by ilene - November 25th, 2014 6:00 pm
Courtesy of Mish.
The cold war took another twist last week when a Senior German Politician Endorsed Russian Takeover of Crimea.
Former state premier Matthias Platzeck, chairman of the German-Russian Forum business lobby and erstwhile Social Democrat (SPD) chief, is the first high-ranking German to say the West should endorse the annexation as a way to help resolve the Ukraine crisis.
Platzeck, 60, told the Passauer Neue Presse newspaper: “A wise man changes his mind – a fool never will… The annexation of Crimea must be retroactively arranged under international law so that it’s acceptable for everyone.”
Platzeck, Brandenburg’s popular state premier from 2002 to 2013, struck a nerve in eastern Germany where there is far less support for sanctions against Russia than in the West.
“We have to find a resolution so that Putin won’t walk off the field as the loser,” said Platzeck, whose career was nurtured by ex-Chancellor Gerhard Schroeder – a friend of Putin. He said areas held by separatists will never be part of Ukraine.
Platzeck’s statement shocked a lot of people including German Foreign Minister Frank-Walter Steinmeier who stated Germany will Never Accept Crimea Annexation.
“We don’t accept what has happened and we don’t accept Europe’s borders being changed again 70 years after the war,” said Steinmeier.
Der Spiegel reports Cracks Form in Berlin Over Russia Stance.
A political solution is more distant than ever in the Russia conflict, with the German government and EU having exhausted their diplomatic options. A rift may now be growing between Chancellor Merkel and her foreign minister over Berlin’s tough stance against Moscow.
Dead End for Merkel
Today, Reuters reports Merkel Hits Diplomatic Dead-End With Putin.
Since February, when the pro-Russian president of Ukraine, Viktor Yanukovich, fled Kiev amid violent protests on the Maidan square, Germany has taken the lead in trying to convince Putin to engage with the West.
Merkel has spoken to him by phone three dozen times. Her Foreign Minister Frank-Walter Steinmeier, a member of the Social Democrats (SPD), traditionally a Russia-friendly party, has invested hundreds of hours trying to secure a negotiated solution to the conflict….
by ilene - November 25th, 2014 3:52 pm
By James Stafford of OilPrice.com
When it takes up to four million pounds of sand to frack a single well, it’s no wonder that demand is outpacing supply and frack sand producers are becoming the biggest behind-the-scenes beneficiaries of the American oil and gas boom.
Demand is exploding for “frac sand”--a durable, high-purity quartz sand used to help produce petroleum fluids and prop up man-made fractures in shale rock formations through which oil and gas flows—turning this segment into the top driver of value in the shale revolution.
“One of the major players in Eagle Ford is saying they’re short 6 million tons of 100 mesh alone in 2014 and they don’t know where to get it. And that’s just one player,” Rasool Mohammad, President and CEO of Select Sands Corporation told Oilprice.com.
Frack sand exponentially increases the return on investment for a well, and oil and gas companies are expected to use some 95 billion pounds of frack sand this year, up nearly 30% from 2013 and up 50% from forecasts made just last year.
Pushing demand up is the trend for wider, shorter fracs, which require twice as much sand. The practice of downspacing—or decreasing the space between wells—means a dramatic increase in the amount of frac sand used. The industry has gone from drilling four wells per square mile to up to 16 using shorter, wider fracs. In the process, they have found that the more tightly spaced wells do not reduce production from surrounding wells.
This all puts frac sand in the drivers’ seat of the next phase of the American oil boom, and it’s a commodity that has already seen its price increase up to 20% over the past year alone.
Frac sand is poised for even more significant gains over the immediate term, with long-term contracts locking in a lucrative future as exploration and production companies experiment with using even more sand per well.
Citing RBC Capital Markets, The Wall Street Journal noted that approximately…
by ilene - November 25th, 2014 3:49 pm
Courtesy of Mish.
Rents are up 6.5% in San Francisco, and 4.5% in numerous other cities. Is this a leading indicator for a stronger inflation as measured by the CPI.
Please consider the Variant Perception article Higher Rents in the US are a Strong Support for CPI.
