Category: zerohedge

In an interview with CNN's Erin Burnett, Dallas Mavericks owner Mark Cuban shared some of his thoughts on what a potential Donald Trump presidency would do to the stock market, as well as who he would vote for if he had to choose today.

Cuban opens up the conversation by discussing his main issue with Trump, which is that he hasn't taken the time to understand issues in any depth, and that he is unpredictable in what he's going to say from one topic to another, which will ultimately not play well for the market.

"Let's take a step back first of all. Where Donald has come from, to today, you would think that he would be more knowledgeable on the issues, that we would look at what he's had to say, and say you know what, he's really picked up some in depth knowledge, he's nuanced on different topics whether it's immigration, whether it's the job plan, whether it's the economy, but that just hasn't happened, and to me that's a problem."

 

"It's apparent the he really hasn't invested the time to really do a deep dive and understand the issues that we're facing. When you have that amount of uncertainty, when you're not sure what the candidate's going to say from one thing to another, that uncertainty potentially as the President of the United States, that's the last thing Wall Street wants to hear."

Cuban goes on to say that he could see a significant market correction if Trump was voted into the White House, and pointed out that even Carl Icahn, a person who is supporting Trump, has taken a massive short position ahead of the fall, as we first reported here.

"There's a really good chance we could see a huge, huge correction. Carl Icahn, someone who is supporting Donald and is mentoring him in economics and finance, has taken on a huge 150 percent short position. That's not a good thing, that's horrific."

 

"Unless he comes up with some concrete examples of what he's going to do, it could really turn Wall Street up and down. All of those 401(k)s from all his followers, their net worth could fall further than Donald's would."

When asked about how big the correction could be, Cuban said it could be 20 percent, or it could be more if the HFTs accelerate it.

"It could be 20 percent, you know now with high frequency trading accelerating strong moves in any direction it could be worse than that."

Burnett then finishes the interview by discussing Cuban's initial appreciation for Trump making others more honest, and before asking who he would vote for if the election were today, Erin asks the obligatory mainstream media question of "How smart do you think Donald Trump is?"

"Probably not as smart as he thinks he is. Look I like Donald, but to be the President of the United States you have to be committed to always learning. In business, to be a great CEO, to be a great investor, to be a great entrepreneur, it's not that you won't fail, everybody fails, but you have to have a commitment to learning, you have to have a commitment to always finding out what's next. Donald just hasn't done that, I mean he won't even learn how to send emails." 

 

"I'd probably say right now it'd be Hillary, because the devil you know is better than the devil you don't know. I know what Hillary's positions are, I can go to Hillary's website and there's spreadsheets, there's depth, there's analysis, there's details. I go to Donald's website, which I have, he lists issues, he lists top line things that he'd like to do, but he doesn't say how he's going to get there."

* * *

To be fair, what Cuban lays out are reasonable criticisms of Trump. However, perhaps the devil we already know is not so different from what Cuban is fearing to begin with.

via http://ift.tt/1XkdJQ6 Tyler Durden

Submitted by Jeffrey Snider via Alhambra Investment Partners,

The US Treasury yield curve is flattening again, with parts finally in 2016 surpassing the bearishness exhibited to start 2015. The mainstream is just now starting to notice likely because unlike last year there are no longer credible excuses to simply wish it away. “Transitory” is not a word you find much anymore, replaced instead by reluctant and forced acknowledgement that there is real economic peril here.

Bearishness in the yield curve is not something new, however, only the notice of it. While risks to the economy are part of this shift in commentary, the Federal Reserve’s haplessness is as well.

“The yield curve itself signals that things are not good looking into the future and talking about recession risk,” Major said in an interview on Bloomberg Television’s “On the Move” with Guy Johnson. “The market is now ready for a long, long time with very low rates and it’s been painful because people have been expecting the Fed to do what it said it was going to do. The Fed really wants to hike rates but can’t.”

Flattening has been the operative condition going all the way back to late 2013; in the 5s10s dating to November 20 that year; in the 2s10s to December 31. That means that credit markets, echoing bearishness in funding, read the economic risks of QE3’s potential completion far differently than economists and policymakers. The latter group chose specifically to ignore markets in order to embrace the unemployment rate and Establishment Survey, while markets never were fooled by the labor statistics no matter how wildly positive they seemed to get.

As the BLS took to calculating “the best jobs market in decades” with mainstream extrapolations to nothing but sunshine, credit and funding were singularly unimpressed with real money betting on vastly overstated economic expectations.

The struggle over competing views was settled last year as credit and funding (the “rising dollar”) were proven correct. There was no completed recovery, instead only great economic risk as the slowdown turned toward and into contraction. This sudden interest in the yield curve misses the point, focusing on unsuited precision. In other words, having showed that past bearishness was correct in being bearish, those late to the process now want to use the yield curve as a hard signal for recession as if that cyclical declaration was all that matters(ed).

In past cycles an inverted curve has appeared months before the onset of recession, so the fact that there is still positive spread in the calendar maturities is being taken as if credit is suggesting still some hope for avoiding it. That doesn’t account for the dramatic and systematic change in the UST curve itself due to FOMC policy intrusions and really the eurodollar system’s rise (and the interplay between those factors). I’m not at all convinced that the yield curve will ever invert recession or not; and I will also argue that it likely won’t matter one way or the other. What is important and significant is what has already been observed here.

