Tag: news

While the Case-Shiller home price index rose modestly MoM (+0.87%), it continues to disappoint expectations with the 7th consecutive miss in a row. Notably, unadjusted the monthly rise in prices was just 0.1%. Year-over-year gains of 5.8% for the top 20 cities is the fastest price appreciation since July 2014 – thanks once again to seasonal adjustments.

7th miss in a row for the non-seasonally-adjusted data…

 

And the “improvement” in the headline data is all seasonal-adjustments:

Before seasonal adjustment, the National Index posted a gain of 0.1% month-over-month in November. The 10-City Composite was unchanged and the 20-City Composite reported gains of 0.1% month-over-month in November.

 

After seasonal adjustment, the National Index, along with the 10-City and 20-City Composites, all increased 0.9% month-over-month in November. Fourteen of 20 cities reported increases in November before seasonal adjustment; after seasonal adjustment, all 20 cities increased for the month.

As Case-Shiller notes,

“Home prices extended their gains, supported by continued low mortgage rates, tight supplies and an improving labor market,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

 

“Sales of existing homes were up 6.5% in 2015 vs. 2014, and the number of homes on the market averaged about a 4.8 months’ supply during the year; both numbers suggest a seller’s market. The consumer portion of the economy is doing well; like housing, automobile sales were quite strong last year.

 

Other parts of the economy are not faring as well. Businesses in the oil and energy sectors are suffering from the 75% drop in oil prices in the last 18 months. Moreover, the strong U.S. dollar is slowing exports. Housing is not large enough to offset all of these weak spots.“

Finally, here is the 20 City Composite monthly increase on a seasonally adjusted basis:

 

And the lack of an “increase” on an unadjusted basis:

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

In what is the first official warning to a central bank to no longer do what has been done so far for seven years, earlier today Deutsche Bank came out with a startling presentation addressed to Mario Draghi, warning him explicitly that any more QE will not only not help stocks (and certainly not DB stock which continues to plumb post-crisis lows on fears it is overexposed to the commodity crunch and potentially such names as Glencore and various other commodity traders), but will actually push equities lower.

Here is the key segment from a report just released by the bank’s European Equity Strategy:

While the outlook for more ECB easing has buoyed equity markets, we think it could turn out to be a negative for risk over the coming months, as it is likely to lead to further dollar strength, which in turn is set to translate into additional downside pressure on the oil price, further balance sheet stress in the US energy space and higher US high-yield credit spreads . Our models suggest that European equities are fairly valued, given the current level of US high-yield spreads. If more dollar strength and weaker oil lead US speculative default rates to rise above the level of around 4% currently priced into the credit market, this could mean more upside risk for HY credit spreads and more downside risk for equities over the coming months.

The key chart:

In other words: “Draghi, back off!“

To be sure, what DB has said is what many others have openly thought but few dares to state: after all in a world in which the Fed is, if only for the time being, out of the easing picture, it was all up to the BOJ, and of course, the ECB whose jawboning last week helped send futures soaring. If the DB thinking catches on, and suddenly any more speculation that the ECB will ease further is perceived as a negative for risk, then all bets are off as the world will have to find an entirely new paradigm with which to justify rising stocks, one which is not predicated upon further easing by non-US central banks.

Of course, the simple implication from DB’s report is that while the ECB should refrain from more QE, the Fed should not only stop hiking but revert to easing more, especially if as we reported previously, China will no longer engage in broad monetary stimulus but instead proceed with targeted liquidity injections via reverse repos.

With the Fed sitting down for its January meeting, it suddenly finds it has many more storm clouds over its head than it had hoped just one month ago.

via Zero Hedge http://ift.tt/1nvPUY1 Tyler Durden

George Soros may have broken the BOE and may well have been at least partially to blame for the Asian Financial Crisis, but he will not win an FX battle with the PBoC.

Or at least that’s Beijing’s message to the billionaire, as conveyed via a characteristically hilarious “op-ed” in the People’s Daily entitled “Declaring war on China’s currency? Ha ha”

Yes, “ha, ha.” Although there’s nothing funny about the $1 trillion in capital that fled the country in 2015 on the heels of the PBoC’s bungled effort to “manage” a controlled devaluation of the yuan.

Although Soros didn’t specifically mention either the RMB or the HKD, he did indicate he is betting against Asian currencies in an interview with Bloomberg TV last week and that, apparently, was cause for Beijing to issue a stern warning.

