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Sun, 25th June 2017

Anirudh Sethi Report

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Posts Authored by: “Jim John”

Macquarie Warns OPEC Deal To Collapse In 2018

OPEC’s production cut deal is unlikely to survive beyond its current deadline in March 2018, with the agreement seen falling apart towards the middle of next year, in which case a huge amount of extra oil would hit the market, Ian Reid, head of European oil and gas research at Macquarie, told CNBC on Thursday.

OPEC’s deal has not had the cartel’s desired effect on the markets, neither in terms of oil prices nor in drawing down the global glut.

According to Reid, the volume of U.S. shale output is basically nullifying OPEC’s efforts.

Putin Meets With Ethereum Founder To Create National Virtual Currency

Two weeks ago, in our latest comparison of Bitcoin and its up and coming competitor, Ethereum, we said “step aside bitcoin, there is a new blockchain kid in town.” Actually, we said that for the first time back in February when Ethereum was still trading in the low teens (the return on ETH since then is roughly 3000%), but the most recent glance provided some perspective on where the competition between the two largest cryptocurrencies may culminate, because according to at least two venture capitalists, the market cap of Ethereum – currently roughly $35 bilion – and whose share of the market has been soaring, will surpass that of Bitcoin, at ~$43 billion although it changes by the second, sometime before the end of 2018.

Two things: first, at the current rate of gains in Ethereum market share (and loss in Bitcoin’s), the inflection point between the two will come not in months, or weeks, but perhaps days.

Turkey Bans Short-Selling, Online-Trading As Nation’s Best-Performing Stock Crashes

After soaring over 100% in the last 3 weeks, Sasa Polyster Sanayi – Turkey’s best-performing stock of the year – crashed 19% at the open after regulators admitted investigations into potentially fraudulent transactions.

The regulator cited trading irregularities between March 24 and May 23, when the stock more than doubled to become the top performer on the Borsa Istanbul 100 Index.

The regulator said it’s investigating potentially fraudulent transactions that may have been aimed at creating artificial trading activity. That sent shares in Sasa Polyester Sanayi AS crashing by as much as 19%, the most in more than 16 years.

Of course the solution when any market starts to drop – Turkey’s market regulator imposed a temporary ban on short-selling and online trading.

So – roughly translated – we know fraudulent behavior ramped this thing to the moon but we are not going to allow you poor Turkish investors to sell, because that would be dangerous… we are just protecting you from your irrational self.

Jihad In Denmark

  • Danish Minister of Justice Søren Pape hopes to solve the issue by prosecuting the imam. However, Danish politicians appear to miss the critical fact that there is clearly a thirsty audience for sermons like this.
  • This sermon is a call to violence against Jews.
  • As the Quran cannot be changed, it is crucial to make more broadly known what is in it, so at least people can see the facts confronting them, to help them determine what choices they might care to make for their own future and that of their children.

In 2015, Omar El-Hussein listened to the imam Hajj Saeed, at the Hizb-ut-Tahrir- linked Al-Faruq-mosque in Copenhagen, decry interfaith dialogue as a “malignant” idea and explain that the right way, according to Mohammed, is to wage war on the Jews. The next day, El-Hussein went out and murdered Dan Uzan, the volunteer Jewish guard of the Jewish community, as he was standing in front of the Copenhagen synagogue. El-Hussein had also just murdered Finn Nørgaard, a film director, outside a meeting about freedom of speech.

Two years later, nothing has changed. A visiting imam from Lebanon at the Al-Faruq mosque, Mundhir Abdallah, is preaching to murder Jews:

 “[Soon there will be] a Caliphate, which will instate the shari’a of Allah and revive the Sunna of His Prophet, which will wage Jihad for the sake of Allah, which will unite the Islamic nation after it disintegrated, and which will liberate the Al-Aqsa Mosque from the filth of the Zionists, so that the words of the Prophet Muhammad will be fulfilled: ‘Judgement Day will not come until the Muslims fight the Jews and kill them. The Jews will hide behind the rocks and the trees, but the rocks and the trees will say: ‘Oh Muslim, oh servant of Allah, there is a Jew behind me, come and kill him.’ …”

Duterte Warns Trump: “That Guy Kim Simply Wants To End The World”

In a rare comment on the deteriorating North Korean situation, outspoken Philippine president Rodrigo Duterte urged the US to show restraint after North Korea’s latest missile test and to avoid playing into the hands of leader Kim Jong Un, who “wants to end the world“. The notoriously blunt Duterte said on Saturday that the Southeast Asia region was extremely worried about tensions between the United States and North Korea, and said one misstep would be a “catastrophe” and Asia would be the first victim of a nuclear war.

“There seems to be two countries playing with their toys and those toys are not really to entertain,” the president said quoted by Reuters during a news conference after the ASEAN summit in Manila, referring to Washington and Pyongyang. “One miscalculation of a missile, whether or not a nuclear warhead or an ordinary bomb, one explosion there that would hit somebody would cause a catastrophe.”

Duterte also warned the United States, Japan, South Korea and China that they are sparring with a man who was excited about the prospect of firing missiles. Duterte’s speech, which was delivered in his capacity as chairman of ASEAN, was due to speak by telephone to U.S. President Donald Trump later on Saturday. He said he would urge Trump not to get into a confrontation with Kim.

