Dec 102016
 
 December 10, 2016  Posted by at 9:57 am Finance Tagged with: , , , , , , , , , , ,  6 Responses »


Arthur Rothstein Interior of migratory fruit worker’s tent, Yakima, Washington 1936

Donald Trump Team Takes Aim At CIA (CNN)
A Rising Stock Market Does Not Signal Economic Health (FEE)
Economist Streeck Calls Time On Capitalism (G.)
Nobel Economics Prize Winner: ‘The Euro Was A Mistake’ (EA)
Beware Of Panic Buying In Bank Stocks (MW)
Trump Has Unleashed The Stock Market’s ‘Animal Spirits’ (MW)
The Bond Market Doesn’t Believe Draghi (BBG)
Why China Can’t Stop Capital Outflows (Balding)
EU Launches New Investigation Into Chinese Steel Imports (R.)
ECB Refuses To Help Italy’s Crisis-Hit Monte dei Paschi Bank (G.)
60% Of Americans Who Usually Fly Home For The Holidays, Won’t This Year (MW)
Greece Under Fire Over Christmas Bonus For Low-Income Pensioners (G.)
Greece Seamen Strike: Angry Farmers Throw Flares, Set Offices On Fire (KTG)
Broken Men in Paradise (NYT)

 

 

Tried to find a better source for this, not as one-sided as CNN, but does it really matter anymore at this point? Anyone who wants to believe more secret and anonymous ‘news’ about Russia and the US elections, can and will. Others find it hard to believe that the WaPo comes with yet another unsubstantiated ‘story’. CNN calls this ‘revelations’, but that really is not the word. And saying things like “the comments from Trump’s camp will cause concern in the Intelligence community” can probably best be seen as an attempt at comedy.

Donald Trump Team Takes Aim At CIA (CNN)

President-elect Donald Trump’s transition team slammed the CIA Friday, following reports the agency has concluded that Russia intervened in the election to help him win. In a stunning response to widening claims of a Russian espionage operation targeting the presidential race, Trump’s camp risked an early feud with the Intelligence community on which he will rely for top secret assessments of the greatest threats facing the United States. “These are the same people that said Saddam Hussein had weapons of mass destruction,” the transition said in a terse, unsigned statement. “The election ended a long time ago in one of the biggest Electoral College victories in history. It’s now time to move on and ‘Make America Great Again.'”

The sharp pushback to revelations in The Washington Post, which followed an earlier CNN report on alleged Russian interference in the election, represented a startling rebuke from an incoming White House to the CIA. The transition team’s reference to the agency’s most humiliating recent intelligence misfire – over its conclusion that Iraq under Saddam Hussein had weapons of mass destruction — threatens to cast an early cloud over relations between the Trump White House and the CIA. The top leadership of the agency that presided over the Iraq failure during the Bush administration has long since been replaced. But the comments from Trump’s camp will cause concern in the Intelligence community about the incoming President’s attitude to America’s spy agencies.

CNN reported this week that Trump is getting intelligence briefings only once a week. Several previous presidents preparing for the inauguration had a more intense briefing schedule. Multiple sources with knowledge of the investigation into Russia’s hacking told CNN last week that the US intelligence community is increasingly confident that Russian meddling in the US election was intended to steer the election toward Trump, rather than simply to undermine or in other ways disrupt the political process. On Friday, the Post cited US officials as saying that intelligence agencies have identified individuals connected to the Russian government who gave Wikileaks thousands of hacked emails from the Democratic National Committee and Hillary Clinton’s campaign chairman John Podesta.

Trump has repeatedly said there is no evidence to suggest that President Vladimir Putin’s Russia, with which he has vowed to improve relations, played a nefarious role in the US election. “I don’t believe it. I don’t believe they interfered,” Trump said in an interview for the latest issue of Time magazine, adding that he thought intelligence community accusations about Russian interventions in the election were politically motivated.

Read more …

“The Economy Isn’t A Thing”.

A Rising Stock Market Does Not Signal Economic Health (FEE)

The headlines tell us that the Dow Jones is up around 1,000 points since Donald Trump won the election on November 8th. The conventional wisdom is that this shows how much confidence people have in Trump’s ability to generate a healthy American economy. The argument is that if people are willing to buy stock in American firms, this indicates their belief that those firms will see improving profits over the next few years. They then draw the conclusion that more profitable firms indicate a healthier American economy. Although this argument is correct about stock prices reflecting an increasing belief in the profitability of US firms, it makes a major error in assuming that profitable firms necessarily mean a better economy. First, it’s important to understand that phrases like “a healthier economy” are themselves problematic. The “economy” is not the thing we should be concerned about. In fact, in some fundamental sense there’s no such thing as “the economy.”

As Russ Roberts and John Papola memorably put it in the music video “Fight of the Century:”
The economy’s not a car.
There’s no engine to stall.
No experts can fix it.
There’s no “it” at all.
The economy is us

Things are not “good/bad for the economy.” They are good or bad for the people who comprise the market process, specifically in our capacity as consumers. All the economy amounts to is people engaging exchanges in order to better satisfy their wants. What we should care about is whether or not people are able to better satisfy those wants. And “better satisfy” here means not just more and better goods and services, but at cheaper prices too. Lower prices mean that consumers have income left over to purchase goods they otherwise couldn’t, enabling them to better satisfy their wants by satisfying more of them. In a genuinely free market, the profitability of firms is a good reflection of their ability to better satisfy the wants of consumers. Our willingness to pay for their goods and services reflects the fact that we receive value from those products, so their profits are at least a general signal of having created that value and satisfied consumer wants.

Trump’s policies may well enrich many firms, but they will impoverish the average American. In fact, consumers get much more value out of most innovations than is reflected in the profits of firms. A famous study by economist William Nordhaus estimated that profits made up only about 2.2% of the total benefits created by innovations. If you doubt this, ask yourself how much it would take for you to give up your smartphone and its connectivity. Then multiply that by all of the smartphone users in the world. Then compare that to the profits made off smartphones. The total value to consumers will dwarf the profits of smartphone producers. However, when markets aren’t free, profits do not necessarily reflect value creation. Firms who profit through privileges, protections, and subsidies from governments demonstrate that they are able to please political actors, not that they can deliver value to consumers by better satisfying their wants.

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Can’t give the article the space it deserves here.

Economist Streeck Calls Time On Capitalism (G.)

Nothing in his work prepares you for meeting Streeck (pronounced Stray-k). Professionally, he is the political economist barking last orders for our way of life, and warning of the “dark ages” ahead. His books bear bluntly fin-de-siecle titles: two years ago was Buying Time, while the latest is called How Will Capitalism End? (spoiler: not well). Even his admirers talk of his “despair”, by which they mean sentences such as this: “Before capitalism will go to hell, it will for the foreseeable future hang in limbo, dead or about to die from an overdose of itself but still very much around, as nobody will have the power to move its decaying body out of the way.”

What does such gloom look like in the flesh? Small glasses, neat side parting and moustache, a backpack, a smart anorak and at least a decade younger than his 70 years. Alluding to Trump’s victory, he cheerily declares “What a morning!” as if discussing the likelihood of rain, then strolls into the gallery. [..] At a time when macroeconomists have failed and other academics have retreated into disciplinary solipsism, Streeck is one of the few to have risen to the moment. Many of the themes that will define this year, this decade, are in his work. The breakup of Europe, the rise of plutocrat-populists such as Trump, the failures of Mark Carney and the technocratic elite: he has anatomised all of them.

