Month: September 2014

Ahead of Thursday’s critical Scottish Independence vote, we thought some context was worthwhile. As The Guardian notes, history shows that when people are asked, they almost always say yes to independence. Every election, country and place’s history is unique and different. Scotland is no exception. Yet, when given the opportunity, The Guardian finds countries tend to vote in favour of independence, and to do so decisively – across 50 votes since 1846, the vote for independence came out on top 88% of the time (and when the margin was small, voters always sided with independence.) But this time is different, right?

 

88% of Votes chose Independence since 1846

 

 

Full dataset:

Source: The Guardian

*  *  *

We leave it to ChunkyMark the tax-driver to explain…

via Zero Hedge http://ift.tt/XefUsO Tyler Durden

Ahead of Thursday’s critical Scottish Independence vote, we thought some context was worthwhile. As The Guardian notes, history shows that when people are asked, they almost always say yes to independence. Every election, country and place’s history is unique and different. Scotland is no exception. Yet, when given the opportunity, The Guardian finds countries tend to vote in favour of independence, and to do so decisively – across 50 votes since 1846, the vote for independence came out on top 88% of the time (and when the margin was small, voters always sided with independence.) But this time is different, right?

 

88% of Votes chose Independence since 1846

 

 

Full dataset:

Source: The Guardian

*  *  *

We leave it to ChunkyMark the tax-driver to explain…

via Zero Hedge http://ift.tt/XefUsO Tyler Durden

Submitted by Nick Cuningham via OilPrice.com,

With U.S. President Barack Obama’s announcement of an open-ended plan for airstrikes on the Islamic State (IS), the U.S. and its allies will need to degrade the power and influence of the Sunni jihadist group, and that means reducing its incoming flow of oil money.

And the Obama administration seems aware of that, according to a New York Times article that reports that the President and U.S. diplomats are pressuring Turkey to cut off the stream of oil smuggled across its border.

IS controls territory in central and northern Iraq, and is thought to be producing between 25,000 and 40,000 barrels per day (bpd). Since they cannot sell this oil legitimately, they smuggle it and sell it on the black market. Some energy analysts think IS could be pulling in between $1.2 and $2 million per day.

“The key gateway through that black market is the southern corridor of Turkey,” Luay al-Khatteeb, a fellow at the Brookings Institute’s Doha Center, told the Times. “Turkey is becoming part of this black economy.”

Turkey, no friend of IS, is hesitant to help because 49 Turkish diplomats are currently being held hostage by IS in Iraq. They were taken during the initial IS onslaught in June.

Smuggled oil could be a pivotal issue for the U.S. as it seeks to destroy IS. The militant group sells oil at a reduced price – perhaps around $25 per barrel. At first, it sold the oil to middlemen, who moved the oil to Iran, Syria, Jordan and Turkey. But as IS’ operations grew, they forced out the middlemen, beat back other militant groups, and are now providing security to their own convoys of oil tanker trucks heading out of their territory to market.

The group then uses the revenues to finance its operations, pay salaries — including support for family members of militant members, even after their death — and sign up new recruits.

The economic lifeline for IS will certainly be a top priority for the United States. Up until now, the U.S. military has not targeted the tanker trucks that flow outwards from IS-controlled territory. But an Obama administration official told the Times “that remains an option.”

The tankers are “clearly visible from the sky should any drone pass overhead, so the smuggling is not particularly furtive,” Howard Shatz, a senior economist with the RAND Corporation, writes in Politico. The roads that tankers use could also be destroyed in order to disrupt the money trail.

Another target could be “mobile refineries,” Shatz says, which IS uses to refine crude oil into useful petroleum products. Along with smuggling crude oil, IS sells refined products to local markets. But even though these mobile refineries provide IS with income, they do not have enough capacity to process all the oil coming from IS territories. There are some larger refineries in Iraq, Syria, and Turkey that refine IS oil.

IS is aggressively trying to expand, but oil remains at the heart of its fundraising strategy. The militant group has tried several times since June to take over the massive Baiji refinery, which is 130 miles north of Baghdad. The refinery can process about 310,000 barrels of oil per day, and is a critical piece of infrastructure that the Iraqi government is desperate to hold onto.

In recent days, IS has renewed its attacks on the refinery, firing mortar rounds and hitting a storage tank, according to Bloomberg News. Luay al-Khatteeb of Brookings said if they do capture the refinery, IS will struggle to operate the huge facility without the expertise of technical staff. Nevertheless, it remains a prize for the organization.

The millions of dollars IS is making from smuggling oil may sound like a lot, but the group also has a lot of costs. Paying salaries and buying weapons is one of them, but Shatz of RAND Corporation says that as a group acting as a state, it needs to provide services to the people in its territories. Just to provide the basics of electricity, water, and other administrative services, the Iraqi government spent far more in the past in IS controlled territory than the $2 million-per-day or so the militant group is earning. Ruling with an iron fist will work for now, but if IS is to last, it will need more cash.

