This is who we are pinning the hopes and dreams of Obamacare’s success on?

 

 

(h/t Sunday Funnies at The Burning Platform blog)

via Zero Hedge http://ift.tt/1allm3m Tyler Durden

This is who we are pinning the hopes and dreams of Obamacare’s success on?

 

 

(h/t Sunday Funnies at The Burning Platform blog)

via Zero Hedge http://ift.tt/1allm3m Tyler Durden

Submitted by Adam Taggart via Peak Prosperity,

 

via Zero Hedge http://ift.tt/1jiUC6f Tyler Durden

There is something morbidly gruesome and ironic in having the world’s wealthiest people, among them the presidents and central bank heads of the world’s most “advanced” nations, as well as the CEOs of the biggest corporations, sitting down in Davos – a place where the press passes alone cost thousands of dollars – and discussing global inequality: the same inequality that their policies and principles are responsible for. It is even more morbid when one considers that according to a recent Oxfam report, one that will be used in Davos itself, the disparity in wealth between the haves and the have nots has reached absolutely record proportions, surpassing any previous inequality gaps seen before and during the Great Depression.

Which brings us to the topic of wealth.

By now everyone is familiar with the popular wealth pyramid, which shows that “29 million, or 0.6% of those with any actual assets under their name, own $87.4 trillion, or 39.3% of all global assets.“

One can extend that rule of thumb to say that almost half of the world’s wealth is now owned by just one percent of the population, and seven out of ten people live in countries where economic inequality has increased in the last 30 years.

However, for the best visual of the disparity between the haves and the have nots we go to Oxfam once more, which just penned the soundbite of the day, and possibly, of the week for suddenly very bleeding-heart Davos:

That’s right: “the 85 richest people own the same wealth as the 3.5 billion poorest people” … aka half the world’s population.

Naturally this should come as no surprise: after all the past 5 years of this website have been, more than anything, a testament to the systematic theft, plunder and pillage of the global middle class by a small cabal of global financial oligarchs – those who have implicit control of the printing presses, who have the legal and legislative support of a few, actually make that all, corrupt and purchased politicians, who have merely made this wealth transfer from the poor, not so poor and modestly wealthy to the wealthiest, possible.

And not only possible, but the most rapid it has ever been in history.

The chart below from OxFam summarizes the unprecedented speed of wealth transfer going to the richest 1% courtesy of Bernanke et al’s theft-enabling, and Congress-approved policies.

Some of the findings by Oxfam:

Given the scale of rising wealth concentrations, opportunity capture and unequal political representation are a serious and worrying trend. For instance:

• The bottom half of the world’s population owns the same as the richest 85 people in the world.
• Almost half of the world’s wealth is now owned by just one percent of the population.
• The wealth of the one percent richest people in the world amounts to $110 trillion. That’s 65 times the total wealth of the bottom half of the world’s population.
• Seven out of ten people live in countries where economic inequality has increased in the last 30 years.
• The richest one percent increased their share of income in 24 out of 26 countries for which we have data between 1980 and 2012.
• In the US, the wealthiest one percent captured 95 percent of post-financial crisis growth since 2009, while the bottom 90 percent became poorer.

Oxfam’s conclusions should be perfectly known in advance by anyone who has been following said systematic wealth plunder over the years:

Some economic inequality is essential to drive growth and progress, rewarding those with talent, hard earned skills, and the ambition to innovate and take entrepreneurial risks. However, the extreme levels of wealth concentration occurring today threaten to exclude hundreds of millions of people from realizing the benefits of their talents and hard work.

 

Extreme economic inequality is damaging and worrying for many reasons: it is morally questionable; it can have negative impacts on economic growth and poverty reduction; and it can multiply social problems. It compounds other inequalities, such as those between women and men. In many countries, extreme economic inequality is worrying because of the pernicious impact that wealth concentrations can have on equal political representation. When wealth captures government policymaking, the rules bend to favor the rich, often to the detriment of everyone else. The consequences include the erosion of democratic governance, the pulling apart of social cohesion, and the vanishing of equal opportunities for all. Unless bold political solutions are instituted to curb the influence of wealth on politics, governments will work for the interests of the rich, while economic and political inequalities continue to rise. As US Supreme Court Justice Louis Brandeis famously said, ‘We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both.’

