Delta Scraps $4 Billion Order For 18 Boeing 787 Dreamliners As Airbus Cuts A380 Production

The datapoints that suggest the market for new airplanes is underoing a severe repricing shock kept coming overnight, when just two days after Iran announced it had negotiated the “$16.6 billion” purchase of 50 737 planes and 30 777 aircraft at half the sticker price, and one year after we revealed that a used Boeing 777 can be purchased for as much as 97% off, overnight Delta Air Lines said that it would scrap an order for 18 787 Dreamliner aircraft, valued at more than $4 billion at list prices, which the company assumed as a part of its merger with Northwest Airlines.

In its statement, Delta did not disclose specific terms of the agreement. “This business decision is consistent with Delta’s fleet strategy to prudently address our widebody aircraft needs,” Greg May, Delta’s senior vice president of supply chain management and fleet, said in the statement.

Delta, which acquired Northwest in 2008 for $2.6 billion in shares, said it would continue to take delivery of 737-900ER aircraft through 2019. 

As Bloomberg notes, Delta’s decision was not completely unexpected . While some Northwest pilots held out the 787 as a “star,” known for its fuel efficiency and a body made of composite materials, some of Delta’s 777 aircraft had nearly the same capabilities, said Bob Mann, head of aviation consultant R.W. Mann & Co. in Port Washington, New York. Also, Delta tends to fly bigger planes on average than its peers, and the larger 777 is more consistent with that strategy than the 777, Mann said. “I wasn’t surprised, but I was surprised they took 10 years to do it,” Mann said of the cancellations.

The disappointing news came just two weeks after Boeing said it doesn’t have enough orders to maintain the current 777 widebody jet-program production rate of seven planes per month and would cut production in Everett to five per month beginning in August. During an earnings teleconference in October, Boeing Chairman and CEO Dennis Muilenburg had projected that outcome if further sales failed to materialize within a couple of months. Zero 777 sales have been booked since.

Boeing’s outlook was worse than the above figures indicate. In 2018, 777 deliveries would drop further to just 3.5 jets per month, as Boeing introduces blank positions in the assembly line before and after each of the first six 777X models it builds, to allow extra time for assembly of that new airplane.

It’s not just Boeing however. Yesterday Europe’s Airbus for the second time in 2016 announced it was cutting production plans for its flagship A380 superjumbo and now faces the prospect of losing money on the plane again already next year. 

Airbus in July had to concede the outlook for the A380 was darkening when it cut production plans to just 12 A380s planes a year starting in 2018, down from the 27 it built last year. It had planned to build around 20 of them next year, reaching break-even on those deliveries. But Airbus Tuesday said it had to cut further. After a three-way agreement involving also Emirates Airline, the biggest buyer of A380s, and engine maker Rolls-Royce Holdings PLC, the plane maker will delay six A380 deliveries planned for next year to 2018 and another six from 2018 to 2019. Airbus wouldn’t detail the reason for the schedule change.

The move comes at a time both the European plane maker and its larger rival Boeing Co. face the prospect the era of the big, four-engine long-haul plane is ending. Airbus has struggled to win orders for the A380 and Boeing has had to cut production plans for its 747-8 jumbo jet owing to slack demand.

In this context, Delta’s cancellation comes the company and other top U.S. airlines seek to slow flight capacity growth and in some instances shrink existing service in response to falling airfares. As Reuters adds, airlines like Norwegian Air Shuttle from outside the United States are adding flights that Delta says have exceeded passenger demand and hurt unit revenue.

Delta has 25 widebody aircraft from Airbus Group SE (AIR.PA), the A350, already slated for delivery that will add to its flight capacity this decade. Delta said earlier this year that it would defer the delivery of four A350s by a year or two from 2018 to make the schedule “more consistent with (the) expected pace of international market improvement.”

“We’ve been working closely with Delta as their needs have evolved since inheriting the order from Northwest,” said John Dern, a spokesman for Chicago-based Boeing. “Delta is a valued customer and we continue working with them to meet their future fleet requirements. Customer interest in the 787 continues to be strong, with almost 1,200 orders to date.”

The problem, John, as the last recession showed, is that all those orders quickly turn to cancelations once economic conditions turns, which they now appear to be doing.

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Trump Tweets “Thanks Donald” For Highest Consumer Confidence In 15 Years

When we observed yesterday that according to the latest Conference Board data, US consumer confidence had soared to 113.7, the highest print since August 2001, we had just one question: would Trump take credit for the spike…

 

… which even the organization behind the index admitted was driven entirely by hope in the Trump administration, as the rebound was “due solely to increasing Expectations which hit a 13-year high”

The post-election surge in optimism for the economy, jobs and income prospects, as well as for stock prices which reached a 13-year high, was most pronounced among older consumers.”

Meanwhile, absent hope for the future, reality for most US consumers deteriorated and their assessment of current conditions declined, with those saying business conditions are “good” decreased slightly from 29.7 percent to 29.2 percent, while those saying business conditions are “bad” increased from 15.2 percent to 17.3 percent.

As the Conference Board correctly notes, consumers’ “continued optimism will depend
on whether or not their expectations are realized.”

One person, however, who is quite confident the surge in confidence will continue, was President-elect Donald Trump, who in a late Tuesday night tweet, credited himself for the surge in optimism on Twitter, writing “Thanks Donald!”

Trump’s latest tweet follows a similar one from Monday night when he tweeted that “The world was gloomy before I won – there was no hope. Now the market is up nearly 10% and Christmas spending is over a trillion dollars!”

As we asked on Monday, “we wonder what Trump will sat if/when Goldman Sachs stops rising and stocks tumble (“never gonna happen”, probably The Fed’s fault after all), but perhaps even more importantly, how does he feel about the $1.2 trillion of value he has erased from global capital markets (equity and debt) since his election?”

