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Wednesday, October 22, 2014

The Flat Debt Society
By: John Mauldin

International Monetary Fund chief Christine Lagarde says the global economy is facing “the risk of a new mediocre, where growth is low and uneven.”…  Lagarde said Europe's 18-nation bloc that uses the euro currency – collectively the world's biggest economy – is facing the "not insignificant" risk of falling back into a recession. (VOA News)

Since at least the beginning of 2006, the most asked question I get after a speech is “Do you think we will have inflation or deflation?” In an attempt at humor, my answer has been “Yes.” I go on to try to explain that we are in a deflationary environment, but eventually we will see inflation. When QE1 was announced, there were many pundits (none of the Keynesian variety) who immediately said the risk was for significant inflation, and there were even those (like Peter Schiff) who talked of hyperinflation and the demise of the dollar. Interest rates would rise, and US government bonds would collapse.

My response at the time was that the Federal Reserve would print more money than any of us could possibly imagine (and who imagined $3+ trillion?), and we would not see any inflation. My reasoning was that we were in a deleveraging world where the velocity of money was clearly falling. I explained – once again – the relationship between inflation and the velocity of money.

Beginning with last week’s letter, “Sea Change,” my answer to that question for the foreseeable future will be simply, “Deflation.” In Endgame Jonathan Tepper and I described the economic environment of a deleveraging world, especially that of Europe. In Code Red we described the coming world of currency wars, with Japan having fired the first shot. Sadly, we continue to see the themes of those books play out in the real world.

Over the coming months we are going to explore the implications of a rising dollar for equity markets, global trade, commodity prices (especially oil), interest rates, and Federal Reserve policy, just to mention a few of the areas that will be impacted as global currency flows shift and protectionism is on the rise. Not all markets and governments will be affected in the same way, and there will be any number of opportunities for investors who are willing to think outside of the status quo.

In this week’s letter we’re going to explore some of the implications of deflation. We will start with an internal client letter from my friend Charles Gave that deserves to be shared. Then we’ll explore a few thoughts on the velocity of money. I should note that I am deeply indebted to Dr. Lacy Hunt for my understanding of the velocity of money. To the extent I get things right it is because of his frequent and long-suffering help, and if I get something wrong it’s because I didn’t understand the things he said correctly or couldn’t communicate them properly. These two men, both of whom I think of as mentors and statesmen, have had a huge impact on my thinking. The fact that they both talk with deeply resonating basso profundo voices that remind me of the voice of God in a movie soundtrack may have something to do with that impact! In any case, it lends an air of authority to their musings. Charles even has the long flowing white hair. (Thanks to David Hay for sending me the following note from Charles.)

JAPAN "IS" Totally SCREWED in 2015!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

BOJ Downgrades View of One Regional Economy

Revision Is First Lowering to Any Region Since Kuroda Took Office in Spring 2013
By Takashi Nakamichi

TOKYO—The Bank of Japan cut its view of one of the nation’s nine regional economies Monday, the first downgrade to any region since Gov. Haruhiko Kuroda took office in the spring of 2013.

In its once-a-quarter report on regional economies, known as the “sakura” report, the BOJ lowered its assessment of the economy of the Tohoku area in the northern part of Japan’s main island of Honshu. The economy there is “recovering moderately,” the BOJ said, a change from its wording that the region was continuing to “recover” in the previous report in July.

While the revision wasn’t dramatic and wasn’t likely to have much immediate impact on the central bank’s monetary policy, the latest report marked a change from the previous six sakura reports released under Mr. Kuroda’s leadership, in which no regions were downgraded.

Weak Yen’s Tap on Worker Wallets Fuels Debate: Chart of the Day
By Andrea Wong

A 26 percent depreciation of the yen versus the dollar in the past two years has boosted Japanese companies’ profits while hurting workers’ purchasing power, intensifying debate among officials on policies to increase inflation.

The upper panel of the CHART OF THE DAY shows the drop in Japanese households’ real disposable income has accelerated since the start of the year. Corporations’ operating profits have climbed as the yen has weakened, shown in the lower panel. The chart is based on government data, and 50-day moving averages were used to accentuate the trends.

“Real disposable income is weakening,” Hans Redeker, London-based head of global currency strategy at Morgan Stanley, said in a phone interview. “The government is very worried what the decline in real disposable income does to the approval rating at a time when reform is required. It definitely is the reason why we’ve seen a significant change in the rhetoric of the Japanese authorities.”

Abenomics fan: Delay tax hike

Kozo Yamamoto, a ruling party lawmaker, backed additional easing by the Bank of Japan in response to what he called a "very alarming" economic slowdown. He also wants a delay in a 2nd tax hike tentatively scheduled for late '15, reversing his prior call for PM Shinzo Abe to proceed. Japan's economy is struggling to recover from the 1st sales tax hike in April. Yamamoto is one of the policymakers most responsible for "Abenomics."

Japan department store sales fall 0.7% in September
Kyodo News International

Japan's department store sales in September decreased 0.7 percent from a year earlier on a same-store basis, marking the sixth straight month of decline, an industry body said Monday.

Sales totaled 440.68 billion yen at 240 stores operated by 84 companies in the reporting month, according to the Japan Department Stores Association.

The association said September had one fewer Sunday than a year before and sales were also affected by a typhoon in late September.

Shaky Japanese economy hit by growing trade deficit

TOKYO: Japan’s shaky economy was dealt another blow Wednesday, as official data showed a widening September trade deficit that puts the world’s number-three economy on track to log a record annual shortfall.

The worse-than-expected deficit of 958.3 billion yen comes on the back of a string of weak figures and a sharp contraction in the second-quarter, which raised fears that a recovery in Japan’s economy has been derailed. The latest numbers translated into a trade deficit of 10.47 trillion yen for the first nine months of the year, a 35 percent leap from a year ago.

APEC warns of growing 'downside risks' for global economy
Yonhap News Agency

BEIJING, Oct. 22 (Yonhap) -- The already-fragile global economic recovery is uneven and "downside risks" have increased, Asia-Pacific finance ministers warned Wednesday, saying they will continue to "flexibly" implement fiscal policies to help tackle global economic worries.

The warning came as finance ministers or their deputies from the 21 member economies of the Asia-Pacific Economic Cooperation forum ended their one-day meeting, weeks before Chinese President Xi Jinping is set to host the APEC's annual summit meeting in November.

"As the global economy still faces persistent weakness in demand, growth is uneven and remains below the pace necessary to generate needed jobs, and downside risks have risen," said a statement released by the APEC finance ministers' meeting at the Diaoyutai State Guesthouse in western Beijing.