 

Oxfam is concerned that, left unchecked, the effects are potentially immutable, and will lead to ‘opportunity capture’ – in which the lowest tax rates, the best education, and the best healthcare are claimed by the children of the rich. This creates dynamic and mutually reinforcing cycles of advantage that are transmitted across generations.

It is this threat of a global revolution that suddenly has the panties of all the Davos participants in a bunch: because regardless of the amounts of cholesterol consumed over the past 5 years of epic wealth transfer, we are confident all of these individuals recall well what happened in France in 1789.

This also means that these unbelievably wealthy men and women will suddenly sit down and fight to undo all the legalized theft they have engaged in since the Lehman collapse, and instead fight for the common man…. The same common man, who would be shot on sight if seen walking through one of Davos’ marble halls without credentials, by the specially trained army of guards protecting the world’s if not best, then certainly wealthiest.

And just who are these kind-hearted Robin Hoods, who will gladly take from themselves and give to the poor? Here, courtesy of RanSquawk, is a very partial list of the people the world’s poor should pray to tonight (and every other night):

President and Prime Ministers from the G20 countries who will address the Meeting include:

• Tony Abbot, PM of Australia and 2014 Chair of the G20
• Shinzo Abe, PM of Japan
• David Cameron, PM of the UK
• Enrico Letta, PM of Italy

Some of the leading public figures who will be participating in the 2014 Annual Meeting are:

• Mark J. Carney, Governor of the Bank of England
• Mario Draghi, President, European Central Bank
• Haruhiko Kuroda, Bank of Japan
• Thomas J.  Jordan, Swiss National Bank
• Angel Gurría, Secretary-General, Organisation for Economic Co-operation and Development (OECD)
• Jim Yong Kim, President, The World Bank, Washington DC
• Christine Lagarde, Managing Director, International Monetary Fund (IMF)
• Ban Ki-moon, Secretary-General, United Nations, New York
• Jacob J. Lew, US Secretary of the Treasury
• Olli Rehn, Vice-President, Economic and Monetary Affairs, European Commission
• Hassan Rouhani, President of the Islamic Republic of Iran
• Shimon Peres, President of Israel

Some of the leading business figures who will be participating in the 2014 Annual Meeting are:

• Lloyd Blankfein  – Goldman Sachs
• Douglas Flint – HSBC Holdings
• Antony Jenkins – Barclays
• Laurence Fink – BlackRock
• Christophe de Margerie – Total
• Bob Dudley – BP
• Klaus Kleinfeld – Alcoa
• Doug McMillon – Wal – Mart
• Marissa Mayer – Yahoo
• Joe Kaeser – Siemens
• Lakshmi Mittal – ArcelorMittal
• Sir Martin Sorrel – WPP
• Paul Bulxke – Nestle

Our advice to the disenfranchised and the poor around the globe hoping that any of the people listed above will do much if anything to help their plight: it will get worse… before it gets much worse.

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

There is something morbidly gruesome and ironic in having the world’s wealthiest people, among them the presidents and central bank heads of the world’s most “advanced” nations, as well as the CEOs of the biggest corporations, sitting down in Davos – a place where the press passes alone cost thousands of dollars – and discussing global inequality: the same inequality that their policies and principles are responsible for. It is even more morbid when one considers that according to a recent Oxfam report, one that will be used in Davos itself, the disparity in wealth between the haves and the have nots has reached absolutely record proportions, surpassing any previous inequality gaps seen before and during the Great Depression.

Which brings us to the topic of wealth.

By now everyone is familiar with the popular wealth pyramid, which shows that “29 million, or 0.6% of those with any actual assets under their name, own $87.4 trillion, or 39.3% of all global assets.“

One can extend that rule of thumb to say that almost half of the world’s wealth is now owned by just one percent of the population, and seven out of ten people live in countries where economic inequality has increased in the last 30 years.

However, for the best visual of the disparity between the haves and the have nots we go to Oxfam once more, which just penned the soundbite of the day, and possibly, of the week for suddenly very bleeding-heart Davos:

That’s right: “the 85 richest people own the same wealth as the 3.5 billion poorest people” … aka half the world’s population.

Naturally this should come as no surprise: after all the past 5 years of this website have been, more than anything, a testament to the systematic theft, plunder and pillage of the global middle class by a small cabal of global financial oligarchs – those who have implicit control of the printing presses, who have the legal and legislative support of a few, actually make that all, corrupt and purchased politicians, who have merely made this wealth transfer from the poor, not so poor and modestly wealthy to the wealthiest, possible.