 

For now Trump is clearly eager to take credit for the surge in markets to record highs, as well as the associated surge in consumer confidence, both of which however have been driven by market hopes that Trump will reflate assets, something which was clearly lost on the latest UMichigan consumer confidence survey which showed US inflation expectations are the lowest on record. We doubt he will be as vocal when the hangover from the recent rally finally hits, unless of course, stocks manage to last the next four years without any corrections, an otherwise laughable prospect which however in this strange “new abnormal”, has to be taken quite seriously.

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The Year’s Best Drug Scares

Marijuana was on the ballot in six states this year, and prohibitionists hauled out some familiar, even quaint, arguments against legalization. Three of those warnings made my list of the year’s most memorable drug scares, which is rounded out by the panic over adolescent vaping and the DEA’s decision to treat kratom as a public menace.

5. Killer Weed Redux

Harry Anslinger, who directed the Federal Bureau of Narcotics from 1932 to 1962, famously described marijuana as a “killer weed” that inspired irrational acts of savage violence. Anslinger’s portrayal of marijuana as “the most violence-causing drug in the history of mankind” helped persuade legislators unfamiliar with the plant to ban it. Now that pot prohibition is collapsing, diehard defenders of that morally and scientifically bankrupt policy are trying to revive the marijuana murder meme.

This year Roger Morgan, a leader of the campaign against marijuana legalization in California, told Reason TV that in “almost all of the mass murders that we’ve had in recent years,” the perpetrator “has been a heavy marijuana user, because it changes the brain.” The website for Morgan’s organization, Stop Pot 2016, includes a list of crimes allegedly caused by marijuana—titled, apparently without irony, “Modern Reefer Madness.” It mentions four mass murderers who were marijuana users, and my review of news stories from the last six years identified three more. Known cannabis consumers committed about a quarter of mass shootings in the U.S. since 2011—nobody’s idea of “almost all.”

Morgan’s claim, then, is not remotely true, even if you ignore the distinction between correlation and causation. Nor does it seem that his Anslingeresque propaganda made much of an impression on California voters, who approved legalization by a margin of 14 points.

4. Pimple-Faced Potheads

When the National Survey on Drug Use and Health (NSDUH) indicated that marijuana use by teenagers in Colorado rose after that state legalized marijuana for recreational use in 2012, drug warriors trumpeted the results, even though the change was not statistically significant. “When comparing the two-year average before and after legalization,” Sen. Dianne Feinstein (D-Calif.), said at a hearing last April, “current marijuana use among 12-to-17-year-olds increased by 20 percent…while the national average decreased by 4 percent. In my book, that’s a very big statistic, and [it] tells you a lot.”

Feinstein probably won’t be citing the latest numbers from that survey, which indicate that adolescent cannabis consumption became less common in Colorado during the very period when state-licensed stores began serving recreational customers. The increase in past-month adolescent marijuana use emphasized by pot prohibitionists was not statistically significant, and neither was the subsequent decline in past-month use. But NSDUH does describe last year’s decline in past-year use as statistically significant, albeit “at the 0.10 level,” which is twice as generous as the usual standard. Another survey with a much bigger sample of Colorado teenagers likewise found that marijuana use did not rise significantly last year.

The picture looks similar in Washington, the other state where voters approved legalization in 2012. According to NSDUH, marijuana use by teenagers rose slightly after possession was legalized for adults, then fell after marijuana stores began operating.

What about the idea that loosening state marijuana laws encourages teenagers to smoke pot by making it seem cooler, more acceptable, or less dangerous? Prohibitionists have been saying that for two decades, since California became the first state to legalize marijuana for medical use. But survey data show no such pattern, as confirmed by the latest numbers from the Monitoring the Future Study.

“I don’t have an explanation,” said Nora Volkow, director of the National Institute on Drug Abuse, which sponsors the MTF survey. “This is somewhat surprising. We had predicted, based on the changes in legalization [and] culture in the U.S. as well as decreasing perceptions among teenagers that marijuana was harmful, that [use] would go up. But it hasn’t gone up.”

3. Vapin’ in the Boys Room

This month Surgeon General Vivek Murthy issued a report that declared adolescent e-cigarette use “a major public health concern,” noting with alarm that it rose “an astounding 900 percent” from 2011 to 2015. A week later, the latest results from the Monitoring the Future Study (MTF) showed that vaping by teenagers, which has been falling since the survey began asking about it in 2014, fell again this year.

Both MTF and the National Youth Tobacco Survey, the source of the “astounding” number emphasized by Murthy, show that adolescent smoking continues to fall, despite warnings from alarmists like Murthy that e-cigarettes could be a gateway to the real thing. Making that fear even less plausible, MTF finds that nonsmoking teenagers who vape typically do not vape nicotine and in any case rarely vape frequently enough to develop a nicotine habit.

These results have not dampened enthusiasm for restrictions that will hurt adult smokers in the name of saving children. “To protect our nation’s young people from being harmed by these products,” Murthy recommended policies, such as higher taxes, vaping bans, limits on advertising, and possibly flavor restrictions, that will undermine public health by making e-cigarettes less appealing to people who currently get their nicotine from conventional cigarettes, a much more dangerous source.

2. Halloween High Horror

For years pot prohibitionists have been warning parents that strangers with cannabis candy are determined to get their kids high by slipping marijuana edibles into their trick-or-treat bags. On Halloween this year, Bureau County, Illinois, Sheriff James Reed announced that he had come across evidence of this heretofore apocryphal threat: “suspicious looking candy marked as Crunch Choco Bar” that “has small pictures of cannabis leaves on it” and tested “positive for containing cannabis.”

