Paul Wilmott: You Naughty Media Spies

No we're not talking Piers Morgan or Rebekah Brooks.
From Paul Wilmott's blog:

I'd like to share statistics that I recently discovered after installing the Ghostery privacy tool, used for finding and blocking trackers on websites.

There's been a lot in the news about Edward Snowden and his information about the data collected by the US agency NSA. Quite rightly so. In the UK this information is being published by The Guardian newspaper. I was on The Guardian website for some reason (believe me, I don't do this often) and Ghostery told me there were 17 trackers monitoring me. This seemed a lot. On wilmott.com we have just two or three. Being an inquisitive sort, I went to the front pages of other UK newspapers, magazines, etc. And guess what?

That's right, The Guardian, who have got all foamy at the mouth about the NSA spying, are doing more spying than any of these other websites.

Here is the data, taken from the front pages only of each website.
Guardian 17
Daily Telegraph 13
Mirror 13
Spectator 12
Daily Mail 11
Times 11
Express 9
Sun 8
Private Eye 3
wilmott.com 2
BBC 0 

Mr. Wilmott is one of those who, along with Edward O. Thorpe, Emanuel Derman, Fischer Black and a few others, can legitimately be considered among the "Quantfathers"

"The Best State of the Union Drinking Games 2014"

From the International Business Times:

President Barack Obama will deliver his fifth State of the Union address on Tuesday, and even some of his biggest cheerleaders are starting to doubt whether the many challenges he vowed to overcome in 2008 will ever be met. But even if you feel like you’ve heard all the rhetoric before, there’s no reason to skip SOTU 2014 -- just don’t watch it sober. In the end, what better way to numb the pain of an intractable health care system, a disappearing middle class and eternal partisan gridlock than having a few drinks with friends?

IBTimes has culled together some of the State of the Union drinking games for 2014 (and there was a surprising number to choose from). As always, please drink responsibly, and remember it’s only Tuesday.

Those of us who remember the 2012 presidential contest between Obama and Mitt Romney will recall how difficult it was to stomach the protracted campaign without throwing a few back. At the time, the good folks at Debate Drinking came to our rescue with some brilliantly conceived drinking games for the presidential debates and another one for election night. Now they’re back with a brand-new game for SOTU 2014. The rules require that players pick a side (Team Bo and Team Sunny) and drink accordingly. Obama’s buzzwords include “challenge,” equality,” “Congress” and “Iran.” Republican terms include “Future,” “threat,” “wage” and “military.” Good luck. Full Game.

The Daily Caller
Who says right-wingers don’t know how to have fun? The conservative website Daily Caller was founded four years ago -- at the height of Obamamania -- so it’s difficult to imagine what its writers will talk about once the current administration is no longer in power. In the meantime, their SOTU drinking game is pretty amusing. Our favorite rule: Make a mimosa if John Boehner looks especially orange. Full Game.

Huffington Post
Since we added the Daily Caller, an entry from its left-leaning nemesis only seemed only fair. Jason Linkins, an opinion writer for HuffPost Politics, came up with a drinking game that is much more comprehensive, if only slightly more daring. OK, so we know Obama isn’t really going to pull out clemency papers for Edward Snowden and place them on a bear trap (one of the rules), but you never know: He may just quote Daft Punk. Full Game.

InTheCapital.com
Streetwise Media’s InTheCapital has conjured up a nice insiders’ game for booze-thirsty Beltway types, courtesy of lifestyle writer Sophie Pyle. In addition to numerous buzzwords, the game requires players to finish their drinks whenever Vice President Joe Biden stands and Boehner stays seated. Also, take two sips when there’s a standing ovation. This is likely to be a high-scorer, so be careful. Full Game.

...MORE  

Here are Wonkette's suggestions:

If Barack Obama uses pretty liberal words to dress up some Third Way nonsense, sip elegantly from a white wine spritzer.

If Barack Obama kills Osama Bin Laden again, shotgun a Budweiser, for Merica.

If Barack Obama class-wars the job creators and makers, by tyrannically asking them to pay their “fair share,” smash a bottle of Johnny Walker Blue on the floor so nobody else can have any.

If Obama mentions immigration reform, drink a shot of tequila. If Republicans don’t stand and applaud, drink another shot of tequila and yell at a Mexican.

If Scalia scowls, kneecap the person to your left.

If Joe Biden does something adorable, send him a lovely handwritten letter at Vice President Joe Biden, Naval Observatory, 3450 Massachusetts Ave NW, Washington, DC 20392.

