• Headline of the day: Oil prices fall as investors’ faith in rally wanes (Reuters)
• Europe shares, dollar gain as investors look to Yellen (Reuters)
• Chinese Bidder for Starwood Has Mysterious Ownership Structure (WSJ)
• Germany wants refugees to integrate or lose residency rights (Reuters)
• BlackRock Joins Pimco Warning Investors to Seek Inflation Hedge (BBG)
• Goldman Sachs and Bear Stearns: A Financial-Crisis Mystery Is Solved (WSJ)
• Contract Workforce Outpaces Growth in Silicon-Valley Style ‘Gig’ Jobs  (WSJ)
• Hugh Hendry has a friend: China Bull Who Beat 99% of All Bond Funds Says Yuan Drop Is Over (BBG)
• Obama says journalists partly to blame for tone of presidential race (Reuters)
• Newt Gingrich: Wives spat is Trump’s ‘wake-up call’ (Politico)
• Europe’s Higher-Yielding Bonds Benefit as ECB Prepares QE Boost (BBG)
• Brazil party set to abandon Rousseff, making impeachment more likely (Reuters)
• Under the Hood of Japan’s Jobs Data: Part-Timers on Low Pay (BBG)
• Filed Your Taxes? Good. (Or Is It?) (BBG)
• For banks, ECB policy experiment opens north-south divide (Reuters)
• Once-Secret Pentagon Agency Asks Industry to Help Find New Ideas (BBG)
• Lenders ‘Freaking Out’ Over London Luxury Home Woes (BBG)
• Japan public divided as laws easing limits on military take effect (Reuters)
• Banker Accused of $25 Million Fraud Arose From a Gilded Legacy (BBG)
• Fed’s Williams Sees Gradual Hikes as U.S. Economy Stays on Track (BBG)

 

Overnight Media Digest

WSJ

– The U.S. government said Monday it had cracked a terrorist’s iPhone without Apple Inc’s help and is seeking to drop its legal case to force the tech giant to unlock the device. (http://on.wsj.com/1RCcaK2)

– Prosecutors charged former Blackstone Group LP executive Andrew Caspersen, most recently an executive at Park Hill, with stealing $25 million from investors and scheming to defraud investors of $70 million more.(http://on.wsj.com/1UqsfGc)

– Low-fare startup Virgin America Inc may soon have a new owner. Takeover offers from two other U.S. airlines – JetBlue Airways Corp and Alaska Air Group Inc – are due by the end of the week, according to a person familiar with the matter, in what could signal the latest wave of consolidation in the industry. (http://on.wsj.com/1UrgAqw)

– A study by researchers at the Icahn School of Medicine at Mount Sinai showed that results for cholesterol tests done by Theranos Inc differed enough from the two largest laboratory companies in the U.S. that they could throw off doctors’ medical decisions. (http://on.wsj.com/1UxKrxU)

– Yahoo Inc has given potential suitors two weeks to submit preliminary bids for its core Web business and Asian assets, according to people familiar with the matter. (http://on.wsj.com/1VQGCDh)

 

FT

*I Squared Capital is buying Irish energy firm Viridian Group Plc in a transaction worth 1 billion euros ($1.12 billion), to gain entry as a contender into the dynamic UK energy market.(http://bit.ly/1XZerQZ)

*Education Secretary Nicky Morgan, a supporter of the campaign for Britain to remain in the EU, will say in a speech that young people should speak out in favour of the EU and convince their elders against Britain’s exit. (http://bit.ly/1VQDg2R)

*The FBI has abandoned its bid to force access Apple Inc’s to help it break into the San Bernardino shooter’s iPhone after it found a way to access the device’s data without the company’s help. (http://bit.ly/1XZdvvU)

*The Ministry of Defence on Monday awarded contracts of service to BAE Systems Plc, Rolls-Royce Holdings Plc and Babcock International Group Plc worth 372 million pounds to maintain and upgrade the Hawk jets used by the Royal Air Force and Royal Navy. (http://bit.ly/1VQDoPV)

 

NYT

– The Justice Department said on Monday that it had found a way to unlock an iPhone without help from Apple, allowing the agency to withdraw its legal effort to compel the tech company to assist in a mass-shooting investigation. (http://nyti.ms/25t5IvW)

– A federal judge in San Juan on Monday threw out a new tax that Puerto Rico had tried to impose on the American retailing giant Walmart, calling it unlawful. (http://nyti.ms/1UytSBU)

– On Monday, federal prosecutors charged Andrew Caspersen, a Wall Street executive, in a criminal complaint with securities and wire fraud in what they called a “brazen” scheme to defraud investors – including a foundation affiliated with a major New York hedge fund – of up to $95 million. (http://nyti.ms/1LVPyot)

– Pandora Media replaced Chief Executive Brian McAndrews with Tim Westergren, a co-founder of Pandora and its former chief strategy officer. (http://nyti.ms/25tvmkp)

– Dell has agreed to sell its Perot Systems subsidiary, which provides information technology services to hospitals and governments, to the Japanese technology company NTT Data for almost $3.1 billion. (http://nyti.ms/1qcJVIQ)

 

Canada

THE GLOBE AND MAIL

** Gareth Joyce, president of Mercedes-Benz Canada Inc, has resigned after less than three months on the job. (http://bit.ly/1pHazsM)

** Canadian Craigslist rival VarageSale’s Chief executive, Carl Mercier, said on Monday that he was promoting Andrew Sider to CEO, while he would take on the job of chief product officer. (http://bit.ly/1pHb4CY)

** Sick days are costing Ontario school boards C$1 billion ($758.90 million) a year, according to a report by School Boards’ Co-operative Inc. (http://bit.ly/1pHbjho)

NATIONAL POST

** Canadian miner Columbus Gold Corp launched a proxy fight against Eastmain Resources Inc on Monday. (http://bit.ly/1pHbNEn)

** In his zeal to investigate reports of rampant harassment in the workplace, RCMP Commissioner Bob Paulson was formally accused of being a bully. The 2012 allegation prompted the then public safety minister Steven Blaney to probe Paulson’s conduct and force the commissioner to apologize for exercising “bad judgment.” (http://bit.ly/1UStrlq)

 

Britain

The Times

– ConocoPhillips is drawing up plans to shut down one of the North Sea’s biggest gas pipeline systems in a move that threatens to knock out 10 percent of the UK’s gas capacity and a string of active fields. (http://thetim.es/1Si9DlE)

