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Plastics Won’t Save Oil

September 13, 2017 Irina Slav 0

Petrochemicals are Big Oil’s big hope for the future—the distant future. Petrochemicals are used in thousands of products, with the biggest group among these being single-use plastic products. The bad news for oil is that green initiatives around the world are mounting and many of them are targeting precisely this group of products. The latest such initiative came from Kenya. Last month, the East African country introduced what is considered one of the toughest bans on plastic bags globally. The making, marketing, and use of plastic…

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Agencies to propose amending CRA regulations to conform to HMDA regulation changes, and remove references to the neighborhood stabilization program

September 13, 2017 tradingeconomics.com 0

Agencies to propose amending CRA regulations to conform to HMDA regulation changes, and remove references to the neighborhood stabilization program
The post Agencies to propose amending CRA regulations to conform to HMDA regulation changes, and remove …

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OPEC Production Falls Despite A Dip In Compliance

September 13, 2017 Ron Patterson 0

All data below is based on the latest OPEC Monthly Oil Market Report. All data is through August 2017 and is in thousand barrels per day. (Click to enlarge)The above chart does not include the 14th member of OPEC that was just added, Equatorial Guinea. I do not have historical data for Equatorial Guinea so I may not add them at all. OPEC production has held steady for the past three months. Their production was down 79,000 barrels per day in August but that is not a big drop when production is over 32.5 million barrels per day. (Click to enlarge)August…

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Nigeria To Shutter Three Oil Refineries To Rehabilitate Output

September 13, 2017 Zainab Calcuttawala 0

Nigeria will shut down three of its oil refineries for comprehensive rehabilitation, according to an announcement by the Nigerian National Petroleum Corporation (NNPC) on Wednesday. The Kaduna, Warri and Port Harcourt refineries will shutter to allow the national oil company to return refining capacity to their nameplate levels, NNPC managing director Dr. Maikanti Baru told reporters at the capital. “As you know, it is being the perception of the public that the repairs of the refineries are never done thoroughly. So this time, our intention…

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Man Shouting “Allahu Akbar” Viciously Attacks Family Of 4 In France

September 13, 2017 Tyler Durden 0

A man reportedly shouted “Allahu Akbar” before viciously assaulting four passers-by and three police officers on Wednesday in Toulouse, France, punching and kicking his victims before being subdued, according to French-language publication La Depeche.

The incident was reminiscent of an attack in Brussels just two weeks ago, when a machete-weilding man also shouted “Allahu Akbar” before lunging at police. But he was shot dead before he could cause any serious injuries.

Video of Wednesday’s incident can be seen below:

#BREAKING: BREAKING: Seven injured in attack by man shouting ‘Allahu Akbar’ in Toulouse, France pic.twitter.com/xA0E7ii8zH

— Amichai Stein (@AmichaiStein1) September 13, 2017

“One witness said: ‘We were chatting and he jumped on us. He first caught my son and then beat my daughter. We just ran,” according to the Daily Mail.

The three policemen, who intervened after they spotted the attacker assaulting the passers-by, were injured by kicks and fists, as were the passers-by.

“We were discussing and he jumped on us. He first caught my son and then beat my daughter. We ran … “, according to the father of the family of four that was attacked.”

After the attacker struck, the panicked victims managed to escape to the Boulevard des Minimes and alert a patrol car.

The officers didn’t need to travel far to find the attacker. During the very rigorous arrest, the individual continued to shout “Allahu Akbar” over and over.

Three policemen were injured in the legs and shoulder. After firefighters were dispatched to examine their wounds, two of the family members were taken to the Toulouse-Rangueil hospital. The 42-year-old alleged perpetrator, whose name was not released, stayed in a psychiatric hospital, but was otherwise unknown to authorities.

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How Will Venezuela Deal With A PDVSA Default?

