Via PandaHedge.com,

We just see another bubble building up in China, aka the domestic commodity market.  On April 21^st, led by bellwether Rebar Steel futures, other 7 commodities were lifted to the up limit (5% to 7%), including iron ore, HRC steel, met coal, asphalt, methanol, cotton, and egg (yes, it’s egg! No one has idea why even eggs go up together with other commodities).  The endless money just flood everywhere in the domestic commodity market, especially for those lagged behind, and fundamentals do not matter here.  The case of Rebar major contract RB1610 (settle in Oct 2016) can tell you how crazy the market is.  On April 21^st, RB1610’s trading volume is 22M contracts (equal to 220M tn of rebar steel), but China only produces 200M tn rebar in 2015 (China total steel production is around 850M tn per year).  So the Chinese trades one year production volume for the underlying commodity in a single day, for a specific contract (Oct 2016) only!

Below is the YTD performace of the major commodities trading in the China domestic futures market.

The bulls talk about inflation trade, while the bears talk about deteriorating fundamentals.  Apparently, both side speak in different languages, and in the short term, the side with stronger fire power (money) wins.  The Shanghai Chaos Fund, which was famous for shorting big in copper in 2015, is reported to lose around $80M a day on April 20^th as it holds 120k contracts short position in Rebar.  One of its flagship funds, Chaos Value I which invests in A share and commodities, has declined 19% YTD.

We all know China created $1 tn credit in Q1 to stimuluate the economy, and apparently part of the money flows into the commodity market (the infamous A share equity market is deemed as “bear market” now and the speculators don’t even bother to trade there).  As indicated by the chart below, the total China domestic commodity daily trading amount is RMB1.4tn per day in 2016 (YTD), compared to RMB1.1tn per day in 2015, a 27% increase.  On Apirl 20^th, its trading amount hits RMB2.9 tn, compared to the A share market’s RMB0.5tn amount.

Trading amount in Chinese domestic commodity market (value in RMB100M)

Seeing the great “opportunities” of the fantasty commodity bull markets, Chinese retails investors rush to the brokers to open new accounts.  It’s reported that the new accounts number in April is double or triple of the normal days.  Does it smell the same as 2015’s A share market?

 

But wait, the leverage in the commodities market (easily 10x) is much higher than that in the A share market (normally 2-4x).  If the investors still remember the lesson in 2015, they should pay extra attention now.  When the music stops, the collapse of price can be faster and steeper than the pace of going up.  2009 already showed us a real example in the Rebar market.

White line: Rebar price in 2009 (lhs),  Purple line: Rebar price in 2016 (rhs)

Is the Rebar rally sustainable?  The A share equity investors gives their own answer.  The orange line (below) is China’s rebar price and the purple line is the share price of Baosteel, the flagship Chinese steel company. 

Apparently the equity investors don’t believe the rally is sustainable.  However, the funny thing is the North American equity investors are chasing the most leveraged commodities equity names (green line is US Steel and blue line is Teck Resources).  They must hope the comodity rally can continue and hold at high level for a while.  So we will see who is right, the Chinese commodity speculators or North American equity investors.

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

One month ago we showed something curious: literally, the very hour the market was hitting its February lows, Janet Yellen was on the phone with Bank of England governor (and former Goldman Sachs employee) Marc Carney, followed the very next day by a conversation with ECB president (and former Goldman Sachs employee) Mario Draghi.

One reader tried to get to the bottom of the content of these phone calls and sent a FOIA to the Fed in which he requested the audio file or any documentation of the nature of the telephone call between Yellen and Carney and, subsequently, Draghi.

The Fed’s response: a resounding “no”, for the following reason: “the responsive document contains nonpublic commercial or financial information” and while “the document containing the exempt information was reviewed… no reasonably segregable nonexempt information was found.” Case closed.

This came from the “most transparent Fed ever.”

A few days later, another very important and once again “behind closed doors” event took place: Yellen met with both Obama in the afternoon of April 10, just hours after the Fed held an emergency meeting under expedited procedures to discuss “rates.” That meeting too was confidential. 

While clearly the detailed contents of the meeting would not be revealed, the White House was kind enough to issue the following three sentence summary:

The President and Chair Yellen met this afternoon in the Oval Office as part of an ongoing dialogue on the state of the economy. They discussed both the near and long-term growth outlook, the state of the labor market, inequality, and potential risks to the economy, both in the United States and globally. They also discussed the significant progress that has been made through the continued implementation of Wall Street Reform to strengthen our financial system and protect consumers.

This in turn came from the “most transparent administration ever.” Sarcasm aside, the above was far more “transparent” than what the Fed provided following Yellen’s meeting, which was nothing.

Which is why one reader decided to once again give it a try, and get to the bottom of what was said during the Yellen-Obama meeting asking for the minutes from said meeting.

The Fed’s response: “we don’t keep those.”

And that, dear readers, is how fully and thoroughly accountable to the public both the White House and the Federal Reserve truly are.

