Month: September 2014

Andy Hall – known as the God of Crude Oil Trading to some of his peers – has, according to Bloomberg, built his success on a simple creed: Everyone who disagrees with him is wrong. He was one of the few traders who anticipated both the run-up in and the eventual crash of oil prices in 2008. Hall has made billions for the companies for which he’s traded by placing one aggressive bet after another; and now, he is all-in again. Hall is going all in on a bet that the shale-oil boom will play out far sooner than many analysts expect, resulting in a steady increase in prices to as much as $150 a barrel in five years or less. As one industry CEO warned, "anybody who bets against Andy Hall might be making a poor bet."

As Bloomberg reports,

“When you believe something, facts become inconvenient obstacles,” Hall wrote in April, taking issue with an analyst who predicted a shale renaissance could result in $75-a-barrel oil over the next five years.

 

Hall is going all in on a bet that the shale-oil boom will play out far sooner than many analysts expect, resulting in a steady increase in prices to as much as $150 a barrel in five years or less.

 

Investing ever-larger sums of his own money, he’s buying contracts for so-called long-dated oil, to be delivered as far out as 2019, according to interviews with two dozen current and former employees and advisers who are familiar with Hall’s trading but aren’t authorized to speak on the record. To attract buyers, the sellers of these long-dated contracts — typically shale companies that have financed the boom with mounds of debt — need to offer them at a discount to existing prices.

Hall's reasoning…

…he digs deep, delving into the minutiae of how Texas discloses oil production, the tendency of some shale wells to play out quickly and the degree to which the boom has relied on debt. The simplest of his reasons, though, is that producers have already drilled in many of the best areas, or sweet spots. Hall predicts that growth in shale output will begin to moderate this year and U.S. production will peak as soon as 2016.

 

“Once those areas have been drilled out, operators will have to move to more-marginal locations and well productivity will fall,” Hall wrote in March. “Far from continuing to grow, production will start to decline.”

How Andy Long does it…

But not everyone agrees…

“We haven’t scratched the surface,” Hall’s former mentor O’Malley says. “There are massive additional shale fields in the United States. Technology does tend to move forward.”

 

…

 

Predictions of $75 oil, espoused by Citigroup oil analyst Edward Morse in a Barron’s story in March, really bug him, according to those who know his thinking.

 

“We are not sure what supports his conviction,” Hall wrote of the analyst’s theories in his June newsletter, although he didn’t identify Morse by name. “It is apparently not facts or analysis.”

 

The shale revolution faces political, environmental and technical hurdles in other parts of the world that will stall its rollout, Hall wrote. Morse, who also correctly predicted the sharp rise in crude prices in the past decade, says Hall has let his admiration of peak oil theorists cloud his judgment.

 

“It took a long time for believers in the Cold War to admit it was dead. So, too, is it taking a long time for peak oil believers to admit that it is dead,” Morse says.

So far this year, he appears to be getting confirmation…

So far this year, there are signs that he may be on the right track. In North Dakota’s Bakken and Texas’ Eagle Ford formations, which have accounted for almost all of the jump in U.S. output, the combined year-over-year growth in production in July fell below 30 percent for the first time since February 2010.

 

Two central questions about technology and shale will likely determine the outcome for Hall: how many wells producers will be able to drill in a finite amount of land that sits atop oil-bearing layers of rock and whether the U.S. renaissance will be repeatable abroad. Hall is betting no on both counts. Morse, and many in the energy world, are betting yes.

Timing is everything…

“He’s a phenomenal trader,” says David Neuhauser, a money manager at Livermore Partners who has followed Hall’s progress as an Occidental shareholder. “I believe he’s right about long-term prices; we’re in the same camp. What I don’t know is how long it will take for the market to catch up.”