As a Google image search would have quickly revealed, Reed had mistaken Japanese maple leaves for cannabis leaves, which along with an inaccurate field test led him to misidentify ordinary candy as a THC-tainted treat. Read admitted his embarrassing error a couple of days later, but in the meantime local news outlets and anti-pot activists had latched onto his original alarmist claim.

“The cruel and unfortunate incident highlights the very real dangers legal marijuana has on children,” said the Drug Free America Foundation. “These children were intentionally targeted by adults that were not their parents with the malicious intent of poisoning them.” The organization’s executive director, Calvina Fay, added:

This shows that the potential for children accidently ingesting marijuana is a real danger. It also shows that this is not just a problem for children who have parents that use marijuana and leave it unsecured and accessible around the house and it is not something we can simply blame on bad parenting. This makes it clear that children, even with the best parenting, can be exposed to marijuana. These children were unsuspecting and taken advantage of by a mean spirited person or persons with no regard for their safety or well-being.

The Halloween argument was deployed against marijuana initiatives in Nevada and Florida, without much success. More than 54 percent of Nevada voters favored legalization for recreational use, while Florida voters approved medical marijuana by a margin of more than 2 to 1.

1. Crazy Kratom Crackdown

After the Drug Enforcement Administration (DEA) announced an “emergency” ban on kratom at the end of August, a spokesman for the agency said “our goal is to make sure this is available.”

In case that was not confusing enough, the spokesman, Melvin Patterson, also told The Washington Post that kratom, a pain-relieving leaf from Southeast Asia, does not belong in Schedule I, the most restrictive category under the Controlled Substances Act, even though that is where the DEA had just put it. He added that kratom, which the DEA says has “no currently accepted medical use,” is “at a point where it needs to be recognized as medicine.”

The DEA apparently was surprised by the backlash against its ban notice, which included angry calls to Capitol Hill, a demonstration near the White House, and letters from members of Congress. In October the agency withdrew the notice, saying it would delay a decision on kratom to allow time for public comments and input from the Food and Drug Administration. Patterson said criticism of the ban “was eye-opening for me personally,” adding that “I want the kratom community to know that the DEA does hear them.”

That attitude was quite a contrast to the deaf arrogance the DEA displayed when it announced it was temporarily placing the drug in Schedule I, a classification that lasts at least two years and could become permanent. Saying a ban was “necessary to avoid an imminent hazard to the public safety,” the DEA summarily dismissed kratom’s benefits while exaggerating its dangers.

Kratom, which acts as a stimulant or a sedative, depending on the dose, has been used for centuries in Southeast Asia to ease pain, boost work performance, and wean people from opiate addiction. But the DEA views all kratom use as “abuse.”

Since the DEA assumed there was no legitimate reason to use kratom, it did not need to muster much evidence that the drug is intolerably dangerous. It claimed there have been “numerous deaths associated with kratom,” by which it meant 30. In the whole world. Ever.

“Deaths associated with kratom” are not necessarily caused by kratom. “Kratom is considered minimally toxic,” noted a 2015 literature review. “Although death has been attributed to kratom use, there is no solid evidence that kratom was the sole contributor to an individual’s death.”

As further proof of kratom’s dangers, the DEA noted that “U.S. poison centers received 660 calls related to kratom exposure” from 2010 through 2015, an average of 110 a year. By comparison, exposures involving analgesics accounted for nearly 300,000 calls in 2014, while antidepressants and antihistamines each accounted for more than 100,000.

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Toshiba Falls By Limit 20%, CDS Soar By Most On Record As Full Extent Of Damage Revealed

One day after Toshiba’s new CEO, Satoshi Tsunakawa, pulled a page from the book of his ill-fated predecessor Hisao Tanaka who presided over the biggest accounting fraud scandal in the company’s history, and bowed down during a press conference to apologize to investors, the company’s stock crashed by the limit 20%, bringing its two day loss to 32% and wiping out $5 billion in market cap in two days.

As we noted yesterday, Tsunukawa said that “I apologize to shareholders, business partners and all stakeholders for the trouble we have caused,” after Toshiba said cost overruns at U.S. nuclear reactors it is building were likely to force a write-down of as much as several billion dollars, clouding its turnaround plan after the 2015 accounting scandal. Specifically, the company said it may have to book several billion dollars in charges related to a U.S. nuclear power plant construction company acquisition, rekindling “concerns about its accounting acumen.”

The problem is that the nuclear business, together with the semiconductors, has been positioned as one of key pillars underpinning Toshiba’s growth which has been trying to shift away from its consumer electronics core. Alas, the latest gaffe now means that much of Toshiba’s growth is gone, and the stock price reflect that overnight, when Toshiba’s stock plunged by 20%, the most permitted, before it was halted for trading.

The crash wiped out $5 billion off Toshiba’s value in two days and prompted a credit rating downgrade on Wednesday, as the company grapples to plug a potential multi-billion dollar hole resulting from cost overrunings from the nuclear business it acquired from Chicago Bridge And Iron. It did not comment on whether that would wipe out its asset value and tip the company into negative net worth. Executives said it could take until February to pinpoint the exact impact.

Toshiba shares, however, took an immediate hit on Wednesday, falling 20 percent to hit the Tokyo exchange’s daily downward limit. That follows a 12 percent drop on Monday after initial warnings from the group. As Reuters adds, investors also fretting that a blow to the group’s finances could even weaken its competitiveness in its core semiconductor business – specifically investment in 3D NAND, a new advanced type of flash memory – or result in firesales and dilutive share issues.

Adding insult to injury, for the first time in seven years, the value of the group fell below that of tech rival Sharp.

Meanwhile, S&P downgraded Toshiba, already in junk territory, to B- from B, with a “negative” outlook. S&P said it expected shareholder equity to “drastically shrink” as a result of the writedown, eroding the group’s resilience, while expected higher working capital would burn more cash. As a result, Toshiba credit default swaps soared by a record 225 bps, surging to an all time wide 370 bps according to a trader quoted by Bloomberg.