"Which Sectors are Bouncing?"

From Bespoke Investment Group:

We won't know whether this is just a dead-cat bounce or the start of another move higher for a few more days, but for those wondering, below is a look at which sectors of the market are doing the best today.  For each sector, we also highlight how it did during the sharp sell-off that the market experienced over the prior three trading days.

As shown, Health Care and Financials are up the most today...MORE

James Chanos: ‘We’re Still Short Caterpillar’

If pressed I'd have to agree with Mr. Chanos, the big cyclical is just too exposed to too many potential problem areas.
The stock is up $1.19 at $92.48
From MoneyBeat:

Short-seller James Chanos said he’s still betting against Caterpillar Inc. despite the company’s better-than-expected quarterly results.

Mr. Chanos, founder of hedge fund Kynikos Associates, said in July that he was shorting the world’s biggest maker of construction and mining equipment. Even after Caterpillar shares rallied 5.9% Monday following the company’s quarterly results, Mr. Chanos said he’s still betting against the stock.

“The only reason they beat [estimates] was because of two one-time items,” Mr. Chanos said in an interview with MoneyBeat. “This is a company that if you go back to last year’s earnings release, in January 2013, their outlook was wildly off the mark.”

He didn’t disclose the size of his position or whether it changed on Monday, or over the past six months.

Caterpillar said its fourth-quarter profit rose, helped by aggressive cost cutting, and forecast that sales would level off this year after dropping 16% in 2013. Shares rose 5.9% on Monday to $91.29, although the stock is still in the red over the past 12 months.

“I think the market saw the earnings beat and got excited, but if you look under the surface, we think they missed estimates for operating earnings excluding one-time gains,” Mr. Chanos added....MORE

Stephen Roach: "America’s False Dawn"

Being the kind of "Hope for the best, plan for the worst" guy that I am...
From Project Syndicate:

NEW HAVEN – Financial markets and the so-called Davos consensus are in broad agreement that something close to a classic cyclical revival may finally be at hand for the US. But is it?

At first blush, the celebration seems warranted. Growth in real GDP appears to have averaged close to 4% in the second half of 2013, nearly double the 2.2% pace of the preceding four years. The unemployment rate has finally fallen below the 7% threshold. And the Federal Reserve has validated this seemingly uplifting scenario by starting to taper its purchases of long-term assets.

But my advice is to keep the champagne on ice. Two quarters of strengthening GDP growth hardly indicates a breakout from an anemic recovery. The same thing has happened twice since the end of the Great Recession in mid-2009 – a 3.4% average annualized gain in the second and third quarters of 2010 and a 4.3% average increase in the fourth quarter of 2011 and the first quarter of 2012. In both cases, the uptick proved to be short-lived.

A similar outcome this time would not be surprising. Indeed, much of the acceleration in GDP growth has been bloated by an unsustainable surge of restocking. Over the first three quarters of 2013, rising inventory investment accounted for fully 38% of the 2.6% increase in total GDP. Excluding this inventory swing, annualized growth in “final sales” to consumers, businesses, and the government averaged a tepid 1.6%. With inventory investment unlikely to keep accelerating at anything close to its recent rate, overall GDP growth can be expected to converge on this more subdued pace of final demand.

That gets to the toughest issue of all – the ongoing balance-sheet recession that continues to stifle the American consumer. Accounting for 69% of the economy, consumer demand holds the key to America’s post-crisis malaise. In the 17 quarters since “recovery” began, annualized growth in real personal consumption expenditures has averaged just 2.2%, compared to a pre-crisis trend of 3.6% from 1996 to 2007....MORE

HT: The Mess That Greenspan Made

"Scientists say the Black Death 'could happen again'"

As Grandmother used to say "It's one tham ding or another".
From io9:

An international team of researchers has discovered that two of the deadliest pandemics in history, the Plague of Justinian and the Black Plague, were caused by strains of the same plague. They warn that mutated — or even bioengineered — versions of the bacteria could lead to future outbreaks.

Above: Pieter Bruegel's The Triumph of Death (c. 1562)

The culprit is Yersinia pestis, a bacterium that can infect humans and other animals. Scientists now suspect that separate and independent emergences of this bacterium have been responsible for some of history's worst pandemics. And it may not be done yet.

Blight

During the sixth century AD, this bacterium caused the Plague of Justinian, killing between 30 and 50 million people — virtually half of the world's population at the time. It spread across Asia, North Africa, Arabia, and Europe before mysteriously petering out.