This summer, Britons mutinied against their government, their experts and the EU – and consigned themselves to a poorer, angrier future. Such frenzies of collective self-harm were explained by Streeck in the 2012 lectures later collected in Buying Time: “Professionalised political science tends to underestimate the impact of moral outrage. With its penchant for studied indifference … [it] has nothing but elitist contempt for what it calls “populism”, sharing this with the power elites to which it would like to be close … [But] citizens too can “panic” and react “irrationally”, just like financial investors … even though they have no banknotes as arguments but only words and (who knows?) paving stones.”

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The structure of the EU makes it impossible for it to survive. That’s what these people miss.

Nobel Economics Prize Winner: ‘The Euro Was A Mistake’ (EA)

The European Union should embark on a process of decentralisation and return certain areas of decision making to the member states if it wants to survive and thrive, according to Nobel Memorial Prize in Economic Sciences winner Oliver Hart. Today (9 December), Hart and his colleague, Bengt Holmström, will receive the top prize for their work on contract theory, which covers everything from how CEOs are paid to privatisation. Hart told EFE that he believes the keyword in EU politics is now “decentralisation” and that Brussels has “gone too far in centralising power”. The British-born economist said that “if it abandons this trend, the EU could survive and flourish, otherwise, it could fail”.

The Harvard University professor insisted that the EU member states are not “sufficiently homogeneous” to be considered one single entity, adding that trying to make the EU-28 into one was an “error”. Hart said that the concerns felt by the member states about decision making and centralisation of power in Brussels should be addressed by returning competences to the EU capitals. The Nobel winner conceded that the EU should retain control of “some important areas”, like free trade and free movement of workers, the latter of which he admitted is “ultimately, an idea that I personally like, although I understand that there are political worries”.

His prize-winning colleague, Holmström, also told EFE that the EU needs to “redefine its priorities, limiting its activities and its regulatory arm, in order to focus on what can be done on the essential things”. The Finnish economist, who also teaches at the Massachusetts Institute of Technology (MIT), said that Brussels needs to rejig its system of governance and its basic rules in order to make them “clearer and simpler”. Hart argued that “the euro was an mistake” and said that it’s an opinion that he has maintained ever since the monetary union was first introduced. The economist added that it “wouldn’t be a sad thing at all” if in the future Europe abandoned the single currency and that the British were “very clever” to stay out of it.

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Wait till January.

Beware Of Panic Buying In Bank Stocks (MW)

Buying of banking stocks has reached panic proportions, suggesting a trend reversal over the next couple of weeks may be likely. The SPDR Financial Select Sector exchange-traded fund rose 0.2% Friday, closing at the highest level since Feb. 1, 2008. Financials have been the best performer of the S&P 500’s 11 key sectors since Donald Trump was elected president, with the sector tracking stock (XLF) soaring 18.8% since Nov. 8, compared with a 5.6% gain in the S&P 500 index. The XLF produced this week its best rolling one-month (22 sessions) %age gains since August 2009, as the financial crisis was ending. Investors appear to be banking that President-elect Donald Trump will provide a Goldilocks scenario for financials, as his promises of lower regulations, lower corporate taxes and a revived economy that results in higher longer-term interest rates are just right for the sector.

A number of technical warnings signs have flashed, however, suggesting the postelection buying frenzy is petering out. On Thursday, 73% of the S&P 500 financial sector hit 52-week highs, the most since Feb. 13, 1997, and the second highest%age since 1990, according to Jason Goepfert, president of Sundial Capital. His research suggests that the previous five-largest surges in 52-week highs in financials produced a median loss of 1.9% over the next week, and a decline of 2.5% over the next two weeks. In comparison, his data showed the average for all days was a gain of 0.2% in a week and a 0.4% rise in two weeks. “There is no doubt that momentum is impressive in the sector—the problem is that it seems to have entered panic mode and that rarely lasts,” Goepfert wrote in a note to clients.

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Question is, how long for?

Trump Has Unleashed The Stock Market’s ‘Animal Spirits’ (MW)

You don’t have to call it a Trump rally. But some market specialists appear to be struggling to pin a name to the recent moves across global markets, which has pushed the S&P 500, DJIA, the Nasdaq – and most recently the Dow Jones Transportation Average – into record territory since President-elect Donald Trump’s Nov. 8 victory over rival Hillary Clinton. The Dow scored its 14th record close on Friday. Steve Barrow at Standard Bank said in a Nov. 30 research note that “whatever fears might exist in some quarters about Trump’s win, some sort of animal spirits might have been spurred.” So-called animal spirits is an oft-used term on Wall Street coined by famed economist John Maynard Keynes to describe gut instinct.

Or as Keynes explained, “a spontaneous urge to action rather than inaction”. A certain verve to scoop up assets has certainly appeared to be at play since early November. Indeed, the Dow industrials as of Friday’s close have risen nearly 8% since the election outcome, the broad-stock benchmark S&P 500 index has climbed 5.6%, while the Nasdaq has picked up 4.8% over the same 30-day period. The Nasdaq scored its first record close since Nov. 29 on Wednesday. Meanwhile, the small-cap focused Russell 2000 which is most sensitive to economic prospects for the country, has jumped more than 15.2% since Nov. 8. To be sure, the U.S. has been a shining star compared with its weaker sisters abroad when it comes to economic growth. The ECB on Thursday said it planned on scaling back elements of its stimulus program but noted that it would extend it “if necessary.”

Barrow speculates that global growth has mostly stagnated in the aftermath of the 2008-09 financial crisis because the market didn’t put much faith in the tools, namely asset-repurchases and ultralow rates, that have been put in place by central bankers. By contrast, Trump has proposed a raft of fiscal-stimulus measures to upgrade the U.S.’s ailing infrastructure. The market now appears to be betting, in part, that the incoming leader of the free world will make good on those promises, which could inject a dose of spending that could create jobs and break a trend of economic stagnation. As a result infrastructure companies, commodities associated with construction and bank shares, among other asset classes, vaulted higher. Wall Street is euphoric over the possibilities.

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People like Draghi have come to rely on docile markets. Once that’s gone….

The Bond Market Doesn’t Believe Draghi (BBG)

The beatings will continue until morale improves, the saying goes. That’s one interpretation of the ECB’s somewhat convoluted rejig of its quantitative easing program this week. By insisting he’s not tapering bond buying while simultaneously reducing the monthly purchases and extending the time frame, President Mario Draghi is sending a mixed message that likely reflects disagreements among his Governing Council members. Cutting the program to €60 billion per month from €80 billion throws a bone to those who worry that it’s time to withdraw the monetary medicine; lengthening the timeline until the end of next year pacifies policy makers who fear the patient isn’t yet on the road to recovery.

