Author: admin

One week ago, we reported that even as traders were focusing on the daily headline barrage out of OPEC members discussing whether or not they would cut production (they won’t) or merely freeze it (at fresh record levels as Russia reported earlier today) a bigger threat in the near-term will be whether the relentless supply of excess oil will force Cushing, and PADD 2 in general, inventory to reach operational capacity.

As Genscape added in a recent presentation, when looking specifically at Cushing, the storage facility is virtually operationally full (at 80%) with just 4-5 more months at current inventory build left until the choke point is breached, and as we have reported previously, storage requests for specific grades have already been denied.

Goldman summarizes the dire near-term options before the industry as follows:

The large builds in gasoline and crude stocks have brought PADD 2 storage utilization near record high levels. While the recent decline in Midcontinent refining margins should help avoid breaching storage capacity, by finally bringing gasoline back into deficit, this will likely only exacerbate the build in crude inventories in coming months and should require further weakness in PADD2 crude prices to spread this build to the USGC. Weaker gasoline demand/exports, or higher margins/runs or finally resilient crude imports/production, could create binding storage issues beyond the intermittent Cushing WTI cash price weakness observed so far, which would require another large leg lower in crude prices to shut production in the Midcontinent and Canada. As we have argued, this continued testing of storage constraints should keep price and margin volatility elevated.

However, while the threat from overproduction on soaring crude inventories, or in other words “supply”, has been extensively documented, far less has been said about another just as big problem: “demand”, or the potential supply-chain bottleneck that will hit the moment refiners finds themselves flooded with too much unwanted product, in turn telling producers they have to turn oil back simply because they have no more capacity.

Is this possible? It’s already happening.

As the WSJ reports in a piece titled “The Big New Threat to Oil Prices: A Glut of Gasoline“, refineries in the U.S. Midwest are losing their thirst for oil, posing a new risk for the battered crude market. The Midwest accounts for nearly a quarter of the crude processed in the U.S. and is home to shale producers that have few other outlets for their oil. But refiners there are already swimming in gasoline and other fuel, forcing them to cut back production until the excess can be worked off.

In other words, not enough intermediate demand in the supply-chain with the result the same as oversupply: more crude oil is available in the market, worsening a glut that has been undermining oil prices for the past year and a half. As the WSJ adds, “with U.S. crude inventories at the highest level in more than 80 years, some storage hubs have little room left to store oil.“

This means that storage hubs are now being hit on both sides: from excess production in a global market oversupplied by 3 million barrels daily, and from collapsing demand by the refiners for whom operating at current prices has become uneconomical. The result is that refinery production capacity, while already running at record levels for this time of the year, has tumbled from 98.2% a month ago to just 92.9% last week.

This drop is significant because, as the WSJ explains, it marks the first time several refineries in the region have opted to reduce activity for economic reasons— a marked change after more than a year of refiners processing as much crude as possible.

Here is the problem illustrated: gasoline stocks are literally off the charts in terms of the past 10 year min-max range:

 

… as refineries operate at a record pace for this time of the year…

 

… while gasoline demand is well within its past decade range:

 

Which means refining production has no choice but to decline, which is precisely what it is doing. Three examples:

• CVR Refining LP is among the companies that have scaled back. The company said recently that it reduced runs at its 70,000-barrels-a-day refinery in Wynnewood, Okla., by as much as 10,000 barrels a day. “It doesn’t make sense to process something when you’re not making anything on it,” Chief Executive Jack Lipinski said during a Feb. 18 earnings call.
• HollyFrontier Corp. said Wednesday that it has trimmed production at refineries in Kansas and New Mexico due to lower margins.
• PBF Energy Inc. Chief Executive Tom Nimbley said during a conference call on Feb. 11 that the industry “turned the dials to make more gasoline” in the last quarter of 2015 and overshot demand. “The gasoline is not going to the consumer,” he said. “It’s going into a tank.”

The first immediate consequence of overproduction are dropping margins as refiners try to sell their product into a glutted market, and sure enough refining margins are lower throughout the country this year, including in the Gulf Coast region, where more than 50% the country’s refining capacity is concentrated. But refiners there have more choices when it comes to buying crude oil and can substitute cheaper options if they become available. And they can put fuel on tankers to sell overseas if supplies build up too much.

In other areas, there are fewer viable options: recent cutbacks have been enough to nudge gasoline prices higher in the Midwest, though it’s still cheap in some places: Gas was selling for as low as $1.11 a gallon on Wednesday in Granite Falls, Minn., according to Gasbuddy.com. Gasoline futures for March delivery rose 4.6% on Wednesday to $1.0104 a gallon, up from a seven-year low hit earlier this month.

