Saudi Oil Minister Puts On Brave Face Amid Severe Headwinds: “Eventually, Economic Producers Will Prevail”
by Zero Hedge - October 5th, 2015 7:01 pm
Submitted by Tyler Durden.
As the EM world looks on helplessly while Saudi Arabia’s war with the US shale complex (and, by extension, with the Fed) serves to keep crude prices depressed putting enormous pressure on commodity currencies and accelerating emerging market outflows, the question is whether Riyadh’s SAMA piggy bank can outlast the various capital market lifelines available to America’s largely uneconomic shale drillers.
It’s tempting to simply say “yes.” That is, with the next round of revolver raids due in days and with HY spreads blowing out amid jittery US markets, it seems unlikely that maligned US producers will be able to survive for much longer, and despite the fact that data out yesterday shows Riyadh’s FX reserves falling to a 32-month low, the Saudi war chest still amounts to nearly $700 billion, giving the kingdom plenty of ammo. However, between maintaining subsidies, defending the riyal peg, and fighting two proxy wars, Saudi Arabia’s fiscal situation has deteriorated rapidly, forcing Riyadh to tap the bond market in an effort to help plug a hole that amounts to some 20% of GDP.
Given the above, some have dared to suggest that in fact, the Saudis could lose this “war” just as they may be set to lose their status as regional power broker to Tehran thanks to Iran’s partnership with Moscow in the ongoing effort to shore up Assad in Syria and wrest control of Baghdad from the US.
But don’t tell that to Saudi Arabia’s Oil Minister Ali al-Naimi who says that despite all the uncertainty, the economics of oil exploration and production will prevail at the end of the day. Here’s Reuters, citing Economic Times:
Saudi Arabia’s Oil Minister Ali al-Naimi believes economic producers will prevail over higher-cost suppliers and OPEC’s share of the market will rise, India’s Economic Times newspaper reported on its website on Monday.
In comments suggesting Saudi Arabia, the world’s top oil exporter, is sticking to its policy of defending market share rather than supporting prices, Naimi told the paper the drop in oil prices was less of a problem than fluctuations.
“The world needs a reliable, sustainable supply. Best way to do it is to make sure that demand and supply should be equal, so there will not be fluctuation of price. The biggest problem for everybody, producer and consumer today,
by Zero Hedge - October 5th, 2015 6:30 pm
Submitted by Tyler Durden.
The think tanks do not disclose the terms of the agreements they have reached with foreign governments. And they have not registered with the United States government as representatives of the donor countries, an omission that appears, in some cases, to be a violation of federal law, according to several legal specialists who examined the agreements at the request of The Times.
As a result, policy makers who rely on think tanks are often unaware of the role of foreign governments in funding the research.
Several legal experts who reviewed the documents, however, said the tightening relationships between United States think tanks and their overseas sponsors could violate the Foreign Agents Registration Act, the 1938 federal law that sought to combat a Nazi propaganda campaign in the United States. The law requires groups that are paid by foreign governments with the intention of influencing public policy to register as “foreign agents” with the Justice Department.
At least one of the research groups conceded that it may in fact be violating the federal law.
– From the New York Times article: Foreign Powers Buy Influence at Think Tanks
Liberty Blitzkrieg readers will be under no illusions when it comes to the role “Think Tanks” play within America’s crony, unethical, slimy and entirely compromised political system. Nevertheless, the recent New York Times article exposing how foreign governments, likely illegally, use them to buy influence in Washington D.C., is extremely important and disturbing. Let’s examine a few excerpts.
From the New York Times:
WASHINGTON — The agreement signed last year by the Norway Ministry of Foreign Affairs was explicit: For $5 million, Norway’s partner in Washington would push top officials at the White House, at the Treasury Department and in Congress to double spending on a United States foreign aid program.
But the recipient of the cash was not one of the many Beltway lobbying firms that work every year on behalf of foreign governments.
