Tag: news

After weeks of modest declines, the US Oil Rig Count plunged by 31 to 467 this week – the biggest drop since April 2015 led by a 19 drop in Texas. Total rig count crashed 48 to 571. The reaction, though muted, was a jump in crude prices.

• *BAKER HUGHES OIL RIG COUNT FALLS 31 THIS WK TO 467
• *U.S. TOTAL RIG COUNT DOWN 48 TO 571

A big plunge – tracking lagged crude perfectly…

Led by Texas in absolute terms – but every region is accelerating in the last 6 months…

The analysis, published ahead of an annual oil-industry gathering in London next week, suggests that oil prices will need to drop even more — or stay low for a lot longer — to meaningfully reduce global production.

 

“Since the drop in oil prices last year there have been relatively few production shut-ins,” according to the report. The company, which tracks production and costs at more than 2,000 oilfields worldwide, estimates that another 3.4 million barrels a day of production are losing money at current prices, of about $35 a barrel. It cautioned against expecting further closures, because “many producers will continue to take the loss in the hope of a rebound in prices.”

via Zero Hedge http://ift.tt/1QKXI1w Tyler Durden

While the primary topic of Albert Edwards’ most recent note is the question how long China can sustain its FX intervention before tapping out and letting the hedge funds win with their short Yuan bets once total reserves drop below the critical redline of $2.7 trillion (the answer incidentally is between 5 months and 10 months assuming monthly reserve burn rates of $130BN to $60BN), we will skip that part as we have discussed it extensively in the past, and instead will fast forward to some chart porn by the SocGenarian.

Here is Albert Edwards showing that the S&P had breached key moving averages normally seen at the start of a bear market.

Back in the mid-1990s I spent three memorable years working at Bank America Investment Management, among some of the industry’s finest. Having previously spent three years as an economist at the Bank of England, I was new to markets and I let my economic enthusiasm often get the better of me when making recommendations to fund managers. I remember the head of fixed income explaining to me it was far better not to try and pick market tops or bottoms but to wait and observe the market turn, making the trade late rather than prematurely trying to pick the bottom or top. So the chart below is notable, showing that key 200d and 320d moving averages for the S&P have just been breached to the downside. If one is looking for key technical indicators to ring the bell on the cyclical bull market- maybe it has just rung loud and clear. A renminbi devaluation will only sever an already badly frayed safety rope.

 

Check to you, “data-dependent” Fed

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Submitted by Jeffrey Snider via Alhambra Investment Partners,

With the BLS’s release of Q4 productivity figures, we get to check the BLS’s estimates just in time for today’s increasingly irrelevant payroll report. That much has become thoroughly apparent especially since the middle of last year as the Establishment Survey and unemployment rate only diverge with the overall breadth of economic indications. With GDP no longer corroborative, the labor reports have been in a world all their own. Far too many economists still rely upon them as their sole window for economic interpretation and these productivity numbers show further why they should not.

You have to understand what productivity means as both an economic concept and the statistic as it is constructed and presented. No economy will grow with low or even zero productivity; it’s plain common sense. Yet, the BLS’s numbers say that productivity growth has been zero or near it for five years. It has puzzled economists only because they take the calculations at face value. The fact that productivity is and remains so confusing already suggests that further investigation on all those accounts within the figure is warranted, and even demanded.

Any way you want to present the productivity estimates, clearly “something” is amiss starting around the beginning of 2011, flowing into and out of the 2012 slowdown. It has persisted at an alarmingly low state for years now, meaning that this is not simple statistical variation that will converge on its own to the mean. I have chosen to focus on the latter two years because that encompasses the “best jobs market in decades”, which serves really to highlight the major discrepancy here. In terms of economic common sense, why would businesses be hiring so robustly and getting so little out of their employees overall?

In the statistical sense, the BLS tells us that productivity since the start of 2011 is just slightly positive; during the “best jobs market in decades” it is even less so – essentially zero.