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Submitted by Yonathan Amselem via The Mises Institute,

The greatest tragedy of the 2008–2009 financial meltdown was not that it happened. The collapse of asset prices was the necessary result of near zero interest rates. No, the most devastating aspect of the financial meltdown is that central planning alchemy lost no credibility. Policymakers around the world are still turning to Keynesian and socialist interventionism to address problems caused by Keynesians and socialists. The twin sledgehammers of central banking and almost unlimited state power have so distorted global markets (again) that some economies are now terminal. The latest victim of the interventionists and micromanagers is the nation of Japan. A once genuinely productive and innovative nation has, over the years, slowly succumbed to the cancerous rot of interventionism.

Japan’s World War II defeat left behind a barren rocky island whose industrial capacity, infrastructure, and labor force were devastated by Allied bombs. Japan’s flattened cities and smoldering factories may have painted a gloomy future but Japan had the thing that mattered most — a population largely free to organize and rebuild. The American military and remnants of central Japanese authority tried to lead the rebuilding of Japan through the political process but lines of communication and the transportation infrastructure were so damaged that many population centers away from Tokyo were left relatively free to rebuild. The resulting Japanese economic boom catapulted Japan’s living standards to a level on par with most Westernized nations. This explosive growth, described as a “miracle,” was no such thing. Japan’s new-found prosperity was simply what happens when markets are allowed to function. Unfortunately, the central planners in banking and government couldn’t resist the statist urge of heavy-handed interventionism. If there’s anything the political elite hate, its free people making voluntary decisions without their forceful input.

Central Planning Has Turned Japanese Corporations into Welfare Queens

The central planners imposed a number of zany anti-market schemes on the Japanese economy that have never been substantively reformed to this day. Legislators shielded Japan’s massive industrial base from foreign competition through protectionist tariffs and even subsidized some overseas exports. On the domestic front, nascent Japanese companies were heavily burdened by onerous regulations and very high taxes — this made it nearly impossible for start-ups to get off the ground and challenge the corporate establishment’s market share. As if this was not enough, exporters were further coddled by the Bank of Japan (BOJ). The BOJ has been fervently trying to turn the yen into toilet paper for the last thirty years. A cheap currency means artificially high profits for companies that export goods and artificially high costs for companies that import goods. After all, no government scheme could rightfully call itself a government scheme if it didn’t enrich somebody at the direct expense of others. The destructive effects of these policies have massively eroded Japanese productivity in the twentieth and twenty-first centuries.

As happens in all industrialized economies with a powerful state and central bank, Japan’s largest corporations became agents or semi-agents of the state. Japanese automakers, shippers, and other producers could reliably be expected to carry out carry out government labor or production policy in exchange for direct access to politicians, cheap loans, anti-competitive legislation, guaranteed profits, and bail outs. Japanese companies (particularly manufacturers) are deeply entrenched and largely immune to domestic and foreign competitors. Government protectionism turned once productive Japanese companies slow and arthritic. The few actually productive sectors of Japan have been forcefully shrunken by taxes to subsidize an outrageously bloated government and the multitude of corporate parasites huddled around its teats. The result is that Japanese companies are increasingly noncompetitive in a global marketplace shared by dynamic companies from Australia, New Zealand, Singapore, Hong Kong, and other more-market-oriented economies.

Keynesian Alchemy in Japan

Japan’s Keynesian death spiral began almost three decades ago. In 1986 the value of the Japanese yen almost doubled relative to the US dollar. Consequently, Japan’s mammoth export sector took a beating. Businesses with political influence found they could achieve higher returns not by innovating or cutting costs, but rather, by pressuring the political and monetary elite to flood the market with cheap credit. The BOJ and short-sighted politicians were happy to oblige. The result was a bubble unlike anything Japan had ever experienced. The land value of Tokyo surpassed the land value of the entirety of the United States. In just a few short years, the Nikkei quadrupled in size and an enormous Japanese financial sector came into existence. The overfinancialization of an economy is among the first signs of a malignant central bank sized tumor. The rise of gargantuan investment banks and multimillion dollar derivatives traders in the United States correlated almost exactly with the death of sound (ish) money in 1971 (Nixon’s administration took the United States completely off the gold standard). Japan’s monetary madness resulted in corporations and households assuming record levels of debt that were financed by zero savings in the private economy.

The inevitable bursting of the bubble in the early 1990s was truly spectacular. The Nikkei lost over 80 percent of its value, land and home prices almost completely flattened, and GDP growth crashed to an anemic 1 percent. When economists refer to Japan’s “lost decade” they refer to Japan’s post-bubble economy. Yet, Japan now finds itself creeping into a third decade with minuscule growth. The Nikkei and asset prices have never recovered anywhere near their previous highs. Anyone getting into the Nikkei in 1990 would, after twenty-six years, have returns of roughly -50 percent. Keynesians and other economic interventionists would do well to view Japan as the canary in the coal mine. The United States and Europe have doubled down on Keynesian alchemy this last decade but our leaders need only look at the devastation these schemes have brought to Japan — a nation that has tried to borrow, print, and tax itself into prosperity for thirty years. Japan is in the late stages of Keynesian cancer and policymakers in the rest of the developed world would do well to take notice.

