Tag: news

The best summary of the morning after the Fed’s official end of QE3 comes from DB’s Jim Reid, and is as follows: “The surprises from last night’s FOMC statement was not that the Fed wants to be more hawkish than the market currently prices in and that its wants to raise rates in 2015, but that they chose to be so confident so soon after the recent volatility. Last night’s statement would have been near impossible to publish two weeks ago so it is a bit of a risk. However as ever the Fed is data dependant and therefore what they say they are going to likely do at some point in the future might prove to be largely irrelevant when the time comes. As a minimum the Fed seem quite comfortable withdrawing liquidity from the market and with that we continue to think that bouts of volatility are more likely now than they were for most of the two years that QE3 was in existence. A lot now depends on the ECB and maybe the BoJ picking up the liquidity baton. We may not have to wait too long to find out about their future direction as the BoJ have an interesting meeting tomorrow and the ECB one this time next week.“

Indeed, the Fed’s hawkishness and the resultant dollar strength are already having an impact on global fixed income markets, as both Japan and Denmark sold Bills at negative yields for the first time. Not only that, but despite another day of endless Japan jawboning which perhaps sought to extend the JPY losses above 109, the USDJPY reverted back to its 109 tractor, a level which it may find far too high as increasingly more Japanese businesses are going bankrupt fighting the weak (gasp) currency. And then there was the Bank of Russia which is rumored to be intervening in the market ahead of its key rate decision tomorrow when it is expected to lower rates by 50 bps to 8.00%, the result being the biggest Ruble surge since January 2010, rising by over 2.8%. What can one say: it is a central bank world after all.

But more to the point, after a relatively tame reaction yesterday in the aftermath of the Fed statement, there has been a sudden and sharp bout of risk-offness around the globe, with Eurostoxx finding an air pocket, following German deflation data which was negative across the board and another day of broad weakness surrounding Italian banks in the aftermath of the “successful” stress test. Perhaps most surprising is the speed with which the session, which was until just an hour ago looking at an unchanged open, turned sharply red, suggesting that while volumes continue to be low, liquidity is near record lows.

So despite opening in the green following a batch of strong earnings reports, European equities trade firmly in the red (Eurostoxx -0.9%) with the DAX slipping below 9000 and Eurostoxx below 3000. This comes as attention resides with the lacklustre German CPI releases with most of the regional results slipping into negative territory around the 0.2-0.3% level. Furthermore, sentiment has also been buoyed in a continuation of the response to the hawkish Fed release yesterday and comments from the EBA chief who said banks should not feel too secure after ECB stress tests, even those banks who passed them. As such financials (particularly in the periphery) are being squeezed lower, with basic materials names are also notably lower, given the broadly stronger USD which was weighed on the commodity complex. US equity futures, which had flirted with the unchanged line for most of the session, just dropped in sympathy to overnight lows.

Elsewhere, Greek bank stocks are down 5%-9% with the GE/GR 10yr government bond yield spread seen wider by 60bps on the session, as the country continues to face a “climate of uncertainty” until February, amid snap election risk, according to the administrative reform minister Mitsotakis. Elsewhere, fixed income markets have been provided some reprieve alongside the slide lower in equities, with the Bund currently residing just shy of yesterday’s highs at 150.66.

To summarize (even though with liquidity as non-existant as it is, this may be completely stale by the time we go to print in a minute or so), European shares erase gains, fall close to intraday lows following the Fed’s decision to end QE. Banks, basic resources sectors underperform, while health care, tech outperform. Companies including Shell, Barclays, Aviva, Volkswagen, Alcatel-Lucent, ASMI, Bayer released earnings. German unemployment unexpectedly declines. The Italian and U.K. markets are the worst-performing larger bourses, the Swiss the best. The euro is weaker against the dollar. Greek 10yr bond yields rise; German yields decline. Commodities decline, with nickel, silver underperforming and wheat outperforming. U.S. jobless claims, GDP, personal consumption, core PCE due later.

• S&P 500 futures down 0.4% to 1963.7
• Stoxx 50 down 0.9% to 2955.6
• US 10Yr yield down 1bps to 2.31%
• German 10Yr yield down 3bps to 0.87%
• MSCI Asia Pacific down 0.3% to 140.2
• Gold spot down 0.7% to $1204.2/oz

Bulletin headline Summary from RanSquawk and Bloomberg

• Despite opening in the green after a batch of strong earnings, EU equities trade firmly in the red (Eurostoxx -0.9%) as attention turns towards weak regional German CPIs and the more hawkish than expected Fed.
• The Post-FOMC USD strength has seen EUR/USD and GBP/USD break below 1.2600 and 1.6000 respectively, with USD/JPY breaking 109.00 to the upside.
• Looking ahead, attention turns to the advanced reading of Q3 GDP, weekly jobs data and the US Treasury wrapping up this week’s auction with USD 29bln in a 7yr note.
• Treasuries steady, curve spreads flatten. Week’s auctions conclude with $29b 7Y notes, yield 2.025% in WI trading vs 2.235% award in September.
• 2Y yield rose most in 3-1/2 years yesterday after Fed officials dismissed recent turmoil in financial markets and focused instead on “solid” employment gains that will keep them on a path toward an interest-rate increase next year
• German unemployment declined 22k in October, most in six months, vs median estimate for 4k increase in Bloomberg survey; adjusted jobless rate held at 6.7%
• Greek bond investors face a rollercoaster ride for the next four months as the government tries to contain the risk of snap elections, Minister of Administrative Reform Kyriakos Mitsotakis said
• ECB chooses Deutsche Bank, State Street, ING and Amundi to advise on ABS purchases, Manager Magazin reports, without saying how it obtained the information
• Obama said the U.S. must keep sending health workers to West Africa to “snuff out” Ebola at its source, warning for the second straight day that travel bans and quarantines won’t keep the U.S. safe
• Republicans, who hold a majority of U.S. governor’s offices and legislatures, seek to expand their dominance to unprecedented levels in Nov. 4 elections that will set the agenda on issues such as abortion, taxes and regulation
• The advance of the U.K. Independence Party is being tested today in an election for a police commissioner’s post in Labour’s political heartland of northern England, three weeks before the party seeks its second elected member of the House of Commons
• Sovereign yields mostly lower; Greece 10Y +38bps to 7.96%. Asian stocks mostly higher, European stocks and U.S. equity- index futures decline. Brent crude and gold decline, copper gains