“You know that they are playing with somebody who relishes letting go of missiles and everything. I would not want to go into his (Kim’s) mind because I really do not know what’s inside but he’s putting mother earth, the planet to an edge.

China’s Credit Excess Is Unlike Anything The World Has Ever Seen

From a global macroeconomic perspective, we encourage readers to consider that the world is experiencing an extended, rolling process of deflating its credit excesses. It is now simply China’s turn.

For context, Japan started deflating their credit bubble in the early 1990s, and has now experienced more than 20 years of deflation and very little growth since. The US began its process in 2008, and after eight years has only recently been showing signs of sustainable recovery. The euro zone entered this process in 2011 and is still struggling six years onward. We believe China is now entering the early stages of this process.

Having said that, we believe that Chinese authorities have a viable plan for deflating their credit excess in an orderly fashion. Please stay posted as we will review this multi-pronged, market-based approach in our next column.

For now, let’s turn our attention to the size of the credit excess that China created and why we estimate it to be the largest in the world.

A credit excess is created by the speed and magnitude of credit that is created – if too much is created in too short a time period, excesses inevitably occur and non-performing loans (NPLs) emerge.

To illustrate the credit excess that has been created in China, let’s review several key indicators, including the: 1) flow of new credit; 2) stock of outstanding credit; 3) credit deviation ratio (i.e., excess credit); 4) incremental capital output ratio (efficiency of credit allocation).

The chart below shows the amount of credit created as a percentage of GDP during the five years prior to major downturns globally.

Global Financial Market Stress Soars To 2017 Highs

April looks set to be the worst month since August 2015 (when China devalued and turmoil spread across the world) for global financial stress.

As Bloomberg reports, rising geopolitical concerns are pushing a gauge of anxiety for global asset classes to this year’s high.

Paris Airport Attacker’s Last Words: “I Am Here To Die For Allah, There Will Be Deaths”

The man shot dead by French soldiers at Paris Orly airport on Saturday shouted he was there to “die for Allah” when as reported this morning, he tried to seize a soldier’s assault rifle, apparently intending to open fire on passengers, a Paris prosecutor said. According to the Paris prosecutor, Francois Molins, who held a press conference in the French capital on Saturday evening the attack is being treated as a terrorist incident, and three people – the assailnt’s father, brother and cousin – have been placed in custody.

The attacker, named as Ziyed Ben Belgacem, arrived at Orly airport on Saturday morning, threw down a bag containing a can of petrol and seized hold of a woman air force member who was part of a military patrol at the airport. Using the servicewoman as a shield, he put his air pistol to her head and shouted at other soldiers with her: “Put down your guns. Put your hands on your head. I am here to die for Allah, there will be deaths.”

He was right, but the death was only one… his, because the moment he grabbed the woman, two soldiers fired eight bullets in three bursts at the man, killing him instantly. A Koran was found on his body.

According to Reuters, the prosecutor said the assailant, who tried to grab the woman’s Famas assault rifle, seemed bent on carrying out a serious attack. “Given the violence that is shown in the (CCTV) pictures … you sense that he was determined to go through with it,” Molins told a news conference. “Everything leads one to believe he wanted to seize the Famas so that there were deaths and then to fire at people.”

Upcoming Week :Fed speakers, Russia probe, Isis fight

With a rate rise in the books investors get to hear from a handful of Federal Reserve speakers next week. On the geo-political front a hearing on Russia’s interference in the US presidential election and a meeting on combatting Isis take the spotlight.

Here’s what to watch in the coming days.

Fed speakers

“Moreover, we’d also look for clarification on the addition of ‘symmetric’ in the press statement when it came to defining the inflation reaction function,” strategists at RBC Capital Markets said. “Our sense is that this was in an effort to put an end to inflation level targeting—also not a dovish development.”

Ms Yellen will deliver the opening keynote at the Federal Reserve System Community Development Research Conference in Washington on Thursday. Through the week, investors also get to hear from voting members of the monetary policy setting Federal Open Market Committee, including Chicago Fed president Charles Evans, Dallas Fed president Robert Kaplan and Minneapolis Fed president Neel Kashkari — the only voting FOMC member to dissent at the March meeting and who has explained his rationale for the move on Friday.

On the economic data front, the calendar is fairly light but investors will keep an eye on fourth quarter current account deficit figures due Tuesday and durable goods orders slated for Friday.

Russia probe

Atlanta Fed Slashes Q1 GDP Forecast To Just 0.9% Hours Before Fed Rate Hike

While it may not be the very definition of irony, we do find the fact that the Atlanta Fed has just cut its Q1 GDP forecast from 1.2% to 0.9%, a number which if confirmed would be the lowest quarterly print in year, just two hours before the Fed’s rate hike quite humorous. As a reminder, the number was as high as 3.4% one and a half months ago.

From the Atlanta Fed

Latest forecast: 0.9 percent — March 15, 2017 

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 0.9 percent on March 15, down from 1.2 percent on March 8. The GDP growth forecast declined 0.3 percentage points on Friday when the February estimate of the model’s latent dynamic factor used to forecast yet-to-be released GDP source data declined after the employment situation release from the U.S. Bureau of Labor Statistics (BLS). The forecast for first-quarter real consumer spending growth inched down from 1.6 percent to 1.5 percent after this morning’s retail sales report from the U.S. Census Bureau and the Consumer Price Index release from the BLS.