Kyle Bass Japan......................................Abenomics has FAILED!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

First Comes the ""GROWTH Recession"" THEN the MOTHER of ALL ""GLOBAL RECESSIONS""!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 
Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear

Editor's note: With permission, the following article was adapted from the October 2014 issue of The Elliott Wave Financial Forecast, a publication of Elliott Wave International, the world's largest market forecasting firm. You may review an extended version of the article for free here.

In February, The Elliott Wave Financial Forecast discussed the great boom in New York City's residential real estate and its keen resemblance to what happened in 1929, when the demand for luxury housing also spiked to previously unseen heights. At 133 East 80th Street, we found this plaque commemorating the earlier era's brick-and-mortar monuments to a Supercycle degree peak in social mood.

The plaque went up in 2010, demonstrating the strength of the bullish echo from the end of Supercycle wave (III) to the final after-effects of Supercycle wave (V). Another link to the prior manic era is that many of Rosario Candela-designed apartment towers from the 1920s have become "some of New York's most coveted addresses." As architectural historian Christopher Gray puts it, Candela is now Manhattan real estate brokers' "name-drop of choice. Nowadays, to own a 10-to 20-room apartment in a Candela-designed building is to accede to architectural as well as social cynosure."

Of course, the most brilliant stars in the New York skyline are those that sell for the highest prices, and that honor belongs to the brand new penthouses that the Financial Forecast talked about in February. Most are popping up along the rim of Central Park, forming a ring of cloud-topping towers that will be so pronounced it is already called Billionaires' Row.

Here is a short video that shows two of them as they were topped off in February.

Currency Wars Evolve With Goal of Avoiding Deflation
By David Goodman, Lucy Meakin and Ye Xie

Currency wars are back, though this time the goal is to steal inflation, not growth.

Brazil Finance Minister Guido Mantega popularized the term “currency war” in 2010 to describe policies employed at the time by major central banks to boost the competitiveness of their economies through weaker currencies. Now, many see lower exchange rates as a way to avoid crippling deflation.

Weak price growth is stifling economies from the euro region to Israel and Japan. Eight of the 10 currencies with the biggest forecasted declines through 2015 are from nations that are either in deflation or pursuing policies that weaken their exchange rates, data compiled by Bloomberg show.

“This beggar-thy-neighbor policy is not about rebalancing, not about growth,” David Bloom, the global head of currency strategy at London-based HSBC Holdings Plc, which does business in 74 countries and territories, said in an Oct. 17 interview. “This is about deflation, exporting your deflationary problems to someone else.”

Bloom puts it in these terms because, when one jurisdiction weakens its exchange rate, another’s gets stronger, making imported goods cheaper. Deflation is a both a consequence of, and contributor to, the global economic slowdown that’s pushing the euro region closer to recession and reducing demand for exports from countries such as China and New Zealand.

Bloom Says Dollar to Gain as Deflation Exported

Oct. 21 (Bloomberg) -- David Bloom, the global head of currency strategy at HSBC Holdings Plc, said the U.S. dollar is set to benefit as economies from the euro area to Israel and Japan seek to export their deflationary problems. He spoke to Bloomberg's Priyanka Sharma on Oct. 17

The Death Rattle Of Europe’s Statist Dream

Rick Ackerman: Europe’s all-too-predictable relapse into recession is gathering force, threatening not only the pipe dream of economic and political unity, but eroding grandiose illusions that have helped prop up the world’s financial house of cards. The unwillingness of France in particular to play by the EU’s — i.e.,  Germany’s — rules appears to have doomed the EU dream.

The idea of a borderless Europe bound by a common currency and a shared desire to forever banish war from the Continent was a lofty one, but it was mired from the start in deeply rooted political animosities, grass-roots skepticism and bureaucratic overreach.

Now these problems, along with a great many others, have turned the EU project into a Tower of Babel. A million pages of meticulously codified EU rules might as well have been written in cuneiform, so inscrutable and arcane have they become. 

Debt and deflation make for a toxic mix
BY Maximilian Walsh

One of Britain’s largest banks, HSBC, is offering its customers housing mortgages carrying a rate of just 0.99 per cent.

There are a few catches. The loan-to-value ratio has to be at least 40 per cent. The mortgage rate has a duration of only two years after which it will revert to the bank’s standard variable rate of 3.94 per cent. The set-up fee is also a hefty £1999 ($3700). Even so, it’s quite a deal.

That rate on a maximum mortgage of £500,000 would cut the servicing cost on the old rate by more than £11,000 a year.

Meanwhile, across the Atlantic, mortgage-finance giants Fannie Mae and Freddie Mac are considering a programme that would make it easier for lenders to offer mortgages with a down payment as small as 3 per cent.

If you think you have heard the story of the finance-based, housing-led recovery that was the ideal medicine for an economy under stress, you are correct.

A property boom underwritten by high leverage and/or low mortgage entry rates will collapse suddenly, ensuring a slow recovery.

In Australia our banks have become little more than building societies. That sounds as though our banks have become less important than was the case in the past. The reality is just the opposite. The banks have positioned themselves to dominate the fastest-growing sector of an economy that is becoming more and more “financialised”.

As Oil Prices Fall, Global Tensions Rise
By Phil Flynn

Bullish and bearish forces are slugging it out in the oil complex and something has to give. On one hand, Russia seemed to move the goalpost on an expected gas deal with Ukraine while the European Central bank is leaking stories that they may be in the market to buy cooperate bonds in an effort to thwart deflationary forces that have plagued the Eurozone.

The sharp drop in oil prices as well as an economic slowdown in Europe, in particular Germany, is creating tension between Prince Al Waleed bin Talal, and Saudi Oil Minister Ali al-Naimi that seemed to reach a fever pitch on the Opening Bell with Maria Bartiromo. For oil today it is about supply and demand but it is also about the rising specter of deflation. The Consumer Price Index and the Energy Information Administration will be the deciding factors today.

Reuters is reporting that the European Central Bank is considering buying corporate bonds to help stimulate the economy. The EU is denying the report but if true it would weaken the Euro and put more downside pressure on Europe especially with most Fed moviemakers in the U.S. saying they are still going to end QE. That great divide in interest rate expectations has been one of the bearish forces that have helped oil lose almost 20% of its value since last June.

U.S. Housing...........................Now comes the CORRECTION!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Currency Crisis

DEFLATION...................................Your Worse NIGHTMARE "IS" Coming!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

EUROPE..............................Totally SCREWED for the REST of this DECADE!!!!!!!!!!!!!!!!!!!!!!!!! 

Crude Oil Prices

The Coming CORRECTION "IS" going to be FRICKING BRUTAL!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

READ America!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Jim Chanos: Petrobras Is a Scheme

Oct. 20 (Bloomberg) -- Jim Chanos, President and Founder of Kynikos Associates, speaks with Bloomberg's Stephanie Ruhle at the Robin Hood Investors Conference in New York. They speak on Bloomberg Television's "Street Smart." 


