Month: June 2018

Top North Korean Official Visits White House For Most Significant Meeting In 18 Years

A top envoy from North Korean leader Kim Jong Un arrived at the White House on Friday for a meeting with President Donald Trump – the first visit by such a high ranking official in at least 18 years.

Former North Korean spy chief Kim Yong Chol was greeted on the south side of the White House by Chief of Staff John Kelly before the pair walked into the White House. Yong Chol was sent to hand deliver a letter from Kim Jong Un during the meeting. 

The letter from Mr. Kim was described as fairly basic, according to one foreign government official who was briefed on the contents. It expresses the North Korean leader’s interest in meeting without making any significant concessions or threats. The Kim lieutenant delivering the letter, Gen. Kim Yong Chol, who is under U.S. sanctions for his role in cyberattacks against American companies, is expected to remain in the U.S. until Saturday, the official said. –WSJ

The visit follows two days of meetings in New York between the North Korean envoy and Secretary of State Mike Pompeo, who made clear that the United States will require North Korea completely denuclearize.

In comments to reporters Thursday before boarding Air Force One for a trip to meet with families affected by a school shooting earlier this month, President Trump said that talks between US and North Korean diplomats were going “very well.”

The White House visit comes on the heels of a dramatic turn of events after President Trump abruptly canceled a summit planned for last week, citing anger and hostility from North Korea. 

The North Korean government immediately responded. In a statement issued by state-run Korean Central News Agency, citing Vice Foreign Minister Kim Kye Gwan, North Korea announced it was willing to sit with the U.S. “whenever, however” through any method to try to resolve the outstanding issues.

Gwan said that whereas President Trump’s announcement to one-sidedly cancel the planned summit is unexpected and very regrettable, “North Korea’s goal and will to do everything for peace and stability of the Korean peninsula and mankind remains unchanged, and we are always willing to give time and opportunity to the US side with a big and open mind,” according to the statement. He added that “We express our intent that there is a willingness to sit at any time, in any way to resolve issues” and noted that President Trump’s decision to cancel the summit is “not what the world wants” and the summit is necessary to resolve the current hostile bilateral relationship.

via RSS https://ift.tt/2JmysDz Tyler Durden

The Best And Worst Performing Assets In May And YTD

The peaceful days of 2017 are long gone, and after the furious January market melt-up, the February vol explosion, the March tech crunch, the April dollar and rate spike, the month of May was perhaps the most memorable of all.

And while May featured a mini EM-collapse, ongoing trade disputes between US and China and geopolitical tensions there is little doubt that the month will be best remembered for the Italian political developments in the last week or so. Indeed, as Deutsche Bank’s Jim Reid writes, the huge selloff across BTPs (-6.7% in local currency terms) stands out most when looking at Deutsche Bank’s monthly performance charts and indeed this was the biggest one-month fall for the BTP index since the German bank started collating monthly data at the start of 2007.

So May eclipsed anything seen during the Euro sovereign crisis although part of that will be down to duration as there are comparable monthly yield moves between May 2018 and in 2011. Italy’s FTSE MIB (-8.0%) also suffered its worst month since the Brexit-impacted June 2016, as did European Banks (-8.1%). European High Yield (-1.4%) had its worst month since the energy crisis in December 2015 while European Sub Bonds (-1.8%) had their worst month since June 2015.

So some impressive stats. That said the spread of returns across assets was still relatively mixed. In local currency terms 20 out of 39 assets ended with a positive total return while 13 did so in USD terms.

Looking closer, the selloff for BTPs was really contained  within the periphery last month with Spanish Bonds also falling -1.8% in local currency terms. In contrast, Gilts (+1.8%), Bunds (+1.7%) and Treasuries (+0.9%) all benefited from safe haven flows however it’s worth noting that EM Bonds lost -4.0% following various country-specific (Argentina and Turkey being examples) reasons earlier in the month.

