Crude Oil vs. Iran: Who Blinks First?
by ilene - February 23rd, 2012 12:07 am
Courtesy of www.econmatters.com.
By EconMatters
Oil futures spiked more than 2% in one day to their highest level in nine months on Tuesday Feb. 21. WTI front month contract closed at $105.84, while Brent ended at $121.66 on ICE, primarily on investors fear of potential conflict over the escalating tensions between the US, Europe, Israel, and Iran. A second Greek bailout deal of €130bn (£110bn; $170bn) also helped to inject some optimism into the market (which would seem totally mis-placed as we may need to relive this Greek drama in two years). Nevertheless, the fact remains crude oil market supply and demand has not changed a bit to warrant a 2%+ price jump in one day.
The U.S. and its allies believe Iran is building nuclear weapons, which Tehran has vehemently denied. Last week, the European Union (EU) imposed a ban on Iran oil imports effective July 1, and froze the assets of its central bank. In December, the U.S. said it would “blacklist” companies in the U.S. market if they do business with Iran’s central bank.
In retaliation, over the weekend, Iran announced that it halted oil exports to France and the United Kingdom and warned European companies that it would halt their supplies unless they sign long-term contracts. However, France and UK do not import a significant portion of crude oil from Iran, and Europe could most likely still get alternative crude supplies from other sources like Saudi, or Russia.
Despite Iran oil ministry spokesman Alireza Nikzad’s statement that “we will sell our oil to new customers,” according to Financial Times, Tehran is “struggling” to find a new buyer for the estimated 500,000 barrels of oil per day left as surplus from its decision to halt sales to France and the UK. And another Reuters report quoting commodities traders that
“Iran is turning to barter – offering gold bullion in overseas vaults or tankerloads of oil – in return for food as new financial sanctions have hurt its ability to import basic staples for its 74 million people….Difficulty paying for urgent import needs has contributed to sharp rises in the prices of basic foodstuffs, causing hardship for Iranians.”
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DiggDavid Rosenberg On Taxation-Shock-Syndrome
by ilene - February 21st, 2012 10:07 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
While nothing is more certain than death and taxes (and central bank largesse), David Rosenberg of Gluskin Sheff uncovers The Unlucky Seven major tax-related uncertainties facing households and businesses that will likely lead to multiple compression in markets (rather than the much-heralded multiple expansion 'story' which appears to have topped the talking-head charts – just above 'money on the sidelines' and 'wall of worry', as 'earnings-driven' arguments are failing on the back of this quarter). As he notes the radically changed taxation climate in 2013 and beyond will have an impact on all economic participants as they will probably opt to bolster their cash reserves in the second half of the year in preparation for the proverbial rainy day.
First, the top marginal personal tax rate rises to 39.6% from 35% as the Bush tax cuts expire at the end of 2012.
Second, a limit on itemized deductions will add a further 1.2 percentage points to the top rate.
Third, a new 0.9% Medicare tax on incomes over $200,000 gets imposed ($250,000 for joint filers).
Fourth, the top 15% rate on long-term capital gains rises to 20%.
Fifth, dividends will once again be taxed at ordinary rates — 39.6% for the top income earners.
Sixth, a new 3.8% tax on investment income gets introduced for incomes over $200,000 ($250.000 for joint filers).
Seventh, the top estate tax rate goes from 35% to 55% (60% in some cases). The estate tax exemption falls to $1 million from $5 million (the gift-tax exemption also drops to $1 million and the rate adjusts hither to 55%).
Forty-one separate tax provisions expire this year — see page 32 of the Economist. Of course, there is always the chance that after the November 6th election, a Congress that can never seem to allow anything temporary to meet its expiry date will pass an extension — for more on all this, see More Uncertainty for 2013 on page B9 of the Weekend WSJ.
“The Straits of America”
by ilene - February 21st, 2012 6:18 pm
By Nouriel Roubini, Project Syndicate
NEW YORK – Macroeconomic indicators for the United States have been better than expected for the last few months. Job creation has picked up. Indicators for manufacturing and services have improved moderately. Even the housing industry has shown some signs of life. And consumption growth has been relatively resilient.
Illustration by Newsart
But, despite the favorable data, US economic growth will remain weak and below trend throughout 2012. Why is all the recent economic good news not to be believed?
First, US consumers remain income-challenged, wealth-challenged, and debt-constrained. Disposable income has been growing modestly – despite real-wage stagnation – mostly as a result of tax cuts and transfer payments. This is not sustainable: eventually, transfer payments will have to be reduced and taxes raised to reduce the fiscal deficit. Recent consumption data are already weakening relative to a couple of months ago, marked by holiday retail sales that were merely passable.
