good measure….

 

 

So much for “higher vol” in 2018!!

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Authored by Metin Gurcan via Al-Monitor.com,

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For the third consecutive year (2017), Baltimore City, Maryland, has had between 319-343 homicides, making it the most dangerous city in America.

The Ferguson effect joined together with an out of control opioid crisis has been the driving force in violent crime, turning the city into a complete mess with some labeling it a war-zone.  

On top of the death and despair, Baltimore gained national attention during the 2015 riots, after Freddie Gray, a young black male was arrested and died in police custody. Needless to say, there are much larger trends at play, including 50-years of failed Democratic leadership and decades of de-industrialization, which have ultimately given today’s war-zone a silver patter to thrive.

The Reverend Kinji Scott, a pastor in Baltimore who’s held various positions in local government, recently spoke with Lauren Frayer, an NPR journalist, on the current environment in Baltimore. Scott clearly describes the city as a war-zone and said, “we have broad daylight shootings–all over the city.”

He’s among a group of activist who believes the higher homicide rate is due to a relaxation of police patrols following the Ferguson effect and the death of Freddy Gray. “We wanted the police there,” Scott said. “We wanted them engaged in the community. We didn’t want them beating the hell out of us, we didn’t want that.” Scott believes real change will come when the black community forms strong relationships with the police; however, that has yet to happen.

When asked if he’s optimistic for 2018, this is what Scott had to say:

This interview has been edited for length and clarity by NPR.

---

Interview Highlights

On the current state of community safety in Baltimore

When you think about young people who are out here facing these economic challenges and are homeless and living places that are uncertain, and you’re a parent — you’re scared. Not just for yourself really, but for your children.

The average age of a homicidal victim in Baltimore City right now is 31 years old. We had a young man who attended one of the prime high schools, [Baltimore Polytechnic Institute], Jonathan Tobash, and he was 19 years old, he was a Morgan State student. And he was killed on his way to the store. That’s the state of Baltimore right now.

On whether the community wanted police to back off after the death of Freddie Gray

No. That represented our progressives, our activists, our liberal journalists, our politicians, but it did not represent the overall community. Because we know for a fact that around the time Freddie Gray was killed, we start to see homicides increase. We had five homicides in that neighborhood while we were protesting.

What I wanted to see happen was that people would be able to trust the relationship with our police department so that they would feel more comfortable. We’d have conversations with the police about crime in their neighborhood because they would feel safer. So we wanted the police there. We wanted them engaged in the community. We didn’t want them beating the hell out of us, we didn’t want that.

On whether the high murder rate is unique to Baltimore

It’s not. I lost my brother in St. Louis in 2004; just lost my cousin in Chicago. No it’s not unique, and that’s the horrible thing.

via RSS http://ift.tt/2DRWjVw Tyler Durden

Authored by Lance Roberts via RealInvestmentAdvice.com,

As I noted this past weekend, 2017 was a year for the record books. Not surprisingly, the strong advance fostered a surge in investor optimism which pushed allocations to equities to the second highest level on record.

And leveraged to boot.

Importantly, don’t mistake record margin debt levels as people borrowing against their portfolio just to make larger investment bets. In reality, they are using leverage to support their lifestyle as well, after all, as long as stocks keep rising it’s like “free money.”  Right?

This is shown in both the level of debt used to support the standard of living and the relationship between real, inflation-adjusted, margin debt and economic growth.

Yes. Investors are optimistic.

The current level of exuberance, and the willingness by individuals to shun risk for the hopes of chasing wealth brought to mind Bob Farrell’s 10-Investment Rules.

Particularly “Rule #9.” 

I have penned these previously, but these rules should be a staple for any investor who has put their hard earned “savings” at risk in the market. These rules, which are rarely heeded in the heat of bull market, are worth revisiting as we enter into 2018.

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The Illustrated 10-Rules Of Investing

1. Markets tend to return to the mean (average price) over time.

Like a rubber band that has been stretched too far – it must be relaxed in order to be stretched again. This is exactly the same for stock prices which are anchored to their moving averages.  Trends that get overextended in one direction, or another, always return to their long-term average. Even during a strong uptrend or strong downtrend, prices often move back (revert) to a long-term moving average. The chart below shows the S&P 500 with a 52-week simple moving average.