But in financial markets, bond yields are effectively tightening monetary conditions on the central bank’s behalf, suggesting investors are beginning to anticipate an improved economic outlook. That could play out in two ways: Either bonds are correct, and the ECB will find itself tapering properly next year, or bonds are wrong, in which case Draghi will have to make good on his pledge to do more if needed. The 10-year German bond yield has climbed to about 0.4% from a low of almost -0.2% in July. That’s still a ridiculously low level; the average in the past two decades is about 3.4%, and for most of the 1990s the range was between 5% and 9%. Nevertheless, it amounts to a significant tightening in monetary conditions in just three months as the yield curve has steepened:

Also, don’t forget that the euro zone remains a fractured economic landscape. Germany, with an unemployment rate of 6%, will find it easier to withstand rising borrowing costs than Italy, where the jobless rate is almost twice as high. And the Italian yield curve has replicated the move seen in Germany, at higher levels that have doubled 10-year yields to 2% since August:

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“China is caught between trying to prop up a currency facing long-term decline and letting capital leave at will, risking a bank crisis…”

Why China Can’t Stop Capital Outflows (Balding)

How China manages its currency is likely to be the global economic story of 2017. Despite the government’s best efforts, capital continues to leave the country at a brisk pace, with a balance-of-payments deficit through the third quarter of $469 billion. Attempts to arrest this flow probably won’t work. But they may well create new risks. Capital outflows began gathering steam in 2012, when the government liberalized current-account payment transactions in goods and services. Enterprising Chinese figured out that while they couldn’t officially move money abroad to buy a house via the capital account – individuals are barred from moving more than $50,000 out of the country each year – they could create false trade invoices that would allow them to deposit money where they needed it.

The result was a huge discrepancy between payments recorded for imports and the declared value of goods passing through customs, amounting to $526 billion in hidden outflows last year. The problem has only worsened in 2016. French investment bank Natixis estimates that outflows will total more than $900 billion this year, despite new restrictions on yuan movements, including prohibitions on using credit and debit cards to pay for insurance products in Hong Kong. Last week, the government added yet another restriction. It announced that all international capital-account transactions of more than $5 million will need to be approved by the State Administration of Foreign Exchange. This has businesses deeply concerned, given that the administration likely doesn’t have the manpower for the sheer number of transactions it will need to review.

And if such restrictions can be placed on the capital account, it seems only a matter of time until they’re imposed on goods and services transactions. All of which raises a simple question: Why is Beijing working so hard to prop up the yuan and crack down on outward capital flows? The common answer is that it fears the trade consequences of a declining yuan. But that’s not it. Since the government devalued the yuan on Aug. 11, the combined value of imports and exports has fallen by only 8%, even as the value of the yuan has fallen 8% against the U.S. dollar. Any coming decline in the currency won’t make much difference, given the weak global economy and the product mix China is buying and selling.

The real reason is that the government is concerned about the implications of further liberalizing. China’s rickety banks, with delinquency rates of 30%, are receiving regular liquidity injections from the PBOC. Money market rates have been rising, from under 2% this summer to above 2.3% in Shanghai today. Allowing international capital mobility could easily trigger larger withdrawals – and hence liquidity crunches for banks already feeling the pinch of bad loans. In other words, China is caught between trying to prop up a currency facing long-term decline and letting capital leave at will, risking a bank crisis.

Read more …

This is far from over.

EU Launches New Investigation Into Chinese Steel Imports (R.)

The EU has launched an investigation into whether Chinese producers of certain corrosion-resistant steels are selling into Europe at unfairly low prices, in its latest action against cheap Chinese steel imports. The European Commission has determined that a complaint brought by EU steelmakers association Eurofer merits an investigation, the EU’s official journal said on Friday. The EU has imposed duties on a wide range of steel grades after investigations over the past few years to counter what EU steel producers say is a flood of steel sold at a loss due to Chinese overcapacity.

Some 5,000 jobs have been axed in the British steel industry in the last year, as it struggles to compete with cheap Chinese imports and high energy costs. G20 governments recorecognized in September that steel overcapacity was a serious problem. China, the source of 50% of the world’s steel and the largest steel consumer, has said the problem is a global one. In October, the European Commission set provisional import tariffs of up to 73.7% for heavy plate steel and up to 22.6% for hot-rolled steel coming from China. Those investigations are set to conclude in April.

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Feels political. They could have announced this just as easily a week ago, before the referendum. Now a crisis threatens that may help make the case for interim technocrats to step in, and keep Grillo out.

ECB Refuses To Help Italy’s Crisis-Hit Monte dei Paschi Bank (G.)

Fears that the Italian government will have to prop up Monte dei Paschi di Siena (MPS) are mounting after the European Central Bank refused to give the world’s oldest bank more time to find major investors to back a €5bn (£4.2bn) cash injection. Trading in the troubled bank’s shares was repeatedly halted on the Italian stock exchange on Friday. The MPS share price closed 10% lower as the bank’s board held a meeting that had already been scheduled before the reports that the ECB had rejected its calls for an extension to the deadline to bolster its financial position. The ECB [..] decision may have closed the door to a private sector solution, under which major investors including the sovereign wealth fund of Qatar would pump billions into the bank.

But MPS said on Friday night that its board would next meet on Sunday night and that it was pressing on with its private sector solutions Even so there were concerns that the Italian government would still have to embark on a “precautionary recapitalisation” of the bank and potentially impose losses on retail investors who hold €2.1bn of the bank’s bonds. Under new EU rules, taxpayer money cannot be used unless bondholders take losses first. A precautionary recapitalisation takes place before a bank becomes insolvent. ECB officials had told Reuters they hoped the refusal to extend the deadline would pave the way for similar support for other Italian banks which are struggling with €360bn of bad loans.

It appeared to leave the Italian government with little option but to embark on a “precautionary recapitalisation” of the bank and potentially impose losses on retail investors who hold €2.1bn of the bank’s bonds. Under new EU rules, taxpayer money cannot be used unless bondholders take losses first. A precautionary recapitalisation takes place before a bank becomes insolvent. The bank has capital above regulatory minimums.

[..] The eurosceptic Five Star Movement, the second most popular party in Italy, said the government needed to step into the fray. “MPS can only be saved by state aid in order to avoid bail-in rules [that hurt] small savers, as happened a year ago,” the party’s MEPs said in a statement on founder Beppe Grillo’s blog. “This is not the time to fear the EU and a possible infraction procedure. The consequences of a disordered bail-in would be disastrous to say the least, almost apocalyptic if one considers the size of MPS.” They added that it was time to “slam our fists at the table in Brussels … while not giving a damn about the deficit”.

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Not as bad as numbers suggest perhaps, but not exactly encouraging wither.

60% Of Americans Who Usually Fly Home For The Holidays, Won’t This Year (MW)

Rising travel costs, airport delays, and other stressors mean fewer people will be flying home for the holidays this December. Almost 60% of people who normally fly home for the holidays will not this year, a survey of more than 1,000 visitors to travel deals website Airfarewatchdog found; 36% of whom say because it is too expensive and 21% would prefer to drive than deal with delays and long lines. An additional 13% said “the skies are too crowded” to fly home this year. It’s also not cheap: 70% of people who fly home for the holidays spend between $500 and $1,000 and 20% spend more than $1,000, according to a study of more than 1,000 users from travel assistant app Mezi.

Most Americans have less than $1,000 in savings, making such steep spending a major yearly commitment. Still, 18% of respondents in the Airfarewatchdog study said they fly home every year and still plan to do so. Air travel makes up a small%age of holiday travel – less than 10% in 2015, according to travel and automotive services non-profit AAA. But whether driving or flying home for the holidays, the majority of Americans are stressed out – 65% of people say they have anxiety about going home for the holidays, including 72% of women and 58% of men. The top sources of dread for these respondents include being bored and having nothing to do, conflict with family members, and questions about their relationship status.

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Makes you wonder how Schäuble spends Christmas. Scrooge comes to mind, prominently.

Greece Under Fire Over Christmas Bonus For Low-Income Pensioners (G.)