And not only possible, but the most rapid it has ever been in history.

The chart below from OxFam summarizes the unprecedented speed of wealth transfer going to the richest 1% courtesy of Bernanke et al’s theft-enabling, and Congress-approved policies.

Some of the findings by Oxfam:

Given the scale of rising wealth concentrations, opportunity capture and unequal political representation are a serious and worrying trend. For instance:

• The bottom half of the world’s population owns the same as the richest 85 people in the world.
• Almost half of the world’s wealth is now owned by just one percent of the population.
• The wealth of the one percent richest people in the world amounts to $110 trillion. That’s 65 times the total wealth of the bottom half of the world’s population.
• Seven out of ten people live in countries where economic inequality has increased in the last 30 years.
• The richest one percent increased their share of income in 24 out of 26 countries for which we have data between 1980 and 2012.
• In the US, the wealthiest one percent captured 95 percent of post-financial crisis growth since 2009, while the bottom 90 percent became poorer.

Oxfam’s conclusions should be perfectly known in advance by anyone who has been following said systematic wealth plunder over the years:

Some economic inequality is essential to drive growth and progress, rewarding those with talent, hard earned skills, and the ambition to innovate and take entrepreneurial risks. However, the extreme levels of wealth concentration occurring today threaten to exclude hundreds of millions of people from realizing the benefits of their talents and hard work.

 

Extreme economic inequality is damaging and worrying for many reasons: it is morally questionable; it can have negative impacts on economic growth and poverty reduction; and it can multiply social problems. It compounds other inequalities, such as those between women and men. In many countries, extreme economic inequality is worrying because of the pernicious impact that wealth concentrations can have on equal political representation. When wealth captures government policymaking, the rules bend to favor the rich, often to the detriment of everyone else. The consequences include the erosion of democratic governance, the pulling apart of social cohesion, and the vanishing of equal opportunities for all. Unless bold political solutions are instituted to curb the influence of wealth on politics, governments will work for the interests of the rich, while economic and political inequalities continue to rise. As US Supreme Court Justice Louis Brandeis famously said, ‘We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both.’

 

Oxfam is concerned that, left unchecked, the effects are potentially immutable, and will lead to ‘opportunity capture’ – in which the lowest tax rates, the best education, and the best healthcare are claimed by the children of the rich. This creates dynamic and mutually reinforcing cycles of advantage that are transmitted across generations.

It is this threat of a global revolution that suddenly has the panties of all the Davos participants in a bunch: because regardless of the amounts of cholesterol consumed over the past 5 years of epic wealth transfer, we are confident all of these individuals recall well what happened in France in 1789.

This also means that these unbelievably wealthy men and women will suddenly sit down and fight to undo all the legalized theft they have engaged in since the Lehman collapse, and instead fight for the common man…. The same common man, who would be shot on sight if seen walking through one of Davos’ marble halls without credentials, by the specially trained army of guards protecting the world’s if not best, then certainly wealthiest.

And just who are these kind-hearted Robin Hoods, who will gladly take from themselves and give to the poor? Here, courtesy of RanSquawk, is a very partial list of the people the world’s poor should pray to tonight (and every other night):

President and Prime Ministers from the G20 countries who will address the Meeting include:

• Tony Abbot, PM of Australia and 2014 Chair of the G20
• Shinzo Abe, PM of Japan
• David Cameron, PM of the UK
• Enrico Letta, PM of Italy

Some of the leading public figures who will be participating in the 2014 Annual Meeting are:

• Mark J. Carney, Governor of the Bank of England
• Mario Draghi, President, European Central Bank
• Haruhiko Kuroda, Bank of Japan
• Thomas J.  Jordan, Swiss National Bank
• Angel Gurría, Secretary-General, Organisation for Economic Co-operation and Development (OECD)
• Jim Yong Kim, President, The World Bank, Washington DC
• Christine Lagarde, Managing Director, International Monetary Fund (IMF)
• Ban Ki-moon, Secretary-General, United Nations, New York
• Jacob J.
  Lew, US Secretary of the Treasury
• Olli Rehn, Vice-President, Economic and Monetary Affairs, European Commission
• Hassan Rouhani, President of the Islamic Republic of Iran
• Shimon Peres, President of Israel

Some of the leading business figures who will be participating in the 2014 Annual Meeting are:

• Lloyd Blankfein  – Goldman Sachs
• Douglas Flint – HSBC Holdings
• Antony Jenkins – Barclays
• Laurence Fink – BlackRock
• Christophe de Margerie – Total
• Bob Dudley – BP
• Klaus Kleinfeld – Alcoa
• Doug McMillon – Wal – Mart
• Marissa Mayer – Yahoo
• Joe Kaeser – Siemens
• Lakshmi Mittal – ArcelorMittal
• Sir Martin Sorrel – WPP
• Paul Bulxke – Nestle

Our advice to the disenfranchised and the poor around the globe hoping that any of the people listed above will do much if anything to help their plight: it will get worse… before it gets much worse.

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

Introduction

Last week’s “Mixed Signals” seems to be reflective of the narrow 4 week trading range that the market now finds itself in. But clues to market direction are surfacing.

REGISTER NOW! TacticalBeta is Completely FREE!

 

 

What are those clues? The first is the $VIX. See figure 1 a weekly chart of the SP500 with the $VIX in the lower panel. The black dots over the $VIX data are key pivot points that define support and resistance areas. A break of support in the $VIX should be accompanied by higher prices in the index. Conversely, a break above of a resistance level should be consistent with lower equity prices. For the past year, the $VIX has been unable to break below the 12 level. The failure of the $VIX to close decisively below the 12 level and confirm the price action, which has been moving higher, is a noteworthy negative divergence that remains uncorrected.

Figure 1. $VIX/ weekly

A more important tell has been the recent price action in the $VIX. A week ago, the $VIX did close below the most recent key pivot point level at 12.22, but this break down was quickly reversed as the $VIX is now at 12.44 and back above the key pivot point level. See figure 1 above. Such reversals –i.e., below a key pivot point and immediately back above again — in the $VIX should be watched carefully. Looking at figure 2 below, the red dots over the SP500 price bars are those times that the $VIX reversed from below a key pivot point to back above. Such action in the $VIX has marked every top/ pullback of significance in the past 2 years.

Figure 2. $VIX/ weekly

Another clue comes from the Rydex market timer. See figure 3 below, which is a weekly chart of the SP500 with the Rydex Total Bull to Total Bear ratio in the lower panel. If there is one group of market timers who actually have timed this market well over the past 4 years, it has been (oddly enough) the Rydex market timers. The indicator is rolling over, which is a sign that these market timers are becoming less bullish. As figure 3 shows, crosses of the indicator below the signal line (at a high value) have been consistent with a market top over the past 2 years.

Figure 3. Rydex Total Bull/ Bear

So what should we do? In my opinion, these clues are a sign of being late in the rally. They should be respected. Should it be another “run for the hills the market is going to crash kind of moment”? The answer to that question I don’t know. From my perspective, I refer to our equity model, which is based upon the “dumb money” indicator (shown in figure 5). The model remains bullish, and will likely remain so for another 2 weeks or more. Exit signals typically occur a week or 2 after investor sentiment has unwound. In essence, we are selling to those investors late to the rally and whom are buying the initial dip after investor sentiment has unwound. The clues cited above are early signs of investor sentiment unraveling. At these levels of bullish sentiment, fewer bulls isn’t a contrarian signal but a sign that there are fewer investors willing to push the market higher.

We have been bullish for 19 weeks now when we became bullish during a period of extreme investor bearishness, and it is our expectation that this trade should last on average 15 weeks. So we are in the late stages of the rally. The best, most accelerated gains typically occur in the beginning of the trade. Just when investors typically get the all clear, the trend will flatten out. (Does this sound familiar?) As a reminder, we have moved our stop loss up to SP500 1706.92.

The Sentimeter

Figure 4 is our composite sentiment indicator. This is the data behind the “Sentimeter”. This is our most comprehensive equity market sentiment indicator, and it is constructed from 10 different variables that assess investor sentiment and behavior. It utilizes opinion data (i.e., Investors Intelligence) as well as asset data and money flows (i.e., Rydex and insider buying). The indicator goes back to 2004. (Editor’s note: Subscribers to the TacticalBeta Gold Service have this data available for download.) This composite sentiment indicator moved to its most extreme position 10 weeks ago, and prior extremes since the 2009 are noted with the pink vertical bars. The March, 2010, February, 2011, and February, 2012 signals were spot on — warning of a market top. The November, 2010 and December, 2012 signals were failures in the sense that prices continued significantly higher. The current reading is neutral but heading towards bearish (as in too many bullish investors).

