Saturday, February 13, 2016

Who's Fighting Whom In Syria

This is as of last week, it looks to change by Tuesday.

Turkey Shells Aleppo Syria, Says "Massive Escalation" Imminent As Saudis Ready Airstrikes

From ZeroHedge:
Even as all sides - including the US, Russia, Saudi Arabia, and select rebel groups - pretend to be working towards a ceasefire and a diplomatic solution to the five year conflict in Syria, actions speak louder than words, and to put it as succinctly as possible, everyone is still fighting.

In fact, the fighting is more intense than ever. Russia and Hezbollah are closing in on Aleppo, the country’s largest city and a key urban center where rebels are dug in for what amounts to a last stand. If the city is liberated by the government (and yes, “liberated” is more accurate than “falls” because occupied territory belongs to the Syrian government, not to Sunni extremists), Assad will have regained control of the country’s backbone in the west.

That would effectively mean the end of the rebellion and the Gulf monarchies, not to mention Turkey, are not happy about it. “The main battle is about cutting the road between Aleppo and Turkey, for Turkey is the main conduit of supplies for the terrorists,” Assad said in an interview with AFP on Friday.

That supply line has been severed and now, it’s do or die time for the rebels’ Sunni benefactors in Ankara, Riyadh, and Doha. Either intervene or watch as Hezbollah rolls up the opposition under cover of Russian airstrikes, restoring the Assad government and securing the Shiite crescent for the Iranians.

As we documented extensively this week, the Saudis and the Turks are now set to invade. Assad has promised to “confront them”, which of course means that the IRGC and Hassan Nasrallah's army are set to come into direct contact with Turkish and Saudi troops, setting the stage for an all-out sectarian war that will almost invariably end up pitting NATO against the Russians. Note that this is different from Yemen, where Tehran fights via proxies rather than directly against the Saudi military.

On Saturday the stakes were raised when Turkey said Saudi Arabia is set to send warplanes to Incirlik.

As a reminder, access to Incirlik was the carrot Erdogan used last summer to convince NATO to acquiesce to Ankara’s brutal crackdown on the PKK. “Let me wage war against my political rivals, and you can use our airbase,” is a fair approximation of Erdogan’s proposition.
Now, it appears the Saudis are set to use the base as a staging ground for strikes in Syria.
As RT reports, “Saudi Arabia is to deploy military jets and personnel to Turkey’s Incirlik Air Base in the south of the country, Ankara said.” 

Of course the excuse is the same as it ever was for everyone involved: the fight against ISIS....MORE

What Does Izabella Kaminska Mean with "Rawaici"?

Dizzynomics put up a post referencing Rawaici.
Schoolboy French reminds us that ici is "here", that's easy enough.

A bit of googling turns up the coat of arms of Rawa, Poland:

File:POL COA Rawicz.svg

A woman on a bear while another bear, apparently under the influence, admires a flower.

So..."Party Here"?

I believe Rawaici may be an invitation to a cocktail party to discuss riding out the bear market.

Or, longshot, if you're into heraldry and heraldic vexillology, it's simply:
Shield Or with bear Sable facing dexter, a maiden on its back.
The maiden, vested in royal attire Gules and a crown Or, with flowing hair and hands upraised and expanded, all proper.

 Out of the crest coronet, between two antlers proper, a bear facing dexter. His left arm in front is lowered, and another one holds a rose on a stem, all proper, which the bear carries to his snout.
 I'll probably stick with the first interpretation but note there isn't any respondez info.

U.S. Allies: "Saudi Arabia sends troops and fighter jets to military base in Turkey ahead of intervention against Isis in Syria"

From The Independent (get it while you can):
Saudi officials have stated that they want to fight Isis and see President Bashar al-Assad removed 
Saudi Arabia is sending troops and fighter jets to Turkey's Incirlik military base ahead of a possible ground invasion of Syria.

The Turkish foreign minister, Mevlut Cavusoglu, confirmed the deployment in a statement to the Yeni Şafak newspaper on Saturday, days before a temporary ceasefire is due to come into force.
“Saudi Arabia declared its determination against Daesh (the Arabic term for Isis) by saying that they were ready to send both jets and troops,” he said.

“At every coalition meeting we have always emphasised the need for an extensive result-oriented strategy in the fight against the Daesh terrorist group.

“If we have such a strategy, then Turkey and Saudi Arabia may launch an operation from the land.”
He confirmed that planes and military personnel were being sent to Incirlik, in Adana near the Syrian border, but said numbers had not been confirmed.

Adel al-Jubeir, the Saudi foreign minister, said Russia's intervention would not help Assad stay in power in an interview published today.

“There will be no Bashar al-Assad in the future,” he told a German newspaper.