Which again brings us to the most important commercial hub in the US, located in the heart of the Midwest in Cushing, Oklahoma.

“Many industry players and analysts think refiners will ramp up production after spring maintenance and they expect activity to pick up in the summer as cheap gasoline spurs Americans to take more road trips. But for producers in the Midwest and Canada, any decline in Midwest refining activity is worrisome. The region is home to the crucial oil storage hub at Cushing, Okla.—the delivery point for the U.S. oil futures contract.”

Sellers in the futures market can either deliver physical crude or buy futures to offset their obligations. A lack of storage space can force buyers out of the market and supplies in Cushing are at their highest level ever. Analysts warn U.S. oil futures could fall further as Cushing nears full capacity.

This is precisely what we have been warning about for months, or as Paul Horsnell, global head of commodities research at Standard Chartered puts it, “There’s a feeling of various bits of ice cracking all at once” in the oil market, with both crude-oil and gasoline inventories at extremely high levels… People are worried about a short-term issue, particularly in the U.S., particularly at Cushing.“

The good news is that we are likely very close to the worst case scenario playing out: refiners are unlikely to start buying more crude in the coming weeks. Instead, many will begin seasonal maintenance ahead of the busy summer-driving season. That could leave some oil producers scrambling to find places to store their output. Prices in some regions might have to drop sharply to justify the cost of shipping the oil to where it can be stored.

Which means there are just two options: find some undiscovered storage, or hope demand picks up.

On the first, there is always hope: “we’ll just look for every other nook and cranny throughout North America to stuff crude oil into,” said Andy Lipow, president of consulting firm Lipow Oil Associates in Houston. “The market is just not going to like it.”

However, it is the second that is the biggest wildcard: refiners profit on the difference between oil prices and fuel prices. Oil prices have dropped 70% since mid-2014 to around $32 a barrel currently, but robust demand for gasoline kept prices at the pump from falling as quickly last year, boosting refiner margins. However, analysts question whether demand will increase strongly this year, especially given broader concerns about sluggish economic growth. 

Which brings us to the punchline: on a four-week average basis, U.S. gasoline demand fell in January compared with the year before, according to Energy Information Administration estimates.

This despite the alleged increase in US consumer purchasing power or the so-called “tax-savings” from low gasoline prices, which should have boosted overall gasoline demand.

It has not.

Which is why with the market having debated the supply issue for over a year, and overanalyzed the OPEC and non-OPEC supply question to death, what virtually nobody has discussed is the just as important demand side of the equation, perhaps because nobody dares to admit the obvious: the much needed rebound in demand is just not there.

If that is indeed the case, expect a sharp, violent move lower in the price of oil in the coming weeks as the fundamental oil reality finally catches up with the imaginary world of stop-hunting, momentum-igniting, algorithmic daytraders.

via Zero Hedge http://ift.tt/210Je0v Tyler Durden

“In view of the circumstances it appears likely that this is a xenophobic act.”

That’s from a police spokesperson who spoke to dpa after a dead pig with Angela Merkel’s name “daubed on it” was discovered at a site where a mosque is being constructed in Leipzig.

“Mutti Merkel” was reportedly scribed on the animal’s corpse. “Mutti,” or “mom” is a term of endearment that’s been variously applied to the chancellor. When Merkel made the push to take in some 1 million refugees last year, she was dubbed a “kind hearted lion mother” by some Mid-East asylum seekers.

But “mother” Merkel’s reputation has suffered irreparable damage over the past six months thanks to her role in fueling the bloc’s worsening refugee crisis. Germany took in more than a million migrants in 2015 and reports of mass sexual assaults carried out by immigrants combined with ever-present concerns about terror have soured Europeans on the chancellor’s “yes we can” message.

Indeed, the narrative is increasingly “no we can’t, even if we wanted to.” In fact, the situation is so bad that EU migration commissioner Dimitris Avramopoulos warned on Thursday that if Turkey and Greece can’t work together on a solution to secure the bloc’s external borders, the entire project will collapse in the next 10 days.

Norwegian PM Erna Solberg is preparing her country for that eventuality by passing a new bill that will allow Norway to essentially lock down the borders and turn all comers away by force if necessary.

As NBC reports, it wasn’t exactly surprising that the pig turned up at the site. “In a 2013 incident after plans for the mosque became known, pigs’ heads were found at the same site. Police say no perpetrator has ever been found.”

“I see this as just a stupid act. I don’t know what they mean to say with this, but our mosque construction project will continue,” Dr Rashid Nawaz of the Leipzig branch of the Ahmadiyya Muslim Jamaat (AMJ) organization told The Local. 