– A multimillion-pound Revenue & Customs publicity campaign to stamp out tax evasion and avoidance used an advertising agency ultimately controlled in an offshore haven. HMRC spent more than 6 million pounds($8.55 million)on the campaigns, including 300,000 pounds specifically on offshore evasion. (http://thetim.es/1SiaSRG)

The Guardian

– The cost of a first class stamp will rise to 64p this week, taking the price increase to 100 percent over the past decade. First class stamp prices are rising by 1p, while a second class stamp will rise by the same amount to 55p. (http://bit.ly/1Si9wX9)

– Britain’s manufacturers are struggling to recruit skilled workers and keep pace with global technology, according to business group EEF’s report that criticises the government for lack of support. (http://bit.ly/1SiaIdg)

The Telegraph

– CEO of the takeover target Premier Foods Plc, Gavin Darby, has claimed a rival bidder could challenge its American suitor McCormick, as he defended the company’s heavily criticised decision to reject a 60p per share offer. (http://bit.ly/1Si9Mpd)

– More than 9000 jobs in Port Talbot hang in the balance as crunch talks begin at Tata Steel Ltd in India over the Welsh site’s future. Fears are rife among workers that the Indian multinational may pull the plug on the loss-making plant. (http://bit.ly/1Siai6x)

Sky News

– Notonthehighstreet, an online marketplace, has been approached by a number of new investors about injecting funds into the business to allow it to accelerate its expansion. (http://bit.ly/1Si9m22)

The Independent

– UK think tank Smith Institute, found that two-thirds of employees say they are working longer than two years ago, but only 10 percent believe they are more productive. A quarter of staff believed their productivity had declined over the period. (http://ind.pn/1Si9QW3)

 

via Zero Hedge http://ift.tt/1REfq7v Tyler Durden

Donald Trump has long taunted the media – and specifically Fox’s “crazy Megyn” Kelly – for failing to understand “math.”

The problem, Trump says, is that it isn’t fair to criticize him for not polling higher than 50% when the GOP field is so crowded. In fact, the billionaire has said, it’s a small miracle he’s been able to garner the amount of support he has over the past nine months given that at one point, there were 17 Republican candidates. Implicit in that argument is the contention that once the field narrows, Trump will command an even larger lead in the polls.

As we head into the Wisconsin primary on April 5, it would appear that Trump was indeed correct. The latest NBC/SurveyMonkey weekly tracking poll shows Trump nearing the 50% threshold as the preferred candidate among registered Republicans nationwide.

“With just three candidates left in the Republican primary race, Donald Trump now holds 48 percent support of registered Republicans and Republican-leaners,” NBC writes. “This is more than 20 points higher than his second-place competitor, Ted Cruz — who now enjoys 27 percent support. John Kasich got a boost of 2 points this week and holds third place with 18 percent support.”

As those who have followed the GOP circus are no doubt aware, the Republican establishment effectively exited the race with Marco Rubio. There’s some begrudging, lukewarm support for Ted Cruz, but make no mistake, were it not for Trump, the GOP would sooner not run a candidate at all then support Cruz. That is, he’s just about the furthest thing from “mainstream” you can get without going … well, without going full-Donald.

Indeed, it’s not even clear that the establishment is prepared to accept Cruz as the nominee even if he somehow manages to steal the nomination from Trump at the convention in July. “If we don’t have a nominee who can win on the first ballot, I’m for none of the above,” former House Speaker John Boehner said. “They all had a chance to win. None of them won. So I’m for none of the above.” In other words, the powers that be in the party may well try to install Paul Ryan or Mitt Romney and send the “outsiders” home with nothing but fond memories of the campaign trail.

In any event, NBC also polled registered Republicans and Republican-leaners on the contested convention. Here’s what they said:

There you have it. Nearly 90% of Trump supporters say he shouldn’t have to abide by the rules that govern the nomination. Unfortunately, as we reported on Monday, they won’t be able to bring their guns to Cleveland to demand the GOP nod.

via Zero Hedge http://ift.tt/1Uzal4t Tyler Durden

With Europe back from Easter break, we are seeing a modest continuation of the dollar strength witnessed every day last week, which in turn is pressuring oil and the commodity complex, and leading to some selling in US equity futures (down 0.2% to 2024) ahead of today’s main event which is Janet Yellen’s speech as the Economic Club of New York at 12:20pm, an event which judging by risk assets so far is expected to be far more hawkish than dovish: after all the S&P 500 is north of 2,000 for now.

Crude slid below $39 a barrel in New York in a fourth day of losses while commodity currencies such as Russia’s ruble and the Norwegian krone weakened. Euro-area sovereign securities climbed as lower energy prices dimmed the outlook for inflation and the European Central Bank prepared to increase its asset-purchase plan by 20 billion euros ($22 billion) a month in April. Treasuries advanced and U.S. equity-index futures dropped before a speech from Federal Reserve Chair Janet Yellen and several key pieces of economic data this week culminating in payrolls figures.

The shaky sentiment was summarized by Pedro Ricardo Santos, a broker at X-Trade Brokers DM SA in Lisbon. who told Bloomberg that “the correction in oil prices is outweighing any optimism about the economy in the markets. Investors will also expect a little more hawkishness from Yellen’s speech today. Although the likelihood of a rate increase in April is practically zero, many are looking for two more hikes by the end of the year.”

Market Snapshot:

• S&P 500 futures down 0.2% to 2024
• Stoxx 600 up 0.3% to 336
• FTSE 100 up 0.3% to 6126
• DAX up 0.7% to 9920
• German 10Yr yield down 3bps to 0.15%
• Italian 10Yr yield down 6bps to 1.24%
• Spanish 10Yr yield down 7bps to 1.45%
• S&P GSCI Index down 0.9% to 325
• MSCI Asia Pacific down 0.5% to 127
• Nikkei 225 down 0.2% to 17104
• Hang Seng up 0.1% to 20366
• Shanghai Composite down 1.3% to 2920
• S&P/ASX 200 down 1.6% to 5005
• US 10-yr yield down 1bp to 1.87%
• Dollar Index up 0.13% to 96.07
• WTI Crude futures down 1.4% to $38.83
• Brent Futures down 1.8% to $39.70
• Gold spot down 0.3% to $1,218
• Silver spot down 0.8% to $15.12

Global Top News:

• Most Passengers on Hijacked EgyptAir Flight Are Released
• U.S. Drops Apple Case After Getting Into Terrorist’s IPhone
• BlackRock Joins Pimco Warning Investors to Seek Inflation Hedge
• Yahoo Said to Set April 11 Deadline for Preliminary Bids: WSJ
• Marriott Faces Prospect of Losing Starwood After Months of Work
• Biotech Trovagene Fires, Sues Its CEO, CFO; Shares Tumble
• Macquarie’s Wins $3.4b Cleco Deal Approval With 2 Promises

Looking at regional markets, we start in Asia stocks traded mostly negative following a subdued lead from Wall St. where discouraging data and a lack of EU participants kept risk-sentiment in check. ASX 200 (-0.77%) returned from its prolonged weekend to extend on last week’s financials weakness, while Nikkei 225 (-0.25%) was heavily pressured from the open following the largest decline in retail sales since 2014 and mass ex. dividends in Japan which totalled over 75% of Topix shares. Chinese markets (Shanghai Comp. -1.3%) conformed to the downbeat tone in the region and continued its recent declining trend with participants cautious ahead of several large named earnings reports and key PM! releases this week. 10yr JGBs traded lower with participants side-lined ahead of fiscal year-end, while the BoJ also refrained from entering the market with its bond purchase program.