A goodwill gesture to ease the plight of those hardest hit in Greece by tax increases and budget cuts has backfired spectacularly on the prime minister, Alexis Tsipras, with the country’s international creditors making clear he has acted out of step. In the starkest case yet of how closely watched loan-reliant Athens is, lenders reacted with unusual alacrity on Friday after the leftist leader announced a one-off Christmas bonus for 1.6 million low-income pensioners. “The programme includes clear commitments to discuss all measures related to programme objectives with the institutions in advance,” an EU spokeswoman said. “The commission was not made aware of all the details of the announcements before they were made. We will now need to study them.”

Retirees have been among those most affected by the gruelling regime of austerity the debt-stricken country has been forced to enact in exchange for over €300bn in emergency rescue funding. Once unassailable, Tsipras’s own popularity has plummeted amid scenes of pensioners being teargassed and beaten as they took to the streets in protest. Under the scheme – announced in a televised address following a nationwide strike when anti-austerity demonstrations had swept the country – Tsipras said handouts of €617m would be given to those living on €800 or less a month. [..] State minister Alekos Flambouraris, the 42-year-old politician’s closest mentor, said creditors had not been forewarned as the money came out of the surplus Greece had managed to achieve through stringent belt-tightening.

[..] social tensions are also spiralling. “Tsipras is worried and that is why he made this move,” Grigoris Kalomoiris, chief policy maker at the union of public sector employees Adedy, told the Guardian. “Come January there will be more cuts to salaries and pensions in very real terms. We are all being pushed to breaking point. This, believe me, is the calm before the storm.” Ignoring creditor anger, Tsipras’s beleaguered administration dug in its heels late on Friday, saying the bonus did not threaten fiscal targets and would not be rescinded. “It is up to the Greek government to distribute expenditure in the way it sees most fit and socially correct, as long as agreed goals are reached,” the prime minister’s office said. “Greece is not a colony.”

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No ferries for 9 days?! In Greece, land of ferries?!

Greece Seamen Strike: Angry Farmers Throw Flares, Set Offices On Fire (KTG)

The port of Heraklion on the island of Crete turned into a battle field when hundreds of raging farmers attacked striking seamen and set the ticket offices of ANEK shipping company on fire on Friday evening. Angry about the ongoing strike of the seamen, the farmers threw flares at a ferry docked at the port. The sailors of Blue Horizon ferry answered with water drops. A farmer from Ierapetra had claimed that the ferry captain had put in operation the machines so that the ferry depart from the pier and that the lines were cut at risk of injuring farmers. The farmers were shouting “traitors” and some climbed on the lines. They kept demanding that the ferry opens its doors so that they can ship their products to the mainland.

Almost at the same time, a group of farmers moved to the ticket offices of shipping company ANEK and set it on fire. Hundreds of angry and determined farmers arrived at the port of Heraklion around 5pm and declared that they will not step back until 150 trucks loaded with vegetables get on board and leave for Piraeus. The harbormaster of Heraklion was injured and taken to the hospital with an ambulance. He was reportedly when he hit at a door during the incidents. In the 9th day of the seamen strike, the farmers are in rage as they cannot forward their products to the mainland and abroad, thus losing thousands of euros.

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I’m not at all a fan of these kinds of comparisons, but what exactly sets Australian ‘policy’ apart from German concentration camps?

Broken Men in Paradise (NYT)

MANUS, Papua New Guinea — The plane banks over the dense tropical forest of Manus Island, little touched, it seems, by human hand. South Pacific waters lap onto deserted beaches. The jungle glistens, impenetrable. At the unfenced airport, built by occupying Japanese forces during World War II, a sign “welcomes you to our very beautiful island paradise in the sun.” It could be that, a 60-mile-long slice of heaven. But for more than 900 asylum seekers from across the world banished by Australia to this remote corner of the Papua New Guinea archipelago, Manus has been hell; a three and a half year exercise in mental and physical cruelty conducted in near secrecy beneath the green canopy of the tropics.

A road, newly paved by Australia as part payment to its former colony for hosting this punitive experiment in refugee management, leads to Lorengau, a capital of romantic name and unromantic misery. Here I find Benham Satah, a Kurd who fled persecution in the western Iranian city of Kermanshah. Detained on Australia’s Christmas Island after crossing in a smuggler’s boat from Indonesia and later forced onto a Manus-bound plane, he has languished here since Aug. 27, 2013. Endless limbo undoes the mind. But going home could mean facing death: Refugees do not flee out of choice but because they have no choice. Satah’s light brown eyes are glassy. His legs tremble.

A young man with a college degree in English, he is now nameless, a mere registration number — FRT009 — to Australian officials. “Sometimes I cut myself,” he says, “so that I can see my blood and remember, ‘Oh, yes! I am alive.’ ” Reza Barati, his former roommate at what the men’s ID badges call the Offshore Processing Center (Orwell would be proud), is dead. A fellow Iranian Kurd, he was killed, aged 23, on Feb. 17, 2014. Satah witnessed the tall, quiet volleyball player being beaten to death after a local mob scaled the wall of the facility. Protests by asylum seekers had led to rising tensions with the Australian authorities and their Manus enforcers.

The murder obsesses Satah but constitutes a mere fraction of the human cost of a policy that, since July 19, 2013, has sent more than 2,000 asylum seekers and refugees to Manus and the tiny Pacific island nation of Nauru, far from inquiring eyes. (Unable to obtain a press visa to visit Manus, I went nonetheless.) The toll among Burmese, Sudanese, Somali, Lebanese, Pakistani, Iraqi, Afghan, Syrian, Iranian and other migrants is devastating: self-immolation, overdoses, death from septicemia as a result of medical negligence, sexual abuse and rampant despair. A recent United Nations High Commissioner for Refugees report by three medical experts found that 88% of the 181 asylum seekers and refugees examined on Manus were suffering from depressive disorders, including, in some cases, psychosis.

Read more …

On a lighter note:

Nov 132015
 
 November 13, 2015  Posted by at 10:08 am Finance Tagged with: , , , , , , , , , ,  7 Responses »


DPC Youngstown, Ohio. Steel mill and Mahoning River 1902

Fresh Wave Of Selling Engulfs Oil And Metals Markets (FT)
Fed Officials Lay Case For December Liftoff (Reuters)
China Banks’ Troubled Loans Hit $628 Billion – More Than Sweden GDP (Bloomberg)
China’s Demand For Cars Has Slowed. Overcapacity Is The New Normal. (Bloomberg)
China Apparent Steel Consumption Falls 5.7% From January-October (Reuters)
China Speeds Up Fiscal Spending in October to Support Growth (Bloomberg)
China Panics, Sends Fiscal Spending Sky-High As Credit Creation Tumbles (ZH)
China Learns What Pushing on a String Feels Like (WSJ)
Oil Slumps 4%, Nears New Six-Year Low (Reuters)
OPEC Says Oil-Inventory Glut Is Biggest in at Least a Decade (Bloomberg)
IEA Says Record 3 Billion-Barrel Oil Stocks May Weaken Prices (Bloomberg)
Number of First-Time US Home Buyers Falls to Lowest in Three Decades (WSJ)
Striking Greeks Take To Tension-Filled Streets In Austerity Protest (Reuters)
Europe’s Top Banks Are Cutting Losses Throughout Latin America (Bloomberg)
Collapsing Greenland Glacier Could Raise Sea Levels By Half A Meter (Guardian)
EU Leaders Race To Secure €3 Billion Migrant Deal With Turkey (Guardian)
PM Trudeau Says Canada To Settle 25,000 Syrian Refugees In Next 7 Weeks (G&M)

This has so much more downside to it.