The incidence of the steeper yield curve is itself a reflection of monetary degradation. The FOMC targeted lower and lower rates for the front end which UST bill rates “obliged.” The back end of the curve was relatively apathetic, which had the effect of steepening the curve far beyond the historical range. While a steeper curve is supposed to reflect better long run economic prospects, that was never the case. Instead, that numerically sharper curve only suggested the increasing inefficiency of monetary policy and the direct effects of the eurodollar expansion.

Like the level of inert bank reserves, that part of the “cycle” was only reflective of monetary policy and money conditions rather than actual economic expectations. It was a measure of economic inauthenticity, a factor all-too-easily observed as the artificial yield curve grew only steeper while the real economy grew slower and weaker (impoverished).

So the narrow focus on the +95 bps spread remaining in the 2s10s part of the curve misses the economic slowing and drastic risks that the prior 150 bps of already completed flattening has been proved right about. It is not the absolute level of the curve that has been useful in determining the slowdown condition (or the appearance of slowdown itself) but rather the relative changes and flattening all throughout this “cycle.” That may be related to the artificial steepening from the last two decades or it might be due to the unique circumstances of this shrunken economy (or both).

In any case, the yield curve sniffed out both the inflection in 2011 that led to the initial slowdown period as well as the further inflection into the current state of contraction (“rising dollar”). It seems as if the temporary steepening after especially Draghi’s July 2012 promise as well as deference to QE in the US was the last time monetary policy would be given such esteem and faith. That means the yield curve for the past five years had already provided a reliable barometer of future economic conditions but only where significant flattening had occurred. Thus, to ignore this bearishness solely because there was no mathematical inversion was a mistake of pseudo-precision. It may not have been full recession yet to this point, but it really isn’t that far away in far too many economic segments already.

It is entirely possible that the yield curve will at some point in the coming months invert, even where the 2-year note, for example, is trading at 79 bps equivalent yield. Is the 10-year bond going to drop another 100 bps to join Europe and Japan in insanity? It may not matter one way or the other since at this level of the flattened curve the economy has already grown worse with no further move toward inversion necessary. For over a year, bearishness has remained more or less steady here and the global economy slid downward the whole time, settling the “debate” between economists and the markets (as if there was ever any realistic doubt which side would win that argument). The textbook curve deadening could still happen and it is actually realistic to think it might, but you won’t need a negative calendar spread to tell you about the economic circumstances of that further flattening.

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As Goldman famously declared on Sunday night when it boosted its near-term oil prices targets (while cutting its 2017 estimates as a result of what it admits will be a delayed rebalancing of the oil market), the biggest upside risk to oil over the next months remains the threat from unexpected supply disruptions…

… such as the Canada wildfire which has mothballed up to 1.5 million barrels in daily production (and which took a turn for the worse earlier today, when new evacuations threatened the restart of oilsands facilities), but mostly the ongoing attacks shaking up, or rather down, Nigerian production, specifically affecting the region of the Niger River delta.

It is here where we meet a recently unknown group of militants, better known as the “Niger Delta Avengers” who are thought to be behind recent attacks on oil pipelines in the south.

As Bloomberg notes, “the Niger Delta Avengers have certainly been busy, forcing Shell’s Forcados terminal to shut in about 250,000 barrels of daily exports; and breaching an offshore Chevron facility in the 160,000 barrels per day Escravos system. In April, ENI had to declare force majeure, letting it stop shipments without breaching contracts — on exports of its Brass River grade after a pipeline fire.The country’s oil production has been severely disrupted by the attacks.”

To be sure, Nigeria has had a long history of dealing with militants who use attacks on oil to gain leverage. The previous wave of discontent, which hit a peak in 2009, only came to an end when President Yar’Adua offered amnesty, training programs and monthly cash payments to nearly 30,000 militants, at a yearly cost of about $500 million. Some leaders of the Movement for the Emancipation of the Niger Delta (MEND), the militant group, got lucrative security contracts. In other words, the “solution” was appeasement, and as Europe knows very well, appeasement never works, and instead invites increasingly greater problems.

As BBC adds, the amnesty program, which provides tens of thousands of former oil militants with a monthly stipend from the government, stemmed the level of violence in the region after its introduction in 2009. But in the latest budget, Nigerian President Muhammadu Buhari reduced funding for the program by 70%, and has spoken of phasing it out entirely by 2018.

Yes, in Nigeria paying blackmail is part of the state budget.

It gets better: critics accuse Mr Buhari, a Muslim northerner, of unfairly targeting communities in the southern, mainly Christian oil-producing regions, as part of his anti-corruption drive. Mr Buhari’s predecessor Goodluck Jonathan, a Christian, comes from the Niger Delta region.

In other words, the indirect accusation is that the current president of a country whose primary source of revenue is oil exports, has unleashed the current Nigerian oil supply crisis on his own due to his reduced support for the same militant groups which he knew would promptly step in an hold the country’s oil production for ransom until they too got paid off.

And this is where the Niger Delta Avengers come into play: the group who, by keeping half a million barrels in oil from the market, have catalyzed not only the latest rally in oil, but now effectively hold the fate of the price of oil in their hands.

But who are the Niger Delta Avengers?

Luckily, the group has its own website called, not surprisingly, Niger Delta Avengers, which while somewhat unoptimized is very social-media friendly and even has a convenient section allowing outside parties to contact the millitant group.

 

Some other notable oddities: the website was created on February 3, 2016 using godaddy as registrar.  The website has its own news blog, where it has posted such stories as “Niger Delta Avengers Zero Chevron Operations“, “STOP KILLING NIGER DELTANS IN THE GUISE OF ESCORTING OIL TANKERS“, and “KEEP YOUR THREAT TO YOURSELF MR. PRESIDENT; WE SHALL CONTINUE TO DO WHATEVER IS NECESSARY TO PROTECT THE NIGER DELTA INTEREST“, all authored by the same person, one Col. Madoch Agbinibo, NDA spokesman.