Stupid act, yes. But we’re not sure what Dr. Nawaz is confused about what the “perpetrator(s) “mean to say.” They mean to send an anti-migrant, anti-Islam message. The piglet, Nawaz says, “was hurled into a patch of earth overnight.” 

“The planned mosque for 100 people would be the second newly built mosque to be constructed in eastern Germany,” Deutsche Welle reports. “The Ahmadiyya Muslim Jamaat (AMJ), a global Islamic community with 35,000 members in Germany, has built a new mosque in Berlin’s Pankow neighborhood.”

Leipzig mayor Burkhard Jung wasn’t particularly enamored with the display. “Insulting, reviling and smearing a whole religious community is narrow-minded and outrageous,” he said, adding that “leaving a dead pig with the words ‘Mutti Merkel’ on it isn’t just tasteless, but demonstrates fundamental failings of democratic education and conviction.”

It seemed to have escaped Jung that when you are mayor, “fundamental failings of democratic education” among the populace are ultimately your fault.

*  *  *

Below, find the original article from Leipziger Volkszeitung (Google translated)

Leipzig . The site for the new mosque of the Ahmadiyya community in Leipzig-Gohlis has been ruined again on Wednesday. As police spokesman Uwe Voigt told LVZ.de, found a passerby about 13 pm dead piglets in a bush, on the red paint “Mutti Merkel” was written. The perpetrators were not seen, but it was assumed that the animal has been filed on the day on the site at the corner Georg Schumann / Bleichertstraße.

Meanwhile, the state protection had been turned on. Investigators from a politically motivated act from, among others, it also go to an insult to the Chancellor, so Voigt further.

Construction in early September with religious leader

The Ahmadiyya community itself responded on Thursday with serenity the fact. “We will not be intimidated. What the perpetrators are hoping, will not happen: This has no impact on the construction process of our mosque, “spokesman Rashid Nawaz told LVZ.de. For discussions, community’m always ready to violence and attacks were not to be tolerated.

The Ahmadiyya plans to begin in early September with the construction of their new mosque. Approximately 700,000 Euro investments are planned for the project. “There are some other things that are now regulated. Then we hope the final construction permit, “Nawaz said. For groundbreaking ceremony then will also the London-based spiritual leader of the religious community, Mirza Masroor Ahmad, expected in the fair site, the spokesman said.

OBM Jung condemned fact – Man: “Another low point.”

Perella (SPD) responded on Thursday dismayed at the attack, “offend an entire religious community, to denigrate and insult is petty and despicable.The vast majority of Muslims, like most members of other religions also, peaceful believers who find in their denomination support and guidance, “said the Social Democrat.

For the member of parliament Holger man the perpetrators expose more clearly than democracy enemies. “A dead pig with red lettering, Mutti Merkel ‘store, is not only tasteless, but discloses basic lack of democratic education as conviction. Symbolically compare a man with pigs and threaten the Chancellor with death is another low point and evidence of the brutality of the political climate “, the SPD politician said.

The attack on Thursday was not the first attack on the planned Ahmadiyya Mosque in Leipzig. In November 2013 Unknown speared bloody pigs’ heads on poles, placed them along a beaten track that leads through the site and set fire to a garbage can. This attack sparked already nationwide revulsion.

In addition, there were months incitement and protests in the district against the planned mosque, led by the far-right NPD. In April 2014, the former NPD politician Alexander Kurth also tried to hand over a petition against the mosque properties on the city council. Mayor Jung refused to accept.Proponents of the sacred building had previously collected more than 6,000 signatures.

via Zero Hedge http://ift.tt/1QiXmR8 Tyler Durden

Submitted by Eugen von Bohm-Bawerk via Bawerk.net,

Things are turning increasingly ugly in Venezuela between President Maduro and the opposition MUD. The core political problem after December 2015 elections is the PSUV are now using the courts to neuter any opposition voices that formally hold a legislative majority to start holding the government to account.

Right on cue, Mr. Maduro just railed a decree through the Supreme Court (TSJ) giving him total control over budgetary measures, utilize any property, suspect constitutional rights and if needs be mobilize the military for a period of 60 days (effective from 15th January) with another 60 day extension not only ‘Constitutionally possible’, but increasingly likely. The ‘good news’ from that, is President Maduro is at least starting to take some tepid measures that might help to get Venezuela onto a more realistic track, including 37% devaluation with a view to bringing Venezuela’s three tiered exchange rate into a dual system.