Demographics

As if the political elite’s harebrained schemes weren’t doing enough to put a nail in Japan’s coffin, the nation is also suffering a demographic disaster. A country that consumes more adult diapers than baby diapers is a nation on its way to the dustbin of history. There is such a shortage of young, capable labor in Japan that the nation has even started importing “interns” from China to work in its many industries. As is happening in Europe and the United States, endless undergraduate and postgraduate “education” has sheltered young adults more and more from the real skills demanded by the labor market. Young adulthood is financed almost exclusively by debt or capital consumption of their parent’s savings. The hassles of starting and raising a family have become more and more burdensome to unskilled, indebted Japanese couples (with no savings) that probably only enter the workforce for the first time in their mid-twenties.

It Is Not Too Late

Japan has a highly capable workforce, an impressive industrial base, and all the infrastructure necessary to reassert itself as a global commercial powerhouse. Japan’s recovery means cutting taxes, paring down its outrageously expensive mercantile policies, allowing for easier immigration of foreign companies and their employees, and letting the market decide the true value of the yen. The Japanese people need to reject the schemers and planners who are suffocating a great nation.

via http://ift.tt/24bPQMN Tyler Durden

Just 3 short months ago, we detailed how – thanks to the collapse in China's growth and massive commodity inventory gluts, the cost of renting a Dry Bulk Tanker was less than the cost of renting a ferrari for a day…

 

 

As Bloomberg reported at the time,

Rates for Capesize-class ships plummeted 92 percent since August to $1,563 a day amid slowing growth in China. That’s less than a third of the daily rate of 3,950 pounds ($5,597) to rent a Ferrari F40, the price of which has also fallen slightly in the past few years, according to Nick Hardwick, founder of supercarexperiences.com.

 

The Baltic Exchange’s rates reflect the cost of hiring the vessel but not fuel costs. Ships burn about 35 metric tons a day, implying a cost of about $4,000 at present prices, data compiled by Bloomberg show.

One would think, considering how much the Baltic Dry Index has 'surged' off its all-time record lows – and the noise being spewed by Cramer et al. that this is somehow indicative of the "big comeback" in the Chinese (and world) economies – that the situation would have improved… But it has not!

 

For the cost of $1 – less than the price of a Grande Black Coffee at Starbucks – you too can be the owner of a 58,429 deadweight tonne bulk carrier…

As The Guardian reports,

Goldenport, one of the last shipping companies left on the London Stock Exchange, has delisted from the market and sold off six of its remaining eight vessels for $1…

 

The giveaway reflects the most dismal shipping conditions in decades, caused by economic slowdown in China combined with an oversupply of vessels due to a building spree during a previous boom and the fact that "average daily hire rates have fallen below even a vessel’s daily operating expenses."

 

The Greek owners are looking for buyers for two remaining vessels and are taking Goldenport off the stock market, saying it no longer makes sense to list shares which have dropped from highs of $100 in 2007 to less than 2c now.

 

John Dragnis, the chief executive of Goldenport, said “Dry bulk vessels generally have fallen in value by around 60% over the last year partly because of extreme oversupply and partly because of low demand for coal as China moves towards renewable energy to curb [carbon] emissions," adding that “The prevailing market conditions are probably the worst of the last 30 years."

All of which seems very odd given the aforementioned resurgence of the Baltic Dry – unless that is not reflecting reality (like so many other indicators).which leaves us to wonder if all this exuberant excitement with regard the Baltic Dry Index's resurrection from the dead is just more China-credit-fueled smoke-and-mirrors speculation – just as it was in 2009 when QE unleashed hope, only to be dashed on the shores of demand-doldrum-reality…

Richard Fulford-Smith, the founder of the Affinity shipbroking firm and a leading figure in the London maritime scene, said the bulk shipping markets were in “a sad state” and there could be more bankruptcies and exits before any bounce back. Fulford-Smith, 60, added: “I will probably be retired by the time there is any real recovery.”

via http://ift.tt/1Tq9H5T Tyler Durden

According to The BBC, the most asylum claims in 2015 occurred in Germany, which saw >500,000…

 

With the main route (reportedly shut down) being from Turkey to Greece, and up through the Balkans…

With Syrians making up the bulk of migrants trying to enter Europe.

 

But now, in response to Balkan countries closing down traditional migrant routes to Europe, Switzerland's military is taking steps to prepare for a potential new wave of immigrants in case it becomes part of a new route.

As such, Switzerland has put together a formal emergency preparedness plan, which outlines three scenarios, one of which would call for military intervention.

 

The three scenarios outlined by the Swiss government are as follows:

Scenario 1: 10,000 applications for asylum in 30 days

 

Scenario 2: 10,000 requests a month for three consecutive months

 

Scenario 3: 30,000 entries in the space of a few days

The third scenario is a worst case situation that would call for 2,000 troops to be mobilized in order to secure the border and guard against terrorist threats. Being that it's also more than three times the number of immigrants that came into the country during the height of the Kosovo crisis in 1999 (which reached 9,600 a month), one can begin to understand the magnitude of the current situation.