Co-operation with Turkey could prove problematic if Saudi Arabia follows its definition of “terrorists” to include Kurdish fighters, who have been one of the most effective forces against Isis on the ground....MORE

Why Does U.S. Productivity Look So Abysmal? It's Not Mismeasurement, Paper Says

From Real Time Economics:
The productivity of U.S. workers has been in a decadelong decline, according to official government measures, a vexing development that suggests continued slow growth for wages and for the overall economy.

But are those government figures getting it right?

One popular school of thought says the problem is measurement. That is, official statistics are geared toward a 20th-century economy of manufacturers rather than a 21st-century world of smartphones, broadband, GPS and other innovations that make workers more efficient and leisure time more abundant.

A working paper released this week examines possible mismeasurement. University of Chicago economics professor Chad Syverson doesn’t think the hypothesis adds up.

While intuitive and seemingly plausible, recalibrating for the latest advances still doesn’t account for a “substantial portion of the measured output lost to the productivity slowdown,” he wrote. “It also suggests that, more likely than not, much if not most of the productivity slowdown is real. Whether that slowdown will end anytime soon is an open question.”

In pure economic terms, the slowdown is a big deal. Productivity, a measure of output per hour worked, allows wages to rise without fueling inflation. And had productivity kept pace with the prior decade, the economy in the third quarter of 2015 would have been at least $2.7 trillion, or 15%, bigger than it was, Mr. Syverson calculates. That’s $8,400 per person or $21,900 per U.S. household.
Recalibrating for new technologies doesn’t come anywhere near closing that gap, according to Mr. Syverson’s research. There’s just not enough of a consumer surplus or enough of a boost in output at firms that make and service the latest technologies.

Furthermore, it’s not even clear mismeasurement is the culprit. The paper notes a broad slowdown across dozens of nations–regardless of the size of information and communication technologies in a particular nation’s economy.....MORE
Here's "Challenges to Mismeasurement Explanations for the U.S. Productivity Slowdown":

Chad Syverson

NBER Working Paper No. 21974
Issued in February 2016
NBER Program(s):   EFG   PR
The U.S. has been experiencing a slowdown in measured labor productivity growth since 2004. A number of commentators and researchers have suggested that this slowdown is at least in part illusory, because real output data have failed to capture the new and better products of the past decade. I conduct four disparate analyses, each of which offers empirical challenges to this “mismeasurement hypothesis.” First, the productivity slowdown has occurred in dozens of countries, and its size is unrelated to measures of the countries’ consumption or production intensities of information and communication technologies (ICTs, the type of goods most often cited as sources of mismeasurement). Second, estimates from the existing research literature of the surplus created by internet-linked digital technologies fall far short of the $2.7 trillion or more of “missing output” resulting from the productivity growth slowdown. The largest—by some distance—is less than one-third of the purportedly mismeasured GDP. Third, if measurement problems were to account for even a modest share of this missing output, the properly measured output and productivity growth rates of industries that produce and service ICTs would have to have been multiples of their measured growth in the data. Fourth, while measured gross domestic income has been on average higher than measured gross domestic product since 2004—perhaps indicating workers are being paid to make products that are given away for free or at highly discounted prices—this trend actually began before the productivity slowdown and moreover reflects unusually high capital income rather than labor income (i.e., profits are unusually high). In combination, these complementary facets of evidence suggest that the reasonable prima facie case for the mismeasurement hypothesis faces real hurdles when confronted with the data.

"Market Chaos Subsiding? Dollar Correction Over?"

Class, Mr. Chandler is going with question marks in the headline. As we've learned, if the question can be answered yes or no, the answer is...