But it would eventually return. Some 800 years later it re-emerged as the Black Death, a blight that killed 50 million Europeans over a four year period from 1347 to 1351 — an astounding figure, to be sure. It's a death rate that averages out to 34,245 mortalities per day. 

Just as disturbing, a strain of Yersinia pestis appeared in the late 1800s, spreading from Hong Kong to across the globe. Today, thousands of cases of plague are still reported to the World Health Organization each year. But with proper treatment (i.e. antibiotics), prognosis is considerably better than it was in the past....MUCH MORE including a link to "Yersinia pestis and the Plague of Justinian 541—543 AD: a genomic analysis." at The Lancet.

By What Benchmarks Should Hedge Funds Be Judged?

I propose: "Can they beat the Little Sisters of the Poor at polo?"
John Authers has some other ideas.
From the Financial Time's Long Short blog:

Hedge funds

How exactly should we benchmark hedge funds? It is obviously unfair to compare them directly to equity indices, as the whole point of hedge funds is to aim for an “absolute” return, not a return relative to gains in the equity market. They will naturally under-perform an S&P 500 tracker in years like 2013 when the stock market shoots straight up.

I drew attention last week to the way hedge fund returns have been left badly behind by long-only equity returns over the five years of the post-crisis relief rally, and this understandably provoked comments that this was an unfair comparison. There are also obviously many methodological problems with creating hedge fund indices. Hedge funds have many different strategies, and they may be particularly prone to “survivorship bias” – those that do not have a good story to tell tend to shut down quietly, and do not tell index compilers about their record.

However, hedge funds do have to accept that their offerings will be used by asset allocators trying to use them to balance against the main asset classes of equities and bonds. On that basis, the following chart, produced by Barclays’ capital solutions group using HFRI indices, is very interesting.

It confirms a basic intuition: hedge funds did very well during the bursting of the dotcom bubble, more than held their own during the subsequent 2002-2007 rally, and have had a far harder time of it in the last five years. Why might this be?

I count about four broad explanations, which were also canvassed by Barclays when they talked to investors in hedge funds. These are:

1) The hedge fund sector is much bigger now. This is undeniable. Whether because there are now many “me-too” stragglers who have diluted the skill in hedge funds’ gene pool, or because some strategies have reached their capacity – certainly something that seemed to befall equity market-neutral strategies in the summer of 2007 – the new bigger hedge fund sector, as a whole, is less nimble and less able to find bargains....

...MUCH MORE 

See also this morning's "Asset International's Periodic Table of Hedge Fund Strategy Returns".

Chicago Fed's Beige Book Warning to Farmers: Plant Corn, Lose Money

According to some ag economists, at current prices it looks as if there could be losses of $150-200/acre.

This is a couple weeks old but very important to folks trading the commodities, speculating on implement and equipment companies (I'm looking at you, CAT), trying to get a handle on the global macro scene (plugging in food prices is a convenient first step) and on and on.
Plus it looks like Congress has a Farm Bill.
From the Farmgate blog:

The Latest Fed Beige Book Accurately Reflects Cornbelt Crops and Livestock

...Chicago:  Seventh Federal Reserve District

Corn and soybean prices moved a bit higher over the reporting period, but remained well below their levels of a year ago. Current prices for corn will not cover expected costs for 2014 production, whereas soybean prices would. This may lead to increased soybean planting in the spring....MORE

Where this can get really interesting is if farmers switch to beans thus shrinking the size of the corn crop but not enough to make corn profitable while at the same time creating enough of an oversupply in soybeans to also make them unprofitable in which case it might be time to short the United States in say six seven years à la the commodity price deflation of 1920-21 as precursor to 1929.

Ahead of the SOTU: The List of Unilateral Actions President Obama May Take on Climate and Energy or How To Make Money Off This Stuff

From our June 25, 2013 post "The Obama Climate Plan, June 2013: Sweeping Executive Power":

There is going to be a lot of money made because of these policy prescriptions.
Just so we're clear, I lean towards the sentiments expressed in The Bored Whore of Kyoto:

..."I don't know if climate change is caused by burning coal or sun flares or what," said the Moscow-based carbon cowboy. "And I don't really give a shit. Russia is the most energy inefficient country around, and carbon is the most volatile market ever. There's a lot of opportunity to make money."...