At the same time, US job growth is still too mediocre to make a dent in the overall unemployment rate and on labor income. The US needs to create at least 150,000 jobs per month on a consistent basis just to stabilize the unemployment rate. More than 40% of the unemployed are now long-term unemployed, which reduces their chances of ever regaining a decent job. Indeed, firms are still trying to find ways to slash labor costs.
Keep reading: "The Straits of America" by Nouriel Roubini | Project Syndicate.
Natural Gas: Will The Recent Rally Change The Bear Course?
by ilene - February 21st, 2012 7:41 am
Courtesy of www.econmatters.com.
By EconMatters
The Chess Game with Iran
by ilene - February 21st, 2012 2:12 am
The Chess Game with Iran
Courtesy of Russ Winter of Winter Watch at Wall Street Examiner
The western embargo against Iran’s oil seems to be running into a buzz saw. The success of any embargo will be conditioned on two variables: 1) whether Saudi Arabia can quickly ramp up production to meet European demand, and 2) whether China and Japan will cooperate. Now, after a two-week delay, Iran is making its own chess move by cutting off supplies to French and British oil companies. With a full European embargo now in effect, the final blow will be delivered by Iran itself. AP reports that Asia has given Europe and the U.S. a “polite” bush off, with China going so far as to increase Iranian imports.
It should be pointed out that when Libya shut down production, the Saudis took it as an opportunity to game the market and little else. Forcing higher production also comes with costs, namely it harms the oil fields. Added production would also involve heavy crude, which the market doesn’t really want. Furthermore, Saudi production is already near full capacity. Finally, shipping 0.6 Mb/d more per day to Europe will involve passage through the Strait of Hormuz, and that would be a direct affront to Iran and something Saudi Arabia might wish to avoid. One of the many under-reported stories in the West is that the Saudis have already made special arrangements to send 100% of their contracted oil to Japan and China. So it appears that the argument that Saudi Arabia will simply ramp up output to meet European demand is nothing more than cheap talk by spin doctors.
With oil spiking once again on these developments, the timing of the latest story of an LTRO bazooka couldn’t be more stunning. Besides shooting itself in the foot, Europe may now be setting up to blow its head off by delivering a new large round of LTRO so that speculators can run amok in the energy markets. Expanding the availability of cheap credit right now in exchange for toxic assets strikes me as the height of folly.
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Halftime in America? More like sudden death
by ilene - February 21st, 2012 1:00 am
By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) — Halftime in America, Clint Eastwood calls it. Halftime? No folks, the game’s in overtime for Wall Street, the Super Rich and their “mutant capitalism,” as Jack Bogle calls America’s out-of-whack economic system in his “Battle for the Soul of Capitalism.”
It’s an economy so distorted we’re creating an ever-widening inequity gap bigger than the one that ignited the 1929 Crash and Great Depression.
Auto-industry Super Bowl ads score
For the second year in a row, Chrysler won over audiences during the Super Bowl with an emotional commercial.
Worse, Clint’s game metaphor from his talked-about Super Bowl ad only fits if we shift from games like football to Wall Street’s casino gambling and games like derivatives trading, where the house always wins.
Keep reading: Halftime in America? More like sudden death – Paul B. Farrell – MarketWatch.
The Torture of the European Periphery
by ilene - February 21st, 2012 12:36 am
Courtesy of The Automatic Earth
Lewis Wickes Hine Breaker Boys January 1911 South Pittston, Pa. "Breaker boys working in Ewen Breaker of Pennsylvania Coal Co."
The President of the European Central Bank, Mario Draghi, looks more and more like the bad guy from the B-rated horror movie series Saw with every passing day. Jigsaw was his name. Or maybe I should say "is" his name, because that series apparently never ends just like the tortured European sovereign debt and banking crises. For those unfamiliar, the premise behind the movie was that Jigsaw would create extremely uncomfortable situations for people, both psychologically and physically, and then watch how they react.
It started off with people who had to saw off their arms, gouge out their eyeballs or murder another person to escape from some sort of death trap. The second movie made the scenarios more complex and had people shoving other people into pits full of dirty needles to reach a key that unlocks a door in a house that leads to yet another booby-trapped room. There were another five or six movies after that one which I didn’t feel inclined to watch, but I imagine the premise didn’t change much.
It was all originally supposed to be about an old cancer patient (Jigsaw) who teaches others about the true value of life in clever ways, but was really just about another pathetic, sadistic man who manufactures impossible situations and gets off on watching other people suffer. Sounds a lot like what’s going on in Europe, huh? By now, everyone and their pet dogs are familiar with the pan-European motto – AUSTERITY OR DIE!
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Meaningless Greek Deal Supposedly Reached; Deal Won’t Hold
by ilene - February 21st, 2012 12:13 am
Courtesy of Mish
Reuters reports Deal reached on second Greek bailout package
Euro zone finance ministers struck a deal early on Tuesday for a second bailout program for Greece that will involve financing of 130 billion euros and aims to cut Greece's debts to 121 percent of GDP by 2020, EU officials said.