From Marc to Market:
The outlook for the dollar in the week ahead is not about economic data or the FOMC and ECB minutes.  It is about the stability of the global capital markets. 
Many are looking for an event or official action that will stop the rout that is of historic proportions to start the year.   We too have been thinking about what it would take to stop the rot.    However, none of the frequently mentioned events, like an agreement to cut oil output, or for a coordinated policy response by the major countries, are particularly likely.   
Nevertheless, perhaps the selling has been a bit like a fire than can exhaust itself.  If market speculation that the sovereign wealth fund is an important driver here, we can assume that it is a one-off portfolio adjustment.  Many Asian markets, including China, have been closed in the past week, and their return poses the immediate risks.  However, the European and US markets may have begun stabilizing at the end of last week, and increasingly media reports quoted analysts and fund managers recognizing the excessive nature of the price action.  
Our reading of the charts suggests that the dollar's swoon against the euro and yen are over of nearly so.  As we have noted the US Dollar Index is heavily weighted toward Europe and is not representative of US trade flows.  Two of America's four largest trading partners (Mexico and China) are not included.   Yet it is a much-followed proxy of "the dollar,"  The RSI appears to be turning higher, and the MACDs could turn next week.    
It briefly slipped below the 61.8% retracement objective of the rally from the August low.   It was found near 95.65.  It did not close below it.  The initial hurdle is seen near 96.60-97.00.   Above there, a push through 97.50-98.00 would lend credence to what now is only a suspicion that the dollar's downside correction is over.  
The euro overshot the 61.8% retracement of the decline since last August.  That was found near $1.1260, where is finished the week.  If last week's euro high near $1.1375 does not hold, many will be looking at $1.17, which is a 38.2% retracment of the euro's decline since mid-2014 when it was near $1.3700.   That $1.17 also corresponds to the August 2015 high.  The first test of the euro's advance comes in near $1.1120 and then $1.1080.   The technical indicators we look at suggest the market is stretched but does not show a convincing reversal pattern.  
The yen's strength is not a sign,  we argue, that monetary policy is not longer effective.  Instead, we suggest that it has been overwhelmed by the unwinding of funding and hedge positions.  By nearly any metric, the more than 10 yen decline in the dollar since the start of the month is excessive.    A move above JPY113.50 area would boost confidence that sharp decline is over, and a new phase has begun.  Corporate surveys suggest many Japanese companies had budgeted for JPY117.00, but dollar gains back above JPY115 would go a long way toward easing profit concerns that have weighed on the Nikkei.  
Sterling was not used as a funding currency nearly as much as the euro and yen.  In the massive unwind it did not benefit as much as they did.  Sterling is vulnerable to the Brexit fears and rate expectations.  The pendulum of market psychology has not only given up on a rate hike this year, but the short-sterling futures strip implies that the market has begun pricing in the (small) risk of a BOE rate cut.  Further deceleration of wage growth, which is expected in next week's labor report, can only fan rate cut ideas....MORE

The Story Of The Search For Gravitational Waves: Ripples In Space-Time

From Quanta Magazine:

Gravitational Waves Discovered at Long Last
Ripples in space-time have been detected a century after Einstein predicted them, launching a new era in astronomy. 
As gravitational waves sweep past Earth, they alternately stretch and compress the arms of Advanced LIGO’s twin detectors, located in Hanford, Wash. (pictured), and Livingston, La.
Ripples in space-time caused by the violent mergers of black holes have been detected, 100 years after these “gravitational waves” were predicted by Albert Einstein’s theory of general relativity and half a century after physicists set out to look for them.

The landmark discovery was reported today by the Advanced Laser Interferometer Gravitational-Wave Observatory (Advanced LIGO) team, confirming months of rumors that have surrounded the group’s analysis of its first round of data. Astrophysicists say the detection of gravitational waves opens up a new window on the universe, revealing faraway events that can’t be seen by optical telescopes, but whose faint tremors can be felt, even heard, across the cosmos.

“We have detected gravitational waves. We did it!” announced David Reitze, executive director of the 1,000-member team, at a National Science Foundation press conference today in Washington, D.C.
Gravitational waves are perhaps the most elusive prediction of Einstein’s theory, one that he and his contemporaries debated for decades. According to his theory, space and time form a stretchy fabric that bends under heavy objects, and to feel gravity is to fall along the fabric’s curves. But can the “space-time” fabric ripple like the skin of a drum? Einstein flip-flopped, confused as to what his equations implied. But even steadfast believers assumed that, in any case, gravitational waves would be too weak to observe. They cascade outward from certain cataclysmic events, alternately stretching and squeezing space-time as they go. But by the time the waves reach Earth from these remote sources, they typically stretch and squeeze each mile of space by a minuscule fraction of the width of an atomic nucleus.

Perceiving the waves took patience and a delicate touch. Advanced LIGO bounced laser beams back and forth along the four-kilometer arms of two L-shaped detectors — one in Hanford, Wash., the other in Livingston, La. — looking for coincident expansions and contractions of their arms caused by gravitational waves as they passed. Using state-of-the-art stabilizers, vacuums and thousands of sensors, the scientists measured changes in the arms’ lengths as tiny as one thousandth the width of a proton. This sensitivity would have been unimaginable a century ago, and struck many as implausible in 1968, when Rainer Weiss of the Massachusetts Institute of Technology conceived the experiment that became LIGO.
 Gravitational waves alternately stretch and squeeze space-time both vertically and horizontally as they propagate.
Gravitational waves alternately stretch and squeeze space-time both vertically and horizontally as they propagate.
“The great wonder is they did finally pull it off; they managed to detect these little boogers!” said Daniel Kennefick, a theoretical physicist at the University of Arkansas and author of the 2007 book Traveling at the Speed of Thought: Einstein and the Quest for Gravitational Waves.