Since the Big U.N. confab in Rio back in 1992 I've read something on the order of 120,000 pages on the science, economics, finance, policy, law and politics of global warming. Add in some expertise in the investment field and, as the Brit nature shows used to say when the lion was going after the old wildebeest, "Sadly now, there can be but one outcome...":

The purpose of this blog is to make money.

It is not to argue science or to lobby for one policy or another. We play the cards we're dealt.

So off we go.

We've been pointing out a little known document that was drawn up for President Obama prior to the 2008 election since, well, since the day it appeared on the internet.
From a 2011 post, "Here Come the Presidential Executive Orders":

From an email response I sent a friend during the budget ceiling negotiations last August regarding the options available to the Government and the Fed:

I have some arcane knowledge of the workings of the Fed and see no impediments there. As to the trust funds, the enabling legislation either exists or could probably be more easily written than the ceiling legislation.

I keep coming back to the President though. Executive orders give so much latitude, especially when couched in state of emergency terms, that my reading is the Exec can do pretty much as he pleases,

Back in 2008 some barrister types were making that argument re: climate change policy, potential constitutional crisis be damned.

The link goes to a 213 page PDF under the imprimatur of the University of Colorado Law School titled:

THE BOUNDARIES OF EXECUTIVE AUTHORITY
Using Executive Orders to Implement
Federal Climate Change Policy

That's the framework of possibilities....

In recent days William Ritter, former governor of Colorado and a bunch of his friends more-or-less updated that 2008 plan in:

Powering Forward: Presidential and Executive Agency Actions to Drive Clean Energy in America

Download Executive Summary

Download Full Report

Download Press Release

Basically a blueprint for how to make money off this stuff.
One HUGE caveat: This is almost entirely agenda driven politics, the science does not prescribe any one policy or another so you have to understand you are dealing with politicians.
There have already been some false starts on the part of the President:
Oct. 2011
Here Come the Presidential Executive Orders
January 2013
Here Come the Executive Orders: Climate Change Central To Next Presidential Agenda

But now it appears to be a go, last week Ritter was meeting with the President's consigliere, John Podesta, so heed the words of Joe Kennedy:

"It's easy to make money in this market," said Kennedy, famously, to an associate. 

"We'd better get in before they pass a law against it."

And remember, There was a reason for the choice of the first winner of the Climateer "Our Hero" award back in April 2007:

The 26th Secretary of War, the Democrat and Republican (!) Senator from Pennsylvania, Simon Cameron:

Our Hero

"The honest politician is one who 
when he is bought, will stay bought."

Asset International's Periodic Table of Hedge Fund Strategy Returns

From Asset International's Chief Investment Officer:

Infographic: 2013 Periodic Table of Hedge Fund Returns 

The ever-popular infographic of hedge fund strategy returns has been updated with full 2013 performance. Who’s on top, and who missed the mark? Find out… 

 

(January 27, 2014) – Not since convertible arbitrage’s blow-out year in 2009 has a hedge fund strategy performed as well as long/short equity did in 2013.

Riding the stock market on the up and down sides, fund managers averaged 17.7% gains for the calendar year, according to the latest “Periodic Table of Hedge Fund Returns” produced by Boomerang Capital, a Connecticut-based hedge fund advisory. That performance more than doubled their 2012 average of 8.2%.

Distressed securities—2012’s best performer at 11.8%—came in second last year, with a typical fund returning 16%. Multi-strategy was next at 11.2%, precisely the same gain it averaged the year prior....MORE

HT: Abnormal Returns

Transcending Dimensions

From CubicleBot:

Commodity Currencies Present a Conundrum

From the ChartWatchers blog:

Recently, the IMF Leader - Christine Lagarde - talked about deflation. She announced we must do all we can do prevent deflation from occurring. In Davos, the IMF released their 2014 World Economic Outlook. Look at the trend they predict for commodities.

That report can be found here. IMF WEC Davos
Even presidents don't trust economists. Truman asked for a one armed economist so they could stop referring to 'On the other hand...'

The charts are our best tool to see the current picture in relation to the past. Unfortunately for the commodity countries and currencies, the chart patterns align with the economists views.  But how many economists realize the strong negative global alignment of the currencies and the commodities ? More importantly, do they realize the macro charts are all breaking through support together? Look at the chart below with the Canadian Dollar, the Aussie Dollar, the Brazilian Real ETF, the Emerging Market Currencies ETF ,and the grey shaded area is the Commodity Research Bureau Index of 19 commodities.

These are major support levels that are breaking whether you rely on the blue line head/shoulders patterns or just flat horizontal support and resistance lines. Are they permanent? No. But until they get bullish as a group and start reversing these long term scenarios, we have to stay with the trend we are in.