From the release [Google translated]

Bern, 04.20.2016 – On 14 April, the Federal Department of Justice and Police (DJP), the Federal Department of Defence (VBS), the Federal Department of Finance (FDF) the cantons, cities and municipalities have set the reference values ??of a common emergency planning in the field of asylum. In this context, various measures have been agreed and planned. The Federal Council took note Wednesday and instructed the DDPS to take all necessary steps for the army to be able, where appropriate, to provide support to civil authorities, including the Corps of border guards (BGC) in accordance with the contingency planning.

 

For now, the Federal Council considers that such intervention is not necessary. With Wednesday's decision, it nevertheless provides power, if necessary, order quickly. According emergency planning of the Confederation, cantons, cities and municipalities, a military intervention would be necessary in scenario 3, that is to say, with 30 000 entries in the territory in space a few days. In scenario 1 (10 000 applications for asylum in 30 days) and Scenario 2 (10 000 requests a month for three consecutive months), the BGC may need to seek the support of the army in case of aggravating circumstances such a terrorist threat of considerable magnitude. Such scenarios have never produced in Switzerland. At the height of the Kosovo crisis, in June 1999, some 9,600 asylum applications were registered. The current figure for March 2016, is about 2,000 requests.

 

Operational mandates the DDPS: legal bases exist

 

Specifically, the Federal Council instructed the VBS Wednesday to ensure that, if necessary, military in 2000 are available for a support service in connection with the migration situation. All necessary steps must also be taken in case of serious event, an additional battalion (700 soldiers) can be made available to meet any needs of the civilian authorities. Finally the VBS is allowed to contact the police force concerned in view of a possible intervention by militia soldiers to protect foreign diplomatic missions. Professional staff of military security could thus be released for intervention in support of the BGC.

 

This support service at BGC would be set up under Art. 67, para. 1 letter. e, the Army Act (LAAM). According to Art. 70 LAAM, competence to put troops on foot and assign them to civil authorities is the federal Council. If the development includes more than 2,000 military and it lasts more than three weeks, the Federal Assembly must approve the commitment in the next session. If the engagement ends before the session, the Federal Council shall report to the Federal Assembly.

 

The civil authority assumes responsibility for the intervention

 

The terms of a possible intervention of the BGC support army are regulated by the Ordinance on the use of troops to secure the border police (OSPF). According to the provisions of this Ordinance, it is the civilian authority that gives the mission to the army, which specifies police powers and determines if the firearm is necessary for that purpose. The troop can only intervene to perform the tasks for which it has both the instruction that the proper equipment. It can not be appealed to the recruits training. It is the civil authority which is responsible for the intervention of the troops.

 

Beyond this support service at BGC, the military can also, for example, support the Secretariat of State for Migration (SEM) or the health authorities in the fields of health, logistics or transportation providing troops and equipment. The VBS also supports SEM in research and the provision of necessary accommodation places in accordance with the reference values ??of emergency planning for asylum established April 14, 2016 by the FDJP, DDPS, the DFF, cantons, cities and municipalities. The prevailing principle is that the needs of the army and the protection of the population (education, operation of the service and commitment of the army) have priority over asylum needs. According to emergency planning, the Confederation will provide lasting 6,000 accommodation places, notably to ensure the registration of the applicants. In scenario 3, it is up to 9000 places that are planned. SEM, with the support of VBS, has already increased the number of places around 2200-4600 during the past year.

This comes just 4 months after Swiss army chief André Blattmann warned the risks of social unrest in Europe are soaring. Recalling the experience of 1939/1945, Blattman fears the increasing aggression in public discourse is an explosively hazardous situation, and advises the Swiss people to arm themselves and warns that the basis for Swiss prosperity is "being called into question."

It would seem a wave of fresh migrants flooding through the nation may just be the catalyst for that "social unrest."

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by David Haggith from The Great Recession Blog

 

As predicted relentlessly here, the scuttled meeting in Doha to limit oil production broke up with no agreement at all. The meeting foundered like a tanker snagged in the dessert sands because of the singular obvious factor that should have sunken all hope weeks ago but did not: Saudi Arabia said, “No deal without Iran.”

 

Doha disaster predictable yet not the disaster that was predicted

 

That Doha would hit the rocks was predictable because 1) The Saudis repeatedly stated in advance of the meeting there would be no deal without Iran; 2) There was no rational justification for the widespread belief that the Saudis were bluffing, given their desire to restore their own lost market share and their desire not to create a window for Iran to build its share back up while everyone puts their transmissions in neutral in order to wait for Iran to catch up with the fleet.

Iran has propelled itself forward toward 4 million barrels a day more quickly than a number of prognosticators thought was possible. Two months ago a number of analysts were saying it would take Iran a year to get production up to  3 million barrels per day. Iran passed that mark in just a couple of months. Their progress to date already offsets all of the slack that would have been created in the market by the ongoing decline in US oil production.

It’s absurd the people did not see with certainty that the meeting would founder. They simply didn’t want to believe Saudi Arabia would stay on the course that it repeatedly stated it would take. They didn’t believe the Saudis were ready to crash the market if that is what it takes to retain their market share and keep Iran in a weakened position. That shows the market is operating in a realm of make-believe and denial. Even after the meeting crashed, the market continues acting as if nothing happened.