US Economic Calendar

• 8:30am: Initial Jobless Claims, Oct. 25, est. 285k (prior 283k)
  • Continuing claims, Oct. 18, est. 2.352m (prior 2.351m)
  • Continuing claims, Oct. 18, est. 2.352m (prior 2.351m)</li></ul>
• 8:30am: GDP, 3Q, est. 3% (prior 4.6%)
  • Personal Consumption, 3Q, est. 1.9% (prior 2.5%)
  • GDP Price Index, 3Q, est. 1.4% (prior 2.1%)
  • Core PCE, 3Q, est. 1.4% (prior 2%)
  • Core PCE, 3Q, est. 1.4% (prior 2%)</li></ul>
• 9:00am: Fed’s Yellen speaks in Washington
• 1:00pm: U.S. to sell $29b 7Y notes

ASIA

JGBs trade down 2 ticks at 146.50 in quiet trade ahead of tomorrow’s key risk events including; BoJ rate decision and semi-annual economic forecast, jobless report and CPI releases. Asian markets trade mixed with corporate earnings the focus of much of today’s session so far. The Nikkei 225 closed up 0.7% supported by a weaker JPY which lost ground against the greenback following the FOMC decision. The Shanghai Comp (+0.8%) and Hang Seng (-0.5%) traded mixed, the latter led lower by oil names after CNOOC (-4.6%) and PetroChina (-1.2%) reported downbeat earnings.

Further cautious sentiment has also stemmed after the Palestinian Authority President Abbas said the closure of Al- Aqsa is declaration of war. This comes after Jerusalem’s Israeli mayor visited the Al-Aqsa mosque compound Tuesday, angering Islamic authorities. Ahead, the UN Security Council is to hold an emergency meeting Wednesday to discuss Israel’s plans to build more Jewish settlements in Arab east Jerusalem.

FX

Price action in FX markets has been predominantly dictated by movements in the USD following the more hawkish than expected Fed release. As such, USD pairs trade on the back-foot, USD/JPY broke above 109.00 to the upside to post a 3-week high while EUR/USD and GBP/USD fell below the 1.2600 and 1.6000 handles respectively. Weakness was observed in AUD led by cross-related selling in AUD/JPY and selling in AUD/USD by a European Life Insurer name. Elsewhere, NZD pared its post-RBNZ losses, where the central bank left rates unchanged, talked down the currency and dropped its reference to further policy tightening.

The RUB has strengthened significantly in recent trade, with USD/RUB falling around 2.5%. Tomorrow the Russian key interest rate decision is scheduled for 1030BST where expectations are for a 50BPS hike from 8.00% to 8.50%. Analysts at Goldman Sachs earlier this morning said that the Russian central bank will increase its key rate by 50 bps at its meeting tomorrow, abolish rule-based interventions and conduct discretionary intervention large enough to stabilise the RUB.

Brazil’s COPOM unexpectedly raised it SELIC rate by 25bps to 11.25%; decision was not unanimous and had favour vote split of 5-3. (BBG)

COMMODITIES

WTI crude futures trade lower after retreating from a 1-week high following the release of lower-than-expected- build in crude stockpiles, weighed on by a strong USD overnight. Similar weakness was observed in spot gold which fell over 1% to trade at its lowest level since October 8. In terms of notable energy related news, Libya is markedly increasing its oil prices, according to people familiar with the matter (WSJ) and Ukraine and Russia have failed to reach a gas agreement at their overnight talks with the EU. (FT)

* * *

DB’s Jim Reid Concludes the overnight event recap

The surprises from last night’s FOMC statement was not that the Fed wants to be more hawkish than the market currently prices in and that its wants to raise rates in 2015, but that they chose to be so confident so soon after the recent volatility. Last night’s statement would have been near impossible to publish two weeks ago so it is a bit of a risk. However as ever the Fed is data dependant and therefore what they say they are going to likely do at some point in the future might prove to be largely irrelevant when the time comes. As a minimum the Fed seem quite comfortable withdrawing liquidity from the market and with that we continue to think that bouts of volatility are more likely now than they were for most of the two years that QE3 was in existence. A lot now depends on the ECB and maybe the BoJ picking up the liquidity baton. We may not have to wait too long to find out about their future direction as the BoJ have an interesting meeting tomorrow (more below) and the ECB one this time next week.

Reviewing the FOMC statement in more detail, the main highlights were that QE will end on time this week and that the ‘considerable time’ language around policy rates was retained. DB’s Peter Hooper noted that the statement was clearly more positive on labour market developments in recognising ‘solid job gains’ and ‘lower unemployment’. Furthermore they also noted that the ‘underutilization of labour resources is no longer significant and is gradually diminishing’. On activity the Committee also dropped the reference to fiscal drag holding things back. The Committee was more downbeat on the inflation picture though as they noted that market-based measures of inflation have declined somewhat while survey based measures have been stable. For us it was interesting to see the mention of disinflationary pressures arising from lower energy prices (and other factors).