“Toshiba’s ability to enhance its shareholders’ equity is likely to continue to be difficult for the foreseeable future,” S&P said, adding it also saw “persistently tough business conditions”.

The immediate question for Toshiba’s management now is – just like for Monte Paschi – how to plug the capital hole. Credit analysts at SMBC Nikko Securities, cited by Reuters, said that they saw three options as Toshiba deals with the imminent task of enhancing its capital base: making more profits faster, selling assets and increasing capital. Only the middle option is likely in the short term, however.

Toshiba is still burning cash despite a positive bottom line in the first half of the financial year and cannot raise more capital on the stock market while it remains on Tokyo’s watch list, where it has been since a 2015 accounting scandal.

“I expect Toshiba to start with asset sales, and then to issue preferred shares if asset sales are not enough. They will start with measures other than (the chip business) listing,” one source close to the company said.

Toshiba has said it will consider all options to bolster its finances, even “the positioning” of its nuclear business which is centred around Westinghouse, a U.S. firm bought in 2006. And since investors know a distressed firesale when they see one, Toshiba will be lucky to get anything remotely close to fair market value for the assets it is trying to sell. Our advice, since this could well turn into Japan’s “Monte Paschi” debacle, do not retain JPMorgan: after all Dimon’s botched recapitalization is one of the main reasons why the third largest Italian bank ended up getting bailed out by Italian taxpayers for the third time in as many years.

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Global Stocks Rise, Dow Flirts With 20,000 As London Reopens; Oil In Longest Winning Streak In 7 Years

Global markets continued their levitation with the UK returning from vacation, pushing the MSCI Asia Pacific Index higher for the first time in seven days, while oil headed for the longest winning streak in almost seven years ahead of the promised OPEC production cut which is set to begin in just days. The USDJPY rose for a second day, pushing US equity futures higher and the DJIA is once again teasing with the 20,000 mark, although a race of sorts has emerged between the Dow and bitcoin, as to who can cross key psychological levels first: the Dow and 20,000 or Bitcoin and 1,000.

Despite the full reopening of global markets, trading remains thin across the globe during the last week of the year, with volume on the Topix about 45% below the 30-day average on Wednesday.  European equities fluctuated and Hong Kong stocks rose the most in a month after being closed Monday and Tuesday. More than twice as many shares on Japan’s Topix index rose than declined, even though the Nikkei225 ultimately closed fractionally lower at 19,402. Australian stocks rode a rise in commodities to gain 1 percent. Indonesian shares added 1.9 percent while Shanghai shed 0.3 percent.

Crude climbed for an eighth session before OPEC and other producing nations start reducing output. The yen fell the most among major currencies against the dollar.

“Until data starts to turn negative or the headlines suggest that (U.S. president-elect) Trump’s stimulus programme could fall short of expectations, the dips in the dollar will be shallow with the currency aiming for new highs,” wrote Kathy Lien, managing director of FX strategy for BK Asset Management. “But at the first sign of bad news there could be massive correction in what is quickly becoming a crowded long dollar trade,” Lien added.

The dollar index was steady at 102.930, while the Bloomberg Dollar Spot Index was also little changed, trading near the highest level in more than a decade. The euro inched up 0.2 percent to $1.0474 and sterling dropped again, sliding to a 2 month low of 1.2224.

After crashing the day before, Shanghai zinc and nickel prices were also pulled higher. “There is strong positive sentiment on the outlook for these industrial metals going into 2017, and that’s what we’re seeing today,” said a Perth-based commodities trader. “Let’s see if this carries in to the main LME session later on.” Iron ore on the Dalian Commodity Exchange extended gains after breaking a 9-day slump the previous day. It was last up 3.5 percent at 569.0 yuan ($81.82) per tonne. The raw material has risen about 170 percent this year, boosted by expectations of Chinese stimulus. It has also benefited from hopes that the incoming Trump Administration will increase infrastructure spending.

In China, the onshore yuan has been trading in a narrower range in the past week, stoking speculation that China is seeking to stabilize its currency as the year ends. The currency was little changed at 6.9557 per dollar; USD/CNY has traded in range of 193 pips since Dec. 21 through today, compared with range of 630 pips from Dec. 14 to 21. The offshore yuan dropped 0.11% to 6.9656; PBOC sets yuan’s fixing 0.05% lower at 6.9495. “The PBOC is trying to actually stabilize the RMB against the dollar,” Wang Tao, UBS head of China economic research, said in a Bloomberg Television interview. “It’s trying to manage expectations among Chinese households and corporates so that you don’t have this very mechanical, one- sided depreciation expectation”

China’s s economy showed improvement in 4Q with gains across all industries, according to China Beige Book; revenues, profits, jobs and capital expenditures improved from 3Q while new orders were stable, it says. Meanwhile the tightening in financial conditions continued with overnight CNH hibor surges 8.6%, most since September, to 15.18%

A snapshot of global markets: The Stoxx Europe 600 Index swung between a gain and loss of less than 0.1%. Hong Kong’s Hang Seng Index added 0.8 percent, rebounding from a five-month low, as banks led a rally by Chinese companies. The Hang Seng China Enterprises Index rallied 1.3 percent, the most in a month, and the Shanghai Composite Index lost 0.4 percent. The Jakarta Composite Index headed for the biggest two-day since February, extending Tuesday’s 1.5 percent gain. The Philippine Stock Exchange Index posted the steepest advance since October.

The Topix was flat, with about 10 percent of companies in the benchmark measure trading without the right to receive the next dividend. India’s S&P BSE Sensex rose 0.5 percent, extending Tuesday’s 1.6 percent gain following the recent decline to a five-week low. South Korea’s Kospi index declined 0.9 percent, the most in two weeks. Australia’s S&P/ASX 200 Index was up 1 percent after holidays Monday and Tuesday.