It was the Center for Global Development, a nonprofit research organization, or think tank, one of many such groups in Washington that lawmakers, government officials and the
by Zero Hedge - October 5th, 2015 6:01 pm
Submitted by Tyler Durden.
As Moscow’s air campaign in Syria enters its sixth day, both the West and The Kremlin have put their respective media propaganda machines into overdrive.
In many respects, the geopolitical stakes for both sides are the highest they’ve been in decades. The West cannot afford to stand by and watch Russia do in a matter of weeks what the US has failed to accomplish in 13 months. Put simply: if Moscow declares victory over ISIS within the next month or two (and that appears as likely as not), Washington will be left to explain to a bewildered public what just happened. To the uninitiated, it will appear as though Russia’s military is far superior to the US Army when it comes to fighting terror and on top of that, Iran’s now well publicized role will not only cast further doubt on the nuclear deal, but will also raise questions about the contention that Tehran is committed to financing and exporting terror.
For Russia, the powerplay in Syria represents nothing short of a return to the world stage after decades of flying below the radar as a second rate superpower. Putin has now proven that Moscow can project its influence with virtual impunity and as Monday’s “accidental” violation of Turkish airspace suggests, The Kremlin is getting more brave by the day in the face of what certainly looks like a de facto surrender by the West.
All of the above presents a real challenge when it comes to analyzing the conflict. That is, with both sides in full-on spin mode, getting at the truth is even more difficult than it would normally be in an East vs. West standoff and while US foreign policy is something of an easy target when it comes to pointing out hypocrisy and outright incompetence, one also has to be careful to avoid taking the Russian line at face value because after all, this is all just a contest to control the narrative and thus to help determine how history will remember the Syrian civil war.
With all of that said, watching Russia effectively humiliate the West by bragging day in and day out is nothing if it’s not amusing, and indeed, as we said on Sunday, the leaked diplomatic cable from 2006 which outlines Washington’s intent to effectively start a…
by Zero Hedge - October 5th, 2015 5:50 pm
Submitted by Pivotfarm.
by Zero Hedge - October 5th, 2015 5:14 pm
Submitted by Tyler Durden.
While the US was been surprised and angered by the stunningly fast turn of events in Syria where in the span of less than a month Russia unleashed a massive, Syria-based airborne campaign against what it says are ISIS terrorists, even as the US accuses Putin of targeting “moderate rebels”, it has had little recourse in accusing Putin of violating Syrian sovereignty: after all Russia is the only nation that Syria has officially invited to eradicate the “terrorist threat” that is ISIS.
Then, last Friday, Syria raised the stakes once again, when as Bloomberg reported a loyalist of the Assad regime said “terrorism cannot only be fought from the air,” making an appeal for more military involvement to defeat Islamic State.
In a defiant speech at the United Nations General Assembly in New York, Syrian Foreign Minister Walid al-Muallem criticized the current approach to fighting the group that has conquered swathes of territory and was encroaching on President Bashar al-Assad’s coastal stronghold in Latakia. Those gains triggered Russian intervention.
“Air strikes are useless unless they are coordinated with the Syrian Arab army, the only force to combat terrorism,” al-Muallem, who also holds the title of deputy prime minister, told a largely empty assembly hall on Friday, the last day of speeches.
The logical implication is that Syria will next invite, if it hasn’t already done so, Russian troops to join the Russian airforce in eradicating the great ISIS strawman which until recently was the pretext for “coalition” forces to bombard Syria with complete disregard for Syrian sovereignty, and the intention of destroying Assad’s military so the CIA can conclude a regime change with a pro-western leader, one which will permit the passage of a Qatar gas pipeline.
Whether or not this assessment is accurate is irrelevant, because earlier today the US decided to jump right on it, and as CNN reported, accordint to the latest U.S. assessment of Moscow’s activity in western Syria, “Russia has moved several ground combat weapons and troops into the area to potentially back up Syrian forces in the field planning to attack anti-regime forces, according to two U.S. defense officials.”