Despite the subdued nature of US CPI, some large components are turning up. Owners’ equivalent rent and rent of primary residence, which together account almost of a third of the CPI basket, are turning up strongly. A low vacancy rate and a relatively resilient US economy is helping to drive rents higher, with San Francisco seeing the greatest rent increases, at 6.4% over the last year, and with many other cities, such as Nashville, Seattle, Denver and Houston, all seeing increases of over 4.5%
Furthermore, our leading indicator for US Shelter CPI, which includes apartment vacancy rates and the growth in the working-age population among its inputs, shows that the trend should continue. Higher rents are a strong support for headline CPI in the US.
Owners’ Equivalent Rent
Owners Equivalent Rent vs. CPI Shifted 18 Months
The red line in the above chart is not the CPI, but rather a “leading indicator for US Shelter CPI, which includes apartment vacancy rates”
I took the above chart, clipped out the red CPI line, made a layer out of it in Photoshop, and then shifted the line back 18 months with reduced opacity so you can see both lines. Here is my result.
Owners Equivalent Rent vs. CPI Shifted 18 Months and Not Shifted
by ilene - November 25th, 2014 2:09 pm
Courtesy of Joshua M Brown, The Reformed Broker
“You begin to believe your own responsibility to ‘get this guy’ – even though that’s complete bullshit….I think the Cramer thing was one of those that negatively impacted me like that because that came out of alchemy but it became such a big deal.”
– Jon Stewart on the The Howard Stern Show, 11/18/2014
Jon Stewart feels bad about the massive railroading that happened to Jim Cramer on The Daily Show in the aftermath of the crisis.
During an hour-long interview on the Howard Stern show this past week, Stewart and Stern got into a discussion about the trouble with viewer expectations that come along with doing a news show on important issues. Jon Stewart explains that it’s not really his role to have every moment be cathartic for everyone or for every interview to result in a gotcha moment. He brings up the Cramer example – wherein he essentially blamed a TV host for the entirety of the nation’s worst financial crisis in 70 years. In my book, Clash of the Financial Pundits, I take Jim’s side in calling the moment completely unfair, even though I’ve been a fan of The Daily Show and Jon Stewart’s since day one.
My take is that the people wanted blood and Jim basically served himself up for a crucifixion. Stewart had a target he could rage against who was willing to do it – but what The Daily Show didn’t count on was Jim Cramer not fighting back. The segment comes off as atrociously one-sided owing to Cramer’s lack of defense. This despite the fact that the Mad Money host is just one person and had absolutely nothing to do with the actual causes of the crisis in real life. Had Cramer pushed back and brought up his vigorously alerting the Federal Reserve to the markets’ problems in advance, it would have been entirely justified. But he didn’t bother. Like any trader, he saw what the story was on-set and simply cut his losses.
Full audio of the Howard Stern interview with Jon Stewart in the embed below, the Cramer stuff is discussed at the 35 minute mark.
by ilene - November 25th, 2014 1:02 pm
By John Mauldin
Russia and its redoubtable president, Vladimir Putin, have been much in the news lately. The latest flurry came when Putin was taken out behind the woodshed at the G20 conference in the Philippines last weekend over his recent moves to inject more Russian troops and arms into Ukraine.
For today’s Outside the Box we have two pieces that deliver deeper insights into the situation with Russia and Putin. The first is from my good friend Ian Bremmer, President of the Eurasia Group and author of Every Nation for Itself: Winners and Losers in a G-Zero World. You probably caught my mention of Ian’s presentation at the institutional fund manager conference where we both spoke last weekend. He had some unsettling things to say about Russia; and so when he followed up with an email to me on Monday, I asked if he’d let me share the section on Russia with you. Understand, Ian is connected, and so what you’re about to be treated to here is analysis from way inside. (He’ll be presenting at our Strategic Investment Conference again next April, too.)
Then we turn to a piece that my friend Vitaliy Katsenelson published last week in his monthly column in Institutional Investor. I need to preface this one by mentioning that Vitaliy was born in Murmansk, Russia, where he lived until age 18, when his family emigrated to the US. Fast-forward 23 years, and today Vitaliy is Chief Investment Officer for Investment Management Associates in Denver and author of the highly successful Active Value Investing: Making Money in Range-Bound Markets and The Little Book of Sideways Markets. That’s quite a journey, and Vitaliy has some very strong feelings about the country he left as well as the one he came to. In his intro to today’s piece he admits,
by ilene - November 25th, 2014 12:31 pm
Here's an interview with Jim Grant in the Graham & Doddsville newsletter, edited by the Students of Columbia Business School. The interview begins on page 1 and then continues on page 52: INTERVIEW WITH JAMES GRANT
G&D: Given the current state of the economy and the low interest rate environment, it sounds like you perceive risks that others do not. What facts, measures, or indications bother you most?