Trying to make sense of this all, DB’s Peter Hooper noted that his view remains consistent with a mid-2015 lift-off under current Fed expectations. His belief is that on balance the committee is feeling better about activity and the labour market although still somewhat concerned about the inflation picture with risks likely more skewed to the downside. Peter also mentions that retaining the wording that policy rates will be held at current levels for ‚a considerable time? following the end of the asset purchase program this month seems fully consistent with the guidance in recent Fed speak from near the center of the Committee. One interesting thing to look out for in the near term will be any additional changes in wording at upcoming meetings that could suggest any changes to expectations of a mid-year lift off.

The market reaction to the statement was dominated by the move higher in the US Dollar and yields. Markets brought forward their expectations of the first rate hike slightly to currently pricing a first full rate hike around late next year from completely pricing out a 2015 hike two weeks ago. With that also came a round of bear flattening especially at the front end of the Treasury curve with the 2s/10s curve flattening by around 7bps to 184bps. Although a firm performance of the 30yr (-2bps to 3.049%) actually led to a bull flattening at the very long end. The Dollar appreciated sharply against key currencies with the Euro, Sterling and Yen now around a percent lower from pre-FOMC statement levels at 1.262, 1.598 and 109, as we go to print. Away from rates and FX, the S&P 500 hit an intraday low shortly after the FOMC statement before recovering back up to just being -0.14% lower on the day. US credit was also slightly weaker with the CDX HY index ending the day 0.38 points lower.

Looking at the overnight session Asian equity markets are somewhat mixed. The Nikkei (+0.8%) is up ahead of BoJ’s decision tomorrow and is probably also helped by the weaker JPY. Elsewhere we see bourses in Australia, India and Shanghai moderately higher despite the slightly negative lead from the US session yesterday. The Hang Seng (-0.6%) and the HSCEI (-1.0%) are standout laggards this morning led by declines in energy stocks. News that China’s biggest bank has reported its largest spike in bad loans since 2006 probably hasn’t help. NPLs rose 9% in Q3 from the previous quarter even though overall earnings came in line with market estimates. Asian credit markets are marginally weaker with IG spreads 1-2bp wider while China onshore IG spread curves are around 3-5bp steeper led by firmer action in the front end.

The FOMC statement aside the other interesting macro release yesterday was the ECB’s Bank Lending Survey. Interestingly the survey shows that Eurozone banks eased loan standards to the private sector over the quarter whilst demand for loans also climbed across both business and households. Although modest, this now represents a second consecutive Bank Lending survey showing a higher proportion of eurozone banks easing credit rather than tightening lending whilst crucially the survey highlights that the outlook for the next quarter also painted a further positive picture. As a side note, the survey also mentioned that by far the biggest reason behind not taking TLTRO money is because the banks have no funding issues at present, rather than there being a lack of demand for loans from the private sector.

Away from macro, corporate earnings have also been keeping company analysts pretty busy lately. 34 S&P 500 companies reported yesterday with 28 of them exceeding EPS estimates although only half of them managed to top the street’s sales revenue forecasts – a theme that has been ongoing for many years now. On the other side of the pond 19 Stoxx600 companies reported yesterday and the beat/miss stats were fairly balanced with just over half of the companies beating analysts’ earnings and revenue expectations.

Before we preview the calendar for today, tomorrow’s BoJ announcement will be a key highlight for markets over the next 24 hours. DB’s Japanese Fixed Income strategist wrote that most market participants likely expect the BoJ to maintain its current policy this time round. The outlook report will likely lower forecasts for GDP in FY14, but maintain the outlook for 2% inflation in FY15. A focus will be whether Kuroda says he is fully committed to keeping current monetary policy open ended, and whether he outlines a target for the BoJ’s asset balance at end-2015. However as a Reuters article overnight noted with just five months left before Governor Kuroda’s self-imposed 2-year deadline for achieving his 2% inflation target there’s also reports about divides among policy makers which may undermine public confidence.

As for today the first Q3 GDP read will probably be the key data highlight in the US although we also have the usual jobless claims series. Yellen will speak on Diversity in the Economic Professions but off a prepared text and there will not be a Q&A so it isn’t likely to be a market moving affair. Importantly we will also get October’s inflation numbers from Germany and Spain as well as the Q3 GDP report of the latter. We’ll also hear speeches from Bank of Finland’s Liikanen (on Europe’s financial sector) and Bank of Spain’s Linde’s (on the role of central banks in Euroland) today.

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

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

Journalists should be dark, funny, mean people. It’s appropriate for their antagonistic, adversarial role.

 

– Matt Taibbi, in this New York Magazine article

 

Reporters on the ground aren’t necessarily ideological, Attkisson says, but the major network news decisions get made by a handful of New York execs who read the same papers and think the same thoughts.

 

Often they dream up stories beforehand and turn the reporters into “casting agents,” told “we need to find someone who will say . . .” that a given policy is good or bad. “We’re asked to create a reality that fits their New York image of what they believe,” she writes.

 

– From the excellent New York Post article: Ex-CBS reporter’s book reveals how liberal media protects Obama

Earlier this week, I published a piece titled, Former CBS Reporter Accuses Government of Secretly Planting Classified Docs on Her Computer, which I thought was incredible in its own right, yet the information in that post seems almost trite compared to the flood of information Attkisson has revealed to the New York Post’s Kyle Smith.

The following excerpts from the piece will confirm all of your worst suspicions about mainstream media:

Sharyl Attkisson is an unreasonable woman. Important people have told her so.