Moody's Downgrades Petrobras' Rating




Five days ahead of the presidential election, the rating agency Moody's decided to reduce Petrobras' rating, the Brazil's largest state-owned company.

The rating measures the ability of a company to pay its debts and serves as a guide for investors.

Although rating agencies have made some mistakes during the 2008 global crisis, lower grades, given by the agency, tend to keep investors away and bring down stock prices.

In a statement, Petrobras said investment rating - which means a good payer designation- was kept the same for the state-owned company.

Petrobras' was downgraded from Baa1 to Baa2, considered average, and a negative outlook was placed (a new downgrade could occur).

In order to lose the investment rating, the company needed to lose two more grades: Baa2 and Baa3.

The reason for the downgrade was the high debt of the state-owned company which makes it more difficult to manage with the drop in oil prices.

For the agency, Petrobras' ability to honor its debt has worsened in recent weeks, after the oil dropped, the lowest in four years.

Petrobras' downgrade was announced after Stock Market closing and it should only impact the markets on Wednesday (22).

Petrobras Cut by Moody’s as Oil Slump Dims Debt Outlook
By Peter Millard and Sabrina Valle

Petroleo Brasileiro SA (PETR4), the most indebted publicly-traded oil company, had its rating lowered by Moody’s Investors Service as lower prices and local currency weakness inhibit its capacity to rein in leverage levels.

The classification was reduced one step to Baa2, the second-lowest investment grade and in line with the rating for Brazil’s government debt. The outlook is negative, Moody’s said today in a statement.

The Rio de Janeiro-based producer’s debt increased $25 billion in the first half of this year to $170 billion, pushing the ratio of total debt to adjusted earnings to 5.3 times, Moody’s said. The company’s earnings are hampered by its inability to raise local prices for oil products, Moody’s said.

Brazil Stocks Sink As Jim Chanos Slams Petrobras
By Kenneth Rapoza

Sometimes all it takes is a celebrity investor to say something bad about a market and the investor riff-raff go running for the door. On Monday, famed investor and regular CNBC guest Jim Chanos said Brazilian state owned oil company was not an investment, but an investment scheme. He was referring to what most Petrobras watchers already know — that the company is used by the government as a revenue stream, and as a means to control inflation as it keeps a lock on gasoline prices.

Chanos said this on a day when Petrobras shares had down their usual mega-drop, falling 6% in a day. Less than 12 hours later, the stock opened 6% lower on Tuesday following Chanos’ guidance.  He’s laughing all the way to the bank this week.

And while every broker and trader on the Bovespa floor in São Paulo needs something to tell newswire reporters about the wild drop in Brazilian equities today, it is very unlikely that the recent poll by Datafolha showing incumbent Dilma Rousseff neck and neck with challenger Aécio Neves is any reason for investors to sell Brazil.  Business Insider gets it. Linette Lopez wrote in a headline today that Chanos Tanked Brazil.

Brazil Fixated as 'Human Bomb’ Revelations Rock Elections
By Sabrina Valle and Juan Pablo Spinetto

When in April 2012 Paulo Roberto Costa was eased out of his job as the refinery chief for Brazil’s Petroleo Brasileiro SA (PETR4), the state-run oil giant, it was treated as a routine shakeup, with Chief Executive Officer Maria das Gracas Foster praising him as a “dear colleague” who would be “hard to replace.”

Costa, who was also a company director, seemed unruffled. Within months, he had set up a consulting company in Rio de Janeiro’s up-and-coming Barra de Tijuca beach district, with ambitions to raise about $120 million to build a shipyard and marine repair terminal.

This would be a family affair. During a champagne party to celebrate, he showed reporters the tidy office –- holding mementos from his 35 years at the company known as Petrobras –- that he said his wife had decorated and that he planned to share with one of his two daughters who would work alongside him.


Just Another ""WTF"" Moment from the Obama White House!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 

Attention to ALL Global Terrorists, Obama "IS" ready to handout Green CARDS to Anyone coming across the Mexican Boarder so I suggest You All head to Mexico and WHO Knows what American City You'll end up being Relocated to at American Taxpayer's Expense!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

America, ""***WAKE the FUCK UP***""!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

ISIS Taking Terror back to the Days of the First CRUSADE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Come at YOU America!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 

US gov't seeks supplies for immigration documents

WASHINGTON (AP) — The Homeland Security Department appears to be preparing for an increase in the number of immigrants living illegally in the country to apply for work permits after President Barack Obama announces his long-promised plans for executive actions on immigration reform later this year.

U.S. Citizenship and Immigration Services confirmed to The Associated Press that it has published a draft contract proposal to buy the card stock needed to make work permits and Permanent Resident Cards, more commonly known as green cards. The proposal calls for providing material for at least 5 million cards a year, with as many as 9 million "during the initial period ... to support possible future immigration reform initiative requirements." The contract calls for as many 34 million cards over five years.

Green cards on the table

President Obama lets slip his scheme for a permanent majority
Thw Washington Times

The White House intended to remain silent about its plans for immigration. Revealing a scheme to open the floodgates of amnesty would be disastrous on the eve of the critical midterm elections. But this is the gang that can’t shoot straight.

The U.S. Citizenship and Immigration Services on Friday threw open the door to as many as 100,000 Haitians, who will now move into the United States without a visa.

Sen. Chuck Grassley, Iowa Republican, rightly and accurately denounced enabling Haitians awaiting a U.S. visa to enter the country and legally apply for work permits as “an irresponsible overreach of the executive branch’s authority.”

White House Punts on USCIS Request for 'Surge' of Immigration ID's
By Charlie Spiering

White House Press Secretary Josh Earnest declined to address a Breitbart News report about a “surge” of immigration ID’s requested by the U.S. Citizenship and Immigration Services.

When asked about the report at the White House Press Briefing today, Earnest referred Breitbart News to the USCIS for comment.

A draft solicitation for bids issued by U.S. Citizenship and Immigration Services (USCIS) Oct. 6 says potential vendors must be capable of handling a “surge” scenario of nine million id cards in one year “to support possible future immigration reform initiative requirements.”

The request for proposals says the agency will need a minimum of four million cards per year. In the “surge,” scenario in 2016, the agency would need an additional five million cards – more than double the baseline annual amount – for a total of nine million.

“The guaranteed minimum for each ordering period is 4,000,000 cards. The estimated maximum for the entire contract is 34,000,000 cards,” the document says.

Obama ""***ILLEGAL***"" Immigration
Is the Last Great Bubble bursting?
By Michael A. Gayed

I believe that the Last Great Bubble is bursting — faith in central banks to solve all problems.

I have said this before and it is worth repeating. Twenty years ago, I'm fairly sure people said "don't fight the Bank of Japan." Two months ago, you could have said "don't fight the European Central Bank." Now, with the Federal Reserve ending quantitative easing as worldwide economic data falters, it appears the time to "fight the Fed" has come.