The bottom chart shows the percentage deviation of the current price of the market from the 52-week moving average. During bullish trending markets, there are regular reversions to the mean which create buying opportunities. However, what is often not stated is that in order to take advantage of such buying opportunities profits should have been taken out of portfolios as deviations from the mean reached historical extremes. Conversely, in bearish trending markets, such reversions from extreme deviations should be used to sell stocks, raise cash and reduce portfolio risk rather than “panic sell” at market bottoms.

The dashed RED lines denote when the markets changed trends from positive to negative. This is the very essence of portfolio “risk” management.

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2. Excesses in one direction will lead to an opposite excess in the other direction.

Markets that overshoot on the upside will also overshoot on the downside, kind of like a pendulum. The further it swings to one side, the further it rebounds to the other side. This is the extension of Rule #1 as it applies to longer-term market cycles (cyclical markets).

While the chart above showed prices behave on a short-term basis – on a longer-term basis markets also respond to Newton’s 3rd law of motion: “For every action, there is an equal and opposite reaction.”  

As I showed in “How Investors Are Dealt A Losing Hand:” 

Our chart of the day is a long-term view of price measures of the market. The S&P 500 is derived from Dr. Robert Shiller’s inflation adjusted price data and is plotted on a QUARTERLY basis. From that quarterly data I have calculated:

• The 12-period (3-year) Relative Strength Index (RSI),
• Bollinger Bands (2 and 3 standard deviations of the 3-year average),
• CAPE Ratio, and;
• The percentage deviation above and below the 3-year moving average. 
• The vertical RED lines denote points where all measures have aligned

As the chart clearly shows, “prices are bound by the laws of physics.” While prices can certainly seem to defy the law of gravity in the short-term, the subsequent reversion from extremes has repeatedly led to catastrophic losses for investors who disregard the risk. 

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3. There are no new eras – excesses are never permanent.

There will always be some “new thing” that elicits speculative interest.  These “new things” throughout history, like the “Siren’s Song,” has led many investors to their demise. In fact, over the last 500 years, we have seen speculative bubbles involving everything from Tulip Bulbs to Railways, Real Estate to Technology, Emerging Markets (5 times) to Automobiles and Commodities.

[The chart below is from my March 2008 seminar discussing that the next recessionary bear market was about to occur.]

We will likely add “Bitcoin” to this list in the not-so-distant future?

It always starts the same and ends with the utterings of “This time it is different”

As legendary investor Jesse Livermore once stated:

“A lesson I learned early is that there is nothing new on Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.”

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4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways

The reality is that excesses, such as we are seeing in the market now, can indeed go much further than logic would dictate. However, these excesses, as stated above, are never worked off simply by trading sideways. Corrections are always just as brutal as the advances were exhilarating. As the chart below shows when the markets broke out of their directional trends – the corrections came soon thereafter.

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5. The public buys the most at the top and the least at the bottom.

The average individual investor is most bullish at market tops and most bearish at market bottoms. This is due to investor’s emotional biases of “greed” when markets are rising and “fear” when markets are falling. Logic would dictate that the best time to invest is after a massive sell-off; unfortunately, this is exactly the opposite of what investors do.

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6. Fear and greed are stronger than long-term resolve.

As stated in Rule $5 it is emotions that cloud your decisions and affect your long-term plan.

“Gains make us exuberant; they enhance well-being and promote optimism,” says Santa Clara University finance professor Meir Statman.  His studies of investor behavior show that “Losses bring sadness, disgust, fear, regret. Fear increases the sense of risk and some react by shunning stocks.”

The chart shows the ratio of bearish funds to bullish funds as compared to the volatility index (VIX) and the ratio of bullish to bearish assets. Rarely have such extremes previously been seen.

In the words of Warren Buffett:

“Buy when people are fearful and sell when they are greedy.”

Currently, those “people” are getting extremely greedy.

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7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.

Breadth is important. A rally on narrow breadth indicates limited participation and the chances of failure are above average. The market cannot continue to rally with just a few large-caps (generals) leading the way. Small and mid-caps (troops) must also be on board to give the rally credibility. A rally that “lifts all boats” indicates far-reaching strength and increases the chances of further gains.