“Soros’s war on the renminbi and the Hong Kong dollar cannot possibly succeed — about this there can be no doubt,” the People’s Daily says, after calling Soros “the financial crocodile,” and blaming the billionaire for “increasing volatility in already unstable financial markets.”

Perhaps Beijing knows something everyone else doesn’t, or perhaps the PBoC simply assumes that when Soros mentions “hard landing” and betting against Asian currencies in the same breath it probably means he’s short the yuan, but whatever the case, Chinese authorities have ramped up the rhetoric in the past several days.

“Reckless speculations and vicious shorting will face higher trading costs and possibly severe legal consequences,” Xinhua wrote over the weekend. “And just as proved in the yuan exchange rate case, the Chinese government has sufficient resources and policy tools to keep the overall economic situation under control and cope with any external challenges.”

The ironic thing about the latter passage there is that Soros actually echoed that sentiment in the interview China appears to be referencing. “China can manage it. It has resources and greater latitude in policies, with $3tn in reserves,” he said.

Of course China won’t be able to arrest Soros and beat a confession out of him like Beijing is fond of doing to others suspected of launching “malicious” short attacks, but the brash commentary does indicate that Chinese authorities are becoming increasingly sensitive to suggestions that a steeper RMB devaluation is a foregone conclusion.

As we’ve noted on a number of occasions, capital flight is as much about perception as it is about reality. If people believe there’s a problem, they’ll act first and ask questions later and when a voice as influential as Soros says the “hard landing” is upon us, it has the potential to trigger more outflows at a time when more than a hundred billion per month is exiting the country for the safety of foreign assets like high-end real estate. 

Also on Tuesday, China said the head of the country’s statistics bureau Wang Baoan is now under investigation for “serious violations of discipline.” The news comes just hours after Wang criticized Soros’ hard landing call. 

Hours after dismissing George Soros’ bearish views on China, stats bureau chief Wang Baoan arrested for corruption

— gabriel wildau (@gabewildau) January 26, 2016

NBS chief says George Soros’s claim of hard landing is only his personal opinion.
China still has great potential. http://pic.twitter.com/LdhAG8nejQ

— Eddie Du (@Edourdoo) January 26, 2016

Coincidence? Perhaps.

We anxiously await the word on what exactly Wang is accused of doing wrong considering the NBS is the body responsible for habitually reporting GDP figures that never deviate materially from the Party’s 7% target. 

*  *  *

Full People’s Daily piece

Original title: a declaration of war to the Chinese currency? “Ha ha”

Source: People’s Daily Overseas Edition

From last year to this year, the “financial predators,” said Soros, the man of the hour for two consecutive years as one of the World Economic Forum in Davos the most interesting. Last year, he used the platform to announce the “permanent retirement”, no financial investment involved in the political arena and instead focus on its so-called “political charity”; this year, is also on this platform, he was open to China “declaration of war”, claiming that We have generous short Asian currencies. Because of his influence, fluctuations in the international financial markets has intensified already existing Asian currencies obviously feel greater pressure speculative attacks.

However, Soros challenge for the renminbi and the Hong Kong dollar is unlikely to succeed – this, no doubt.

Although China’s economic growth downward since last year, stock market volatility, the yuan against the dollar, but in this period of global slowdown in economic growth, China’s economic fundamentals are relatively good among the great powers: economic growth last year, equivalent to the US growth twice; China in 2015, although exports fell 1.8%, but the global trade decreased by 10% over the same period; China continues to upgrade industrial structure, advanced manufacturing and emerging new services is still growing, and has begun more and more field line leading world ……

These show that China’s macro-economic stability is far better than the other BRIC countries and most developed countries, economic shocks can not simply overturn China, China is still able to maintain a global economic power in relatively good condition. Meanwhile, the ethnic composition and cultural tradition unity and other factors also gives a higher high social stability of China.

Specific to the RMB exchange rate is concerned, since the middle of last year the RMB against the US dollar depreciated slightly indeed, but market participants will also be seen that the average annual exchange rate of RMB measure, from $ 1 in 1994 against 8.6187 yuan to one US dollar in 2014 against 6.1428 yuan, the appreciation of the RMB against the US dollar has been for nearly 20 years, only a slight repeated in 2000. The continued appreciation of one currency against the US dollar so long time, amplitude so large is rare, a slight pullback now is normal. Moreover, China has become the world’s second largest economy, the yuan pegged to the dollar is not always in fact – in the capital is highly mobile world, in order to achieve the independence of monetary policy, China is willing and able to withstand the temporary exchange rate, slightly volatility, market participants will sooner or later realize that and get used to this, thereby reducing the current over-reaction so.