I have waited a long time personally for this environment, given that I have largely stood alone on the deflation-pulse thesis for the better part of a year and a half, and have been very public about failed reflation. The pushback was always that I was wrong, that markets were fine, and that equity gains proved it. 

Part I: Roubini Talks Risk, Recovery And The Threat Of A Triple Dip Recession

What keeps renowned economist Nouriel Roubini up at night? In a wide ranging interview with FINalternatives’ editor-in-chief Deirdre Brennan, the professor and chairman of Roubini Global Economics discusses the challenges facing the global economy, including the threat of a hard landing in China, the risk of a triple dip recession in the Eurozone and the possibility of a stalled U.S. recovery.

In this, the first part of this two-part interview, Roubini focuses on the U.S. economy, the end of quantitative easing and his outlook for the U.S. stock market. (View Part II)

The U.S. appears to be one of the bright spots in the global economy. What risks could derail the current U.S. recovery?

Part II: Roubini Talks Risk, Recovery And The Threat Of A Triple Dip Recession

In the second half of our interview with Nouriel Roubini, FINalternatives editor-in-chief Deirdre Brennan speaks with the renowned economist about IMF policies, the risk posed by shadow banking systems, and the possibility of a hard landing in China.

In the first part of this two-part interview, which was published yesterday, Roubini focused on the U.S. economy, the end of quantitative easing and his outlook for the U.S. stock market. (View Part I)

The IMF recently lowered its growth projections for emerging markets and developing economies. What is your view on that?

Well, we started the year with projections that were similar to the ones that now the IMF has. So, we were more bearish than the consensus about global economic growth and we saw some of the weaknesses that would manifest themselves, say, in many parts of the world like emerging markets, the Eurozone, even some of the softness in Japan. And on the U.S. we believed that the recovery will be more anemic than what the consensus had it. So, I would say currently the [IMF] forecast for the U.S and for the global economy for this year and next year is quite close [to ours], with some caveats. So, I would say the consensus and the IMF [view] is moving in our direction.

Santelli Exchange: Draghi's dilemma
2 Hours Ago

CNBC's Rick Santelli discusses comments made by ECB President Mario Draghi in front of the IMF regarding global growth.

Santelli Exchange: End of QE crutch
3 Hours Ago

CNBC's Rick Santelli, and Peter Boockvar, The Lindsey Group, discuss how the central bank and markets will operate in a post quantitative easing environment.


Uncle Ben's ""QE"" VooDoo IS going to FAIL Everywhere it has been TRIED!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


The Coming CORRECTION "IS" going to be FRICKING BRUTAL!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Kyle Bass warns QE end will shake up markets
By Drew Sandholm

Central banks meeting next week will expose a huge divergence in monetary policy between several major economies, putting the macro environment in focus and weighing on foreign exchange, hedge fund manager Kyle Bass said Wednesday.

The founder of the $1.7 billion hedge fund Hayman Capital thinks the Fed likely will taper its bond-buying stimulus to zero next week. The Bank of Japan, however, likely will announce it will do whatever it takes to prevent the world's third-largest economy from heading into a major crisis.

Kyle Bass: Fed tapers to zero next week

Kyle Bass

China's third-quarter growth touches 5-year low
By Virginie Mangin


CHINA'S third-quarter economic growth ground to its slowest pace in five years as the country continues to struggle with a downturn in the property sector, overcapacity and weak export demand. Analysts, however, remained cautiously upbeat as they had expected worse.

The world's second largest economy grew 7.3 per cent in the third quarter, the National Bureau of Statistics said on Tuesday - down from 7.5 per cent in the previous three months and its slowest pace since the global economic crisis in 2009.

Many factors were behind the slower expansion. Domestically, a continued slump in the property sector - which accounts for about half of GDP - as well as overcapacity were hard trends to reverse. Also weighing on growth were Beijing's crackdown on corruption and sluggish demand in Europe, China's main trading partner. 


China’s Slowdown Not Good for the Global Economy or the U.S.
By William Wilson

China announced on Tuesday that third quarter gross domestic product (GDP) growth had slowed to 7.3 percent, the slowest since the 2008–2009 global recession. This slowdown means that Beijing will most likely fail to meet its annual growth target of 7.5 percent for the first time since 1998. With the U.S. and China at odds over so many issues from elections in Hong Kong to freedom of the seas to Russia’s aggression in Ukraine, it is tempting to cheer its ever-more-sobering economic environment. But China’s slowdown is not good for the global economy, which means it’s not good for the U.S.

According to the Financial Times, most alternative indicators of growth such as electricity consumption, credit expansion, and railway freight traffic have also been weak. Economists expect Chinese growth to continue slipping in the coming months. Growth would have been even slower without the economic stimulus package passed earlier in the year. 


China's GDP growth slows

2 Hours Ago
China's latest report on gross domestic product shows a slowdown in the world's second-largest economy. 

China GDP may reignite global growth panic

China may ignite fresh panic over the state of the global economy when it reports its third quarter gross domestic product (GDP) on Tuesday, which could confirm a marked slowdown in the world’s main growth engine.

The economy is forecast to have grown 7.2 percent in the July-September period, according to a Reuters poll, the slowest pace since the first quarter of 2009 and down from 7.5 percent in the previous three months.

“The sagging housing market has affected the economy more broadly, weighing on investment and on commodity production,” Alaistair Chan, economist at Moody’s Analytics, wrote in a report.

“A bright spot was the acceleration in exports, but this was not sufficient to keep the economy from growing below potential,” he said.

Recent economic indicators, including weaker-than-expected inflation, have painted a grim picture of the world’s second-largest economy. China’s annual consumer inflation slowed to 1.6 percent in September, a level not seen since January 2010, suggesting rising risks of deflation.

The weakening inflationary pressure is a reflection that the economy is growing below its potential growth rate, with too much spare capacity and too little demand, economists explain. 

China HARD Landing...........................Has BEGUN!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 

China’s capital defences have sprung a major leak
By John Foley

China’s strict capital controls are designed to shield the economy from flighty foreign money. In practice, they haven’t stopped a tremendous build up of fickle cash from abroad. There’s enough to create a serious nuisance if it starts to flow the other way.

The People’s Bank of China allows money to cross the border for trade or long-term investment, but generally frowns on short-term speculation. Nevertheless, central bank data suggests $725 billion of what might be called “hot money” has piled up since 2008. That’s the combination of short-term funds Chinese residents have borrowed from foreign lenders, and securities they have sold to overseas investors, minus anything that was repaid or sold.

China 'replicates' West's mistakes: panel
By Martin O'Rourke
Managing editor,

China is replicating the mistakes of the West and heading towards its own crisis, a panellist at #TradingDebates said Wednesday.