The chart above shows the ARMS Index which is a volume-based indicator that determines market strength and breadth by analyzing the relationship between advancing and declining issues and their respective volume.  It is normally used as a short-term trading measure of market strength. However, for longer-term periods the chart shows a weekly index smoothed with a 34-week average. Spikes in the index has generally coincided with near-term market peaks.

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8. Bear markets have three stages – sharp down, reflexive rebound and a drawn-out fundamental downtrend

Bear markets often start with a sharp and swift decline. After this decline, there is an oversold bounce that retraces a portion of that decline. The longer-term decline then continues, at a slower and more grinding pace, as the fundamentals deteriorate. Dow Theory suggests that bear markets consist of three down legs with reflexive rebounds in between.

The chart above shows the stages of the last two primary cyclical bear markets. The point to be made is there were plenty of opportunities to sell into counter-trend rallies during the decline and reduce risk exposure. Unfortunately, the media/Wall Street was telling investors to just “hold on” until hey finally sold out at the bottom.

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9. When all the experts and forecasts agree – something else is going to happen.

This rule fits within Bob Farrell’s contrarian nature. As Sam Stovall, the investment strategist for Standard & Poor’s once stated:

“If everybody’s optimistic, who is left to buy? If everybody’s pessimistic, who’s left to sell?”

As a contrarian investor, and along with several of the points already made within Farrell’s rule set, excesses are built by everyone being on the same side of the trade. Ultimately, when the shift in sentiment occurs – the reversion is exacerbated by the stampede going in the opposite direction

Currently, everyone on Wall Street is optimistic 2018 will turn in another positive year making it the longest streak in history of positive return years for the market.

Being a contrarian can be quite difficult at times as bullishness abounds. However, it is also the secret to limiting losses and achieving long-term investment success. As Howard Marks once stated:

“Resisting – and thereby achieving success as a contrarian – isn’t easy. Things combine to make it difficult; including natural herd tendencies and the pain imposed by being out of step, since momentum invariably makes pro-cyclical actions look correct for a while. (That’s why it’s essential to remember that ‘being too far ahead of your time is indistinguishable from being wrong.’)

Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one – especially as price moves against you – it’s challenging to be a lonely contrarian.”

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10. Bull markets are more fun than bear markets

As stated above in Rule #5 – investors are primarily driven by emotions. As the overall markets rise; up to 90% of any individual stock’s price movement is dictated by the overall direction of the market hence the saying “a rising tide lifts all boats.”

Psychologically, as the markets rise, investors begin to believe that they are “smart” because their portfolio is going up. In reality, it is primarily more a function of “luck” rather than “intelligence” that is driving their portfolio.

Investors behave much the same way as individuals who addicted to gambling. When they are winning they believe that their success is based on their skill. However, when they began to lose, they keep gambling thinking the next “hand” will be the one that gets them back on track. Eventually – they leave the table broke.

It is true that bull markets are more fun than bear markets. Bull markets elicit euphoria and feelings of psychological superiority. Bear markets bring fear, panic, and depression.

What is interesting is that no matter how many times we continually repeat these “cycles” – as emotional human beings we always “hope” that somehow this “time will be different.” Unfortunately, it never is and this time won’t be either. The only questions are: when will the next bear market begin and will you be prepared for it?

Conclusions

Like all rules on Wall Street, Bob Farrell’s rules are not meant has hard and fast rules. There are always exceptions to every rule and while history never repeats exactly it does often “rhyme” very closely.

Nevertheless, these rules will benefit investors by helping them to look beyond the emotions and the headlines. Being aware of sentiment can prevent selling near the bottom and buying near the top, which often goes against our instincts.

Regardless of how many times I discuss these issues, quote successful investors, or warn of the dangers – the response from both individuals and investment professionals is always the same.

 “I am a long-term, fundamental value, investor.  So these rules don’t really apply to me.”

No, you’re not. Yes, they do.

Individuals are long term investors only as long as the markets are rising. Despite endless warnings, repeated suggestions and outright recommendations; getting investors to sell, take profits and manage your portfolio risks is nearly a lost cause as long as the markets are rising. Unfortunately, by the time the fear, desperation, or panic stages are reached, it is far too late to act and I will only be able to say that I warned you.

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