The U.S. views the move as Russia “stepping up its ground activity” in Syria to attack those forces, rather than ISIS elements,
by Zero Hedge - October 5th, 2015 4:45 pm
Submitted by Tyler Durden.
Earlier this year I wrote two articles about the Fed's ability to hike interest rates this year. (see "Fed At Risk Of Missing Window To Hike Rates" and "The Window Continues To Close.") In both articles, I discussed the biggest worry of the Federal Reserve, and frankly every Central Banker on the planet, was deflation. The problem with deflation, as an economic pressure, is that once entrenched it becomes extremely difficult to break as conventional monetary policy tools, mainly interest rates, have little effect.
The Federal Reserve has continued to hope for the last several years that extremely "accommodative" monetary policy, near zero interest rates, would spark stronger levels of economic activity leading to a rise in inflationary pressures. Unfortunately, this has yet to be the case. This is likely due to a monetary policy phenomenon known as a "liquidity trap" which is described as follows:
"A 'Liquidity Trap' is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in general price levels."
The problem for the Federal Reserve is that getting caught in a liquidity trap was not an unforeseen outcome of monetary policy, but rather an inevitable conclusion. As shown in the chart below of GDP, inflation and interest rates, each time the Fed has intervennd with monetary policies it has lead to lower rates of economic growth and lower rates of inflaton and interest rates. As stated, the current low levels of inflation, interest rates, and economic growth are the result of more than 30-years of misguided monetary policies that have led to a continued misallocation of capital.
For several years, there have been repetitive screams that inflation was imminent due to deficits, a fiat currency and expanding debt levels. Yet, the opposite has been true. The
by Zero Hedge - October 5th, 2015 4:29 pm
Submitted by Tyler Durden.
Several months ago activist Nelson Peltz may lost his proxy fight against DuPont, but in retrospect he may be counting his lucky stars as moments ago the company became only the latest chemical giant to admit the gruesome reality of the global economic slump driven by a historic USD surge, when it not only cut its second half operating EPS from $0.75 to $0.40, in the process also slashing full year operating EPS from a prior guidance of $3.10 to just $2.75 mostly blaming Brazil, but in an even bigger shocker also reported that its CEO and Chairman Ellen Kullman is retiring from the company effective October 16.
First, the reason for the dramatic guidance cut, from the company:
DuPont announced that it now expects operating earnings per share for the full year to be approximately $2.75, compared with the prior guidance of $3.10. The revised outlook primarily reflects continued strengthening of the U.S. dollar versus currencies in emerging markets, particularly the Brazilian Real; and a further weakening of agricultural markets, primarily in Brazil. The new guidance assumes full-year currency impacts of $0.72 per share, versus the prior expectation of approximately $0.60 per share. Excluding the impact of currency, the revised guidance for full-year operating earnings per share, including expected benefits from share repurchases and cost savings, represents an approximately 3 percent increase in operating earnings per share year over year. The company now expects second-half operating earnings per share to be approximately $0.40, compared with the prior guidance of $0.75. Approximately 25 percent of expected second-half operating earnings will be earned in the third quarter. Prior year operating earnings were $3.36 and $0.96 per share for the full year and second-half 2014, respectively. Reconciliations of non-GAAP measures are included at the end of this release.
Demand for crop protection and seed products, primarily in Brazil, further weakened in the third quarter impacted by macroeconomic and competitive pressures. In Brazil, where the planting season is in progress, tighter farmer profit margins and credit are causing growers to be more cautious in their spending. The company is experiencing reduced demand for crop protection products reflecting low insect pressure and lower seed volumes as growers are expected to reduce hybrid corn planted area.
The U.S dollar continues to strengthen versus currencies in emerging markets. The Brazilian Real
by Zero Hedge - October 5th, 2015 4:02 pm
Submitted by Tyler Durden.