"China's lesson from the Asia crisis of the 1990s was never to be beholden to the West for debt," Director at Fathom Consulting Danny Gabay said. "Our concern is China will mismanage what increasingly looks like a hard landing."

"China has effectively managed to replicate the mistakes of the West since the global financial crisis," said Gabay. "The Chinese will ultimately be defaulted upon."

Gabay's sombre prognosis for China chimed with the sentiment of the high-level panel that the recovery of the global economy has a long way to go yet.

"The crux of the problem is that we talk about the 20% constantly," Saxo Bank chief economist Steen Jakobsen said. "Monetary policy is conducted towards supporting them." 

China SHADOW Banking..........................................BANKING Crisis II Coming at YOU!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 
Almost one in 10 big eurozone banks will fail ECB stress tests

Reports say that at least 11 of the 130 banks being tested by the European Central Bank will not stand up to the health checks 
By James Titcomb

The eurozone's unprecedented tests of its biggest banks' financial health will fail at least 11 institutions - almost a tenth of the 130 banks being tested by the ECB.

According to the Spanish newswire EFE, banks across six countries have failed the European Central Bank's stress tests, the results of which will be released on Sunday.

The identities of the banks are unknown, but they are mainly in the eurozone's struggling states, in particular Greece and Italy.

Three of the banks are from Greece and three from Italy, with two from Austria and one each from Cyprus, Belgium and Portugal. Among the banks that have been identified as potential red flags are Austria's Volksbanken, Italy's Monte dei Paschi di Siena and Portugal's BCP.

However, this list may not be comprehensive, with Ireland's Permanent TSB widely expected to have failed the stress test.

Eleven Eurozone banks poised to fail stress tests – UPDATE
By : WebFinancialGroup

As markets prepare for the official results of the European Central Bank (ECB) stress tests and asset quality review on Sunday, a report stated that 11 Eurozone banks would fail similar tests by the European Banking Authority (EBA).

The ECB and EBA have been assessing the balance sheets of 123 and 130 financial institutions, respectively, before the ECB takes over as bank supervisor in November.

Spanish news agency Efe reported that 11 smaller banks were expected to fail the EBA stress tests, although it did not mentioned any names.

However, Efe said its ‘financial sources’ revealed that the 11 included three banks from Greece and Italy, two in Austria and one each in Cyprus and Belgium.

ECB previously stated that any banks failing these tests would have two weeks to submit plans to raise capital. 

Euro Faces Economic Headwinds with Weakening German, Euro-Zone PMIs
By Christopher Vecchio

- The Euro may have its own problems, but it may be able to lever the US Dollar’s moment of vulnerability.

- The retail crowd’s shift in the US Dollar is led by what could be a bottom forming in EURUSD led by sentiment.

- Have a bullish (or bearish) bias on the Euro, but don’t know which pair to use? Use a Euro currency basket.

The Euro broadly stabilized for the second straight week, posting a +1.09% gain against the US Dollar, with the EURUSD exchange rate closing at $1.2761 on Friday. The 18-member currency gained against all but two of the other seven major currencies, with minor gains rewarded to the Swiss Franc (EURCHF -0.09%) and the New Zealand Dollar (EURNZD -0.31%). Concerns over the region’s growth prospects continue to linger, but they haven’t produced further downside yet in the Euro.

WEAK Banks and RECESSION "IS" a Toxic Combination for the ECB and SOON Investors are going to Figure THIS Out BIG TIME!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 
19 Very Surprising Facts About The Messed Up State Of The U.S. Economy
By Michael Snyder

Barack Obama and the Federal Reserve are lying to you.  The "economic recovery" that we all keep hearing about is mostly just a mirage.  The percentage of Americans that are employed has barely budged since the depths of the last recession, the labor force participation rate is at a 36 year low, the overall rate of homeownership is the lowest that it has been in nearly 20 years and approximately 49 percent of all Americans are financially dependent on the government at this point.  In a recent article, I shared 12 charts that clearly demonstrate the permanent damage that has been done to our economy over the last decade.  The response to that article was very strong.  Many people were quite upset to learn that they were not being told the truth by our politicians and by the mainstream media.  Sadly, the vast majority of Americans still have absolutely no idea what is being done to our economy.  For those out there that still believe that we are doing "just fine", here are 19 more facts about the messed up state of the U.S. economy...

#1 After accounting for inflation, median household income in the United States is 8 percent lower than it was when the last recession started in 2007.

Real Hourly Wages Drop In September, Fail To Rise In 6 Of Past 7 Months


One of the greatest misconceptions plaguing modern economics is that just because there is broad inflation (real, not hedonic, seasonally-adjusted or a burst in Saudi Arabia dumping crude to pressure a Russian default), then nominal, and real, wages also have to increase.

The problem is that without the latter, there can be no actual economic recovery, and instead one ends with stagflation, something Japan is acutely experiencing right now.

Another problem: with nearly one hundred million people out of the labor force, and epic slack within the workforce, there is virtually no amount of inflation in this environment that can force corporations to not only stop firing people (see M&A bubble) but actually hike their pay (except of course for BTFD "traders" at major hedge funds and bank prop desks).

And just to confirm this, alongside the CPI data released earlier which showed the smallest possible broad price increase, when considering that previously the BLS reported flat nominal hourly wages in September, it implied that real wages declined once again. Sure enough, in a separate report today, the BLS announced that real average hourly earnings (in constant 1982-1984 dollars) declined once again, this time from $10.34 to $10.32, a -0.2% drop from past month.

This also means that since March, there has been just one month in which real hourly wages have increased, and that was mostly due to the outright deflationary print the BLS reported last month. 

The ""FAUX" Recovery HAS been nothing more than ""BIG Government"" BULLSHIT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


Beware the HELL of the Liquidity TRAP the Central Bankster find themselves IN!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 

Jakobsen: Another 'shock drop' is coming and it's coming soon

Steen Jakobsen:

The fourth Saxo Bank #TradingDebates are being held this Wednesday at the British Museum in London. Among the speakers will be Saxo Bank's Chief Economist Steen Jakobsen who's predicting another 'shock drop' in the markets within a few weeks. With debt and low inflation continuing to create a nervous atmosphere behind most markets, Steen argues that we will hit fresh lows in mid-November.

Steen takes the view that central bank policy is creating a 'fantasy land' for investors and he points out that the recent 'day dive' in markets was a closer reflection of reality.
Steen outlines his suggestions for trading ahead of another dip in mid November with targets for the S&P 500 around 1810 and the Dax at 8000 - 7800. 


One simple reason why global stock markets are reeling

The world's central banks have slashed stimulus by $125bn a month since the end of last year - leading to the current market rout
By Ambrose Evans-Pritchard

It is no mystery why global liquidity is evaporating. Central banks have turned off the tap. They have reduced net stimulus by roughly $125bn a month since the end of last year, or $1.5 trillion annualized.