Air strikes may succeed in destroying vehicles and other military equipment under IS control, but cutting off the flow of money – specifically from oil smuggling – will likely go further in weakening the Islamic State.

via Zero Hedge http://ift.tt/1t95VC5 Tyler Durden

Submitted by Nick Cuningham via OilPrice.com,

With U.S. President Barack Obama’s announcement of an open-ended plan for airstrikes on the Islamic State (IS), the U.S. and its allies will need to degrade the power and influence of the Sunni jihadist group, and that means reducing its incoming flow of oil money.

And the Obama administration seems aware of that, according to a New York Times article that reports that the President and U.S. diplomats are pressuring Turkey to cut off the stream of oil smuggled across its border.

IS controls territory in central and northern Iraq, and is thought to be producing between 25,000 and 40,000 barrels per day (bpd). Since they cannot sell this oil legitimately, they smuggle it and sell it on the black market. Some energy analysts think IS could be pulling in between $1.2 and $2 million per day.

“The key gateway through that black market is the southern corridor of Turkey,” Luay al-Khatteeb, a fellow at the Brookings Institute’s Doha Center, told the Times. “Turkey is becoming part of this black economy.”

Turkey, no friend of IS, is hesitant to help because 49 Turkish diplomats are currently being held hostage by IS in Iraq. They were taken during the initial IS onslaught in June.

Smuggled oil could be a pivotal issue for the U.S. as it seeks to destroy IS. The militant group sells oil at a reduced price – perhaps around $25 per barrel. At first, it sold the oil to middlemen, who moved the oil to Iran, Syria, Jordan and Turkey. But as IS’ operations grew, they forced out the middlemen, beat back other militant groups, and are now providing security to their own convoys of oil tanker trucks heading out of their territory to market.

The group then uses the revenues to finance its operations, pay salaries — including support for family members of militant members, even after their death — and sign up new recruits.

The economic lifeline for IS will certainly be a top priority for the United States. Up until now, the U.S. military has not targeted the tanker trucks that flow outwards from IS-controlled territory. But an Obama administration official told the Times “that remains an option.”

The tankers are “clearly visible from the sky should any drone pass overhead, so the smuggling is not particularly furtive,” Howard Shatz, a senior economist with the RAND Corporation, writes in Politico. The roads that tankers use could also be destroyed in order to disrupt the money trail.

Another target could be “mobile refineries,” Shatz says, which IS uses to refine crude oil into useful petroleum products. Along with smuggling crude oil, IS sells refined products to local markets. But even though these mobile refineries provide IS with income, they do not have enough capacity to process all the oil coming from IS territories. There are some larger refineries in Iraq, Syria, and Turkey that refine IS oil.

IS is aggressively trying to expand, but oil remains at the heart of its fundraising strategy. The militant group has tried several times since June to take over the massive Baiji refinery, which is 130 miles north of Baghdad. The refinery can process about 310,000 barrels of oil per day, and is a critical piece of infrastructure that the Iraqi government is desperate to hold onto.

In recent days, IS has renewed its attacks on the refinery, firing mortar rounds and hitting a storage tank, according to Bloomberg News. Luay al-Khatteeb of Brookings said if they do capture the refinery, IS will struggle to operate the huge facility without the expertise of technical staff. Nevertheless, it remains a prize for the organization.

The millions of dollars IS is making from smuggling oil may sound like a lot, but the group also has a lot of costs. Paying salaries and buying weapons is one of them, but Shatz of RAND Corporation says that as a group acting as a state, it needs to provide services to the people in its territories. Just to provide the basics of electricity, water, and other administrative services, the Iraqi government spent far more in the past in IS controlled territory than the $2 million-per-day or so the militant group is earning. Ruling with an iron fist will work for now, but if IS is to last, it will need more cash.

Air strikes may succeed in destroying vehicles and other military equipment under IS control, but cutting off the flow of money – specifically from oil smuggling – will likely go further in weakening the Islamic State.

via Zero Hedge http://ift.tt/1t95VC5 Tyler Durden

One of the more impressive moves in recent months among the universe of European bonds, has undoubtedly been that by French OATs, which have actually outperformed Bunds in recent years, with the OAT-Bund spread the tightest it has ever been… 

… even as the French economy has cratered in the past year under its socialist regime, and far from being one of the “core” European economies,  is now increasingly considered B-grade at best.

Whether this miraculous performance, in which the market is doing the opposite of what the fundamentals suggest, is due to the ECB-intervention or simply because asset managers have stuck their collective head in the sand of willful ignorance is irrelevant, but according to Citi this latest period of complete disconnect between reality and market may be coming to an end as soon as the Friday when none other than Moody’s may put France, and its Aa1 rating, once again on review for a downgrade.