It’s a similar story for equity markets too. As well as the decline for the FTSE MIB and European Banks, the Spanish IBEX lost -5.1% and the Greek Athex -11.7%. The Bovespa (-10.9%) and EM Equities (-3.5%) also tumbled while the Nikkei (-1.2%) was also slightly weaker last month. Interestingly the Portugal General actually rallied +2.8%, bucking the periphery weakness, while the FTSE 100 (+2.8%), S&P 500 (+2.4%), Stoxx 600 (+0.2%) and DAX (-0.1%) largely shrugged off the Italy news. It’s worth noting that returns for the latter indices were generally flat to slightly negative in Dollar adjusted terms though.

For credit, unsurprisingly Europe lagged the US with IG Non-Fin and Fin Sen also flat to down -0.3% respectively in addition to the bigger declines for the higher beta markets. US credit was flat to modestly positive led by IG (IG Non- Fin +0.5% and HY +0.2%). Note that all broad US/Euro credit categories under-performed their respective Government index in May.

Finally, commodities were also more mixed last month. Interestingly there was a large divergence in the Oil complex with Brent rising +4.6% and leading all assets but with WTI down -2.2%. Gold fell -1.3% while softs like Wheat (+2.7%) and Corn (+0.4%) rose slightly.

Looking back at the full returns, following May’s moves, the YTD picture is a lot more mixed now with only 17 out of 39 assets in positive territory in local currency terms and just 12 in dollar terms.Commodities lead the way easily with Wheat (+23.2%), Brent (+19.1%), Corn (+12.3%) and WTI (+11%) holding the top 4 spots. The moves for BTPs in May mean they have lost -4.3% YTD now while Bunds (+1.5%) and Gilts (+1.0%) are slightly positive. Treasuries (-1.1%) have pared losses. In equity markets, after being one of the top performers through April the FTSE MIB is now up just +1.6% YTD.

European Banks are also -9.3% and the IBEX -4.4%. However the S&P 500 (+2%) is back to positive territory joining the Stoxx 600 (+0.7%). Credit markets remain negative across the board. In Europe returns are -0.3% (IG Non-Fin) to -2.7% (Fin Sub) while in the US returns are -0.1% (HY) to -4% (Fin Sub).

via RSS https://ift.tt/2H9ednL Tyler Durden

The U.S. Economy In Two Words: Asymmetric Gains

Authored by Charles Hugh Smith via OfTwoMinds blog,

The Status Quo is in trouble if the bottom 95% wake up to the asymmetric gains that are the only possible output of our hyper-financialized economy.

The core dynamic of the U.S. economy in this era is asymmetric gains: the gains in income, wealth and power are increasingly concentrated in the top slice of the economy and society, while the income, wealth and power of the majority stagnate or decline.

The Status Quo must paper over this widening gulf with threadbare narratives that no longer match reality: for example, we’re an ownership society. We sure are: the vast majority of the nation’s productive assets are owned by the top 5%.

The U.S. economy has changed, but the transformation is largely invisible to the average participant and conventional economist. The previous iteration of the economy expired in the 1970s, an era of stagflation (stagnant growth and rising inflation that eroded the purchasing power of most households), higher energy costs and increasing global competition, an era in which the “external costs” of industrial-scale pollution finally came home to roost and the early stages of digital technologies began impacting human labor.

Stocks and bonds were destroyed in the 1970s. Investing capital in industrial production no longer generated outsized profits.

The 1980s ushered in a New Economy based on financial magic: the outsized profits flowed to those with access to credit and the tools of financialization: buying assets with borrowed money, selling the assets off in the global marketplace and reaping enormous gains by producing no goods or services.

We now inhabit a hyper-financialized economy in which the only way to get ahead is to speculate. For the middle class, this means speculating in housing: if you hit the jackpot and your house soars in value, then leverage this new wealth into the cash needed to buy a second property–or extract the equity to fund a more luxe lifestyle.

Entrepreneurs seek to generate “value” only as a means of cashing out via an initial public offering or selling their company to a global corporation. The “value” sought now is the perception of value–the magic of future promise that boosts valuations into the millions, or better yet, billions.