Fresh Wave Of Selling Engulfs Oil And Metals Markets (FT)

A renewed sell-off in oil and metals has shaken investors as fears grow that falling demand for commodities is signalling a sharper slowdown in China’s resource-hungry economy. Copper, considered a barometer for global economic growth because of its wide range of industrial uses, fell to a six-year low below $5,000 a tonne on Thursday. Oil, which has tanked almost 20% since a shortlived rally in October, dropped to under $45 a barrel on Thursday, less than half the level it traded at for much of this decade. The Bloomberg Commodity Index, a broad basket of 22 commodity futures widely followed by institutional investors, has fallen to its lowest level since the financial crisis.

Commodity prices have become a barometer for the health of China’s economy, whose rapid industrialisation over the past 10 years has been the engine of global growth. While markets already endured a commodity sell-off in August, traders and analysts say the drop is more worrying this time as it appears to be driven by concerns about demand rather than a glut of supply. “Whether it was power cable production [in China] or air conditioner data … activity in October continued to show deep contraction”, said Nicholas Snowdon, analyst at Standard Chartered. The slowdown is particularly concerning as many analysts and investors had expected an easing in Chinese credit conditions to stoke a modest increase in consumption in the fourth quarter.

Goldman Sachs said this week that recent data pointed to shrinking demand in China’s “old economy” as Beijing tries to manage a transition to more consumer-led growth. By some measures commodity prices are back where they were before China started on its path to urbanisation more than a decade ago. Other leading commodity indices are back at levels last seen in 2001, while shares in Anglo American fell to their lowest since the company s UK listing in 1999 on Thursday. A stronger US dollar has also weighed on raw material prices. “There are signs that oil demand growth is slowing down significantly relative to earlier this year”, said Pierre Andurand, one of the top performing energy hedge fund managers last year. “World GDP growth will keep on being revised down”.

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Forward narrativeance.

Fed Officials Lay Case For December Liftoff (Reuters)

U.S. Federal Reserve officials lined up behind a likely December interest rate hike with one key central banker saying the risk of waiting too long was now roughly in balance with the risk of moving too soon to normalize rates after seven years near zero. Other Fed policymakers argued that inflation should rebound, allowing the Fed to soon lift rates from near zero though probably proceed gradually after that. In New York, William Dudley said: “I see the risks right now of moving too quickly versus moving too slowly as nearly balanced.” Dudley, who as president of the New York Fed has a permanent vote on the Fed’s policy-setting committee, said the decision still required the central bank to “think carefully” because of the risk that the United States is facing chronically slower growth and low inflation that would justify continued low rates.

But his assessment of “nearly balanced” risks represents a subtle shift in the thinking of a Fed member who has been hesitant to commit to a rate hike, but now sees evidence accumulating in favor of one. For much of Janet Yellen’s tenure as Fed chair, policymakers at the core of the committee, and Yellen herself, have said they would rather delay a rate hike and battle inflation than hike too soon and brake the recovery. But Dudley said the current 5% unemployment rate “could fall to an unsustainably low level” that threatens inflation, while seven years of near-zero rates “may be distorting financial markets.” “I don’t favor waiting until I sort of see the whites in inflation’s eyes,” he said about monetary policy timing. Going sooner and more slowly, he said at the Economic Club of New York, may now be best for the Fed’s “risk management.”

In Washington, Fed Vice Chair Stanley Fischer said inflation should rebound next year to about 1.5%, from 1.3% now, as pressures related to the strong dollar and low energy prices fade. The second-in-command also noted that the Fed could move next month to raise rates, which could be taken as yet another signal the central bank is less willing to let low inflation further delay policy tightening. “While the dollar’s appreciation and foreign weakness have been a sizable shock, the U.S. economy appears to be weathering them reasonably well,” Fischer told a conference of researchers and market participants at the Fed Board.

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I’d like to know what bad loans are at in the shadow banking sector.

China Banks’ Troubled Loans Hit $628 Billion – More Than Sweden GDP (Bloomberg)

Chinese banks’ troubled loans swelled to almost 4 trillion yuan ($628 billion) by the end of September, more than the gross domestic product of Sweden, according to figures released by the industry regulator. Banks’ profit growth slumped to 2% in the first nine months from 13% a year earlier, according to data released on Thursday night by the China Banking Regulatory Commission. The numbers come as a debt crisis at China Shanshui Cement Group Ltd. prompts lenders including China Construction Bank Corp. and China Merchants Bank Co. to demand immediate repayments and as weakness in October credit growth shows the risk of a deeper economic slowdown. While the official data shows non-performing loans at 1.59% of outstanding credit, or 1.2 trillion yuan, that rises to 5.4%, or 3.99 trillion yuan, if “special mention” loans, where repayment is at risk, are also included.

The amount of bad debt piling up in China is at the center of a debate about whether the country will continue as a locomotive of global growth or sink into decades of stagnation like Japan after its credit bubble burst. “Evergreening,” which is when banks roll over debt that hasn’t been repaid on time, may contribute to the official bad-loan numbers being understated. The Bank for International Settlements cautioned in September that China’s credit to gross domestic product ratio indicated an increasing risk of a banking crisis in coming years. Bad-loan provisions, shrinking lending margins and weakness in demand for credit are eroding banks’ profits just as financial deregulation boosts competition. Ramped-up stimulus, with the central bank cutting interest rates six times in a year, failed to prevent the nation’s broadest measure of new credit slumping to the lowest in 15 months in October.

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“New Chinese factories are forecast to add a further 10% in capacity in 2016—despite projections that sales will continue to be challenged.”

China’s Demand For Cars Has Slowed. Overcapacity Is The New Normal. (Bloomberg)

For much of the past decade, China’s auto industry seemed to be a perpetual growth machine. Annual vehicle sales on the mainland surged to 23 million units in 2014 from about 5 million in 2004. That provided a welcome bounce to Western carmakers such as Volkswagen and General Motors and fueled the rapid expansion of locally based manufacturers including BYD and Great Wall Motor. Best of all, those new Chinese buyers weren’t as price-sensitive as those in many mature markets, allowing fat profit margins along with the fast growth. No more. Automakers in China have gone from adding extra factory shifts six years ago to running some plants at half-pace today—even as they continue to spend billions of dollars to bring online even more plants that were started during the good times.

The construction spree has added about 17 million units of annual production capacity since 2009, compared with an increase of 10.6 million units in annual sales, according to estimates by Bloomberg Intelligence. New Chinese factories are forecast to add a further 10% in capacity in 2016—despite projections that sales will continue to be challenged. “The Chinese market is hypercompetitive, so many automakers are afraid of losing market share,” says Steve Man, a Hong Kong-based analyst with Bloomberg Intelligence. “The players tend to build more capacity in hopes of maintaining, or hopefully, gain market share. Overcapacity is here to stay.” The carmaking binge in China has its roots in the aftermath of the global financial crisis, when China unleashed a stimulus program that bolstered auto sales.

That provided a lifeline for U.S. and European carmakers, then struggling with a collapse in consumer demand in their home markets. Passenger vehicle sales in China increased 53% in 2009 and 33% in 2010 after the stimulus policy was put in place. But the flood of cars led to worsening traffic gridlock and air pollution that triggered restrictions on vehicle registrations in major cities including Beijing and Shanghai. Worse, the combination of too many new factories and slowing demand has dragged down the industry’s average plant utilization rate, a measure of profitability and efficiency. The industrywide average plunged from more than 100% six years ago (the result of adding work hours or shifts) to about 70% today, leaving it below the 80% level generally considered healthy. Some local carmakers are averaging about 50% utilization, according to the China Passenger Car Association.