"The financial volume (of the Greek package) is 130 billion euros and debt-to-GDP (will be) 121 percent. Now it's down to work on the statement," one official involved in the negotiations told Reuters.
Another official confirmed that the financing would total 130 billion euros with the aim of reducing Greece's debts from around 160 percent of GDP now to 121 percent by 2020.
Deal Won't Hold
Even if true, the deal won't last. It may not even last a month. In fact, it may be nothing but a setup to convince Greeks to leave their money in banks.
Greek Debt Nightmare Laid Bare
Please consider Greek Debt Nightmare Laid Bare
A “strictly confidential” report on Greece’s debt projections prepared for eurozone finance ministers reveals Athens’ rescue programme is way off track and suggests the Greek government may need another bail-out once a second rescue – set to be agreed on Monday night – runs out.
The 10-page debt sustainability analysis, distributed to eurozone officials last week but obtained by the Financial Times on Monday night, found that even under the most optimistic scenario, the austerity measures being imposed on Athens risk a recession so deep that Greece will not be able to climb out of the debt hole over the course of a new three-year, €170bn bail-o
It warned that two of the new bail-out’s main principles might be self-defeating. Forcing austerity on Greece could cause debt levels to rise by severely weakening the economy while its €200bn debt restructuring could prevent Greece from ever returning to the financial markets by scaring off future private investors.
A “tailored downside scenario” in the report suggests Greek debt could fall far more slowly than hoped, to only 160 per cent of economic output by 2020 – well below the target of 120 per cent set by the International Monetary Fund. Under such a scenario, Greece would need about €245bn in bail-out aid, far more than the €170bn under the “baseline” projections eurozone ministers were using in all-night negotiations
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Prions point to a new style of evolution
by ilene - February 20th, 2012 9:54 pm
This is interesting, on prions (remember mad cow disease?).
THE rogue proteins behind variant CJD, the human form of mad cow disease, have revealed their benign side. Prions, it seems, lie at the heart of a newly discovered form of near-instant evolution that provides life with a third way to adapt to potentially lethal environments. Crucially, it involves neither genetic nor epigenetic changes to DNA.
The conventional view is that new traits can only evolve if DNA itself changes in some way. The classic way to do this is by mutating the genetic code itself. More recently, researchers have discovered that molecules can clamp onto DNA and prevent some parts of the sequence from being read, leading to genetic changes through a process that is known as epigenetics.
Yeast breaks the mould. In challenging conditions, it can instantly churn out hundreds of brand-new and potentially lifesaving proteins from its DNA, all without changing the genes in any way. Instead, yeast alters the way genes are read. The tiny fungi convert a special type of protein called Sup35 into a prion.
Keep reading: Prions point to a new style of evolution – life – 15 February 2012 – New Scientist.
Greek Headline Reality Check
by ilene - February 20th, 2012 9:58 am
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
Mainstream media is desperately scrambling to fill copy with stories of collaboration, rescue, heroism, sacrifice, and altruism among the European leaders. The dismal reality facing real people and real participants is quite different and as Peter Tchir points out "How many 'untruths' have become so accepted that they are now treated as facts or axioms". In an effort to get to the facts and reality, we disentangle Bloomberg's 'Greek Rescue' story and note the increasingly Orwellian nature of the events unfolding across the pond.
From Peter Tchir,
What grade should this paper "Greek Rescue Close as Ministers Meet to Resolve Disputes" receive? How many "untruths" have now become so accepted that they are now treated as facts or axioms.
The "Greek Rescue" in the headline is funny. Why is this a "rescue"? What are they being "rescued" from? Has any laid out what a debt free Greece would look like? What Greece would be able to do? Where Greece could raise money once defaulting? No. So maybe the "rescue" is worse than what would actually happen. I haven't seen any actual evidence to the contrary, but politicians have said over and over it would be bad, so it must be true? Yes, everything politicians say over and over to push through their own agenda must be true.
The first sentence states that "officials are attempting to fend off the euro area's first sovereign default". Really? If PSI is successful, 100 billion euros of debt will be wiped clean. Not paid. I searched a few definitions of default, but pretty much they all say not paying is default. So it is a default. The rating agencies are correct to call it a default. It may or may not turn out to be a CDS Credit Event, but it is definitely a default. Why pretend it isn't? It is a default with a recovery of less than 50%. Why is it not being called what it is? Explain how the PSI isn't a default? It might be orderly, it might be voluntary, but it is still a default.
"Merkel, Papademos, and Italian premier Mario Monti" expressed….Why those 3? Because Merkel got the other two their jobs? Maybe that doesn't have to be mentioned each time they are quoted, but it does seem like an…
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