How many entrepreneurs are looking forward to owning their company ten years hence? Very few, as “the long haul” has no value in a hyper-financialized economy. If you don’t cash out in six months, your Big Idea might be worthless, leapfrogged by some other Big Idea.

In a hyper-financialized economy, hype is the most valuable skill. Those who can raise $100 million in capital for a fancy juicer win, as do those who sell the Big Idea to global corporations desperate not to miss out on the Next Big Thing.

In a hyper-financialized economy, future income is pulled into the present and monetized to benefit the top dogs. We borrow from the future to fund the inefficiencies of today. It’s a great system, and the Status Quo has the answer to everything: the government can never go broke because all it has to do is print more money.

What a swell idea. Isn’t that what Venezuela has done for the past decade?And how did that work for them? If you think that destroying the purchasing power of “money” is a winner, then by all means, go on believing that the government can never go broke because all it has to do is print more money.

Here’s my favorite chart of asymmetric gains. The vast majority of the gains reaped since the 2008-09 Global Financial Meltdown have flowed to the top .1%. This is not a bug, it is a feature of hyper-financialization. Indeed, it is the only possible output of the current system.

Meanwhile, the bottom 95% live in an economy where wages go nowhere and costs are soaring. The financial media cheers when wages (supposedly) rise by 2%, but nobody dares measure the impact of rising costs in services such as healthcare and higher education.

The Status Quo is in trouble if the bottom 95% wake up to the asymmetric gains that are the only possible output of our hyper-financialized economy.

Hype and propaganda are the key tools of the present era, as these are required to disconnect perception from reality. How long the disconnect will last is anyone’s guess, but when the two reconnect, all that is solid now will melt into thin air.

*  *  *

My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

via RSS https://ift.tt/2Lbv8sw Tyler Durden

Pelosi Pans “Strong” Jobs Numbers As “Meaningless… Bad For Middle-Class”

Democrat Leader Nancy Pelosi seems to have reached peak cognitive dissonance this morning.

Following the better than expected jobs data pushed the unemployment rate to its lowest in almost 50 years, the California politician issued a statement seemingly proclaiming that all of this is bad news for US workers.

 

In March of last year – after a 235k job gain, Pelosi was more excited about the strong jobs number, proudly proclaiming that the strong jobs number was due to Obama:

“February’s jobs numbers indicate the enduring power of President Obama’s economic leadership.

The firm foundation for growth created under the Obama Administration continues to deliver, but President Trump is taking dangerous steps that will hollow out our economy and weaken working families.”

Which is odd, because in fact, Americans’ confidence in the economy has almost never been higher and it is the lowest income Americans that have seen the biggest rise in confidence…

She added

“After 50 days in office, President Trump still has not put forward a single significant jobs bill… it will destroy millions of jobs and create chaos throughout the economy.”

Which is odd, because in fact, since that March statement, Trump’s administration has added 1.821 million jobs to the US economy based on BLS data.

So given her extreme disappointment in the fact that her predictions of doom and gloom did not work out, perhaps it is little wonder that following today’s strong jobs numbers, she felt the need to go full Orwell – “war is peace, love is hate, jobs are bad”…

In a statement on the May Jobs reports, Pelosi explained that:

“May’s jobs report shows that strong employment numbers mean little to the families hit with soaring new costs under the Republicans’ watch.”

Seemingly doubling-down on her elitist “crumbs” remarks over Trump’s tax-cuts, Pelosi then whined:

“… the President’s reckless policies are exploding gas prices, wiping out the few meager gains that some families should have received from the GOP tax scam, as wages remain stagnant.

Which is odd, because in fact, wage growth is near its best (admittedly slow) since June 2009…

And which is also odd, because in fact, while gas prices are up notably, they are just back to Nov 2014 levels, well below the wallet-crushing levels during President Obama’s reign…and in fact perfectly in line with the average gas price at the pump during Obama’s entire 8 years…

Pelosi ends with her pitch for what The Democrats plan is – aside from being “not Trump” that is…

“Democrats know that the American people deserve A Better Deal, with Better Jobs, Better Wages and a Better Future. 

We are committed to creating millions of new good-paying jobs and raising wages, lowering the soaring cost of living for families and giving every American the tools to succeed in the 21st Century economy.  Democrats will never stop fighting for the hard-working middle class families who are the backbone of our nation.”

Which is odd, because in fact, the biggest driver of soaring cost of living is her glorious leader’s Obamacare scheme…

So, the Democrats want to fight The Fed’s reflationary credit-creating ways, and at the same time create faster wage growth in already reportedly ‘overheating and tight’ labor market?

We wonder what she thinks about record low black unemployment rates?

Though we are sure that is a terrible thing!!!

via RSS https://ift.tt/2HcAa5v Tyler Durden

‘A Lot of Cities Signed Up for Pensions They Can’t Afford’ Says California Gov. Jerry Brown: New at Reason

It’s rare that a politician will say something that is praiseworthy and anger-inducing in the same breath. Nevertheless, Gov. Jerry Brown accomplished that unusual feat when he released his May revised budget, and told cities that the state government isn’t in a position to help them with their soaring pension costs. “They have to handle that themselves,” he explained during a briefing in the state Capitol.

His rationale for refusing to bail out hard-pressed local governments is compelling, concise and worthy of applause: “A lot of cities signed up for pensions they can’t afford.”

Why should taxpayers throughout the state pay more in taxes—or tolerate fewer services or more debt—to help those city governments that were fiscally irresponsible? They knew the risks, ignored the warnings and retroactively boosted pensions by as much as 50 percent over the past 15 years, yet now city officials are complaining about their tough fiscal position.

Cry me a river, writes Steven Greenhut.

Read the whole thing here.

from Hit & Run https://ift.tt/2HaOT0M
via IFTTT

BofA: Beware These Three June “Capitulation” Risks

Looking at the latest weekly EPFR fund flow data, BofA’s Michael Hartnett writes in his latest Flow Show that while there was a tepid “buy the dip” reaction to the recent volatility ($3.0bn into equities of which $5BN ETF inflows and $2BN mutual fund outflows, $0.5bn into gold, $1.1bn in redemptions from bonds), the notable shift this week was another major outflow from Emerging Markets and Europe, with investors continuing to park their capital in the “cleanest dirty shirt”, America:

EM outflows accelerate: largest weekly EM equity outflow since Dec’16 (Chart 6); EM debt & equity redemptions >$8bn the past 5 weeks; but remember this pales in comparison to $235bn EM inflows since Feb’16.

Unambiguous EU to US equity rotation: US inflows $23bn past 4 weeks, EU redemptions $29bn in the past 3 months

Meanwhile, as investors put money into US stocks, they liquidated US debt holdings resulting in another week of substantial credit outflows, to the tune of $1.2 billion from IG and $1.4 billion from HY, although as Hartnett notes, “this pales in comparison to $360bn inflows to IG+HY Feb’16 to Feb’18.”

A defensive posture was also observed when looking at sector rotations, where inflows went to defensive sectors (Health, Consumer), REITs, Tech (which remains 2018 flow leader YTD – Chart 5), offset by redemptions from Fins & Energy.

Similar retrenchment was also observed among BofA private (aka high net worth retail) clients, as a result of the first week of equity ETF redemptions since Dec’17, driven entirely by selling of EM equity ETFs. This bearish sentiment impacted BofA’s proprietary Bull & Bear Indicator, which this week fell to only 4.1, the lowest reading since Jan’17, on HY & EM outflows, more HF positioning, and weaker technicals.

And yet despite the tepid bearish sentiment, there has been no bull capitulation yet.

That may change soon because according to Hartnett, we are now entering a “June risk” zone in which there are three key catalysts that could result in liquidation: Credit, China and Tech, to wit:

  • Credit: if lower Treasury yields fail to incite a bid to EM, EU, HY, IG credit, that – to Hartnett – means excess debt, all $320 trillion of it  + lame bank lending + weak global growth = deleveraging cycle begins (something one can already see in a handful of German banks, whose CDS is rapidly widening vs US).

  • China: watch export growth next week as well as the ongoing Korea & Japan weakening: Hartnett predicts that should China export growth fall, investors will anticipate CNY devaluation and EM contagion, something which the Securities Daily already hinted at last night when it reported that China may further cut the RRR by 0.5-1.5% by year end. As a reminder, it was the April 17 RRR cut that launched the surge in the USD/10Y Yield, so another cut will send the dollar surging even more, with very adverse consequences for US corporations and emerging markets.


 

  • US: Here keep a close eye on the record delta between US and EU equities which are at  record high; Meanwhile the one catalyst that can spoil the US equity party is the return of stagflationary data to the US, such as a surge in US wage growth (AHE >0.4% which “traps” the Fed) & weak payrolls (<150k), both of which are negative US equities although neither of which will take place today, however, after May's "spectacular" jobs report. Meanwhile, the biggest threat to the "last bull market" remains forced selling of US equities, specifically tech stocks.

That covers the big June risks. What about the bigger picture? Here Hartnett says that he remains “tactically defensive” until asset prices force the Fed to “pause” tightening in Sep-Dec’18, i.e. stocks fall enough for Powell to end up on the rate hike cycle in roughly 2-3 more rate hikes.

via RSS https://ift.tt/2L9q1c0 Tyler Durden

Uber Driver Kills Passenger In Denver Shootout

Just as Uber CEO Dara Khosrowshahi launches his new advertising campaign to promote the friendlier new face of the tech-taxi company,  the firm takes another PR hit as an Uber driver in Denver “exchanged shots” with his passenger who is now dead.

The incident forced the closure of southbound Interstate 25 for five hours early Friday morning, the Denver Police Department said.

A confrontation between the driver and a passenger broke out at about 2:45 a.m. as they were traveling south on Interstate 25, Jackson said.

The driver allegedly fired at least one shot at the passenger, Jackson said.

As The Mercury News reports, the Uber passenger was taken to a hospital and pronounced dead, police said.

“At this time no one has been arrested. That isn’t to say that there won’t be an arrest in the future,” said Sonny Jackson, Denver police spokesman.

During the shooting, the car careened out of control and smashed into a concrete barrier near the University of Denver, a few miles south of downtown, Jackson said.

Notably, Uber has a policy that prohibits its drivers from carrying firearms while driving passengers, so we suspect Khosrowshahi will have some new policies to enforce to ensure its drivers and passengers feel safe.

Will Warren Buffett be calling him again now that there is literally ‘blood on the streets’?

via RSS https://ift.tt/2J8rgb5 Tyler Durden

Woman’s Jersey Beach Beatdown by Police Goes Viral

When a police officer tackled a 20-year-old woman on a New Jersey beach over Memorial Day weekend and then punched her in the head, all over a bottle of Twisted Tea, bystander footage of the beatdown quickly went viral.

For those who missed it, here’s the initial video, which has been viewed more than a million times:

It’s remarkable that in the crazy-fast, rapid-spin news cycle that now rules us, the story is still getting significant attention a week later. On Wednesday, the Wildwood, New Jersey, police released body camera footage of parts of their encounter with Emily Weinman, 20. If anything, the additional footage highlights how absurd and unnecessary the violence was.

None of the body camera footage shows the initial encounter that led to the confrontation. What we do know is that two Wildwood police officers came across Weinman on the beach. Her family spread included a cooler, and police spotted a bottle of alcohol. Weinman insisted this belong to her aunt, who she said would be coming back soon. (She never shows up during the videos.)

Weinman is not terribly hospitable toward the police, who make her take two breathalyzer tests. You can’t really tell what the outcome was, but when all is said and done, she has not been charged with being drunk in public. But she’s uncooperative, and she refuses to give police her last name. Eventually an officer has had enough and pulls out the cuffs to arrest her. She’s upset by this, so she attempts to walk away. That’s when the officer declares “You’re about to get dropped,” tackles her into the sand, punches her in the head, and arrests her.

The mayor of Wildwood, Ernie Troiano, was quick to come to the defense of the police officers with very little evidence other than his own experience as an ex-bouncer. (I hope to God all mayors in New Jersey are ex-bouncers.) He insisted that Weinman was “by far the aggressor here,” then turned to the “she’s no angel” tactic, pointing to the fact that Weinman was on probation for a previous crime. (She got into a fight in Philadelphia with a woman she believed was sleeping with her ex-boyfriend.)

The mayor then complained about underage drinking and people’s insistence on drinking on the beach. From Philly.com:

“I don’t understand why it seems to be that this is a God-given right that they can come here and drink underage,” he said, adding that no one is allowed to drink in public or on the beach in Wildwood unless they are attending an event that has received a permit to allow drinking.

So Troiano’s argument is that drinking isn’t a God-given right; it’s a right given by the government. Just because the taxpayers are forced to shell out money to maintain the beach doesn’t mean they can just come out there and drink on it, unless they have the government’s permission. So you see, they had no choice but to beat up a 20-year-old unarmed woman who was neither drunk nor violent.

It may ultimately turn out that Weinman is, indeed, no angel. It may turn out that she spit at an officer. (It kinds of look like she did as they brought her to the police vehicle.). It may turn out that she was consuming alcohol. But none of that justifies the police’s behavior. They decided they wanted to make a lesson out of Weinman, and now the public is repulsed by it. Note the reaction of the bystanders in the video. Several confront the officers about their behavior. At one point one even appears to try to pull the officer off the woman.

Weinman has been charged with two counts of aggravated assault on a police officer, aggravated assault by spitting at or on an officer, disorderly conduct, resisting arrest, obstruction, and being a minor in possession of alcohol.

from Hit & Run https://ift.tt/2sveQ6X
via IFTTT

The Opioid Crisis Isn’t What You Think It Is—and It Can’t Be Stopped by More Drug War: Podcast

Across the country, overdoses and crimes attributed to drugs such as hydrocodone, oxycodone, codeine, and fentanyl are up. Heroin, once an exotic and expensive drug, is now widely available and reportedly as cheap as $5 a pop. Politicians, law enforcement, and the medical community are scrambling to respond. Media coverage abounds.

What is the reality of the opioid “epidemic,” what are its causes, and what are its effects on chronic pain patients, whose demand for prescription drugs is often (and incorrectly) blamed for causing the problem? In this Reason Podcast, I talk with Reason‘s Zach Weismueller, whose latest documentary follows a pain doctor who is retiring rather than put up with increasing government hassles and surveillance, and Jacob Sullum, a finalist for a National Magazine Award for his article “No Relief in Sight: Torture, despair, agony, and death are the symptoms of ‘opiophobia,’ a well-documented medical syndrome fed by fear, superstition, and the war on drugs. Doctors suffer the syndrome. Patients suffer the consequences.” That story was published way back in 1997, a striking indication of just how long—and how ineffective—the war on pain drugs has been.

“Contrary to the impression left by most press coverage of the issue, opioid-related deaths do not usually involve drug-naive patients who accidentally get hooked while being treated for pain. Instead, they usually involve people with histories of substance abuse and psychological problems who use multiple drugs, not just opioids,” Sullum writes in a cover story for the April 2018 Reason. “Treating pain medication as a disease vector, the government has restricted access to it by monitoring prescriptions, investigating doctors, and imposing new limits on how much can be prescribed, for how long, and under what circumstances. That approach hurts pain patients by depriving them of the analgesics they need to make their lives livable, and it hurts nonmedical users by driving them into a black market where the drugs are deadlier.”