Background from a larger perspective, the current strength of the dollar against most other emerging market currencies may continue for a long time, but the renminbi is difficult to do this. Because China’s trade balance surplus remained sustained, and surplus is still expanding; the US economy is already in deep financial “Dutch disease” (a sector booms caused by the decline of other sectors) and escape.Although the United States want to re-consolidate the economic foundation in fact, the body, the “re-industrialization” momentum almost but difficult to continue, resulting in the goods trade balance continued to deteriorate as the economy recovers. This one US dollar against the yuan temporarily strong, will certainly be the aforementioned “Triffin dilemma” (confidence and liquidity dilemma) interrupted, and it can be expected that this time may not be too long.

From another perspective, Soros to Asian currencies “declaration of war”, but also for China to create a deepening of financial cooperation in East Asia as well as “all the way along the” opportunity of financial cooperation. International monetary cooperation from low to high is divided into international financing cooperation, joint intervention in currency markets, macroeconomic policy coordination, joint exchange rate mechanism, the single currency five levels – direct power of its deepening, usually pressure from speculative currency attacks.

The current monetary cooperation in East Asia, is still in currency swaps and repurchase network level marked by cooperation in the area of ??financing. Now, emerging market currencies volatility, Soros started speculative attacks on Asian currencies starting gun for the Chinese and other East Asian economies, to achieve cooperation from international financing to carry out joint intervention in currency markets and even upgrade macroeconomic coordination, is not a Opportunities do? 

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

Submitted by David Stockman via Contra Corner blog,

As of June 2008 no Wall Street banking house was predicting a recession, yet by then the Great Recession – the worst economic downturn since the 1930s – was already six months old, as per the NBER’s subsequent official reckoning.

Actually, it was already several years old if you concede that the phony housing boom of 2005-2007 was generating merely transient “statistical” GDP, not permanent gains in main street wealth. Even the movie houses now showing “The Big Short” have some pretty palpable reminders on that point——not the least being the strip club dancer who owned 5 residential properties, with two adjustable rate mortgages on each.

In fact, by then main street America was crawling with strippers. That is, equity strippers who were repeatedly doing “cash out” refinancings in order to generate between $20,000 and $100,000 or more of mortgage proceeds to spend on vacations, cars, man caves, aspirational leather goods, shoes and apparel, among much else.

At the peak in 2006-2007, upwards of 10% of personal consumption expenditures were accounted for by MEW (mortgage equity withdrawal). The utter unsustainability of that kind of Potemkin prosperity goes without saying, but the point here is that it was no deep dark secret buried in the economic entrails.

In fact, Chairman Greenspan went to great lengths to publicize the facts of MEW on an up-to-date basis. But he wasn’t trying to warn that the end was near. Unaccountably, he and his Wall Street acolytes concluded that the US economy had become virtually recession proof because of the extra firepower being accorded to household consumption by MEW!

In short, the economic booby trap of MEW was hiding in plain sight and so was the Great Recession. Yet there was nothing at all unusual about the 2008 recession call miss.

Wall Street never predicts a recession. And that’s basically why the stock market goes up for 5-7 years on a slow escalator, and then plunges down an elevator shaft during several quarters of violent after-the-fact retraction when an economic and profits downturn has already arrived.

Needless to say, there are plenty of economic booby traps hiding in plain sight this time, too. Yet the sell side was out over the weekend with noisy chatter about stocks now being on sale at a discount, and that selective buying of the dip is once again in order.

According to these Keynesian Cool-Aid drinkers, the US economy is doing “just fine” because job growth is robust, real wages are rising and the consumer is fixing to commence a shopping spree at any moment now. And since stocks have purportedly never gone deep into bear market territory in the absence of a recession, what’s to worry?

How about the fact that there are booby traps like MEW lurking in plain sight everywhere—both at home and abroad? For example, consider the allegedly robust condition of auto sales.

During the last 12 months, retail sales of autos were up 6.1% or by $65 billion. But then again, auto loan paper outstanding was up by nearly $90 billion!