JG: Here’s a fact: China’s banking assets represent one-third of world GDP, whereas China’s economic output represents only 12% of world GDP. Never before has the world seen the likes of China’s credit bubble. It’s a clear and present danger for us all. And here’s a sign of the times: Amazon, with a trailing P/E multiple of more than 1,000, is preparing to build a new corporate headquarters in Seattle that may absorb more than 100% of cumulative net income since the company’s founding in 1994. Now, there are always things to worry about. Different today is the monetary policy backdrop. Which values are true? Which are inflated? In a time of zero percent interest rates, it’s not always easy to tell.
G&D: Where can the average investor find income?
JG: The average, risk-averse investor can’t. There’s none to be had, at least none in natural form. To generate yield, you must apply leverage. This is the stuff of businessman’s risk. A pair of examples: Annaly Capital Management (NYSE:NLY), a mortgage real estate investment trust, which changes hands at 83% of book value to yield 11.4%; and Blackstone Mortgage Trust (NYSE:BXMT), a new real estate finance company, which trades at 113% of book value to yield 6.43%. We judge both to be reasonable risks. More speculative, but—we think, also priced appropriately for the risk—are long-dated Puerto Rico general obligation bonds. The 5s of 2041 trade at 65.40 to yield a triple tax-exempt 8.18%. Widows and orphans stand clear.
G&D: What about the great debate over tapering?
JG: Grant’s is on record as saying that the Fed won’t taper. Or, that if it does taper, it will likely de- taper—i.e., reverse course to intervene once more— because the economic patient is hooked on stimulus.
The source of the Fed’s problem (which, of course, is everyone’s problem) is that there ought to be deflation. In a time of technological wonder, prices ought to fall, as they fell in the final quarter of the 19th century. As it costs less to produce things (and services), so it should cost less to buy them. In an attempt to force the price level higher by an arbitrary 2% a year, the central bank inevitably creates too much money. Those redundant dollars don’t disappear.
by ilene - November 25th, 2014 12:27 pm
Courtesy of Charles Hugh-Smith of OfTwoMinds
Playing monetary games has done nothing to eliminate moral hazard.
If we step back and look at the past six years since the global financial meltdown of 2008, we see that in terms of financial and political power, nothing has changed--and that's the problem. If nothing has changed structurally, then none of the problems that caused the meltdown have truly been addressed.
All that's changed is the vast expansion of monetary games has masked the dysfunctional reality that the same old vested interests that had a death-grip on wealth and power in 2008 have tightened their death-grip in the past six years.
Here's the problem facing every nation and trading bloc:
1. Vested interests institutionalized moral hazard, separating their gains from the consequences of taking risks. This is also known as privatized gains, socialized losses: vested interests reaped the gains from risky speculative bets, but then passed the staggering losses onto the central banks and taxpayers while keeping the gains.
2. The vested interests control the machinery of governance, so there is no way the central state will force the vested interests to absorb the losses that are rightfully theirs. Instead of de-institutionalizing moral hazard, governments have spewed thousands of pages of complicated regulations, in effect, grudgingly nudging the barn door half-closed after the horses of systemic risk galloped away in 2008.
3. With moral risk still institutionalized, nothing has changed: all the gains from subprime auto loans, selling sovereign bonds issued by insolvent governments, etc., are private, and all the risk is being transferred to the central banks and taxpayers.
The money-printing of quantitative easing--central banks printing money to purchase sovereign bonds and mortgages--is actually a form of money-laundering, as all this expansion of central bank balance sheets, debt and liquidity enables the vested interests to expand their control of the financial and political power centers at the expense of everyone else.
Take a look at the vast expansion of debt and the modest impact of that debt on GDP
Look at the unprecedented expansion of the Fed's balance sheet and ask cui bono-- to whose benefit?
by ilene - November 25th, 2014 11:15 am
Courtesy of Lee Adler of the Wall Street Examiner
The trend is your friend, but maybe not when it extends to meet a secular downtrend. That’s what the Consumer Conference Board’s ConsumerConfidence (aka the ConCon Con) Index showed today. It shocked Street conomists, whose consensus guesstimate was a reading of 96. Instead it came in at 87.