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Russia would sure be happy itf Andy Long is right… USA not so much… perhaps that is the crucial factor in this manipulated market that overpowers everything?

via Zero Hedge http://ift.tt/1xde24o Tyler Durden

Well into the second year of Abenomics, doubts have risen about the effectiveness of Japanese Prime Minister Shinzo Abe’s approach of boosting economic growth and overcoming deflation via “three arrows” of monetary, fiscal, and structural policy. Yet another set of disappointing data recently released for July has reinforced these doubts. As several key turning points approach before year-end, whether Abenomics will succeed or stumble is at the forefront of most traders’ minds (whether they understand that or not). In the interest of some context for just how far Japan has fallen, we present 145 years of growth and XX-flation for the Japanese economy… one might argue that ‘lost decade’ or two is generous…

 

 

As one former Japanese Economic Policy cabinet member noted,

“I am very concerned [about the widening trade deficit], not about the widening of the trade deficit in itself, but about the fact that this widening is a result of a rising energy import burden. This situation cannot continue forever; we must reform our energy policies.”

 

“Monetary policy is just a placebo – it has no effect on real economic activity and certainly no effect on the longer-term growth path of the Japanese economy.”

Yukio Noguchi

 

Source: Goldman Sachs

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Submitted by Michael Snyder of End of The American Dream blog,

Has there ever been a nation more hooked on drugs than the United States?  And I am not just talking about illegal drugs – the truth is that the number of Americans addicted to legal drugs is far greater than the number of Americans addicted to illegal drugs.  As you will read about below, more than 30 million Americans are currently on antidepressants and doctors in the U.S. wrote more than 250 million prescriptions for painkillers last year.  Sadly, most people got hooked on these drugs very innocently.  They trusted that their doctors would never prescribe something for them that would be harmful, and they trusted that the federal government would never approve any drugs that were not safe.  And once the drug companies get you hooked, they often have you for life. 

You see, the reality of the matter is that some of these “legal drugs” are actually some of the most addictive substances on the entire planet.  And when they start raising the prices on those drugs, there isn’t much that the addicts can do about it.  It is a brutally efficient business model, and the pharmaceutical industry guards their territory fiercely.  Very powerful people will often do some really crazy things when there are hundreds of billions of dollars at stake.  The following are 22 facts about America’s endless pharmaceutical nightmare that everyone should know…

#1 According to the New York Times, more than 30 million Americans are currently taking antidepressants.

#2 The rate of antidepressant use among middle aged women is far higher than for the population as a whole.  At this point, one out of every four women in their 40s and 50s is taking an antidepressant medication.

#3 Americans account for about five percent of the global population, but we buy more than 50 percent of the pharmaceutical drugs.

#4 Americans also consume a whopping 80 percent of all prescription painkillers.

#5 It is hard to believe, but doctors in the United States write 259 million prescriptions for painkillers each year.  Prescription painkillers are some of the most addictive legal drugs, and our doctors are serving as enablers for millions up0n millions of Americans that find themselves hooked on drugs that they cannot kick.

#6 Overall, pharmaceutical drug use in America is at an all-time high.  According to a study conducted by the Mayo Clinic, nearly 70 percent of all Americans are on at least one prescription drug, and 20 percent of all Americans are on at least five prescription drugs.

#7 According to the CDC, approximately 9 out of every 10 Americans that are at least 60 years old say that they have taken at least one prescription drug within the last month.

#8 In 2010, the average teen in the United States was taking 1.2 central nervous system drugs.  Those are the kinds of drugs which treat conditions such as ADHD and depression.

#9 A very disturbing Government Accountability Office report found that approximately one-third of all foster children in the United States are on at least one psychiatric drug.

#10 An astounding 95 percent of the “experimental medicines” that the pharmaceutical industry produces are found not to be safe and are never approved.  Of the remaining 5 percent that are approved, we often do not find out that they are deadly to us until decades later.

#11 One study discovered that mothers that took antidepressants during pregnancy were four times more likely to have a baby that developed an autism spectrum disorder.

#12 It has been estimated that prescription drugs kill approximately 200,000 people in the United States every single year.

#13 An American dies from an unintentional prescription drug overdose every 19 minutes.  According to Dr. Sanjay Gupta, accidental prescription drug overdose is “the leading cause of acute preventable death for Americans”.

#14 In the United States today, prescription painkillers kill more Americans than heroin and cocaine combined.

#15 According to the CDC, approximately three quarters of a million people a year are rushed to emergency rooms in the United States because of adverse reactions to pharmaceutical drugs.

#16 The number of prescription drug overdose deaths in the United States is five times higher than it was back in 1980.

#17 A survey conducted for the National Institute on Drug Abuse found that more than 15 percent of all U.S. high school seniors abuse prescription drugs.

#18 More than 26 million women over the age of 25 say that they are “using prescription medications for unintended uses“.

#19 If all of these antidepressants are helping, then why are more Americans killing themselves?  The suicide rate for Americans between the ages of 35 and 64 increased by nearly 30 percent between 1999 and 2010.  The number of Americans that die by suicide is now greater than the number of Americans that die as a result of car accidents every year.

#20 Antidepressant use has been linked to mass shootings in America over and over and over again, and yet the mainstream media is eerily quiet about this. Is it because they don’t want to threaten one of their greatest sources of advertising revenue?

#21 The amount of money that the pharmaceutical industry is raking in is astronomical.  It has been reported that Americans spent more than 280 billion dollars on prescription drugs during 2013.

If many of these drugs were not so addictive, the pharmaceutical companies would make a lot less money.  And pharmaceutical drug addicts often don’t fit the profile of what we think a “drug addict” would look like.  For example, CNN shared the story of a 55-year-old grandmother named Cynthia Scudo that become addicted to prescription painkillers…

For Scudo, her addiction began — as they all do — innocently enough.

 

She sought relief from hip pain, possibly caused by scarring from cesarean sections she had delivering several of her children.

 

Her then-husband recommended a physician.

 

“There was no physical therapy offered,” she said of the doctor’s visit. “The first reaction was, let’s give you some drugs.”

 

He put her on OxyContin.

 

By the second week, she was physically addicted.

 

She was popping so much of the painkiller and other drugs such as anti-anxiety Valium that they equated to a dosage for three men.

There is lots and lots of money to be made from addiction.  In fact, if the U.S. health care system was a totally separate nation it would actually be the 6th largest economy on the entire globe.  We are talking about piles of money larger than most people would ever dare to imagine.

And with so much money floating around, it is quite easy for the pharmaceutical industry to buy the cooperation of our politicians and of the media.

Some time when you are watching television in the evening, consciously take note of how often a pharmaceutical commercial comes on.

It has gotten to the point where we are literally being inundated with these ads.

They are already making hundreds of billions of dollars, and they think that there is room for even more growth.

Will they ever be satisfied?

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

A little over a week ago we wrote that in order to mitigate problems arising from record debt and soaring NPLs, the G-20 had a modest proposal for global banks: more debt. Specifically “in November said leaders will agree “that the world’s top banks must issue special bonds to increase the amount of capital which can be tapped in a crisis instead of calling on taxpayers to come to the rescue, industry and G20 officials said.” In other words, suddenly the $2.8 trillion in Fed injected excess reserves, split roughly equally between US and European banks, are no longer sufficient, and while regulators are on one hand delaying the implementation of Basel III and its tougher capital rules, on the other they are tactically admitting that whatever “generous” capital buffer banks have on their books right now will not be sufficient when the next crisis strikes.”

The proposal for the first time introduced GLACs, or bonds known as “gone concern loss absorption capacity”, seen by regulators as essential to stopping the world’s 29 biggest lenders from being “too big to fail.”

Some of our thoughts at the time: “according to the G-20, instead of having to collapse liabilities to offset that scourge of the New abnormal, namely Non-Performing Loans, banks are hoping to lever up, pun intended, the current scramble for yield and instead beef if up their cash asset, even if it means increasing the liability side of the balance sheet by issuing more debt. Because really all the GLAC do is limit how the banks may use the proceeds from such bond issuance. Then again, these being banks, one can be certain that the moment the GLAC cash is wired in, the funds will be used to ramp risk instead of sitting in a drawer somewhere, awaiting rainy days. Because nobody in a bank is paid for avoiding a crisis, and everyone is paid to generate a return even if it means making the systemic bubble even bigger.”

And our summary:

in lieu of being able to actually generate and retain funds from operations, banks will once again scramble to raise epic amounts of debt, only this time, the proceeds will be retained “pinky swear” as a capital buffer, i.e., cash on the books. Cash which nobody makes a single dime in bonus on anywhere in the bank’s org chart. Would anyone wish to wager how long before the trillions in GLACs are “mysteriously” found to have funded shanty town developments in Shanghai, to buy the S&P500 at the all time high, and naturally, the purchase of a golden commode or two in various US banks? How could this possibly fail…

 

And the absolutely brilliant punchline: who do these regulators and “leaders” think will be the purchasers of said debt? Why other systemically important, TBTF banks of course! Which means that, in the by now quite familiar “daisy-chaining” of counterparties and collateral, once one bank fails, its exposure via collateral, repo and certainly, funding of other bank balance sheets, everything will promptly freeze as risk reprices, a la Lehman bonds.

Fast forward to today when, focusing solely on the US, we learned that as part of the domestic “macroprudential” effort to ensure firms don’t run out of cash in a crisis, the so-called Liquidity Coverage Ratio, US regulators said banks likely will have to raise an additional $100 billion to satisfy the new requirement, the WSJ reported.

The disclosure is part of the final draft of the so-called Liquidity Coverage Ratio, released by the Fed earlier today, and which was promptly passed on a 5-0 vote Wednesday that will subject big U.S. banks for the first time to so-called “liquidity” requirements. The Federal Deposit Insurance Corp. and the Treasury Department’s Office of the Comptroller of the Currency adopted the rules later in the day.

According to the WSJ, the thrust of the proposal remains unchanged: Banks must now maintain enough safe assets to equal their net cash outflows over about a month.

Some of the details: “The 15 largest banks – those with more than $250 billion in assets – will have to hold enough cash, government bonds and other high-quality assets to fund operations for 30 days during a time of market stress. Smaller banks – those with more than $50 billion but less than $250 billion in assets – will have to keep enough to cover 21 days. Banks with less than $50 billion in assets and nonbank financial firms deemed by regulators as posing a potential threat to the system will not be subject to the requirements.”

And some more:

Under the final version of the rule, U.S. banks with between $50 billion and $250 billion in assets will be able to calculate their liquidity positions on a monthly basis, rather than every day as proposed in the rule’s first draft last fall. Those banks also won’t have to start meeting the rule until January 1, 2016, giving them an extra year to comply.

 

Banks with more than $250 billion in assets will have to comply starting this coming January but will have until July 2015 before they must calculate the liquidity ratio on a daily basis.

 

…

 

Staff at the Fed estimated that the rule under consideration Wednesday would require big U.S. banks to raise an additional $100 billion of high-quality liquid assets, for a total of about $2.5 trillion.

 

Fed officials didn’t make changes in response to the industry’s concerns about the rule’s treatment of municipal debt securities, which weren’t classified as safe “high-quality liquid assets” that could count toward a bank’s compliance. But Fed Gov. Dan Tarullo said staff would reconsider that point in the future and “develop some criteria for determining which such bonds fall into this category and thus might be considered for inclusion” as a high-quality liquid asset.

The shortfall as illustrated visually by the WSJ:

On the surface, this is all great macroprudential news: forcing banks to hold even more “high quality collateral” is a great idea, to minimize the amount of money taxpayers will have to fork over when the system crashes once again as it certainly will thanks to the unprecedented Fed micromanaging interventions over the past6 years.

There are just three problems.

• First, when it comes to high quality collateral, there just isn’t enough, a complaint the TBAC made loud and clear in early 2013 and which served as the basis for our assessment that Tapering will have to take place at least until such time as the US once again is forced to plug massive deficit funding holes, and thus the Fed can monetize copious amounts of debt once more.
• Second, when one considers that the last time the financial system imploded it took not the paltry $700 billion TARP widely trumpeted as the “total” bailout cost, but closer to $14.4 trillion to keep the system from collapsing. As such, $100 billion – if and when the banks’ funding mechanisms lock up again in the absence of a perpetual Fed backstop – is nothing but pocket change, even if added to an existing pool of some $2.5 trillion in “high-quality liquid” assets. Furthermore, when the system is locked up in a funding spasm, the last thing any counterparty will bother with is purchasing liquid securities from insolvent competitors at par or even 50 cents on the dollar. In fact, due to the systemic interconnectedness, the only possible buyer of these liquid assets will once again be… you guessed it… the Fed.
• Third, and this is where this whole “macroprudential” scheme crashes under the weight of its own illogic, is when one considers that the source of the funding of any one bank’s debt issuance proceeds, are other banks and financial intermediaries, all part of the same group of chain-linked counterparties, which hold on their shoulders over $200 trillion in notional derivatives, and where even one collateral chain breach means net becomes gross and the derivative exposure collapes into the singularity of the next bailout. Basically stated, banks X will be selling debt to bank Y in exchange for cash, thus boosting bank X’ capital line item, while depleting bank Y’s. And when the moment comes to rescue the liquidity depleted bank Y, what then?

In other words, not only is this latest window dressing too little to make a dent, or that there simply isn’t enough of the high quality, liquid collateral needed to prefund a disaster fund, but at the end of the day, all that is happening is a circular pickpocketing where liquidity is simply rotated in a circle without any exogenous funds entering or leaving the banking sector. And as everyone knows, it isn’t any one banks that is insolvent: it is the entire banking sector in total, confirmed quickly when one recalls that Hank Paulson “forced” all the banks to accept TARP funding to restore confidence in the US banking system: not a piecemeal bailout.

Which is why we appreciate both the attempt to pull the wool in front of everyone’s eyes, and the humor behind it – the sad truth is that all of the above is not only meaningless, but it will likely further concentrate collateral and liquidity shortfalls away into the weakest banks whose failure will just make the TBTFs even bigger and even more systematically important.

What is worst of all, is that this example clearly indicates that when it comes to macroprudential policy, all the Fed really has, is an attempt to reallocate liabilities among the banking sector, in the process further obfuscation each bank’s total exposure. As to the most important issue, collateral chains and counterparty exposure should the “weakest link” in said chain fall, the Fed’s weapons are the same two it had during the last crisis: a printer and a prayer.

Everything else is still nothing but smoke and mirrors.

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

When Americans talk about immigration, they picture those they want to keep out: undocumented people sneaking across the southern border. But, as Bloomberg’s Kathleen Hunter reports, when U.S. businesses talk about immigration, they picture people they’d like to bring in: ones with science, math or technology skills, notable artists or those willing to pick tomatoes. The U.S. wants these immigrants. The ‘other’ immigration problem, then, is in deciding who and how many should be admitted.

 

Both U.S. tech and agriculture employers say there are not enough Americans able to fill all the available jobs.

As Bloomberg adds,

Facebook, Google, Intel and Cisco Systems are among the companies lobbying Congress to increase the number of technology workers, who enter the U.S. on H-1B visas. In fiscal 2014, it took just six days for the federal government to reach the 85,000 allotted petitions for H-1B visas for the year.

 

…

 

U.S. businesses bring in seasonal agriculture workers under the H-2A visa program; these are limited to 66,000 per fiscal year.

 

Meanwhile, movie stars, distinguished academics and professional athletes face less trouble getting special U.S. work visas set aside for those with “extraordinary ability.”

 

Extraordinary bank accounts allow the rich to receive visas if they’re willing to invest at least $500,000 in the U.S. and create at least 10 jobs within two years.

 

…

 

The U.S. Senate immigration reform bill passed in 2013 initially would raise the annual H-1B visa limit to 135,000 from 85,000; it could increase in later years to 180,000. Some House Republicans didn’t like the sweep of the Senate bill, which included a pathway to citizenship for undocumented immigrants, and instead want to move separate legislation for the expansion of technology worker visas. Democrats who control the Senate have resisted that approach; they want to use the promise of more H-1Bs as the sweetener to help get broader immigration reform legislation enacted. So Congress stands at an impasse.

*  *  *

so much for “slack”

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Via Scotiabank’s Guy Haselmann,

Draghi’s Difficult Dance

Draghi’s clever Jackson Hole speech unleashed financial market expectations of additional stimulus measures at Thursday’s meeting.  However, the situation is complicated.  Thus, numerous interpretations have unfolded on what he signaled (or didn’t signal) and on what types of ECB-led solutions are possible. Some pundits have argued that large-scale QE for Europe would do more harm than good.  Regardless, markets are likely to be disappointed as the October meeting seems to be a more practical time for any announcement.

Draghi further complicated quarrels by saying that such a program would ultimately not be effective without action that occurs in parallel with fiscal changes. In his concluding remarks, for example, he said that “a coherent strategy to reduce unemployment has to involve both demand and supply side policies, at both the Euro area and the national levels.”  (some have referred to this as Draghi’s three arrows)

He was basically telling politicians that the stance of Eurozone fiscal policy needed to be re-examined.  His New-Keynesian framework probably did not go over well in Berlin.  It was leaked in the German press that Merkel called Draghi after his speech.  He might have chosen to lecture politicians, because of his tacit acknowledgement that the economy is facing a liquidity trap;  implied by his comment, “due to the zero lower bound constraint, there is a real risk that monetary policy loses some effectiveness in generating aggregate demand”.

Draghi is a savvy political operator.  He is fully aware of the limitations and consequences of a sovereign debt QE program.  He knows that a central bank’s willingness to purchase a country’s debt (in ‘whatever –it-takes’ quantities), basically places an implicit cap on the price of a country’s funding.  Such a program rids a government of fiscal discipline, while simultaneously eliminating the spikes in yields that would normally result.  Complacency or fiscal stalemate ensues; enabled specifically by monetary actions.

Could this offer a partial explanation why Portuguese 10 year yields have fallen from 15% in 2012 to 3.22% today, while its Debt-to-GDP has steadily risen (64% in 2007, 84% in 2010, 108% in 2012, and 129% in 2014)?

After many failed years of trying to attain fiscal reforms in Brussels and at the Nationals’ level, the ECB is unlikely to receive any near-term fiscal help (due to austerity-drive and fiscal targets).  Therefore, the ECB will ultimately have to go-it-alone, despite questionably effective tools.   Europe is in dreadful and deteriorating shape, so the ECB does not want to be viewed as not doing enough: Draghi said, the risks of ‘doing too little’, outweigh those of ‘doing too much’.  Consequently, when the ECB reaches the point of desperation, its key objective will become to merely ‘buy time’.

It could easily be argued that markets have already taken yield levels to record lows; so markets have already done the job for the ECB.  An effort to lower them further would have little, if any, impact on aggregate demand (a classic liquidity trap).  However, the critical channel at this point for the ECB (to glean economic benefits) is through the weakening of the Euro.  Therefore, the ideal time to expand its balance sheet may be at the same time that the Fed’s balance sheet flat lines, i.e. at the ECB’s Oct 2nd meeting.  

Draghi noted in his speech how inflationary expectations had become unanchored; a condition previously identified as a potential catalyst for a broad-based QE program.   This extemporaneous part of his speech might have been directed at the Bundesbank in an attempt to gain its support.

Draghi’s statement about the short fall in demand was recognition that real interest rates are still too high.  Markets need to remember however that the ECB recently announced negative deposit rates, targeted longer-term refinancing operations (TLTRO), and plans for purchases of asset-backed securities.  These programs will take time to have influence and take time to be fully implemented.

I expect Draghi to be dovish on Thursday, but it likely too presumptuous to expect any new measures.  I suspect the ECB will eventually be forced (reluctantly into the QE revelry).  The main goal will be to weaken the Euro.   Equities and periphery sovereign spreads are probably already fully-priced for a QE program.  Bund yields and inflationary expectations will likely rise on the announcement (real yields will fall).  

The US/Bund spread will likely become less negative and drop from -148 today toward -100 bps.

“I came in from the wilderness, a creature void of form.  “Come in”, she said, “I’ll give you shelter from the storm”. – Bob Dylan

via Zero Hedge http://ift.tt/WdyP78 Tyler Durden

Thanks to the ingenious combination of a camera and a drone, also known as a GoPro Camera-on-a-drone, we have the first aerial footage of Apple’s new $5bn spaceship-shaped global headquarters in Cupertino, known imaginatively as Apple Campus 2…

 

 

 

As DeZeen reports,

The eight-minute film was made using a Phantom 2 flying vehicle produced by DJI and a GoPro Hero 3 camera. Footage was sent live from the device to a pair of Carl Zeiss video goggles worn by JCMinn via a transmitter also produced by DJI, allowing him to see what was filmed as he controlled the drone.

 

The footage shows a huge circular trench, which dwarfs the nearby houses in the residential district that abuts the site.

 

Concrete foundations for the ring-shaped building by British firm Foster + Partners are visible inside the trench.

 

 

The $5 billion project is due for completion in 2016 and will include one of the largest photovoltaic arrays in the world.

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