The detection ushers in a new era of gravitational-wave astronomy that is expected to deliver a better understanding of the formation, population and galactic role of black holes — super-dense balls of mass that curve space-time so steeply that even light cannot escape. When black holes spiral toward each other and merge, they emit a “chirp”: space-time ripples that grow higher in pitch and amplitude before abruptly ending. The chirps that LIGO can detect happen to fall in the audible range, although they are far too quiet to be heard by the unaided ear. You can re-create the sound by running your finger along a piano’s keys. “Start from the lowest note on the piano and go to middle C,” Weiss said. “That’s what we hear.”...MORE



The Golden Quarter-Century: 1945-1971

They say it was all about the risks you are willing to take on.
From Aeon Magazine:
We live in a golden age of technological, medical, scientific and social progress. Look at our computers! Look at our phones! Twenty years ago, the internet was a creaky machine for geeks. Now we can’t imagine life without it. We are on the verge of medical breakthroughs that would have seemed like magic only half a century ago: cloned organs, stem-cell therapies to repair our very DNA. Even now, life expectancy in some rich countries is improving by five hours a day. A day! Surely immortality, or something very like it, is just around the corner.

The notion that our 21st-century world is one of accelerating advances is so dominant that it seems churlish to challenge it. Almost every week we read about ‘new hopes’ for cancer sufferers, developments in the lab that might lead to new cures, talk of a new era of space tourism and super-jets that can fly round the world in a few hours. Yet a moment’s thought tells us that this vision of unparalleled innovation can’t be right, that many of these breathless reports of progress are in fact mere hype, speculation – even fantasy.

Yet there once was an age when speculation matched reality. It spluttered to a halt more than 40 years ago. Most of what has happened since has been merely incremental improvements upon what came before. That true age of innovation – I’ll call it the Golden Quarter – ran from approximately 1945 to 1971. Just about everything that defines the modern world either came about, or had its seeds sown, during this time. The Pill. Electronics. Computers and the birth of the internet. Nuclear power. Television. Antibiotics. Space travel. Civil rights.

There is more. Feminism. Teenagers. The Green Revolution in agriculture. Decolonisation. Popular music. Mass aviation. The birth of the gay rights movement. Cheap, reliable and safe automobiles. High-speed trains. We put a man on the Moon, sent a probe to Mars, beat smallpox and discovered the double-spiral key of life. The Golden Quarter was a unique period of less than a single human generation, a time when innovation appeared to be running on a mix of dragster fuel and dilithium crystals.

Today, progress is defined almost entirely by consumer-driven, often banal improvements in information technology. The US economist Tyler Cowen, in his essay The Great Stagnation (2011), argues that, in the US at least, a technological plateau has been reached. Sure, our phones are great, but that’s not the same as being able to fly across the Atlantic in eight hours or eliminating smallpox. As the US technologist Peter Thiel once put it: ‘We wanted flying cars, we got 140 characters.’
Economists describe this extraordinary period in terms of increases in wealth. After the Second World War came a quarter-century boom; GDP-per-head in the US and Europe rocketed. New industrial powerhouses arose from the ashes of Japan. Germany experienced its Wirtschaftswunder. Even the Communist world got richer. This growth has been attributed to massive postwar government stimulus plus a happy nexus of low fuel prices, population growth and high Cold War military spending.

But alongside this was that extraordinary burst of human ingenuity and societal change. This is commented upon less often, perhaps because it is so obvious, or maybe it is seen as a simple consequence of the economics. We saw the biggest advances in science and technology: if you were a biologist, physicist or materials scientist, there was no better time to be working. But we also saw a shift in social attitudes every bit as profound. In even the most enlightened societies before 1945, attitudes to race, sexuality and women’s rights were what we would now consider antediluvian. By 1971, those old prejudices were on the back foot. Simply put, the world had changed.
Header light 7461373190 761c9890f6 o
But surely progress today is real? Well, take a look around. Look up and the airliners you see are basically updated versions of the ones flying in the 1960s – slightly quieter Tristars with better avionics. In 1971, a regular airliner took eight hours to fly from London to New York; it still does. And in 1971, there was one airliner that could do the trip in three hours. Now, Concorde is dead. Our cars are faster, safer and use less fuel than they did in 1971, but there has been no paradigm shift.

And yes, we are living longer, but this has disappointingly little to do with any recent breakthroughs. Since 1970, the US Federal Government has spent more than $100 billion in what President Richard Nixon dubbed the ‘War on Cancer’. Far more has been spent globally, with most wealthy nations boasting well-funded cancer‑research bodies. Despite these billions of investment, this war has been a spectacular failure. In the US, the death rates for all kinds of cancer dropped by only 5 per cent in the period 1950-2005, according to the National Center for Health Statistics. Even if you strip out confounding variables such as age (more people are living long enough to get cancer) and better diagnosis, the blunt fact is that, with most kinds of cancer, your chances in 2014 are not much better than they were in 1974. In many cases, your treatment will be pretty much the same.