Looks good on ‘paper’, but don’t be fooled. It merely leaves official rates of 10 bolivares to the US dollar, 200 bolivares (likely floated as the second tranche), compared to black market rates that’s more like 1000 to the greenback. Unsurprisingly, domestic price reforms got similarly ‘piecemeal treatment’, where memories of the 1989 Caracozo riots still ring loud in the PSUV’s ears. Going from 0.07 bolivar a litre to 1 bolivar sounds huge at 1,329% price hikes for 91 octane, but it still makes Venezuelan gasoline the cheapest in the world. PDVSA will only save around $800m from the move, and that’s assuming the government continues to adjust prices give Mr. Maduro’s measures will send inflation into the 1000% stratosphere. The IMF was already being very polite with 720% estimates on basic goods, including fabled toilet paper and condoms in increasingly short Venezuelan supply these days. 

 

But so much for the ‘economic story’, what about the political backdrop?

Unsurprisingly, Mr. Maduro’s Supreme Court stunt has left the opposition with little choice but to push for regime change at this stage. To be clear, the Venezuelan constitution is explicitly worded that any emergency Presidential enabling powers should have the approval of the Supreme Court and the National Assembly. The fact they’ve run roughshod straight over them and made up their own rules, basically renders the Assembly dead in the water at this stage. Regime change is the only card the MUD now have left to play.

The question is how to pull it off? The preferred option would almost certainly be to hold a constituent assembly to re-write the constitution, including shortening and limiting presidential terms. The snag is that the MUD needs a two-thirds assembly majority to do so. And it’s the same ‘super-majority’ the PSUV and TSJ evidently blocked from the December 2015 poll, which makes a so called ‘recall referendum’ the obvious plan B against Mr. Maduro in April 2016 once the President is officially half way through his term. The MUD will need to garner 25% of registered voters to trigger the process, in what’s then a five month ordeal from start to finish, with multiple National Election Board (CNE) hurdles along the way. It’s almost certain the CNE and Courts will drag their heels as long as they can, mimicking previous 2003-04 tactics to forestall Chavez’s removal.

The key reason for that is by early 2017, the PSUV can legitimately remove Maduro themselves where they could essentially put its own puppet back into office. And far more importantly, protect their own (and military) patronage networks in what’s left of an economically gutted Venezuela. The ailing bus driver soaks up all the bad PSUV news along the way, while the Party gets to work jailing more MUD figures, dividing and ruling all the way.

Whether things can realistically be strung out that far frankly remains contingent on the ‘Venezuelan street’, somewhat ironically mirrored by what’s happening within military elites, where the Generals are getting increasingly nervous they might have to oversee a ‘transitional’ period of military rule to safeguard their own interests. Try as his might, President Maduro can politically run, but he can’t economically hide from the fact that Venezuelan will see another 5% contraction this year, with around $20bn of debt payments due by the end of 2016 with little foreign reserves left to do it.

0

A third of that is owed by the Central Bank, a third owed by PDVSA, and another tranche directly payable to China under oil for loans. To its ‘credit’ Venezuela has tried to honour its international obligations, even to the point of squeezing imports to avoid the political embarrassment of tanker seizures to date. But under current benchmark prices, Venezuela will have to spend around 90% of oil export revenues purely servicing debts to get through the year. Our take is that’s going to be politically impossible to do given some of those scarce dollars will be needed to provide the most basic of basic goods. That means structural default is inevitable sooner or later, at least without any fundamental regime change to try and chart a new course.

 

On that ironic note, anyone expecting things to get better under a drastically fractured MUD consisting of 27 internal groups will prove very disappointed. Cut to the chase, and that ultimately leaves the ball in China’s court given its massive ($50bn) sunk costs in Venezuela where it’s thrown caution to the Caracas wind over the past decade. Sure, CNPC can directly tie new capital to its operations all it likes, but at some point, Beijing needs to decide between propping up the PSUV with more cash, or just let the house of cards fall and take their chances with a hostile MUD.

Then again, ‘plan C’ might prove the most attractive for Beijing: Ditch the democratic niceties and do what China does best, cut a deal with the military to maintain status quo interests. Either way, Beijing will have a key role on what does or doesn’t happen with Maduro’s Mayhem in 2016-17. Force us to make a call, Mr. Maduro ultimately won’t be part of the Sino script over the longer term….

via Zero Hedge http://ift.tt/1LKMRR0 Tyler Durden

In many ways, 2016 has been the year that the world woke up to how far down Krugman’s rabbit hole (trademark) DM central bankers have plunged in a largely futile effort to resuscitate global growth.

For whatever reason, Haruhiko Kuroda’s move into NIRP seemed to spark a heretofore unseen level of public debate about the drawbacks of negative rates. Indeed, NIRP became so prevalent in the public consciousness that celebrities began to discuss central bank policy on Twitter.