Some of my recent blog postings have been discussing the XMA.TO which tracks materials. This should be the next sector to break out higher as the industrials had a fabulous year last year.   One concern is XMA.TO seems to start every January since 2010 with a roar, then roll over and move lower....MORE

Kleiner Perkins Founder Says Google Bus Protests NOT Like Kristallnacht; Firm Denies Knowing Mr. Perkins

Following up on "Kleiner Perkins founder says Silicon Valley elite are being treated like Jews in Nazi Germany".
Lifted in toto from The Verge:

The co-founder of a prominent Silicon Valley venture capital firm apologized today for saying he worried that the Bay Area would be the scene of the next Kristallnacht, referring to a night of violence against Jews that took place before World War II. Tom Perkins, who co-founded Kleiner Perkins Caufield & Byers, said he had formally apologized in a letter to the Anti-Defamation League. "It was a terrible word to have chosen," Perkins said of the reference to Kristallnacht, in an interview on Bloomberg West. "I, like many, have tried to understand the 20th century and the incomprehensible evil of the Holocaust. It can’t be explained. Even to try to explain it is questionable. It's wrong, it’s evil."

Perkins sparked a furor over the weekend with a letter to the editor in the Wall Street Journal, where he said a "rising tide of hatred of the successful one percent" mirrors the treatment of Jews in Nazi Germany. His remarks came amid rising tensions in San Francisco, where rising rent and an increase in the number of evictions has focused anger on Silicon Valley tech companies and the private shuttles that ferry their employees to work using public bus stops. Perkins argued that the Occupy movement and San Francisco Chronicle had provoked class warfare in a feat of "progressive radicalism" that he likened to attacks against the Jews.

"It's absurd to demonize the rich for being rich."

Appearing on Bloomberg West today, Perkins said that while he regretted his use of the word "Kristallnacht," he stood by his original message. "I don't regret the message at all," he said. "The message is that any time the majority starts to demonize a minority, no matter what it is, it’s wrong, and dangerous. And no good ever comes from it." He also said "the majority" should not attack the 1 percent. "It’s absurd to demonize the rich for being rich and for doing what the rich do, which is get richer by creating opportunity for others," he said.

Kleiner Perkins responded to Perkins' original letter with a tweet saying Perkins had not been involved with the firm for years. "We were shocked by his views expressed today in the WSJ and do not agree," the firm said. "They chose to sort of throw me under the bus, and I didn't like that," Perkins said today.

• Source Bloomberg West

• Related Items godwin's law kpcb kleiner perkins google bus tom perkins kleiner perkins caufield byers

No, I have no interest in reviewing Mr. Perkins' "Sex and the Single Zillionaire".

Dear Airbnb: Charging Rent to Someone Is Not "The Sharing" Economy

Dude can't have it both ways, either he's a for-profit commercial venture or he's not.
From the Wall Street Journal:

Brian Chesky: The 'Sharing Economy' and Its Enemies
The cofounder of Airbnb on how an idea to rent space on air mattresses turned into a Web business that has hotel chains fuming and politicians suspicious.

San Francisco's Radius Cafe is one of those places where "local" is the rule—all the food is sourced within a 100-mile radius of the restaurant. So it's a touch ironic to meet there with Brian Chesky, the hoodie-wearing 32-year-old co-founder of Airbnb, whose game plan is global. 

Airbnb is a Web service that lets travelers book couches, beds, rooms, houses, boats and even castles on a nightly basis. In six years Airbnb has become a company valued at $2.5 billion, with 500,000 properties available in more than 190 countries—a stand out in what is often called the sharing economy. Airbnb could do to hotels what Amazon has done to bricks-and-mortar bookstores. By year's end, Airbnb says it will have booked more overnight stays than the Hilton and InterContinental hotel chains. 

As might be expected, hoteliers and hospitality-industry regulators are suspicious of the Airbnb model. In October, New York state sued the company for violating a law passed in 2010—just when Airbnb was picking up steam—barring private citizens from renting an entire apartment for less than 30 days. 

"I want to challenge the status quo, but in a way that's constructive," Mr. Chesky says. "There were laws created for businesses, and there were laws for people. What the sharing economy did was create a third category: people as businesses. . . . They don't know whether to bucket our activity as person or a business."

That the New York lawsuit was issued from Albany hit Mr. Chesky close to home: He grew up just outside the city, the son of social-worker parents. To hear him tell it, disrupting the hospitality industry—let alone working on the Web—couldn't have been further from his ambitions growing up. Back then he was a fidgety doodler. His interest in art led him to the Rhode Island School of Design, where he majored in illustration, later switching to industrial design.

"Industrial design teaches empathy," Mr. Chesky says....MORE

I usually side with the upstart against the incumbent but this guy sounds seriously manipulative.

Natural Gas Volatility Crushed Some Big Funds

This article is in regards to 2013, the story on the last week or so won't be written until the end of the first quarter.
We talked about one of the the trades that clobbered the unwary in Apr 2013's "Why Do You Think They Call It The Widowmaker? 'Energy Hedge Funds Caught Out in the Cold '" and prior to that in "3D: Still Watching for a Double Top in Stratasys (SSYS; DDD)":

Warning:

That $8.11 range between Wednesday's high and Friday's low is 10.97%.
These are moves you see in one of the most volatile commodities, natural gas.
Trading natural gas is called "The Widowmaker".
(okay, the Widowmaker term originally came from the March-April calendar spread where the premium/discount can swing 20% based on a couple weather rumors and you might see several swings from backwardation to contango and back in a week.. Now it is used to refer to the whole darn curve and any point on it)

The lesson is the same as the first rule of minefields: If you don't know where you're going, STOP. NOW!

From Reuters:

RPT-EXCLUSIVE-Big gains for natural gas fuel big losses for hedge funds

Natural gas was the biggest gainer among commodities last year but the hedge fund that has historically led gains in the space had its first losing year, and many others were down double-digits after being on the wrong side of the market.

U.S. gas prices gained more than 26 percent in 2013, the largest rally in eight years as brutally cold weather boosted gas demand. Prices rose, and toward the end of the year, the market saw wild swings in the spread between the March and April gas contracts.

Investors suspect that natural gas hedge funds lost heavily on spread trades of the March and April contracts, after miscalculating winter and spring gas demand and price action.

Prominent funds, from the $1 billion Velite Benchmark Capital in Houston to the smaller Sasco Energy Partners in Connecticut, finished the year down about 20 percent or more, according to industry sources and performance data obtained by Reuters.

"It was a tough year without doubt for most of us. The losses were pretty broad-based," said Kyle Cooper, managing director of research at Cypress Energy Capital Management in Houston, a small $20 million hedge fund that lost 17 percent.

Hedge funds typically do not reveal their book, so it was hard to ascertain the price bets or size of the positions laid out by the gas funds, and the trades where they lost money.
It is also unclear how funds have fared in the first weeks of this year as natural gas futures prices have surged 20 percent so far this month.

Velite ended down 25 percent, according to two sources familiar with its numbers. It was the fund's first loss since its launch in 2006, and was also the most high-profile loss among gas funds. Velite was founded by natural gas trader David Coolidge, 49, who became the top natural gas fund manager after ex-Enron wunderkind John Arnold retired two years ago.
Velite declined comment.

Big price swings are not unusual in natural gas, but the fluctuating March-April spread caught even the most experienced traders by surprise. The spread, known as the "widowmaker" for sharp losses it has caused in the past, gyrated wildly in a 20-cent range in December as forecasters predicted milder temperatures and then arctic-like chills.

In December, the gap between March and April 2014 gas moved from 4 cents on Dec. 4 to 19 cents on Dec. 12, as funds expected inventories to drain by the end of the winter heating season as Arctic chills swept across the United States.

It then contracted to as low as 9 cents five days later only to blow out to 30 cents on Dec. 23, leaving ample room for winners and losers.

INCREDIBLE VOLATILITY
This year, the market has continued to surge, with front-month gas futures hitting above $5 per million British thermal units on Friday, a peak since June 2011, after some of the coldest temperatures in two decades. Next-day gas prices in New York City rose to a record above $100 per mmBtu on Tuesday.

"We're still having incredible volatility now," Cooper said. "This means we could have more big losses in January, and possibly some big winners if they got it right." He declined to say how Cypress had performed for the month so far.

Of last year's losers, Fairfield, Connecticut-based Sasco reported a 20-percent slide on a capital of $244 million, performance data obtained by Reuters showed.

Houston-based Skylar Capital, which opened with about $100 million at the end of 2012 and is run by former Arnold protégé Bill Perkins, lost about 25 percent, industry sources said.