That is a shock for the financial system. The ratchet effect has been incremental, but relentless. We are finally seeing the consequences, with the usual monetary policy lag.

The Fed and People‘s Bank of China (PBOC) have stopped their two variants of global QE altogether (for now). Others have chopped their purchases of bonds by half or more. The Brazilians are net sellers, and in a sense they carrying out reverse QE. The Russians have just joined them again. 


Now IF there was EVER a Better Explanation of HOW the Central Banksters ""PONZI"" Scheme Worked you would be hard pressed to find it in Fewer words than here. FOLKS, THIS "IS" SOOOOOOOOOOOOO Much BULLSHIT what the ""PIMPS"" of Wall Street have been doing This WEEK!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


TAKE Note, THE ECB is getting ready to release their AQR Report on EMU Banks and it going to show EUROPE has some SHIT coming there way when EUROPE finds itself in FULL Recession in 2015!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 


In Uncharted Waters
By Charles Smith

What I see as extremes that must necessarily end badly, others see as mere extensions of recently successful policies and trends.

A long-time reader recently chastised me for using too many maybe's in my forecasts. The criticism is valid, as "on the other hand" slips all too easily from qualifying a position to rinsing it of meaning.

That said, given that we're in uncharted waters, maybe's become prudent and certainty becomes extremely dangerous. I have long held that the financial policy extremes that are now considered normal are unprecedented in the modern era: extremes in debt, leverage, risk, complexity and willful obfuscation of these extremes.

Consider the extent to which sky-high asset valuations and present-day "prosperity" depend on extremes of leverage: autos purchased with no money down, homes purchased with 3.5% down payments and FHA loans, stocks bought on margin, stock buybacks funded by loans, student loans issued with zero collateral, and so on--an inverted pyramid of "prosperity" resting precariously on a tiny base of actual collateral. 


What Happens When Cash Is No Longer Trash?

By Charles Smith

Those who actually create value as opposed to chasing yield with nearly-free money will actually have some traction once the swamp of excess liquidity drains.

When those closest to the money spigots of the Federal Reserve can borrow billions for next to nothing, cash--laboriously saved from years of paychecks--is reduced to trash. What chance does a saver have in a bidding war for a house or other asset against a financier who can borrow essentially unlimited cash?

Answer: none. The saver can leverage his cash at best 4-to-1: a 20% down payment leverages a mortgage of 80% borrowed money. The financier can borrow as much he wants for next to nothing.

The saver will lose every bidding war, thanks to the excess liquidity created by the Fed and other central banks. The reason given for this vast expansion of credit is that if credit is cheap enough, people and businesses will put that nearly-free money to work.

The problem with cheap credit is that it does not flow to productive investments--it flows to safe yields. Launching a new product or service is risky, especially in a stagnant economy, so the safe way to play unlimited credit (i.e. liquidity) is to chase assets that reliably generate returns. 


Beware the HELL of the Liquidity TRAP the Central Bankster find themselves IN!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 



The Magic Number Is Revealed: It Costs Central Banks $200 Billion Per Quarter To Avoid A Market Crash


We have all seen it countless times before: visual confirmation that without the Fed's (and all other central banks') liquidity pump, the S&P would be about 70% lower than were it is now. 

Most recently, this was shown last Friday in "Another Reminder How Addicted Markets Still Are To Liquidity" in which Deutsche bank's Jim Reid said:

So now that "best Keynesian practices" are out of the window, and everyone has once again turned Austrian, and only the "flow of money" (either inside or outside) matters, the question is how much do central banks need to inject to keep the stock market from crashing, let alone continuing to levitate. Luckily, Citi's Matt King has just done the math, and the answer is... 

Here is his answer:

For over a year now, central banks have quietly being reducing their support. As Figure 7 shows, much of this is down to the Fed, but the contraction in the ECB’s balance sheet has also been significant. Seen from this perspective, a negative reaction in markets was long overdue: very roughly, the charts suggest that zero stimulus would be consistent with 50bp widening in investment grade, or a little over a ten percent quarterly drop in equities. Put differently, it takes around $200bn per quarter just to keep markets from selling off. 


World economy so damaged it may need permanent QE

Markets are realising that the five-and-a-half year recovery since the financial crisis may already be over, says Ambrose Evans-Pritchard
By Ambrose Evans-Pritchard

Combined tightening by the United States and China has done its worst. Global liquidity is evaporating.


Uncle Ben's ""QE"" VooDoo IS going to FAIL Everywhere it was TRIED!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 


The Coming CORRECTION "IS" going to be FRICKING BRUTAL!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 

Thursday, October 16, 2014

Chinese Navy Chief Conducts 'Unprecedented' Survey Of Spratly Islands
By Michelle FlorCruz

Chinas appears to have made headway in the so-called ‘reclamation’ of disputed areas in the South China Sea, a project to create new land masses using reefs in areas claimed by both Beijing and its neighbors. According to Taiwan and Hong Kong news sources, China’s naval chief has been surveying islands located in disputed maritime territories, angering nations locked in territorial disputes with China such as the Philppines.

According to Taiwan’s Want China Times, which cited briefing given in Taipei by Lee Hsiang-chou, the director general of Taiwan’s National Security Bureau, Chinese admiral Wu Shengli, the commander of the People’s Liberation Army Navy, completed a survey of five islands in the archipelago known as Spratly Islands. The Spratlys are claimed by multiple Southeast Asian countries, including the Philippines, Brunei and Malaysia. Lee called Wu’s visit to the islands “unprecedented” even for China, a nation that continues to assert claims in the area by setting up oil rigs, military outposts and other structures.

China: Sharpening Swords for War?
By Richard L. Russell

From a realist’s geopolitical perspective, the United States needs to keep eyes on global hot spots with concentrations of power that could adversely affect American national interests.  Of the three geographic centers of global power today, two are engulfed in war while the third is on the war’s precipice.  In Europe, Russia has returned to its quest for global power with its steely paramilitary and military disembowelment of Ukraine.  Moscow’s aggression now looms over other states in Europe, especially the Baltic states and Poland.  In the Middle East, the Islamic State has lurched onto the international scene with a bloody rampage that has torn apart Syria and Iraq.  The Islamic State looks ready is to expand and spill more blood along the borders of Jordan and Turkey and in Kurdish areas in Iraq, notwithstanding the American and international coalition air campaign against the jihadists.

In Asia, China has not yet shed any blood in war.  But a read of Robert Haddick’s new book Fire on the Water: China, America, and the Future of the Pacific painstakingly shows through his level-headed, scholarly, and realist analysis that Beijing is sharpening its swords for war while Washington is distracted by chaos elsewhere.  Haddick rightly judges that the United States “acting as an outside balancer, has played the central role in East Asia’s security, a responsibility that has boosted the prosperity of all.  But just like Europe a century ago, it is doubtful that Asia, left on its own, could shape a stable balance of power in the face of China’s dramatic rise.” 