When we say “for whatever reason” we don’t mean that the public shouldn’t be concerned about NIRP. In fact, we mean the exact opposite. The ECB, the Nationalbank, the SNB, and the Riksbank have all been mired in ineffectual NIRP for quite sometime and the public seemed almost completely oblivious. Indeed, even the financial media treated this lunacy as though it were some kind of cute Keynesian experiment that could be safely confined to Europe which would serve as a testing ground for whether policies that fly in the face of the financial market equivalent of Newtonian physics could be implemented without the world suddenly imploding.

We imagine the fact that equity markets got off to such a volatile start to the year, combined with the fact that crude continued to plunge and at one point looked as though it might sink into the teens, led quite a few people to look towards the monetary Mount Olympus (where “gods” like Draghi, Yellen, and Kuroda intervene in human affairs when necessary to secure “desirable” economic outcomes) only to discover that not only has all the counter-cyclical maneuverability been exhausted, we’ve actually moved beyond the point where the ammo is gone into a realm where the negative rate mortgage is a reality. That shock was compounded by Kuroda’s adoption of NIRP and another cut from the Riksbank, and before you knew it, everyone was shouting what we’ve been shouting for more than seven years: the emperors have no clothes!

But central banks aren’t willing to surrender just yet. Admitting that this entire experiment has been a mistake would be a disaster at this juncture. And while some brave sellside desks are indeed going full-tinfoil-hat-fringe-blog by daring to suggest that this whole damn thing simply isn’t working when it comes to reviving aggregate demand and boosting inflation, there are still those who want you to know that the “gods” are not out of lightening bolts just yet. Take HSBC for instance, where the fixed income team is out with an excellent – if rather disturbing for its references to helicopter money and even negative-er-er rates – summary of “life below zero.”

First off, HSBC doesn’t buy the idea that rates can’t go lower – even given the constraint imposed by physical bank notes (that damn barbarous paper relic).

“The Swiss National Bank currently operates the most negative rate at -75bp (see table 2). If the costs incurred by Swiss banks – expressed as a proportion of total assets at the negative rate – were applied to the eurozone banking system, the ECB’s depo rate would be much more negative. A simple calculation would put the ECB’s repo rate at -180bp, assuming the current level of excess reserves would all be charged at the negative rat,” the bank writes.

HSBC then moves to address the constraints that keep central banks from taking rates even lower. Those contraints (in order) are:

via Zero Hedge http://ift.tt/1LKKU79 Tyler Durden

Submitted by Thad Beversdorf via FirstRebuttal.com,

So I’m currently teaching applied financial modeling at Marquette University in the beautiful blue collar town of Milwaukee, WI; home of the Harley, the (Miller) High-Life and SummerFest.  It’s a great town and a great school.  A few years ago the business college brought in a pretty savvy guy called David Krause who then started a program called AIM, where the top finance students actually manage more than $2M.  Because of the program’s success US News & World Report ranked Marquette’s finance program 21st in the nation this year.  Not bad for a small Jesuit school in the midwest.

Now I mention this because after 15 years in banking, teaching financial modeling has forced me to reacquaint myself with some of the basic tenets of markets and valuation.  Such things tend to get lost in the midst of “getting the deal done” and chasing paper profits.  This reacquaintance process has been quite illuminating for me and I thought perhaps for others too.

A reminder of what the market actually represents is a good place to start.  The stock market is simply an asset with some intrinsic value based on an expectation of future free cash flows to equity holders.  Those cash flows are generated from revenues less costs of the underlying companies that make up the market.  Let’s use the Wilshire 5000 Full Price Cap Index as the proxy market for this discussion as it is the broadest measure of total market cap for US corporations.  It’s level actually represents market capital in billions.

So the market has put a valuation on those expected future cash flows to equity holders (as of today) at around $19.7T (a 55% increase from Jan of 2012) down from around $22.5T (a 77% increase from Jan of 2012) at the market peak last summer.  So let’s take a look at the growth in cash flows of US corporations over that same period. 

We should expect to find a growth pattern in free cash flows similar to the above growth pattern in the overall market valuation (the Wilshire is a statistically large enough sample to be representative of total US corporations).  Let’s have a look…

The above chart depicts corporate free cash flows (blue line) indexed to 100 in Jan 2012.  It is obtained by taking the BEA’s Net Cash Flow with IVA and CCAdj adding back depreciation and net dividends and subtracting net capex.  (The actual definitions of these can be found here.)