Figure 4. The Sentimeter

Dumb Money/ Smart Money

 The “Dumb Money” indicator (see figure 5) looks for extremes in the data from 4 different groups of investors who historically have been wrong on the market: 1) Investors Intelligence; 2) MarketVane; 3) American Association of Individual Investors; and 4) the put call ratio. The indicator shows that investors are extremely bullish.

Figure 5. The “Dumb Money”

Figure 6 is a weekly chart of the SP500 with the InsiderScore “entire market” value in the lower panel. From the InsiderScore weekly report: “Market-wide sentiment continues to move further into Neutral territory, away from a Sell Bias, as transactional volume continues a seasonal decline. With earnings season beginning shortly, most companies have closed trading windows, limiting the ability of insiders to transact non-10b5-1 purchases and sales. “

Figure 6. InsiderScore “Entire Market” value/ weekly

REGISTER NOW! See More Charts on the $VIX and Rydex Data.  It’s Completely FREE!

via Zero Hedge http://ift.tt/LJaaTj thetechnicaltake

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The fundamentals of demographics, stagnant household income and an overbuilt retail sector eroded by eCommerce support only one conclusion: commercial real estate in the U.S. will implode as retail sales and profits weaken.

In the early stages of the sub-prime mortgage crisis it was widely believed that US commercial real estate (CRE) would manage to dodge the bullets. In the end CRE was found to be as vulnerable as anything else.

© 2014 Real Capital Analytics, Inc. All rights reserved. Source: Real Capital Analytics and Moody’s Investors Service. www.rcanalytics.com Used by permission.

These three graphs of relative prices show that in CRE the “core” is doing better than the “periphery”. The gap in relative price performance of major metro CRE over smaller cities and towns has approximately doubled from where it was in 2008.

And as with residential real estate, some CRE sub-sectors and cities are obtaining far greater benefit from bailout, stimulus and quantitative easing programs than other areas:

© 2014 Real Capital Analytics, Inc. All rights reserved. Source: Real Capital Analytics and Moody’s Investors Service. www.rcanalytics.com Used by permission.

Commercial real estate has a more complex structure than residential real estate. There is greater specialization in function. For instance strip shopping centers and indoor malls are generally not exchangeable with warehouse facilities.

We can simplify this a bit by classifying CRE by consumer sector and function. Industrial real estate will not be considered in detail. Current industrial construction spending is near a record high. But the value of current industrial CRE can still be depressed due to existing plant obsolescence and rapid shifts in activity location.

This leaves us to consider consumer retail and consumer service CRE.

Consumer Retail Spending & Retail CRE

The value of commercial real estate is driven by the revenues and profits earned by the businesses occupying CRE. This relationship is similar to the relationship between residential real estate prices and average household income.

The Two Drivers of Consumer Spending: Population Size and Average Household Income:

These two parameters show continuously increasing population size and declining average household incomes. The subsequent data shows this is resulting in a small increase in total consumer spending and also large shifts in spending patterns.

Real inflation adjusted total retail spending has increased slightly over its peak in 2007.

Essentially all of this increase has occurred in food spending. (A smaller portion has gone into clothing). And this is the only reasonable expectation given the twin conditions of an increasing total population and a declining average income per consumer. We can also note that “food” is a minuscule part of eCommerce. The retail food trade occurs almost entirely in neighborhood groceries, markets and convenience stores. The other non-food retail sectors are flat to declining. But within these sectors there is a large zero-sum game being played out between eCommerce and local bricks ‘n mortar stores:

The Rise of eCommerce

Since 2008 eCommerce retail sales have nearly doubled. But as we just saw, the entire increase in total consumer spending since 2008 is accounted for by the increased food sales which occur at local markets. “eCommerce” is therefore taking sales away from other local retail sectors. And the biggest single loser is:

Local Retail Department Stores

This macroeconomic data is well-supported by the current financials of both Sears and JC Penney. Sears’ trailing twelve month (ttm) earnings per share are – $14.11. This loss will increase once Sears reports its fourth quarter earnings at the end of February, 2014. Sears is widely expected to lose one billion dollars in 2014. J.C. Penney meanwhile is currently reporting ttm losses of -$7.32 per share.