But the most interest post is the one explaining Operation Red Economy from February 13, and which lays out the group’s geneis, agenda and demands.

OPERATION RED ECONOMY

 

We are a group of young Niger Deltans who have support from other parts of Nigeria, namely Northern, Western and Eastern part of the Country.

 

We have watched with keen interest, the way and manner in which the president Muhammadu Buhari Led APC government runs the affairs of this country, and we not pleased with the way things are going. For instance, the so-called anti-corruption fight is directed towards perceived enemies of the government, and those that are sympathetic to former President Goodluck Jonathan. We wonder why this persecution, despite the peaceful manner Jonathan hand over government to All Progressive Congress APC. When they did not even the win the 2015 election because he was after lives of Nigerians as he saw that the APC is blood tasty.

 

So far the only two governorship elections that were conducted under this government were and still remain the most controversial elections in the history of this nation.

 

The 2016 budget that was presented to the national assembly is full of fraud, yet nobody has owned up to the frauds spotted in the budget by Nigerians and the national assembly.

 

The president has not deem it fit to expose and prosecute those that are behind these frauds and punish them accordingly, because, because he is neck dip in these frauds. What kind of anti-corrupt fight is this?

 

This is the time Nigerians need to say the truth and stand by it. There must be a revolution to deliver this country from the hands of this wicked administration now. Imagine all the appointees to the president are all his relations eg DSS, Customs, INEC, and so on. We can no longer continue like this. There is a serious and biting hunger in the land. So many persons have lost their jobs under this Buhari led administration, while his wife and children are doing party everyday in Aso Rock Villa.

 

We cannot continue like this. Most APC leaders and other big men are pretending as if all is well but all is not well with them. Infact, they are dying in silent. Nigerians must speak up against this Military in Democracy government. Things must be done in the right way.

 

Therefore, we have chosen to start this revolution to free country from these vampires called APC government. We are hereby giving president Buhari two weeks ultimatum to do the following things urgently.

1. Immediate implementation of the report of the 2014 National Conference. Otherwise, this country will break-up forcefully.
2. President Buhari, the DS SSS and Timipre Sylva should apologize to the people of the Niger Delta region and family of Late Chief DSP Alamieyesegha for killing him with intimidation and harassment because of his party affiliation.
3. The ownership of oil blocks must reflect 60% for the oil producing people and 40% for the non-oil producing people.
4. The only Nigerian Maritime University sited in the most appropriate and befitting place Okerenkoko must start the 2015/2016 academic session immediately.
5. The minister of transportation, Mr Rotimi Amechi should apologize to the Ijaws and the entire Niger Delta people for his careless and reckless statement about the siting of the University.
6. The Ogoniland and indeed ll oil polluted lands in the Niger Delta must be cleaned up and compensation be paid to all oil producing communities.
7. Mr Nnamdi Kanu, the Leader of IPOB must be released unconditionally as the court said.
8. The Niger Delta Amnesty programme must be well funded and let it continue to run effectively.
9. All APC members that are indicted in any corruption related cases should be made to face trial like the PDP members. Otherwise Buhari should shamefully forget about this nonsense anti-corruption fight.
10. All oil multi-nationals and foreign investors should observe this ultimatum, as their business interest in the country must be first target.
11. A word is enough for the wise.

In addition to tell the Nigeria government that we mean business at as 10:55pm on Saturday the Forcados terminal crude oil export pipeline was blown up by Niger Delta Avengers.

And then there is another follow up post on the site’s home page titled “CONGRATS TO ALL STRIKE TEAM OF THE NIGER DELTA AVENGERS” which goes on to list the group’s successful accomplishments to date (key excerpts ).

From the high command of the Niger Delta Avengers we congratulating all strike teams of the Avengers without taking any innocent life or that of the Nigeria military we were able to shut down 50% of crude production. 

 

We have been seeing a lot on the media about us. Some are asking, “Who are you avenging?” some calling us empty heads, ex-agitators have been condemning us on daily basis. Our criticizer from other part of the country, we don’t have any thing to tell you because you clearly don’t know how life is in the region.

 

To our criticizers from the region we want you to know you are all cowards and afraid to stand for your people.

 

Our agitation is more civilize than yours the Niger Delta Avengers is more concern with people of Niger Delta unlike you (ex-agitations) that were into kidnapping, killing of Nigeria soldiers, sea pirates, vessel and tanker hijacking. But we were able to carry out all our operations without killing a fly. We have sophisticated arms far better than what you use to have during your kidnapping days.

 

We are young, educated, well traveled and most of us were educated in east Europe but don’t worry when we achieved our goal (sovereign state of Niger Delta) then you people will be proud of us. In as much as we respect you as our elder brothers (ex-agitators) please don’t dare to stand on our way because if you do we will crash you.

 

To the Nigeria military the Niger Delta avengers is among you. And we know all your plans so we will always ten steps ahead of you. In our meeting comprising all heads of the strike teams, which was held in Bayelsa. The Niger Delta Avengers high Command comes to the conclusion that, if the military harass or invade any community in the region then you (Nigeria military) will get a feel of the Avengers.

 

If you smart or intelligent enough you will look inward not outside. We know when you are vulnerable but not take our calmness for granted. 