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We should use ‘apparent’ for all Chinese offcial data.

China Apparent Steel Consumption Falls 5.7% From January-October (Reuters)

Apparent steel consumption in China, the world’s biggest producer and consumer, fell 5.7% to 590.47 million tonnes in the first 10 months of the year, the China Iron and Steel Association (CISA) said on Friday. The figure was disclosed by CISA vice-secretary general Wang Yingsheng at a conference. China’s massive steel industry has been hit by weakening demand and a huge 400 million tonne per annum capacity surplus that has sapped prices. Producers have relied on export markets to offset the decline in domestic demand, but crude steel output still declined 2.2% in the first 10 months of the year, according to official data.

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“Fiscal spending jumped 36.1% from a year earlier..”

China Speeds Up Fiscal Spending in October to Support Growth (Bloomberg)

China’s government spending surged four times the pace of revenue growth in October, highlighting policy makers’ determination to meet this years’ growth target as a manufacturing and property investment slowdown weigh on the economy. Fiscal spending jumped 36.1% from a year earlier to 1.35 trillion yuan ($210 billion), while fiscal revenue rose 8.7% to 1.44 trillion yuan, the Finance Ministry said Thursday. In the first ten months of the year, spending advanced 18.1% and revenue increased 7.7%. China is turning to increased fiscal outlays as monetary easing, a relaxation on local government financing, and an expansion of policy banks’ capacity to lend, struggle to stabilize growth in the nation’s waning economic engines.

Meantime, government revenue has been strained as companies face overcapacity, factory-gate deflation and the slowest annual economic growth in a quarter century. “With downward economic pressure and structural tax and fee cuts, fiscal revenue will face considerable difficulties in the next two months,” the Ministry of Finance said in the statement. “As revenue growth slows, fiscal expenditure has clearly been expedited to ensure that all key spending is completed.” The stepped-up stimulus effort had taken the fiscal-deficit-to-gross-domestic-product ratio to a six-year high by the end of September, according to an October report by Morgan Stanley analysts led by Sun Junwei in Hong Kong.

“The central government has been taking the lead in fiscal easing to support growth” as local governments’ off budget spending through financing vehicles have slowed, the analysts wrote. The country plans to raise the quota for regional authorities to swap high-yielding debt for municipal bonds by as much as 25%, according to people familiar with the matter. The quota of the bond-swap program will be increased to as much as 3.8 trillion yuan to 4 trillion yuan for 2015, according to the people, who asked not to be identified because the move hasn’t been made public. Increases have been made throughout the year from an originally announced 1 trillion yuan.

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“..companies don’t need to invest and they’re already straining under mountainous debt loads they can’t service.”

China Panics, Sends Fiscal Spending Sky-High As Credit Creation Tumbles (ZH)

Earlier this week, MNI suggested that according to discussions with bank personnel in China, data on lending for October was likely to come in exceptionally weak. That would mark a reversal from September when the credit impulse looked particularly strong and the numbers topped estimates handily. “One source familiar with the data said new loans by the Big Four state-owned commercial banks in October plunged to a level that hasn’t been seen for many years,” MNI reported. Given that, and given what we know about rising NPLs and a lack of demand for credit as the country copes with a troubling excess capacity problem, none of the above should come as a surprise. Well, the numbers are out and sure enough, they disappointed to the downside. RMB new loans came at just CNY514bn in October – consensus was far higher at CNY800bn. That was down 6.3% Y/Y. Total social financing fell 29% Y/Y to CNY447 billion, down sharply from September’s CNY1.3 trillion print.

As noted above, this is likely attributable to three factors. First, banks’ NPLs are far higher than the official numbers, as Beijing’s insistence on forcing banks to roll souring debt and the suspicion that nearly 40% of credit is either carried off the books or classified in such a way that it doesn’t make it into the headline print. Underscoring this is the rising number of defaults China has seen this year. Obviously, you’re going to be reluctant to lend if you know that under the hood, things are going south in a hurry. Here’s Credit Suisse’s Tao Dong, who spoke to Bloomberg: “Banks are still unwilling to lend. This is quite weak, even stripping out the seasonality. The rebound in bank lending, boosted by the PBOC’s injection to the policy banks, has been short lived.” Second, it’s not clear that demand for loans will be particularly robust for the foreseeable future. The country has an overcapacity problem. In short, companies don’t need to invest and they’re already straining under mountainous debt loads they can’t service.

Here’s Alicia Garcia Herrero, chief Asia Pacific economist at Natixis: “The reason is simple: too much leverage.” With those two things in mind, consider thirdly that this comes against the backdrop of lackluster economic growth. As Goldman points out, “China is likely to continue to slow credit growth over the medium to long term given credit growth is still running at roughly double the rate of GDP growth.” In short, it’s not clear why anyone should expect these numbers to rebound. Back to Bloomberg: “The “big miss for China’s credit growth in October rings alarm bells about the strength of the economy and significantly increases the chances of continued aggressive easing,” Bloomberg Intelligence economist Tom Orlik wrote in a note. “It lends support to the idea that a combination of falling profits, the high cost of servicing existing borrowing and uncertainty about the outlook has significantly reduced firms’ incentives to borrow and invest. That’s similar to the problem that afflicted Japan during its lost decades.”

So if these kind of numbers continue to emanate from China, expect the calls for fiscal stimulus to get much louder. Indeed consider that fiscal spending soared 36% on the month (via Bloomberg again): “China’s government spending surged four times the pace of revenue growth in October, highlighting policy makers’ determination to meet this years’ growth target as a manufacturing and property investment slowdown weigh on the economy. Fiscal spending jumped 36.1% from a year earlier to 1.35 trillion yuan ($210 billion), while fiscal revenue rose 8.7% to 1.44 trillion yuan, the Finance Ministry said Thursday. In the first ten months of the year, spending advanced 18.1% and revenue increased 7.7%.”

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“Total credit outstanding was up just 12% from a year earlier, close to its slowest pace in over a decade.” That’s still twice as fast as even the official GDP growth number..

China Learns What Pushing on a String Feels Like (WSJ)

The People’s Bank of China has been easing policy for nearly a year, but the economy hasn’t bounced back. Capital outflows and a tapped out banking system are holding it back. Data out Thursday showed lending in October to be decidedly lackluster. Banks extended 513.6 billion yuan ($80.7 billion) of new loans, down 3.3% from a year earlier. Total social financing, a broader measure of credit that includes various kinds of shadow loans, was also weak. Total credit outstanding was up just 12% from a year earlier, close to its slowest pace in over a decade. This will be disappointing to the central bank, which has been bending over backward to stimulate credit. Since November last year, it has slashed benchmark interest rates six times and cut the required level of reserves, which frees up funds for lending, four times.

Demand for loans is weak, as companies see fewer opportunities for profitable investment in a slowing economy. What’s more, disinflationary pressures mean that real, inflation-adjusted lending rates have fallen by not much or none at all, depending on what price index is used. Banks are also hesitant to lend aggressively, says Credit Suisse economist Dong Tao, as they are already facing a buildup of nonperforming loans. In the third quarter, profit growth at the country’s eight biggest lenders was close to zero, due to rising provisions for bad loans. Capital outflows are also making the PBOC’s job harder. Figures out on Wednesday indicated that there was a massive $224 billion of investment outflows in the third quarter.