Everything must be awesome, right!!!
This 5-day run is even bigger than the ramp off the October 2014 Bullard lows…
This is the biggest 2-day short-squeeze since October 2011 (the last time the market squeezed like this was after the Black Monday plunge… which saw new lows hit)
Volume was abysmal…
Across asset classes since Payrolls…
* * *
Off Friday's lows, the move in stocks is epic…
On the day, cash indices surged again… (note that S&P remains just shy of the 50-day moving average at 2000.25)..
But The Dow rallied back to its 50DMA…
As VIX was clubbed like a baby seal…5th day in a row… (biggest 5 day drop since mid July)
As USDJPY did the heavy-lifting..Spot The Difference..
Energy was the best-performing sector (most squeezed) as crude surged…
Notably, financial stocks bounce is entirely decoupled from credit markets…
While the broad credit market rallied, No deals priced in the high-yield market on Monday.
The primary market has been shut since September 25. Meanwhile spreads continue to widen. The average high-yield bond spread hit a new 2015 high of T+683bp.
The average spreads on Double B, Single "B" and Triple "C" rated credits hit new 2015 highs of T+477bp, T+700bp and T+1323bp, respectively. The high-grade and high-yield average spread differential hit a new 2015 high of 503bp.
Treasury yields continued to spike all day…
The USD was heavily bid during the US session after weakness again overnight…
Silver has been the biggest winner post-payrolls as Gold, Copper and Crude are all clustered around the same gains…
by Zero Hedge - October 5th, 2015 3:50 pm
Submitted by Tyler Durden.
There’s nothing like the comment section when it comes to Federal Reserve propaganda in the editorial pages of the Wall Street Journal. Liberty Blitzkrieg readers will remember the last time the WSJ published a disconnected piece of Central Bank stroking garbage from Fed propagandist John Hilsenrath, and the riotous anger which ensued in the comment section. If you missed it, I strongly suggest taking a read: “Revolution is Coming” – The Top 20 Responses to Jon Hilsenrath’s Idiotic WSJ Article.
Fast forward a few months, and here we have Ben “the courage to bail out billionaires” Bernanke writing an almost unreadable piece of propaganda in the WSJ titled “How the Fed Saved the Economy.”
At this point in a post I’d typically highlight the more egregious parts of an Op-Ed, but this one is so bad, so poorly written and completely uninteresting, there’s really no point. If you feel like wasting two minutes of your life go ahead and read it yourself, but it appears to me that it was put together in a couple of seconds by an intern instructed to boost book sales.
What’s far more interesting, is the comment section. Apparently there are 591 comments as of this writing, and if the first page is any indication, WSJ readers are not on the same page as Bernanke. And that’s putting it lightly.
So what do Americans think of our hero? Here are a few examples from the first page alone:
Thank you for your service Dr. Bernanke.
by Chart School - October 5th, 2015 3:28 pm
Courtesy of Declan.
A fresh day of gains keeps bullish momentum running in healthy action. The Dow was the first index to break past declining resistance established by July – August declining trendline. Volume also climbed to register accumulation.
This will help the Nasdaq 100 which is just shy of a test of declining resistance. It too enjoyed a day of bullish accumulation. Technicals are not as bullish, but they are improving.
The Russell 2000 had the most ground to make up as it’s the index which has consistently under-performed since July. While other indices have done well, a true bullish recovery will need leadership from this index, which hasn’t come yet.
The S&P broke from declining resistance, but not the key resistance level challenged and broken in the Dow.
Today knocked out a short position I took at resistance in the Dow. Intraday analysis shows an extended sequence of green candles, which suggests short covering, but it was enough to knock me out. Watch for a ‘bull trap’ in the Dow, although buyers will be finding confidence on what is increasingly looking like a double bottom.
You’ve now read my opinion, next read Douglas’ and Jani’s.