I see little value in this number. While the secular trend has been down for 14 years, reflecting ever worsening conditions for an increasing number of Americans, over the short to intermediate term the index follows stock prices. If memory serves, wasn’t there a sharp market break in October that had everyone in a panic? I suspect that this influenced the “consumers” who were surveyed by the Conference Board in early November.
The mainstream media dutifully reports this number as if it means something in the short run, and even occasionally will post a chart that goes back a few years showing the uptrend in place since 2009. But you almost NEVER see a long term chart in the Wall Street Journal, on Bloomberg, or CNBC. Gee I wonder if they’re trying to con us?
Consumer Confidence Long Term Trend- Click to enlarge
We should also note that the last two peaks in 2000 and 2007 coincided with stock market tops. Does slightly breaking this trend mean that we’ve broken out? Or is it just a little overshoot, a final burst of “optimism” before the secular trend reasserts itself. If the Con Con Con drops below 86 next month, that could be the ringing of the bell. We need not ask not for whom the bell would toll. It would toll for us.
Get regular updates on the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Click this link to try WSE's Professional Edition risk free for 30 days!
by ilene - November 25th, 2014 8:39 am
Courtesy of Pam Martens.
Last Thursday, the U.S. Senate’s Permanent Subcommittee on Investigations, chaired by Senator Carl Levin, released an alarming 396-page report that details how Wall Street’s too-big-to-fail banks have quietly, and often stealthily through shell companies, gained ownership of a stunning amount of the nation’s critical industrial commodities like oil, aluminum, copper, natural gas, and even uranium. The report said the scale of these bank holdings “appears to be unprecedented in U.S. history.”
Adding to the hubris of the situation, the Wall Street banks’ own regulator, the Federal Reserve, gave its blessing to this unprecedented and dangerous encroachment by banking interests into industrial commodity ownership and has effectively looked the other way as the banks moved into industrial commerce activities like owning pipelines and power plants.
For more than a century, Federal law has encouraged the separation of banking and commerce. The role of banks has been seen as providing prudent corporate lending to facilitate the growth of commerce, not to compete with it through unfair advantage by having access to cheap capital from the Federal Reserve’s lending programs. Additionally, the mega banks are holding trillions of dollars in FDIC insured deposits; if they experienced a catastrophic commercial accident through a ruptured pipeline, tanker oil spill, or power plant explosion, it could once again put the taxpayer on the hook for a bailout.
The Levin report addresses the element of catastrophic risk, noting:
“While the likelihood of an actual catastrophe remained remote, those activities carried risks that banks normally avoided altogether. Goldman, for example, bought a uranium business that carried the risk of a nuclear incident, as well as open pit coal mines that carried potential risks of methane explosions, mining mishaps, and air and water pollution…Morgan Stanley owned and invested in extensive oil storage and transport facilities and a natural gas pipeline company which, together, carried risks of fire, pipeline ruptures, natural gas explosions, and oil spills. JPMorgan bought dozens of power plants whose risks included fire, explosions, and air and water pollution. Throughout most of their history, U.S. banks have not incurred those types of catastrophic event risks.”
by ilene - November 25th, 2014 6:58 am
Submitted by Tyler Durden.
Protests have gone nationwide
New York Live Feed:
BREAKING NEWS: PROTESTERS HAVE JUST SHUT DOWN THE BROOKLYN BRIDGE IN ADDITION TO THE MANHATTAN & TRI-BORO BRIDGES – http://t.co/cFfxvUcVgR
— PzFeed Top News (@PzFeed) November 25, 2014
against historical judgement, the march attempts to cross the Triborough Bridge pic.twitter.com/iMwnsYFD0r
— mask magazine (@mask_mag) November 25, 2014
— OG (@BeenThugN__) November 25, 2014
And in LA… blocked I-10
— Brendon Geoffrion (@tvbrendon) November 25, 2014
— Breaking Headlines (@WorldUSNews) November 25, 2014
Oakland protest gettng violent… and have blocked I-580
— Ryan Flinn (@RS_Flinn) November 25, 2014
— OaklandMofo (@OaklandMofo) November 25, 2014
And Ferguson is in flames…
BREAKING NEWS: Police officer shot in University City near Ferguson, condition