The statistical measure of productivity is essentially a check between the BLS’s version of the economy in labor against the BEA’s version of the economy in GDP. We start on the right side (below) where overall nominal GDP is reduced by some calculation of price changes and then further sliced into what the BLS uses as “private output.” On the left side, the BEA inputs its related CES figure for total hours worked, which goes hand in hand with the payroll and employment estimates. Productivity is simply the difference or plug in between output and hours.

While not derived as anything more than a remainder between other terms, it does again give us an opportunity to at least sync up the BEA’s version of the economy and the BLS’s; labor market vs. GDP. With GDP less than 1% in Q4 2015 and the Establishment Survey wholly unbothered by anything, you can guess without much trouble that there would be an issue in this kind of reconciliation through statistical productivity. Sure enough, the BLS reported today that productivity was supposedly -3.0%.

Private output being barely positive, the relatively large increase in BLS’s version of hours worked left productivity to be so highly negative. In other words, the BLS-skewed picture of the economy was nothing like the BEA’s account, with highly negative productivity just that kind of signal. One quarter of difference is not all that rare, though the size of the discrepancy is already suggestive, but this divergence has lasted again for years. Using just the averages of the past eight quarters, we can see the problem clearly.

At essentially zero productivity, that would suggest that output is gained only through increasing labor – which is not the way a truly productive system operates. Past productivity calculations bear that out conclusively. From 2004 through 2007, productivity averaged 1.66% (which is being charitable by comparison of only later in that cycle, since productivity from 2002 through 2007 averaged 2.53%) which means that if productivity in the current period was at least as positive as then there would have been only about a third of the increase in total hours.

The recovery from the dot-com recession during the housing bubble mania was not in any way especially robust. By further comparison, the average productivity rate in the 1990’s (from 1992 through the end of 2000) was 2.23%. Using that in our current status would have meant virtually no labor gains whatsoever, as the “best jobs market in decades” simply disappears almost entirely.

While that may sound unduly harsh, it actually more closely replicates our economic experience outside of these payroll accounts. In other words, as noted earlier today, factory orders have contracted for fourteen consecutive months through December 2015, a direct relationship with consumers and consumer spending. That would appear far more like what we see of a more positive productivity figure rather than a highly positive labor figure. That is also true of retail and wholesale sales, as well as the fact of Chinese production and global trade and economy that was and remains highly dependent on those same US consumers.

The front side of the labor statistics shows nothing but terrific gains, but the rest of them including this multi-agency economic check disagrees – vehemently. The numbers just don’t add up to the “best jobs market in decades”, far from it. Further, the BLS’s own inflation metrics also argue in favor of productivity rather than robust employment. The Employment Cost Index endures at a highly subdued rate where the unemployment rate heading for and reaching “full employment”, as Janet Yellen claims, should be creating highly visible inflation pressures through wages.

That is the whole point of the rate increase exercise, as it indicates that the FOMC believes the mainstream BLS statistics suggest “slack” is gone and that overheating through wage gains is the primary concern. The ECI and its components continue to instead show nothing of the sort; agreeing fully with the productivity check that I describe above.

Economists have been saying for over a year that the unemployment rate is and was meaningful; more meaningful, in fact, than market prices in funding and credit that increasingly doubted the full narrative. Those markets have been proven increasingly correct as the labor statistics fall further and further toward irrelevance. How likely is it that they have been accurate and the economy just falls apart while businesses are hiring and expanding labor utilization at a rate not seen since Bill Clinton’s last term? Occam’s Razor alone would suggest the productivity interpretation, that the BLS has simply been overstating labor gains for years. That would actually fit quite well within both the decrepit recovery picture, the one that has caused Main Street to near political revolt, and the onrushing recession.

The only other statistical possibility is that the BEA has been understating GDP, a question that is increasingly settled by further and broader contraction throughout the economy. If anything has been overstated it is by far the belief in the “best jobs market in decades”; it simply cannot be found in even the BLS’s own more removed numbers. That it will not reconcile with the BEA’s output figures nor the increasingly negative world we see around is leaves so very little doubt in that respect. The jobs market just wasn’t there; how could it have been? It never made sense and a closer inspection easily reveals it never added up, either.