That’s right. Auto lenders—especially the legions of subprime nonbank operations that have sprung up with junk bond financing——have been extending credit to anyone who can fog a rear view mirror. Indeed, since mid-2010 when the auto recovery incepted, auto credit outstanding is up by $340 billion or by 90% of the $375 billion gain in auto sales.

Needless to say, virtually 100% debt financing of an auto sales boom is no more sustainable than was the MEW financing of household consumption last time around.  Like then, the pool of credit worthy borrowers has been depleted, meaning that it is only a matter if time before the debt fueled auto boom of recent years goes pear-shaped.

In this particular instance, it all about the fragile condition of the used vehicle market. At present upwards of 80% of all new car sales are either leased or loan financed. But leasing economics depend heavily on the “residual” or resale value of the vehicle and loan financing late in the sales recovery cycle depends on the ability of the marginal buyer to generate enough trade-in value to qualify for a new loan–even at today’s 120% LTV ratios.

As one industry analysis recently noted, when used car prices roll over, new vehicle demand gets whacked:

But it will mean a double whammy for new-car buyers. Greater supply will mean lower prices for used vehicles, thus reducing the trade-in value of a shopper’s current vehicle.

 

In addition, those lower prices could wallop lease terms. Typically, monthly lease payments are lower than monthly loan payments for the same vehicle because the financing institution doesn’t charge for the vehicle’s residual value — the amount it will be worth at the end of the lease. Falling used-vehicle prices will bring falling residual prices, with the consumer having to pay more to make up the difference. Automakers increasingly have relied on leasing to offset higher sticker prices, but that may not be as effective starting in 2016.

And that’s where the skunk in the woodpile is hiding. During the next 5 years a veritable tsunami of used vehicles will come off lease and loan and flood the used car market, thereby reversing the virtuous cycle of debt fueled new car sales that may well have peaked last fall.

Thus, in 2009 nearly 2.5 million vehicles came off lease, but by 2012 that number was down to 1.56 million owing to the 2007-2009 auto sales collapse. By contrast as estimated 3.1 million vehicles will come of lease in 2016, 3.4 million in 2017 and upwards of 15 million in the next four years.

Like in the earlier cycles shown below, therefore, used car prices are certain to weaken sharply.  And that’s in the opinion of NADA, the auto dealers association:

An expanding inventory of off-lease used vehicles will gradually reduce used-vehicle prices during the next few years……… It’s estimated conservatively that used-vehicle prices could fall by 2.5% per year over the next three years. That would be down 7.3% in 2018 from 2015. This drop would mean that used-vehicle prices would be at their lowest point since 2010.

In turn, prices back at the recession period levels shown below will dry up the pool of credit eligible borrowers and send the leasing market into a tailspin as losses surge and new lease rate adjust sharply higher.

Manheim Used Vehicle Value Index
December 2015

In short, this is just one more case of the truism that under conditions of “peak debt” new borrowings do not increase GDP on a permanent basis; they just steal sales and output from future years, thereby booby-trapping the main street economy with recession risk that the Keynesian Cool-Aid drinkers refuse to recognize.

Much the same can be said out the alleged strength in housing. As shown below, actual outlays for private residential construction in November had still just recovered to the April 2003 level, and that was in nominal terms. In fact, real outlays are at 30 year lows and amount to just 3.2% of GDP—–or barely half of the historic level.

Moreover, more than one-third of the outlays shown above are for home improvements, not new construction. The skunk in the woodpile there is that home improvement spending is heavily concentrated in the top quartile of households. It is also highly correlated to the stock averages.

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

Back in August we noted that John Paulson managed to get himself and his investors involved in two rather dubious “firsts” in 2015: Puerto Rico became the first US commonwealth in history to default, and Greece became the first developed country to default to the IMF.

“[Paulson] is one of a handful of bold hedge fund investors who poured hundreds of millions of dollars into Greece in a wager that the country’s economy would recover after years of economic crisis,” the New York Times wrote late last summer, on the way to explaining why the wealth management arm of Bank of America Merrill Lynch was liquidating its clients’ money from one of Paulson & Company’s funds. “Mr. Paulson is also one of Puerto Rico’s biggest hedge fund investors, betting that the commonwealth will emerge from its own debt crisis,” The Times continued.