For the past 20 years, as a science writer, I have covered such extraordinary medical advances as gene therapy, cloned replacement organs, stem-cell therapy, life-extension technologies, the promised spin-offs from genomics and tailored medicine. None of these new treatments is yet routinely available. The paralyzed still cannot walk, the blind still cannot see. The human genome was decoded (one post-Golden Quarter triumph) nearly 15 years ago and we’re still waiting to see the benefits that, at the time, were confidently asserted to be ‘a decade away’. We still have no real idea how to treat chronic addiction or dementia. The recent history of psychiatric medicine is, according to one eminent British psychiatrist I spoke to, ‘the history of ever-better placebos’. And most recent advances in longevity have come about by the simple expedient of getting people to give up smoking, eat better, and take drugs to control blood pressure.

There has been no new Green Revolution. We still drive steel cars powered by burning petroleum spirit or, worse, diesel. There has been no new materials revolution since the Golden Quarter’s advances in plastics, semi-conductors, new alloys and composite materials. After the dizzying breakthroughs of the early- to mid-20th century, physics seems (Higgs boson aside) to have ground to a halt. String Theory is apparently our best hope of reconciling Albert Einstein with the Quantum world, but as yet, no one has any idea if it is even testable. And nobody has been to the Moon for 42 years.

Why has progress stopped? Why, for that matter, did it start when it did, in the dying embers of the Second World War?

One explanation is that the Golden Age was the simple result of economic growth and technological spinoffs from the Second World War. It is certainly true that the war sped the development of several weaponisable technologies and medical advances. The Apollo space programme probably could not have happened when it did without the aerospace engineer Wernher Von Braun and the V-2 ballistic missile. But penicillin, the jet engine and even the nuclear bomb were on the drawing board before the first shots were fired. They would have happened anyway.

Conflict spurs innovation, and the Cold War played its part – we would never have got to the Moon without it. But someone has to pay for everything. The economic boom came to an end in the 1970s with the collapse of the 1944 Bretton Woods trading agreements and the oil shocks. So did the great age of innovation. Case closed, you might say.

And yet, something doesn’t quite fit. The 1970s recession was temporary: we came out of it soon enough. What’s more, in terms of Gross World Product, the world is between two and three times richer now than it was then. There is more than enough money for a new Apollo, a new Concorde and a new Green Revolution. So if rapid economic growth drove innovation in the 1950s and ’60s, why has it not done so since?...MORE

Friday, February 12, 2016

"Oil Or Yuan Depreciation: Which Is Greater Global Risk?"

From Barron's Emerging Markets Daily blog:
In the near term, pressured oil prices may trump the prospect of a sharp depreciation in the Chinese yuan (CNY) as the biggest risk to financial markets, Barclays says. 
Oil is flying higher today, with the U.S. price up 10% to a recent $29.98 per barrel, and the international Brent benchmark is up 9% to roughly $32.60. That’s lifting all markets, commodities-driven companies and emerging market funds. Petroleo Brasileiro (PBR), Brazil’s state-controlled oil producer, was up 8% in recent trading, Brazil mining giant Vale (VALE) was up 9%, Argentina energy producer YPF (YPF) was up 7%, and PetroChina (PTR) was up more than 5%. With headlines that a ceasefire in Syria, even if temporary, could bring together factions in the Middle East, the SPDR S&P Emerging Middle East & Africa exchange-traded fund (GAF) was up 3.4%, while the iShares MSCI Emerging Market ETF (EEM) and the iShares MSCI China Large-Cap ETF (FXI) were up 1% apiece. 
Researchers Ajay Rajadhyaksha and Jeffrey Meli write: 
“The three main issues facing financial markets are pressure on senior liabilities of European financials, a new decline in oil prices and related spill-over effects, and further weakness in the Chinese economy and currency. We believe that imminent solvency fears related to European financials are overdone and likely to fade, even as concerns persist about lower profitability, continued legal risks, and exposure to energy and emerging markets. 
Over the medium term, the prospect of a sharp depreciation in the CNY is a big risk to financial markets. Over the near term, the issue that could most pressure markets is a further decline in oil, with the related spill-over into high yield and emerging market energy exporters. While the risk-off move has been violent and seems too extreme relative to economic fundamentals, we are closely watching for any spill-over from financial volatility into the real economy. We do not expect a sudden turnaround in risk sentiment, with Chinese equity markets set to open after a week and the prospect of heavy downgrades in U.S. energy credits looming … Unlike in past risk-off episodes, investors cannot look to the Fed to improve near-term sentiment ...MORE
Also at Emerging Markets Daily:
Oil Output Cut In March, As Saudis, Russia, US & Turkey Talk Syria Ceasefire? 

Oil Industry Gathers In London, Agree Things May Never Improve, Placed On Suicide Watch

Having been conditioned into a state of resigned apathy, the test subjects appear ready for phase two of the experiment...

WTI has jumped 11.20% today, still can't break $30.

From Bloomberg: 

The Oil Industry Got Together and Agreed Things May Never Get Better 
Thousands of industry participants gathered in London for their annual get-together, only to find a world awash in crude and hardly a life jacket in sight.