S&P 500 futures rose again, extending monthly gains by another 0.2%.  The Nasdaq Composite Index rose to an all-time high and the Dow Jones Industrial Average approached 20,000.

In rates, 10Y US yields rose on Tuesday to one-week highs in response to the strong domestic data which reinforced hopes for a series of monetary tightening by the Federal Reserve next year.

Market Snapshot

  • S&P 500 futures up 0.2% to 2266
  • Stoxx 600 up less than 0.1% to 361
  • FTSE 100 up 0.3% to 7091
  • DAX down less than 0.1% to 11468
  • German 10Yr yield down 2bps to 0.19%
  • Italian 10Yr yield down 3bps to 1.82%
  • Spanish 10Yr yield down 4bps to 1.35%
  • S&P GSCI Index up 0.3% to 399.2
  • MSCI Asia Pacific up 0.3% to 135
  • Nikkei 225 down less than 0.1% to 19402
  • Hang Seng up 0.8% to 21755
  • Shanghai Composite down 0.4% to 3102
  • S&P/ASX 200 up 1% to 5685
  • US 10-yr yield down less than 1bp to 2.56%
  • Dollar Index up 0.15% to 103.17
  • WTI Crude futures up 0.5% to $54.19
  • Brent Futures up 0.6% to $56.44
  • Gold spot up 0.2% to $1,141
  • Silver spot down 0.5% to $15.89

Top Headline News

  • Delta Cancels $4b Boeing Order Inherited From Northwest: Decision ‘consistent’ with fleet strategy for widebody craft
  • Qualcomm Fined $853 Million by South Korea’s Antitrust Agency: Fair Trade Commission describes ‘monopolistic’ practices
  • Toshiba’s Record Fall Highlights U.S. Nuclear Cost Nightmare: Writedown related to dispute over value of Westinghouse deal
  • Oil Trades Near 17-Mo. High Before Planned OPEC Supply Cuts: Inventories should stabilize as output is trimmed: Del Pino
  • Gold Shakes Off Trump Slump With Third Advance as Year-End Nears: Bullion prices head for best run of advances since Nov.
  • Miners Unearth a Profit Bonanza, Rally Set to Last Into 2017: Rebounding prices end losses that forced debt cuts, mine sales
  • Dynegy Files FERC Mitigation Proposal for Engie Plant Purchase: Asks FERC for expedited approval of mitigation plan

Asian stocks advanced, ending a six-session drop. 10 out of 11 sectors rise in the MSCI Asia Pacific Index with materials, information technology outperforming and consumer staples, consumer discretionary underperforming. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent. Australian stocks rode a rise in commodities to gain 1 percent. Indonesian shares .JKSE added 1.9 percent while Shanghai .SSEC shed 0.3 percent. Japan’s Nikkei was basically unchanged. “Gains at the start of the week on Wall Street and the rally in crude oil prices have helped most Asian markets move into black this morning,” said Jingyi Pan, market strategist at IG Asia Pte Ltd. “Nevertheless, we again have the condition of low volume plaguing markets.”

Asia Econ Data

  • Japan Nov. Retail Sales Rise 0.2% M/m; Est. -0.5%
  • Japan Nov. Industrial Production Rises 1.5% M/m; Est. +1.7%
  • Vietnam Dec. Trade Deficit $300M; Est. $400M Deficit
  • Vietnam’s Dec. Consumer Prices Rise 4.74% Y/Y; Est. +4.85%
  • Vietnam 2016 GDP Grows 6.21%, Prime Minister Phuc Says
  • Macau Nov. Visitor Arrivals Unchanged Y/y
  • Macau Nov. Consumer Prices Rise 1.53% Y/y

Asian Top News

  • China Banking Official Urges Cut to Reserve Ratio: People’s Bank of China has held ratio at 17% since February
  • Chinese Insurer to Compensate Bondholders After Cosun’s Default: Zheshang Property’s payments will start from Dec. 28
  • Hitachi Koki Shares Up Most in 16 Years as Parent Eyes Sale: KKR in final stage of talks on $1.3 billion deal, Nikkei says

In Europe, stocks are little changed after trading resumed in U.K. and Ireland after holidays.  11 out of 19 Stoxx 600 sectors drop with real estate, travel & leisure underperforming and basic resources, oil & gas outperforming. 54% of Stoxx 600 members decline, 43% gain. “The political fog remains intense in Europe, resulting in limited visibility as we head into 2017,” HSBC strategists Robert Parkes and Amit Shrivastava write in note. “Investors have to grapple with the uncertainty surrounding the numerous key political events on the horizon. Any one of these has the ability to shock and call into question the future of the whole EU project. But it is not all bad news. The global economy is showing signs of life and we could be finally exiting a multi-year earnings downgrade cycle.”

European Top News

  • BP to Buy Woolworths Australian Gas Stations for $1.3 Billion: U.K. oil company set to acquire 527 retail fuel outlets
  • U.K. Builder Bovis Slumps Most Since October as Production Falls: Bovis will hand over 3,950 to 4,000 homes this year
  • Turkey, Russia Agree on Plan for Syria Truce, Anadolu Reports: Erdogan accuses U.S.-led coalition of aiding IS, Kurds
  • Vestas Secures Wind Turbine Orders in U.S., Honduras: Order for 200 MW of V110-2.0 MW turbine components in U.S.
  • Volkswagen to Hire More Than 1,000 IT Experts in Next 3 Years: From high-tech sectors, gaming industry, research centers
  • Boohoo.com to Acquire Certain Assets of Nasty Gal Inc. for $20m: Further update after seeking U.S. court approval on Jan. 5

In commodities, crude futures jumped 0.4% to $54.10 a barrel, extending Tuesday’s 1.7% climb. Prices are set to recover next year as production cuts help rebalance an oversupplied market, Saudi Arabia’s Energy Minister Khalid Al-Falih said last week. OPEC and 11 nations from outside the group including Russia have agreed to trim about 1.8 million barrels a day from January. Gold was up 0.3 percent at $1,141.71, climbing for a third day from an 11-month low.