Facing this, the PBOC has been intervening to keep the currency from depreciating, selling off dollars and buying up yuan. Unfortunately this shrinks the domestic money supply, thus counteracting much of the PBOC’s easing measures. The alternative would be to let the currency depreciate. That would lead to more outflows in the near term, until the currency falls to a level that would bring money back in. But if the economy keeps stalling, pressure for depreciation may be too strong to resist. Investors who have seen the yuan stabilize since the botched August devaluation shouldn’t rest too easy. The outflow situation appeared to improve in October. The PBOC’s forex reserves unexpectedly ticked up for the month, suggesting it didn’t have to intervene as much in the currency markets.

But economists such as Daiwa’s Kevin Lai believe the central bank was merely intervening more stealthily, for example by borrowing dollars from forward markets instead of spending its reserves. Regardless, unless the Chinese economy surges back soon, outflow pressures are likely to intensify again, especially if the Federal Reserve raises interest rates as expected in December. That will make it even more difficult to stimulate growth in China. Fiscal policy, including more infrastructure stimulus, will likely be needed to supplement monetary easing. Otherwise, the PBOC will just keep pushing on a string.

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The $30 handle is not far away.

Oil Slumps 4%, Nears New Six-Year Low (Reuters)

Oil prices tumbled almost 4% on Thursday, accelerating a slump that threatens to test new six-and-a-half year lows, with traders unnerved by a persistent rise in U.S. stockpiles and a downbeat forecast for next year. Benchmark Brent crude fell below $45 a barrel for the first time since August, its sixth decline of a seven-day losing streak of more than $6 a barrel, or 12%, in a slump that will vex traders who thought the year’s lows had already passed. The latest decline was triggered by data showing that U.S. stockpiles were still rising rapidly toward the record highs reached in April, despite slowing U.S. shale production. Weekly U.S. data showed stocks rose by 4.2 million barrels, four times above market expectations.

In its monthly report, OPEC said its output dropped in October but at current levels it could still produce a daily surplus above 500,000 barrels by 2016. Brent futures settled down $1.75, or 3.8%, at $44.06 a barrel. The tumble of the past week has left Brent less than $2 away from its August lows and a new 6-1/2 year bottom. U.S. crude futures finished down $1.18, or 2.8%, at $41.75. Its low in August was $37.75. “We’re going to have a lot of oil on our hands with the builds we’re seeing, talk of rising tanker storage and the yawning discount between prompt and forward oil,” said Tariq Zahir at New York’s Tyche Capital Advisors.

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And everyone’s pumping.

OPEC Says Oil-Inventory Glut Is Biggest in at Least a Decade (Bloomberg)

Surplus oil inventories are at the highest level in at least a decade because of increased global production, according to OPEC. Stockpiles in developed economies are 210 million barrels higher than their five-year average, exceeding the glut that accumulated in early 2009 after the financial crisis, the organization said in a report. Slowing non-OPEC supply and rising demand for winter fuels could “help alleviate the current overhang,” enabling a recovery in prices, it said. The group’s own production slipped last month because of lower output in Iraq. “The build in global inventories is mainly the result of the increase in total supply outpacing growth in world oil demand,” OPEC’s research department said in its monthly market report. Oil prices have lost about 40% in the past year as several OPEC members pump near record levels to defend their market share against rivals such as the U.S. shale industry.

While inventories peaked in early 2009 before OPEC implemented record production cuts, this time the group has signaled it won’t pare supplies to balance global markets and U.S. output is buckling only gradually in response to the price rout. The current excess is bigger than the surplus of 180 million barrels to the five-year seasonal average that developed in the first quarter of 2009, according to the report. The 2009 glut was the only other occasion in the past 10 years when the oversupply has topped 150 million barrels, it said. “The massive stockpile overhang is one more indicator, along with the ongoing slump in prices, that Saudi Arabia’s oil strategy isn’t working so far,” said Seth Kleinman, head of energy strategy at Citigroup Inc. in London. “The physical oil market is falling apart just as we are hitting the winter, when it’s all supposed to be getting better.”

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The entire market is collapsing, but the IEA sees a positive: ““Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions..”

IEA Says Record 3 Billion-Barrel Oil Stocks May Weaken Prices (Bloomberg)

Oil stockpiles have swollen to a record of almost 3 billion barrels because of strong production in OPEC and elsewhere, potentially deepening the rout in prices, according to the International Energy Agency. This “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia, even as world fuel demand grows at the fastest pace in five years, the agency said. Still, the IEA predicts that supplies outside OPEC will decline next year by the most since 1992 as low crude prices take their toll on the U.S. shale oil industry. “Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions,” the Paris-based agency said in its monthly market report. With supplies of winter fuels also plentiful, “oil-market bears may choose not to hibernate.”

Oil prices have lost about 40% in the past year as the OPEC defends its market share against rivals such as the U.S. shale industry, which is faltering only gradually despite the price collapse. Oil inventories are growing because supply growth still outpaces demand, the 12-member exporters group said in its monthly report Thursday. Total oil inventories in developed nations increased by 13.8 million barrels to about 3 billion in September, a month when they typically decline, according to the agency. The pace of gains slowed to 1.6 million barrels a day in the third quarter, from 2.3 million a day in the second, although growth remained “significantly above the historical average.” There are signs the some fuel-storage depots in the eastern hemisphere have been filled to capacity, it said.

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Excuse me? … “..younger households are forgoing the opportunity to accumulate wealth..”

Number of First-Time US Home Buyers Falls to Lowest in Three Decades (WSJ)

The share of U.S. homes sold to first-time buyers this year declined to its lowest level in almost three decades, raising concerns that young people are being left out of an otherwise strong housing-market recovery. First-time buyers fell to 32% of all purchasers in 2015 from 33% last year, the third straight annual decline and the lowest%age since 1987, according to a report released Thursday by the National Association of Realtors, a trade group. The historical average is 40%, according to the group, which has been recording such data since 1981. The housing market is on track for its strongest year for sales since 2007, but the dearth of younger buyers could pose long-term challenges, economists said.

Without them, current owners have difficulty trading up or selling their homes when they retire. If home prices continue to rise sharply it will become even more difficult for new buyers to enter the market. The median price of previously built homes sold in September was $221,900, up 6.1% from a year earlier, according to the NAR. The median price for a newly built home rose to $296,900 in September from $261,500 a year ago, according to the Commerce Department. “The short answer is they can’t afford it,” said Nela Richardson, chief economist at Redfin, a real-estate brokerage. By delaying homeownership, younger households are forgoing the opportunity to accumulate wealth, said Ms. Richardson.

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For now, they look stuck with nowhere to turn.

Striking Greeks Take To Tension-Filled Streets In Austerity Protest (Reuters)

Striking Greeks took to the streets on Thursday to protest austerity measures, setting Alexis Tsipras’ government its biggest domestic challenge since he was re-elected in September promising to cushion the impact of economic hardship. Flights were grounded, hospitals ran on skeleton staff, ships were docked at port and public offices stayed shut across the country in the first nationwide walkout called by Greece’s largest private and public sector unions in a year. As Greece’s foreign lenders prepared to meet in central Athens to review compliance with its latest bailout, thousands marched in protest at the relentless round of tax hikes and pension cutbacks that the rescue packages have entailed.