The thousands of attendees seeking reasons for optimism didn’t find them at the annual International Petroleum Week. Instead they were greeted by a cacophony of voices from some of the largest oil producers, refiners and traders delivering the same message:

There are few reasons for optimism. The world is awash with oil. The market is overwhelmingly bearish.

No Hope
Producers are bracing for a tough year. Prices will stay low for up to a decade as Chinese economic growth slows and the U.S. shale industry acts as a cap on any rally, according to Ian Taylor, chief executive officer of Vitol Group, the world’s largest independent oil trader. Even refiners, whose profits have held up better than expected, are seeing a worsening outlook.

“The oil industry is facing a crisis,” said Patrick Pouyanne, CEO of Total SA, Europe’s biggest refiner. BP Plc boss Bob Dudley described himself as “very bearish” and joked that the surplus is so extreme that people will soon be filling swimming pools with crude.

As the world runs out of places to store oil, “I wouldn’t be surprised if this market goes into the teens,” said Jeff Currie, head of commodities research at Goldman Sachs Group Inc.

Cuts? What Cuts?
Crude prices surged briefly last month on speculation the Organization of Petroleum Exporting Countries would team up with Russia to cut production. The head of the nation’s biggest oil company had other ideas.

“Tell me who is supposed to cut?” said Igor Sechin, CEO of Rosneft. "Will Saudi Arabia cut production? Will Iran cut production? Will Mexico cut production? Will Brazil cut production? Who is going to cut?”...MORE


In Honor Of Charles Darwin's Birthday

Chas. would be 207 today.
Here are some recent posts from The Darwin Awards:

Not the London Fire Brigade


Not the U.S. Marines


Not the brightest


Ditto


Oil Company Decides Not To Drill For Oil, Stock Jumps 7%

From City A.M.:
Premier Oil and Rockhopper Exploration today announced the early termination of a drilling contract in the Falklands.

The companies said their contract for the Eirik Raude rig was terminated with immediate effect yesterday, due to operational issues.

"As a result, Premier will no longer be drilling the Chatham exploration well during the current campaign" it said in a statement to the London Stock Exchange this morning.

"However, we are in discussions with the Falkland Islands government regarding the possibility of drilling this prospect in the future."

But shares in the the FTSE 250-listed Premier Oil still rose as much as 7.56 per cent to 32p this morning....MORE

La Niña expected in next months for the first time since 2012

To paraphrase Chris Farley, 'for those who don't habla Español, La Niña is Spanish for..ah..the niña.'

I mentioned on Tuesday "We are expecting to have a lousy weather-thank you La Niña long trade later this year..." Here's more.
From Reuters:
Even as the El Nino weather phenomenon continues to impact global temperatures and crops, its counterpart La Nina is increasingly expected to emerge in the coming months for the first time in four years.
The return of La Nina, Spanish for "the girl" and characterized by unusually cold ocean temperatures, is possible later this year, the U.S. government forecaster said Thursday. It joined other forecasters in projecting La Nina could follow on the heels of one of the strongest El Ninos on record.

Weather models indicate La Nina conditions, which tend to occur unpredictably every two to seven years, may emerge in the Northern Hemisphere fall, while El Nino - which means "the little boy" in Spanish - is expected to dissipate during the late spring or early summer, the National Weather Service's Climate Prediction Center (CPC) said in its monthly forecast.

The phenomenon can be less damaging than El Nino, but severe La Ninas are linked to floods, droughts and hurricanes.

Even though CPC is not on official watch for La Nina, the probability is trending towards one, said Michelle L'Heureux, a CPC climate scientist and El Nino/La Nina expert.

When La Nina last appeared from August 2011 to March 2012, it hurt corn and soybean crops in Argentina and Brazil, brought the worst drought in a century to Texas and increased the number of storms that threatened U.S. coastal regions, like Hurricane Irene....MORE
We have a couple hundred posts on La Niña, here's one from last week, or use the search blog box.
Contra the headline:
Agriculture: "Corn, Wheat, and Soybean Prices to Fall in 2016"

Google Says U.K.'s Google Tax Doesn't Apply to Google (GOOGL)

From LearnBonds:

Alphabet Inc (GOOGL) Says UK’s ‘Google Tax’ Doesn’t Apply To Them
Alphabet Inc (NASDAQ:GOOGL)’s top tax executive told UK authorities that the new UK tax – popularly called “Google Tax” – will not apply to the Internet firm, says a report from Bloomberg. The tax – the Diverted Profits Tax – came up last year owing to rising concerns that Alphabet and other tech firms are using loopholes to transfer profits to offshore tax havens.

“Google Tax” does not apply to us
So, to discourage transfer to offshore tax havens, the UK officials introduced this so-called “Google tax,” which allows the govt. to charge 25% tax on any profits it believes have been moved out of the US improperly. Standard corporate tax rate in the UK is 20%.