One or both of these chains will be in bankruptcy by 2015 even if the current “recovery” continues. And outright liquidation of one or both companies is at least as likely as reorganization. There is little reason to believe either of these companies would be more viable following mere debt reduction.

The third major department store chain is Macy’s, which is still reporting profits. Oddly enough Macy’s management celebrated their 2013 holiday season by announcing 2,500 permanent layoffs from their local retail department stores. This was paired with a mid-December announcement of an increase of 1,500 employees in a new eCommerce fulfillment center in Oklahoma.

In these circumstances it is unsurprising that retail CRE prices are showing weak recovery.

© 2014 Real Capital Analytics, Inc. All rights reserved. Source: Real Capital Analytics and Moody’s Investors Service. www.rcanalytics.com Used by permission.

The Coming Implosion of the Regional Indoor Shopping Mall
(and adjacent strip shopping centers)

There are approximately 1,100 indoor shopping malls in the USA. Sears has about 2,000 stores. JC Penney’s has almost exactly 1,100 stores. There are very few malls that don’t have at least one of these chains. The vast majority of malls have both as major anchor stores. Macy’s is typically the third major anchor now. A regional department store chain or two round out the large anchor stores.

A virtual stroll down the typical mall concourse will reveal plenty of other money losing chain retailers with names like Radio Shack et al. Adjacent strip shopping centers
This should not be surprising. The regional indoor mall is a middle class income institution. It grew up with the post-WWII rise in average incomes. As middle class incomes now disappear so are the former favorite shopping venues of the middle class.

Every time a mall store closes shoppers lose another reason to go to the mall. “Dead mall” syndrome will soon afflict most of this sector.

In addition to decaying tenant revenues the mall owning Real Estate Investment Trusts are dangerously overleveraged with low-cost to free ZIRP and QE funding. Now that the Federal Reserve is tapering QE their financing costs will be rising as commercial balloon mortgages come due and have to be rolled over. And since the typical commercial mall mortgage does carry a large balloon payment at the end they have to be refinanced. Assuming honest loan underwriting a higher risk premium will also be attached due to the deteriorating retail fundamentals of the tenants.

General Growth Properties (GGP) is probably in the best condition. This is because GGP just exited a Chapter 11 reorganization in 2010. It was placed into involuntary bankruptcy in 2009 by two mortgagors holding matured recourse balloon mortgages. GGP was understandably unable to refinance these balloons in the spring of 2009.

This entire sector will collapse when the next recession appears.

And since history hasn’t ended, the next recession will appear at some point. It may be appearing already. At the beginning of October, 2013 the analyst consensus for retail profit growth for the strongest October – December holiday quarter was 5.5%. At the beginning of the reporting cycle in January expectations were down to 0.5% profit growth. That is a 90% reduction in analyst expectations in just three months.

Barring a turnaround, many retail chains still reporting profits will be reporting quarter-on-quarter profit declines in April. And by the end of the third quarter more will start reporting outright losses.

Part 3 will examine the other major part of local consumer oriented CRE. These are consumer services like neighborhood banking, investment, insurance and other services. Experience to date demonstrates that in the next few years the internet, expert software systems and robotics/automation will eliminate 50% and more of the jobs formerly associated with these businesses. These same trends will also shift most of the surviving positions away from the traditional storefront strip center and local office park locations.

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

Many analysts believe that the precious metal is DEAD due to its having fallen from a record high of $1900 per ounce to roughly $1200 per ounce today (a 36% drop).

 

 

However, this price movement, while dramatic, is quite inline with how commodities trade. Gold has already posted one drop of 28% (in 2008) during its bull market, before more than doubling in price. This latest drop is not much larger.

 

Moreover, a 36% drop in prices is nothing in comparison to what happened during that last great bull market in Gold back in the 1970s. At that time, Gold staged a collapse of nearly 50%. But after this collapse, it began its next leg up, exploding 750% higher from August ’76 to January 1980.

 

With that in mind, I believe the next leg up in Gold could very well be the BIG one. Indeed, based on the US Federal Reserve’s money printing alone Gold should be at $1800 per ounce today.

 

Since the Crash hit in 2008, the price of Gold has been very closely correlated to the Fed’s balance sheet expansion. Put another way, the more money the Fed printed, the higher the price of Gold went.

 

Gold did become overextended relative to the Fed’s balance sheet in 2011 when it entered a bubble with Silver.  However, with the Fed now printing some $85 billion per month, the precious metal is now significantly undervalued relative to the Fed’s balance sheet.