 

From our analysis above, 90% oil blocs are allocated to individuals from northern Nigeria and some confused elements from the region are calling the Niger Delta Avengers names, some are calling us criminals….  To owners and operators of these oil blocs in our region the Niger Delta Avengers is giving you two weeks ultimatum to shut down your operations and evacuates your staff. If at the end of the ultimatum and you still operating. We will blow up all the locations. It will be bloody. So just shut down your operations and leave.

 

Once again on behalf of all the commanders of the avengers strike teams we congratulate our loyal and gallant soldiers who put human life before their targets. On behalf of the Niger Delta people we said congratulation as we have cripple the Nigeria economy by 50% by the grace of God we will make it 100% if our demands are not met soon.

 

By October 2016 we will display our Currency, Flag, Passport, our ruling Council and our Territory to the world.

 

To the United Nations, we are not asking for much but to free the people of the Niger Delta from environmental pollution, slavery, and oppression.  We want a country that will turn the creeks of the Niger delta to a tourism heaven, a country that will achieve its full potentials, a country that will make health care system accessible by everyone. With Niger delta still under the country Nigeria we can’t make it possible. So we are calling on the Ban Ki-Moon Secretary General United Nations and all Heads of the government of the five Permanent Security Council members to come to the aid of Niger delta people. We are calling on world leaders to come to the Niger delta to see the atrocities committed by the Nigeria government

 

Long Live the Niger delta Avengers.
Long Live the Niger Delta.

 

Col. Mudoch Agbinibo
Spokesperson

So another group of “young, east-Europe educated idealists”, who have a “patriotic agenda” and are intent on achieving an independent state in southeast Nigeria. To do this they will blow up every piece of oil infrastructure in their way.

Of course, in doing so, the price of oil will remain high and keep rising.

What is odd is how unexpectedly this group of African “freedom fighters” emerged, and created a website no less just as oil hit a 13 year low. One almost wonders if there was not certain western financial and military backing behind said group of “freedom fighters”, perhaps backing that has an interest in the price of oil going higher, and thus any sunk costs to fund and arm the NDA would be promptly recovered once oil jumped… as it has in the past week as a result of none other than Goldman highlighting Nigeria’s oil supply problems and making it the basis for their “bullish” (if only in the shoter-term) oil call.

Of course, that would never happen: after all, when in the history of the US has the country, either directly through the government or indirectly through the private sector, armed and funded offshore “rebel” groups to achieve specific national interest goals…

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One problem with the jobs "recovery" that many people still can't quite figure out, is if jobs are growing, why are wages relatively flat.

As we have explained on numerous occasions, the jobs that have been created can largely been divvied up between leisure and hospitality (our waiter and bartender chart should be familiar to all regular readers of this site), and part-time help, with any wage growth being found at two extremes instead of broadly based throughout the spectrum, as Matt King recently pointed out.

Morgan Stanley is out with two charts that put everything into context as to why wages are not growing along with this "stellar" jobs recovery. Quite simply, the jobs that have been created have lower average wages.

First, here is the breakdown of the total number of private sector jobs created since February 2010:

 

And here are the corresponding wages for each industry…

Charts: Morgan Stanley

Oh, and MS adds one more thing, something that perhaps will now resonate with everyone now that it comes from a source that doesn't "peddle fiction." Although 'Professional and Business Services' has seen significant job creation since February 2010, the bulk of it was from temporary help services, which pay well below the industry average, thus the jobs recovery isn't quite as wonderful as many would like you to believe.

"The sector of Professional & Business Services alone represented 21.6% of the aggregate wage bill in 2015 and created a high percentage of net new private jobs, but as we found in our May 2015 analysis, a deep dive within the sector revealed that the bulk of the job creation came from Temporary Help Services, which pays well below the national average ($16.69/in 2015) and as such, represents a small share of the overall average."

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Authored by Bill Bonner of Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),

Don’t Plan on Living in St. Petersburg…

When we left you last week, we were describing why neither democracy nor planning works on a large scale. Austrian School economist Friedrich Hayek described the problem with great thoroughness in his book The Fatal Conceit.

 

The Fatal Conceit: central economic planning is literally impossible – there can be no centrally planned rational economy. Individual planning is distinct from central planning, in that the many individual plans pursued by self-interested individuals mesh and create a spontaneous order. This order is far superior to anything that a central planning agency can ever hope to achieve –  in fact, as Mises has shown, central planning is even doomed to failure if the planners hypothetically had perfect knowledge of all facets of the economy at a given time. However, this hypothetical situation can can never be realized anyway, as knowledge is widely distributed and as Hayek argues, is often tacit and therefore not directly communicable. It only expresses itself in human action.

 

Planning is a necessary feature of life. We have to plan our day… our year… our business, our vacations, our budgets – we plan for everything in our lives. And generally speaking, the better we are at planning and at following through on our plans, the better things go.

Naturally, we assume that this sort of planning will be helpful at all levels – from our personal schedules to an agenda for the entire nation. But there’s a problem: Planning requires detailed knowledge of our goals and resources.

If you’re going to build a factory, for example, you need a lot of information. You need to know where, when, how, and why, covering a vast range of issues. How much will it cost? How long will it take? What will it make? How will the goods be delivered? Where will employees come from? How much will they earn? Etc., etc.

You do that planning as best you can – sometimes right, sometimes wrong – and always knowing that you’ll have to live with the results. But then, along come the feds. And they’ve got their own plans.

“You can’t build a factory there,” they say.

“We’re raising the minimum wage,” they add.