However, Alphabet’s VP for finance – Tom Hutchinson – speaking to a Parliamentary committee, which is investigating Google’s 130m-pound ($188 million) settlement with the U.K. tax authority, said the new tax does not apply to the firms past profits.

“Because of our agreement with the HMRC we are paying the right amount of tax, so we are not having to pay anything else,” the executive said.

Alphabet Inc (NASDAQ:GOOGL) has been using tactics like the “Double Irish” and “Dutch Sandwich,” to shift its profits to a Bermuda subsidiary, Bloomberg reported in 2010. But, in Thursday’s hearings, the executive said such strategies has no effect on the tax the firm paid in the UK. Transferring of profits to Bermuda has been designed to lower the taxes in the US, the executive said.

“Under the rules in the U.S., this structure makes sense,” he said. “I don’t think this is an aggressive structure.” Hutchinson said his duty is to efficiently manage the tax affairs of his firm, and Alphabet paid 19% as tax around the world, “a fair amount of tax to pay.”

Alphabet executive does not know his salary...
...MORE

Art Institute of Chicago Recreates Van Gogh's Bedroom, Puts it On Airbnb

From Messy Nessy Chic:
vangogh1
What would it be like to go inside the mind of one of the most brilliant and misunderstood artists of all time? To potter around in his own bedroom, an intimate space that so inspired him? Well, if you’re curious, the Art Institute of Chicago has recreated the room in Vincent Van Gogh’s Bedroom in Arles painting and put it up for rent on Airbnb. Bookings are now open!
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Did you know that there are in fact not one, not two, but three versions of Van Gogh’s bedroom painting? The first version was created in 1888 while the painter was living in his beloved “Yellow House” in the south of France; that one is now in Amsterdam....MORE

"Corn Belt farmland price retreat longest since 1980s"

From Agrimoney:
Farmland values in major US agricultural states ended 2015 on a weak note, recording the worst declines on some measures not seen since the 1980s' price slump – and with further losses seen likely, official data showed.
Much watched quarterly reports from the Federal Reserve on land prices showed values in its Chicago region, covering major Corn Belt states such as Illinois, Indiana and Iowa, shedding 3% last year.
The drop, which followed a 3% fall in 2014, represented the first period of back-to-back falls in annual land prices since the mid-1980s, towards the tail end of a six-year market slump during which regional values near-halved, in a correction fuelled by soaring US interest rates.
Prices in Iowa, the top US corn-producing state, have suffered particularly badly in the latest retreat, recording a third successive year of annual decline in prices, over which prices have dropped by more than 13%, the central bank data showed.
Biggest drop since 1987
Separately, the Fed's Kansas City bank, which covers largely Plains states, such as major wheat producers Kansas and Oklahoma, also revealed an accelerated downturn in farm prices in its region.
Price change, as measured as the average for the October-to-December quarter compared with that a year before, hit a negative 3.7% for non-irrigated cropland, the fastest rate of decline since early 1987.
And ranchland prices, which rose 10% over 2014 amid buoyant livestock markets, retreated with cattle values....MORE

Oil & Gas Companies With the Worst Debt Coverage

From Barron's Stocks to Watch:

Oil Stocks: Yes, There Will Be More Dividend Cuts, Equity Raises
Barclays analyst Thomas Driscoll and team see more dividend cuts and equity raises coming for oil & gas stocks like Apache (APA), Devon Energy (DVN), Encana (ECA), Anadarko Petroleum (APC), and Marathon Oil (MRO). They explain why:
Leverage concerns will lead E&P companies to take strong steps to strengthen balance sheets. As oil price weakness has lingered, management teams have become more willing to take stronger steps to address leverage. We view 4x debt to pre-interest cash flow as a warning sign that companies may be overlevered. At a $30-40/bbl WTI oil price, debt to estimated pre-interest cash is over 4x for 16-19 of the companies we cover. At $50 oil, roughly half of our coverage universe remains “overlevered” using our 4x coverage test…

We have seen several dividend cuts in the recent past, including Anadarko Petroleum cutting its dividend by 81%…and we expect more companies to follow suit. Chesapeake Energy (CHK), ConocoPhillips (COP), Encana, Marathon Oil and Noble Energy (NBL) are among energy companies that have also cut dividends in the past 12 months, but dividend requirements – even after several cuts – will consume ~26% of 2016 estimated cash flow at current dividend rates (15% excluding Occidental Petroleum (OXY)) for the large cap E&Ps we cover. We believe most of the companies with a dividend yield of more than 1.5% should consider cutting the dividend and find the following companies more likely than not to reduce dividends:...MORE
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Vultures, Circling: Blackstone Aims New Fund at Troubled Offshore Drilling Market

We've seen a few smaller deals, including another one yesterday, but not enough to mark a bottom.
From Reuters via PEHub:
Blackstone Group has launched a fund to finance the troubled offshore drilling and services sector, the U.S. private equity firm said on Thursday, anticipating a buyer’s market as low oil prices set the stage for restructuring and consolidation.