From Citi’s Peter Goves:

Downgrade risks have increased for France this week

 

France has been rated Aa1 with a negative outlook by Moody’s since November 2012. France appears increasingly isolated with its negative outlook given that Moody’s has upgraded several sovereigns this year, revised various outlooks back to stable (Figure 1) and notably, did not revise the outlook back to stable when France last appeared in its calendar on 23rd May. France next appears on Moody’s calendar this Friday (19th Sept). In their latest Credit Opinion (5th August), Moody’s indicated that they would likely downgrade France’s rating if:

• Moody’s confidence in the likelihood of the implementation of the proposed reforms or their effectiveness were to decline,
• Moody’s views on the country’s medium- to long-term growth prospects were to deteriorate further,
• Moody’s expectation with respect to the medium-term path of the general government’s debt/GDP ratio were to drift towards 100%.

Why we think downgrade risks have increased: Over the course of the last year, economic performance has been disappointing, with zero QoQ GDP growth both in Q1 and Q2. In light of this, Moody’s stated on 18th August that they have “cut 2014 real GDP forecast to 0.5% from 0.6% and our 2015 growth forecast to 0.9% from 1.3%” signalling a further deterioration in their growth outlook. Furthermore, finance minister Sapin recently lowered growth forecasts (2014 to 0.5% from 1%) and raised deficit forecasts (now expecting 4.4% in 2014 and 4.3% in 2015, Figure 2).

 

Moody’s stated the fact that France will miss its 2014 deficit target was credit negative on 18th August.

 

Outlook therefore unlikely to be revised back to stable: We believe it is now less likely that Moody’s revises its outlook to stable on Friday. Instead, we believe it is more likely that Moody’s puts France formally on a “review for possible downgrade” with a conclusion probably coming after the budget (due on 1st October).

Of course, all of the above assumes that rating agencies are still relevant in a world where central-planning has made all non-central banker opinion irrelevant; furthermore with the ECB now openly buying up ABS, will even a one notch downgrade in France matter.

At the end of the day, even if Citi is right, it will be all about nationalist pride, one of the few things France has left. And judging by France’s hysterical reaction to its first rating agency fall from grAAAce, anything Moody’s does, as irrelevant as it may be, will be worth the price of subprime, CCC-rated, and securitized popcorn.

via Zero Hedge http://ift.tt/1t95Vls Tyler Durden

One of the more impressive moves in recent months among the universe of European bonds, has undoubtedly been that by French OATs, which have actually outperformed Bunds in recent years, with the OAT-Bund spread the tightest it has ever been… 

… even as the French economy has cratered in the past year under its socialist regime, and far from being one of the “core” European economies,  is now increasingly considered B-grade at best.

Whether this miraculous performance, in which the market is doing the opposite of what the fundamentals suggest, is due to the ECB-intervention or simply because asset managers have stuck their collective head in the sand of willful ignorance is irrelevant, but according to Citi this latest period of complete disconnect between reality and market may be coming to an end as soon as the Friday when none other than Moody’s may put France, and its Aa1 rating, once again on review for a downgrade.

From Citi’s Peter Goves:

Downgrade risks have increased for France this week

 

France has been rated Aa1 with a negative outlook by Moody’s since November 2012. France appears increasingly isolated with its negative outlook given that Moody’s has upgraded several sovereigns this year, revised various outlooks back to stable (Figure 1) and notably, did not revise the outlook back to stable when France last appeared in its calendar on 23rd May. France next appears on Moody’s calendar this Friday (19th Sept). In their latest Credit Opinion (5th August), Moody’s indicated that they would likely downgrade France’s rating if:

• Moody’s confidence in the likelihood of the implementation of the proposed reforms or their effectiveness were to decline,
• Moody’s views on the country’s medium- to long-term growth prospects were to deteriorate further,
• Moody’s expectation with respect to the medium-term path of the general government’s debt/GDP ratio were to drift towards 100%.

Why we think downgrade risks have increased: Over the course of the last year, economic performance has been disappointing, with zero QoQ GDP growth both in Q1 and Q2. In light of this, Moody’s stated on 18th August that they have “cut 2014 real GDP forecast to 0.5% from 0.6% and our 2015 growth forecast to 0.9% from 1.3%” signalling a further deterioration in their growth outlook. Furthermore, finance minister Sapin recently lowered growth forecasts (2014 to 0.5% from 1%) and raised deficit forecasts (now expecting 4.4% in 2014 and 4.3% in 2015, Figure 2).

 

Moody’s stated the fact that France will miss its 2014 deficit target was credit negative on 18th August.

 

Outlook therefore unlikely to be revised back to stable: We believe it is now less likely that Moody’s revises its outlook to stable on Friday. Instead, we believe it is more likely that Moody’s puts France formally on a “review for possible downgrade” with a conclusion probably coming after the budget (due on 1st October).

Of course, all of the above assumes that rating agencies are still relevant in a world where central-planning has made all non-central banker opinion irrelevant; furthermore with the ECB now openly buying up ABS, will even a one notch downgrade in France matter.

At the end of the day, even if Citi is right, it will be all about nationalist pride, one of the few things France has left. And judging by France’s hysterical reaction to its first rating agency fall from grAAAce, anything Moody’s does, as irrelevant as it may be, will be worth the price of subprime, CCC-rated, and securitized popcorn.

via Zero Hedge http://ift.tt/1t95Vls Tyler Durden