What we find is that while the current valuation of expected future free cash flows to equity holders (i.e. market cap of Wilshire) has increased by some 55% since the end of 2011, the actual free cash flows of US corporations have only increased by 4%.

This becomes a very difficult fact to reconcile inside the classroom.  Why would market participants be baking in so much growth when the actual data simply doesn’t support it?

Well there are plenty of potential explanations.  For instance, rarely are investors rational.  While buy low and sell high is rational investing behaviour, often market euphoria comes at the market top right before a major sell off, leading to a buy high and sell low strategy.  Another reason is that the Fed has been providing a free put to all investors for the past 7 years essentially significantly reducing naturally occurring risk factors.  But whatever the reason this dislocation between expected and realized growth begs the question, how long can it last?  So let’s explore this issue.

Below is a longer term growth chart of the Wilshire vs US corporate free cash flows to equity holders both indexed to 1995 (i.e. 1995 = 100).

And so over the past 20 years we’ve seen this same type of dislocation three times.  That is, we see expectations of growth far exceeding actual growth of free cash flows to equity holders.  In the previous two dislocations we reached a peak dislocation (peak stupidity) followed by a reversion to reality (epiphany) where expected growth moves back in line with actual growth. Let’s have a closer look at specific indicators as to when the epiphany takes place.

What we find is that the epiphany trigger occurs when YoY growth of free cash flows to equity holders drops down to or below zero.  The last two bubbles began their burst when medium term moving average of free cash flows dropped to zero.  We see the very same pattern occurring presently.  Today we appear to have just passed the peak stupidity inflection point as seen in the two charts above.

But let’s be sure not to ignore the technical patterns, so let’s do some charting.  If we look to volatility and price level patterns between our current market and the last bubble cycle (credit crisis) we find incredible similarities.

The above chart depicts weekly high vs low intra-week price spreads and price level.  What we find is that at this point in the last bubble cycle we had a period of reduced volatility (small green box in 08) that followed a period of increased volatility as the market slowly rolled over.  Today’s bubble is just entering that period of reduced volatility following the period of increased volatility as the market rolled over.

And so what should we expect from here?

Well the fundamental charts above suggest we have significantly overvalued growth expectations and historically those over-inflated expectations can drop very sharply back in line with actual growth.  So from a fundamentals perspective we should expect a significant drop in overall valuations (i.e. market cap).

And from a technical perspective, if we are in fact following the previous bubble cycle pattern (which we seem to be), we should expect a nice bounce in price level from the recent lows (to perhaps somewhere between 2000 – 2030) accompanied by relative calm before an explosion of volatility and a market price plunge that sends us into the next crisis sometime around May (give or take).  Happy trading!

via Zero Hedge http://ift.tt/1QLMXQ1 Tyler Durden

“One of the calmest periods [in Damascus] since the start of the war,” is due to Russia’s hit on Jaysh al Islam chief Zahran Alloush, Reuters wrote on Friday, citing local sources.

Alloush was something of a hero among some Sunnis but as we said in the wake of the airstrike that killed him in December, he was, in reality, a radical militant who advocated the extermination of Alawites and Shiites in Syria.

His death was emblematic of what the Russian intervention represents to many Syrians who are still loyal to Bashar al-Assad and the Alawite government. As we’ve noted before, regardless of how skeptical you are regarding the Western media’s portrayal of the Assad government, there’s no argument to be made that Assad is some kind of benevolent statesman. He’s not. Plain and simple. Indeed, he himself admits that the Mid-East isn’t ready for democracy (he’s said as much on a number of occasions). But the fact is this: Sunni extremist elements have made life a living hell in Syria and the country was much better off when Assad was firmly in power. Even if he wielded that power irresponsibly.

So when Russia kills commanders like Alloush, the Syrian people feel some sense of hope that at the very least, Vladimir Putin, the Ayatollah, and Bashar al-Assad will be able to restore some sense of normalcy to everyday life. For those in the West who constantly spew the whole “Syrians want democracy and it’s the international community’s duty to support the opposition to that end” line, have a look at the images from the aftermath of the suicide blasts that killed dozens in Homs and Damascus last Sunday (see here).

If that’s what a “democratic revolution” looks like, then we can assure you that Syrians would just prefer to be governed by an autocrat. 

In any event, we say all of that to introduce the following punchline and image. From Reuters: “Bashar al-Seyala, who owns a souvenir shop in the Old City, said he had just sold out of mugs printed with Putin’s face.”

Also visible are cups emblazoned with the face of Hezbollah leader Hassan Nasrallah. We imagine they’re selling out as well.

So tell us again John Kerry, about how Syrians want the US to “liberate” their country and rid them of an evil dictator and rollback Iranian influence.