Sullum appears in Weissmueller’s documentary about Dr. Forest Tennant, who is shutting down his five-decade-long practice in Southern California after being raided last fall by the Drug Enforcement Administration. Sullum and Weissmueller discuss misconceptions about opioid abuse, and they talk about how to help both abusers and patients in ways that won’t cause needless suffering and pain.

Subscribe, rate, and review our podcast at iTunes. Listen at SoundCloud below:

Audio production by Ian Keyser.

Photo Credit: Erik McGregor/Pacific Press/Newscom

Don’t miss a single Reason Podcast! (Archive here.)

Subscribe at iTunes.

Follow us at SoundCloud.

Subscribe at YouTube.

Like us on Facebook.

Follow us on Twitter.

from Hit & Run https://ift.tt/2J7y2Ol
via IFTTT

Is A Natural Gas Pipeline Between Alaska And China Realistic?

Authored by Irina Slav via OilPrice.com,

When Alaska’s governor Bill Walker headed with a trade delegation to China earlier this week, he must have hoped to bring back good news about an 800-mile gas pipeline project that would see the state’s gas reserves flow into an increasingly gas-hungry Chinese economy. However, the only news the delegation brought home was that Sinopec and Bank of China were still interested in the project.

This declaration of interest is hardly worth a headline, but one outtake from the meeting with Sinopec’s president, as reported by Alaska’s Energy Desk Rashah McChesney, is worth mentioning. The president of China’s largest refiner said, “After some of the work we did, in terms of assessment and evaluation in technology, economics and in terms of the resources of Sinopec – I think there’s a lot more work for us to be done than originally imagined.”

The latter part of this remark should be a cause for concern for the project’s proponents as it is a clear sign that Sinopec will be taking a cautious approach to what could be a multibillion-dollar investment.

To be more precise, the pipeline will cost an estimated US$45 billion. It would ship natural gas from Prudhoe Bay to the southern Alaska coast, in Nikiski, from where the now liquefied gas will be shipped to a booming Chinese gas market. Without it, the gas is as good as non-existent, because it cannot be brought to market without a pipeline.

Given the size of the investment that would be needed to build the infrastructure, it’s no wonder that Governor Walker reached out to potential investors in the country that would benefit from the project. He inked a preliminary deal with Sinopec, China Investment Corp., and Bank of China last November.

This, by the way, happened after the original companies behind the deal, including Exxon, BP, and ConocoPhillips, quit, worried about a surge in global LNG supplies that made the project “one of the least competitive” globally, according to Wood Mackenzie.

But Alaska is not giving up. With falling oil production and revenues, tapping the U.S.’s huge Arctic gas reserves, which estimates peg at as much as 200 trillion cubic feet, makes perfect economic sense, provided that Chinese demand lives up to the promise and there isn’t too much competition, which is doubtful, what with all the megaprojects in Australia, and Russia joining the LNG game with its eyes set mainly on Asia.

The head of the Alaska Gasline Development Corporation, Keith Meyer, said at a recent public meeting that the project will happen, despite doubts about its viability. “We’ve got some time; we’ve got some lead time, but that’s going to disappear very, very quickly,” Meyer said. “And so every person, every small company, every large company in the state has got to get ready.”

Meanwhile, in addition to the doubts in both China and the U.S. about the project’s competitiveness, there is naturally environmentalist opposition to yet another pipeline. The Environmental Investigation Agency this month called on the National Marine Fisheries Service to reject AGDC’s application for approval of the pipeline project on the grounds that it will threaten a population of beluga whales in Cook Inlet, where a portion of the pipeline will pass under the seabed. The EIA has accused the company of revising its original application to reduce the extent of the threat for the endangered marine mammals.

The Sierra Club is also against it, for more general reasons such as “increased natural gas drilling in the Arctic…. increasing air pollution, diminishing wildlife habitat, and exacerbating climate change.”

The odds seem to be stacked against the Alaska gas pipeline, at least at the moment. If the Chinese investors are not yet ready to commit any actual money to the project, they might not be ready at all.

via RSS https://ift.tt/2LRd33N Tyler Durden