 

When the longtime CBS reporter asked for details about reinforcements sent to the Benghazi compound during the Sept. 11, 2012 terrorist attack, White House national security spokesman Tommy Vietor replied, “I give up, Sharyl . . . I’ll work with more reasonable folks that follow up, I guess.”

 

Another White House flack, Eric Schultz, didn’t like being pressed for answers about the Fast and Furious scandal in which American agents directed guns into the arms of Mexican drug lords. “Goddammit, Sharyl!” he screamed at her. “The Washington Post is reasonable, the LA Times is reasonable, The New York Times is reasonable. You’re the only one who’s not reasonable!”

Interesting, because as Matt Taibbi notes in the quote at the top, investigative journalists are not supposed to be reasonable. I digress…

In nearly 20 years at CBS News, she has done many stories attacking Republicans and corporate America, and she points out that TV news, being reluctant to offend its advertisers, has become more and more skittish about, for instance, stories questioning pharmaceutical companies or car manufacturers.

 

Working on a piece that raised questions about the American Red Cross disaster response, she says a boss told her, “We must do nothing to upset our corporate partners . . . until the stock splits.” (Parent company Viacom and CBS split in 2006).

 

Reporters on the ground aren’t necessarily ideological, Attkisson says, but the major network news decisions get made by a handful of New York execs who read the same papers and think the same thoughts.

 

Often they dream up stories beforehand and turn the reporters into “casting agents,” told “we need to find someone who will say . . .” that a given policy is good or bad. “We’re asked to create a reality that fits their New York image of what they believe,” she writes.

 

Reporting on the many green-energy firms such as Solyndra that went belly-up after burning through hundreds of millions in Washington handouts, Attkisson ran into increasing difficulty getting her stories on the air. A colleague told her about the following exchange: “[The stories] are pretty significant,” said a news exec. “Maybe we should be airing some of them on the ‘Evening News?’ ” Replied the program’s chief Pat Shevlin, “What’s the matter, don’t you support green energy?”

 

Says Attkisson: That’s like saying you’re anti-medicine if you point out pharmaceutical company fraud.

 

One of her bosses had a rule that conservative analysts must always be labeled conservatives, but liberal analysts were simply “analysts.” “And if a conservative analyst’s opinion really rubbed the supervisor the wrong way,” says Attkisson, “she might rewrite the script to label him a ‘right-wing’ analyst.”

 

In mid-October 2012, with the presidential election coming up, Attkisson says CBS suddenly lost interest in airing her reporting on the Benghazi attacks. “The light switch turns off,” she writes. “Most of my Benghazi stories from that point on would be reported not on television, but on the Web.”

 

Two expressions that became especially popular with CBS News brass, she says, were “incremental” and “piling on.” These are code for “excuses for stories they really don’t want, even as we observe that developments on stories they like are aired in the tiniest of increments.”

 

Hey, kids, we found two more Americans who say they like their ObamaCare! Let’s do a lengthy segment.

 

When the White House didn’t like her reporting, it would make clear where the real power lay. A flack would send a blistering e-mail to her boss, David Rhodes, CBS News’ president — and Rhodes’s brother Ben, a top national security advisor to President Obama.

I had no idea that the President of CBS News’ brother was a top national security advisor to President Obama, did you?

Attkisson, who received an Emmy and the Edward R. Murrow award for her trailblazing work on the story, says she made top CBS brass “incensed” when she appeared on Laura Ingraham’s radio show and mentioned that Obama administration officials called her up to literally scream at her while she was working the story.

 

One angry CBS exec called to tell Attkisson that Ingraham is “extremely, extremely far right” and that Attkisson shouldn’t appear on her show anymore. Attkisson was puzzled, noting that CBS reporters aren’t barred from appearing on lefty MSNBC shows.

 

No interview with Holder aired but “after that weekend e-mail exchange, nothing is the same at work,” Attkisson writes. “The Evening News” began killing her stories on Fast and Furious, with one producer telling Attkisson, “You’ve reported everything. There’s really nothing left to say.”

 

Sensing the political waters had become too treacherous, Attkisson did what she thought was an easy sell on a school-lunch fraud story that “CBS This Morning” “enthusiastically accepted,” she says, and was racing to get on air, when suddenly “the light switch went off . . . we couldn’t figure out what they saw as a political angle to this story.”

 

The story had nothing to do with Michelle Obama, but Attkisson figures that the first lady’s association with school lunches, and/or her friendship with “CBS This Morning” host Gayle King, might have had something to do with execs now telling her the story “wasn’t interesting to their audience, after all.”

The who charade is completely incestuous.

Meanwhile, she says, though no one confronted her directly, a “whisper campaign” began; “If I offered a story on pretty much any legitimate controversy involving government, instead of being considered a good journalistic watchdog, I was anti-Obama.”

 

Yet it was Attkisson who broke the story that the Bush administration had once run a gun-walking program similar to Fast and Furious, called Wide Receiver. She did dozens of tough-minded stories on Bush’s FDA, the TARP program and contractors such as Halliburton. She once inspired a seven-minute segment on “The Rachel Maddow Show” with her reporting on the suspicious charity of a Republican congressman, Steve Buyer.

All I have to say is thank you CBS, or should I say SeeBS. Thank you for being so horrible at reporting that you have opened an enormous gap for myself and countless others in alternative media to fill. I genuinely couldn’t have done it without your incompetence.

 

via Zero Hedge http://ift.tt/1rU1JlN Tyler Durden

Ahead of tomorrow’s decision by the FOMC, Peter Schiff ventured on to CNBC to discuss the economy, the fed, and gold… among other things. Schiff rightly fears that while the Fed may well stop QE3 tomorrow, QE4 will not be too long behind it as he notes, rather eloquently, that “an economy that lives by QE, will die by QE” as the Fed’s total lack of willingness to allow stocks to fall (see Bullard 2 weeks ago) or a ‘cleansing’ recession leaves the nation’s economy in far worse shape than it was before the Fed’s intervention. Schiff calmly replies to the anchor’s questions (as she proclaims “I am not on the side of the Fed but…”), gently explains his view on gold when challenged about his ‘wrongness’, but when a guest starts hounding him for being dangerous to CNBC viewers wealth… Schiff (rightly) loses it – must watch!

 

A well reasoned discussion of the Fed’s manipulation of markets and mal-investment hangovers is well worth the price of admission… but at around 6:35 when Scott Nations unleashes his tirade on Schiff, the fireworks start to fly… and Schiff (while being shouted over) reminds guests, anchors, and viewers alike “Go to YouTube, I am wrong a lot less often than most people on this program… and all you do is hassle me”  that he was among the very few appearing on CNBC before the crash who foresaw it and the cataclysmic shift that has occurred (no matter what the perception of short-term memory traders)…“Think of all the bulls you paraded out here when Nasdaq was 5,000”

Absolute must watch…

We can’t help but feel the timing of this tirade against Schiff is spookily prophetic and will be in its own YouTube class in a few years…

*  *  *

Ironically, here is Scott Nations in 2008 getting “Schiff’d” by the CNBC anchors (Liesman) and some other guest muppet when he dares to suggest the Fed is intervening and that the President’s Working Group (i.e. Plunge Protection Team) is hard at work…

“look at the market action on the 10th and 28th and tell me what else might have generated a 100 point rally in the S&P under that situation?” Liesman fobs him off as some conspiracy wonk…

Yep looks normal to us… 10/10/2008

 

and 10/28/2008

 

Those are 100 point moves on a 700/800 S&P!! Nothing to see here eh Liesman, Kiernan, Quick?

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

Almost exactly a month ago, long before the Texas Ebola fiasco, when virtually nobody had heard of a small company out of Ronkonkoma, NY called Lakeland Industries and whose only product is “industrial protective clothing for industry, municipalities, healthcare and to first responders” i.e., Hazmat suits, we asked “i) who will get sick next and ii) how bad could it get?” For the answer we focused on the recently announced order of 160,000 Hazmat suits by the US State Department which had come at a time when the CDC was urging everyone that there is nothing to fear and that Ebola is under control. Not surprisingly, shortly thereafter the Ebola situation promptly escalated and led to not only the first Ebola death and Ebola transmission on US territory, but also the first Ebola infection in New York City.

Fast forward to today when shortly after the close, and minutes after it announced the completion of another $11 million follow on offering, Lakeland surprised everyone, and especially those who are short the stock, when it released the following “Update on Business Activity Relating to Ebola Crisis” in which it announced that it has, by now, received a stunning 1 million Hazmat suit orders and rising exponentially.

Through its direct sales force and numerous distribution partners throughout the world, Lakeland has secured new orders relating to the fight against the spread of Ebola.  Orders have been received from government agencies around the world as well as other public and private sector customers.  Certain of these contracts require weekly delivery guarantees or shipments through the first calendar quarter of 2015.  The aggregate of orders won by Lakeland that are believed to have resulted from the Ebola crisis amount to approximately 1 million suits with additional orders for other products, such as hoods, foot coverings and gloves.  Lakeland started shipping such orders only in October, which is the end of its fiscal 2015 third quarter reporting period.  The main impact from Ebola-related orders received to date will not be realized until the Company’s fiscal 2015 fourth quarter ended January 31, 2015. 

Additionally:

Monthly production capacity for sealed seam ChemMAX and MicroMAX protective suit lines has increased by nearly 50% from August 2014, prior to Ebola-related product demand, to October 2014, and is on track for a 100% increase from that level by January 2015, with the ability for additional increases as needed.  Substantially all of the available production capacity in August 2014 had been allocated to purchases by the Company’s industrial customers (for non-Ebola related purposes).  The Company will continue to service its industrial customers who are dependent upon Lakeland to conduct their work safely.  The expanded capacity is necessary in order to meet obligations for both traditional customers as well as for protection against the spread of Ebola.

Conveniently enough, we put the 1 million Hazmat suits in context just two weeks ago when it was revealed that Ebola-stricken Liberia alone needs about 1 million suits for its population.

Some additional context: earlier today the World Health Organization said that 4,910 people had died of Ebola and anew record, or 13,676 confirmed, probable or suspected cases, had been reported in the three hardest-hit countries of Guinea, Liberia and Sierra Leone.

As we said in the summery when the Ebola cases in those countries were orders of magnitude fewers, “let’s hope these cases do not cross borders and certainly not the Atlanic.”

Finally, to remind everyone what the hoopla is all about, and why LAKE stock was up 30% after hours despite the equity dilution, here is what a Lakeland suit looks like… and costs. Something tells us LAKE’s $60 million market cap as of today’s close will be quite a bargin in the coming months.

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

US shale oil is now the marginal swing barrel in the new world oil order, and as Goldman Sachs warns (despite Larry Kudlow apparently knowing better), a decline in WTI to $75/bbl would start to significantly slow US shale growth (and thus employment, capex, and the entire US economy).

 

Via Goldman Sachs,

Our oil forecast calls for a slowdown in US shale oil production which our North American Energy equity research team led by Brian Singer estimates will occur at $75/bbl WTI prices.