That explains why economists were so wrong about 2015 because they were depending on phantom jobs in order to forestall very real market-driven and market-suggested danger. There is no productivity mystery, only a distinct and illegitimate lack of curiosity on the part of economists to simply take the Establishment Survey as gospel regardless of how little it fit the rest of the world. It also calls into question the legitimacy of the FOMC and monetary policy that was certainly subject to, and predicated upon, the same quackery. No matter how little the payroll reports described the economy as it was, including the relation to GDP, they held on to nothing else to instead deny everything. And some continue to.

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Following Jason Furman's "Baghdad Bob" appearance on CNBC this morning…

It is President Obama's turn to gloat over the awesomeness of a 4.9% unemployment rate (never mind the fact that the gains during his presidency have gone to low-paying jobs). A job is a job after all… right?

With a stock market screaming for The Fed to back off (i.e. desperate for bad news), Obama better be careful not to paint too rosy a picture of his "Mission Accomplished" jobs recovery…

President Obama is due to speak at 1230ET (plan accordingly)…

We wonder which "economy" President Obama will discuss…

The "Bartender" Recovery…

Or the "Foreign Worker" Recovery…

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“We are in a serious situation and there is a high risk that there could be an attack. But the security agencies, the intelligence services and the police authorities are very alert and our goal is to minimize the risk as best we can.”

That’s from Hans-Georg Maassen head of Germany’s domestic intelligence agency and it certainly doesn’t inspire much in the way of confidence.

In an interview with ZDF television, Maassen said the BfV has “repeatedly seen that terrorists … have slipped into [Germany] camouflaged or disguised as refugees.”

And that’s not mere speculation. “This is a fact that the security agencies are facing,” he added.

According to comments made to the The Berliner Zeitung newspaper, BfV has received “more than 100” tips that there are ISIS fighters embedded among the 1.1 million refugees who streamed across Germany’s borders last year.

The comments come one day after German authorities arrested an Algerian man suspected of training with ISIS in Syria. The suspect, who was staying at a refugee shelter in North Rhine-Westphalia, apparently entered Germany at the Bavarian border last fall.

Several other men – two of whom were detained – with alleged ties to Islamic State were located on Thursday in a series of coordinated raids. Berlin police spokesman Stefan Redlich said they are believed to have been “planning a violent act intended to seriously damage the state.”

“Suspects encountered during a number of police raids conducted in the early morning hours Thursday had allegedly been planning to meet in Berlin to carry out terrorist attacks,” Deutsche Welle writes. “It is not known how close their plans were to completion, but German police said they believed all the suspects had active links to IS.” Here’s more:

Martin Steltner, spokesman for the Berlin prosecutor’s office, declined to comment on any further details from the ongoing police investigation but said that prosecutors were aware of a “concrete” plan to target the capital.

 

The German newspaper “Bild” meanwhile claimed that the suspects had been plotting to attack Berlin’s Alexanderplatz, a central shopping and entertainment square as well as a major regional transportation hub. Checkpoint Charlie, the former border crossing between East and West Berlin, was discussed as potential target, according to the German dpa news agency.

 

About 450 officers were deployed in Berlin during the operation, which occurred as parts of Germany started a week of celebrations marking Carnival amid beefed-up security measures. The raids came after a tipoff from Germany’s domestic intelligence agency, the Federal Office for the Protection of the Constitution (BfV), regarding the prospect of a terrorist attack.

 

A 35-year-old Algerian man apprehended at the refugee shelter in Attendorn is believed to be the head of the terrorist cell. The man had allegedly entered the EU several months ago posing as a refugee. Algerian authorities confirmed they had a warrant for the man’s arrest, accusing him of being a member of the Islamic State terrorist organization, while German authorities added that they had reason to believe the man had attended a militant training camp in Syria.

 

“Bild” reported that the suspect’s wife and two infant children had also been taken into police custody. Police sources confirmed that a woman had also been detained during the raids, but said she had been arrested in Berlin, not Attendorn. It is unclear whether the woman arrested in Berlin is the wife of the Algerian national detained in Attendorn.