Copperwood, also in Houston and run by ex-Enron veteran Greg Whalley, declined about 27 percent on a capital of $800 million, two market sources said....MUCH MORE

United Arab Emirates Considers IMPORTING Natural Gas From The United States

From Arabian Business:

UAE mulls natural gas imports from North America 

The UAE, a Gulf OPEC oil producer, said it was looking at the possibility of importing natural gas from North America, in what would be one of the most striking developments since the start of the US shale boom.

The United States and Canada are producing record amounts of gas from shale rock formations, pulling down North American prices to levels that have attracted the interest of foreign buyers.
Around a dozen long-term deals, each worth billions of dollars, have recently been signed behind closed doors between US producers and buyers in China, Japan, Taiwan, Spain, France and Chile as global demand for gas increases.

"We may follow the same trend of considering investments in the United States and Canada to bring some of that gas back home," UAE Oil Minister Suhail bin Mohammed al-Mazroui said on Monday at an energy conference in London....MORE

(For illustrative purposes only)

Propane Prices Hit $210 Barrel as Propane/Ethane Mix is Negative 50 Cents/Gal

Since natural gas is, at least on the blog, untradable -up 9.6% on Friday, ranging between $5.44 and $4.83 today, today-we'll check in on some of the current craziness in natural gas liquids.
A couple interesting ways to look at things from RBN Energy:

A Perfect Storm – Polar Vortex Turns Propane and other NGL Markets Upside Down 

Last week the U.S. NGL markets entered uncharted territory.   According to OPIS, cash propane prices in the Conway, KS market reached almost $5.00/gallon for a time, responding to a massive product shortage across the entire eastern half of the country.  But at the same NGL hub, OPIS also reported that the price for ethane/propane mix (EP mix) dropped deep into negative territory at $(0.50)/gallon.  That’s crazy.  The seller is paying the buyer to take the product.  Nothing like this has been seen before in these markets.  Propane inventories continue to drop, transport trucks are moving product hundreds of miles to markets, terminals remain on allocation and a state of emergency has been declared by at least 20 state governors.  The inventory graphs look so scary that the Black Swan is frozen stiff.   Today we begin a series on the NGL markets of 2014, a year that this industry will be talking about for a long time.

Wrong Way Conway
Conway, Kansas is the second largest NGL hub in North America.  Only the huge NGL hub at Mont Belvieu, TX is larger.  Conway is a major distribution point for the Midwest.  The last three days in that market have been totally unprecedented. 

Let’s start with the biggest news of the week.  Propane prices at Conway are exorbitant and ethane prices have plummeted.  As you can see in Figure #1 below, propane prices at Conway were up to $4.32/gallon when they were only $0.80 in June and $1.40 as recently as two weeks ago.  It’s worth noting that though prices for the day Friday were in the $4.00 to $4.65 range, at one point on Thursday they reached as high as $4.935.  That’s getting pretty close to $5.00/gallon, which – if you like to think in barrels – is $210 per barrel!  

Source: OPIS (Click to Enlarge)

On the flip side of the coin, the strangest development in this saga is that Ethane/Propane Mix (E/P) at Conway has dropped to $(0.50)/gallon from around a positive $0.20 where it’s been since April (Figure #2).  Note to those unfamiliar with the NGL business – prices are not supposed to go negative.

OK, that’s really freaky.  What’s going on? 
Propane prices are sky high for three primary reasons but at the end of the day, it’s all about supply and demand.  We’ll look at what’s driving the demand side first.  Of course, the weather plays a huge factor but that’s not the only culprit.  Grain drying and exports have also played a major role. 

But let’s address the icy cold gorilla in the room, the weather, first.  The well-publicized polar vortex gripped the country for the initial weeks of the New Year but, as seen in Figure #3 below, we have been experiencing periods of extremely low temperature since December and it’s still pretty cold out there.

Source: Brison Bickerton at Freepoint Commodities (Click to Enlarge)

The graph above from our friend Brison Bickerton at Freepoint Commodities shows winter heating degree days.  For you technicians, these are natural gas weighted numbers, but they tell a similar story for propane.  We’ve discussed HDD’s in the past (See Under the Weather) so we aren’t going to spend any time explaining the concept today.  Suffice to say that that purple line (2013-14 degree days) is well above the gray and red lines (30 year normal weather and the last nine year average). ...MORE

Natural Gas: New York City Weather Forecast Is "Slightly Less Wanting to Die"

From The Awl:

Extended: Tuesday-Wednesday: Another Deep Freeze. Highs, mostly in teens. Thursday-Friday: Less harsh. High near 32.