 

Iran seems to think that Saudi Arabia is more interested in placing obstacles in its return to the global energy market than an actual rise in oil prices.

 

Of course, it is. That is what I’ve been saying all along, and it boggles my mind that so many experts don’t see that just because they don’t want to. If the price of oil were the Saudis’ big concern, they wouldn’t have started down this path of refusing to curb their own production in the first place. They would have done what was necessary to support the price of oil right off … just as they have always done until recently.

Why would anyone dream the Saudis went through all this pain just for some short-term reason of throwing a little chaos into the world? Until they reach their objective — be it to recapture market share or to quash Iran — why would they change course? They knew the price would go down when they started down this path. That’s why you have talks at OPEC in the first place — so everyone else can talk the Saudis into limiting or reducing production in order to support the price of oil.

This time, the Saudis said, “No. We will ONLY limit our production after EVERYONE else limits theirs. We’re no longer going to be the ones who cut back only to see everyone else take on more market share when we do cut back. Those days are over.” And, OF COURSE, they want to hurt Iran as much as possible at the same time. They hate Iran!

So, how could the majority of the oil buyers not have seen this coming? It’s obvious they didn’t see the Doha shipwreck coming, given that they bid up the price of oil day after day in anticipation that the meeting would limit production.

Now the situation is different to where almost no one expects any positive change in positions before the next meeting:

 

The differences between Opec … members that led to Sunday’s failure in Doha to reach an agreement on oil production will likely persist until the next meeting in June, analysts said…. “I would expect next Opec meeting in June is going to be very divisive and very unsuccessful,” said Edward Bell, a commodity analyst at Emirates NBD, speaking about the upcoming Vienna meet. (Gulf News Energy)

 

Thats the majority opinion of the many articles I’ve been reading  … and oil prices are still going up anyway.

 

Outcome of Doha was the world’s biggest ho-hum

 

What I didn’t anticipate about Doha’s failure and what nobody anticipated (that I saw) was that a total failure of the Doha meeting would end with oil prices going up the next day. Many major investment firms had predicted that a failure at Doha would cause a crash in oil prices right away. Even those who were convinced Doha would limit production, believed that the meeting’s failure, if it happened, would be devastating to oil prices:

 

Since the Doha summit was put on the calendar several weeks ago, a production freeze looked all but certain…. That was particularly true since the objectives for the Doha meeting were not all that ambitious – a freeze at record levels of production for nearly all parties involved was never going to have a major impact on the global oil supply imbalance. (Oilprice.com)

 

It is hard to overstate how surprising the outcome was to the world of energy analysts and market watchers. WTI and Brent prices are set to plunge on Monday, reflecting the failure of OPEC to reach a deal, as oil traders had largely baked in the production freeze deal into the price for crude…. “This is an extremely bearish scenario.” Abhishek Deshpande, an oil analyst at Natixis, told The Wall Street Journal. “Prices could touch $30 a barrel within days….” Russia’s energy minister Alexander Novak expects the oil market will take an additional six months to find a balance because of the collapse of Doha. (Oilprice.com)

 

Iraq, to be sure, was quite displeased: “We are very, very disappointed,” said Iraq’s representative. “This will effect the price and our earnings. We wanted a deal….” If there is no agreement, then expect a sharp oil market sell-off on Monday. (Zero Hedge)

 

Negotiations between 16 oil producers in Doha ended without any agreement on limiting supplies, a diplomatic failure that threatens to renew the rout in prices. (Bloomberg)

 

The deal’s demise will probably do little to alter supply-demand fundamentals as producers committed to a freeze including Russia and Iraq were already producing at record levels. But it’s left a coordinated response to the slump [in oil prices] in ruins, and that will send an important message to the market: it’s every country for itself again. (NewMax)

 

Somehow the market missed the important message:

 

The oil markets … already seem to have forgotten about the failed Doha summit this weekend, with WTI and Brent regaining all of the ground it lost over the past two days or so. (Oilprice.com)

 

Yes, they have. The oil market dropped for less than a day, and then it yawned for the rest of the week, as if it couldn’t care less about the long-anticipated Doha meeting.

 

On Sunday, many thought the collapse of Doha would have provided that catalyst, leading to a sell off when the markets opened on Monday. Instead, prices only moved down briefly before bouncing back up. The most likely reason is that oil traders saw other geopolitical events that more than made up for Doha. First came the news that oil workers in Kuwait knocked off somewhere around 1.5 million barrels of oil production per day (mb/d).

 

Many shocked by how the Doha deal turned out

 

Who would have thought that Saudi Arabia and Iran would have killed off the chances of a deal to stop oil prices and therefore share prices slumping?(Switzer Daily)

 

I wasn’t surprised by that at all. I was absolutely certain this was 1) a deal the wouldn’t happen and 2) a deal that wouldn’t accomplish anything even if it did happen. However, I was also as certain as everyone that, if the deal didn’t happen, oil prices would crash. And I was wrong!

Tyler Durden at Zero Hedge saw the collapse as inevitable as I did:

 

The most anticlimiatic culmination to the most farcical “agreement” of 2016, one which could have been seen a mile away by any carbon-based trader not housed in a collocated, supercooled facility in Secaucus, has taken place and here is the “shocking” result: OPEC, NON-OPEC MINISTERS FINISH OIL TALKS IN DOHA, NO AGREEMENT – RTRS

 

While the failure of the meeting seemed likely to the point of obvious, what it did to oil prices surprised just about everyone.

Naturally, nearly everyone I read also thought the stock market would go down in response to a failure of Doha meeting since the market has been tracking in lockstep with the price of oil. However, since oil did the opposite of what people on both sides expected, the market did its thing of following oil and went up, too.

 

Stock investors gush over oil’s spurt

 

The stock market got a case of the thrills when Doha hit ground and oil prices rose anyway. The Dow jumped up to 18,000, breaking significantly beyond that downward trend line I mentioned for its ceiling. That’s a major breakthrough that defies my statements earlier that this was just a bear-market rally.

But does the strengthening in the price of oil and the resulting jubilance in the stock market make any sense? In my opinion, it proves both markets are running on the fumes of euphoria and wishful thinking. The end of the Doha meeting spelled nothing but trouble for oil prices.

I should point out that oil didn’t go up because Doha ran aground; it went up in spite of Doha’s failure. It went up because a strike in Kuwait promised a sudden drop in oil production. I would say the failure of Doha far outweighs a strike in Kuwait. So, when I see oil go up because of Kuwait, after such a major failure to resolve the core problem, I see a market that has lost its last attachment to rationality.

The strike that turned oil and stock markets all giddy, didn’t even survive twenty-four hours before its threat to oil production in Kuwait went kaput. That’s when irrationality sailed off the charts: Since a strike in Kuwait caused the price of oil to go up immediately after Doha’s failure, oil should have crashed hard as soon it became clear the strike was over and did NOTHING to limit Kuwait’s production; but it didn’t. Once again, oil breathed a big ho-hum, and has remained in its raised price zone for days afterward.

This kind of irrational exuberance either reeks of stupidity or else market manipulation. (No one ever said, however, that markets were either smart or rational; but the more irrational they are, the shakier the economy, as stupidity never leads to consistently positive results.)

And, then, as if all of that was not irrational enough, the failure at Doha led to threats that there major oil producers will actually increase production out of spite … and the prices of oil still stayed up!

 

Production increases planned in retaliation for Iran’s refusal to join production freeze

 

After [Saudi Arabia’s] comments thwarted supply negotiations in Doha, oil traders are weighing another implied warning from the Saudi deputy crown prince: the threat of an intensifying clash with Iran over market share…. “It was an indication to Iranians that, look guys, if you’re not joining the table we have enough power to crank up production,” Abhishek Deshpande, an analyst at Natixis SA in London, said in a Bloomberg Television interview Monday. “You can question how much more they can crank it up by, but the chances are that, now there’s no freeze, the Saudis willgo ahead and increase their production as they were planning.” (Newsmax)

 

Saudi Arabia has said a few times that it has the capacity to easily increase production by about a million barrels a day.

 

“Saudi Arabia’s refusal to sign the agreement just proves that they would not mind if prices stay lower for longer,” Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt, said by e-mail. “I would not even be surprised if they hike production further as a ‘revenge’ to Iran’s reaction. They can withstand lower oil prices longer than most of the other producers.”

 

But to that, oil breathed another underwhelming ho-hum. Then Russia threw out a similar threat this week:

 

Russia said it was prepared to push oil production to historic highs, just days after a global deal to freeze output levels collapsed…. “They (Saudis) have the ability to raise output significantly. But so do we,” Russian Energy Minister Alexander Novak told journalists…. He said Russia was “in theory” able to raise production to 12 million or even 13 million bpd from current record levels of close to 11 million bpd. (NewsMax)

 

Again, oil sighed a h0-hum.

Venezuela fears that this game of Saudi Arabia getting revenge on Iran for not joining and Russia getting revenge on Saudi Arabia if they do increase production will cause a crash in oil prices between now and the next meeting. Venezuela’s oil minister suggested oil prices may go back down to $30 per barrel before next month’s meeting in Vienna.

 

“I anticipate that, without a deal, prices from now to OPEC will drop and it’s not the same to sit down at the table with Brent at $43 per barrel as it is when it’s below $30…. We are close to 90 percent of inventory levels already. … We could see a steep fall in oil prices in the next few weeks.“

 

And oil prices breathed another ho-hum.

As if all that were not enough, it turns out that, during the run-up to the Doha meeting, the major players have already been ramping up production since no agreement was actually yet in place. All they had (as I’ve pointed out) was an agreement to TALK about limiting production:

 

First it was the Saudis; then Russia announced another month of record oil production. And now it is Iraq’s turn. According to the state-run Oil Marketing Co., Iraq increased crude output to a record level in March, ahead of the long-awaited April 17 meeting in Qatar…. The 500,000 barrel increase in monthly barrels has made up almost entirely for the 600,000 barrel decline in US shale output….

 

An expansion at Saudi Arabia’s Shaybah field should add 250,000 barrels a day as early as June, while the Khurais field could contribute another 300,000 barrels by the end of 2017. State-owned Saudi Aramco says this will let it … maintain a production capacity of more than 12 million barrels per day, 2 million barrels above its current rate. For Kuwait and the U.A.E., the goals are even higher. Kuwait plans to raise production capacity by 5 percent from 3 million barrels a day by the third quarter, and to reach 4 million barrels by 2020. Abu Dhabi means to lift production capacity to 3.5 million barrels a day by 2017 from about 3 million. (Zero Hedge)

 

So, production has done nothing but expand in the Middle East during the past two months by more than enough to offset any falling production in the West. Most players in the Middle East are activity planning additional production increases. A meeting to freeze production at these ever-increasing levels failed completely. Two of the major players have now stated they are thinking seriously about ramping up production even more …. And oil prices keep floating upward.

Someone must have programed the algorithms of the robo-buyers to go up no matter what the news is for oil’s over supply. It is almost as if the more the Middle East does to expand production, the more the prices of oil rise.

I think most readers here know or have, at least, heard that irrational exuberance is a precursor to all great market crashes. If the above scenario is not proof that market exuberance has reached the zenith of irrationality, I’m not sure that anything could provide proof in the face of such irrationality, for it is the irrational who will be judging the proof harshly.

via http://ift.tt/1r8lmND Knave Dave

Submitted by Adam Dick via AntiWar.com,

It all started so “harmless.” The Federal Bureau of Investigation (FBI) wanted to access the information of a person being investigated for mass murder so, the FBI said, it could try to prevent more terrorist attacks.

A couple months later this has morphed into a situation where the FBI is offering to help police departments across America access secured information of any electronic device connected to criminal investigations and where members of the United States Senate are moving forward with legislation to force technology companies to give the government access to secured, including via encryption, electronic devices information.

First, the FBI’s bumbled handling of an iPhone connected to a mass killing in San Bernardino provided an opening for the FBI to seek a precedent-setting court order to require Apple to assist the government in overcoming the phone’s security. Rather convenient, one might say, for a government agency determined to search and seize with the minimum possible constraint. Then, when Apple resisted the court’s order that was obtained ex parte (without Apple being afforded an opportunity to present its opposing arguments), the FBI dropped the case, claiming it found people who helped it bypass the iPhone’s security. This is after the FBI had told the magistrate judge that the FBI needed Apple’s help to accomplish the task.

Now, a “law enforcement source” has told CBS News that “so far nothing of real significance has been found” on the San Bernardino iPhone. This latest development should come as no surprise. There were plenty of indications early on that the San Bernardino iPhone likely had very little to no information that would be helpful for pursuing the mass murder investigation or for protecting people from any potential terrorist attack.

Jenna McLaughin summed up in a February 26 The Intercept article what seemed to be the FBI’s real motivation in seeking the court order: “It’s becoming increasingly clear that law enforcement doesn’t really think there’s any important data on San Bernardino killer Syed Rizwan Farook’s iPhone and that it has more precedent-setting value than investigative value.” McLaughlin then proceeds in her article to detail several reasons to believe there would be little to no investigative benefit gained from overcoming the iPhone’s security. Among other reasons, McLaughlin notes that the FBI already had “plenty of phone data, none of which indicated any overseas terror connection;” that the local police chief had said there was “a reasonably good chance that there is nothing of any value on the phone;” and that the iPhone was Farook’s employer-owned work phone that — unlike his laptop computer and two personal phones — he had not bothered to demolish.

The FBI’s effort to force Apple to overcome the San Bernardino iPhone’s security was never about one phone of one terrorist. Instead, it was about expanding the ability to overcome privacy protections of electronic devices via the courts after the executive branch had tried and failed in its effort to help bring through Congress legislation that would force companies to provide the government with “backdoor” access to electronic information.

As time goes on, the veneer is wearing away. Investigators, including at the American Civil Liberties Union, are revealing the great breadth of the FBI’s effort to obtain court orders against Apple and other technology companies, as well as that such efforts appear more likely to arise from victimless drug crime investigations than from terrorism or murder investigations.

Also, just four days after FBI Director James Comey had claimed in a February 21 press release that “The San Bernardino litigation isn’t about trying to set a precedent or send any kind of message,” Comey admitted before the US House of Representatives Intelligence Committee that the San Bernardino iPhone court proceedings “will be instructive for other courts.”

Then, shortly after the FBI announced its success at breaching the San Bernardino iPhone’s security without Apple’s assistance, the FBI sent a letter to police departments across America promising to help them overcome privacy protections on electronic devices. Considering that Manhattan, New York District Attorney Cyrus R. Vance, Jr. claimed in February that his prosecutors alone have 175 iPhones with information they want to access but cannot because of encryption, there is likely much demand for the FBI’s assistance.