September 13, 2017 OilPrice.com 0

While debt servicing has been a government priority, declining external liquidity and a deteriorating domestic situation (three-digit hyperinflation, shortages, and a political crisis between the government and the National Assembly) make it a daunting task. By 2020, the country must repay 30 percent of the external debt due to expire in the next 23 years. Venezuela can get access to liquidity via three main ways. The first option is to borrow directly on the financial market which implies that the country must pay an increasingly prohibitive risk…

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Tax Reform Breakthrough? Trump To Host White House Dinner With Schumer, Pelosi

September 13, 2017 Tyler Durden 0

Today’s reincarnation of the “Trump Rally”, manifested by a jump in small-cap stocks, which as a reminder are the best equity proxy for the future of the US economy, and a long-overdue spike in US dollar

… is due to the previously observed spark in Trump tax plan talk, whose outline Paul Ryan said earlier could be unveiled as soon as September 25, as well as a report that Trump’s tax reform discussions would include Senate Democrats. Now, adding to the speculation that Trump may actually pull off another deal with Democrats over GOP objections, is a report from ABC that one week after allying himself with Democratic congressional leadership on efforts to raise the debt limit and provide money for hurricane relief, on Wednesday night Trump will host top Democrats, Senate and House Minority Leaders Chuck Schumer and Nancy Pelosi for dinner at the White House to discuss DACA, health care reform along with “fall deadlines” – two points that have become Democrat bargaining chips for Trump’s agenda.

While not explicitly mentioned, Trump will certainly also discuss his proposed tax plan. More details on tonight’s meeting from ABC:

The focus of Wednesday’s dinner, according to sources familiar with the meeting, will be to discuss protections for so-called Dreamers, undocumented immigrants currently protected by the Deferred Action for Childhood Arrivals (DACA) policy, which the administration said last week it would end in six months. The trio will also talk about efforts to stabilize health care markets.

 

The dinner will follow a bipartisan roundtable between a number of leading moderate House Democrats with Trump Wednesday afternoon.

Rep. Josh Gottheimer, D-N.J., a leader of the House Problem Solvers Caucus, said the White House legislative affairs office invited him and other members to discuss health care, tax reform and infrastructure Wednesday afternoon.  “I’m hoping this is part of a new era of bipartisanship. Because that’s what people want,” he said.

Gottheimer, who attended a bipartisan meeting at the White House last week on New York and New Jersey infrastructure projects, told reporters he wants to discuss the status of young undocumented immigrants with Trump, and push for a vote to address the expiring DACA policy.  “If there’s bipartisan support to get something done, let’s bring it to the floor and get legislation passed,” he said.

Among the republicans invited to the session is Tom Reed, the other co-chair of the Problem Solvers Caucus. It was not clear if Gary Cohn will be present at tonight’s dinner, however.

The bipartisan meeting will take place at 2 p.m. in the White House Cabinet Room, according to the president’s schedule.

Meanwhile, as Rasmussen reports, “despite their failure to advance President Trump’s agenda, congressional Republicans aren’t happy about his outreach to Democrats in the House and Senate, but most voters think it’s a great idea.”

A new Rasmussen Reports national telephone and online survey finds that 66% of Likely U.S. Voters say it is good for the country if Trump works with congressional Democrats to advance his agenda. Just 13% think the bipartisan cooperation is bad for the country, while 21% are undecided

 

Only 19% believe the president should continue to rely on congressional Republicans to pass his agenda. That’s down from 29% in early April. Sixty-five percent (65%) now feel he should reach out more to Democrats in Congress for help versus 58% who felt that way five months ago. Sixteen percent (16%) are not sure.

 

Republicans (72%) are even more enthusiastic about the president working with congressional Democrats than Democrats (62%) and voters not affiliated with either major party (63%) are.

While the outcome of the dinner is unknown, judging by the market’s reaction and the rekindling of the Trump trade, it appears that at least according to trader, Trump’s pivot away from Republicans and toward democrats, where the quid-pro-quo is insurance/DACA in exchange for tax reform, suggests the probability of a successful outcome is rising by the minute.

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Is This The Biggest Damocles Sword Hanging Over The Markets?