China Military Buildup Shifts Balance of Power in Asia in Beijing’s Favor

Congressional report warns the danger of U.S.-China conflict is rising
BY: Bill Gertz

China’s decades-long buildup of strategic and conventional military forces is shifting the balance of power in Asia in Beijing’s favor and increasing the risk of a conflict, according to a forthcoming report by a congressional China commission.

China’s military has greatly expanded its air and naval forces and is sharply increasing its missile forces, even while adopting a more hostile posture against the United States and regional allies in Asia, states a late draft of the annual report of the bipartisan U.S.-China Economic and Security Review Commission.

As a result, “the potential for security miscalculation in the region is rising,” the report said, using the euphemism for a conflict or shootout between Chinese forces and U.S. forces or those of its regional allies.

The report paints an alarming picture of China’s growing aggressiveness and expanding power, including development of two new stealth jets, the first deployment of a naval expeditionary amphibious group to the Indian Ocean, and aerial bombing exercises held in Kazakhstan. 

China’s military buildup altering power balance
By William Lowther

China’s ongoing military buildup could destabilize Taiwan, according to a draft copy of the latest report from the US Congress’ US-China Economic and Security Review Commission.

“China’s rapid military modernization is altering the balance of power in the Asia Pacific,” the draft says.

It says the buildup could “engender destabilizing security competition” between major nearby countries, such as Japan and India, and at the same time it could “exacerbate regional hotspots such as Taiwan.”

The congressional commission’s report is due to be released in its final form next month.

A summary of “a late draft” of the report was published on Tuesday by conservative online newspaper the Washington Free Beacon. 

Japan Has Doubled The Number Of Times It's Scrambled Fighter Jets Against Russia Over The Past 6 Months
By Tim Kelly

CHITOSE, Japan (Reuters) — The number of times Japanese fighter jets scrambled to ward off Russian military aircraft more than doubled in the last six months, amid diplomatic tensions between the two countries which Prime Minister Shinzo Abe is keen to ease.

The increased activity in Japan’s north also comes as the armed forces pivot their focus southwards towards China, the assertive Asian giant which is seen in Tokyo as the more immediate challenge.

According to government figures released this week, instances of fighter jets scrambling into the skies above Japan jumped by 73 per cent in the six months through September, led by sorties confronting Russian bombers and spy planes.

A Top Japanese General Says The US Needs To Be Ready To Confront Chinese Aggression In East Asia
By Richard Sisk,

In stark contrast to White House policy, a top Japanese general on Tuesday said the US military rebalance of forces to the Pacific should confront Chinese aggression in the region.

Japanese Gen. Kiyofumi Iwata, chief of staff of Japan's Ground Self-Defense Force, said that "some countries want to change the status quo by force" in the region.

"This is a reality we must face up to," Iwata said.

He then made clear his intent with a reference to China's declaration late last year of an Air Defense Identification Zone (ADIZ) over the East China Sea to include the disputed islets called the Senkakus by Japan and the Diaoyu by China.

China warned at the time that aircraft passing through the ADIZ without identifying themselves could be subject to "emergency measures." 

Australia May Not Be Prepared for North-East Asia Conflicts

First part of our interview with Professor Desmond Ball, one of Australia's top security analysts
By Shar Adams, Epoch Times

CANBERRA—Desmond Ball has spent over a quarter of a century as a special professor at the Australian National University’s Strategic and Defence Studies Centre. For Professor Ball, the recent Australian deployment of air power and military personnel to northern Iraq represents a familiar scenario – the Middle East has once again become a distraction from what is needed to defend Australian shores.

“We go through processes [for Australia's defence] … and then they get short circuited because we respond to the war on terror, or Afghanistan or Iraq,” he said. “We end up with a force structure which is totally ad hoc.”

With limited resources, the fear is that Australia is spreading itself too thin to meet the demands of homeland defence.

Billions of defence dollars have been spent on supporting the United States in Iraq and Afghanistan, including on heavy equipment like Abrams battle tanks and C17 transport aircraft. This weaponry may be suitable for warfare in the Middle East, but defending Australia in the event of a North-East Asia conflict requires a different force structure, he said. 

China Military

""GLOBAL WAR"" in this DECADE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 
Folks YOU Better Believe OPEC and PUTIN are FRICKING ""***Freaking OUT***"" Right about NOW!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Planet EARTH, YOUR about to find out how Destabilizing the FALLING Price in Crude Oil can BE(***GOT it RIGHT Again***)!!!!!!!!!!!!!!!!!!!!!!!!! IF it Falls below $80/Barrel you begin to see the effects of Market Prices being below the Costs of Production. Below $70 and YOU Crush the Economies of the Producers of Crude Oil and that MEANS ""*****America*****"" TOOOOOOOOOOOOOOOOOOOO!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Oil prices headed lower despite Saudi curbs -PIRA's Ross
By Jonathan Leff

NEW YORK, Oct 9 (Reuters) - World oil prices are set to fall further, extending a months-long rout because Saudi Arabia is unlikely to make deep enough production cuts to erase a growing surplus, according to Gary Ross, chief executive of PIRA Energy Group.

Although there are faint signs of improving fundamentals in some physical crude oil markets, any uptick in prices ahead of OPEC's Nov. 27 meeting will be short-lived. The cartel is struggling to rebalance a world market heading toward a 1 million to 1.5 million barrel per day (bpd) excess next year, he said.

"Structurally, the market is oversupplied. Something has to give and we think it will be price," Ross told Reuters in a interview.

Oil Price Blues (Read: Dangers) for Some
By Steve H. Hanke

As the price of crude oil continues its downward tumble towards $80 per barrel, I am reminded of a similar scenario from near the end of the Cold War in the 1980s. When Saudi Arabia announced in 1985 that protecting oil prices was no longer its main priority, oil production surged and prices fell off a cliff, briefly plunging below $10 per barrel, as I had correctly predicted.

Lower prices delivered a fatal blow to the Soviet economy, which ended up seeing $20 billion per year in oil revenues evaporate. The resulting fiscal shortfalls proved to be a dagger in the heart of the U.S.S.R.

On October 1st of this year, Saudi Arabia’s national oil company announced that it had abandoned a policy of price protection and would start to focus on protecting its market share. Combined with falling global demand and rising supplies elsewhere, oil prices have fallen accordingly. This has put a squeeze on eight of the world’s top oil producers. States like Iran, Venezuela, and Iraq can only balance their current budgets at oil prices ranging from $110 to $135 per barrel (so-called break-even prices).