Meanwhile, the legislative push that the Obama administration publicly abandoned in the fall of 2015 appears to have new energy. On Wednesday, Senate Intelligence Committee Chairman Richard Burr (R-NC) and Vice Chairman Dianne Feinstein (D-CA) released draft legislation intended to empower courts to require Apple and others to, as Feinstein puts it, “render technical assistance or provide decrypted data” in criminal investigations.

While Feinstein uses the word “terrorists” three times in her three-paragraph introduction to the draft legislation on her Senate website, there is no doubt that her goal, like the FBI’s, is for the US government to be able to exercise sweeping power to overcome privacy protections on electronic devices, and not just for terrorism investigations. Talk of terrorism is a persuasive way of advancing the privacy-stripping effort by using people’s fear to overcome their desire for liberty.

The effort to ensure the US government can exercise expansive powers, including even the conscription of technology companies, to overcome security keeping electronic information private has taken some twists and turns in the last few months. But, make no mistake: An attack on liberty and privacy is moving forward in the courts and in Congress.

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

By EconMatters

 

Declining U.S. Production, the Massive drop in RIG Counts, and robust Demand Growth for 2016 are all bullish fundamentals for the Oil Market heading into the Seasonally Strong part of the Demand Curve from a consumption standpoint.

 

Rig Count Overview & Summary Count

    Source: Baker Hughes

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via http://ift.tt/1qIkDCe EconMatters

As part of his World Apology Tour visit to Britain, President Obama took time to answer questions from London students. When asked about his presidential legacy, Obama said he was proud of the healthcare reforms, and added that:

"saving the world from a Great Depression – that was quite good."

Defending the sheer arrogance (and ignorance) of such a statement, he aded, "I'm proud; I think I've been true to myself during this process." Truth must have a different meaning where he comes from, but of course, anyone doubting the truthiness of such a statement was hacked down to size with the now ubiquitous "Don't give up and succumb to cynics."

You have nothing to fear World but the reality itself hiding behind all this smoke and these mirrors.

Perhaps what President Obama meant to say was:

"saving the world's stock markets from a great depression – that was pretty good"…

If this is what "saving" the world looks like (near 40-year lows in employment participation), we would hate to see what it would have looked like otherwise…

 

Perhaps the following nine charts will provide a little more color as just what "saving the world" looks like for President Obama (red shaded section is his 'reign')…

 

Mission Accomplished! We leave it to Obama to summarize:

"Reject pessimism, cynicism and know that progress is possible. Progress is not inevitable, it requires struggle, discipline and faith.”

And question nothing, and reject reality in favor of propaganda, of course.

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

One of the recurring complaints about Donald Trump, if mostly emanating from those whom he is defeating on the campaign trail, is that the Republican presidential front-runner should act more “presidential.” Then, just a few days ago, the WaPo’s Chris Cillizza – one of Trump’s biggest media adversaries who has predicted Trump’s political demise countless times so far – wrote that Trump 2.0 is being unveiled.

It appears the WaPo will be wrong again, because on Saturday while speaking during a campaign speech in Waterbury, CT, Trump revealed the secret behind his success which he said comes from not acting “presidential” and lashed out at the idea that he should be more “presidential”, i.e. appeasing his critics, saying he’s done so well because he’s not acting like other politicians.

During his rally, Trump said he has been trying to follow the advice of family members and aides who told him to be more presidential, but now, “people are starting to say, ‘wait a minute, look what got you here.’” 

Trump compared his situation to a baseball player of golfer who succeeds with an unorthodox approach, and then is suddenly told to ‘change your swing.’ “And you never hear from them again, that’s the last time, right?”

And sure enough, as AP adds, Trump made it clear to his supporters that he’s not changing his pitch to voters, a day after his chief adviser assured Republican officials their party’s front-runner would show more restraint while campaigning.

Trump joked about how it’s easy to be presidential, making a series of faux somber faces. But he said told the crowd he can be serious and policy-minded when he has to be.

Manafort “said, ‘you know, Donald can be different when he’s in a room.’ Who isn’t,” asked Trump. “When I’m out here talking to you people, I’ve got to be different.” Trump had drawn attention in recent weeks for softened rhetoric, with some attributing his change of tone to newly-arrived campaign leader Paul Manafort.

“You know, being presidential’s easy — much easier than what I have to do,” he told thousands at a rally in Bridgeport, Connecticut. “Here, I have to rant and rave. I have to keep you people going. Otherwise you’re going to fall asleep on me, right?”

Well, he is right: his job during campaign rallies is to entertain, and he certainly has done a better job of it than any of his competitors.

Trump declared to the crowd that he has no intention of reversing any of his controversial policy plans, including building a wall along the length of the Southern border.

“Everything I say I’m going to do, folks, I’ll do,” he said.

That remains to be seen, but one thing is clear: whatever Trump has been doing in the past three weeks has worked, and as PredicIt shows, the odds of a brokered convention have crashed from the early April highs of nearly 80% to just 30%, and approaching the all time lows…

 

… while Trump’s probability for nomination has doubled over the same period.

 

In short: if Trump wants to win, he really shouldn’t change a thing.

* * *

Trump’s approach to acting “presidential” starts 50 minutes in the speech below.

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