Besides Greece and Puerto Rico, Paulson also managed to tie up money in Mallinckrodt, which is down sharply since last summer.

Now, amid a client exodus, the billionaire is putting up his own holdings to secure a longstanding line of credit with HSBC. “The billionaire pledged his personal investments in four of his firm’s hedge funds as additional collateral for a credit line Paulson & Co. has had with HSBC Bank USA for at least five years,” Bloomberg reports, adding that “Paulson is using his wealth to back the firm’s borrowings after investment losses and client defections cut assets by more than half from their peak.”

Essentially, Paulson secured the line of credit with management fees as collateral, but with AUM having fallen by a whopping $18 billion over the last five or so years, HSBC apparently wanted some reassurance. Here’s a bit more from Bloomberg: 

Filings show Paulson & Co. secured its December 2010 credit line with annual management fees from five of its hedge funds, a common form of collateral in the industry. The firm’s funds charge outside clients a standard annual management fee equaling 1 percent to 2 percent of assets and a performance fee totaling 20 percent of profits, according to its latest investment-adviser registration.

 

The collateral may be down in value since Paulson & Co. entered into the agreement. The firm’s assets under management, which generate the fees, have fallen about 50 percent to $18 billion since Paulson & Co. received the credit line. Of the money that remains, more than half belongs to Paulson and other insiders at the firm who have been exempt from paying fees.

 

As of the end 2014, about 57 percent of the firm’s capital belonged to Paulson and others who don’t pay management and performance fees, according to a filing.

Paulson also secured a personal line of credit with HSBC. Some speculate the billionaire is shoring up the fund’s finances to ensure it can retain “top talent” in a downturn. “You run the risk of losing key people if you don’t provide a market level of compensation,” Jeff Levi, a partner at Casey Quirk said.

Of course it could just be that HSBC wants to cover its bases now that volatile, increasingly correlated markets have dealt blow after vicious blow to a 2 and 20 crowd that looks increasingly inept in a world where investors actually need hedge funds to live up to their billing and do what they’re supposed to do: namely provide some semblance of stability and return in turbulent times. 

Losing 36% in a year as Paulson Advantage did in 2014 doesn’t exactly inspire much confidence and at this juncture we think it’s safe to say that Mr. Paulson may indeed have been a one hit wonder.

via Zero Hedge http://ift.tt/23qnWNL Tyler Durden

• China shares end at 14-month lows after late selling frenzy (Reuters)
• China Dec gold imports through Hong Kong highest since 2013 (Reuters)
• China Contagion Fades as European Stocks Pare Drop, Oil Rises (BBG)
• Apple set for slowest ever iPhone sales growth (Reuters)
• Saudis, Russia Seen by Iraq as More Flexible on Oil-Output Cuts (BBG)
• China Probes NEV sector for subsidy fraud (China Daily)
• J&J forecasts 2016 sales below analysts’ estimates (Reuters)
• Wider China-Hong Kong Discrepancy Revives Fake Trade Doubts (BBG)
• German two-year yields hit new low as March ECB cut almost priced in (Reuters)
• AIG to Sell Broker-Dealer Network (WSJ)
• At $3.68 Million, This California Home Has Everything But Buyers (BBG)
• Pimco to Vanguard Step Into Credit Fray to Buy High-Grade Bonds (BBG)
• Vacant Office Spaces Pile Up in Houston  (WSJ)
• Khomeini Grandson Barred From Iran Poll in Blow to Reformers (BBG)
• Germany’s Cautious Savers Find New Taste for Risk (WSJ)
• In coastal New Jersey, a flood of criticism for Christie follows storm (Reuters)
• European Stability Mechanism head rules out haircut for Greek debt  (Reuters)
• One Salmon Costs More Than Barrel of Oil as Slump Deepens (BBG)

 

Overnight Media Digest

WSJ

– The Supreme Court ruled Monday that convicts who received life sentences as juveniles can seek parole, extending the possibility of freedom to as many as 2,500 inmates who otherwise would die in prison. (http://on.wsj.com/1PhlByD)

– The White House unveiled on Tuesday a raft of proposals to make it easier for workers to save for their retirements, in part by pushing businesses and states to make benefits more portable. The steps include a $100 million grant proposal to explore ways to provide benefits that are portable across employers and are available to workers who are self-employed, are part-timers or have multiple employers. (http://on.wsj.com/1PhlItY)