Asia Top News

• China Bull Who Beat 99% of All Bond Funds Says Yuan Drop Is Over: Seaman sees yuan rising on average 2-3% each year over decades
• Offshore Yuan Gains as PBOC Raises Fixing, Fed Rate Bets Recede: Central bank boosts reference rate by most since March 18
• RBA Rate Cut in Response to Stronger Aussie Seen by Bond Bull: Monetary easing more likely in 2H, Gor says
• India Open to Importing U.S. Oil in Effort to Diversify Sources: India purchasing Iranian crude and engaging in other projects
• Malaysia Building Society Becoming Islamic After Failed Mergers: Lender has stopped offering conventional loans, CEO says

European participants return from their long weekends today to see equities firmly in the green (Eurostoxx: +0.3%). Stocks have benefitted from upside in financials, with this the best performing sector in Europe. Material names underperform amid downside in the commodity complex, with a bid in USD weighing on the likes of WTI, which resides around the USD 39/bbl level, and base metals which are broadly in the red.

European Top News

• ECB’s Gloomy Price Outlook to Be Confirmed Just as QE Grows
• EasyJet Leads Britain’s Stock Advances After Week of Declines
• Volkswagen May Suspend Dividend on Emissions Probe, DPA-AFX Says
• Stocks Gain in Europe as Crude Extends Declines; Dollar Rebounds

In FX, markets are back to full strength today, but with USD sentiment hanging on the word(s) of Fed chair Yellen — due to speak in NY just after the London close – trading has been mixed, with very little sense of direction as yet. We saw some early selling in Cable and EUR/USD, but this proved short lived, though the highs seen in thin trade Monday have yet to be matched. That said, a softer tone in EUR/GBP is giving Cable better support than that seen last week.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, rose less than 0.1 percent. While it pared its monthly drop to 2.5 percent, that’s still biggest since April. “The dollar is really not your best bet right now,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in an interview on Bloomberg Television. “Every time you have the dollar rising, concerns about China devaluation, concerns about emerging-market growth, concerns about commodity markets – those start to resurface.”

Odds of the Fed raising rates at its June meeting have fallen to 38 percent, from 42 percent a week ago, according to Fed funds futures data compiled by Bloomberg. The Japanese yen weakened 0.1 percent at 113.56 per dollar, falling for an eighth day. Norway’s krone and Australia’s dollar were the worst performing major currencies.

In commodities, amid the continued appreciation in the USD-index, the energy complex has subsequently been pressured with WTI crude futures residing near session lows having broken below yesterday’s low at USD 38.86 and is now eyeing last week’s low at USD 38.33. West Texas Intermediate crude dropped further after sliding 5 percent over the past three sessions amid ongoing concern over a global glut in the commodity. Weekly U.S. government data is forecast to show another increase in crude stockpiles. Brent futures in London lost 2.1 percent to $39.42. Indonesia will attend a meeting of major oil exporters in Doha next month to consider an output freeze, according to Energy and Mineral Resources Minister Sudirman Said.

Spot gold fell 0.2 percent to $1,218.90 an ounce, pressured by the aforementioned recovery in the greenback, with the precious metal relatively range bound for much of the European morning.

In the base metals complex, copper and iron ore prices were also pressured amid the widespread cautious tone, with the latter falling by as much as 5% to a 3-week low alongside weakness in steel. Zinc and tin also declined, while aluminum rose as the London Metal Exchange reopened after two days of public holidays.

On today’s calendar we get the January Case-Shiller, the latest Consumer Confidence print and the API weekly inventory number, but the key highlight will be Janet Yellen’s speech at 12:20pm at the Economic Club of New York, while former Goldmanite and current Dallas Fed president Steven Kaplan will speak in Austun at 4pm.

 

Bulletin Headline Summary from RanSquawk and Bloomberg

• European bourses kick off the week in positive fashion as participants return from their elongated break with notable outperformance in financials.
• USD-index stages a slight recovery as investors look towards comments from Fed Chair Yellen to subsequently shed light on the path of the Fed’s tightening cycle.
• Looking ahead, highlights include US API Crude Oil Inventories, Fed’s Yellen (Voter, Soft Dove), Williams (Non Voter, Neutral), Kaplan (Non-Voter, Soft Dove)
• Treasuries rally in overnight trading, global equity markets mostly higher and oil drops; Fed’s Yellen will speak this morning and U.S. housing prices will be released.
• U.S. auctions continue today with $34b 5Y notes, WI yield 1.355%, compares with 1.169% awarded in Feb., lowest 5Y auction stop since 1.045% in May 2013
• Central bankers have managed to steer the world economy clear of a recession while leaving it stuck in the same rut that led to its troubles in the first place
• The Bank of England said banks should begin building up capital earmarked to support lending when the economy turns down, as the outlook for U.K. financial stability worsens
• BlackRock joined Pimco in recommending inflation-linked bonds and warning costs are poised to pick up. “Stabilizing oil prices and a tighter labor market could contribute to rising actual, and expected, U.S. inflation,” Richard Turnill, BlackRock’s global chief investment strategist, wrote Monday
• Commodities including oil and copper are at risk of steep declines as recent advances aren’t fully grounded in improved fundamentals, according to Barclays Plc, which warned that prices may tumble as investors rush for the exits; With energy stocks enjoying the biggest rebound since the beginning of the oil rout, short sellers have shifted their sights to regional banks that do business with the industry
• While Japan’s labor market is tight with a jobless rate of just 3.3%, almost 38% of workers are now part-timers who are generally on lower pay and have less job security.
• $4.65 IG credit priced yesterday, MTD $149.455b, YTD $443.705b; $1.4b HY priced yesterday, MTD 24 deals for $15.365b, YTD 49 deals for $30.22b
• Sovereign 10Y bond yields mixed; European and Asian equity markets mixed; U.S. equity-index futures drop. WTI crude oil, gold and copper fall