 

Indeed, for Gold to even realign based on the Fed’s actions, it would need to be north of $1,800. That’s a full 30% higher than where it trades today (see below).

 

 

 

 

For a FREE report outlining how to buy Gold at $273, swing by:

http://ift.tt/1cNOxuw

 

Best Regards

Graham Summers

 

 

via Zero Hedge http://ift.tt/KtvBXv Phoenix Capital Research

Before the “shale revolution” many considered that the biggest gating factor for US economic growth is access to cheap, abundant energy abroad – indeed, US foreign policy around the world and especially in oil rich regions was largely dictated by the simple prerogative of acquiring and securing oil exposure from “friendly” regimes. And while domestic US crude production has soared in recent years, making US reliance on foreign sources a secondary issue (yes, the US is still a major net importer of crude) at least as long as the existing stores of oil at domestic shale sites are not depleted, marginal energy watchers have shifted their attention elsewhere, namely China.

Recall that as we reported in October, a historic event took place late in the year, when China (with 6.3MMbpd) officially surpassed the US (at 6.24MMbpd) as the world’s largest importer of oil. China’s reliance on imports is likely only to grow: “In 2011, China imported approximately 58 percent of its oil; conservative estimates project that China will import almost two-thirds of its oil by 2015 and three-quarters by 2030.”

Which means that the question that most were focused on before, i.e., where the US gets its oil, and what is the US energy strategy, refocuses to China.

We have some answers.

The graphic below summarizes all the known Chinese energy import transit routes.

Some additional color from the 2013 Annual Report to Congress on all key developments relating to China:

China’s Energy Strategy

 

China’s engagement, investment, and foreign construction related to energy continue to grow. China has constructed or invested in energy projects in more than 50 countries, spanning nearly every continent. This ambitious investment in energy assets is driven primarily by two factors. First, China is increasingly dependent upon imported energy to sustain its economy. A net oil exporter until 1993, China remains suspicious of international energy markets. Second, energy projects present a viable option for investing China’s vast foreign currency holdings.

 

In addition to ensuring reliable energy sources, Beijing hopes to diversify producers and transport options. Although energy independence is no longer realistic for China, given population growth and increasing per capita energy consumption, Beijing still seeks to maintain a supply chain that is less susceptible to external disruption.

 

In 2011, China imported approximately 58 percent of its oil; conservative estimates project that China will import almost two-thirds of its oil by 2015 and three-quarters by 2030. Beijing looks primarily to the Persian Gulf, Africa, and Russia/Central Asia to satisfy its growing demand, with imported oil accounting for approximately 11 percent of China’s total energy consumption.

 

A second goal of Beijing’s foreign energy strategy is to alleviate China’s heavy dependence on SLOCs, particularly the South China Sea and the Strait of Malacca. In 2011, approximately 85 percent of China’s oil imports transited the South China Sea and the Strait of Malacca. Separate crude oil pipelines from Russia and Kazakhstan to China illustrate efforts to increase overland supply. A pipeline that would bypass the Strait of Malacca by transporting crude oil from Kyuakpya, Burma to Kunming, China is currently under construction with an estimated completion time of late 2013 or early 2014. The crude oil for this pipeline will be supplied by Saudi Arabia and other Middle Eastern and African countries.

 

Given China’s growing energy demand, new pipelines will only slightly alleviate China’s maritime dependency on either the Strait of Malacca or the Strait of Hormuz. Despite China’s efforts, the sheer volume of oil and liquefied natural gas that is imported to China from the Middle East and Africa will make strategic SLOCs increasingly important to Beijing.

 

In 2011, China imported 14.3 billion cubic meters (bcm) of natural gas, or 46 percent of all of its natural gas imports, from Turkmenistan to China by pipeline via Kazakhstan and Uzbekistan. This pipeline is designed to carry 40 bcm per year with plans to expand it to 60 bcm. Another natural gas pipeline designed to deliver 12 bcm per year of Burmese-produced gas is under construction and estimated for completion in late 2013 or early 2014. This pipeline parallels the crude oil pipeline across Burma. Beijing is negotiating with Moscow for two pipelines that could supply China with up to 69 bcm of gas per year; discussions have stalled over pricing differences.