– Hassan Rouhani landed in Rome on Monday on his first overseas trip since the European Union lifted sanctions on Jan. 16 in return for Tehran’s implementation of key restrictions on its nuclear program. With a number of U.S. sanctions still in place, European countries are moving quickly to re-establish ties to sell everything from consumer goods to aircraft. (http://on.wsj.com/1PhlRxm)

– Johnson Controls Inc and Tyco International Plc agreed to merge in a $14 billion deal that creates a new giant provider of commercial-building systems and reflects a growing push by some executives and shareholders toward companies that are bigger but more focused. (http://on.wsj.com/1PhlSBC)

– A highly anticipated new energy-demand projection from Exxon Mobil Corp released Monday cuts the company’s expectations for China. And a slew of data is emerging that points to the toll a weakened economy has taken on Chinese energy demand, which is among the most important factors in determining the price of crude oil. (http://on.wsj.com/1Phm5Vs)

 

FT

Greg Medcraft, chairman of the International Organization of Securities Commissions said that financial groups betting on blockchain technology should also take into account the cost of fraudulent transactions, much like banks do for credit card transactions.

The CFE-CGC energy union has put forward a set of challenges that may jeopardise EDF’s plans to build an 18 billion pound ($25.61 billion) nuclear power plant at Hinkley Point in Somerset. These include an expression of serious concern about the plant’s viability and what it might cost the company.

French billionaire Xavier Nile’s Iliad has held preliminary discussions with UK telecoms regulators Ofcom to enter Britain’s mobile market.

Greece has hit back at EU proposals to tighten its border security with Macedonia to stem the flow of refugees, saying its a dangerous experiment which would turn the country into a “cemetery of souls”.

 

NYT

– Years of rapid economic growth across sub-Saharan Africa fueled hopes of a prosperous new era. To many, the world’s poorest continent was finally emerging, with economies that were no longer dependent on the fickle global demand for Africa’s raw resources. (http://nyti.ms/1PhmRS7)

– “Manchester by the Sea,” a buzzy drama starring Casey Affleck as a handyman coping with family strife, was sold to Amazon.com Inc for $10 million, beating out the likes of Fox and Universal. (http://nyti.ms/1Pho6Rq)

– Johnson Controls Inc, which introduced a device that could control room temperature some 130 years ago, has agreed to combine with Tyco International PLc. With the deal, Johnson Controls will relocate its headquarters from Milwaukee to Cork, Ireland, where Tyco is domiciled and where corporate taxes are lower than in the United States. (http://nyti.ms/1Pho7VA)

– Airbus Group SE said Monday it was in talks with Iran toward the sale of dozens of new commercial aircraft – part of a number of international business deals likely to flow toward Iran since it agreed to curtail its nuclear ambitions. (http://nyti.ms/1Pho8Zm)

– A Chinese journalist who was traveling across Thailand on a frantic quest for political refuge messaged his wife recently to say that he would soon reach the border with Laos. Two weeks ago, the journalist, Li Xin, disappeared. Li’s wife, He Fangmei, and his supporters believe he has joined a growing list of people at odds with Beijing, who have been spirited into China across borders, especially from Thailand. (http://nyti.ms/1PhoiQG)

 

Canada

THE GLOBE AND MAIL

** WestJet Airlines will suspend some of its regularly scheduled flights from Calgary and Edmonton to divert more of its capacity to Central and Eastern Canada. (http://bit.ly/200RYII)

** Canadian government plans to require a separate climate test for proposed pipelines and a planned LNG export terminal, which are now under regulatory review, to determine their impact on Canada’s greenhouse gas emissions, a move that could impose new delays on billion dollar projects. (http://bit.ly/200S5E7)

** Postmedia Network Canada Corp announced an unconventional deal with Mogo Finance Technology Inc, an online provider of short-term loans that is looking to build a customer base among young people who shy away from traditional bank branches. (http://bit.ly/200SfLQ)

NATIONAL POST

** Vancouver is the third least affordable city in the world for a home, and construction constraints are to blame for rising home prices there and in other Canadian cities, according to U.S. group Demographia. (http://bit.ly/200Sq9Z)

** Fitch Ratings affirmed the default ratings of Canada’s largest banks Monday, but changed its outlook on Royal Bank of Canada’s to negative from stable. (http://bit.ly/200SyWK)