“You’ll have to get a license… a permit… clearance from the FDA, EPA, FBI, TSA, NSA, DOJ, SEC, NLRB…

“And, oh yes, your product must be sold at the price we set…”

 

Sorry dear entrepreneur – all your plans are belong to us.

Cartoon by Ingram Pinn

 

Uh-oh.

The problem is not one with planning, per se, but with a conflict of plans. You have your plans – based on specific information about what you want to do and what you have to work with – and the feds have theirs.

You want to spend your money; the feds want to take it away to fund their own projects. You want to live in St. Petersburg. They want to put you in a gulag in Siberia.

 

Shot to Hell

You save money for your retirement. You plan ahead. You calculate how much you need, and for 20 years you hold back enough…sticking to your plan until your 65th birthday. Then here comes the Fed, cutting interest rates so drastically that your entire plan is shot to hell.

By edict – with no vote from you or anybody you ever voted for – roughly $8 trillion in interest payments has been confiscated from savers and handed to debtors, making them richer at your expense.

 

Sorry old boy – all the returns you expected to get from your savings one day are belong to us too… – click to enlarge.

 

When you put your plans forward, they are based on a free give-and-take with the rest of the private sector – raising the money you need, buying the resources necessary, and hiring workers.

Nobody is forced to do anything. It is all voluntary; everyone involved believes he comes out ahead. But along come the feds. They tell you their plans take precedence. They have the Gestapo, the NKVD, the Stasi, and the ATF behind them.

You can negotiate and persuade with customers and suppliers. The feds simply levy fines…put you in jail…or worse. It doesn’t matter what you want or what you think: You go along – or else. Families, businesses, and small towns, too – all must bend to the will of the central government.

And then what?

Inevitably, the central planners in Washington, Moscow, London, and Paris make a mess of things. Growth slows. Money is lost. Wars are launched. People are killed.

Who pays the costs? The central planners?

 

Assorted historical enforcers of the “collective good” – Gestapo (lhs) and Stasi (rhs).

 

Not on your life. The costs of their errors and shenanigans are always imposed – by force – on the people whose own plans were disrupted: investors, taxpayers, consumers, and communities.

The “fatal conceit,” says Hayek, is that they believe they can make a better world by interfering with private plans and imposing their ideas about how the world should work.

 

Wishful Thinking

And democracy? It is like a pair of twins – one scam and the other wishful thinking – and often hard to tell them apart. We want to think that the common people – in their wisdom – will always make the right choice, after they’ve exhausted the wrong ones.

You fool all of them some of the time, as Abe Lincoln said (and proved), but you can’t fool them all the time. But what we see in history is that most people are ready for almost any kind of mischief, day or night. There is nothing so stupid, murderous, and counterproductive that they won’t get up to it sooner or later.

“But at least they get what they deserve,” you might say. Surely public policy will reflect the will of the people, won’t it?

Well, even it did, it would still be repulsive and ineffective. Even with the support of 51% of the population, central planning would still disrupt the plans of the other 49% – leading to mass larceny, less output, and involuntary servitude.

But there is almost no chance that central planning on a national scale will be understood and supported by a majority of the people anyway. How many people understand the Fed’s zero-interest-rate policy? How many support the wholesale rip-off of America’s savers for the benefit of the rich?

Studies have proven that no matter whom you elect, the central planners work for the Deep State, not for the voters. They continue pursuing their self-serving agenda… no matter what you want.

 

Can the Deep State be “voted out”? It hasn’t happened yet, that much is certain…

 

And since their agenda involves taking wealth and power from the many and giving it to themselves, there is almost no chance – were it fully understood – that the majority of voters would support it. So, if you think the nuisances and indignities imposed by the feds will stop – just because you elect Hillary or Donald – you’re probably mistaken.

But wait – we have one more question to answer. Thoughts on that next time. Then we promise to keep quiet about voting. Perhaps we could all agree to disagree? We will respect your position, dear reader, such as it is, and you will accord the same silent contempt to ours. Okay?

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The beauty of a woman is not in a facial mode but the true beauty in a woman is reflected in her soul. It is the caring that she lovingly gives the passion that she shows. The beauty of a woman grows with the passing years.
– Audrey Hepburn

 
I recently spent time with two people that superficially seem quite similar, but after some close observation are really quite different.  Both are middle-aged white women.  Both, I speculate, are considered very attractive by most people they encounter. They both are married with one young daughter.  I will guess that both husbands earn approximately the same salary, roughly $120,000 – $150,000. 

One woman is an American living in Texas.  We will call her Amy. She is a sales manager earning about $70,000 per year. 

The other woman is a Canadian, living overseas.  We will call her Cathy.  She is a stay-at-home mother and is a financial dependent of her husband. 

Initially, Amy seems tall, has a nice figure, looks to be in great shape, appears healthy, and comes across very successful and happy.   However, upon closer examination, she isn’t really that tall, but is nearly always wearing high-heeled platform shoes that add at least four inches to her height.  These shoes cause Amy to walk in an unnatural fashion. 

I soon learn from Amy that her nice figure is largely due to elective-aesthetic surgeries, including breast implants and a tummy tuck.

Amy explains that she does pay monthly for a gym membership, and says that she tries to work out at the gym with her husband.  However, she says that her knees and shins hurt her when she uses the machines and that she really doesn’t have the time, because of her job and family.  Amy is unable to run more than a minute or two without stopping due to being completely out of breath.  She cannot do a single push-up or a pull-up. 