*  *  *

Forget Goldman’s muppetizing recos. Zero Hedge top trade idea for the remainder of Q1: Long Putin wearing sunglasses mugs.

via Zero Hedge http://ift.tt/1S79Tbz Tyler Durden

Submitted by Lance Roberts via RealInvestmentAdvice.com,

I was wrong.

I wrote last year that the economists in charge of monetary policy at the Fed were the worst economic forecasters on the planet. To wit:

“Importantly, while Janet Yellen suggested the Fed’s economic forecast was ‘not a weak one,’ the reality is it actually was. I have repeatedly stated over the last two years that we are in for a low growth economy due to debt deleveraging, deficits and continued fiscal and monetary policies that are retardants for economic prosperity. The simple fact is that when the economy requires roughly $4 of debt to provide $1 of economic growth – the engine of growth is broken.

 

Economic data continues to show signs of sluggishness, despite intermittent pops of activity, and with higher taxes, increased healthcare costs, and regulation, the fiscal drag on the economy could be larger than expected.

 

What is very important is the long run outlook of 2.15% economic growth. As shown in the chart below, real economic growth used to run close to 4%. Today, the Fed’s prediction is down markedly from the 2.7% rate they were predicting in 2011.”

Why anyone actually takes the Federal Reserve’s projections seriously is beyond me. However, as bad as the Fed is at making projections, the IMF has proven to be worse.  To wit:

“Since 2010, the International Monetary Fund’s outlook for global growth has disappointed.

 

And every year, the IMF cuts its global growth forecast only to have that lowered forecast eventually prove too aggressive.

 

This chart, which comes from the Economic Report of the President, shows the sad state of global growth and perennially disappointed IMF forecasts.

 

And while the failure of these forecasts for one or two years out is notable, it might be most depressing to see the IMF’s 2011 forecast for 2016 gross-domestic-product growth of 5% miss the mark so widely.”

Considering that Central Banks globally are basing monetary policy decisions on faulty assumptions about economics, the potential for a severe negative outcome is an increasing possibility.

But most importantly, it is probably a good time to stop believing the people making these decisions actually have a level of useful insight. If they did, their forecasts would be substantially more accurate.

This week’s reading list is a collection of articles from people who have been “getting it right” for the last few years. While they are often dismissed by the media because they disagree with  “mainstream thinking,” it is quite apparent they had a better grasp of the issues in the end.

---

1) Earnings & Revenue Confirm Weak Economy by Jeffrey Snider via Alhambra Partners

“Again, with revenue and EPS expected to decline further in Q1, that will make at least four straight quarters of EPS contraction and five for revenue. Currently, analysts are not predicting positive growth in either until Q3, but that is as tenuous as the once much more robust predictions for right now.

 

S&P Capital IQ, for example, was also as late as the end of September (even after all the August messiness and ongoing uncertainty) projecting slightly positive EPS growth in Q4 and then much better throughout the start and rest of 2016.

 

They chose to ignore everything in order to follow the mainline narrative. Last January, S&P Capital IQ was calling for almost 12% growth for the S&P 500 overall in both Q3 2015 and FY2015. The reason for that optimism was nothing other than “transitory”, which marks the baseline for all these unraveling forecasts.

 

In their April 2015 projections they had Q1 2016 EPS growth accelerating to 15.1%, and were still looking for +5% as late as October; they now suggest -2.5%. Estimates for future quarters are also coming down and rapidly: last April and July they expected Q2 2016 EPS growth of more than 13%; down to 6.78% in October and just 1.25% currently. For Q3 2016: also more than 13% at both the April and July estimates, shooting higher to almost 15% at the October update, though now down to 7.22%. Current market disruptions suggest only that these downgrades are far from over.”

But Also Read: S&P Earnings Far Worse Than Advertised by Justin Lahart via WSJ

2)  Closing Tick As A Sentiment Tool by Tom McClellan via McClellan

“The robust rally in mid-February 2016 has pushed the TICK’s 10MA up to its highest reading since late 2014 (just off the left end of the chart).  The message is that traders were a bit too eager in chasing that counter-trend rally, and so the stage is set for the next leg down. “

But Also Read: I Am Bearish – Period by Doug Kass via Real Clear Markets

3) Difference Between Past Fed Tightening & Now by Comstock Partners

“Another reason we are skeptical about the U.S. economy avoiding a recession in 2016 is because of the breadth being as weak as it was in 2015.  The top 10 companies in the S&P 500 accounted for virtually all the gains, but were overwhelmed by the 490 stocks that accounted for the decline in the index.  This is also true about the number of stocks in the S&P 500 above the 10 day, 150 day and 200 day moving averages.