 

US Event Calendar

• 8:55am: Redbook weekly sales
• 9am: S&P/Case-Shiller Composite-20 y/y NSA, Jan., est. 5.75% (prior 5.74%)
• 10am: Consumer Confidence Index, March, est. 94 (prior 92.2)
• 12:20pm: Fed’s Yellen speaks at Economic Club of New York
• 1pm: Fed’s Kaplan speaks in Austin; 4pm at University of Texas
• 4:30pm: API weekly oil inventories

 

DB’s Jim Reid completes the overnight wrap

So as we approach the final few days of what’s been one of the more volatile Q1’s in memory, the month of March has certainly been far kinder to risk assets relative to what we saw in January and February. A big rally across commodity markets and notably Oil has more than played its part, as has improving US economic data, a more dovish than expected Fed and of course the ECB bazooka. Over the holiday break newsflow has been fairly light and instead we’re looking ahead to a couple of events this week which will see the focus switch back once again to the Fed. The first of those will come this afternoon when we are due to hear from Fed Chair Yellen, speaking at the Economic Club of New York (scheduled for 4.20pm GMT). The speech looks set to take on slightly more importance than normal in light of what’s been a chorus of relatively hawkish Fedspeak over the past ten days or so. In that time we’ve heard Bullard, Lacker, Lockhart and Williams all hint at the possibility of a hike as soon as April or June, with Bullard the latest to suggest that ‘the Fed forecasts suggest that the next hike may not be far off’. This contrasts to the overall dovish view that we got from the Fed at the FOMC meeting earlier this month. Despite the comments in recent days, our US economists are still of the view that they doubt Yellen will sound overtly hawkish this afternoon and while she may reiterate that April remains a ‘live meeting’, they doubt that she will send a strong hike signal for next month. Markets are still yet to be convinced that the Fed will move next quarter, with the odds of an April hike a lowly 6% and a June hike just 38%, which is more or less where it has been since the FOMC meeting.

The other big event this week and another hurdle for the Fed is the March employment report which we’ll get this Friday. We’ll give a preview of this later in the week but the early market expectations are for a 210k print (after the 242k February number), a modest tick up in earnings and no change in the unemployment rate. As usual we’ve got the full run down of the week ahead at the end.

Taking a look at the latest in Asia this morning, it’s been a softer start on the whole with the bulk of bourses currently in the red. In China the Shanghai Comp is currently down -1.14%, while the tech-heavy Shenzhen is down a sharper -2.01%. The Nikkei (-0.49%) and Hang Seng (-0.26%) have seen more modest losses and are off their lows, although in Australia the ASX has tumbled -1.49% (with financials weighing the index down). Only the Kospi (+0.37%) is trading in positive territory as we go to print. Oil markets are reflecting the slightly damper tone this morning with WTI down close to half a percent, while credit markets are close to unchanged. Some mixed employment and retail sales data out of Japan this morning has seen the Yen trade in a fairly choppy manner meanwhile.

Moving on. In the period we’ve been off much of the newsflow has centered around a number of economic releases out of the US. Recapping the prints from yesterday firstly, on the inflation front we saw the core PCE print for February rise a less than expected +0.1% mom (vs. +0.2% expected) which has had the result of keeping the YoY rate unchanged at +1.7% (and a tenth above the Fed’s forecast for this year). The deflator was down -0.1% and in line with the consensus estimate. Away from this we saw personal spending rise +0.1% mom as expected last month, but more telling was the four-tenths of a percent downward revision to the January print. Personal income was a modest beat at +0.2% mom (vs. +0.1% expected). It’s worth noting that post yesterday’s PCE data the Atlanta Fed has now significantly downgraded their Q1 GDP forecast to 0.6% from 1.4% previously after revising down their real consumer spending growth forecasts.

Elsewhere yesterday, housing market data was reserved for the latest pending home sales data which revealed a bumper +3.5% mom rise for the month of February (vs. +1.2% expected) which was the biggest monthly gain in 12 months. Meanwhile the advance goods trade balance last month revealed a slightly wider than expected deficit ($62.9bn vs. $62.2bn expected) which is the widest in six months. The other notable release yesterday was further evidence of improvement in the manufacturing sector in the US. The Dallas Fed manufacturing survey bounced 18.2pts this month and although at a still lowly -13.6, is now at the highest level since November.

There was some notable data for us to highlight on Friday too, with an unexpected upward revision to the third estimate of Q4 GDP in the US to 1.4% qoq (from 1.0%). An upward revision to final sales boosted the number, as did a less negative contribution from inventories. Concerning in the details however was the first estimate of corporate profits in the quarter, with the data revealing a -7.8% qoq decline which is the biggest fall since Q1 2011. The -11.5% yoy decline for profits is now the worst since Q4 2008.

Quickly recapping the price action yesterday, with the bulk of markets shut in Europe for holidays it was an unsurprisingly quiet session in the US (with one eye on the events this week too) although both the S&P 500 (+0.05%) and Dow (+0.11%) did manage to eke out small gains with the former bringing to an end three consecutive days of (albeit modest) losses. The rally in the US Dollar, which had coincided with that run of hawkish rhetoric sputtered however with the Dollar index closing -0.34% for its first loss since the 17th of March.

Commodity markets were fairly subdued also with WTI closing out the day with a -0.18% loss and just below $40/bbl. Credit markets were near enough unchanged. Away from the US there was no negative reaction in Sterling (in fact closed up +0.86%) after Reuters ran a story on the weekend suggesting of some notable support for the pro-Brexit camp. According to the article, the report highlighted that 250 business leaders have backed the pro-Brexit campaign according to the Vote Leave group, although the Sunday Times did suggest that there were some notable omissions from the list which had some questioning the overall reliability of the headlines.