At lunch, Amy orders a salad and a diet coke.  After eating, she pulls a plastic bag out of her purse containing 12 pills, four of them horse-sized, which she ingests with gulps of her diet Coke.  I look at her in shock.  She says, “Don’t worry.  They aren’t prescription.  They are supplements.”  I reply, “I am not worried, because I am not eating those pills.  Do you know who’s life you are supplementing?  Really?”  She laughs nervously and changes the subject.

The waitress complements Amy on her eyelashes.  Amy replies, “Thanks.  They’re fake.” 

It is at this point that I observe how much make up Amy is wearing, how dehydrated she appears, and I start thinking about writing this article.  I then remember a joke I heard recently.

Q: Why do women wear make-up and perfume?
A: Because they are ugly and they smell badly.

Why is this joke funny? 

Is this joke funny? 

Is it because there is a little bit of truth in it? More on this later.

Is Amy successful?  She uses her employer’s credit card to buy our $100 lunch.  She makes enough money to afford a fake parent to raise her real daughter for more than 40 hours each week.  She has a purse, watch, and sunglasses with Cartier’s logo on it.  She has succeeded in keeping my company’s business for another year, and probably earned a bonus for doing so.

Is Amy happy?  The frequent sighs, the shaking of her head each time her cell phone vibrates, the worry lines in her forehead, and the look in her eyes all indicate to me that she is not happy, despite her forced but perfect smile with whitened teeth and two-tones of lipstick. 

In contrast, Cathy seems to always be smiling, and not just with her mouth, but with her eyes…in fact her entire face…even her whole person, if such a thing is possible.

Cathy also seems tall, has a nice figure, looks to be in great shape, appears healthy, and comes across very successful and happy.   Upon closer examination, she isn’t really that tall, maybe 5-4, and in fact is nearly always wearing flat sandals exposing her tanned feet and unpainted toenails.  Cathy looks tall because she walks, rather she struts, upright with the perfect posture of a dancer or professional athlete, although she is neither. 

Indeed, Cathy might be mistaken for a professional athlete, or at least a former one.  Her nice figure is largely due to the almost daily exercise she gets doing her favorite watersport, and the occasional morning run with her friends.

Cathy explained to me that she has worked it out where nearly every day her daughter plays with either her husband, or a neighbor family, while she does her watersport or runs.  I can attest that Cathy is very good at her favorite sport.  In fact, she is arguably better than her husband, who is one of the best I have ever seen.  Cathy can do every maneuver on the water that her husband can do, if not more, but she does them with a certain grace and beauty that seems to be reserved for women. 

At their home, while her daughter plays with the cat, Cathy makes us a massive lunch consisting of leftover grilled chicken, garbanzo beans, fresh garden vegetables, whole-wheat bread, and a local beer.  We laugh about the current gluten-free fad, and wonder what corporate America’s next junk-science scheme will be. 

Cathy is wearing a pair of cut-off shorts, a halter top, no make-up, no jewelry other than her wedding ring, and her hair is in a ponytail.  Mrs_horseman mentions how beautiful Cathy looks.  I agree.   Cathy returns the compliment. 

Cathy does not wear make-up and perfume.

Cathy is not ugly and does not smell badly.

Is Cathy successful?  She has money to buy the groceries to make our $20 lunch.  She can afford to stay at home to raise their daughter.  She has the life sold by every product in every women’s health magazine.  She has succeeded in earning the admiration and compliments of those that know her, including her husband and child.

Is Cathy happy?  The frequent laughs, the many hours she spends each day with her daughter and without her cell phone, the lack of any worry lines in her forehead, and the look in her eyes all indicate to me that she is very happy, enforced by her perfect, whole-person smile, with no lipstick. 

Now, please consider the recent news that in a surprising reversal the life expectancy for white women is going down.

Life expectancy at birth for white, non-Hispanic females in the United
States declined slightly from 2013 to 2014, a change that could be a
statistical blip but still represents a rare drop for a major
demographic group, according to new data from the Centers for Disease
Control and Prevention.

 

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When I think about Amy and Cathy, I cannot help but feel that this is the beginning of a trend caused, at least in part, by the fact that women now have a much higher labor force participation rate than men, meaning more stress, and a lower quality of life, especially in a recession.

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I hope this article causes readers to stop for a moment and consider the consequences of what we wish for, what we teach our daughters, and the lifestyle that we are being sold. 

Peace and love,

h_h

via http://ift.tt/27woKCS hedgeless_horseman

Today’s steep selloff was launched by the latest jawboning by Lockhart and Williams who, now that the S&P 500 is back comfortably above 2000, once again hinted that a June rate hike is back on the table. Incidentally, the dynamic of the Fed responding to the market, and the market responding to the Fed, has been the only one worth paying attention to in recent months.

Confused? Don’t be. Here is an explanation from none other than Bank of America.

Not so merry-go-round: By some accounts the Fed is stuck in an adverse feedback loop. They want to raise interest rates so they can “reload” their policy ammunition, but the markets won’t let them. The chart of the day illustrates this nightmarish merry-go-round: the Fed threatens to hike, markets tank, the Fed delays the hike, the market recovers and the cycle repeats. The end result is repeated delays and very little actual policy tightening.

 

 

While we think there are elements of truth in this argument, we think it exaggerates the constraints on the Fed in two ways. First, if we are to believe the story, the timing of this feedback loop shifts from one episode to the next. In particular, in the first three episodes the market responded to the threat of tighter policy, but not to the actual implementation of policy; while in the December case the market was fine with the threat of hiking but only reacted weeks after the fact. So which is it: are markets forward looking or not? Second, the Fed merry-go-round story puts the entire onus on the Fed when a lot else is going on.