Do not be fooled by the current conditions outdoors: like all good things they are ethereal and serve only to remind you just how transient happiness is in even its most relative state. No, this short spate of temperatures that could be best described as "not freezing" will swiftly give way to the resumption of the perpetual cold under which we have been crushed since what seems like time immemorial.

But there is good news on the horizon: the week's end will find us in a climate that actual forecasters are calling "less harsh."

I am not one to belabor the opportunity to tease out a metaphor and extend it until it is so stretched and brittle that simply the hint of close examination might cause it to snap, so I will just say that, given the way we get as we grow older and start to focus on the futility of all our efforts and how, in our increasing fragility, we become less inured to the common brutalities both intentional and inadvertent that are meted out upon us and which we mete out in turn, perhaps the best we can hope for while we wind down our days—understanding full well that it is more than we deserve—is the occasional respite of a life "less harsh" even as we are resigned to the knowledge that the season of our souls will stay stuck on winter and no amount of emotional climate change will warm us up on the inside. But I guess you should still try to get out there right now, who the hell knows when we're going to see the 40s again? 

German Executives Optimistic, Probably Don't Know The NSA Engages in Industrial Espionage Against Them

Now is the time we juxtapose.
From Quartz:

German executives are optimistic, but they might be getting ahead of themselves

The euro zone’s largest economy is the strongest it has been in years. That’s at least the impression one gets from surveys of business managers in Germany.

The latest reading of the influential Ifo business climate survey, published today, beat market expectations and set the highest mark since the middle of 2011. It follows similarly robust surveys of purchasing managers and financial analysts released over the past week.

But against this cheery backdrop, actual economic growth in Germany looks remarkably weak....MORE

And from the Canadian Broadcasting Corp:

Edward Snowden says NSA engages in industrial espionage
Ex-NSA contractor cites German engineering firm Siemens as one target

The U.S. National Security Agency is involved in industrial espionage and will grab any intelligence it can get its hands on regardless of its value to national security, former NSA contractor Edward Snowden told a German TV network.

In text released ahead of a lengthy interview to be broadcast on Sunday, ARD TV quoted Snowden as saying the NSA does not limit its espionage to issues of national security and he cited German engineering firm, Siemens as one target.

 "If there's information at Siemens that's beneficial to U.S. national interests — even if it doesn't have anything to do with national security  — then they'll take that information nevertheless," Snowden said, according to ARD, which recorded the interview in Russia where he has claimed asylum....MORE

"Insurers weigh risks of an oil-train catastrophe"

John Kemp writing at Reuters:

In the event of a mass-casualty accident involving the derailment of a crude-carrying train in a densely populated urban area, who would be responsible for the compensation for deaths, injuries, damage to property and environmental clean up?

The short answer is the railroad operator. By law, the operator of any railroad in the United States or Canada cannot refuse to transport any cargo, no matter how hazardous, provided it conforms to applicable regulations.

Marine and air transportation carriers can limit their liability as a condition of carriage. But uniquely in the case of rail, the railroad operator cannot insist on an agreement sharing the risk with the shipper. The railroad operator is liable for all costs in the event of an accident up to an unlimited amount.

"Once the railway has received a car from a shipper, all of the risk and exposure associated with that car are then transferred to the railway even when the liability arising from the carriage of the dangerous goods is not caused by the negligence of the railway," Canadian National wrote in a letter to the Canadian Transportation Agency (CTA) on January 21.

"Should an incident occur within or near a densely populated area ... an incident ... has the potential to be truly catastrophic and result in billions of dollars in personal injury and property damage claims," the Association of American Railroads (AAR), which represents railroad operators, wrote in its own submission to the CTA.

"The damages potentially resulting from an exposure could risk the financial soundness and viability of the rail transportation network in North America," the AAR warned.

INSURANCE REVIEW
The transportation agency is urgently reviewing the rules covering third-party liability and minimum insurance cover following the rail disaster at Lac-Megantic, Quebec, in July 2013, when 63 tank cars containing crude oil derailed, causing a fireball that killed at least 42 people and destroyed the town centre.

Montreal, Maine & Atlantic, the train operator at Lac-Megantic, filed for bankruptcy protection just one month later when it became clear that costs arising from the accident would overwhelm the company.
The costs of the clean-up alone have been put at $200 million. Compensation for deaths, injuries and damage to property will add hundreds of millions more. Montreal, Maine & Atlantic had liability insurance of only $25 million, typical for a small railroad....MORE