Over in the US this afternoon the notable release will be the March consumer confidence reading (where expectations are for a 1.8pt rise to 94.0), while the January S&P/Case-Shiller house price index for January is also due out. We’ll also hear from Fed Chair Yellen this afternoon when she is due to speak at the economic club of New York, while we’ll also hear from Williams and Kaplan today, Evans on Wednesday, Dudley on Thursday and finally Mester on Friday.

via Zero Hedge http://ift.tt/1Uz9OQ5 Tyler Durden

The 81 passengers aboard EgyptAir flight MS181 got quite a scare on Tuesday when the Airbus 320 en route from Alexandria to Cairo was hijacked by a man who claimed to be wearing an explosive belt. Here’s the tweet that hit earlier this morning:

Our flight MS181 is officially hijacked. we’ll publish an official statement now. #Egyptair

— EGYPTAIR (@EGYPTAIR) March 29, 2016

Given recent events, it was only logical to suspect that we might soon be talking about #Egyptair as the latest in a string of tragic terror attacks perpetrated by ISIS militants. Indeed it was just five months ago that Islamic State’s Egyptian affiliate brought down a Russian passenger jet over Sinai killing more than 200 people. 

Fortunately, the hijacker onboard MS181 turned out to be nothing more than a disgruntled man wanting to see his ex-wife. In Cyprus.

@SkyHindHassan and when Cypriot Pres was asked whether ‘a woman was involved’ he *reportedly* replied: “There is always a woman involved.”

— Zein Ja’far (@skyzein) March 29, 2016

I saw it. This definitely happened. #EgyptAir https://t.co/FtApH3KWa2

— Hind (@SkyHindHassan) March 29, 2016

The man has been identified as one Seif El Din Mistafa. Initially, the media fingered the wrong guy, blaming Ibrahim Samaha, a professor of veterinary medicine at Alexandria University.

At first, media identified the wrong Ibrahim Samaha and then realized that the hijacker’s name is not Ibrahim Samaha either. Priceless.

— Yannis Koutsomitis (@YanniKouts) March 29, 2016

Mistafa was sitting in seat K38 and apparently, he threatened the pilot (Omar Al-Gammal) with an explosives belt. Egyptian authorities were immediately skeptical. 

“I doubt that he had explosives because security has been heightened across all Egyptian airports. But we will be able to confirm later,” Aviation Ministry spokesman Ehab Raslan said.

Still, the pilot followed the man’s demands and landed at Larnaca airport in Cyprus where all passangers save the crew and a handful of foreigners were released. “He’s not a terrorist, he’s an idiot,” The Egyptian foreign ministry said, in a statement. “Terrorists are crazy but they aren’t stupid. This guy is.”

Apparently, the ex-wife is being brought to the airport for negotiations. Meanwhile, the man has now decided that in addition to seeing his ex and securing asylum for himself in Cyprus, he also wants 63 women imprisoned in Egypt freed.

#Cyprus state TV now says #EgyptAir ? #MS181 hijacker wants also release of a number of political prisoners in #Egypt.
Plot thickens.

— Yannis Koutsomitis (@YanniKouts) March 29, 2016

Pending those demands, the pilot, co-pilot, and 3 passengers are still being held on the plane, Cypriot media reports.

?? ??????? ?? ?????? ?????????????? ??? ???????.?? ?????? ????.https://t.co/ajuWuH2vbn#EgyptAirhijack_Cyprus http://pic.twitter.com/0bb9wUfYUR

— ant1iwo (@ANT1iwo) March 29, 2016

Photos from #Larnaca RT @ANT1iwo: ?? ??????? ?? ?????? ??????????????https://t.co/eP3PimxnEg#EgyptAir #Cyprus http://pic.twitter.com/U5A9WPpN6h

— Janine Louloudi (@janinel83) March 29, 2016

Watching @EGYPTAIR #hijacking unfold. http://pic.twitter.com/UG5aasrEGd

— Ollie Michael (@OllieMichael15) March 29, 2016

Egypt Plane Hijack: First visuals of Cyprus TV. https://t.co/pLHiIiTxcY

— NewsX (@NewsX) March 29, 2016

via Zero Hedge http://ift.tt/22Xc8Bl Tyler Durden

 

 

Hold your real assets outside of the banking system in one of many private international facilities  –>  http://ift.tt/1M1FiG5 

 

 

 

Gold, the Misery Index and Insanity

Posted with permission and written by Gary Christenson, The Deviant Investor (CLICK FOR ORIGINAL)

 

 

 

In 1980 Ronald Reagan spoke about the Misery Index. An economist had added the inflation rate to the unemployment rate, called it the Misery Index, and used it to indicate the social costs and economic difficulty for the middle class.

Today the Misery Index is much smaller than in 1980, thanks to … intelligent fiscal management, economically beneficial monetary policy from the Federal Reserve, and wise political policy from the White House. If you believe any of those, read no further.

Most people will agree that the Misery Index is much smaller today because the numbers have been gimmicked. Does anyone believe a few percent for inflation or around 5% unemployment? Massage(torture) the numbers and the Misery Index declines, incumbent politicians are re-elected, while far too many people remain out of work, earning practically nothing on their savings, and paying too much for food, clothing, drugs, medical care, college, transportation and so on.

What we need for this decade, instead of a Misery Index, is an Insanity Index based on measures than indicate how out of balance, crazy, unsustainable, and dangerous our current fiscal and monetary world has become. Consider a few examples:

• Wall Street bonuses (in excess of base pay) average around $150,000 per person per year. Obviously some receive significantly more than average. Finance, trading, and “paper pushing” have become incredibly profitable. Compare the average Wall Street bonus to the base annual wage for an E-5 U.S. military soldier. See graph below.

• The SNAP (food stamps) program has escalated from a cost of $15 billion in 1990 to about $74 billion in 2015. Measure the program costs in ounces of gold each year and then try to convince yourself that 60 million ounces of gold each year do not matter. See graph below. Gold is real and can’t be printed like most currencies. The program would “eat up” all the gold in Fort Knox about every three years. Insane!

• Student loan debt is approaching $1.4 trillion, climbing rapidly, and has increased about 11.5% per year, ever year, since 2006. The student loan debt, measured in gold, is over 1.1 billion ounces – about 8 times the gold supposedly stored in Fort Knox. See graph below of student loan debt measured in Fort Knox Gold Units – the 147,300,000 ounces of gold that supposedly are vaulted in Fort Knox.

• National Debt (official only – not including unfunded liabilities) currently exceeds $19 trillion, and that debt has increased, and increased, and … increased about 9% per year, ever year, since 1971. The official national debt of $19 trillion, measured in gold, is about 15 billion ounces – around 100 times the quantity of gold supposedly stored in Fort Knox. In 1937 the Fort Knox gold was an asset and a national treasure. Today the U.S. government OWES that national treasure about 100 times … and has what to show for those expenditures and $19 trillion in debt? Insane!