In currencies, the yen slipped 0.1 percent to 117.57 per dollar after falling 0.3 percent Tuesday. The Bloomberg Dollar Spot Index was little changed, still trading near the highest level in more than a decade.

US Event Calendar:

  • 8:55am: Redbook weekly sales
  • 10am: Pending home sales MoM, Nov., est. 0.5% (prior 0.1%)
  • 4:30pm: API weekly oil inventories

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Who Wants To Keep Gas Flowing Through Ukraine And Why?

Submitted by Pyotr Iskenderov via Strategic-Culture.org,

This past year of 2016 set a new record for the export history of Gazprom, Russia’s biggest gas company. Its chairman, Alexey Miller, has claimed that by the end of the year Gazprom will have shipped a total of 180 billion cubic meters to non-CIS countries.

Gazprom had only planned to export between 166 and 170 billion cubic meters of gas in 2016 (in 2015, 158.56 billion cubic meters of gas were delivered to non-CIS countries).

But even this new high is not the limit. Gazprom’s latest calculations envision a further uptick in shipments in 2017, and those will primarily be to the European Union. The key factors here are, first and foremost, the weather conditions (this winter promises to be a more severe one in Europe than last year), and second – the jump in demand for gas in Europe that has been seen in recent months in the face of lower domestic production in EU countries.

The biggest consumers of Russian gas are still Germany (47.4 billion cubic meters in 2015), Turkey (27 billion), Italy (24.4 billion), Great Britain (22.5 billion), and France (10.5 billion). And Russian gas shipments play a very important role in ensuring the energy security of Southeastern Europe. In 2015 Bulgaria purchased 3.1 billion cubic meters of gas from the companies that make up the Gazprom Group, while Greece bought 2 billion cubic meters, Serbia – 1.9 billion cubic meters, and Croatia – 0.6 billion cubic meters.

The market price for Russian gas has taken some interesting twists and turns. It is worth noting that that figure has risen right along with the increase in supply. This proves once again that the close interdependence of European consumers and Russian energy suppliers is «overriding» the market formula: simultaneous growth in both supply and price is an atypical phenomenon in a market environment, however, it proves once again that any moves aimed at «replacing» Russian gas or «displacing» Russia from the EU gas market might be disruptive for Europe’s energy sector.

The attempts by some countries to block Russian gas supplies look particularly irrational in this context. This primarily applies to Poland, which rushed to the European Court to appeal the European Commission’s decision to allow Gazprom greater access to the OPAL pipeline that links Nord Stream with the gas-transit system of Central and Western Europe.

The Polish media cites the official spokesperson for the Polish Ministry of Finance, Joanna Wajda, in its reports that Warsaw has already asked the European Union to suspend the implementation of the European Commission (EC) decision. The EC’s official reaction to this proposal is still unknown, but it will be interesting to see.

The OPAL gas pipeline has a capacity of 36 billion cubic meters of gas per year, but Germany’s network regulator has only been permitting Gazprom to use 50% of that, meaning that it can pump no more than 18 billion cubic meters of gas annually. The European Commission ruled in October (which should take effect on Jan. 1, 2017) that Gazprom may bid for the right to pump another 7.7-10.2 billion cubic meters of gas through that pipeline, thus using an additional 21-28% of OPAL’s capacity.

In light of these developments, it is hard to see the position being taken by Poland – and by those in solidarity with Warsaw over this matter (or who are clearly urging that country to embark on such initiatives) – as anything but a deliberate attempt to jeopardize Europe’s energy security in order to keep gas flowing through Ukraine, so as not to threaten the survival of the regime in Kiev that is close to bankruptcy and desperately in need of that revenue in order to survive. This political objective entirely trumps any rational economic considerations.

Poland has begun criticizing not only Russia and the European Commission but also Germany over the question of gas transit through Ukraine. The Polish online news site Biznes Alert has accused the German Federal Network Agency (Bundesnetzagentur) that manages the operation of gas pipelines of colluding with Gazprom and the German companies that «trade Russian gas that passes through OPAL».

Polish politicians and the media are not displaying much ingenuity in their attempts to claim that the sun is really the moon. However, if Gazprom’s export capacity and the real picture in Europe’s energy markets are being weighed on one side of the scale, while on the other side is the political flap over the question of gas shipments through Ukraine, European countries are unlikely to act against their own interests in order to back plans being made by Warsaw and its overseas handlers. After all, this could be a really harsh winter.

via http://ift.tt/2idahaK Tyler Durden

China Rattles Sabre – Tests Prototype Fifth-Generation Stealth Fighter

As president-elect Trump plays Boeing and Lockheed off against each other, China flexed its military muscles once again – after sending its aircraft carrier Liaoning into the western Pacific – by testing the latest version of its fifth-generation stealth fighter, state media reported on Monday, as it tries to end the West’s monopoly on the world’s most advanced warplanes.

As The South China Morning Post reports, the newest version of the J-31, now renamed the FC-31 Gyrfalcon, took to the air for the first time on Friday, the China Daily reported.

The so-called “fifth-generation” twin engine jet is China’s answer to the US F-35, the world’s most technically advanced fighter.

 

The new FC-31 has “better stealth capabilities, improved electronic equipment and a larger payload capacity” than the previous version which debuted in October 2012, the newspaper said, quoting aviation expert Wu Peixin.

 

“Changes were made to the airframe, wings and vertical tails which make it leaner, lighter and more manoeuvrable,” Wu told the paper.

The jet is manufactured by Shenyang Aircraft Corp, a subsidiary of the Aviation Industry Corp of China.

The manufacturer has said that the FC-31 will “put an end to some nations’ monopolies on the fifth-generation fighter jet”, the China Daily reported.

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Scientist Warns That Gene Editing Could Wipe Out Future Generations Of Geniuses

Submitted by Josepth Jankowski via PlanetFreeWill.com,

While the development of new genome-editing technology that could one day ensure that children do not inherit unwanted diseases and disorders sounds like a magnificent breakthrough, one scientist is warning that the latest technology runs the risk of eliminating future geniuses like Thomas Edison and Stephen Hawking.

According to Dr. Jim Kozubek, author of Modern Prometheus, eliminating conditions such as depression, autism, schizophrenia or Asperger's through the new Crispr-Cas9 human genome editing technology runs the risk of seeing future generations of geniuses wiped out.

Express reports:

Dr Kozubek said a world without depression, autism, schizophrenia or Asperger’s might also mean one without the likes of playwright Tennessee Williams, as figures show that writers are ten times more like to suffer from bipolar than the general population and poets are 40 times more likely to be diagnosed with it.

 

Dr Kozubek said: “Thomas Edison was ‘addled’ and kicked out of school. Tennessee Williams, as a teenager on the boulevards of Paris felt afraid of ‘the process of thought’ and came within ‘a hairsbreadth of going quite mad’.

Kozubek says that “Darwin showed us that evolution does not progress toward an ideal concept or model, but rather is a work of tinkering toward adaptation in local niches.”

He added that a condition like autism should be thought of as a “gift” that has made its was through human genes for millions of years.

“Before we begin modifying our genes with gene editing tools such as Crispr-Cas9, we’d be smart to recall that genetic variants that contribute to psychiatric conditions may even be beneficial depending on the environment or genetic background,” Kozubek said.

Crispr-Cas9 is a new technology that enables geneticists and medical researchers to edit parts of the genome by removing, adding or altering sections of the DNA sequence.

 

Dr. Kozubek’s rather shocking warning comes as human trials using Crispr are already underway inside the United States.

The first human trials involving the method began in China where oncologists at Sichuan University were the first in the world to insert Crispr edited cells into a patient suffering from an aggressive form of lung cancer.

Last year, British scientists at the University College London used a similar gene editing technique to help a 17-month-old girl with leukemia.

Researchers from the Perelman School of Medicine at the University of Pennsylvania have recently used CRISPR/Cas9 gene targeting system to mice to treat hemophilia B.

via http://ift.tt/2id07H9 Tyler Durden

How The Crackdown On Patriots Will Occur: “Dissent Will Become Unthinkable”

Submitted by Mac Slavo via SHTFPlan.com,

fema-camp-resettlement

Despite the rise of populism and a resurgence of American values, it has become more dangerous than ever to speak out. A new war on patriots has begun…

In the visible future, Americans may see real tyranny take hold at home. The deep state, which operates both inside and outside of the official channels and independently of presidents and Congress, is waging a war against the constitutional rights, financial independence and the rugged individualism that has allowed freedom to exist to a certain degree in this country.

Speaking out as a patriot – despite the sense of victory in the people with the election of Donald Trump – has never been more dangerous.

This is the time when people will start to disappear. But it begins digitally….

While a major event is likely to take place in the next several years that could justify red level action on the ground to raid, round-up and re-shelter patriots and prominent voices in the alternative media may well take place in an American future – and has historically taken place in several notable regimes – it is more likely to happen online.

The forum of social media on the internet is not only shutting down outlawed opinions, but it is also re-educating the populace about what is acceptable to think. It is doing more to reprogram the mind than TV ever could. Algorithms for censorship mean that dissent will no longer be heard by many people. Mere association with outlaws and undesirables will hurt social and credit scores, and society is likely to cluster around redundant groups of safe speech and like viewpoints reinforced by a narrow band of news coverage.

You will see individuals in the news who are labeled as domestic terrorists; some of them will have done nothing more than spoken out against the system. The NDAA and, now, the

BLEACHING PUBLIC OPINION

Wash and rinse, concentrating down certain artificial attitudes, and bleaching out the undesirable ones. This has been an objective of the CIA, the State Dept., US AID and other government agencies for decades now.

Television programming, radio broadcasts, leaf-letting and other forms of propaganda are dissemintated, both here and at home, and routinely carry pro-state messages. The coordination of public thought and discourse is alarming.

fake-news-overton-window

Here’s a theory: Maybe the TV will only show you what you’re allowed to believe. Political pundits already have a name for this concept: the Overton window.

A shift in the “window of discourse,” known as the Overton window determines what the public will accept. Will any political question, the two opposing viewpoints, and all the middle ground, will fall within the accepted plane of thought, no matter how vehemently there are cries of right or left, yes or no, less or more, tyranny or freedom. Wikipedia summarizes:

The Overton window, also known as the window of discourse, is the range of ideas the public will accept. It is used by media pundits. The term is derived from its originator, Joseph P. Overton (1960–2003), a former vice president of the Mackinac Center for Public Policy, who in his description of his window claimed that an idea’s political viability depends mainly on whether it falls within the window, rather than on politicians’ individual preferences. According to Overton’s description, his window includes a range of policies considered politically acceptable in the current climate of public opinion, which a politician can recommend without being considered too extreme to gain or keep public office.

Because the public perceives that it has been offered multiple choices, individual members of the public take stake in whichever view – confined within that acceptable window – best fits theirs. But they lack perception of the shifts in direction that window has taken; they have forgotten all previous attitudes – or regard them as taboo or ridiculous.

Right now, the biggest shift in the Overton window is happening on social media. Facebook and Google are leading the charge, hiring new hit teams to flag and censor news.

Because it all works on algorithms, the “window” effect becomes literal, rather than just figurative. News and information that falls outside of the acceptable range of view is simply not seen by the public – it is hidden from view, and omitted from search results.

Yet increasingly, Facebook accounts, Google credentials and etc. are needed for identification, transactions, etc. Banking and commerce is leaning towards becoming completely digital. Cash controls have begun in the United States and abroad.

This is where prepping, patriotism and independence has begun to be outlawed. Politically-correct speech is now just programmed into the system.

Electricity and data are now intertwined. Smart meters, smart grids and smart appliances go together and make tracking built in. The concept of digital footprints expands…

OUTLAWING DISSENT & INDEPENDENCE

In the next two decades – independence will be ferreted out.

While a truly free spirit can never be crushed, they are making it harder than ever to go rogue in occupied America.

Living off the grid has been criminalized in many places, and strongly discouraged in most, with codes leading to conformity in the real world. True individuals are few and far between, but the struggle goes on.

Pockets of resistance continue to be met with public relations problems and threats of government raids. Malheur and Bundy Ranch have offered a glimpse into what may be ahead; Waco and Ruby Ridge provide examples from the past.

Patriots will endure… but in the coming years, they will either work inside the system – where hackers and whistle blowers have become traitors – or operate outside of its boundaries altogether. Patriots will need people on the inside and outside.

Individuals will be rounded up through police encounters; speech will flag people as dangerous, and arrests will be made in conjunction with domestic disputes, nosy neighbors, false reports, etc. Database “pings” will pre-mark dissenters for detention or prison.

Patriots have been marked for suspicion, and so have the symbols that express those positions. Beware in how you are seen, particularly, if there is a need to stay below the radar and avoid detection. Unless you have shielded your identity, your past actions and words could give you away.

fbi-memo-patriots

The system places patriots under suspicion, and closely monitors independent, unaccountable actions… because they are control freaks.

A COMING CIVIL WAR

A civil war is being created as a response from the system to maintain long-term dominance through banking and information management.

Meanwhile, they will be coming for those who are speaking out. The only question is when.

As Michael Snyder reported:

According to a senior government official who served with high-level security clearances in five administrations, “There exists a database of Americans, who, often for the slightest and most trivial reason, are considered unfriendly, and who, in a time of panic, might be incarcerated. The database can identify and locate perceived ‘enemies of the state’ almost instantaneously.” He and other sources tell Radar that the database is sometimes referred to by the code name Main Core. One knowledgeable source claims that 8 million Americans are now listed in Main Core as potentially suspect. In the event of a national emergency, these people could be subject to everything from heightened surveillance and tracking to direct questioning and possibly even detention.

War will be asymmetrical, and physical conflict will be balanced with cyber engagement of public perception.

As resistance continues, the liberty contingent will have to be wary of an evolving threat matrix that seeks to use technology as a means of control.

Above all, recognize that the system will phase in their control gradually – it is this seamless shift of perception, stretched out over time, that is its greatest weapon.

HOW TO DISAPPEAR COMPLETELY

Identity protection will be crucial, and use of technology should reflect the state of the art of surveillance.

If you want to get yourself totally outside of the system, and stay there, it will be increasingly difficult to do, but not impossible.

Sargent Survival at BeSurvival.com has some very solid tips for making this a reality. Here are just a few, but read them all and be thorough about your process:

  • There are 30 million plus surveillance cameras on the US, one camera for every ten Americans.
  • The average American is in 200 databases.
  • Putting a plan in motion to keep you from being tracked is a good idea if you want to devise a new life for yourself
  • Right before you leave, change your appearance significantly
  • Before you leave, terminate all of your accounts (email, bank accounts, credit cards, etc).
  • Don’t terminate your social network sites as you can use these sites to provide disinformation.
  • Before you leave, delete all of your computer files and get rid of your computer’s hard drive  – boil; smash; run a Degausser/ electromagnetic wand
  • Get rid of all of your personal items like photos, trophies, mementos, etc. that could tie you to your old life.
  • Get rid of your cell phone or tablet as these can be easily used to track your location
  • Break your normal patterns (what you eat, where you frequent, how you shop, the kind of work you do, etc).
  • Completely change your lifestyle [and employment]
  • Pay for everything with cash.
  • Avoid frequenting your usual places
  • Ditch your car and find a substitute; get rid of the toll pass which can track your movements
  • To determine the best place to resettle, choose a mid-sized city in a not overly cold place. Big cities and small towns are not good places for anonymity because of all the cameras.
  • To change your identity … petition the court to change your name legally to a new–and common–name.
  • Apply for a driver’s license under your new name.
  • Buy a basic pre-paid cell phone (not a smart phone). Replace the pre-paid phone frequently, about every 2 weeks.
    When you are not using the cell phone, remove the battery
  • To get back online use a new laptop. Stay away from libraries!
  • Always use a hard wire to your laptop and turn off the wi-fi; reroute your ip address so your location can’t be determined
  • Be aware of the NSA spying and the ECHELON program in the US which monitors phone and computer transmissions for keywords and messages.
  • The police now consider common activities suspicious such as bird watching, sketching or painting, or taking photographs in public.
  • There are 70+ FUSION centers in the US which coordinate surveillance and other information.
  • Technology is now available to identify you by the way you walk, your facial measurements and biometrics
  • It will be 7 to 10 years before your old identity drops off of databases, if ever.
  • The less you interface with technology, the better off you will be.

In the next few years, you must make careful decisions about when you will and will not engage the system, use technology, or participate in society.

Freedom will not be compatible with the digital control grid; it will endure in ways that out think the constraints that have been placed on us, in whatever way it can.

via http://ift.tt/2hvdBky Tyler Durden