 

In fact, we believe the Fed’s decisions over the past 20 years were instrumental in the dot com and housing bubbles.  In the Fed’s mind they have done everything possible (including increasing their balance sheet from $800 bn. to $4.5tn.) to resurrect the U.S. economy.  Instead, their legacy will be tarnished by the outrageous policies that were used over the past 8 years, and in our view, will not result in the salvaging of our economy, but rather what may become one of the greatest destructions of wealth in history.”

Also Read: The Fed’s Nightmare Scenario by Peter Schiff via EuroPacific Capital

4) S&P Could Plunge 75% by Sara Sjolin via MarketWatch

“According to Edwards, global strategist at Société Générale and prominent perma-bear, the stock benchmark could falls as much as 75% from the recent peak of 2,100 to trade around 550. Edwards argues that stocks are already in a bear market—commonly defined as a 20% fall from a recent high—and that U.S. industrial production is shaky and could represent the beginning phases of a recession. That’s bad news for stock-market bulls.

 

A fall to below 666 would have been a plunge of 65% from Tuesday levels, but if the bottom is around 550, the size of the decline would be 72%. Measured against the recent peak, it would be a steeper 75%.”

Also Read: 3 Day Rally Says Bear Market Is Over by Simon Maierhofer via MarketWatch

5) Houston, You Have A Problem by Terry Wade & Anna Driver via Reuters

“Prices for mansions in Houston’s swankiest neighborhood have tumbled in lock step with crude prices. The Houston Opera has offered free season tickets to patrons who lost their jobs in the oil bust. A fancy restaurant offers cut-price dinners.

 

Twenty months into the worst oil price crash since the 1980s, well-heeled residents of the world’s oil capital are among the hardest hit largely because tanking energy firm shares make up much of oil and gas executives’ compensation.“

Also Read: Recession Sign That Is 81% Accurate by Jeff Cox via CNBC

---

MUST READS

• The Problem Of Negative Interest Rates by Rick Rieder via BlackRock
• More Subprime Borrowers Falling Behind by Matt Scully via Bloomberg
• Citi: “We Have A Problem by Tyler Durden via Zero Hedge
• One Chart That Should Scare Investors by Matt Turner via BusinessInsider
• “Gig Economy” – Lots Of Workers, Few Full-Time Jobs by Eric Morath via WSJ
• 100 Reasons To Audit The Fed by Michael Snyder via Economic Collapse
• Beware Of The Second Half-Cycle by John Hussman via Hussman Funds
• Market Calm May Be Short-Lived by Mohamed El-Erian via Bloomberg
• The Big Earnings Con by Jesse Felder via The Felder Report
• Stock Rally Glass – Half Full Or Empty via Dana Lyons via Tumblr
• Agriculture – Asset Worth Harvesting by Michael Lebowitz via 720 Global
• Ranking Global Markets By Valuation by Meb Faber via Faber Research

---

“Investors are condemned by almost mathematical law to lose” – Ben Graham

via Zero Hedge http://ift.tt/1TJ1SKZ Tyler Durden

The week explained…

 

Stocks extend gains this week – now the best 2-weeks since Bullard's Oct 2014 lows… BULLARD 2 – 0 REALITY

 

But ended on a weak note…

 

Futures give us a glimpse of the sudden buying panic into Europe's Open/China's close, selling at US Open on the "good" news… Weak close…

 

Even though Trannies and Small Caps gained on the day (more squeezes)…

 

Materials and Homebuilders outperformed on the week but note that financials and energy lagged today…

 

One thing of note is "noise" in VIX – this was not seen during the rise in VIX but now that the trend is lower, we see these paniccy spikes lower…

 

The S&P is still having the worst start to a year since 2009.

This has been the biggest 2-week short-squeeze since October 2011…

 

And the weakest momentum stocks soared…

 

Treasury yields swung around like a penny stock this week. The three red lines show a delayed POMO, a delayed auction, and the actual auction… all of which triggered selling…

 

This was the best week for The USD Index in almost 4 months…

 

Led by serious weakness in cable (and EUR)… and general strength today after positive econ data… (note quite a significant decoupling between AUD and CAD today)

 

Commodities were a very mixed bag with crude (best week since Aug 2015) and copper gaining on China stimulus hopes and PMs sold (Silver's worst 2 week drop in over 3 months)

 

Oil and Silver seemed somewhat coupled with their crazy moves…

 

And finally, despite an ugly week for Silver, this is the best start to a year in Gold since 1980…

 

Charts: Bloomberg

via Zero Hedge http://ift.tt/210oGF9 Tyler Durden