 

Meanwhile in Berlin, a 49-year-old suspect was also taken into custody. News reports said it was another Algerian national, who was held in custody for having counterfeit identity documents. Two of the four suspects had allegedly sought to pass themselves off as Syrian refugees.

The alleged ringleader’s identity hasn’t been revealed.

When he was taken from the shelter by police, he had a towel draped over his head. The towel featured smiling orange lions and monkeys.

Meanwhile, new testimony from a friend of Hasna Aït Boulahcen, the cousin of Paris attack ringleader Abdelhamid Abaaoud suggests there are “dozens” of ISIS fighters in Europe posing as refugees.

“The woman, who spoke under the pseudonym Sonia, accompanied Mr. Abaaoud’s cousin, Hasna Aït Boulahcen, to a hidden encampment along a highway north of Paris in the days after the attack to meet Mr. Abaaoud,” WSJ writes. “She said Mr. Abaaoud told them that he arrived in Europe without documents, among the refugees, along with 90 other operatives, including French, British, German, Iraqi and Syrian citizens, an official familiar with her.” 

Apparently, Abaaoud was planning to enlist Boulahcen’s help in several more attacks including an assault on the La Defense commercial center, police station, and nursery school. “I said to him, ‘You have killed innocent people!’ “He said to me, ‘No, they aren’t innocent. You have to see what’s happening with us in Syria.’ ” the woman said in an interview with RMC radio, her voice disguised.

As for Angela Merkel’s migrant “miracle”, well, it now appears that hugs and selfies has given way to a new strategy: packing 1,000 migrants per day on military planes and dropping them back off where they came from. “German Chancellor Angela Merkel’s government is considering expelling as many as 1,000 rejected asylum seekers per day on military transport planes if refugee influx doesn’t subside,” Bloomberg said, earlier today citing Bild-Zeitung. The flights, Bild says, could start before March 13.

When asked about the plane idea, Merkel’s spokespeson Steffen Seibert said only this: “I have nothing to report on such plans.”

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Submitted by Charles Hugh-Smith of OffTwoMinds blog,

Once private credit rolls over in China and the U.S., the global recession will start its rapid slide down the Seneca Cliff.

Few question the importance of private credit in the global economy. When households and businesses are borrowing to expand production and buy homes, vehicles, etc., the economy expands smartly.

When private credit shrinks–that is, as businesses and households stop borrowing more and start paying down existing debt–the result is at best stagnation and at worst recession or depression.

Courtesy of Market Daily Briefing, here is The Chart of Doom, a chart of private credit in the five primary economies:

Why is this The Chart of Doom? It's fairly obvious that private credit is contracting in Japan and the Eurozone and stagnant in the U.K.

As for the U.S.: after trillions of dollars in bank bailouts and additional liquidity, and $8 trillion in deficit spending, private credit in the U.S. managed a paltry $1.5 trillion increase in the seven years since the 2008 financial meltdown.

Compare this to the strong growth from the mid-1990s up to 2008.

This chart makes it clear that the sole prop under the global "recovery" since 2008-09 has been private credit growth in China. From $4 trillion to over $21 trillion in seven years–no wonder bubbles have been inflated globally.

Combine this expansion of private credit in China with the expansion of local government and other state-sector debt (state-owned enterprises, SOEs, etc.) and you have the makings of a global bubble machine.

In other words, the faltering global "recovery" and all the tenuous asset bubbles around the world both depend on a continued hyper-velocity rocket rise in China's private credit. What are the odds of this happening? Aren't the signs that this rocket ship has burned its available fuel abundant?

Three out of the five major economies are already experiencing stagnant or negative private credit growth. Three down, two to go. Helicopter money–government issued "free money" to households–is no replacement for private credit expansion.

Once private credit rolls over in China and the U.S., the global recession will start its rapid slide down the Seneca Cliff: The Global Economy Could Fall Farther and Faster Than Pundits Expect.

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