As pertains to the “second”, the Fed chose to take on the “onus” in 2009 when it decided to centrally-plan the world’s most artificial market rally in history, so they will get no commiseration from us.

As for the first, “are markets forward looking or not”, the answer is simple: the markets can only look as far forward as the next Fed statement… and since the next Fed statement is in turned driven by what the market will do at any given moment, it explains why the only chart traders need is Bank of America’s “nightmarish merry-go-round.”

via http://ift.tt/1rS7tDv Tyler Durden

Hillary Clinton's lead over Donald Trump is the lowest in two months as a number of the most recent polls show trump neck-and-neck with the establishment's mouthpiece-of-choice. From a Clinton lead of over 11pts in March, Rasmussen recently reported Trump leading 2pts, Gravis showed him lagging by just 2pts in the last two weeks, and NBC reports Clinton's lead dropping from 5pts to just 3 pts in the last week alone.

As RealClearPolitics shows, Clinton's lead is evaporating rapidly…

 

As The Hill reports, however, the nation remains extremely dvided…

The Democratic front-runner holds an overwhelming lead among black and Hispanic voters, while Trump is up among white voters by 14 points. She also leads him among female voters by 15 points, while Trump defeats her by 11 points among men.

 

The poll also found that Trump leads Clinton by 8 points among independent voters, 44 percent to 36 percent.

And, ironically given our earlier comments, Mitt Romney's 'safe space' Utah is now being dominated by Trump…

Voters in Utah appear to be warming rapidly to presumptive Republican presidential nominee Donald Trump, according to a new poll that shows the billionaire 13 points ahead of his Democratic opponent Hillary Clinton after tying with her just last month.

 

The latest Dan Jones & Associates survey of registered voters shows Trump leading Clinton 43-30 percent in the Beehive State, marking a 5-point increase since voters were last surveyed in early April. Twenty-six percent of respondents in the same survey remain undecided.

 

Trump, who suffered a landslide loss to Texas Sen. Ted Cruz in Utah's Republican primary back in March, has also opened up an edge over Vermont Sen. Bernie Sanders.

 

"People's comfort level with Donald Trump will grow," ?Utah's Republican House Speaker Greg ?Hughes? told the Salt Lake Tribune. ?"He is the unconventional candidate. He's not the establishment's preferred choice. He'll have to earn people's support."

 

?Trump's steady rise in the largely Mormon state could be due, in part, to the recent endorsement of Utah Sen. Orrin Hatch. The state's senior Republican senator told reporters last week that he "totally" supported Trump after he and several GOP lawmakers met with their party's presumptive nominee on Capitol Hill.

 

"Now that Donald Trump is the presumptive nominee, I will do what I can to help him run a successful campaign," Hatch ?later ?said in the statement?.

*  *  *

And the debates haven't even begun yet…

 

via http://ift.tt/22fkH9T Tyler Durden

Who could have seen that coming?

 

Here’s what we said yesterday… Deja vu all over again from last Tuesday…No Volume meltup off VWAP

 

And sure enough…

via http://ift.tt/1rS5Gyf Tyler Durden

Submitted by Arthur Berman via OilPrice.com,

Data suggests that oil producers need prices in the $70-80 range to survive. That is unlikely in the next year or so. Without more timely price relief, the future looks grim for an industry on life support.

EIA Revises Consumption Upward

Major EIA revisions to world oil consumption* data provide a new perspective on oil-market balance.

The world was over-supplied by only 570 kbpd of liquids in April compared to EIA’s earlier estimate for March of 1,450 kbpd; that March estimate has now been revised downward to 970 kbpd (Figure 1). February’s over-supply has been revised downward from 1,180 to 240 kbpd.

These revisions indicate that oil markets are much closer to balance than previously thought.

(Click to enlarge)

Figure 1. EIA world liquids market balance (supply minus consumption). Source: EIA and Labyrinth Consulting Services, Inc.

The EIA adjusted world consumption growth for 2016 upward to 1.4 mmbpd. Its estimate for 2017 is now a very strong 1.54 mmbpd (Figure 2).

(Click to enlarge)

Figure 2. EIA annual consumption growth and forecast. Source: EIA and Labyrinth Consulting Services, Inc.

IEA’s demand growth estimate for 2015 is 1.8 mmbpd but the agency maintains its 1.2 mmbpd estimate for 2016 based on concerns about global economic growth.

It is easy to be skeptical about these new revelations but reports by both groups have been pointing toward improving market balance for some time.

Oil Prices and Market Balance

Oil markets are never in balance. Producers always misjudge demand and either over-shoot or under-shoot with supply. Balance is simply a zero-crossing from one state of disequilibrium to the next, from surplus to deficit and back again.

Since 2003, the oil market has only been within 0.25 mmbpd of balance 16 percent of the time. The average price (2016 dollars) for that near-market balance rate was $82 per barrel (Figure 3)

(Click to enlarge)

Figure 3. World liquids market balance (supply minus consumption), 2003-2016. Source: EIA and Labyrinth Consulting Services, Inc.

But that was essentially the average oil price of $78 per barrel for the entire period (Figure 4).

(Click to enlarge)

Figure 4. CPI-adjusted WTI prices, 2003-2016. Source: EIA and Labyrinth Consulting Services, Inc.

In fact, market balance occurred in every monthly average oil-price bin in Figure 5 except $130 per barrel. Although prices above $90 per barrel represent 37 percent of near-market balance prices from 2003 to 2016, oil prices also averaged more than $90 per barrel 36 percent of the time during that 15-year period.