** Crude oil prices have fallen so low that oilsands producers are now in danger of seeing negative prices for their bitumen, according to a report Monday from FirstEnergy Capital Corp. (http://bit.ly/200SI0o)

 

Britain

The Times

The Guardian is to slash its costs by £54 million over the next three years and could start charging for some of its content after burning through £80 million of cash in only a year. (http://thetim.es/1POjwX3)

Ophir Energy has signed a preliminary agreement with Schlumberger to develop its Fortuna gas project off the coast of Equatorial Guinea. (http://thetim.es/1Py8kNN)

The Guardian

American Apparel founder Dov Charney has lost his last-ditch attempt to wrest back control of the bankrupt retailer he started in his Tufts University dorm room in 1989. (http://bit.ly/1SflfJv)

Sainsbury’s largest investor, the Qatar Investment Authority, has indicated that it might be willing to support a £1bn-plus bid for Home Retail Group at a “modest” increase to the 130p or so cash and shares offer rejected by the Argos owner in November. (http://bit.ly/1TkzsFZ)

The Telegraph

Regulators are considering whether to allow two Iranian banks in London to resume operations after years of sanctions. (http://bit.ly/1JzxJdV)

McDonald’s will accelerate the rollout of table service across its refurbished UK restaurants and expand its trial of premium burgers in a bid to revamp its image amid intensifying competition in the fast food space. (http://bit.ly/1JzAk7t)

Sky News

George Osborne is preparing to end a six-month search for the new head of the City watchdog this week after ruling out one of the leading contenders for the job. (http://bit.ly/1njOwXH)

The head of Opec has laid the blame on smaller oil-producing countries for the glut in supply swilling through global markets that has driven down prices. (http://bit.ly/1ZOKB1G)

The Independent

The oil explorer JKX, which faces an attempt to topple its management this week, banned two of its biggest shareholders from voting yesterday after accusing them of providing “false or materially incorrect” information. (http://ind.pn/1JzBpwb)

A former Oxford schoolboy dubbed “Jihadi Jack” has dismissed reports that he is a member of Isis and accused the media of demonising young Britons who convert to Islam – in messages seen exclusively by The Independent. (http://ind.pn/1nkgLpg)

 

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

The reason why oil has stormed higher from down over 3% to up well over $30 in the span of hours (and dragging futures higher with it), was – as observed earlier – news that Iraq’s Oil Minister Adel Abdul Mahdi said that both Saudi Arabia and Russia, the world’s biggest oil producers, “are now more flexible about cooperating to cut output as crude prices have fallen to levels that hydrocarbon-rich nations didn’t foresee.”

“This flexibility should be finalized, and we should hear some solid suggestions coming from all parties,” Abdul Mahdi told reporters at a conference in Kuwait City. He didn’t give details about what the increased Saudi and Russian flexibility entailed, nor did he say how he knew about it.

There is one problem with this: it wasn’t the Saudis saying the Saudis should (or would) cut, and in fact, while Aramco’s CEO said that there is an even greater glut than expected at 3MM b/d, he made precisely zero mention of Saudi Arabia cutting production at all in the near future.

And sure enough, moments ago Bloomberg’s own oil strategist, Julian Lee explained that comments that Saudi Arabia, Iraq, Russia have become more willing to consider production cuts need to be viewed with caution.

What else he said:

• Saudi Arabia has said it would cut output as part of broader OPEC, non-OPEC agreement ever since current mkt share policy was introduced. There’s no indication that position has changed.
• Aramco Chairman Khalid Al-Falih said in Davos last wk that country won’t reverse course unless non-OPEC nations play their part in production cuts
• Iraq only willing to reduce output if others also cut
• Russian govt officials continue to say that output reductions would not be effective; Energy Minister Alexander Novak has said several times that artificial production cuts are senseless
• Lukoil’s Leonid Fedun says Russia could work with OPEC if a political decision was taken to cooperate No such agreement exists.
• Parties agree that rising supply has been driven largely by U.S.

Lee concludes by saying that there’s no mechanism in U.S. to coordinate supply cut from large number of independent producers who have duty to their shareholders to maximize revenue. Actually there is a mechanism, if only a short-term one: it is called bankruptcy liquidation, and to get there the Saudis will need to keep the market oversupplied by 3MMb/d for a long, long time to take out said 3 million barrels in excess daily shale supply away from the table.

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