As for China’s Top Crude suppliers as of 2011:

Finally, from a previous Zero Hedge post on this topic, here is why China’s increasing reliance on Crude imports means that the ascent of the Petroyuan is assured, and why by implication the days of the Petrodollar may be numbered: an outcome which the US will hardly be pleased with.

So what does this shift in oil imports mean?

More than anything else, it is a sign that China will increasingly depend on global markets to satisfy its ever-growing oil demand. This necessitates further engagement with the international system to protect its interests, encouraging a fuller integration with the current liberal order. This will have effects on both China’s approach to its currency and its diplomatic demeanour.  

Derek Scissors wrote last week that this shift might usher in a world where oil is priced in RMB as opposed to solely in USD. This transition could only occur, however, if the RMB was made fully convertible and Beijing steps back from its current policy of exchange rate manipulation. Earlier this year, HSBC predicted that the RMB would be fully convertible by 2017, a reality that is surely hastened by its position as the single largest purchaser of foreign oil. A fully convertible RMB would be a “key step in pushing it as a reserve currency and enhancing its use in global trade, said Sacha Tihanyi, a strategist at Scotia Capital.

On the diplomatic side, while the United States is unlikely to withdraw from its role as defender of global oil production or guarantor of shipping routes, an increasing reliance on foreign oil will push Beijing toward a more engaged role within the international community. It is likely that we will see a change in Beijing’s approach to international intervention and future participation in multilateral counterterrorism initiatives—anything to ensure global stability. In the future, anything that destabilizes the oil market will increasingly harm China more than the United States. While Beijing views this increased import reliance as a strategic weakness, it a boon for those hoping to see Beijing grow into its role as a global leader.

Bottom line: as Chinese oil imports grow, Beijing will become increasingly reliant on the current market-oriented global system—this is nothing but good news for those that enjoy the status quo.

via Zero Hedge http://ift.tt/1mlQuQ5 Tyler Durden

Interesting article by Pam Martens about a missing David Bird, a WSJ reporter covering energy, and the US oil market he has been writing about. While is no evidence yet suggesting a connection between his work and his disappearance, NBC reported that “the family believes that his coverage of OPEC may be related to his disappearance.” 

Martins wonders about his continual reporting on an imbalance in oil supply in the US market caused by overproduction of shale oil in the face of slacking demand.

 

 

David Bird, Wall Street Journal Reporter, Goes Missing After Reporting for Three Months on Oil Glut in U.S.

By Pam Martens: January 20, 2014

David Bird, a reporter who covers energy markets for the Wall Street Journal, has been missing for nine days. Bird, who has worked for the parent of the Wall Street Journal, Dow Jones, for more than 20 years, left his Long Hill, New Jersey home on the afternoon of Saturday, January 11, telling his wife he was going for a walk. Despite a continuous search by hundreds of volunteers and law enforcement officials, Bird has not been located.

Bird is 55 years old, approximately 6’1, and was last seen wearing a red jacket with yellow zippers according to officials. He and his wife, Nancy, have two children, ages 12 and 15. Anyone with information is asked to contact the Long Hill Police at (908) 647-1800.

According to a report in the Wall Street Journal, Bird is a liver-transplant recipient and is required to take medication twice a day. He did not take his medication with him when he left for the walk.

NBC reported that sources close to the family said one of his credit cards was used in Mexico last Wednesday. Other media outlets have been unable to confirm that report. In the same news story, NBC reported that “the family believes that his coverage of OPEC may be related to his disappearance.”

However, a careful review by Wall Street On Parade of the articles Bird has written for the Wall Street Journal since last October, shows that what he was regularly reporting on was a supply imbalance caused by overproduction of shale oil in the U.S. in the face of slacking demand.

On October 21, Bird wrote that “U.S. crude-oil futures Monday settled 1.6% lower, dropping to less than $100 a barrel for the first time since July on rising inventories and weak refiner demand. Prices dropped as the Energy Information Administration [EIA] reported U.S. crude-oil stocks rose for a fourth straight week, to the highest level since late June…The sluggish demand from refiners allows crude stocks to climb four-million barrels in the week ended Oct. 11, the EIA said in a report that was delayed from last week due to the government shutdown. That is the latest piece of a four-week build of 18.9 million barrels in stocks that has put pressure on prices, as refiners have lowered crude-oil processing runs by 1.26 million barrels a day since mid September…”

Read the whole article here. 

via Zero Hedge http://ift.tt/1kRduuR ilene