My thoughts:

• The average Wall Street bonus is about five times the annual wage of an E-5 soldier, and the ratio is increasing. Perhaps the economy overemphasizes the value of the Wall Street casino and paper money, and does not appreciate the soldier enough. Short term insanity!
• The Food Stamps program is expensive. How crazy is running a program that spends the equivalent of 60 million ounces of gold each year when the supposed total gold savings of the U.S. is about 260 million ounces, of which 147 million are supposedly stored in Fort Knox? Insane!
• Student loan debt is obviously out of control, increasing rapidly, and may not be repaid unless the Fed and politicians devalue the dollar to near worthlessness. How insane is a program that substantially increases the cost of a college education, creates increasingly unpayable debt, and saddles graduates with a crushing debt load before they are employed?
• National debt, over $19 Trillion, doubles every eight years on average. Given the “spend, spend, spend” mentality of our politicians, military, and entitlement programs, the national debt will probably double even more rapidly in the next two decades. In round numbers the debt will be $20 trillion by the end of 2016. Can you imagine $80 trillion in debt by the year 2032 (two doubles in 16 years)? Borrow and spend may buy votes and military conquests in the short term but in the longer term expect this insanity to bring dire consequences to the people, country, U.S. economy, and the world.

The Insanity Index:

An index could be created – but what is the point? The United States fiscal and monetary policies passed “crazy” long ago, and now are pushing deeper into insanity with negative interest rates, a war on cash, out of touch Federal Reserve policy, insane debt, QE, uncontrolled deficit spending, and a “what could go wrong” attitude. Clearly the “paper game” has a limited life expectancy, Wall Street is due for a reset, government spending programs and pension plans are on life support, food stamps and student loans are two of many programs aggressively pushing the U.S. government into insolvency – and the solution is … negative interest rates, more QE, and a war on cash! Desperate and delusional!

Suppose the U.S. national debt in 2032 exceeds $80 trillion and the system has not yet imploded … what will be a fair price for an ounce of gold or an average house? What will that 30 year T-bond you bought in 2016 be worth in purchasing power in 2032? What will be the purchasing power of your saving account or retirement account or Social Security check? Debt, desperation and delusional thinking do not buy groceries, shelter, and health, or create a vibrant economy.

Bubbles always pop. Delusions can persist for years or decades, but they eventually crash on the rocky shores of reality. Gold and silver were valuable 3,000 years before the first central bank and I submit they will be valuable 3,000 after the world regains monetary sanity.

Given the insanity of endless borrow and spend programs, ever increasing debt, overpriced stocks and bonds, desperation and delusions, and … so much more … have you stacked physical gold in preparation for the inevitable consequences of all the above?

 

 

Please email with any questions about this article or precious metals HERE

 

 

 

Gold, the Misery Index and Insanity

Posted with permission and written by Gary Christenson, The Deviant Investor (CLICK FOR ORIGINAL)

 

 

GE Christenson is the owner and writer for the popular and contrarian investment site Deviant Investor and the author of the book, “Gold Value and Gold Prices 1971 – 2021.” He is a retired accountant and business manager with 30 years of experience studying markets, investing, and trading. He writes about investing, gold, silver, the economy, and central banking. His articles are published on Deviant Investor as well as other popular sites.

 

via Zero Hedge http://ift.tt/1RHmqO3 Sprott Money

With the increasing propaganda wars, we thought a reminder of just how naive many Westerners are when it comes to their news-feed. As Arjun Walia, of GlobalResearch.ca, notes,  Dr. Ulfakatte went on public television stating that he was forced to publish the works of intelligence agents under his own name, also adding that noncompliance with these orders would result in him losing his job.

He recently made an appearance on RT news to share these facts:

I’ve been a journalist for about 25 years, and I was educated to lie, to betray, and not to tell the truth to the public.

 

But seeing right now within the last months how the German and American media tries to bring war to the people in Europe, to bring war to Russia — this is a point of no return and I’m going to stand up and say it is not right what I have done in the past, to manipulate people, to make propaganda against Russia, and it is not right what my colleagues do and have done in the past because they are bribed to betray the people, not only in Germany, all over Europe.

It’s important to keep in mind that Dr. Ulfakatte is not the only person making these claims; multiple reporters have done the same and this kind of truthfulness is something the world needs more of.

One (out of many) great examples of a whistleblowing reporter is investigative journalist and former CBC News reporter Sharyl Attkisson.

She delivered a hard-hitting TEDx talk showing how fake grassroots movements funded by political, corporate, or other special interests very effectively manipulate and distort media messages.

Another great example is Amber Lyon, a three-time Emmy award winning journalist at CC, who said that they are routinely paid by the US government and foreign governments to selectively report and even distort information on certain events. She has also indicated that the government has editorial control over content.

Ever since Operation Mockingbird, a CIA-based initiative to control mainstream media, more and more people are expressing their concern that what we see in the media is nothing short of brainwashing.

This is also evident by blatant lies that continue to spam the TV screen, especially when it comes to topics such as health, food, war (‘terrorism‘), poverty, and more.

Things have not changed, in fact, when in comes to mainstream media distorting information and telling lies. They have gotten much worse in recent years, in fact, so it is highly encouraging that more people are starting to see through these lies, even without the help of whistleblowers like Dr. Ulfakatte.

One great example is the supposed ‘war on terror,’ or ‘false flag terrorism.’ There are evenWikileaks documents alluding to the fact that the United States government planned to “retaliate and cause pain” to countries refusing GMOs.

Mainstream media’s continual support of GMOs rages on, despite the fact that a number of countries are now banning these products.

The list of lies goes on and on. It’s time to turn off your T.V. and do your own research if you are curious about what is happening on our planet. It’s time to wake up.

via Zero Hedge http://ift.tt/1SiqK6X Tyler Durden

Over the course of his campaign, Bernie Sanders has made it clear that criminal justice reform is something he cares quite a lot about.

“I consider reforming our criminal justice system one of the most important things that a president of the United States can do,” the Vermont senator told a Chicago crowd in December. Sanders has called the incarceration rate in America “an international embarrassment,” and earlier this month, he said the following during a debate with Hillary Clinton:

“Where we are right now, is having more than 2.2 million people in jail — more than any other country on Earth. This is a campaign promise: At the end of my first term, we will not have more people in jail than any other country.”

Given the high rate of incarceration in the US, it’s important that Americans don’t take their freedom for granted because, well, because the government won’t hesitate to throw you in jail. Once there, UN guidelines only require that you get to breathe fresh air for one hour a day – the standard minimum guidelines call for “at least one hour of suitable exercise in open air daily.”