(Click to enlarge)

Figure 5. Brent oil price histogram at plus-or-minus 0.25 million barrels per day of world liquids production. Source: EIA & Labyrinth Consulting Services, Inc.

In other words, market balance merely reflects whatever price the market deems necessary to maintain supply at the time. There is no clear causal relationship between market balance and specific higher or lower oil prices. Balance merely represents the midpoint between prices on either side of the disequilibrium states that it demarcates.

Our recent memory is of $90-100 per barrel prices so we think that was normal. When those prices prevailed in 2007-2008 and in 2010-2014, the disequilibrium state of the market was largely deficit. Moving toward market balance and being on the deficit side of market balance are hardly the same thing.

The Price Producers Need

Lower-cost oil producers of the world (Kuwait through Deepwater in Figure 6) need $50-80 per barrel and an average price of $65 per barrel to break even. Probably $70-80 is a minimum price range for near-term survival of more efficient producers allowing that some will still lose money at those prices.

(Click to enlarge)

Figure 6. Projected 2016 break-even oil prices for OPEC and unconventional plays. Source: IMF, Rystad Energy, Suncor, Cenovus, COS & Labyrinth Consulting Services, Inc.

Related: How Oil Prices Are Impacted By Storage Logistics

Existing Canadian oil sands projects, and Bakken and Eagle Ford Shale core areas are among the very lowest-cost major plays in the world. For all of the OPEC rhetoric about the high cost of unconventional oil, few OPEC countries are competitive with unconventional plays when OPEC fiscal budgetary costs are included.

Tight Oil Companies On Life Support

Despite this relatively favorable rating, most unconventional producers are on life support at current oil prices.

All of the tight oil-weighted companies that I follow had negative cash flow in the first quarter of 2016 except EP Energy and Occidental Petroleum (Figure 7). Nine companies increased their capex-to-cash flow ratios compared with full-year 2015 results and six increased that ratio by more than 2.5 times.

(Click to enlarge)

Figure 7. First quarter 2016 and full-year 2015 tight oil E&P company capital expenditure-to-cash flow ratios. Source: Google Finance and Labyrinth Consulting Services, Inc.

On average in 2016, companies spent $1.90 more in capex than they earned while in 2015, they spent $0.60 more than they earned. The percent of negative cash flow has increased more than three-fold so far in 2016 compared with 2015.

The good news is that about half of the companies (Apache, EOG, Laredo, Continental, Statoil, and Diamondback) only increased negative cash flow slightly despite falling revenues. The bad news is that the rest (Marathon, Whiting, Pioneer, Murphy, ConocoPhillips and Newfield) did not.

The debt side of first quarter earnings is far more disturbing. The average debt-to-cash flow ratio for tight oil companies increased more than 3-fold to 10, up from 3 in 2015 (Figure 8).

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Figure 8. First quarter 2016 and full-year 2015 tight oil company debt-to-cash flow ratios. Cash flow was annualized based on first quarter data. Source: Google Finance and Labyrinth Consulting Services, Inc.

Debt-to-cash flow is a critical determinant of risk from a bank’s perspective because it measures how many years it would take to pay off debt if 100 percent of cash from operations were used for this purpose. This means that it would take these companies an average of 10 years to pay down their total debt using all cash from operating activities.

The energy industry average from 1992-2012 was 1.53 and 2.0 was a standard threshold for banks to call loans based on debt-covenant agreements. That threshold increased in recent years to about 4 but 10 years to pay off debt is clearly beyond reasonable bank exposure risk.

How High Might Oil Prices Go?

Current prices around $46 per barrel are a big improvement from earlier this year when prices were below $30. Nevertheless, all producers–companies and exporting countries alike–are failing and probably need sustained prices in the $70-80 per barrel range to survive.

That is a stretch from the mid-$40’s resistance level of the past 10 months or so (Figure 9).

(Click to enlarge)

In fact, EIA’s forecast data suggest that improving market balance may result in a minor supply deficit by the second half of 2017 (Figure 10). Its forecast for Brent price, however, is to remain below $60 per barrel.

Through A Glass Darkly

The price rally that began in late January-early February 2016 seems to have substance even though there are outsized inventories that concern serious observers. Anticipation of future supply deficits are moving prices higher in defiance of present-moment fundamentals to the contrary. Recent consumption data from EIA support improving oil prices going forward.

At the same time, I expect to see high price volatility and price cycling similar to what has characterized oil markets since prices collapsed in late 2014. The current cycle appears to have found resistance at about $46-48 per barrel and will probably move downward in an uneven way over the next few months before beginning the next upward cycle.

Recent outages in Kuwait, Nigeria, Venezuela and Canada have underscored the fragility of supply despite the prevailing production surplus. Under-investment during 2015 and 2016 will undoubtedly lead to much higher oil prices in just a few years especially with strong demand growth.

Prices must eventually reach the $70 to $80 per barrel range to restore balance sheets enough that investment may resume. It is, however, difficult to see that happening in 2016 or 2017 without serious supply disruptions or an OPEC production cut. Otherwise, prices should gradually and irregularly improve over the course of several 4- to 5-month cycles.

The weak global economy will be an important check on price recovery. Demand has improved during the period of lowest real oil prices since the 1990s but I expect demand destruction at prices higher than about $60 per barrel.

If a weakened world economy cannot support those prices, we may see supply dwindle in a few years to levels that cause price spikes that cannot be absorbed. That may bring a traumatic end to the Age of Oil. People will have to learn to get by with less in a future based on lower energy-density fuels and lower economic growth potential than oil has provided.

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