They estimate that the WTI oil price at which average wells in the Eagle Ford, Bakken and Permian Basin plays achieve an 11% IRR ranges between $70-$80/bbl. More importantly, they believe that funding gap constraints below $80/bbl WTI will ultimately drive the slowdown in production. Specifically, balancing capex with cash flow is likely to be the key constraint for shale producers, which continue to outspend their cash flow. Historically, E&Ps under our equity research coverage have spent 120% of cash flow annually, with only 2012 above this threshold when several companies which have since changed strategy were large spenders. At our pre-oil price decline capex assumption for 2015, this 120% reinvestment rate would be reached at $80/bbl WTI prices.

Based on their analysis of key shale play production growth at various oil prices, we estimate that WTI prices will need to remain at $75/bbl in 2015 to achieve the required 200 kb/d slowdown in production growth. Given the lag of 4-6 months between when rigs are dropped and when there is an impact to production as well as the impact of hedging, this price forecast implies a larger slowdown in US production growth in 2H15 to 650kb/d yoy.

The uncertainty around this estimate remains elevated nonetheless:

Some cuts could occur prior to $80/bbl WTI as companies with below-average free cash flow hit reinvestment thresholds first and less well capitalized companies reduce activity. Further, non-core parts of each play have higher breakevens such as non-core Bakken, which represents 19% of total Bakken production and has breakevens above $90/bbl. Finally, the decline rate at major shale plays remains high, potentially exacerbating the production growth slowdown once capex is cut.

 

Conversely, balance sheets have strengthened over the past few years, leaving less pressure for some companies to cut back on spending during a downturn. Further, these estimates do not assume any service cost deflation that likely would occur in a lower price environment and could lower well costs and the threshold prices at which E&P budgets would fall. Finally, should the global oversupply be significantly larger than we expect, reaching a point of production shut-in would likely require meaningfully lower prices given the low variable costs of shale extraction.

Core-OPEC can cope with lower oil prices

Estimates of breakeven oil price above our 2015 Brent forecast of $85/bbl for many OPEC members raises the question of the fiscal sustainability of these countries.

First and foremost and as we discuss above, cutting production to maintain prices at a higher level is not the optimal (revenue-maximizing) alternative for core-OPEC swing producers, given the current size of shale.

Second, eliminating the primary deficit does not imply debt sustainability as it does not set new debt issuance to zero, but rather equal to outstanding debt service. From a sustainability point of view, what actually matters is not the level of debt, but the relative size of debt to GDP: countries with very low debt-to-GDP ratios might be able to afford running primary deficits for a few periods without compromising their position.

Third, for oil producing countries, a drop in oil prices– all else equal – reduces GDP and raises the debt-to-GDP ratio, potentially adding debt sustainability pressure.

 

 

As a result, we consider other breakeven metrics that provide a broader picture and account for these issues. We consider the following simple model across OPEC producers and Russia: we split the economy into two sectors, oil and non-oil, and let non-oil GDP grow at the going rate while fixing oil production constant at our 2015 expected level. We calibrate the fiscal sector to account for oil and non-oil revenue, expenditures and debt. We then look for: (1) the oil price that lets the debt-to-GDP ratio grow up to 40% over a given number of periods, and (2) how the oil price must evolve to keep the debt-to-GDP ratio constant at its current level. This analysis shows that in both scenarios core-OPEC producers require oil prices that are below our Brent forecast, comforting us in our expectation that they can implement such a change in strategy. In turn, Nigeria and Iran require oil prices well above current levels for either to contain their leverage.

It is worth highlighting that this simple exercise abstracts from FX dynamics as core OPEC members have a pegged exchange rate to the USD. Therefore our breakeven may be an overestimation for countries with a flexible exchange rate, such as Russia and Iran. In particular, Russia’s vulnerability to oil prices is lower than for OPEC members given: (1) a flexible ruble that can act as an automatic adjustment mechanism, and (2) a banking sector now in a positive net international asset position, less dependent on foreign funding, and benefiting from a stronger ruble funding base.

Shale is accelerating the deflation in production costs

We are lowering our long-term Brent oil price forecast from $100/bbl to $90/bbl as we believe that the shale revolution has shifted the global oil cost curve down by $10/bbl. In the next few years, moderate demand growth can accommodate a pull back from more expensive projects. Medium term, continued cost deflation should allow for today’s more expensive project to still come online.

 

 

Specifically, our European Energy equity research team led by Michelle della Vigna estimates that a slowdown in capex outside North America at a time of material expansion of oil service capacity will lead to a potential 5%-15% cost deflation across oil developments after a decade of 10% inflation. The oversupplied market that we forecast for 2015-16 is likely to lead to a curb in activity that is likely to accelerate these deflationary forces.

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And just one more thing… for those that shun 'demand' weakness as a reason for the plunge in oil…

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Last week we noted a near-record number of VLCC oil tankers sailing towards Chinese ports as we speculated that the world's largest economy looked to rebuild its strategic petroleum reserve at low-low prices. Now we know… as Bloomberg reports, China National United Oil Co., a unit of the country’s biggest energy company, bought the most ever cargoes of Middle East crude through a pricing platform in Singapore. "The big question is what China will do with all of these cargoes," notes one analyst, "It's very difficult for the market to know Chinaoil's strategy."

 

There are 89 tankers sailing for Chinese ports, 80 of which are VLCCs – the highest since January 3rd.

 

And now as Bloomberg reports, China National United Oil Co., a unit of the country’s biggest energy company, bought the most ever cargoes of Middle East crude through a pricing platform in Singapore amid oil’s slump into a bear market.

The company, known as Chinaoil, purchased about 21 million barrels this month through the system used to determine benchmark prices by Platts, a unit of McGraw Hill Financial Inc. It bought more than 40 cargoes of the Dubai, Oman and Upper Zakum grades in the so-called window, according to data compiled by Bloomberg. A Beijing-based press officer for CNPC, the parent company, wasn’t immediately able to comment and asked not to be identified because of internal policy.

 

“It’s very difficult for the market to know Chinaoil’s strategy,” Ehsan Ul-Haq, a senior market consultant at KBC Energy Economics in Walton-on-Thames, England, said by phone. “Prices have gone down and China is always interested in buying more crude whenever the price is right, but they could also have some other different trading strategy.”

 

…

 

“The big question is what China will do with all of these cargoes,” JBC said in an e-mailed report Oct. 21. “If the Middle Kingdom puts the barrels into strategic storage, something that would be logical given low outright prices, they will disappear entirely from the market and China will still have to buy more crude for its day-to-day needs.”

 

…

 

Chinaoil may be trying to narrow the spread between the prices of two different Middle East grades, according to Bernard Leung, an oil strategist for Bloomberg First Word in Singapore who traded crude for 15 years.

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Originally posted at Club Orlov blog,

Based on the lessons of history, all empires collapse eventually; thus, the probability that the US empire will collapse can be set at 100% with a great deal of confidence. The question is, When? (Everyone keeps asking that annoying question.)

 

Of course, all you have to do is leave the US, go some place that isn't plugged into the US economy in non-optional ways, and you won’t have to worry about this question too much. Some people have made guesses but, as far as I can tell, no one has come up with viable methodology for calculating the date. In order to provide a remedy for this serious shortcoming in collapse theory, I once tried to outline a method for figuring it out in an article titled “Peak Empire,” which was based on Joseph Tainter’s theory of diminishing returns on complexity—or diminishing returns on empire. It’s a perfect problem for differential calculus, and all those microeconomics students who are busy calculating marginal cost vs. marginal revenue, so that they can look for work in the soon-to-be-defunct shale gas industry, might take it up, to put their math talents to better use. In the meantime, here is an update, and a revised estimate.
 

US Empire of Bases

Just to review, as the brilliant analyst Chalmers Johnson explained, the US is an “empire of bases,” not an empire of colonies. It is not considered politically correct to annex other countries anymore. Witness the reaction to Russia taking back Crimea, even though its population has a right to self-determination, and voted 98% in favor of the idea. But, had things turned out differently, putting a NATO base in Crimea would have been just fine. Still, there are quite a few US “territories” (read “colonies”) listed in the Pentagon Base Structure report, including American Samoa, Guam, Johnston Atoll, Marshall Islands, Northern Mariana Islands, Puerto Rico, US Virgin Islands and Wake Islands. We should probably include Hawaii, since in 1993 the US Congress “apologized” to Hawaii for kidnapping the Queen and illegally annexing the territory. They are not giving it back, mind you, but they don't mind saying we’re sorry, because they stole it fair and square. The same could be said for Texas, California—the whole bloody continent for that matter. But they don’t do that sort of thing any more—not too much. Sure, the US stole Kosovo from Serbia just to set up a huge NATO base there, but in general there has been a shift to controlling other countries through economic institutions—like the IMF, the WTO, and the World Bank. There has also been plenty of political subterfuge, assassinations and coups d’états, as explained by John Perkins in Confessions of an Economics Hit Man, or in Michael Hudson’s work. William Blum writes: “Since the end of the Second World War, the United States of America has…

1. Attempted to overthrow more than 50 governments, most of which were democratically elected.

 

2. Attempted to suppress a populist or nationalist movement in 20 countries.

 

3. Grossly interfered in democratic elections in at least 30 countries.

 

4. Dropped bombs on the people of more than 30 countries.

 

5. Attempted to assassinate more than 50 foreign leaders.”

Only a few of these actions—such as Iran in 1953, Guatemala in 1954, Nicaragua in the 1980’s, Ukraine 2014, etc.—are well known in the US. Now here is the key point: all of this “democracy-building” requires the US to have plenty of foreign military bases. Much of the military is outsourced, so there is no need for consent of the governed any more—just their tax money. Marching in the streets in protest is a complete waste of time. Millions of people marched against the Iraq War in 2003. Did it make any difference? Secretary of State Alexander Haig remarked during a peace march in the 1980’s: “Let them protest all they want as long as they pay their taxes”; Kissinger explained that “Soldiers are dumb, stupid animals for the conduct of foreign policy”; and CIA director William Casey made sure the US public remains completely in the dark with his famous dictum, “We'll know our disinformation program is complete when everything the American public believes is false.” (This is from his first staff meeting in 1981; it’s not a secret.) The US is completely open about its desire to subjugate the entire world—if this weren't already obvious from its behavior.
 

Pentagon Base Structure Report

And so, maintaining US hegemony requires an empire of bases. How many bases? Every year the Pentagon publishes a “Base Structure Report,” which lists all the property of the military including land, buildings and other infrastructure. The latest Pentagon Base Structure report lists 4169 domestic military bases, 110 in US territories, and 576 in foreign countries, for a total of 4855. But it turns out to leave out a lot: Nick Turse of TomDispatch calculated that in 2011 the number of foreign military bases was closer to 1075.  But even though a lot is left out of the Pentagon report, it is still a good data source for us to use because, for the purpose of calculating our estimate, all we are interested in is trends, not absolute numbers. Trends require that data from year to year be reported consistently, and the Pentagon appears to be very consistent in what it reports and what it keeps secret from one year to the next. So this is a very good source by which to measure trends.

Since the US public is completely in the dark, zombified and terrified by the mass media and traumatized by psy-ops like 9/11, the empire will have to collapse on its own, without their help. I’m sorry to say this, but the American sheeple are not going to rise up and help it collapse. But when will it collapse on its own? Do we all want to know when? Ok, here goes…
 

Peak Empire

Total US Military acreage peaked in 2007 at 32,408,262 acres, and has been declining ever since, including a precipitous drop in 2014.  

This curve of military acreage follows peak oil and peak empire theory generally quite well. I haven’t done the curve-fitting exercise, but it looks a bit like a Hubbert curve from peak oil theory. The important point is, according to total acreage the US empire has already peaked and is in decline. Note that global conventional crude oil production peaked at around the same time; you may consider that a pure coincidence if you wish.
 

Looking at the data from 2003-2014, we see shows a bit more detail, including a sharp downturn in 2014.

The drop in total bases in 2006 and 2007 seems like a bit of an anomaly, but the trend in acreage follows the peak theory.

What is even more noteworthy is the decline in foreign military bases and acreage. The US may still have control of its domestic and territorial bases, but it has suffered huge losses of foreign military bases and acreage. Since reaching “peak foreign military bases” in 2004, the US now has just 64% of them—a loss of over a third in a decade! In the case of acreage the US retains 69% of its peak acreage in 2006, so it has lost 31% of its foreign military acreage—also close to a third. If you want to guess at what's behind these numbers, you might want to look at them as the fallout from disastrous US foreign policy, as described by Dmitry in his article, “How to start a war and lose an empire.” Perhaps the people to whom we are bringing “freedom and democracy” are getting sick of being occupied and murdered? But, whatever the explanation, the trend is unmistakable.

But we still haven’t addressed Tainter's central thesis of diminishing returns on empire.  Ok, let's do that next next.
 

I previously showed military acreage divided by military spending declining since 1991 in constant 2008 dollars.

Bringing this up to date in constant 2014 dollars, we see that return on spending leveled off in 2010, but in 2014 the trend of decreasing returns on spending has resumed.
 

At the same time, US Government debt, which fuels much of this military spending, continues to climb at a steady rate, and the military acreage/debt ratio shows negative returns on debt.

That is, the empire is getting negative returns in military acreage from increasing its debt burden. In their prime, empires are massively profitable ventures. But when the returns on government spending, debt and military spending all turn negative—that is when we enter the realm of diminishing returns on empire—that, according to Tainter's theory, sets them on a trajectory that leads directly to collapse.

The collapse does not have to be precipitous. It could be gradual, theoretically. But the US economy is fragile: it depends on international finance to continue rolling over existing debt while taking on ever more debt. This amounts to depending on the kindness of strangers—who aren't in a particularly kind mood. To wit: numerous countries, with Russia, China, India, Brazil and South Africa leading the way, are entering into bilateral currency agreements to avoid using the US dollar and, in so doing, to avoid having to pay tribute to the US. Just like Rome, the US empire is being attacked all over the world by “barbarians,” except the modern barbarians are armed with internet servers, laptops and smartphones. And just like Rome, the empire is busy spending billions on defending its fringes while allowing everything on the home front to fall apart from malign neglect.

Meanwhile, the US has been struggling to avoid a financial panic through lies and distortions. The US Federal Reserve has been printing $1 trillion a year just to keep US banks solvent, while selling naked shorts on gold in order to suppress the price of gold and to protect the value of the US dollar by (see Paul Craig Roberts for evidence). In truth, US employment has not recovered since the financial panic and crash of 2008, and wages have actually gone down since then, but the US government publishes bogus economic data to cover this up (See John Williams' Shadow Stats for details). Meanwhile, there are signs that the militarized police state is getting ready to face open rebellion.
 

Two paths down

As we have shown, return on investment in empire has turned negative: the empire has to go further and further into debt just to continue shrinking its foreign presence by a third from its peak every decade. There are two ways out of this situation: quick and painful, or slow and even more painful.

The quick one is for the US to recognize the situation, cut its losses and abandon the project of empire, like the USSR did in 1989/90. But it must be understood that the threat of military action is what keeps countries around the world in line, forcing them to soak up US debt. Without this discipline, further money-printing will trigger hyperinflation, the financial house of cards on which the spending ability of the US government now rests will promptly pancake, and the US economy will shut down, just like in the USSR in the early 1990s.

 

The other option is the more likely one, since it doesn't require making any large course adjustments, which are unlikely in any case. (You see, even in its dying days the USSR had slightly better leadership than the USSA currently does, which was actually capable of making major decisions.) This option is to simply keep smiling and waving and borrowing and spending until the empire is all gone. This will take no more than two decades at the current rate. Note that this forecast is based on a straight-line projection that doesn't take into account any of the positive feedbacks that may hurry the process along. One positive feedback is that a smaller empire means more countries around the world thumbing their noses at the US, escaping from dollar hegemony, and making it harder for the US to continue sinking into debt at an ever faster rate. These positive feedbacks are likely to be highly nonlinear, and this makes their effect difficult to estimate.

But a moment may arrive well before empire is all gone when the suspension of disbelief that is required to keep US government finances from cratering ceases to be achievable—regardless of the level of propaganda, market distortion, or US officials smiling, waving and lying in front of television cameras. Thus, we have two estimates. The first estimate is objective and based on US government's own data: two decades or less. But we also have room for an estimate that is subjective yet bracketed: anywhere between later today and two decades (or less) from now.

Based on these estimates, you can be as objective or subjective as you like, but if you are “long empire,” holding dollar-denominated assets and such, and if your horizon extends beyond 2034 (or less), then there is a reasonably high likelihood that you are just being silly. Likewise, if you think that NATO will come to your defense more than a decade from now, you should start reconsidering your security arrangements now, because NATO will cease to be functional on the same time scale as the US empire. Some time ago Pres. Obama issued what for him sounded like a pretty good order: “Don't do stupid stuff.” You should probably try to follow this order too, and I am here to try to help you do so.

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