You can believe that inmates cherish that hour and you can imagine how shocked the residents of Indiana’s Wabash maximum security prison were to find out from researchers that one third of all children aged 5 to 12 in the UK play outdoors for less than 30 minutes each day, while a fifth of parents surveyed said their children don’t go outside at all.

“Outdoor play isn’t happening,” the “Dirt Is Good” initiative found in a survey of 12,000 parents. “Almost a third of children play outside for 30 minutes or less a day and one in five don’t plan outside at all on an average day.” Watch below as inmates react to the study.  

So what are kids in the UK doing instead? Why, staring at screens of course. “Children spend twice as much time on screens inside as they do playing outside,” the same study found. 

But it’s not all bad news. Children in the UK are far more likely to be able to make up for lost time outdoors later in life than are kids in the US. The incarceration rate in the UK is around five times lower than it is in America.

via Zero Hedge http://ift.tt/1qcCu4d Tyler Durden

In late September, during the peak of fall borrowing base redetermination , many oil and gas companies got their first glimpse of just how bad their liquidity would get when as a result of collapsing commodity prices, the value of their collateral crashed when PV-10s plunged by up to 80% Y/Y as of December 2015…

 

… and resulted in plunging access to secured liquidity as borrowings bases were eviscerated as much as 38% (for those unfamiliar with the basics of the semiannual redetermination process, the WSJ has a handy and brief 101).

 

Incidentally, it would have been far worse if the Dallas Fed and OCC had not stepped in and told lender banks to take it as easy on the debtors as possible, and in some cases, even suspend market-based calculations for price decks. The reason for this kid glove treatment was that many banks were unprepared to reserve and write down the value of their energy loans down to fair values as of the fall. 

Now, six months later, neither the OCC nor the (Dallas) Fed will be quite as generous and demand that banks act as a benevolent cartel. In fact, from what we have heard, it will be quite the opposite which explains the urgent scramble by many banks to force their debtor clients to issue equity and use the proceeds to repay secured loans.

As such, the imminent spring redetermination may prove to be just the catalyst to push the recently latent energy crisis to the next level.

So which companies are most at risk of a suddenly air pocket in liquidity? For the answer we go to a recent Bloomberg Intelligence slide deck prepared precisely for the purpose of showcasing the companies with maxed out credit lines. These are as follows:

 

However, while these companies certainly have pulled the short stick, ironically they may not be the first to go: after all, at least they had the foresight of using up their entire available revolvers (and in the odd case of PostRock, more than 100% of it) – it doesn’t matter if now the banks decide to collapse their borrowing base – the funds have already been wired and good luck getting a refund.

No, the companies most at risk may actually be those with that currently have some of the most highly utilized borrowing bases, ranging anywhere from 62% for Contango to 94% for Vanguard. It is these companies that will suddenly find themselves with zero incremental sources of liquidity as the banks proceed to whack anywhere from 30 to 50% of their borrowing base, leaving them scrambling to preserve liquidity and ultimately leading to bankruptcy court, in no small part under the pressure of secured and soon to be DIP lenders (and in most cases, the post reorg equity) who will demand the least amount of Enterprise Value be wiped out in the months before bankruptcy. Here are the names.

 

We would be most worried about the near-term viability of the companies shown above: in our humble opinion these are the companies most at risk from the upcoming spring redetermination period.

As for the companies shown below, we would not be quite as worried about them, although we are confident that in a few weeks time these “largest borrowing bases” will be substantially smaller.

 

Finally, courtesy of Haynes and Boone, here is a less impartial perspective thanks to a poll of banks, PE firms, and oil service companies who were asked to share their thoughts on the upcoming spring redetermination. Among the key findings:

• Overall respondents expect 79% of the borrowers to see a decrease in their borrowing base in spring 2016
• Overall respondents, on average, expect to see borrowing bases to decrease by 38% compared to what they were in fall 2015
• As to the most likely path to be taken by lenders and borrowers who face a borrowing base deficiency this spring: 36% of respondents said the would negotiate an amendment or extension with the lender; 31% said they would sell non-core assets; 15% said they would seek capital from a hedge fund or private equity fund; 4% said sell the company; 13% said restructure or declare bankruptcy

Haynes and Boone slideshow:

 

via Zero Hedge http://ift.tt/22J346p Tyler Durden

Submitted by Justin Raimondo via AntiWar.com,

The vicious attack on the Brussels airport and metro underscores the futility of focusing on the Syrian “Caliphate” as the epicenter of terrorism: as I’ve been saying in this space since 2001, the snake has no head. Both al-Qaeda and now ISIS are protean entities with a vast geographical spread, and what the Brussels attack – and, before it, the Paris attack – show is that they have successfully colonized Europe.

If the “Islamic State” proclaimed by ISIS was defeated and eliminated tomorrow, the terrorist and criminal networks that pulled off the Brussels attacks would still exist.

The population of Brussels is nearly 25 percent immigrants from Muslim countries, primarily Morocco and Algeria. And as it turns out the two brothers who were the core of the ISIS cell were habitués of the now notorious Molenbeek neighborhood, which consists primarily of the descendants of immigrants who settled there decades ago. Poor, and beset by petty crime, it is a pool in which terrorist recruiters fish with much success. The Syrian civil war has become a cause that attracts young toughs with no prospects, who are looking for some sense of meaning – and a way to express their alienation from the larger society in which they live. Molenbeek was also the base for those who planned and carried out the Paris attacks – it is, in effect, a general headquarters for ISIS to carry out its European operations. Salah Abdeslam, the chief planner of the Paris attacks, fled there and found sanctuary for four months before being caught.

In short, the problem of terrorism in Europe is an internal phenomenon, not something that comes from the outside. The Europeans imported it – and, as Germany’s welcoming of hundreds of thousands of refugees from the war-torn Middle East dramatizes, they are continuing to import it. Now they are living with the consequences.

In response, various right-wing populist parties have emerged in Europe that focus on stopping immigration from Muslim countries: in France, Britain, and Germany the rise of the anti-immigration movement has liberal elites in a panic. And yet these movements are for the most part exercises in futility, because that horse is already out of the barn. France, for example, is not going to deport the millions of North African Muslims who have lived in the country for a generation and more: they are French citizens. The same goes for Britain, and all the former empires of Europe whose colonial adventures brought in large numbers of the colonized. Now they are learning – too late – that colonialism is a two-way street.

What Brussels also showed is that the universal surveillance championed by the War Party as a necessary corollary of the “war on terrorism” would not have stopped the attacks: the ISIS cell consisted of two brothers, which not only ensured against infiltration but also made it next to impossible for any but the most intrusive surveillance to have had any effect. Indeed, the key to stopping the attacks was intelligence – which the Belgian authorities ignored. It turns out that Brahim el-Bakraoui had been deported from Turkey and the Belgians had been warned he was dangerous. They ignored the warning.