September 13, 2017 Tyler Durden 0

Authored by Ralf Zimmermann, Head of Equity Strategy at Bankhaus Lampe KG,

Let’s forget for ten minutes the upcoming Q3 reports (supportive for stocks), US policy risks (probably the biggest medium-term risk for stock markets), hurricane-related diversions and North Korean rumblings – and turn to a pretty fundamental issue, most likely the biggest one in contemporary capital markets: Central bank interventions in and manipulation of capital markets. 

The Bank of Japan has been leading the field all the time. In terms of size (BoJ’s balance sheet is now close to the size of Japan’s national GDP), in terms of the dependency of government financing on its central bank (BoJ market share in government bond market now stands at ~ 45%; annual BoJ buying of government bonds is twice the annual tax revenue and equals the annual public budget – terminating bond buying would trigger an immediate crash in Japan) and in terms of variety of assets the BoJ is buying (government bonds, REITs – and stocks).

It’s the latter which is of particular interest for stock investors. There had been an interesting article in Bloomberg highlighting the distortions the BoJ is creating in the Japanese ETF market as the BoJ accounts for 75% of the total ETF market (see the attached article at the end of the snippet).

In Euroland, investors are wondering when the ECB is going to start crossing this frontier and step into equities – as a means to circumvent the “unwelcome” scarcity of government bonds and ownership limitations. Will this be the main policy tool of last resort in a next crisis/crash?

It is tempting for stock investors to look forward to a new price-pushing co-investor, but they should think twice about what they really wish for in the long run.

Let´s broaden Bloomberg’s analysis a bit. Some basic lessons can be learned (see chart 1):

  • Central bank purchases of stocks push markets upwards. The BoJ certainly contributed heavily to the massive rally in Japan.
  • However, it’s not a silver bullet for the long run. The Topix peaked in August 2015 and is still some 4% below the level back then. In this period, the net asset value of BoJ ETFs has risen by close to Yen 11 trillion or > US$ 100 bn (based on Bloomberg data). In the year to date, the Japanese market has underperformed the US and Euroland – and is only flat in euro terms. Despite massive central bank support, stocks remain a two-way street.

Chart 1: Bank of Japan net asset value of Japanese stock market ETF vs. Topix

Source: Bloomberg

Over time the BoJ has become increasingly important. Its share of the Japanese stock market has risen from 0% in late 2010 to now 5% (see chart 2). This has been funded from thin air, i.e.by simply printing money. The interesting point is that the incremental gains of one percentage point in ownership are realised in an increasingly shorter time period. It took 4 1/2 years to reach 2%, but only 2 1/4 years to add another 3 percentage points (to the current 5%). This reflects two patterns: the declining positive impact of BoJ buying on stock prices and the increase in buying volumes by the central bank.

Investors should not be fooled. This is serious and creates massive long-term problems:

  • At some companies, the BoJ seems to have already reached a visible double-digit stake (e.g. at Fast Retailing). Is the BoJ going to control private companies?
  • What is going to happen when the BoJ tries to exit the stock market again? Can a stock market crash and/or recession be avoided?
  • What happens if the BoJ is not able to exit due to economic cooling/declining stock prices and the resulting public outcry. If one extrapolates the recent gains in ownership to the future – and does not assume another decay of the positive impact on stocks or any further increase of volumes – it will take only 13 years and the BoJ owns one quarter of the Japanese stock market. Ultimately, the BoJ is nationalising the stock market and thus eroding one fundamental pillar of a market-based economy (bear in mind it already “owns” the government bond market).

Chart 2: Share of Bank of Japan ownership in Japanese stock market

Source: Bloomberg, BHL Research

Looking at the slow motion attempts of the key central banks to withdraw their interventions, their back and forth even in better economic times after they have dived so deeply into capital markets in bad times, gives sufficient clues about the difficulties central banks are facing. As a starter, look at the recent ECB press conference. It may become pretty asymmetric: a tiny retreat in an upswing, followed by much bigger additional involvement in future downswings.

Central banks like the BoJ want to “help” markets but they risk destroying them. In my view, this is the great paradox of modern central banking.

In the longer run, this is the biggest Damocles sword hanging over markets.

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