Tensions briefly boiled over in the city’s main Syntagma Square, where a Reuters witness saw riot police fired tear gas at dozens of black-clad youths who broke off from the march to hurl petrol bombs and stones and smash shop windows near parliament. Some bombs struck the frontage of the Greek central bank. Police sources said three people were detained before order was restored. Five years of austerity since the first bailout was signed in 2010 have sapped economic activity and left about a quarter of the population out of work. “My salary is not enough to cover even my basic needs. My students are starving,” said Dimitris Nomikos, 52, a protesting teacher told Reuters. “They are destroying the social security system … I don’t know if we will ever see our pensions.”

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Losses wherever you look.

Europe’s Top Banks Are Cutting Losses Throughout Latin America (Bloomberg)

European banks are on the retreat all across Latin America Societe Generale announced in February that it’s dismissing more than 1,000 workers while exiting the consumer-finance business in Brazil. In August, HSBC sold its unprofitable Brazilian unit, with more than 20,000 employees. Two months later, it was Deutsche Banks turn. The German lender said it’s closing offices in Argentina, Mexico, Chile, Peru and Uruguay and moving Brazilian trading activities elsewhere. Barclays is shrinking its operations in Brazil too. The exodus threatens to deepen Latin America’s turmoil, making it harder for companies and consumers to obtain financing. The region already is out of favor as sinking commodity prices drive it toward the worst recession since the late 1990s.

European banks, meanwhile, are looking to cull weak businesses as they struggle to generate profits and meet tougher capital requirements back home. “All large European banks are under great pressure from regulatory changes and low stock prices to change their business models,” Roy Smith, a finance professor at New York University’s Stern School of Business, said in an e-mail. “These changes have to be quite significant to make enough difference.” The exits are opening opportunities for local rivals and global banks from the U.S., Spain and Switzerland willing to wait out the economic slump. Latin America’s economy will probably contract 0.5% this year, squeezed by falling commodity prices and a slowdown in Brazil that’s predicted to be the longest since the Great Depression.

That would make it the first recession in the region since 2009 and the biggest since 1999. Demand for investment-banking services is tumbling, with fees plunging 45% this year through Oct. 15 to a 10-year low of $817 million, Dealogic said. “European banks have fairly weak profits right now and in some cases low capital levels,” Erin Davis, an analyst from Morningstar, said in an e-mail. That leaves “little wiggle room” to absorb losses or low profits from Latin America, even if they believe in its long-term potential, Davis said.

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“..from 2002 to 2014 the area of the glacier’s floating shelf shrank by a massive 95%..”

Collapsing Greenland Glacier Could Raise Sea Levels By Half A Meter (Guardian)

A major glacier in Greenland that holds enough water to raise global sea levels by half a metre has begun to crumble into the North Atlantic Ocean, scientists say. The huge Zachariae Isstrom glacier in northeast Greenland started to melt rapidly in 2012 and is now breaking up into large icebergs where the glacier meets the sea, monitoring has revealed. The calving of the glacier into chunks of floating ice will set in train a rise in sea levels that will continue for decades to come, the US team warns. “Even if we have some really cool years ahead, we think the glacier is now unstable,” said Jeremie Mouginot at the University of California, Irvine. “Now this has started, it will continue until it retreats to a ridge about 30km back which could stabilise it and perhaps slow that retreat down.”

Mouginot and his colleagues drew on 40 years of satellite data and aerial surveys to show that the enormous Zachariae Isstrom glacier began to recede three times faster from 2012, with its retreat speeding up by 125 metres per year every year until the most recent measurements in 2015. The same records revealed that from 2002 to 2014 the area of the glacier’s floating shelf shrank by a massive 95%, according to a report in the journal Science. The glacier has now become detached from a stabilising sill and is losing ice at a rate of 4.5bn tonnes a year. Eric Rignot, professor of Earth system science at the University of California, Irvine, said that the glacier was “being hit from above and below”, with rising air temperatures driving melting at the top of the glacier, and its underside being eroded away by ocean currents that are warmer now than in the past.

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Wow, really?! Foreigners controlling your borders?: “..a pact that would see Turkey patrolling the EU’s southern border with Greece..”

EU Leaders Race To Secure €3 Billion Migrant Deal With Turkey (Guardian)

The German chancellor, Angela Merkel, and other EU leaders are racing to clinch a €3bn (£2.4bn) deal with Turkey’s strongman president, Recep Tayyip Erdogan, to halt the mass influx of migrants and refugees into Europe. All 28 national EU leaders are expected to host Erdogan at a special summit in Brussels within weeks to expedite a pact that would see Turkey patrolling the EU’s southern border with Greece and stemming the flow of hundreds of thousands of refugees, mainly from Syria. In return, Ankara would get €3bn over two years and the EU would also probably agree to resettle hundreds of thousands of refugees in Europe directly from Turkey. No EU country, not even Germany, has committed to paying its share of the €3bn bill except Britain.

In what appears to be a unique event in David Cameron’s chequered history of relations with the EU, the prime minister, while in the Maltese capital of Valletta, offered €400m for the Turkey plan, the only financial pledge yet delivered. That figure is roughly in line with a breakdown of expected national contributions by the European commission and would make Britain the second biggest participant after Germany. The prospect of a breakthrough with Turkey is tantalising for Merkel, for whom the refugee crisis has posed the biggest problem in 10 years of power. This week her finance minister, Wolfgang Schaeuble, likened the arrival of almost 800,000 newcomers in Germany this year to an avalanche and appeared to blame the chancellor for the situation by stating that “careless skiers can trigger avalanches”.

Facing tumult within her governing coalition and her own party, Merkel looks like a leader seeking relief in a hurry. An emergency EU summit in Valletta heard from EU negotiators on Thursday that Erdogan was demanding two quick moves by the Europeans to pave the way for a deal – €3bn over two years and a full summit. Senior EU sources said the message from Ankara was that the price tag would rise if it was not accepted now. Merkel wasted no time in agreeing, witnesses to the closed-door summit exchanges said. She told her fellow EU leaders that she was ready to put money on the table and proposed 22 November as the summit date. She later said the date was not set because it had to be agreed with Ankara, but that it would be around the end of the month.

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It’s a start.

PM Trudeau Says Canada To Settle 25,000 Syrian Refugees In Next 7 Weeks (G&M)

Prime Minister Justin Trudeau will use his first international trip as an opportunity to show other nations there is an economic – as well as humanitarian – case for welcoming large numbers of Syrian refugees. Less than two weeks after being sworn in as Prime Minister, Mr. Trudeau will participate in a summit of G20 leaders hosted by Turkey, Syria’s northern neighbour that is currently home to more than two million refugees. Mr. Trudeau said he expects Canada’s plan to settle 25,000 Syrian refugees this year will have a greater impact in terms of setting an example to others. “I think one of the things that is most important right now is for a country like Canada to demonstrate how to make accepting large numbers of refugees not just a challenge or a problem, but an opportunity; an opportunity for communities across this country, an opportunity to create growth for the economy,” he said.

Mr. Trudeau is departing on a whirlwind of foreign travel that will test his political skills as he attempts to strike positive first impressions with the world’s most influential leaders. The Liberals are promoting the trips as a message that Canada will now play a more constructive role in international affairs. The Prime Minister said his focus at the G20 will be to encourage global growth through government investment rather than austerity. The G20 pledged last year in Brisbane, Australia, to boost economic growth by 2% partly by increased spending on infrastructure, a plan that is in line with Mr. Trudeau’s successful election platform. The global economy has since moved in the opposite direction. The IMF has lowered its global growth forecasts for this year and next.

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