If oil prices stay below $90 per barrel for any length of time, we will witness massive fiscal squeezes and regime changes in one or more of the following countries: Iran, Bahrain, Ecuador, Venezuela, Algeria, Nigeria, Iraq, or Libya. It will be a movie we have seen before.

Russia's Gazprom Expects Oil Price to Plummet by Another 10-15%

The global oil market slump looks likely to continue, with prices possibly nearing $70 a barrel in the short term, an official of Russian gas producer Gazprom said.

Crude fell more than $1 a barrel on Thursday to a four-year low below $83 a barrel as growing concerns over the global economy stretched a four-month rout.

"It could be at $70-75 in a question of months," Gustavo Delgado, head of Gazprom in Venezuela, told Reuters on the sidelines of an oil conference on Margarita Island. He did not specify whether he was speaking of Brent prices or U.S. crude.

The Russian company participates in several gas and crude projects with Venezuelan state oil company PDVSA.

"Investments right now in oil and energy are being affected by the price fall," Delgado added in the interview late on Wednesday, attributing the drop to economic slowdowns in both Europe and China, plus the rise of new technologies like shale.

A senior official from another Russian company, Rosneft, said the crude price fall could be partly for "speculative" reasons but nevertheless obliged all producers to seek cost reductions. 

Venezuela’s PDVSA head laments global oil “price war”

The falling price of crude and a global price war are disadvantageous for everyone in the international oil market, the new head of Venezuela’s state oil company PDVSA said.

“The current market situation doesn’t suit anyone, neither consumers nor producers,” Eulogio Del Pino told an oil conference on Venezuela’s Margarita Island.

“We are in a price war.”

Venezuela is calling for an emergency meeting of the Organization of the Petroleum Exporting Countries (OPEC) – prior to its next scheduled Nov. 27 gathering – to halt the slide in oil prices to their lowest level since 2010.

Global benchmark Brent crude, trading around $85 per barrel on Wednesday, has dropped 25 percent since June due to ample supplies and weak demand.

The price of Venezuela’s oil basket has lost almost $10 per barrel in the last five weeks to $82.72 per barrel, a price that is $16.35 lower than a year ago. 

Falling Oil Prices Could Push Venezuela Over The Edge


"There is nothing good to say about the state of Venezuela’s economy, and this isn’t helping," warns Danske's Lars Christensen as tumbling prices for Venezuela’s oil are threatening to choke off funds (oil is 95% of exports) needed to pay debt.. and that is clear from the collapse of bond prices. The Maduro government desperately needs a rise in oil prices, but Saudi Arabia has so far rebuffed calls for an emergency meeting as it pursues a strategy of waiting out higher cost competitors. OPEC does not plan on meeting until Nov. 27. That is an eternity for a country that is beginning to unravel. 

Did The Saudis Just Get A Tap On The Shoulder?


The US-Saudi "secret" plan that was supposed to crush Putin quickly turned sour when as we reported several days ago, one after another America's own shale plays, which recently entered a very sharp bear market, started appearing on various death watches (case in point today's MHR Second Lien refi which repriced from L+500 to L+750 in minutes).

As a result, one wonders: did Obama realize that Russian "costs" which as everyone knows by now include a Eurpoean triple-dip recession, could also very soon include an insolvent US shale industry, and thus may be just a little too much, and, one further wonders, if he is the one who just tapped Saudi Arabia on the shoulder? 


Don’t Mess With Saudis in Oil Bear Market Global Shakeout
By Isaac Arnsdorf

The bear market in oil is showing the world there’s still only one country in a position to choose winners and losers in the global market: Saudi Arabia.

The world’s largest oil exporter is trying to protect its market share by keeping its production steady even as prices hit a four-year low. Energy producers in turmoil, such as Russia, Iran and Venezuela, stand to lose the most, U.S. shale drillers and other Saudi rivals will suffer and industrialized importing countries including Japan will get a boost from cheaper prices.

“Saudi Arabia is the only one in the position of putting more oil on the market when they want to and cutting production when they want to,” said Edward Chow, a senior fellow at the Center for Strategic & International Studies in Washington. “Consumers win, producers lose.”

Brent crude, the international benchmark, fell as much as 29 percent since June 19 to $82.60 a barrel, the lowest since November 2010. Prices have averaged above $105 a barrel since 2011, the four highest years on record. Brent will stay higher than $80 a barrel, analysts at Bank of America Corp. and BNP Paribas SA said yesterday.

While cheaper crude erodes Saudi Arabia’s income, too, the country has enough reserves and credit to withstand the slump, Chow said. The kingdom needs $83.60 a barrel to balance its budget, and the central bank has $734.7 billion in reserve assets, the International Monetary Fund said. The Saudis ran deficits from the mid-1980s until the late 1990s and may be prepared to do so again, according to Chow. Brent traded at $82.96 as of 12:58 p.m. in London.


Saudi Arabia Still Calling the Shots
By Robert Rapier

The US Shale Oil Boom

There have been a lot of stories over the past few years about the implications of the US shale boom. To review for those who might have been living in a cave for the past 5 years, the marriage of horizontal drilling and hydraulic fracturing (fracking) has reversed 40 years of declining US oil production and created a shale oil and gas boom.

As amazing as it would have seemed a decade ago, US oil production is increasing at the fastest pace in US history. In the past 5 years US oil production has increased by 3.22 million barrels per day (bpd). The overall global oil production increase during that time was only 3.85 million bpd, meaning the US was responsible for 83.6 percent of the total global increase over the past 5 years. 

Mideast markets bleeding further amid global sell-off

Markets across the Middle East tumbled yesterday as global equities and oil prices continued to decline, while Saudi Arabia’s drop was magnified by investors selling to prepare for a $6bn initial public offer of shares.

Brent crude oil, which has slid more than 28% since June because of slow demand growth and signs that producers are not cutting output, hovered around $83 per barrel, near a four-year low.

Economists and fund managers continue to believe the oil price decline will not be disastrous for Gulf economies and markets. Governments have huge fiscal reserves that will allow them to keep spending, even though they may slow the growth in their budgets if oil prices stay low for a long period.

“Lower oil prices shouldn’t cause too many problems for the Gulf economies thanks in large part to their relative prudence over the past decade,” Jason Tuvey, Middle East economist at London’s Capital Economics, said in a report. “Even so, weaker growth in oil production and less supportive fiscal policy mean that the Gulf economies are likely to slow over the coming years and growth rates of 3%-4%, rather than 6%-7%, will become the ‘new norm’.”

Growth rates of 3%-4% would still be healthy by global standards, but the sight of oil prices collapsing and volatility in international equity markets has spooked some Gulf retail investors.

The main Saudi index closed 3.6% down after tumbling as much as 5.7% earlier in the session. The benchmark has now erased all of the 14% gains which it posted after authorities announced in late July that they would open the market to direct foreign investment early next year.

CRUDE Oil Prices