The Israeli newspaper Ha’aretz claims that the Belgian authorities had “advance and precise intelligence warnings” about the attack on the airport and the subway but failed to take sufficient action to prevent them. This highlights another lesson of the Brussels attacks: the European authorities are utterly incompetent and unprepared for the challenge they face.

Beyond that, however, is a larger problem: the ISIS phenomenon is largely a creation of the Western powers and its allies in the Gulf. The Saudis, the Qataris, and the Kuwaitis have long been funding Wahabist extremism, and they are the real progenitors of the ideology that inspired the creation of al-Qaeda and ISIS. Furthermore, regime change in Syria has long been on the American-European agenda, with funding for ‘moderate” Islamist head-choppers flowing from the US Treasury directly into the pockets of extremist gangs in the region. The same enabling action took place in Libya, where – led by Hillary Clinton – the Obama administration sided with “pro-democracy” rebels who turned out to be terrorists.

With the Syrian civil war as their training ground, the ISIS recruits of Molenbeek and other similar ghettos underwent the transformation from petty criminals to battle-hardened jihadists. And now they are swarming all over Europe, with reportedly thousands of them traveling back to Belgium, France, Britain, and elsewhere to wreak havoc in the name of their newfound cause.

For us here in America, the lessons of the European tragedy are there to be learned. There is only one solution to the problem of terrorism and it doesn’t involve going abroad in search of monsters to destroy. The point is to make sure those monsters never reach our shores.

Furthermore, we must withdraw from the Middle East – a possibility that doesn’t bear the economic consequences it once did, given the creation of new technologies that make domestic oil production far easier.

We are spending billions defending and sustaining the Saudi monarchy and the Gulf states – some of the most repressive regimes in the world. And for what? The interventionists declare that America’s role as a “global leader” represents the defense of our values. But does a regime that beheads “infidels” represent American values? Indeed, there is no operative difference between the internal rule of the ISIS “caliphate” and the Saudi Kingdom. Yet we are obsessed with destroying the former and cuddling up to the latter.

It’s too late for the Europeans, who are now forced to sleep in the bed they so assiduously made. It isn’t too late for America: we can learn the lesson of Brussels if only we have the will to do so.

via Zero Hedge http://ift.tt/22W3i6Z Tyler Durden

For the first time since January 2009, 12-month Saudi interbank rates have breached 2.00% – double the 1% lows of August.

 

This 'stress' is also evident in the record pace of collapse of Saudi money-supply.

 

 While Riyal forwards have rallied back from extreme bets on devaluation, they remain concerning for Saudi officials who to undertake some deep and fundamental changes to their economy, reforms that no amount of browbeating from organizations like the IMF could induce.

As OilPrice.com's Nick Cunningham details, a new report from The Atlantic Council finds that the extensive decline in oil revenues is focusing minds in Riyadh. The fiscal pressure is forcing “the kingdom’s leadership to modernize the economy,” the report concludes.

Saudi Arabia ran a fiscal deficit of about $98 billion in 2015, a figure that will decline only slightly to $87 billion this year. That deficit total is also probably closer to $120 billion in reality though, given that the costs from the war in Yemen were not included.

The fiscal squeeze is forcing some changes. First, the Saudi government is looking at new taxes, including a 5 percent value added tax (VAT). That may seem like a run-of-the-mill austerity measure, but for Saudi Arabia it is a novel proposal: it will be the first tax imposed in the country.

More to the point, the VAT is illustrative of where Saudi Arabia is heading. The Atlantic Council argues that the kingdom is starting to reform its economy in fundamentally positive ways. Low oil prices are forcing it to rely more upon taxes and less on oil revenues. That would start to make Saudi Arabia less of a “rentier state,” a country that has no need to build much of an economy because resource extraction is so lucrative. Rentier states often suffer from greater corruption and a deeper lack of responsiveness to the needs of the public, since abundant oil revenues mean that the government does not need revenue from its populace.

Another major shift in Saudi Arabia could be the partial privatization of Saudi Aramco. Prince Mohammed bin Salman made news in early January when he told The Economist that the government was mulling over such a step. There has been a lot of speculation about why an IPO would be staged. Transparency appears to be a top concern. While Aramco routinely publishes operational data, detailing production figures, shipments, and downstream activity, the company reveals very little about its finances. “The most likely explanation for Saudi Aramco’s lack of financial transparency is that it wants to hide how much money is siphoned off to the royal family,” The Atlantic Council report suggests.

By privatizing some Aramco assets (likely downstream) and cleaning up and publishing data from the company’s books, the Saudi government apparently is showing some recognition that its relationship with the public must change. “Naturally, the royal family is unlikely to find itself cut off from any of the oil benefits to which it is accustomed. However, what is likely to change is that the family will no longer see itself as able to access funds without being held responsible by the Saudi public.”

Obviously, the downturn in oil prices is not exactly something that the Saudi government is happy about. Although it has about $616 billion in cash reserves, enough to finance its large fiscal deficits for years, Saudi Arabia is burning through those reserves at a rapid clip. In 2014, Saudi Arabia had $746 billion in reserves at its highest point.

Also, the government’s perennial top concern is social stability. Having to introduce new austerity measures, reduce subsidies, raise some taxes, and generally acknowledge that the country’s luxurious days could be coming to an end, the fall in oil prices presents some new risks. As The Atlantic Council notes in its report, any instability in a country that accounts for 10 percent of the world’s oil production would be felt across the globe.

Still, the reforms underway are long overdue, and in that sense, there is a silver lining in the crude price crash. In recent years, Saudi Arabia has succeeded in starting to build a more diversified industrial economy, with new facilities producing chemicals, fertilizers, aluminum, cement, and other industrial products. Up until now, however, economic diversification has not gone as far as it could. Part of the reason is that Saudi Arabia, as a “rentier state,” does not tax manufacturing, and thus, has had little incentive to promote its growth. For that matter, it has had little incentive to promote the growth of any non-oil sector of its economy.

Now, the reforms underway – new taxes, subsidy cuts, and the partial privatization of Saudi Aramco – are making Saudi Arabia “increasingly resemble most modern economic states.”

However, it is still early days and the reforms are far from assured. “Admittedly, complete change will not come overnight, but it is nonetheless being prodded on by the decline in income,” the report concludes.

via Zero Hedge http://ift.tt/1PC4BOP Tyler Durden