Blackstone’s new entity, called Clarion Energy Partners, will be led by former executives of Pride International, an offshore drilling services company that was acquired by London-based Ensco PLC in 2011.

Clarion would be able to provide “creative financing and operational solutions” to companies whose “balance sheets are under severe pressure” in the current downturn, Louis Raspino, the new entity’s chairman and Pride’s former chief executive, said in the press release.

The oil price rout has left many energy companies teetering on the brink of bankruptcy and left many of their assets appearing cheap. Private equity funds have been mobilizing to hunt for favorable deals.
Creation of the Blackstone fund was announced on the day that Hercules Offshore Inc, a U.S.-based offshore driller and liftboat services provider that emerged from bankruptcy in August, said it was exploring strategic options, including selling itself.

Offshore rig services is perhaps the most oversupplied sector of the glut-ravaged oil industry, and many players besides Hercules have begun exploring restructuring options.

Samson Resources Corp filed for bankruptcy in September, while Paragon Offshore PLC has hired a well-known restructuring firm and the investment bank Lazard and has deferred interest payments amid conversations with debtholders....MORE

Thursday, February 11, 2016

"U.S., Russia and other powers agree on ‘cessation of hostilities’ in Syria’s civil war"

Following up on the post immediately below, "Russia’s Prime Minister Medvedev Warns of New World War if US, Arab Troops Invade Syria".

From the Washington Post:
The United States, Russia and other powers have reached agreement on a “cessation of hostilities” in Syria’s civil war that allows for immediate humanitarian access to besieged areas, Secretary of State John F. Kerry announced here early Friday morning.

The end of hostilities, which Kerry avoided calling a cease-fire, is scheduled to go into effect “in one week’s time,” Kerry said. Humanitarian access to towns and cities in Syria where food and medical supplies have been blocked, sometimes for months, is to begin immediately.

“It was unanimous,” Kerry said. “Everybody today agreed on the urgency of humanitarian access. What we have here are words on paper. What we need to see in the next few days are actions on the ground.”

Agreement came after day-long consultations that lasted until early Friday here. Hours earlier, Russian Foreign Minister Sergei Lavrov huddled with his counterpart from Iran, Russia’s ally in backing the Syrian government of President Bashar al-Assad, and Secretary of State John F. Kerry sat down with allies backing the Syrian opposition, before all parties gathered for a joint meeting at which the deal was struck.

Lavrov called cessation of hostilities the “first step” toward a full cease-fire.

The effort has been considered a last chance to stop the carnage in Syria that has left hundreds of thousands dead and sent millions fleeing from the country. What was already a desperate situation in Syria has greatly worsened over the past few weeks, as massive Russian bombardment in and around the city of Aleppo has scattered opposition fighters and driven tens of thousands of civilians toward the barricaded Turkish border.

Participants said they had noted a new resolve in U.S. willingness to stand up to the Russians, who agreed in December to a U.N. resolution calling for a cease-fire in conjunction with peace negotiations...MORE

Russia’s Prime Minister Medvedev Warns of New World War if US, Arab Troops Invade Syria

And in other news...Kris Jenner Calls Kim Kardashian a ''Big Mouth'' After She Tells Caitlyn About Kendall's Victoria's Secret Fashion Show ...

Ah, that schtick never gets old.
Now back to threats of world war from Sputnik (all caveats apply):
As Turkey and Saudi Arabia edge closer to sending ground forces into Syria at the behest of the United States, Russian Prime Minister Dmitry Medvedev has warned that an escalation of the conflict could lead to world war. 
During an interview with German newspaper Handelsblatt, Medvedev warned of dire consequences if the United States and its allies abandon Syrian peace talks in favor of deploying ground forces. 
"All ground operations, as a rule, lead to permanent wars," he said. "Look at what is going on in Afghanistan and a number of other countries. I don’t even mention the ill-fated Libya....MORE
A few days ago Hezbollah was also warning the Saudis. From PressTV:
Ground incursion into Syria, Iraq opens gates of hell: Hezbollah Brigades
We last heard that turn-of-phrase from the Arab League in 2002.

You can probably tell I don't believe Saudi Arabia is going into Syria.

Seriously, the Saudis seem to have their hands full with just the Houthi tribesmen in Yeman, I can't imagine them going up against Russia's T-90 main battle tanks, Su-35 fighter planes and S-400 anti-aircraft missiles, each of which is the best of its kind in the world and all of which are in Syria right now.

So, I'm thinking it's just talk when we see this at al-Arabiya: "Saudi’s decision to send troops in Syria ‘final’"
Here's an Su-35 showing off that we first posted on in 2012. It caught the attention of U.S. Generals: