reality is only those delusions that we have in common...

Saturday, November 28, 2015

week ending Nov 28

9 Regional Feds Pushed For Discount Rate Hike In October -- In July it was 5, then in October the number rose to 8, and moments ago we learned that during the meetings on October 15 and 22, a total of nine regional Feds had asked to increase the Fed's discount rate from 0.75% to 1.00%, with Boston joining the St. Louis, Atlanta, San Francisco Fed, Cleveland, Dallas, Philadelphia, Kansas City and Richmond Fed. Two banks, the Chicago and NY Fed wanted to keep rates at 0.75%, while the domain of Fed's uber dove Kocherlakota, the Minneapolis Fed where former Goldmanite Neel Kashkari will soon operate, asked for a Discount Rate cut to 0.50%. According to the minutes, the Fed Directors requesting an increase in the primary credit rate (to 1 percent) viewed a move toward a more normal level as appropriate in light of the improvements in labor market conditions this year and their expectations for inflation to rise gradually toward the Federal Reserve's 2 percent objective. Some directors favoring an increase judged that an earlier start to the policy normalization process could allow for a more gradual pace of adjustment, thereby limiting the associated risks. As a reminder, the Board’s meeting to review discount-rate requests took place on Oct. 26, two days before the Federal Open Market Committee decided to hold the federal funds rate target in a range of zero to 0.25%. However, even as the regional Fed hawks were soaring, the discount-rate minutes said that "no sentiment was expressed for changing the primary credit rate before the Committee’s meeting, and the existing rate was maintained" among the Fed Board.

Fed Watch: Mission Accomplished - Federal Reserve policymakers have pretty much taken all of the mystery out of this next meeting. Federal Reserve Vice Chair Stanley Fischer, via Reuters:"In the relatively near future probably some major central banks will begin gradually moving away from near-zero interest rates," "While we at the Fed continue to scrutinize incoming data, and no final decisions have been made, we have done everything we can to avoid surprising the markets and governments when we move, to the extent that several emerging market (and other) central bankers have, for some time, been telling the Fed to 'just do it'." New York Federal Reserve President William Dudley, via Reuters: The Federal Reserve should "soon" be ready to raise interest rates as U.S. central bankers grow confident that low inflation will rebound and that employment remains stable, William Dudley, the influential head of the New York Fed, said on Friday.  Atlanta Federal Reserve President Dennis Lockhart, via CNBC: "I'm comfortable with moving off zero soon," said Atlanta Fed President Dennis Lockhart in prepared remarks. San Francisco Federal Reserve President John Williams, via Reuters: "Assuming that we continue to get good data on the economy, continue to get signs that we are moving closer to achieving our goals and gaining confidence getting back to 2-percent inflation... If that continues to happen there's a strong case to be made in December to raise rates." Obviously serial dissenter Richmond Federal Reserve President Jeffrey Lacker is also looking for a rate hike. And so too is Cleveland Federal Reserve President Loretta Mester. To be sure, they all give a nod to “data dependence,” implying that a rate hike is not a sure thing. But, barring an outright collapse in financial markets, it is very difficult to see the data evolve between now and December 15-16 in such a way that the Fed suddenly has a change of heart. And note there is little reason for them to think at this point that growth has slowed well below trend.

New agonies, alliances as Fed debates post-liftoff plan -- Federal Reserve officials, who are expected to raise interest rates next month, are already sketching out positions for a post-liftoff debate that may blur the lines between inflation "hawks" and "doves" and make the Fed's policy less predictable. With unemployment steadily falling, Fed policymakers have been waiting for a return of healthy price and wage increases. But those have yet to appear, prompting some within the central bank to begin doubting whether their tried and tested economic models still work. Fed officials' private and public comments show that the debate now centers on whether the U.S. economy is returning to its old robust self, or whether tepid growth and resulting weak inflation and slow wage increases have become the new norm after the deep recession of 2007-2009. The Fed's 17 policymakers are also wide apart on the question how high interest rates should go and how quickly to get there. The debate will effectively determine how far U.S. rates will diverge from those in other major economies that are still in an easing mode and how far the dollar may rise, possibly triggering an emerging markets sell-off and hurting U.S. exports. Uncertainty as to who will prevail in the debate may also sow confusion among investors, adding to market volatility. Now even some of the hawks, who would typically worry more about inflation risks than weak economic growth, are weighing a possibility that they may face a long spell of sub-par growth and low inflation. Others, such as Fed Chair Janet Yellen, have held to a tried and true approach of trying to preempt any pick up in prices, which they anticipate next year.

The December Jobs Number May Really Be The "Most Important Ever" -- Everyone has heard the phrase "this is the most important jobs report ever", and virtually every time this has been an exaggeration. However according to an analysis conducted by BofA's Vadim Iaralov, the nonfarm payrolls report on December 4 (a day after the just as critical ECB announcement, but more importantly 12 days before the Fed's "historic" December 16 "rate-hike" announcement) may just indeed be the most important jobs number. Ever. Here is why, according to Bank of America: With the much-anticipated 16 December FOMC meeting around the corner, the 4 December US non-farm payrolls (NFP) is one of the most important remaining data points. The significance of recent NFP surprises in driving asset prices has been increasing since summer 2014 and is near historical highs. We last observed this pattern of market behavior during the 2004-2006 Fed hiking cycle, suggesting this relationship exists due to market expectations for rate policy normalization. During the previous hiking cycle the importance of NFP surprises rose ahead of the first hike and continued to rise until the end of the hiking cycle. Despite high anticipation for the next Fed hike, the importance of the employment report could remain elevated even after the initial liftoff. This relationship is particularly pronounced now as the Fed has adopted a data-dependent stance, and each NFP report will likely continue to play a key role in informing the path of subsequent Fed policy decisions. The importance is actually quite simple: if the report is a solid beat, and if the Fed beats, that means that the stronger the economy, at least as measured by the jobs report, the steeper the rate of hikes will be, the more negative the impact on risk assets.

The False Promise of a Rules-Based Fed -- Greg Ip - Last week the House of Representatives passed a bill that would bring about the most sweeping changes to the Federal Reserve since the 1930s. At the heart of the bill is a requirement that the Fed set interest rates according to a quantitative rule. Like advocates of the gold standard, proponents of the bill blame many of the economy’s ills on the Fed exercising too much discretion because it succumbs to economic expediency or political pressure. Many see the Fed’s emergency lending during the crisis and its bond-buying since then as bailouts for big, reckless banks and a profligate federal government. They want rules to circumscribe such discretion.  But history shows that discretion is unavoidable no matter what sort of standard a central bank uses. “The practical difficulties of life cannot be met by very simple rules,” Walter Bagehot, an early editor of The Economist, wrote in “Lombard Street.” “Those dangers being complex and many, the rules for encountering them cannot well be single or simple. A uniform remedy for many diseases often ends by killing the patient.” Legislating a rule doesn’t do away with discretion, but makes it more likely discretion will be exercised only after the rule has failed, perhaps at great economic cost. Numerous Fed officials and economists have noted, no rule can anticipate all the shocks and economic changes the Fed is likely to encounter, from a financial crisis to the “zero bound” on interest rates to a change in the neutral interest rate. So the bill in effect orders the Fed to do something it believes impossible; it would be like ordering the Fed to design a stock-picking formula then prove it will always beat the market.

Chicago Fed: "Index shows economic growth improved in October" - The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic growth improved in October Led by improvements in employment- and production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to –0.04 in October from –0.29 in September. Two of the four broad categories of indicators that make up the index increased from September, but only one category made a positive contribution to the index in October. The index’s three-month moving average, CFNAI-MA3, decreased to –0.20 in October from –0.03 in September. October’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Chicago Fed: Economic Growth Improved in October -  "Index shows economic growth improved in October." This is the headline for today's release of the Chicago Fed's National Activity Index, and here are the opening paragraphs from the report: Led by improvements in employment- and production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to –0.04 in October from –0.29 in September. Two of the four broad categories of indicators that make up the index increased from September, but only one category made a positive contribution to the index in October. The index’s three-month moving average, CFNAI-MA3, decreased to –0.20 in October from –0.03 in September. October’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. The CFNAI Diffusion Index, which is also a three-month moving average, decreased to –0.18 in October from –0.07 in September. Forty-one of the 85 individual indicators made positive contributions to the CFNAI in October, while 44 made negative contributions. Forty-six indicators improved from September to October, while 39 indicators deteriorated. Of the indicators that improved, 16 made negative contributions. [Download PDF News Release] The previous month's CFNAI was revised upward from -0.37 to -0.29.  The Chicago Fed's National Activity Index (CFNAI) is a monthly indicator designed to gauge overall economic activity and related inflationary pressure. Negative values indicate below-average growth, and positive values indicate above-average growth. The first chart below shows the recent behavior of the index since 2007. The red dots show the indicator itself, which is quite noisy, together with the 3-month moving average (CFNAI-MA3), which is more useful as an indicator of the actual trend for coincident economic activity.

Chicago Fed: US Growth Remained Sluggish In October -- US economic growth continued to weaken in October, according to this morning’supdate of the Chicago Fed National Activity Index’s three-month moving average (CFNAI-MA3). Last month’s reading slipped to -0.20, the lowest since Mar. 2015. But even after the latest decline, this benchmark of economic activity remains well above its -0.70 tipping point that marks the start of recessions, according to Chicago Fed guidelines. Meantime, there are signs that the trend will firm in the final months of the year. One clue is the Atlanta Fed’s current GDPNow estimate of fourth-quarter GDP growth: 2.3% (as of Nov. 18), which reflects a moderate improvement over Q3’s sluggish 1.5% increase.  As for CFNAI-MA3, the moderately negative reading for October “suggests that growth in national economic activity was somewhat below its historical trend,” the Chicago Fed said in a press release today. The monthly data for the index, however, hints at a rebound last month. Before averaging, the Chicago Fed index climbed to -0.04 for October, a three-month high. The monthly numbers are noisy, which is why the Chicago Fed recommends focusing on the three-month average for monitoring the business cycle. By that standard, the economy is still trending positive, albeit at a relatively slow pace. CFNAI-MA3’s current -0.20 level is moderately below the zero mark that equates with growth at the historical trend rate.

October 2015 CFNAI Super Index Declined and Remains Below the Historical Trend Rate of Growth.: The three month moving average of the Chicago Fed National Activity Index (CFNAI) which provides a summary quantitative value for all the economic data being released - declined from -0.03 (originally reported as -0.09 last month) to -0.20. Three of the four elements of this index are in contraction. PLEASE NOTE: This index IS NOT accurate in real time (see caveats below) - and it did miss the start of the 2007 recession. The headlines talk about the single month index which is not used for economic forecasting. Economic predictions are based on the 3 month moving average. The single month index historically is very noisy and the 3 month moving average would be the way to view this index in any event. A value of zero for the index would indicate that the national economy is expanding at its historical trend rate of growth, and that a level below -0.7 would be indicating a recession was likely underway. Econintersect uses the three month trend because the index is very noisy (volatile). As the 3 month index is the trend line, the trend is currently showing a marginally decelerating rate of growth. As stated: this index only begins to show what is happening in the economy after many months of revision following the index's first release.

GDP November 24, 2015: Third-quarter GDP is revised to an annualized plus 2.1 percent, up 6 tenths from the initial estimate but showing less strength by the consumer with final sales now at plus 2.7 from plus 3.0 percent. Higher inventories are a big factor in the upward revision, subtracting 6 tenths from GDP vs an initial 1.4 percent subtraction. Net exports pulled GDP down by 2 tenths vs only a small negative effect in the first estimate. Exports rose only 0.9 percent in the quarter, down 1 percentage point from the initial reading. Readings on residential investment, adding 2 tenths to GDP, and nonresidential fixed investment, adding 3 tenths, are little changed. Turning back to the consumer, personal consumption expenditures are revised to plus 3.0 percent, down 2 tenths from the initial estimate and reflecting less strength for durable goods and also services on lower spending for communications and natural gas. The gain in inventories is not a positive for the fourth quarter, posing headwinds for businesses which may limit production and employment to pull down their inventories. Still, the readings on the consumer are a positive and a reminder that the nation's economy is being driven by domestic demand. Other details include a tame plus 1.3 percent rise in the GDP price index, up 1 tenth from the initial reading.

Q3 GDP Revised Up to 2.1% Annual Rate -- From the BEA: Gross Domestic Product: Third Quarter 2015 (Second Estimate): Real gross domestic product -- the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes -- increased at an annual rate of 2.1 percent in the third quarter of 2015, according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.9 percent.  The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 1.5 percent. With the second estimate for the third quarter, the decrease in private inventory investment was smaller than previously estimated ...
Here is a Comparison of Second and Advance Estimates. PCE growth was revised down from 3.2% to 3.0%. Residential investment was revised up from 6.1% to 7.3%.

U.S. Third-Quarter GDP – At A Glance - WSJ -- The U.S. economy expanded at a faster pace than initially estimated in the third quarter as businesses stocked up on more goods, suggesting the economy remains on track to close out the year with modest but unspectacular growth. Gross domestic product, the broadest measure of goods and services produced across the economy, advanced at a 2.1% seasonally adjusted annual rate, the Commerce Department said Tuesday, up from the initial estimate of 1.5% growth.  The 0.6 percentage point increase from the initial GDP reading reflects an upward revision to private inventory investment that was partly offset by downward revisions to consumer spending and exports, the Commerce Department said.  Tuesday’s revised GDP reading reaffirms that the strong dollar and economic weakness overseas haven’t proven too great a drag on net exports. Exports rose 0.9% in the third quarter, while imports climbed 2.1%. Overall, net exports subtracted 0.22 percentage point from third-quarter GDP.  Tuesday’s GDP reading showed corporate profits fell in the third quarter, a sign U.S. corporate profits cooled somewhat after posting the strongest quarterly increase in a year this spring. Profits after tax and without inventory or capital consumption adjustments fell 3.2% in the third quarter after increasing 6.4% in the second. The print is the weakest reading since the final quarter of 2014. Investors are increasingly focused on profit margins as companies face the potential for higher labor and borrowing costs.  Businesses stepped up investments in the third quarter. Nonresidential fixed investment—a proxy for business spending on structures, equipment and intellectual-property products—increased 2.4%. While investment in equipment increased 9.5%, its strongest reading since the third quarter of 2014, investment in structures plunged 7.1%. The numbers suggest the drilling and mining sectors continue to suffer the effects of overcapacity and low energy prices,  Consumer spending was down slightly from the Commerce Department’s initial estimate. The reading on consumer-spending growth was 3%, revised down from an earlier reading of 3.2% growth. The revision reflected slightly higher spending on goods but lower spending on services compared with the initial estimate.

Economic Growth Was Slightly Better Over The Summer Than Initially Reported - After an initial report that seemed to suggest that economic growth over the summer was sluggish at best, the first revision to that report is somewhat more optimistic: The American economy turned in a better performance last quarter than first thought, expanding at a 2.1 percent rate, the government said on Tuesday. While well below the pace of growth recorded in the spring, it was better than the 1.5 percent rate for the third quarter that the Commerce Department reported late last month. Much of the improvement was because of revised data on inventories, which showed businesses’ restocking shelves at a faster pace than the government first estimated. The improvement in inventory levels was offset by a slight downward revision in consumer spending last quarter. Wall Street economists had been expecting the upward revision, which is the second of three estimates for growth that the government will release. The final set of numbers will come out on Dec. 22. For all of 2015, the rate of economic growth is expected to be about 2.5 percent, not much different from the 2.4 percent rate in 2014. The tepid pace prompted Jan Hatzius, chief economist at Goldman Sachs, to call this the “tortoise recovery” in a recent note to clients. But that sobriquet does not mean the economy has been uniformly lackluster. “Yet while this expansion may go uncelebrated, growth in fact has been good enough to achieve a great deal of cumulative progress in the labor market,” he added. “We now expect that the U.S. economy will reach full employment within the next 12 months — the ‘tortoise recovery’ looks to be approaching the finishing line.” Indeed, that is among the reasons policy makers at the Federal Reserve are more focused on the unemployment rate than the overall pace of gains in gross domestic product. With the unemployment rate’s falling to 5 percent in October and employers’ bolstering payrolls by 271,000, Fed officials are likely to conclude when they meet next month that the economy is strong enough to handle the first increase in interest rates in nearly a decade.

Second Estimate 3Q2015 GDP Revised Upward to 2.1%: The second estimate of third quarter 2015 Real Gross Domestic Product (GDP) is a positive 2.1 %. This is a moderate increase from the advance estimates +1.5 % if one looks at quarter-over-quarter headline growth. Year-over-year growth declined from the previous quarter. The major reason for the improvement in GDP growth from the advance estimate was a "less bad" decline in inventories. Headline GDP is calculated by annualizing one quarter's data against the previous quarters data (and the previous quarter was relatively strong in this instance). A better method would be to look at growth compared to the same quarter one year ago. For 3Q2015, the year-over-year growth is 2.2 % - significantly down from 2Q2015's 2.7 % year-over-year growth. So one might say that GDP decelerated 0.5% from the previous quarter.   This second estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. (See caveats below. The table below compares the 2Q2015 third estimate of GDP (Table 1.1.2) with the advance and second estimate of 3Q2015 GDP which shows:

  • consumption for goods and services declined.
  • trade balance degraded
  • there was significant inventory change removing 0.6 % from GDP
  • there was slower fixed investment growth
  • there was little change in government spending

Q3 GDP Second Estimate at 2.1%, A Slight Improvement from Advance Estimate of 1.5% - The Second Estimate for Q3 GDP, to one decimal, came in at 2.1 percent, a small increase from the 1.5 percent for the Advance Estimate. Today's number was on par with most mainstream estimates, with and both forecasting 2.1 percent. Here is an excerpt from the Bureau of Economic Analysis news release: Real gross domestic product -- the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes -- increased at an annual rate of 2.1 percent in the third quarter of 2015, according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.9 percent. The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 1.5 percent. With the second estimate for the third quarter, the decrease in private inventory investment was smaller than previously estimated. The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, state and local government spending, residential fixed investment, and exports that were partly offset by a negative contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.The deceleration in real GDP in the third quarter primarily reflected a downturn in private inventory investment and decelerations in exports, in PCE, in nonresidential fixed investment, in state and local government spending, and in residential fixed investment that were partly offset by a deceleration in imports. [Full Release] Here is a look at Quarterly GDP since Q2 1947. Prior to 1947, GDP was calculated annually. To be more precise, the chart shows is the annualized percent change from the preceding quarter in Real (inflation-adjusted) Gross Domestic Product. We've also included recessions, which are determined by the National Bureau of Economic Research (NBER). Also illustrated are the 3.25% average (arithmetic mean) and the 10-year moving average, currently at 1.43 percent.

Q3 GDP Revised Higher As Inventories Surge Again, Personal Consumption Disappoints --A month ago the US economy was said to have grown only 1.5%, driven by a long-overdue and perhaps welcome correction to inventories. Moments ago we got the first revision to the Q3 GDP, which as consensus expected rose from 1.5% to 2.1%, however for all the wrong reasons because while personal consumption actually decline from a 3.2% increase, and a 2.19% contribution to the GDP bottom line, it is now said to have grown only 3.0%, adding 2.05% to the final GDP print. So what drove the jump? The "old faithful" plug to "growth" inventories, which instead of dropping at an annualized 1.44% as in the original release, declined just 0.59% annualized, meaning that instead of contributing $62.2 billion, inventories jumped a material $100.6 billion, confirming that the inventory liquidation is still to take place, and as a result we now expect substantial downward revisions to Q4 GDP in the coming hours as Wall Street has no choice but to assume the inventory reduction will now be shifted to Q4. The summary GDP print:  And the inventory contribution to GDP, showing that Q3 increase from $62.2 billion to a whopping $100.6 billion.

Upward Revision to Q3 GDP…Yet Weakness in The Details -- (9 graphs)  Today’s release of the second estimate for Q3 by the Bureau of Economic Analysis (BEA) reveals an upward revision from 1.5% in the advance estimate to 2.1% for real GDP. As pointed out in the release, “The upward revision to the percent change in real GDP primarily reflected an upward revision to private inventory investment that was partly offset by downward revisions to PCE and to exports.” Personal consumption expenditure was revised down from 3.2% to 3.0%. The weakness in consumption and the higher than anticipated inventory investment are signs of weaknesses that are confirmed elsewhere. In our last post we mentioned that what looked like some bad news was not so bad. This time, what looks like good news with the upward revision reveals some troubling signs for the future path of interest rate hikes. It seems that the Fed will do what the Fed will do this December, as there is not much in the way of strong evidence to not raise rates at the next meeting and there is a strong desire to move off the zero lower bound. But weaknesses in the recovery are likely to affect the future path of the federal funds rate. Moreover, this is now quite a “mature” if tepid recovery, as can be seen in the first chart below – other recoveries had expired this many quarters out.Consumption, investment and its components are all consistent with a continued, but weak, recovery; and this recovery is set in the context of a world economic order that is fragile and changing. Europe has continued to be slow to improve, Japan and China show signs of weakness and many emergent market economies are beset by the falls in commodity prices. Weakness in Manufacturing A strong dollar and aggressive monetary expansions elsewhere in the world have contributed to weakness in U.S. manufacturing. Industrial production has been weak over the past year or so and capacity utilization continues to be below the estimated “boom-bust” level of 82.5. Barring a bad jobs report, the weakness in manufacturing is not likely to constrain the Fed from raising rates at its next meeting. But along with other factors it is likely to constrain the path of interest rates for some time to come.

Taking Inventory: 3Q GDP Estimate Revised Higher - In their second estimate of the US GDP for the third quarter of 2015, the Bureau of Economic Analysis (BEA) reported that the economy was growing at a +2.07% annualized rate, up +0.58% from their previous estimate -- but still down nearly 2% (-1.85%) from the second quarter. This report's headline number was buoyed substantially by a sharp revision in inventories. All of the other line items were either essentially unchanged or weaker. Although inventories are still reported to have been contracting at a -0.59% annualized rate, that is a +0.85% improvement from the -1.44% contraction rate reported in the previous estimate. As we have mentioned a number of times before, the BEA's treatment of inventories can introduce noise and seriously distort the headline number over short terms -- which the BEA admits by also publishing a secondary headline that excludes the impact of inventories. Because of the general weakness in the non-inventory line items, this BEA "bottom line" (their "Real Final Sales of Domestic Product") was revised downward -0.29% to a +2.66% growth rate for the third quarter, from the +2.93% previously reported. Consumer activity once again contributed the vast bulk of the headline number (providing +2.05% in total), although that contribution was less than in the previous estimate (down -0.14% in aggregate). Fixed commercial investments and governmental spending were essentially unchanged, while exports and imports weakened materially from the previous estimate. And in a glimmer of good news, household income was again revised significantly upward. Real annualized per capita disposable income was reported to be $38,260 per annum, up $174 from the previous estimate and now up $293 per year from the prior quarter. The household savings rate was reported to be 5.2% -- up substantially from the prior quarter's 4.7% rate.

Good news and bad news in revised Q3 GDP: There was good news and bad news in this morning's Q3 GDP revisions. As you probably have already read, real GDP increased (good news), but that was mainly because of an inventory build (bad news). We really want to see inventories being liquidated to accommodate the strong US$. To the extent that isn't happening, it means more pain in the future. A second dose of bad news was that corporate profits, a long leading indicator, declined from the Q2 highs: This is one of the relatively few times that corporate profits moved in the opposite direction of proprietors' income (red), which improved. Most likely this is due to the greater international exposure of large corporations vs. proprietors. The downturn in corporate profits joins the failure of interest rates to make new lows for 3 years, as I reported yesterday: as a yellow flag for the economy particularly beginning in the second half of next year. A second item of (continued) good news was that real private residential investment, another long leading indicator, remained positive: Finally, it is thought that Gross Domestic Income (red in the graph below), more accurately forecasts the direction of GDP (blue): Real GDI also increased, at a higher rate than real GDP. In summary, revised Q3 GDP provides further confirmation that the economic expansion is getting long in the tooth. But there is no imminent danger of a downturn, especially with housing and cars continuing to trend positive.

Q3 GDP Per Capita at 1.3% for Second Estimate - - Earlier today we learned that the Second Estimate for Q3 real GDP came in at 2.1 percent (rounded from 2.08 percent), a slight increase from the 1.5 percent of last month's Advance Estimate. Here is a chart of real GDP per capita growth since 1960. For this analysis we've chained in today's dollar for the inflation adjustment. The per-capita calculation is based on quarterly aggregates of mid-month population estimates by the Bureau of Economic Analysis, which date from 1959 (hence our 1960 starting date for this chart, even though quarterly GDP has is available since 1947). The population data is available in the FRED series POPTHM. The logarithmic vertical axis ensures that the highlighted contractions have the same relative scale. The chart includes an exponential regression through the data using the Excel GROWTH function to give us a sense of the historical trend. The regression illustrates the fact that the trend since the Great Recession has a visibly lower slope than long-term trend. In fact, the current GDP per-capita is 9.8% below the pre-recession trend but fractionally above the -10.1% below trend in Q1 2014. The real per-capita series gives us a better understanding of the depth and duration of GDP contractions. As we can see, since our 1960 starting point, the recession that began in December 2007 is associated with a deeper trough than previous contractions, which perhaps justifies its nickname as the Great Recession. The standard measure of GDP in the US is expressed as the compounded annual rate of change from one quarter to the next. The current real GDP is 2.1 percent. But with a per-capita adjustment, the data series is currently at 1.3 percent (1.27 percent to two decimal places). The 10-year moving average illustrates that US economic growth has slowed dramatically since the last recession.

Atlanta Fed Slashes Q4 GDP Forecast -- Just when you thought it was safe to hike rates, The Atlanta Fed takes an ax to its Q4 GDP forecast, smashing it to cycle lows following this morning's unexpected weakness in consumer spending. The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 1.8 percent on November 25, down from 2.3 percent on November 18. The forecast for the fourth-quarter rate of real consumer spending declined from 3.1 percent to 2.2 percent after this morning's personal income and outlays release from the U.S. Bureau of Economic Analysis. The Atlanta Fed model is now almost half 'consensus' expectations...

Counting backwards to the next recession: In most advanced economies business cycles can be well characterized by a succession of long expansion phases that are interrupted by short recessions. Given this pattern it is sometimes natural to think about the length of expansions as a key feature that describes the business cycle. The current expansion is already 77 months long, longer than the previous expansion of 2001-2007. While counting months is not a good way to forecast the timing of the next recession it is at least a reminder that there is another recession waiting for us in the not-so-distant future. And when we start counting backwards to the next recession a key questions is whether we will be ready for it. In particular, will monetary policy be back to normal and able to react to it? Interest rates have not yet moved away from zero in either Europe, the U.S. or Japan. This is, of course, very unusual given the length of the expansion. Another way to see how unusual monetary policy and interest rates look like is to plot the difference between long-term rates and the central bank rate. For the case of the US we can see that this difference (the term premium) has stayed very high since the 2008-09 recession. Unlike in previous expansion where after two to four years the term premium started declining (mostly through increases in the short-term rate), in this case the number remains unusually high.

Liquidity deteriorates for US Treasuries - FT - Trading in the world’s biggest government bond market has become increasingly challenging as the large banks that support transactions focus on slimming down their balance sheets. As dealers step back from facilitating the buying and selling of US Treasury debt, a key measure of market liquidity has deteriorated sharply and plumbed a level not seen since the bond rout of 2013, when investors anticipated that the Federal Reserve would start tapering its quantitative easing policy. Ahead of an expected shift higher in official borrowing costs next month by the central bank, investors have been selling Treasuries, with the rise in yields and decline in prices being compounded by a tougher operating environment for dealers. Faced with capital constraints, primary dealers, who are responsible for underwriting the US government’s debt, have struggled in their traditional role of being middlemen for investors. That has resulted in the price of older or “off-the-run” Treasury debt issues cheapening beyond their usual discount compared with current or “on-the-run” bond benchmarks. Such a breakdown between older and new Treasury securities typically signifies market tension and comes when derivatives trading is also being adversely affected by shrinking dealer support, the prospect of a Fed rate rise and looming end of the financial year. “Lower turnover requires banks to hold on to positions in off-the-run securities for longer periods and as capital and balance sheet has got more expensive that cost has gone up,” That relationship has been exacerbated by foreign central banks selling their holdings of older Treasuries as they support their currencies against the dollar. Highlighting the inability of banks to digest large supply and demand imbalances, their holdings of Treasuries have increased from around $20bn in July to $60bn.

F-35 Too Expensive: US Air Force Might Buy 72 New F-15 or F-16 Fighter Jets -- The F-35 Joint Strike Fighter might not be produced in sufficient numbers to maintain the U.S. Air Force’s current operational capabilities due to budgetary constraints, according to Aerospace Daily & Defense Report. As a result the service is considering filling the capabilities gap with 72 Boeing F-15s, Lockheed-Martin F-16’s, or even Boeing F/A-18E/F Super Hornets. “F-15s and F-16s are now expected to serve until 2045, when an all-new aircraft will be ready, and plans to modernize F-16s with active electronically scanned array radars and other improvements are being revived,” the article states. U.S. Air Force officials and industry officials revealed as much at the Defense IQ International Fighter Conference, which took place November 17-19 in London. The U.S. Air Force “is struggling to afford 48 F-35s a year” for the first years of full-rate production a senior Air Force officer told Aerospace Daily & Defense Report.  Full rate-production is slated to begin in 2019 and the U.S. Air Force wants to buy 60 planes in 2020, and 80 F-35 per year after that. This year, the Air Force is to receive 28 F-35s, whereas in 2016 the number is slated to increase to 44. By 2038, the service wants to have 1763 F-35 aircraft in service. However, this procurement schedule might not be financially feasible for the Air Force. “Consequently, F-15s and F-16s will serve longer and will outnumber F-35s and F-22s through the late 2020s,”

U.S. working to keep up with surging weapons demand: Pentagon | Reuters: The U.S. government is working hard to ensure quicker processing of U.S. foreign arms sales, which surged 36 percent to $46.6 billion in fiscal 2015 and look set to remain strong in coming years, a top Pentagon official said. "Projections are still strong," Vice Admiral Joe Rixey, who heads the Pentagon's Defense Security Cooperation Agency (DSCA), told Reuters in an interview late on Monday. He said the agency was trying to sort out the impact of a much stronger-than-expected fourth quarter as it finalized its forecast for arms sales in fiscal 2016, which began Oct. 1. The fight against Islamic State militants and other armed conflicts around the globe were fueling demand for U.S. missile defense equipment, helicopters and munitions, Rixey said, a shift from 10 years ago when the focus was on fighter jets. "It's worldwide. The demand signal is coming in Europe, in the Pacific and in Centcom," he said, referring to the U.S. Central Command region, which includes the Middle East and Afghanistan. U.S. companies and some foreign countries have expressed growing frustration in recent months about delays in arms sales approvals. They argue that the U.S. government has not expanded its capacity to process arms deals despite a big spike in such transactions.

Blowback, Money and the Washington War Party -  Gaius Publius - In a provocative piece called, “Blowback — the Washington War Party’s Folly Comes Home to Roost,” David Stockman asks, in effect — “Does America have the wars it seeks and deserves?”  Whatever your answer might be, or mine, I think Stockman’s answer is Yes, and he details that answer in an excellent looking-back and looking-forward essay about the U.S. and its Middle East “involvement.” I have excerpted several sections below, but the whole is worth a full top-to-bottom read. Before we turn to Stockman’s points, though, I just want to highlight two semi-hidden ideas in his essay. One is about money. What Stockman calls the “War Party” in Washington is really the bipartisan Money Party, since the largest-by-far pile of cash looted from the federal budget (in other words, from taxpayers) goes to fund our military and its suppliers and enablers. Which means that most of it is stolen and diverted in some way. Which means that those who do the stealing have a lot of “skin in the game” — the game that keeps the money flowing in the first place. Recall that what’s now called the Money Party was what Gore Vidal called the “Property Party”: “There is only one party in the United States, the Property Party … and it has two right wings: Republican and Democrat.” Which means the Washington War Party is a bipartisan gig. Thus our bipartisan wars, which for Stockman answers the first part of the imputed question above. Yes, America does have the wars it seeks. But that’s just the first part — what about wars it “deserves”? Do Americans really want these wars? Does the D.C.-based “war party” have popular backing? You’ve probably guessed the answer just reading the news, but for the most recent, post-Paris evidence, consider this: A majority of Americans want the United States to intensify its assault on the Islamic State following the Paris attacks, but most remain opposed to sending troops to Iraq or Syria, where the militant group is based, a Reuters/Ipsos poll found.  The poll makes clear that Americans don’t want to send in troops (yet), at least most don’t. But that just means we’re happy with more bombs, drones and missiles fired into streets and villages filled with potential “collateral damage” — also knows as victims,  also known as “future U.S.-hating terrorists.”

Getting My Money’s Worth -  - A trillion here, a trillion there…. Countless (and unknowable) trillions of dollars are spent annually by NATO / western countries on (so-called) defense spending and (so-called) intelligence spending and (so-called) homeland security spending. There are satellites covering virtually every square inch of inhabited earth; every phone call, email, web site, and internet chat page is monitored. Before boarding an airplane, passengers are strip-searched. Armed military patrol every major airport and train station. Every financial transaction monitored, money transfers scrutinized, detailed regulation of every commercial transaction. What do I get for all this effort? The State Department on Monday issued a worldwide alert three days of ahead Thanksgiving cautioning travelers of “increased terroristic threats” from ISIS, al-Qaeda, Boko Haram and other groups. A “worldwide alert.” Everywhere I go is at risk of a terrorist action. Well, hopefully it will be over soon. The alert expires Feb. 24. I am afraid to ask…of what year? Can they at least be specific about the tactics and targets, what I should look for? “These attacks may employ a wide variety of tactics, using conventional and non-conventional weapons and targeting both official and private interests,” the alert says. Got it? Everywhere you go, for an indefinite period of time, and under every possible means, you are under terrorist threat. Worth every penny????

The American SAFE Act and Paul Ryan's Broken Promise to Fix the House - Before taking the speakership last month, Paul Ryan made a promise to fix a “broken” House of Representatives and return the chamber to “regular order.” Eschewing the centralized authority of his predecessor, John Boehner, Ryan promised to put legislative power back in the hands of rank-and-file members—something key House constituencies had been clamoring for. Under regular order, House bills go through an often-lengthy process from subcommittee to the floor; they are vetted, debated, and amended before receiving a final up-or-down vote. A return to regular order is one of the few areas with serious support from both ultraconservative Freedom Caucus members and progressive reformers in the House. After all, legislators on both sides of the aisle want a chance to be heard, offer amendments, and share expertise. Ryan concurred “The committees should retake the lead in drafting all major legislation. When we rush to pass bills, a lot of us do not understand, we are not doing our job.” That’s why it was surprising when, just three weeks into his tenure as speaker, Ryan laid this promise to rest. In the wake of the Paris attacks, Ryan brought the American SAFE Act—a bill to rewrite refugee vetting rules—to the floor without committee hearings, without input from experts or agencies, and without opportunities for amendment from members of the House.

Initial Analyses of Key TPP Chapters (23 pp PDF) Eyes on Trade - ENVIRONMENT CHAPTER: The TPP Would Increase Risks to Our Air, Water, and Climate Multilateral Environmental Agreements (MEAs) Rollback: The TPP actually takes a step back from the environmental protections of all U.S. free trade agreements (FTAs) since 2007 with respect to MEAs

The Data Is in the Details: Cross-Border Data Flows and the Trans-Pacific Partnership - By taking a look at relevant chapters within the Trans-Pacific Partnership—including e-commerce, financial services, intellectual property, and telecommunication—a broader picture about the potential future of cross-border data flows materializes.In particular, the TPP includes provisions for data privacy, limitations on data localization and access to source code, measures to crackdown on the theft of trade secrets and incentives for increased network connectivity among countries. However, despite these positives, the TPP does leave some wiggle room for countries to skirt their responsibilities and implement policies that might block the free flow of data across borders. The electronic commerce chapter of the TPP addresses three important areas relevant to cross-border data flows: privacy, data localization and access to software source code.The TPP calls for each party to adopt legal frameworks that protect the privacy of users’ data, and recommends looking towards existing privacy principles when doing so. However, the TPP neither lists current privacy principles worth adopting nor advocates for a particular regulatory regime.

The Economic Serfdom Continues --Paul Craig Roberts --The re-enserfment of Western peoples is taking place on several levels.  One about which I have been writing for more than a decade comes from the offshoring of jobs.  Americans, for example, have a shrinking participation in the production of the goods and services that are marketed to them. On another level we are experiencing the financialization of the Western economy about which Michael Hudson is the leading expert (Killing The Host).  Financialization is the process of removing any public presence in the economy and converting the economic surplus into interest payments to the financial sector.  These two developments deprive people of economic prospects.  A third development deprives them of political rights.  The Trans-Pacific and Trans-Atlantic Partnerships eliminate political sovereignty and turn governance over to global corporations. These so called “trade partnerships” have nothing to do with trade.  These agreements negotiated in secrecy grant immunity to corporations from the laws of the countries in which they do business.  This is achieved by declaring any interference by existing and prospective laws and regulations on corporate profits as restraints on trade for which corporations can sue and fine “sovereign” governments.  For example, the ban in France and other counries on GMO products would be negated by the Trans-Atlantic Partnership.  Democracy is simply replaced by corporate rule.I have been meaning to write about this at length. However, others, such as Chris Hedges, are doing a good job of explaining the power grab that eliminates representative government. Once these partnerships are in effect, government itself is privatized.  There is no longer any point in legislatures, presidents, prime ministers, judges.  Corporate tribunals decide law and court rulings.

Giving Billions to the Rich - IT’S that time of year again, when Republicans and Democrats put aside their differences to dole out gifts of corporate welfare to a lucky few.  Congress will soon take up the so-called tax extenders package, which has more than 50 tax breaks affecting a variety of industries and issues. Lawmakers will undoubtedly spin this as a tax cut that will benefit hardworking Americans and improve our economy, but the reality is that this bill mostly helps the wealthy and the well connected. It’s been this way for nearly three decades. The first tax-extender package — the Technical and Miscellaneous Revenue Act of 1988 — wrapped together several tax breaks that had expired the year before, reauthorizing them for another year. Initially supposed to be temporary, it opened a door that lobbyists and lawmakers were all too willing to run through. They were drawn by the allure of handing out corporate welfare, with the ability to hide the long-term cost to taxpayers. The Congressional Budget Office calculates the cost of each individual tax break, yet it doesn’t extrapolate the costs beyond the overall package’s one- or two-year extension. This gives the public the false impression that the cost will be both temporary and smaller than a long-term extension.  The tax-extender package is now a time-honored tradition, appearing about each year or so since 1988, usually with overwhelming bipartisan support. Consider just a few of the provisions in the two-year extension package currently under consideration in the United States Senate.

How not to talk about taxes: New York Times promotes misleading language of "loopholes" | Brookings Institution - Reading the New York Times this morning, you may have come across an op-ed railing against “corporate welfare” and “crony capitalism” tax breaks that give “billions to the rich.” On first glance, one might think this a leftist critique á la Bernie Sanders. But no. The authors, Marc Short and Andy Koenig, are the president and senior policy advisor at Freedom Partners, a political operation worth hundreds of millions of dollars associated with conservative billionaire Charles Koch.  The first hint at the authors’ politics comes when they single out particular beneficiaries of the corporate tax break largesse: “Hollywood” and “wind-energy producers,” both business sectors associated with the Democratic Party. Anti-Hollywood rhetoric has been a mainstay for Christian conservatives for decades, of course, and sustainable energy has been pilloried on the right at least since Reagan took the solar panels off the White House roof. On the subject of breaks for oil companies, worth an estimated $4 billion a year, the authors remain silent.  Still, a conservative attack on corporate tax loopholes seems like a break from tradition – until you look more closely at what the authors are recommending: across-the-board rate cuts. Several Republican presidential candidates have been taking a similar policy tack. In each case, the result is vastly lower taxes for corporations and the wealthy, with hand-waving explanations of the budget shortfalls that would likely result.  Lower taxes for multinational corporations and the wealthy are nowhere on the average American’s agenda; indeed, two thirds of Americans think corporations pay too little in taxes, and about 60% think the wealthy are paying too little. In fact, underpayment by the wealthy and corporations is what bothers Americans most about the tax system, more than the complexity of the system and even the amount they pay in taxes.

Hillary Slams "Unfair" Tax Inversions After Sanders Calls Pfizer/Allergan Deal "Disaster For Americans" -- Just an hour after Bernie Sanders exclaimed that the Pfizer/Allergan merger would be a disaster for Americans who already pay the highest prices in the world for prescription drugs, Hillary Clinton has come out swinging in her most populist manner lambasting Republicans for "enabling tax inversions" and vowing to "crackdown" on companies moving abroad to "avoid paying their fair share."First this...This merger would be a disaster for Americans who already pay the highest prices in the world for prescription drugs— Bernie Sanders (@SenSanders) November 23, 2015 And then this... The Clinton Press Statement Today, Hillary Clinton is expressing her deep concerns with the announced merger of Pfizer and Allergan, which would produce the world’s largest pharmaceutical company by allowing Pfizer to shift its corporate residence overseas to unfairly ease its tax burden. Throughout this campaign, Clinton has said that our economy works best when businesses invest in America for the long term, driving growth, innovation, jobs, and better pay. She firmly believes businesses should get ahead by building a stronger economy here at home, rather than using tax loopholes to shift earnings overseas, or to move abroad to escape paying their fair share.

Pfizer-Allergan merger shows why it’s so hard to stop tax-dodging companies -- The megadeal announced Monday between Pfizer and Allergan will create one of the world's largest drugmakers. It is also the clearest sign yet that the Obama administration's efforts to rein in companies that renounce their U.S. citizenship in order to secure a lower tax rate are not likely to be enough to end the practice. The deal between the pharmaceutical giants is being structured as an "inversion." Under such deals, an U.S. firm merges with a foreign company in order to move its headquarters to a country with a lower tax rate. In this case, Allergan, which is based in Dublin, is buying Pfizer and the combined company will operate from Ireland. The deal -- the largest inversion on record -- is expected to lower the combined company's tax rate from about 25 percent to 17 percent to 18 percent. While inversion have been around for decades, they have become more common in recent years and drawn the ire of many in Congress. The Pfizer-Allergan deal is likely to re-ignite the debate about how best to curb the practice, which experts have said diverts billions in tax revenue from U.S. coffers. "This only further underscores the arcane, anti-competitive nature of the U.S. tax code," Senate Finance Committee Chairman Orrin Hatch (R-Utah) said in a statement. "Short of a tax overhaul that will make it easier for American companies to invest and create more jobs at home," he added, "Washington ought to work together to explore viable policy-driven, apolitical solutions that will effectively combat inversions."

Tax Policy and the Magic Investment Channel - There was a dreadful column on tax policy in today’s New York Times, and none of the usual suspects (Dean, where are you?) has jumped on it yet, so I guess it’s up to me.  The column tells us that shifting from an income to a consumption tax is something that “many economists in both parties applaud”.  We learn that “Democratic economists, like their Republican counterparts, say taxing consumption encourages savings, investment and greater economic growth.”  The only trick is to avoid making a national sales tax too regressive, so we’ll have to work on that. Now tell me: exactly how is a consumption tax supposed to increase investment?  Like, by what channel?  Is there a dearth of savings that prevents business from being able to finance new projects?  We have a savings glut.  Will a flood of savings lower interest rates?  Current rates on business borrowing are just about all risk premium at this point.  And what’s the evidence that savings rates are so responsive to taxes anyway?  Yes, I know that countries with VAT’s tend to save more, but there’s massive endogeneity there.  Look at it this way: I live in Washington State, which finances itself with an 8% sales tax, while our next door neighbor, Oregon, has an income tax.  Is there any evidence that savings are so much greater here than there? So exactly what is the channel that’s supposed to lead from taxing consumption to greater business investment?

The Cost of Redistributing Wealth - Noah Smith  - Suppose you’re a really rich person. You have $50 billion in wealth, though it fluctuates day to day depending on the financial markets. But even if the markets take a tumble, you will still have enough to buy almost anything you want -- mansions, private jets, super yachts. You can afford to give hundreds of millions to political causes, universities or charities each year without putting a noticeable dent in your net worth.  Now suppose some hacker comes and steals $10,000 out of one of your brokerage accounts. Unless you have a very careful accountant, you probably won’t even notice the theft. The difference it would make in your purchasing power would be negligible. The loss would be no larger than what you probably suffer a hundred times a day from the random movements of the markets.  Now suppose that hacker, in the tradition of Robin Hood, decided to give the stolen $10,000 to a poor man in a slum in Baltimore. That $10,000 is probably as much as the poor guy earns in a year. Suddenly, his yearly salary is doubled and his risk of having to sleep in a homeless shelter is dramatically reduced. In other words, $10,000 makes only a tiny difference to the well-being of our multibillionaire, but it would make a huge difference to the well-being of the average American poor person -- to say nothing of the average poor person in India or Nigeria. So should we just redistribute all the wealth until everyone has an equal amount? Even if you think that doing so would be morally acceptable, you would have good reason for caution. Although rich people might not notice one or two random thefts from their bank accounts, they will most definitely notice the systematic appropriation of their wealth by the government. That systematic appropriation, of course, is called taxation.

The middle-class economic squeeze is not about rising federal taxes -Policymakers and candidates for office have reacted to rising inequality and near-stagnant wages in recent decades by promising to either cut or hold the line on federal taxes for “middle-class” families (and they tend to define “middle-class” awfully liberally, often lumping in those with incomes higher than 98 percent of American households). However, the rise in inequality and the near-stagnation of hourly wages for most American workers has not been driven by rising federal taxes. In fact, federal tax rates have steadily fallen for the middle 60 percent of American households, as shown in the figure below.   Note that the figure includes all federal taxes—the income tax rate faced by these households, meanwhile, is much, much lower.  It is true that state and local taxes remain quite regressive relative to federal taxes and that the total tax bill of middle-income families is higher when you include this state and local taxation. But federal policymakers and candidates for federal office should present people with the facts: federal taxes have been steadily lowered for the middle 60 percent in recent decades, and this hasn’t stemmed the rise in inequality or the near-stagnation of hourly pay. As EPI President Lawrence Mishel has noted, “The problem isn’t what the federal government has taken out of paychecks, it’s what employers haven’t put in.” In short, we need to focus on lots of policies besides federal taxes on middle-income families if we’re looking for ways to boost hourly pay for most.

Not So Fast, 1 Percent Whippersnappers - The New York Times##: Wealth in America has never looked so young — at least on its face.In its most recent World’s Youngest Billionaires list, Forbes tallied a record 46 under 40, part of a “youth revolution” in the three-comma club. CNN Money reported this year that a growing share of today’s rich are under 65. “America’s über-rich are getting younger and younger,” the report said. “Call it the Mark Zuckerberg trend.”From Silicon Valley, with its parade of 20-something and 30-something billionaire whiz kids, to farther east, where Gen X hedge fund titans like William A. Ackman and Kenneth C. Griffin are paying record prices for real estate, portraits of American wealth today are often wrinkle-free.Yet new research shows that despite their high profile, the young rich are a minority and the wealthy as a group are actually getting older. A study by Edward Wolff, a wealth expert and economics professor at New York University, found that the median age of the wealthiest 1 percent of Americans increased to 63 in 2013 (the latest year available) from 58 in 1992.People 65 to 74 accounted for almost a third of the wealthiest 1 percent in 2013 — up from 19 percent in 2001.

Obscene Golden Parachutes Are Part of America’s Rising Wealth Inequality - Pam Martens - America’s new gilded age has been lined with Golden Parachutes with pathological underpinnings. On September 11, 2002, the Securities and Exchange Commission brought charges against the three top executives of Tyco International. The complaint began with this: “This is a looting case.” The SEC charged that Tyco’s CEO, Dennis Kozlowski and Mark Schwartz, its CFO, “took hundreds of millions of dollars in secret, unauthorized and improper low interest or interest-free loans and compensation from Tyco.” The transactions were concealed from shareholders and, according to the SEC, “Kozlowski and Swartz later pocketed tens of millions of dollars by causing Tyco to forgive repayment of many of their improper loans” and “engaged in numerous highly profitable related party transactions with Tyco and awarded themselves lavish perquisites — without disclosing either the transactions or perquisites to Tyco shareholders.” USA Today reported that the Manhattan apartment that Tyco had been providing to Kozlowski “includes a $6,000 shower curtain, coat hangers valued at $2,900, two sets of sheets for $5,960 and a $445 pincushion.”  Today, Wall Street has added another insidious practice to Golden Parachutes. As we reported in 2013, the sitting U.S. Treasury Secretary, Jack Lew, received a $940,000 parting bonus from a Wall Street bank which was predicated on “full time high level position with the United States Government or a regulatory body,” terms that were spelled out in his employment agreement. Lew accepted the funds even though his employer at the time, Citigroup, was being propped up with the largest taxpayer bailout in U.S. history. Now, the AFL-CIO has submitted shareholder proposals to six Wall Street banks and investment banks, asking for this practice of Government Service Golden Parachutes to end. The Wall Street firms involved are Bank of America, Goldman Sachs, Citigroup, JPMorgan Chase, Lazard and Morgan Stanley. In addition to Jack Lew’s deal, the AFL-CIO states that Morgan Stanley’s “Chairman and CEO James Gorman was entitled to $9.35 million in vesting of equity awards if he had a government service termination on December 31, 2013.”

Car Dealers Have Their Way With Congress - Dave Dayen -- With a crush of must-pass bills coming at the end of the year, it’s a lobbyist feeding frenzy on Capitol Hill. The prize: a rider tacked onto one of those bills that’s worth big bucks. Arguably the most successful group when it comes to building bipartisan coalitions to protect their profits and avoid federal scrutiny is auto dealers. Last Wednesday, 88 Democrats joined 244 Republicans in the House to advance a bill that amounts to a stand-down order to the Consumer Financial Protection Bureau. If it becomes law, CFPB will no longer be able to crack down on racial discrimination in auto lending that costs individual African-American and Hispanic consumers hundreds of dollars, while earning dealers hundreds of millions in ill-gotten profits. The vote was essentially a test by the GOP leadership to see how much Democratic support they could get for deregulatory measures. By contrast, a bill that would have relaxed the rules for mortgage lenders who charge high upfront fees or balloon payments only got 12 Democratic votes. But with those 88 Democrats supporting the auto lending bill, if Republicans attach it as a rider, they can cite a big bipartisan coalition to force the White House to accept it. This victory is far from the only perk auto dealers have secured. Thanks to a dealer-friendly provision inserted into the bill that created the CFPB in the first place, the agency cannot monitor dealers directly. In the cases of racial discrimination, for instance, CFPB can only fine the lenders who finance car purchases, not the dealers who make the markups.

Lew Vows to Resist Congressional Maneuvers to Weaken Dodd-Frank -  As an important deadline looms in Congress, the Obama administration signaled on Tuesday that it would push back hard against any legislation that substantially loosens the sweeping 2010 overhaul of the financial system.Republicans in Congress are backing legislation that would soften certain parts of the reforms, which were accomplished through the Dodd-Frank Act five years ago. They are now seeking to insert the changes into a spending bill that has to be passed by Dec. 11 to avoid a government shutdown.Last year, Congress attached a provision to a wider spending bill that ended up gutting an important part of the law regulating instruments known as swaps. The victory for Wall Street indicated that big banks still had sway in Washington, but it also helped reinvigorate the campaigns of those who want to do more to rein in large financial institutions.On Tuesday, Jacob J. Lew, the secretary of the Treasury, sought to underscore the administration’s opposition to any meaningful concessions on Dodd-Frank.“I have publicly made clear that my recommendation to the president would be that if there are legislative measures that will roll back the clock, that would take us back toward where we were before the financial crisis, I would recommend a veto,” Mr. Lew said via email.Still, such declarations may not deter those in Congress who may believe that the Obama administration is more likely to give ground on financial regulation than on its signature health care overhaul or other policies it holds dear.

Stung by Oil, Distressed-Debt Traders See Worst Losses Since '08 -- It’s mid-November, but for investors who trade in the debt of distressed companies, the year’s already done -- and they lost. Hedge funds that specialize in the debt are grappling with their worst declines in seven years. Funds managed by Knighthead Capital Management, Candlewood Investment Group, Mudrick Capital Management and Archview Investment Group all posted losses through October. And year-end bonuses at Wall Street desks that trade distressed debt could be slashed by a quarter, Options Group said. After six years of easy-money central-bank policies kept over-leveraged companies afloat and left scant opportunities for traders who profit off the market’s scrap heaps, a rout in commodities prices in 2014 presented what had seemed like a perfect chance tobuy again. Instead, those prices only declined further this year, causing the debt of everyone from oil drillers to coal miners to fall deeper into distress. As the losses intensified, gun-shy investors pulled back from almost anything that smacked of risk, spreading the losses to industries from retail to technology.  “It wasn’t just energy. It was anything with loads of leveraged debt on it." Distressed hedge funds dropped 5 percent in 2015 through October, putting them on pace for their worst year since 2008, when they lost 25 percent. They’re lagging behind hedge funds across indexes, which are flat for the year, according to Chicago-based data provider Hedge Fund Research Inc. Rough November November isn’t looking like it will be much better. A Bank of America Merrill Lynch index of distressed debt is down almost 8 percent this month as the average price of bonds in the benchmark dropped to 57 cents on the dollar, from as high as 75.6 cents in February.

To Junk Bond Traders "It Almost Feels Like 2008" -- Despite distressed-debt funds suffering their worst losses since 2008, mainstream apologists continue to largely ignore the carnage in the credit market (even though veteran bond managers have urged "it's not just energy, it's everything.") With the number of loan deals pricing below 80 (distressed) at cycle peaks, and "a less diverse group of investors holding a lot more bonds," price swings continue to be wild but as DB's Melentyev warns, initially "all of this looks random when there is no underlying news to support the big moves. But eventually a narrative emerges -- maybe we have turned the corner on the credit cycle."Investors are shunning the lowest-rated junk bonds. That is underscored by the extra yield that investors are demanding to hold CCC rated credits relative to those rated BB. This has jumped to the most in six years. As Bloomberg reports, With confidence slipping in the strength of the global economy, there are fewer investors to take the opposite side of a trade in the riskiest parts of the market, according to Oleg Melentyev, the head of U.S. credit strategy at Deutsche Bank. "These are all small dominoes in one corner of the market," Melentyev said. "In the early stage, all of this looks random when there is no underlying news to support the big moves. But eventually a narrative emerges -- maybe we have turned the corner on the credit cycle. One sometimes-overlooked element that’s contributing to the big price swings is the increasing concentration among investors, according to Stephen Antczak, head of credit strategy at Citigroup Inc. Mutual funds, insurance companies and foreign investors make up 68 percent of corporate bondholders compared with 52 percent at the end of 2007. That means that if one mutual fund investor wants to sell some holdings, there isn’t another one that’s ready to step in. That’s because they typically have similar mandates from investors and often need to sell for the same reasons.

New York’s top prosecutor probes brokers over forex spoofing FT -- Four interdealer brokers including an ICAP joint venture and BGC Partners have received subpoenas from the New York attorney-general’s office, which is investigating allegations of manipulative foreign exchange trading, people familiar with the case said. GFI Group and Tullett Prebon also received subpoenas last week as part of a probe into a practice known as spoofing in which orders are rapidly posted and then cancelled in order to move prices around. Eric Schneiderman, New York attorney-general, is investigating the four brokers in relation to possible false bids made using their electronic platforms in emerging markets forex options, the people added. The probe is in the early stages. BGC, GFI, Tullett and TFS-ICAP — the forex joint venture operated by Swiss group Tradition — declined to comment. Bloomberg first reported the subpoenas. Spoofing is a modern computerised form of an old trading tactic — that of using fake bids to push up prices in a negotiation. It has come under increasing scrutiny by regulators and law enforcement agencies in the US, but some market participants say it is difficult to distinguish improper trading from normal activity. To date, spoofing allegations have been more common in the larger and more liquid futures markets than in foreign exchange options markets. Earlier this month, a New Jersey-based trader became the first person to be found guilty of spoofing in a landmark criminal case. Michael Coscia was found guilty of all 12 counts, including intending to defraud other traders in gold, corn, soyabeans, foreign exchange and crude oil futures markets. In a separate spoofing case, a British trader, Navinder Singh Sarao, faces charges by the US Department of Justice and the Commodity Futures Trading Commission. The agencies have accused Mr Sarao, who is fighting extradition to the US, of helping to cause the “flash crash” in May 2010.

Martin Shkreli Sets Out To Crush KaloBios Shorts: Will Stop Lending Out Shares -- The brutal tragedy of at least one KaloBios short seller was first documented a week ago when we noted the margin call massacre that befell "novice" trader Joe Campbell, who went to bed with a $35K short on Wednesday and woke up with a $106K margin call the next morning after it was revealed that a "consortium" led by Martin Shkreli had taken an unknown stake in heretofore insolvent KBIO.  However, the story did not end there because the very next day we got new information that Shkreli had not bought just any amount of KBIO shares but a whopping 70%, which got us thinking: is the "most hated man in America" contemplating to unleash a Volkswagen scenario, in which he has acquired enough shares to leave more shorts outstanding than there is actual float, and then one day to simply pull all the borrow by no longer lending out shares to potential shorters.Oddly enough, there was a radio silence from Shkreli who supposedly had mentioned he had no intention of demanding share delivery, which made us wonder if he was merely waiting for the right moment to strike. Then something caught our attention: last night Bloomberg reported that according to Markit, the short interest in KBIO had soared to 49% of the free float from just 5.6% on Nov. 16. Surely, if there was any trigger to push Shkreli to demand delivery, this would be it. And, not unexpectedly, this is precisely what he did earlier today. I spoke with my counsel & advisers and decided to stop lending my $KBIO shares out until I better understand the advantages of doing so. I apologize for any inconvenience this may create in lending markets and I will probably resume lending at some point. Happy Thanksgiving! — Martin Shkreli (@MartinShkreli) November 26, 2015

Shorts Subject - Paul Krugman - Last night I was invited to a screening of The Big Short, which I thought was terrific; who knew that CDOs and credit default swaps could be made into an edge-of-your-seat narrative (with great acting)?  But there was one shortcut the narrative took, which was understandable and possibly necessary, but still worth noting. In the film, various eccentrics and oddballs make the discovery that subprime-backed securities are garbage, which is pretty much what happened; but this is wrapped together with their realization that there was a massive housing bubble, which is presented as equally contrary to anything anyone respectable was saying. And that’s not quite right. It’s true that Greenspan and others were busy denying the very possibility of a housing bubble. And it’s also true that anyone suggesting that such a bubble existed was attacked furiously — “You’re only saying that because you hate Bush!” Still, there were a number of economic analysts making the case for a massive bubble. Here’s Dean Baker in 2002. Bill McBride (Calculated Risk) was on the case early and very effectively. I keyed off Baker and McBride, arguing for a bubble in 2004 and making my big statement about the analytics in 2005, that is, if anything a bit earlier than most of the events in the film.  So the bubble itself was something number crunchers could see without delving into the details of MBS, traveling around Florida, or any of the other drama shown in the film. In fact, I’d say that the housing bubble of the mid-2000s was the most obvious thing I’ve ever seen, and that the refusal of so many people to acknowledge the possibility was a dramatic illustration of motivated reasoning at work. The financial superstructure built on the bubble was something else; I was clueless about that, and didn’t see the financial crisis coming at all.

Wall St. Faces Mounting Criticism From Regulators -  Despite the fallout from the 2008 financial crisis, Wall Street still has a tendency to dismiss as frivolous some of the ethical issues it faces daily. But at a Nov. 5 symposium on ethics at the Federal Reserve Bank of New York — the second on the topic two years — regulators suggested that Wall Street executives who continue to ignore the various cultural flaws at their firms do so at their own peril.It seems that this time really is different: If Wall Street doesn’t take steps to prevent some of the behavior that has led to $230 billion in fines against American and European banks in the last six years, principal regulators appear quite determined to do it for them, promising to break up the big investment banks if they need to. And that will not be an outcome that will appeal to anyone running a powerful Wall Street firm.  William C. Dudley, the former Goldman Sachs partner who has been president of the New York Fed since January 2009, organized the event as a follow-up to his October 2014 closed-door session on the same subject. During that meeting, he told the assembled bankers and executives that changing Wall Street culture was “imperative” because Wall Street had lost the “public trust.” He threatened to break up the big banks if bank executives failed to do their part “in pushing forcefully for change across the industry.” He also gave a speech in November 2013 at the Global Economic Policy Forum, where he argued that the scandals in the financial sector — such as the excesses by a trader known as the London Whale, the manipulation of the benchmark London interbank offered rate, and troubles in the foreign exchange and commodities markets — were evidence of “deep-seated cultural and ethical failures.”

Ruling From the Shadows - Narrower interests that would otherwise find themselves straining to shape political outcomes often prevail unchallenged. Somewhat perversely, we may well be better off when politics is a bazaar of ideas and incentives.Consider the technical regulations that govern capital markets — the tedious but critical details that determine how companies account for profits, whether banks have as much capital as they say they do, and how insurance and pension entities should measure their obligations. We might think these regulations are somehow self-evident, derived from fundamental laws of economics. In reality, they are largely social constructs, reflecting expert opinions and political necessities. The meetings where these esoteric rules are imagined into existence are often eerily amiable.I call these regulatory processes thin political markets because they seldom attract wide public participation. On any specific rule-making issue, there are usually a handful of business executives — often fewer than 50 — who are truly experts on the subject. They also have the greatest stakes in the outcome. They meet with regulators in genteel isolation, obligingly offering direction for regulation. The rules of the game that emerge reflect their interests.But there are no manifest villains here. Executives get involved when they understand an issue, and it matters to them. When they participate, they rarely face serious opposition. Those who might oppose them are sometimes not even aware of the regulatory proceedings. What arises in aggregate is a system of rules that looks as if it was produced by a quilt of special interests. Society as a whole bears the costs of this subtle subversion of capitalism.Look at our system for corporate accounting rule making. We don’t often think about the quality of the accounting rules underlying our economy, but without sound measures for corporate performance, markets cannot function fairly or efficiently. Distortions in accounting rules can resonate harshly through the economy.

Big banks accused of interest rate-swap fixing in class action suit - (IFR/Reuters) - A class action lawsuit, filed Wednesday, accuses 10 of Wall Street’s biggest banks and two trading platforms of conspiring to limit competition in the $320 trillion market for interest rate swaps. The class action lawsuit, filed in U.S. District Court in Manhattan, accuses Goldman Sachs, Bank of America Merrill Lynch, JPMorgan Chase, Citigroup, Credit Suisse, Barclays, BNP Paribas, UBS, Deutsche Bank, and the Royal Bank of Scotland of colluding to prevent the trading of interest rate swaps on electronic exchanges, like the ones on which stocks are traded. As a result, the lawsuit alleges, banks have successfully prevented new competition from non-banks in the lucrative market for dealing interest rate swaps, the world’s most commonly traded derivative. The banks “have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case,” the lawsuit alleged. The suit was brought by The Public School Teachers' Pension and Retirement Fund of Chicago, which purchased interest rate swaps from multiple banks to help the fund hedge against interest rate risk on debt. As a result of the banks’ collusion, the suit alleges, the Chicago teachers’ pension and retirement fund overpaid for those swaps. The suit alleged that since at least 2007 the banks “have jointly threatened, boycotted, coerced, and otherwise eliminated any entity or practice that had the potential to bring exchange trading to buyside investors.” “Defendants did this for one simple reason: to preserve an extraordinary profit center,” the lawsuit said.

Why the Internet of Things Should Be a Bank Thing - American Banker: Asked about the Internet of Things, bankers often shrug and admit they haven't given the subject much thought. But as more "things" — cars, refrigerators, dryers, scales and such — get connected (Gartner forecasts 25 billion new sensors will be deployed between now and the end of the decade), participating in the IoT could help banks stay relevant. Forward-thinking companies could get a reputation lift from being first out of the gate with interesting apps for the Internet of Things. Banks could also be first to help protect customers from the inevitable privacy and security breaches that the Internet of Things will make possible. A handful of banks are studying this technology. U.S. Bank is looking at IoT use cases that include secure payment management (think subscriptions and supplies) and information exchange. The bank's innovation center recently made a video about some of the projects it's working on, such as a link between an Internet-connected body weight scale and a financial rewards program. And financial institutions from Santander to USAA to Charlotte Metro Federal Credit Union in North Carolina are pondering a range of IoT ideas. "As bankers, do we care if our customers connect their refrigerator to the Internet? I say we should care," said J. Paul Leavell, senior marketing analyst at Charlotte Metro Federal. "If you're paying for groceries with your refrigerator, as a banker I want to have my credentials in your refrigerator making that payment."

When bank balance sheets become scarce commodities -- Izabella Kaminska -- Distortions are occurring in collateralised funding and swap markets meaning secured funding is weirdly costlier than unsecured. Bankers are blaming post-crisis leverage ratio regulation for the anomaly. But what really does the aberration in the collateralised Fed-funds spread reflect? Credit Suisse’s FI team puts it relatively simply this Thursday: it’s all about the cost of balance-sheet rental, which is now as scarce a commodity as oil:  Not only have intermediating dealers not yet fully priced in balance sheet costs, but we also expect that they won’t do so in the near future as well. Instead, to avoid having a large drag on returns of the business as a whole, we expect they will use some combination of wider GC–OIS spreads and rationing of balance sheet.  Further, certain counterparties are likely to lose access to funding, or be able to obtain balance sheet only at a higher spread to GC (such as bilateral repos with hedge funds).. Looking ahead, credit risk in Libor panel banks is minimal (especially so post-2008 reforms), as is the risk of a disconnect between the market for Eurodollar deposits and fed funds.This means the Libor-OIS spread, which is a pure term spread in the absence of the aforementioned risks, is likely to remain relatively stable through the hiking cycle. By contrast, increases in term GC–OIS spread, which are reflective of the increased cost of renting balance sheet, are likely to continue. Therefore, while it’s true that GC is a secured funding rate, there is no reason it can’t trade over Libor on a persistent basis—it is simply reflective of the relative scarcity of resources.

November 2015: Unofficial Problem Bank list declines to 255 Institutions - This is an unofficial list of Problem Banks compiled only from public sources. Here is the unofficial problem bank list for November 2015:   During the month, the list fell from 264 institutions to 255 after nine removals. Assets dropped by $2.2 billion to an aggregate $77.0 billion. The asset total was updated to reflect third quarter figures, which resulted in a small decline of $224 million. A year ago, the list held 408 institutions with assets of $124.7 billion. This past week, the FDIC released third quarter industry results and an update on the Official Problem Bank List. FDIC said the official list held 203 problem banks, a decline of 25 during the quarter. During the past three months, the unofficial list holds 27 fewer banks. Actions have been terminated against CertusBank, National Association, Easley, SC ($877 million); First National Bank in Howell, Howell, MI ($355 million); United American Bank, San Mateo, CA ($303 million); Quontic Bank, Astoria, NY ($165 million); First Alliance Bank, Cordova, TN ($120 million); and Summit National Bank, Hulett, WY ($64 million). Several banks merged to find their way off the problem bank list including Columbus Junction State Bank, Columbus Junction, IA ($47 million); Farmers State Bank, Lumpkin, GA ($45 million); and The State Bank of Blue Mound, Blue Mound, IL ($31 million). One other change this month was a name change of The Farmers Bank to Persons Banking Company, Forsyth, GA ($328 million).

Pimco, others sue Citigroup over billions in mortgage debt losses - (Reuters) - Pacific Investment Management Co and other investors have sued Citigroup Inc over the bank's alleged failure to properly monitor toxic securities backed by more than $13.8 billion of mortgage loans, resulting in $2.3 billion of losses. According to a complaint filed Tuesday night in a New York state court in Manhattan, Citigroup breached its duties as trustee for the 25 private-label trusts dating from 2004 to 2007 by ignoring "pervasive and systemic deficiencies" in how the underlying loans were underwritten or being serviced. The investors said Citigroup looked askance at the loans' "abysmal performance" out of fear it might "jeopardize its close business relationships" with loan servicers including Wells Fargo & Co and JPMorgan Chase & Co, or prompt them to retaliate over its own problem loans. Some loans backing the 25 trusts came from issuers including the now-defunct American Home Mortgage and Washington Mutual. The lawsuit seeks class-action status and unspecified damages. Citigroup spokeswoman Danielle Romero-Apsilos declined to comment. TIAA-CREF, and affiliates of Prudential Financial Inc and Aegon NV's Transamerica are among the other plaintiffs.

Investors hold breath over subprime reboot -- Look out next week for a small but significant milestone. A Santa Monica-based hedge fund is on the brink of selling bonds backed by mortgages deemed too risky to be bought by the government agencies that dominate home loans in the US. At less than $100m, the deal would barely move the needle in the broader market for private mortgage-backed securities, which saw total issuance of $30bn in the third quarter. But according to Daniel Perl, chairman and chief executive of the loans’ originator, Citadel Servicing Corporation, it could mark a real moment: the first securitisation of subprime mortgages since the financial crisis. CSC — an Irvine, California-based firm which is no relation to the investment group run out of Chicago by Ken Griffin — is at the forefront of a new breed of originators eyeing big opportunities for growth as tougher federal rules shut out huge swaths of Americans. In January this year CSC closed $15m of home loans, last month it did $38m, and next year Mr Perl is aiming at $1bn — a target that a successful securitisation could bring nearer. Sponsors, traders and underwriters are anxiously looking on to see if the bottom end of the market can be rebooted. “The whole industry has been waiting with bated breath,”  “I can’t tell you how many conferences I’ve been to where everyone’s been asking when [subprime] will come back.” This latest iteration of subprime — or “nonprime”, as Mr Perl prefers to call it — will be different from the last. Before the crisis, mortgage originators routinely signed up customers without any proof of income, often lending them more than the price of the property. That dragged down hundreds of billions of dollars of MBS when the loans — inevitably — went bad.

Case-Shiller: National House Price Index increased 4.9% year-over-year in September --  S&P/Case-Shiller released the monthly Home Price Indices for September ("September" is a 3 month average of July, August and September prices).  This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.  From S&P: Widespread Gains in Home Prices for August According to the S&P/Case-Shiller Home Price IndicesThe S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a slightly higher year-over-year gain with a 4.9% annual increase in September 2015 versus a 4.6% increase in August 2015. The 10-City Composite increased 5.0% in the year to September compared to 4.7% previously. The 20-City Composite’s year-over-year gain was 5.5% versus 5.1% in the year to September. After adjusting for the CPI core rate of inflation, the S&P/Case Shiller National Home Price Index rose 3% from September 2014 to September 2015. ...Fifteen of 20 cities reported increases in September before seasonal adjustment; after seasonal adjustment, 19 cities increased for the month. ... “  The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000). The Composite 10 index is off 14.3% from the peak, and up 0.6% in September (SA). The Composite 20 index is off 13.0% from the peak, and up 0.6% (SA) in September. The National index is off 6.0% from the peak, and up 0.8% (SA) in September. The National index is up 27.0% from the post-bubble low set in December 2011 (SA). The second graph shows the Year over year change in all three indices.  The Composite 10 SA is up 5.1% compared to September 2014. The Composite 20 SA is up 5.5% year-over-year.. The National index SA is up 4.9% year-over-year. Prices increased (SA) in 20 of the 20 Case-Shiller cities in September seasonally adjusted. (Prices increased in 15 of the 20 cities NSA) Prices in Las Vegas are off 39.2% from the peak, and prices in Denver and Dallas are at new highs (SA). The last graph shows the bubble peak, the post bubble minimum, and current nominal prices relative to January 2000 prices for all the Case-Shiller cities in nominal terms.

Case-Shiller Home Prices Rise At Fastest Pace In 6 Months (Despite NAR Reporting Falling Prices) --After 3 straight months of home price declines, August and now September have seen the usual seasonal pattern unfolding as Case-Shiller reports 0.61% rise in September (double the +0.3% expectations). Of course this runs in the face of NAR's 4 month decline in median home prices, but who's quibbling. It appears Case-Shiller is playing out a similar pattern... up 2 months in a row... But NAR sees home prices have now dropped for the last 4 months in a row... As Reuters reports, Annualized U.S. single-family home prices rose in September at a faster pace than in August and above market expectations, a closely watched survey showed on Tuesday. The S&P/Case Shiller composite index of 20 metropolitan areas gained 5.5 percent in September on a year-over-year basis compared with 5.1 percent in the year to August. It was above the 5.1 percent estimate from a Reuters poll of economists. "The general economy appeared to slow slightly earlier in the fall, but is now showing renewed strength. With unemployment at 5 percent and hints of higher inflation in the CPI, most analysts expect the Federal Reserve to raise its fed funds target range to 25 to 50 basis points, the first increase since 2006," said David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices.

Real Prices and Price-to-Rent Ratio in September --Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 4.9% year-over-year in September The year-over-year increase in prices is mostly moving sideways now at between 4% and 5%.   In October 2013, the National index was up 10.9% year-over-year (YoY). In September 2015, the index was up 4.9% YoY.  Here is the YoY change since January 2014 for the National Index: This slowdown in price increases this year was expected by several key analysts, and I think it is good news for housing and the economy. In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted). Case-Shiller, CoreLogic and others report nominal house prices. As an example, if a house price was $200,000 in January 2000, the price would be close to $274,000 today adjusted for inflation (37%). That is why the second graph below is important - this shows "real" prices (adjusted for inflation). It has been almost ten years since the bubble peak. In the Case-Shiller release this morning, the National Index was reported as being 6.0% below the bubble peak. However, in real terms, the National index is still about 19.7% below the bubble peak. The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through September) in nominal terms as reported. In nominal terms, the Case-Shiller National index (SA) is back to August 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to February 2005 levels, and the CoreLogic index (NSA) is back to June 2005. The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). . In real terms, the National index is back to September 2003 levels, the Composite 20 index is back to May 2003, and the CoreLogic index back to January 2004.  In real terms, house prices are back to 2003 levels.On a price-to-rent basis, the Case-Shiller National index is back to May 2003 levels, the Composite 20 index is back to December 2002 levels, and the CoreLogic index is back to October 2003.

FHFA Reports Home Prices Rose At Fastest Pace In 30 Months - Despite weaker home sales, tumbling homebuilder confidence, and fading median home prices according to NAR, FHFA reports home prices in America rose 0.8% in September. Doubling expectations of a 0.4% rise, this is the biggest MoM price increase since March 2013's peak.

FHFA House Price Index November 25, 2015: Yesterday's gains for Case-Shiller are now underpinned by a very strong FHFA house price report where the September index jumped 0.8 percent with gains across all nine regions. This is the strongest monthly gain since March 2013. Year-on-year, FHFA is up 6.1 percent for the best showing since March last year (this reading hit a recovery high in the low 8 percent area in mid-2013). Home-price appreciation is a central factor for household confidence and spending strength. Price gains will also draw in more supply to the housing sector which in turn should give a boost to still uneven sales levels.

Zillow Forecast: Expect October Year-over-year Change for Case-Shiller Index Similar to September -- The Case-Shiller house price indexes for September were released on Tuesday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close. From Zillow: Case-Shiller Forecast Calls for Similar Annual, Monthly Gains in October The September S&P Case-Shiller (SPCS) data published [on Tuesday] showed home prices rising on a seasonally-adjusted monthly basis, with month-over-month rises of 0.6 percent for both the 10- and 20- city indices and 0.8 percent for the national index.  The October Case-Shiller forecast calls for similar monthly increases of 0.4 percent for the 10- and 20-City Indices in October from from September (seasonally adjusted). The national index is expected to gain another 0.8 percent in October from September. We expect the 10-City Index to grow 5 percent year-over-year, and the 20-City Index to grow 5.4 percent over the same period. The national Index looks set to gain 5.1 percent since October 2014. All SPCS forecasts are shown in the table below. These forecasts are based on today’s September SPCS data release and the October 2015 Zillow Home Value Index (ZHVI), released November 20. The SPCS Composite Home Price Indices for October will not be officially released until Tuesday, December 29. This suggests the year-over-year change for the October Case-Shiller National index will be about the same as in the September report.

Housing Bubble - Part Deux - The housing recovery without mortgage originations is coming to its inevitable conclusion. The Fed, Wall Street bankers and the US Treasury have been able to increase national home prices by 30%, with 50% to 100% in some bubble markets, using 0% interest rates, a massive buy and rent scheme, withholding foreclosures from the market, encouraging foreign cash buying, and allowing flippers back into the market. In a real free market would home prices go up by 30% while mortgage originations remained flat for the last four years? Thirty year mortgage rates have been falling for the last 30 years. They bottomed at 3.35% in late 2012. Since then they rose as high as 4.4% in early 2014. They fell to 3.6% by early 2015 and are now hovering in the 3.8% range. Everyone who had a high interest mortgage loan, including those with underwater mortgages, have refinanced to a lower rate. The economic boost to the economy from the lower mortgage payments is over. The Obamacare costs have spent the mortgage payment savings. The combination of declining real household income, overpriced homes, millennials with massive levels of student loan debt, and now rising mortgage rates are putting a halt to this fake Fed recovery scheme.

Real Home Prices Could Take 17 Years to Return to Peak - Home prices have been growing at a rate that some see as alarming—about twice the rate of wages. But adjusting for inflation, the market still has a long way to go before returning to the frothy state of a decade ago. Most measures of home prices— including the S&P/Case-Shiller Home Price Index, the CoreLogic Home Price Index and the National Association of Realtors existing home sales report—don’t take inflation into account and show prices nearing or surpassing the peak hit in 2006 or early 2007. But a new analysis by real-estate information firm CoreLogic finds that when adjusted for inflation, home prices are years away from hitting the lofty heights of the housing boom. Indeed, economists there say that prices are unlikely to surpass 2006 levels until 2023 or beyond, some 17 years past the peak. “It’s a slow recovery in housing,” said Sam Khater, deputy chief economist at CoreLogic. The rise and fall in prices without adjusting for inflation matter for existing homeowners because they determine whether or not they are underwater on their mortgages. The rapid run-up in prices in recent years has made it easier for people to sell their homes because they no longer owe more on their mortgage than the home is worth. As of September 2015, CoreLogic’s Home Price index was 7% below its April 2006 peak, not adjusted for inflation. Prices fell 32% from that peak to the trough in March 2011. ut adjusted for inflation, the bust looks far worse. In September 2015, CoreLogic’s Home Price Index was still 20% below the peak in March 2006. It dropped 41% from that peak to the trough in February 2012.

Existing Home Sales in October: 5.36 million SAAR -- From the NAR: Existing-Home Sales Dial Back in October Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 3.4 percent to a seasonally adjusted annual rate of 5.36 million in October from 5.55 million in September. Despite last month's decline, sales are still 3.9 percent above a year ago (5.16 million). ... Total housing inventory at the end of October decreased 2.3 percent to 2.14 million existing homes available for sale, and is now 4.5 percent lower than a year ago (2.24 million). Unsold inventory is at a 4.8-month supply at the current sales pace, up from 4.7 months in September.  This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in October (5.36 million SAAR) were 3.4% lower than last month, and were 3.9% above the October 2014 rate. The second graph shows nationwide inventory for existing homes. According to the NAR, inventory decreased to 2.14 million in October from 2.19 million in September. Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Existing-Home Sales Decline from Last Month's Jump - This morning's release of the October Existing-Home Sales shows a decline from last month's jump to a seasonally adjusted annual rate of 5.36 million units from 5.55 million in September. The consensus was for 5.40 million. The latest number represents a 3.4% decrease from the previous month and an 3.9% increase year-over-year.  Here is an excerpt from today's report from the National Association of Realtors. Lawrence Yun, NAR chief economist, says a sales cooldown in October was likely given the pullback in contract signings the last couple of months. "New and existing-home supply has struggled to improve so far this fall, leading to few choices for buyers and no easement of the ongoing affordability concerns still prevalent in some markets," he said. "Furthermore, the mixed signals of slowing economic growth and volatility in the financial markets slightly tempered demand and contributed to the decreasing pace of sales." [Full Report] For a longer-term perspective, here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 is available in the St. Louis Fed's FRED repository here.

Existing Home Sales Tumble, Weakest Annual Growth Since January -- Dominated by an 8.7% collapse in The West, existing home sales fell 3.4% in October MoM (worse than the 2.7% drop expected) to a 5.36mm SAAR. Year-over-year, existing home sales are up just 3.9% - the weakest since January. And finally, in a mind-numbing reality for The Fed's wealth creation plan, median home prices have now dropped for 4 months in a row.  This is the weakest growth in existing home sales since January… By region, its extremely mixed... October existing-home sales in the Northeast were at an annual rate of 760,000, unchanged from September and 8.6 percent above a year ago. The median price in the Northeast was $248,900, which is 1.3 percent above October 2014. In the Midwest, existing-home sales declined 0.8 percent to an annual rate of 1.30 million in October, but are 8.3 percent above October 2014. The median price in the Midwest was $172,300, up 5.7 percent from a year ago. Existing-home sales in the South decreased 3.2 percent to an annual rate of 2.14 million in October, but are still 0.5 percent above October 2014. The median price in the South was $188,800, up 6.2 percent from a year ago.Existing-home sales in the West fell 8.7 percent to an annual rate of 1.16 million in October, but are still 2.7 percent above a year ago. The median price in the West was $319,000, which is 8.0 percent above October 2014.

October 2015 Existing Home Sales Headlines Say Sales Have Fallen.: The headlines for existing home sales say " a sales cooldown in October was likely given the pullback in contract signings the last couple of months". Our analysis of the unadjusted data shows that home sales declined. Econintersect Analysis:

  • Unadjusted sales rate of growth decelerated 7.1 % month-over-month, up 0.9 % year-over-year - sales growth rate trend declined using the 3 month moving average.
  • Unadjusted price rate of growth decelerated 0.5 % month-over-month, up 3.4 % year-over-year - price growth rate trend is modestly improved using the 3 month moving average.
  • The homes for sale inventory declined again this month, remains historically low for Octobers, and is down 4.5 % from inventory levels one year ago).

NAR reported: Sales down 3.4 % month-over-month, up 3.9 % year-over-year. Prices up 5.8 % year-over-year. Lawrence Yun, NAR chief economist, says a sales cooldown in October was likely given the pullback in contract signings the last couple of months. "New and existing-home supply has struggled to improve so far this fall, leading to few choices for buyers and no easement of the ongoing affordability concerns still prevalent in some markets," he said. "Furthermore, the mixed signals of slowing economic growth and volatility in the financial markets slightly tempered demand and contributed to the decreasing pace of sales." Adds Yun, "As long as solid job creation continues, a gradual easing of credit standards even with moderately higher mortgage rates should support steady demand and sales continuing to rise above a year ago." "All-cash and investor sales are still somewhat elevated historically despite the diminishing number of distressed properties," adds Yun. "With supply already meager at the lower-end of the price range, competition from these buyers only adds to the list of obstacles in the path for first-time buyers trying to reach the market.

Existing Home Sales Decline, NAR Calls Report "Disturbing"; First Time Buyers Decline Third Year; Housing Clearly Weakening --Existing home sales came in a bit under Bloomberg Econoday Consensus, down 3.4% in October. Year-over-year trends are weakening.  Sales of existing homes are not a source of strength for the economy, down 3.4 percent in October to a slightly lower-than-expected annualized rate of 5.36 million. Year-on-year, sales are up only 3.9 percent which is the lowest for this reading since January. Weakness is split roughly even between single-family homes, down 3.7 percent in the month to a 4.75 million rate, and condos, down 1.6 percent to a 610,000 rate. Lack of homes on the market, in a reflection of price weakness, remains a major factor holding down sales. Supply relative to sales is at 4.8 months, up slightly from the prior month but still below the 5.2 months of October last year. A reading of 6.0 months is considered a balanced market. The number of homes on the market, at 2.14 million, is actually below the 2.24 million this time last year, an unwanted surprise that the National Association of Realtors, which compiles the existing home sales report, calls "disturbing". Price data for October are once again weak, down 0.9 percent for both the median (at $219,600) and the average (at $262,800). Year-on-year, the median is up 5.8 percent with the average up 3.4 percent. Regional sales data show a sharp decline in the West, down 8.7 percent in the month for a year-on-year gain of 2.7 percent. The South, which is the largest housing region, also shows weakness, down 3.2 percent for only a 0.5 percent year-on-year gain. The Northeast and Midwest were little changed in October with year-on-year appreciation very solid for both, in the high single digits. But the weakness in the West and the weakness in the South are not positive indications for the housing sector where moderate strength on the new home side of the market is being offset by weakness on the existing side.

A Few Random Comments on October Existing Home Sales  -- I expected some increase in inventory this year, but that hasn't happened.  Inventory is still very low and falling year-over-year (down 4.5% year-over-year in September). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.  It would seem if we do see lower sales - and higher prices - that should eventually lead to more inventory.  So far the opposite has been true.  Also, if sales do slow, it is important to remember that new home sales are more important for jobs and the economy than existing home sales. Since existing sales are existing stock, the only direct contribution to GDP is the broker's commission. There is usually some additional spending with an existing home purchase - new furniture, etc - but overall the economic impact is small compared to a new home sale.  So some slowing for existing home sales (if it happens) will not be a big deal for the economy.  Also, the NAR reported distressed sales declined further year-over-year and are now at the lowest level since the NAR started tracking distressed sales in 2008: Distressed sales – foreclosures and short sales – declined to 6 percent in October, which is the lowest since NAR began tracking in October 2008; they were 9 percent a year ago. Five percent of October sales were foreclosures and 1 percent were short sales.  The following graph shows existing home sales Not Seasonally Adjusted (NSA).

New Home Sales increased to 495,000 Annual Rate in October -- The Census Bureau reports New Home Sales in October were at a seasonally adjusted annual rate (SAAR) of 495 thousand.  The previous three months were revised down by a total of 40 thousand (SAAR). "SSales of new single-family houses in October 2015 were at a seasonally adjusted annual rate of 495,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 10.7 percent (±17.7%)* above the revised September rate of 447,000 and is 4.9 percent (±17.6%)* above the October 2014 estimate of 472,000."  The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. Even with the increase in sales since the bottom, new home sales are still fairly low historically. The second graph shows New Home Months of Supply. The months of supply decreased in October to 5.5 months. The all time record was 12.1 months of supply in January 2009. This is now in the normal range (less than 6 months supply is normal).Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed. The third graph shows the three categories of inventory starting in 1973. The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

October 2015 New Home Sales Improve But Rolling Averages Still Decline.: The headlines say new home sales significantly improved from last month (even though last month was revised downward) - but the improvement was less than last month's decline. The rolling averages smooth out much of the uneven data produced in this series - and this month there was a deceleration in the rolling averages. As the data is noisy, the 3 month rolling average is the way to look at this data. This data series is suffering from methodology issues. Econintersect  analysis:

  • unadjusted sales growth accelerated 16.0 % month-over-month (after last month's revised deceleration of 24.7 %).
  • unadjusted year-over-year sales up 7.9 % (Last month was down 2.7 %). Growth this month average for the range of growth seen last 12 months.
  • three month unadjusted trend rate of growth decelerated 4.8 % month-over-month - is up 5.4 % year-over-year.
  • seasonally adjusted sales up 10.7 % month-over-month
  • seasonally adjusted year-over-year sales up 4.9 %
  • market expected (from Bloomberg) seasonally adjusted annualized sales of 458 K to 540 K (consensus 499 K) versus the actual at 495 K.

The quantity of new single family homes for sale remains well below historical levels.

New Home Sales Slightly Below Expectations, but Up 10.7% MoM - This morning's release of the October New Home Sales from the Census Bureau at 495,000 disappointed general expectations, and the previous month was revised downward by 21K. The MoM increase was 10.7%. The forecast was for 500K. Here is the opening from the report: Sales of new single-family houses in October 2015 were at a seasonally adjusted annual rate of 495,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 10.7 percent (±17.7%)* above the revised September rate of 447,000 and is 4.9 percent (±17.6%)* above the October 2014 estimate of 472,000. [Full Report]  For a longer-term perspective, here is a snapshot of the data series, which is produced in conjunction with the Department of Housing and Urban Development. The data since January 1963 is available in the St. Louis Fed's FRED repository here. Over this time frame we see the steady rise in new home sales following the 1990 recession and the acceleration in sales during the real estate bubble that peaked in 2005.   Now let's examine the data with a simple population adjustment. The Census Bureau's mid-month population estimates show a 71% increase in the US population since 1963. Here is a chart of new home sales as a percent of the population.

New Home Sales Miss As Median Price Drops To Lowest In 13 Months -- Today's data deluge continues with the latest New Home Sales in which we find that in October a total of 495K new homes were sold, of which just 146K completed (the lowest in the past year), 172K under construction and a whopping 177K houses sold which have not even been started - this was the highest print since 2007. Still, the headline number, while rising from last month's downward revised 447K missed expectations of a a 500K print. As the chart below shows, new home construction has plateaued and has been in decline ever since February of 2015 when it posted its post-recession peak of 545K. But what is more troubling is that the median price of new homes tumbled from 307,800 in September, or the highest in the series history to just $281,500, the lowest in 13 months!

Comments on October New Home Sales -- The new home sales report for October was slightly below expectations, however sales for July, August and September were revised down. Sales were up 4.9% year-over-year in October (SA).  Even though the October report was somewhat disappointing, sales are still up solidly year-to-date.  The Census Bureau reported that new home sales this year, through October, were 430,000, not seasonally adjusted (NSA). That is up 15.7% from 371,000 sales during the same period of 2014 (NSA). That is a strong year-over-year gain for 2015 through October.` This graph shows new home sales for 2014 and 2015 by month (Seasonally Adjusted Annual Rate). The year-over-year gain was small in October, and I expect the year-over-year increases to be lower over the last two months of 2015 compared to earlier this year - but the overall year-over-year gain should be solid in 2015. And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales. Now I'm looking for the gap to close over the next few years. The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through October 2015. This graph starts in 1994, but the relationship has been fairly steady back to the '60s. Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales. I expect existing home sales to move sideways (distressed sales will continue to decline and be partially offset by more conventional / equity sales). And I expect this gap to slowly close, mostly from an increase in new home sales. However, this assumes that the builders will offer some smaller, less expensive homes.

Why the Housing Rebound Hasn’t Lifted the U.S. Economy Much - WSJ: American homeowners are finally digging out of the hole created by the housing crisis. But their housing wealth is playing a much smaller role in the overall economy than it did before the downturn. Home equity has roughly doubled to $12.1 trillion since house prices hit bottom in 2011, according to the Federal Reserve. As a result, a key gauge of housing wealth—homeowners’ equity as a share of real-estate values—is nearing the point seen a decade ago, before the downturn. Such a level once would have offered a double-barreled boost to the economy by providing owners with more money to tap and making them feel more flush and likely to spend. But today, that newfound wealth has had little effect on behavior. While the traditional ways Americans tap their home equity—home-equity loans, lines of credit and cash-out refinances—are higher than last year, they are still depressed. In the first half of the year, owners borrowed $43.5 billion against their homes with home-equity loans and lines of credit, according to trade publication Inside Mortgage Finance. That was 45% higher than in the first half of 2014, but scarcely a quarter of the amount seen when equity was last as high in 2007. Meanwhile, cash-out refinances, which let homeowners take out a new mortgage and tap some of the home’s value at the same time, were up 48% in the three months ended in August from the year-earlier period, according to Black Knight Financial Services.  But they remain below the level seen in the summer of 2013. The average cash-out refinance in the three months ended in August left the borrower with mortgage debt of about 68% of the home’s value—not a risky level by any stretch.

Personal Income increased 0.4% in October, Spending increased 0.1% -- The BEA released the Personal Income and Outlays report for October:  Personal income increased $68.1 billion, or 0.4 percent ... in October, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $15.2 billion, or 0.1 percent... Real PCE -- PCE adjusted to remove price changes -- increased 0.1 percent in October, the same increase as in September. ... The price index for PCE increased 0.1 percent in October, in contrast to a decrease of 0.1 percent in September. The PCE price index, excluding food and energy, increased less than 0.1 percent, compared to an increase of 0.2 percent. The October price index for PCE increased 0.2 percent from October a year ago. The October PCE price index, excluding food and energy, increased 1.3 percent from October a year ago. The following graph shows real Personal Consumption Expenditures (PCE) through October 2015 (2009 dollars). The dashed red lines are the quarterly levels for real PCE. The increase in personal income was at consensus expectations. And the increase in PCE was below the consensus. On inflation: The PCE price index increased 0.2 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.3 percent year-over-year in October.

Personal Income and Outlays: Income Hits Estimates, Spending Disappoints; Optimism Reins Supreme -- Today's Personal Income and Outlays shows consumer spending once again on the "soft side" despite solid income growth.  Income was in-line with expectations of a 0.4% gain. However, spending came in a with an anemic  0.1% gain month-over-month. The Econoday Consensus Estimate for consumer spending was 0.3% in a range of 0.2% to 0.5%, so economists once again were way overoptimistic.  Moreover, the core PCE (personal consumption expenditures) price index, the Fed's preferred inflation measure, came in at 0.0% whereas the consensus estimate was 0.2% in a range of 0.1% to 0.2%. The PCE price index was another big miss for economists.  The core PCE is the Fed's most important inflation reading and it is not showing rising pressure, coming in unchanged in October, vs an expected gain of 0.2 percent, with the year-on-year rate at 1.3 percent which is also unchanged. Consumer spending also proved soft, up only 0.1 percent vs expectations for a 0.3 percent gain. Spending shows flat readings across categories including only a small gain for services which usually are strong.The income side is better, hitting expectations at a 0.4 percent gain with wages & salaries showing an outsized gain of 0.6 percent. And the outlook for future spending is solid with a strong 3 tenths rise in the savings rate to 5.6 percent. Turning back to inflation readings, the overall PCE price index remains nearly dead flat in a reminder that fuel prices remain very low and should give a boost to durable spending during the holidays. The PCE price index is up only 0.1 percent, vs Econoday expectations for a 0.2 percent gain, with the year-on-year rate at a very telling and extremely low plus 0.2 percent. Though income data in this report do point to consumer strength ahead, the spending data are not a strong start at all for the fourth quarter. These results, especially the core price readings, will not lift the odds for a December rate hike.

The Big Four Economic Indicators: Real Personal Income for October - Personal Income (excluding Transfer Receipts) in October rose 0.47% and is up 4.5% year-over-year. When we adjust for inflation using the BEA's PCE Price Index, Real Personal Income (excluding Transfer Receipts) rose 0.41%. The real number is up 4.3% year-over-year. Real PI less TR is one of those indicators that warrants adjustment for population growth. Here is a chart of the series since 2000 adjusted accordingly by using the Civilian Population Age 16 and Over as the divisor.A Note on the Excluded Transfer Receipts: These are benefits received for no direct services performed. They include Social Security, Medicare & Medicaid, Unemployment Assistance, and a wide range other benefits, mostly from government, but a few from businesses. Here is an illustration Transfer Receipts as a percent of Personal Income. The chart and table below illustrate the performance of the generic Big Four with an overlay of a simple average of the four since the end of the Great Recession. The data points show the cumulative percent change from a zero starting point for June 2009.

October Disposable Income Per Capita Rose 0.35%, 0.29% When Adjusted for Inflation -  With the release of today's report on October Personal Incomes and Outlays we can now take a closer look at "Real" Disposable Personal Income Per Capita. The first chart shows both the nominal per capita disposable income and the real (inflation-adjusted) equivalent since 2000. This indicator was significantly disrupted by the bizarre but predictable oscillation caused by 2012 year-end tax strategies in expectation of tax hikes in 2013. In today's low inflation environment, the October nominal 0.35% month-over-month increase in disposable income rises to 0.29% when we adjust for inflation. The year-over-year metrics are 3.36% nominal and 3.14% real.  The BEA uses the average dollar value in 2009 for inflation adjustment. But the 2009 peg is arbitrary and unintuitive. For a more natural comparison, let's compare the nominal and real growth in per capita disposable income since 2000.  Nominal disposable income is up 65.1% since then. But the real purchasing power of those dollars is up only 23.6%.

US Personal Spending Remains Soft In October - Consumer spending in the US continued to rise at a snail’s pace, rising 0.1% in October, according to this morning’s release from the Bureau of Economic Analysis. That’s the second month in a row for 0.1% growth, marking the weakest two-month period for consumption in eight months. Economists were expecting a much stronger gain—0.4% via’s consensus forecast. But the sluggish rise shouldn’t be terribly surprising after news from earlier this month that retail sales barely budged in October. Perhaps the most intriguing part of today’s report is that the weak rate of consumption is self imposed. Disposable personal income rose a strong 0.4% last month and the annual growth rate inched higher for the fourth month in a row. It’s anyone’s guess if the expanding divergence between rising income and decelerating consumption growth will roll on. Meantime, it’s clear that the reluctance to spend isn’t due to stumbling income. Disposable personal income (DPI) increased 4.1% for the year through October, fractionally higher than the previous month’s rise. As a result, DPI is advancing at the strongest year-over-year rate in nine months.

October 2015 Inflation Adjusted Personal Income and Expenditure Growth Mixed.: The data this month showed stronger income growth (and at market expectations) - and spending growth remained weak (and was on the low side of expectations).

  • The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, income growth trend is flat whilst expenditures is down.
  • Real Disposable Personal Income is up 3.9 % year-over-year (3.4 % last month), and real personal expenditures is up 2.7% year-over-year (3.2% last month)
  • this data is very noisy and as usual includes moderate backward revision (detailed below) - this month the changes were mixed.
  • The second estimate of 3Q2014 GDP indicated the economy was expanding at 2.1% (quarter-over-quarter compounded). Expenditures are counted in GDP, and income is ignored as GDP measures the spending side of the economy. However, over periods of time - income and expenditure must grow at the same rate.
  • The savings rate continues to be low historically, improved marginally this month.

The inflation adjusted income and consumption are "chained", and headline GDP is inflation adjusted. This means the impact to GDP is best understood by looking at the chained numbers. Econintersect believes year-over-year trends are very revealing in understanding economic dynamics.

The PCE Price Index for October Shows Little Change -  The Personal Income and Outlays report for October was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index year-over-year (YoY) rate is 0.22%, up from the previous month's 0.17%. The latest YoY Core PCE index (less Food and Energy) came in at 1.28% little changed from the previous month's 1.33%. The general disinflationary trend in core PCE (the blue line in the charts below) must be perplexing to the Fed. After years of ZIRP and waves of QE, this closely watched indicator consistently moved in the wrong direction. Since Early 2013, Core PCE Price Index has hovered in a narrow YoY range around 1.5%. For six months beginning in April 2014 it rose to a plateau slightly above the range has since dropped to a lower range around the 1.3% level. The adjacent thumbnail gives us a close-up of the trend in YoY Core PCE since January 2012. The first string of red data points highlights the 12 consecutive months when Core PCE hovered in a narrow range around its interim low. The second string highlights the lower range of the past twelve months. The first chart below shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. Also included is an overlay of the Core PCE (less Food and Energy) price index, which is Fed's preferred indicator for gauging inflation. The two percent benchmark is the Fed's conventional target for core inflation. However, the December 2012 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low FFR and quantitative easing) are in place. The most recent FOMC statement now refers only to the two percent target.

On the Verge of Consumer Exhaustion  - Following today's personal income report in which consumer spending rose only 0.1% month-over-month, the Atlanta Fed GDPNow Forecast for fourth quarter declined 0.5%. "The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 1.8 percent on November 25, down from 2.3 percent on November 18. The forecast for the fourth-quarter rate of real consumer spending declined from 3.1 percent to 2.2 percent after this morning's personal income and outlays release from the U.S. Bureau of Economic Analysis." The latest Blue-Chip forecast for early November was 2.7%, a highly unlikely number at this stage unless season spending picks up big time. Reports show stores are not discounting merchandise as much as consumers like, and consumers generally expect to spend less, so odds of a hefty jump in Christmas sales is questionable. e may know more next week when reports on Black and Blue Friday become available.

Most Americans Hit "Peak Income" More Than 15 Years Ago - After adjusting for inflation, the majority of Americans are worse off today than they were decades ago. The map below shows that median household income actually peaked at least 15 years ago in 81% of U.S. counties. This visualization of household incomes is from an interactive map created by the Washington Post that allows users to zoom in on individual counties to see how income has changed over the years. Some of the more interesting revelations include:

  • Income peaked one year ago for many of the counties that are a part of the shale boom. This includes much of North and South Dakota, as well as parts of Texas, Nebraska, and Oklahoma. Income in Washington, D.C. and neighboring Arlington County also peaked then.
  • In 1999, a total of 1,623 counties had their households reach peak income. The majority of these counties are in the Midwest and Southeast.
  • The most southern part of California and parts of New England both peaked around 25 years ago.
  • Many states along the Rocky Mountains such as Wyoming and Montana had counties that peaked roughly 35 years ago.
  • Household income peaked in upstate New York, the northern tip of California, and southern Nevada at the same time that humans were first landing on the moon in 1969.

Retailers Ring Alarm Bells for the Holiday Season - - Retailers are ringing bells as they head into the holiday shopping season—alarm bells, in many cases. “Corporate earnings from big apparel retailers have been shockingly bad,” say economists at BNP Paribas. Some have reported inventory backups that suggest demand is slowing, a threat to fourth-quarter economic output after a third quarter that turned out to be better than initially estimated. The government on Tuesday revised up its third-quarter GDP reading, thanks to rising stockpiles at retailers and elsewhere. That inventory build may wind up hurting fourth-quarter output, however, when those stocks are drawn down. “The anticipated inventory drag has only been postponed,” “Inventories will still need to come into line with sales.”Retailers’ warnings have coincided with weak retail sales in the government’s official figures, confirming a broader slowdown in the sector despite cheap gasoline, strong job growth and early signs of faster wage growth. Retail sales have largely stalled in recent months, extending the lackluster streak this year. Americans have curbed discretionary spending lately on items like electronics and appliances, and in its most recent report the Commerce Department said shoppers more than halved their spending at retailers in November from a year earlier.

Cash is King for Holiday Shopping; 63% of Millennials Have No Credit Cards; Millennial Attitudes and Deflationary Trends  - As we head into the black Friday holiday shopping season, cash is king.  Cash will be the most popular payment method for shoppers buying holiday gifts, with 39% of Americans saying they plan to use it for most of their holiday purchases, in a recent survey of 1,000 shoppers personal finance website Bankrate conducted with Princeton Survey Research Associates International. This number was about the same as in 2014, when 38% of holiday shoppers said they planned to use cash. Behind cash, the most popular choices for payment were debit cards, with 31% saying they would pay this way, followed by credit cards (22%) and checks (3%). Younger shoppers were especially unlikely to use credit cards; 48% of millennials said they would do most of their holiday shopping with debit cards, and 36% said they preferred cash. Mobile payments are still unpopular; only 14% of U.S. adults with smartphones or similar devices plan to make even one mobile payment during the holiday season, according to Bankrate. Millennials in general tend to avoid credit cards more than previous generations have done; 63% of millennials don’t own a single credit card, according to a separate Bankrate survey in 2014. “They grew up in the Great Recession and saw what happened with their parents,” Cetera said. “They don’t ever want to be in a situation where they’re in debt. They’re shying away from high-interest loans, essentially.”

US consumer confidence falls hard in November — Confidence in the economy eroded this month as Americans became more worried about the job market. A business research group said Tuesday that its consumer confidence index fell to 90.4 in November, down from 99.1 in October. The index is at its lowest level since September 2014. The share of Americans surveyed by the Conference Board anticipating more jobs in the coming months fell. Fewer people also expect to see their incomes increase. The percentage describing jobs as “plentiful” declined to 19.9 percent from 22.7 percent. The decline in the confidence index comes after a robust month of hiring in October. Employers added 271,000 jobs last month as the unemployment rate settled at a healthy 5 percent, an indication that companies see the economy as continuing its gradual, six-year expansion from the depths of the recession. The drop in consumer confidence was a curveball for many economists, some of whom warned that the population might be reflecting concerns about hiring momentum while others could not reconcile the survey with other indicators hinting at a resilient U.S. economy. “November’s results could be sending a cautionary signal about the key economic variable of job growth,”

Consumer Confidence at a 15-Month Low - The latest Conference Board Consumer Confidence Index was released this morning based on data collected through November 12. The headline number of 90.4 was an unexpected plunge from the October final reading of 99.1, which is an upward revision from the initial 97.6. Today's number was below the forecast of 99.5 and the lowest reading in 15 months. Here is an excerpt from the Conference Board press release. “Consumer confidence retreated in November, following a moderate decrease in October,”  “The decline was mainly due to a less favorable view of the job market. Consumers’ appraisal of current business conditions, on the other hand, was mixed. Fewer consumers said conditions had improved, while the proportion saying conditions had deteriorated also declined. Heading into 2016, consumers are cautious about the labor market and expect little change in business conditions.” The chart below is another attempt to evaluate the historical context for this index as a coincident indicator of the economy. Toward this end we have highlighted recessions and included GDP. The regression through the index data shows the long-term trend and highlights the extreme volatility of this indicator. Statisticians may assign little significance to a regression through this sort of data. But the slope resembles the regression trend for real GDP shown below, and it is a more revealing gauge of relative confidence than the 1985 level of 100 that the Conference Board cites as a point of reference.

Final November 2015 Michigan Consumer Sentiment Drops from Preliminary.: The University of Michigan Final Consumer Sentiment for November came in at 91.6, a drop from the 93.1 November Preliminary reading. had forecast a more optimistic 93.1. Surveys of Consumers chief economist, Richard Curtin makes the following comments: Although some of the gains recorded earlier in the month evaporated in late November, consumer confidence remained quite favorable, just below the average for the past six months 91.6. Other than for the past twelve months, the Sentiment Index was higher in November than any time since the start of 2007. Nonetheless, the data indicate that consumers have become increasingly aware of economic cross currents in the domestic as well as the global economy. Nearly all of the recent advance was focused on current conditions rather than future economic prospects, and the entire November gain was due to lower income households. Households with incomes in the top third of the distribution, who account for more than half of all spending, expressed a more cautious optimism. This more guarded outlook reflected somewhat weaker personal financial prospects and a greater insistence that their purchases will be contingent on the availability of discounted prices and reduced interest rates. See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy

International Trade in Goods November 24, 2015: Highlights: The nation's trade gap in goods came in at a lower-than-expected deficit of $58.4 billion in October vs $59.2 billion in September. Though the month-to-month comparison points to improvement for the trade deficit, the details are not positive with exports down 2.6 percent and imports, in a sign perhaps of softening domestic demand, down 2.1 percent and following weakness also in September. Weak categories for imports include foods/feeds/beverages, industrial supplies and also capital goods as well as consumer goods with the latter hinting at weak business expectations for the holidays. Export categories showing weakness include foods/feeds/beverages and also industrial supplies.

ATA Truck Tonnage Index Jumped 1.9% in October --  American Trucking Associations' advanced seasonally adjusted For-Hire Truck Tonnage Index increased 1.9% in October, following a decrease of 0.7% during September. The September figure was revised down from our press release on October 20. In October, the index equaled 135.7 (2000=100), up from 133.1 in September, and just below the all-time high of 135.8 reached in January 2015. Compared with October 2014, the SA index increased 2%, which was above the year-over-year increase of 1.6% in September. However, October's year-over-year gain was well below the year-to-date figure through October, compared with the same period last year (3%). The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 139.8 in October, which was 2.1% above the previous month (136.9). "It was good to see tonnage increase nicely in October after contracting a total of 1.6% in August and September," said ATA Chief Economist Bob Costello. "However, tonnage has been overall pretty flat this year, as October's reading is just shy of January's level." "Like I've said over the last couple of months, I remain concerned about the high level of inventories throughout the supply chain. We recently learned that inventories throughout the supply chain and relative to sales rose in September, which is not a good sign. This will have a negative impact on truck freight volumes over the next few months," he said. Trucking serves as a barometer of the U.S. economy, representing 68.8% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled just under 10 billion tons of freight in 2014. Motor carriers collected $700.4 billion, or 80.3% of total revenue earned by all transport modes.

Rail Week Ending 21 November 2015: Contraction Continues to Grow: Week 46 of 2015 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic contracted year-over-year, which accounts for approximately half of movements and weekly railcar counts continued in contraction. The 52 week rolling average contraction is continuing to grow.A summary of the data from the AAR: The Association of American Railroads (AAR) today reported U.S. rail traffic for the week ending Nov. 21, 2015. Total carloads for the week ending Nov. 21 were 267,830 carloads, down 9.4 percent compared with the same week in 2014, while U.S. weekly intermodal volume was 264,702 containers and trailers, down 1.7 percent compared to 2014. Four of the 10 carload commodity groups posted an increase compared with the same week in 2014. They included miscellaneous carloads, up 12.3 percent to 9,597 carloads; motor vehicles and parts, up 5.9 percent to 19,105 carloads; and nonmetallic minerals, up 2.1 percent to 35,420 carloads. Commodity groups that posted decreases compared with the same week in 2014 included petroleum and petroleum products, down 25.8 percent to 11,894 carloads; metallic ores and metals, down 22.7 percent to 19,782 carloads; and coal, down 16.8 percent to 92,998 carloads. For the first 46 weeks of 2015, U.S. railroads reported cumulative volume of 12,815,842 carloads, down 4.9 percent from the same point last year; and 12,311,269 intermodal units, up 1.9 percent from last year. Total combined U.S. traffic for the first 46 weeks of 2015 was 25,127,111 carloads and intermodal units, a decrease of 1.7 percent compared to last year.

Vehicle Sales Forecast for November: Over 18 Million Annual Rate Again? -- The automakers will report November vehicle sales on Tuesday, December 1st. Sales in October were at 18.1 million on a seasonally adjusted annual rate basis (SAAR), and it possible sales in October will be over 18 million SAAR again.  Note:  There were 23 selling days in November, down from 25 in November 2014.  Here are two forecasts:  From WardsAuto: Forecast: U.S. Light Vehicle Sales on Track for Record Year  A WardsAuto forecast calls for U.S. light-vehicle sales to reach an 18.4 million-unit seasonally adjusted annual rate in November, leading to the first 3-month streak of 18 million-plus results. The forecasted SAAR would be the highest monthly outcome since July 2005’s 20.6-million. From J.D. Power: U.S Auto Sales Projected to Increase 7% in November Total and retail new light-vehicle sales in November are expected to increase 7% on a selling-day-adjusted basis, according to a monthly sales forecast developed jointly by J.D. Power and LMC Automotive. Another strong month for car sales.  The only question is if the sales rate will be over 18 million for three consecutive months - for the first time ever.

U.S. traffic is growing at fastest rate since 1997 -- Traffic on U.S. roads is growing at the fastest rate in almost two decades, as cheap gasoline, coupled with a strong economy, encourages motorists to use their cars more. U.S. motorists drove 3.12 trillion miles in the 12 months ending in September 2015, an increase of 3.4 percent from the same period ending September 2014. The increase was the fastest since 1997 according to data compiled by the Federal Highway Administration ( The driving boom shows no sign of fading. Traffic volume was up 3.4 percent in September compared with the same month a year earlier after seasonal adjustments. Cumulative traffic volume in the first nine months of 2015 is 3.5 percent higher than in the same period of 2014 (“Traffic Volume Trends” Sep 2015). Traffic volume growth reflects changes in the driving age population, employment, incomes, economic growth and fuel prices. In general, demographic factors (population) and economic ones (employment, income and GDP) have a bigger impact on traffic volumes than fuel prices. By extension, structural and economic factors have a bigger impact on consumption of gasoline and diesel than prices. Gasoline consumption is four times as responsive to a small change in average real personal disposable income as a small change in prices, but even a small degree of responsiveness to prices can produce a big change in gasoline consumption when prices shift by a large amount in a short space of time.

End of the Road? Impact of Interest Rate Changes on the Automobile Market   - NY Fed - The Federal Reserve has kept interest rates at historic lows for the last six years, but eventually rates will return to their long-term averages. That means both policymakers and the public will once again be asking one of the classic questions in monetary economics: What are the impacts of rising interest rates on the real economy? Our recent New York Fed staff report “Interest Rates and the Market for New Light Vehicles,” considers this question for the U.S. market for new cars and light trucks. We find strong evidence that rising rates will dampen activity: Our model predicts that in the short-run a 100-basis-point increase in interest rates will cause light vehicle production to fall at an annual rate of 12 percent and sales to fall at an annual rate of 3.25 percent.

Durable-goods orders snap back in October -  — Stronger demand for computers, heavy machinery, military hardware and jumbo jets boosted orders for durable goods in October. A key measure of business investment also snapped back. Orders for U.S.-made durable goods rose a seasonally adjusted 3% last month, the Commerce Department said Wednesday. The rebound in orders last month after two straight declines bodes well for the fourth quarter. Business spending and investment has been soft through most of 2015, acting as a brake on the economy. The improvement in October points to “some semblance of stabilization in business capital investment intentions after the summer slump,” wrote Millan Mulraine, deputy chief U.S. macro strategist at TD Securities, in a report. Bookings for commercial aircraft led the way, as orders skyrocketed 81%. Orders for computers were also strong, up 5.5%. Demand for machinery and a variety of other metal products also rose. One of the few categories to show a decline was autos. Orders dipped almost 3% despite the strongest pace of sales in more than a decade. With auto production on the rise, however, orders are likely to rebound. Omitting autos and aircraft, whose bookings are unpredictable month-to-month, orders minus transportation rose a smaller 0.5%. So-called core capital-goods orders, a key measure of business investment, posted a moderate 1.3% gain after several months of weak readings.

US business spending gauge surges, durable goods orders soar: A gauge of U.S. business investment plans surged in October, the latest suggestion that the worst of the drag from a strong dollar and deep spending cuts by energy firms was over. The Commerce Department said on Wednesday non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 1.3 percent last month after an upwardly revised 0.4 percent rise in September. Economists polled by Reuters had forecast these so-called core capital goods orders rising only 0.4 percent after September's previously reported 0.1 percent dip. The report came on the heels of data this month showing a solid increase in manufacturing output in October. A survey of factories also showed a rise in new orders last month.Manufacturing, which accounts for 12 percent of the economy, has been slammed by the dollar strength and the spending cuts in the energy sector. The dollar has appreciated 18.1 percent against the currencies of the United States' main trading partners since June 2014. The pace of appreciation, however, is gradually slowing. Economists also believe that the bulk of spending cuts by oil field firms like Schlumberger in response to lower crude prices have already been implemented.  Still, manufacturing has to deal with an inventory overhang. Data on Tuesday showed businesses had not been as aggressive as initially thought in their efforts to reduce unsold merchandise, leading to an accumulation of inventories that economists said was unsustainable.  Shipments of core capital goods, which are used to calculate equipment spending in the government's gross domestic product measurement, fell 0.4 percent last month after an upwardly revised 0.7 percent gain in September.

Durable Goods New Orders Improved in October 2015.: The headlines say the durable goods new orders improved. The three month rolling average improved this month but remains in contraction.Last months data was revised upward. Econintersect Analysis:

  • unadjusted new orders growth accelerated 2.2 % (after decelerating an upwardly revised 0.6 % the previous month) month-over-month , and is down 1.0 % year-over-year.
  • the three month rolling average for unadjusted new orders accelerated 6.3 % month-over-month, and down 3.6 % year-over-year.
  • Inflation adjusted but otherwise unadjusted new orders are down 1.6 % year-over-year.
  • The Federal Reserve's Durable Goods Industrial Production Index (seasonally adjusted) growth accelerated 0.5 % month-over-month, up 1.2 % year-over-year [note that this is a series with moderate backward revision - and it uses production as a pulse point (not new orders or shipments)] - three month trend is decelerating, and has been decelerating for a year..
  • unadjusted backlog (unfilled orders) growth accelerated 0.1 % month-over-month, down 2.1 % year-over-year.
  • according to the seasonally adjusted data, most of the data was good - but the size of the acceleration was due to civilian aircraft which improved 81% month-over-month.
  • note this is labelled as an advance report - however, backward revisions historically are relatively slight.

October Durable Goods Report Shows Improvement - The Advance Report on Manufacturers’ Shipments, Inventories and Orders released today gives us a first look at the October durable goods numbers. Here is the Bureau's summary on new orders: New orders for manufactured durable goods in October increased $6.9 billion or 3.0 percent to $239.0 billion, the U.S. Census Bureau announced today. This increase, up following two consecutive monthly decreases, followed a 0.8 percent September decrease. Excluding transportation, new orders increased 0.5 percent. Excluding defense, new orders increased 3.2 percent. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $6.1 billion or 8.0 percent to $82.1 billion. Download full PDF The latest new orders headline number at 3.0 percent beat the estimate of 1.5 percent. However, this series is up only 0.5 percent year-over-year (YoY). If we exclude transportation, "core" durable goods came in at 0.5 percent month-over-month (MoM), which was above the estimate of 0.3% percent. The core measure is also up only 0.5 percent YoY. If we exclude both transportation and defense for an even more fundamental "core", the latest number was up 0.6 percent MoM but is down -2.5 percent YoY. Core Capital Goods New Orders (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending, often referred to as Core Capex. It posted a 1.3 percent advance but is up only 0.4 percent YoY. For a look at the big picture and an understanding of the relative size of the major components, here is an area chart of Durable Goods New Orders minus Transportation and Defense with those two components stacked on top. We've also included a dotted line to show the relative size of Core Capex.

Durable Goods Orders Signal Recession With 7th Consecutive Drop -- For the 7th month in a row, Durable Goods New Orders fell year-over-year (down 1.0%). This has not occurred without a recession. While MoM the headline number rose 3.0% (beating the 1.7% rise expected), it appears driven by another one-off surge in Boeing plane orders as Capital Goods Shipments Ex-Air fell 0.4%. Finally, the inventory to shipments ratio re-accelerated in October, back near cycle highs.

Chemical Activity Barometer "Chemical Activity Barometer Stabilizes" -- Here is an indicator that I'm following that appears to be a leading indicator for industrial production. From the American Chemistry Council: Chemical Activity Barometer Stabilizes as Year End Approaches The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), stabilized in November, rising 0.1 percent following three consecutive months of decline. October data was revised up 0.3 percent and September by 0.2 percent. All data is measured on a three-month moving average (3MMA).The pattern reverses a downward trend that had begun to gain momentum. Accounting for adjustments, the CAB remains up 1.3 percent over this time last year, a deceleration of annual growth. In November 2014, the CAB logged a 3.4 percent annual gain over October 2013. ....Applying the CAB back to 1919, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.

US Manufacturing PMI Collapses To 2 Year Low As New Orders, Employment Slow  -- Despite EU PMIs surging, US Manufacturing PMI has re-collapsed to 25 month lows as manufacturing employment showed "one of the smallest monthly gains seen over the past five years." The 52.6 print is below October's 54.1 and expectations of 54.0. Export orders saw renewed weakness and overall new orders, output, and employment slowed. Of course, hope remains that the Services side of the economy will maintain the dream of escape velocity but if last month's drop in Services PMI is anything to go by, it seems unlikely. Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said: “November’s flash PMI survey indicates that the manufacturing sector lost some growth momentum after the nice pick up seen in October, but still suggests the goods producing sector is expanding at a robust pace which should help support wider economic growth in the fourth quarter. The survey data are broadly consistent with manufacturing output growing at an annualised rate of at least 2% in the fourth quarter so far. “Domestic demand appears to be holding up well, but the sluggish global economy and strong dollar continue to act as dampeners on firms’ order book growth. Export orders showed a renewed decline, dropping for the first time in three months.

Richmond Fed: Manufacturing Slowed in November - Today the Richmond Fed Manufacturing Composite Index dropped 2 points to -3 from last month's -1. had forecast an increase to 0. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at -3.0, indicating contraction. The complete data series behind today's Richmond Fed manufacturing report (available here), which dates from November 1993. Here is a snapshot of the complete Richmond Fed Manufacturing Composite series. Here is the latest Richmond Fed manufacturing overview.  Shipments remained sluggish and new orders declined. Hiring in the sector changed little compared to the previous month, while the average workweek shortened and wages rose mildly. Raw materials prices rose at a somewhat faster pace, while prices of finished goods increased modestly in November. Manufacturers' expectations were less optimistic in November compared to October. However, they still looked for an improvement in business conditions during the next six months. Compared to October's outlook, producers expected slower growth in shipments and in the volume of new orders in the six months ahead. Compared to current conditions, firms anticipated faster growth in backlogs and capacity utilization during the next six months, and. expectations for vendor lead times were expected to change little in the next six months. Link to Report Here is a somewhat closer look at the index since the turn of the century.

Richmond Fed Region Negative Again; Inventories Suggest Outright Disaster on Horizon -- Economists expected manufacturing activity in the Richmond Fed region would bounce into positive territory this month. The Bloomberg Econoday Consensus Estimate was +1 in a range of 0-4, but the reading of -3 came in below any economist's estimate.  Early indications for the November factory sector are soft right now after Richmond Fed reports a much lower-than-expected minus 3 headline for its manufacturing index. Order data are very negative with new orders at minus 6, down from zero in October, and backlog orders at minus 16 for a 9-point deterioration. Shipments are also in contraction, at minus 2, with the workweek at minus 3. Employment, at zero, shows no monthly change but the declines for backlog orders and the workweek don't point to new demand for workers. Price data are subdued but do show some constructive upward pressure. This report along with Empire State, as well as yesterday's manufacturing PMI, are pointing to a downbeat month for the factory sector which is being held down by weak foreign demand, as evidenced in the decline for goods exports in this morning's advance release of international trade data. Ahead of the release, Bloomberg had this to say: "Regional Fed surveys have been showing improvement in November and the same is expected for the Richmond Fed's manufacturing index.  Details in this report, as in other manufacturing surveys, did show life in October but there were points of weakness including lack of growth for new orders and extended contraction for backlog orders."

Richmond Fed Manufacturing Survey Remains In Contraction in November 2015 - Below Expectations -- Of the four regional Federal Reserve surveys released to date, two are in contraction and the rest are weakly in expansion. The market expected values (from Bloomberg) from 0 to +4 (consensus +1) with the actual survey value at -0.3 [note that values above zero represent expansion]. Fifth District manufacturing activity slowed in November, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments remained sluggish and new orders declined. Hiring in the sector changed little compared to the previous month, while the average workweek shortened and wages rose mildly. Raw materials prices rose at a somewhat faster pace, while prices of finished goods increased modestly in November. Manufacturers' expectations were less optimistic in November compared to October. However, they still looked for an improvement in business conditions during the next six months. Compared to October's outlook, producers expected slower growth in shipments and in the volume of new orders in the six months ahead. Compared to current conditions, firms anticipated faster growth in backlogs and capacity utilization during the next six months, and. expectations for vendor lead times were expected to change little in the next six months. Survey participants looked for moderate growth in wages and a pickup in the average workweek during the next six months. Hiring expectations remained solid in November, although the outlook was less robust than a month earlier. Firms anticipated faster growth in prices paid and prices received.  Manufacturing activity slowed this month, with the composite index softening to a reading of −3, following last month's reading of −1. The index for shipments remained negative, ending at a reading of −2, while the index for new orders fell six points to −6. In addition, the index for employment flattened to a reading of 0 this month.

PMI Services Flash November 25, 2015: Highlights: Strength in the service sector, given weakness in global demand, is more vital than ever to the nation's economy and Markit's U.S. sample is pointing to strength with the composite index up more than 2 points to a 56.5 level that well exceeds Econoday's high estimate. The sample's output is the strongest since April and is tied directly to domestic demand. New orders are the strongest since July with gains in both consumer and business categories. Strength is confirmed by a solid increase in employment though a fourth straight decline for backlog orders is containing demand for labor. One negative is caution on the 12-month outlook, the result of the uncertain global environment. Price data remain mute though prices charged are up for a second month. This report is a positive and, together with this morning's durable goods orders on the factory side, point to economic momentum heading into year end and the holidays.

US Services Economy Surges To 7-Month Highs (As Manufacturing Hits 2 Year Low) -- Following US Manufacturing PMI's tumble to two year lows, amid slowing new orders and employment, Markit reports that US Services PMI rose to 56.5 - its highest since April. Amid a solid increase in job creation (low-paying compared to the job weakness in manufacturing) and improvement in business growth, the divergence between Services & Manufacturing is at its highest since Q3 2013 which presaged a complete collapse in Services.  Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said: “The US economy is showing further robust economic growth in the fourth quarter, with the pace of expansion picking up in November. “The upturn in the flash PMI brings the surveys up to a level indicative of 2.3% annualised GDP growth in November, up from 1.8% in October. “The surveys therefore suggest the economy is on course to grow by just over 2% again in the fourth quarter, providing additional reassurance on the strength of the economy after yesterday’s GDP revision. The revision to official GDP annualised growth from 1.5% to 2.1% has brought the official third quarter growth rate into line with that signalled by the PMI. “Hiring remains healthy, albeit down on the trend seen earlier in the year. The November survey results are consistent with a non-farm payroll rise of approximately 180,000, down from an average of just over 200,000 in the first ten months of the year. “The faster pace of growth and healthy hiring trend were accompanied by the sharpest rise in average selling prices seen for four months, providing a triple-boost to the chances of the Fed hiking interest rates at its next meeting.”

What Is Holding Back the Economy? - As of October 2015, the unemployment rates in half the states in the country had fallen to or below their pre-recession levels. In the other half, unemployment rates were still higher than before the recession.  Conditions could be so much better.  In general, joblessness is currently trending down and job growth is trending up, according to the latest government report on job conditions in the states.  Obviously, those are positive indicators of continued healing in the labor market. On the other hand, the time it has taken just to get to this point suggests that for many if not most people, the standard of living that can be achieved by working has been permanently reduced — by long bouts of unemployment and underemployment, by unstable and insecure employment, by long-term stagnation of wages and, perhaps most significantly, by the failure of Congress to use fiscal policy, consistently and aggressively, to counteract the devastation of the recession and its corrosive effects on the economy. For some people in some places, steady work is simply no longer a way of life, if it ever was. In several states where jobless rates have fallen to pre-recession levels, including Illinois and Ohio, the drop is due mainly to shrinking labor forces, not increases in hiring. When unemployment rates go down because people have despaired of ever finding a job, the economy is not really improving. Rather, it is downshifting to a less prosperous level. There are two related ways to counter that downshift. One is to make productivity-enhancing investments that create jobs today and lay the foundation for future growth. Such investments would include bolstered spending for education, transportation, environmental protection, basic science and other fields that are the purview of government. The other is to enact policies to ensure that pay and profits from enhanced productivity are broadly shared, rather than concentrated at the top of the income-and-wealth ladder. Such policies would include strict anti-trust enforcement, steeply progressive taxes, a higher minimum wage and support for labor unions.

Weekly Initial Unemployment Claims declined to 260,000 -- The DOL reportedIn the week ending November 21, the advance figure for seasonally adjusted initial claims was 260,000, a decrease of 12,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 271,000 to 272,000. The 4-week moving average was 271,000, unchanged from the previous week's revised average. The previous week's average was revised up by 250 from 270,750 to 271,000.  There were no special factors impacting this week's initial claims.  The previous week was revised up to 272,000.  The following graph shows the 4-week moving average of weekly claims since 1971.

Continuing Jobless Claims Rise At Fastest Pace Since July 2013 -- While initial claims collapsed 11k to 260k, practically cycle lows and the hovering at the lowest level since 1973. But in continuing claims, something is different. The last 4 weeks have seen continuing claims rise 2.85% - the fastest pace of increase since July 2013. Of course, none of that matters with a Fed set on hiking rates no matter what, but it is seasonally aberrant to see a surge of this scale this time of year. Once again a significant turn in trend...  Which is notably out of line with seasonal trends...  Charts: bloomberg

What is the “natural rate” for u6?  -  Those of us interested in just how close we are to full employment like to track the more comprehensive “u6” rate, aka, “underemployment.” It includes all the unemployed, but also the millions of involuntary part-timers (IPT)—who are, quite literally, underemployed—plus a small subset of those out of the labor market who might be willing to work if there were more good opportunities available. Especially because IPT has been so elevated in this recovery, and because some special factors, like depressed labor force participation, have led to a downward bias of the unemployment rate, u6 is worth watching closely. As you see below, u6 rose more in the Great Recession and has fallen faster in the expansion than the official rate. Now, for reasons I’ll explain, it’s necessary to guesstimate to the “natural rate” of unemployment, i.e., the unemployment rate consistent with stable prices. The Fed thinks it’s about 5% which is where we are now, ergo, they’re getting ready to raise rates. But I think that these days, it’s better to gauge slack using u6, which last clocked in at 9.8%. But where is that relative to the natural rate of underemployment? The (justifiably) influential macro team at Goldman Sachs believes that the natural rate for u6, call it u6*, is 9%. That’s about where u6 stood at the end of the last expansion (late 2007) when the official rate was at 5%, so not an unreasonable guess. OTOH, as you can see in the figure, u6 was around 7% at the end of the 2000s expansion, when the official rate was around 4% (and inflation was perfectly well behaved, ftr). There are reasons to believe the “natural rate” is higher today than it was back then—certainly productivity and thus potential growth are lower now. And, of course, there are good reasons not to truck in this whole “natural rate” business at all; there’s no reliable way to nail it down, it moves around, and economists invariably tend to pitch it too high, at great cost to those who depend on truly full employment.

Unloved Labor Economy Continues to Improve - Barry Ritholtz - A few weeks ago, I described why this economic recovery remainsdoubted and unloved. The improvements have been very unevenly distributed, with wide disparities based on education level, geographic location and industry. Some peoples’ recoveries are far worse than others. However, sometimes we lose sight of the basic facts. The data show the economy is expanding and creating jobs in a manner consistent with recoveries from credit crises: Getting better, slowly, though maybe not fast enough to lead to a general sense of optimism. But the signs of recovery are undeniable. Consider the latest Bureau of Labor Statistics data looking at regional and state unemployment changes. As the chart below shows, as of last month there was no state with an unemployment rate higher than 7 percent. That’s the first time that has happened since 2007.

No Surprise Productivity Growth is Slow -- The following graph shows a pattern of productivity growth through a business cycle. The graph plots my UT index against Year over Year % change in productivity for the past 41 years. (Link to FRED data for graph, 1974 to present) The UT index is a measurement of effective demand. It measures the difference between effective labor share and the composite utilization of labor and capital. The UT index is mostly a measure of spare capacity. As the UT index falls to zero, the business cycle is maturing and coming to an end. As the UT index average rises from zero, a business cycle is going through and recovering from a recession. The orange line is data from 1974 to 2001. The high portion of the orange line where the UT index goes over 19% happened during the Volcker recession. That portion shows high spare capacity but low productivity growth. It is an anomaly because the recession was induced. The blue line is data since 2002. The red dot near the crossing point of the axes shows the current data point for 3Q 2015. The general trend is that productivity will increase when more spare capacity opens up in a business cycle. Looking at the position of the red dot of current data (1% UT index, 0% productivity growth), there really is no surprise that productivity growth is low.

Want Innovation? Try Raising Minimum Wages - I’ve spent some time talking about the downsides of minimum-wage laws. But there is a big possible upside that I haven’t mentioned, in part because it’s pretty speculative. It’s the idea that minimum wages improve productivity and innovation over the long run.   Usually, it’s detractors of the minimum wage who talk about the long term. Minimum-wage hikes tend to have only small or negligible effects on employment levels, but critics of setting pay floors have said that they slow long-term employment growth. But I’m now thinking about the even longer term, and about the effect of minimum wages on productivity rather than employment.   In the long term, productivity comes from technology. Economists often treat technology as if it just appears out of nowhere, but in fact it comes from the innovative efforts of companies and researchers. Why do companies innovate? You might think that companies invent any technology that will make them more productive, but this isn’t actually true, for a number of reasons. First of all, innovators don’t know ahead of time which things they will be able to create -- trying to innovate is risky, and companies are usually risk-averse. Second, companies may be focused on the short term, and may thus be unwilling to shell out cash for research and development that would only pay off years later. Finally, companies may simply get comfortable with what they have, and fail to engage in innovation unless they feel sufficiently intense pressure to do so. So what happens if a company suddenly finds that it has to pay higher wages? It might just take the hit to its profit margins and continue operating as before. It might decide to downsize, laying off workers and shrinking its operations.  Or, it might decide to invest in labor-saving technology.

Philly Fed: State Coincident Indexes increased in 43 states in October -- From the Philly FedThe Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for October 2015. In the past month, the indexes increased in 43 states, decreased in six, and remained stable in one, for a one-month diffusion index of 74. Over the past three months, the indexes increased in 42 states, decreased in seven, and remained stable in one, for a three-month diffusion index of 70. The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Unemployment Debt Weighs on U.S. States 6 Years After Recession - U.S. states are still repaying federal loans for unemployment benefits more than six years after the recession, costing businesses from mighty Apple Inc. to Ohio’s humble Canton Chair Rental hundreds of millions in taxes and interest. And only a third of states are prepared for the next downturn. Thirty-five states borrowed from a federal fund when dismissals from the 18-month recession that began in December 2007 depleted jobless benefit accounts. California, Ohio and Connecticut are the only ones that haven’t retired their debt, which businesses must repay through higher levies. California firms alone have already paid $1.8 billion though last year, and the loan isn’t projected to be paid off until sometime in 2018. “This is money that we should not be paying out,” said Ginny Grome of Restaurant Management Inc. in Cincinnati, which owns 65 Arby’s restaurants in seven states and has paid almost $218,000 in extra taxes because of Ohio’s outstanding loan. “That’s a lot of money as far as reinvesting or how many more employees could we have had.” A bill was introduced in Ohio on Nov. 9 to build reserves by 2025 to avoid borrowing again when the next recession hits. But only 17 states have an unemployment insurance fund that the U.S. Labor Department considers sufficient for a downturn, according to a June report, as states try to balance an adequate safety net with an aversion to higher taxes.

From G20 to Labour20 -- naked capitalism - Yves here. It’s hard to have much hope for the American labor movement, at least based on the shape it’s in now, and I hope readers outside the US can tell us about the status and cohesiveness of labor movements in their countries. In the US, things we once took for granted (and are on their way out) like the 8 hour day and workplace safety rules, were won at considerable cost. The fact that labor activists were often killed in particularly brutal ways has been airbrushed out of US history.  And what is distressing about the labor movement in the US now is its inability to claim the moral high ground. There are some important exceptions, such as nurses’ unions, which have been politically active, savvy in their messaging, and are well respected. But in too many other cases, the strong feature of unions, that of their solidarity, has become a weakness as no one in the labor movement seems willing to call out corrupt or merely feckless leaders and local bosses. In keeping, a savvy and very much left leaning colleague said, “I wouldn’t trust anyone in the American labor movement as far as I can throw them.” It’s discouraging to recognize that reality in light of the list of the estimable and sensible goals set forth in the L20 below. I wonder if organizations oversea have had more success in self-policing.

How Walmart Keeps an Eye on Its Massive Workforce: In the autumn of 2012, when Walmart first heard about the possibility of a strike on Black Friday, executives mobilized with the efficiency that had built a retail empire. Walmart has a system for almost everything: When there’s an emergency or a big event, it creates a Delta team. The one formed that September included representatives from global security, labor relations, and media relations. For Walmart, the stakes were enormous. The billions in sales typical of a Walmart Black Friday were threatened. The company’s public image, especially in big cities where its power and size were controversial, could be harmed. But more than all that: Any attempt to organize its 1 million hourly workers at its more than 4,000 stores in the U.S. was an existential danger. Operating free of unions was as essential to Walmart’s business as its rock-bottom prices.OUR Walmart, a group of employees backed and funded by a union, was asking for more full-time jobs with higher wages and predictable schedules. Officially they called themselves the Organization United for Respect at Walmart. Walmart publicly dismissed OUR Walmart as the insignificant creation of the United Food and Commercial Workers International (UFCW) union. “This is just another union publicity stunt, and the numbers they are talking about are grossly exaggerated,”  Internally, however, Walmart considered the group enough of a threat that it hired an intelligence-gathering service from Lockheed Martin, contacted the FBI, staffed up its labor hotline, ranked stores by labor activity, and kept eyes on employees (and activists) prominent in the group. During that time, about 100 workers were actively involved in recruiting for OUR Walmart, but employees (or associates, as they’re called at Walmart) across the company were watched; the briefest conversations were reported to the “home office,” as Walmart calls its headquarters in Bentonville, Ark.

Economists tested 7 welfare programs to see if they made people lazy. They didn't. - For as long as there have been government programs designed to help the poor, there have been critics insisting that helping the poor will keep them from working. But the evidence for this proposition has always been rather weak.  And a recent study from MIT and Harvard economists makes the case even weaker. They reanalyzed data from seven randomized experiments evaluating cash programs in poor countries and found "no systematic evidence that cash transfer programs discourage work." Attacking welfare recipients as lazy is easy rhetoric, but when you actually test the proposition scientifically, it doesn't hold up. The programs covered in the study have a pretty wide geographic spread. There are four in Latin America (two in Mexico, one each in Nicaragua and Honduras), two in Southeast Asia (Philippines and Indonesia), and one in Morocco.Most of the programs the study analyzes are what's known as "conditional cash transfers" (CCTs), where households receive help on the condition that they, say, have their kids attend school, or get them vaccinated. The idea is both to help poor people and to use the aid as a lever with which to ensure kids are getting educated and receiving health services. CCTs first caught on in Latin America, so it makes sense that most of the programs analyzed in the paper are from countries in that region. But the study also includes a Mexican program that provided a $13-a-month unconditional cash transfer to families in poor regions.  Exactly zero of the seven programs saw a statistically significant change in either employment levels or hours worked per week:

How Refugees Make It In America - The topic of the 10,000 Syrian refugees that President Obama promised to resettle in the U.S. has moved front and center in the presidential campaign, in particular the Republican primary. “The Statue of Liberty says bring us your tired and your weary; it didn’t say bring us your terrorists and let them come in here and bomb neighborhoods, cafes and concert halls,” Mike Huckabee said. Ben Carson compared Syrian refugees to a rabid dog “running around your neighborhood.” More than half the nation’s governors — almost all Republicans — have announced that they won’t accept additional refugees, and Jeb Bush and Ted Cruz have proffered that Christians from the war-torn country should be given favorable preference for refugee status over their Muslim counterparts. The House passed a bill, supported by 47 Democrats, that would require more stringent screening for refugees, who are already required to go through a process that can take years. The worry underlying this frenzy of statements and legislative actions is, of course, that refugees who enter the country could be Islamic State sleeper cells; one of the Paris attackers was carrying a Syrian passport — likely stolen or fake — giving shape to scenarios by which a terrorist might inflict his harm in this increasingly borderless-seeming conflict. There’s also anxiety that those who are not incorporated into American culture will seek to upend it by violent means. It’s a fear that’s coursed through America’s veins since 9/11, but the attacks in Paris brought the gore to the surface again, like a maliciously precise scalpel dragging across an old scar. That some of the attackers were French nationals who had grown so disillusioned with their home country inspired a helpless kind of dread: What can we know about the minds of those we crowd onto trains with daily, stroll by on the street? Politicians have pointed to a recent poll from Bloomberg that found that 53 percent of Americans don’t want to continue Syrian refugee resettlement, with 11 percent of respondents saying that they favored a program to resettle only Christians.

Nonprofits told not to help Syrian refugees: As of 4pm Friday, several Houston organizations complied with Governor Abbott's deadline order to stop providing help to Syrian refugees. It comes in response to the deadly terror attacks in Paris on November 13th. A letter from the Texas Health and Human Services Commission went out to several local non-profits this week asking the organizations to comply with the Governor's request by Friday afternoon. However, some say it comes across as an ultimatum: comply or risk funding. "It puts them in a situation that I think is very uncomfortable," said immigration attorney Gordon Quan regarding the letter. "This is basically saying, 'Don't do resettlement. If you do resettlement of these Syrian refugees, you may be endangering the whole program that you have'." The letters could affect programs at organizations like Interfaith Ministries, Catholic Charities and YMCA International Services just to name a few. Quan explains that programs could be endangered by losing funds to keep them running. Although refugee resettlement costs are funded by the federal government, Quan says the state has the ability not to accept the funds; essentially that could cut these organizations off at the knees. On Monday, Abbott announced that Texas would not provide refugee status to Syrian refugees, this was in response to the terrorist attacks in Paris.

A Grim Holiday Season Awaits America’s Hungry -  For households that struggle with food insecurity, November often marks the beginning of the particularly lean months. Cooler evenings mean bigger heating bills, putting more stress on grocery budgets. And school vacations mean children stay home, without access to the free or reduced-price school meals that help keep many households afloat. When those households run out of money and food stamp benefits, many turn to food pantries and soup kitchens. At this time of year, emergency food assistance charities — often referred to as “the last line of defense against hunger” by the people who manage them — see a sharp spike in the number of meals they distribute per month. That spike would be a challenge under normal conditions. The past few years, however, have been anything but normal for food assistance charities. Besides the usual ebb and flow of seasonal demand, soup kitchens and food pantries are now struggling to address skyrocketing year-round demand for emergency aid. The holiday spike is especially pronounced in low-income, high-density urban areas, where food-insecure households coexist side-by-side with robust, accessible charity networks. In New York City’s Brooklyn borough, the Bed-Stuy Campaign Against Hunger “always sees [its] needs increased, maybe doubled," said its founder and executive director, Rev. Dr. Melony Samuels. “We are expecting to serve about 50,000 individuals this holiday season,” Samuels told Al Jazeera. “The heating bills, kids out of school, and the cost of food all contribute to what the needs are. Families are not able to buy food."

These Are The 20 Worst Cities In The US - Spot The Common Theme -  A new analysis by WalletHub has compared and classified 1,268 of America's small cities in the U.S. to find the ones where residents don’t have to give up much by avoiding the "bright lights" and the soaring rent. Its data set include a total of 22 metrics, ranging from housing costs to school-system quality to the number of restaurants per capita. Why live in a small city? Inevitably, life in a small city demands some tradeoffs such as shorter business hours, a heavier reliance on cars and fewer dating opportunities. It does bring benefits - tighter communities, less competition, shorter commutes and an actual backyard with a white picket fence. And from a purely financial standpoint, living in a small city creates a sense of greater wealth because of cheaper cost of living — one of the main draws for in-movers, especially those seeking to raise a family. According to the Economic Policy Institute, a two-parent, two-child family would need to earn $49,114 a year “to secure an adequate but modest living standard” in Morristown, Tenn., compared with $106,493 in Washington. So even with a lighter wallet, a family or soloist can enjoy a comparable, or even better, quality of life for much less in a cozy place like Morristown.

Drug offenders in American prisons: The critical distinction between stock and flow: There is now widespread, bipartisan agreement that mass incarceration is a huge problem in the United States. The rates and levels of imprisonment are destroying families and communities, and widening opportunity gaps—especially in terms of race.  But there is a growing dispute over how far imprisonment for drug offenses is to blame. Michelle Alexander, a legal scholar, published a powerful and influential critique ... in 2012, showing how the war on drugs has disproportionately and unfairly harmed African Americans. Recent scholarship has challenged Alexander’s claim..., but the standard analysis—including Alexander’s critics—fails to distinguish between the stock and flow of drug crime-related incarceration. ...The picture is clear: Drug crimes have been the predominant reason for new admissions into state and federal prisons in recent decades. ... In other work, Pfaff provides grounds for believing that the aggressive behavior of local prosecutors in confronting all types of crime is an overlooked factor in the rise of mass incarceration. More broadly, it is clear that the effect of the failed war on drugs has been devastating, especially for black Americans. As I’ve shown in a previous piece, blacks are 3 to 4 times more likely to be arrested for drug crimes, even though they are no more likely than whites to use or sell drugs. Worse still, blacks are roughly nine times more likely to be admitted into state prison for a drug offense....

How Chicago tried to cover up a police execution -- It was just about a year ago that a city whistleblower came to journalist Jamie Kalven and attorney Craig Futterman out of concern that Laquan McDonald’s shooting a few weeks earlier “wasn’t being vigorously investigated,” as Kalven recalls. The source told them “that there was a video and that it was horrific,” he said. Without that whistleblower—and without that video—it’s highly unlikely that Chicago Police officer Jason Van Dyke would be facing first-degree murder charges today. “When it was first reported it was a typical police shooting story,” Kalven said, where police claim self-defense and announce an investigation, and “at that point the story disappears.” And, typically, a year or 18 months later, the Independent Police Review Authority confirms the self-defense claim, and “by then no one remembers the initial incident.” “There are an average of 50 police shootings of civilians every year in Chicago, and no one is ever charged,” said Futterman. “Without the video, this would have been just one more of 50 such incidents, where the police blotter defines the narrative and nothing changes.” Last December, Kalven and Futterman issued a statement revealing the existence of a dash-cam video and calling for its release.  Kalven tracked down a witness to the shooting, who said he and other witnesses had been “shooed away” from the scene with no statements or contact information taken. In February, Kalven obtained a copy of McDonald’s autopsy, which contradicted the official story that McDonald had died of a single gunshot to the chest. In fact, he’d been shot 16 times—as Van Dyke unloaded his service weapon, execution style—while McDonald lay on the ground.

Why do American cops kill so many compared to European cops? -  Chicago police officer Jason Van Dyke was charged with first degree murder November 24 in the death of Laquan McDonald. A video released by police shows Van Dyke shooting the teenager 16 times. Van Dyke is an extreme example of a pattern of unnecessary deadly force used by US police. American police kill a few people each day, making them far more deadly than police in Europe. Historic rates of fatal police shootings in Europe suggest that American police in 2014 were 18 times more lethal than Danish police and 100 times more lethal than Finnish police, plus they killed significantly more frequently than police in France, Sweden and other European countries.As a scholar of sociology and criminal justice, I recently set out to understand why rates of police lethality in the US are so much higher than rates in Europe. Such massive disparities defy a simple explanation, but America’s gun culture is clearly an important factor. Unlike European nations, most states make it easy for adults to purchase handguns for self-defense and to keep them handy at nearly all times.Acquiring guns illegally in the US is not much harder. About 57% of this year’s deadly force victims to date were allegedly armed with actual, toy or replica guns. American police are primed to expect guns. The specter of gun violence may make them prone to misidentifying or magnifying threats like cellphones and screwdrivers. It may make American policing more dangerous and combat-oriented. It also fosters police cultures that emphasize bravery and aggression. Less-lethal weapon holders make up only about 20% of deadly force victims in the US. Yet the rates of these deaths alone exceed total known deadly force rates in any European county.

How Social Justice Became Cool -- In October, Usher released a single called “Chains.” It was accompanied by a browser-based interactive video created in collaboration with the artist Daniel Arsham, hosted by TIDAL, and promoted under the hashtag #DontLookAway. Like the song’s lyrics, the visual implores the viewer to acknowledge a few of the black men and women killed or otherwise targeted for their race in recent years; the viewer must lock eyes with black and white photos of the deceased to unlock the track. If you avert your gaze at any point or lean too deeply out of the view of your computer, the webcam-enabled technology pauses and begs you not to look away. “While racial injustice keeps killing, society keeps looking away,” an introductory title screen reads. The first time I watched it, I lasted just two dead faces. When I felt uncomfortable, I closed the tab, a privilege admittedly reserved for the living. On the morning of the video’s release, I had a short conversation with a co-worker about the unlikeliness of Usher releasing such a politically motivated piece of art.  Earlier in the summer, Janelle Monae’s Wondaland camp, including Jidenna, Deep Cotton, and the band St. Beauty, dropped “Hell You Talmbout (Say Their Names).” It’s a protest song in the most literal sense possible. Over chanting drums, it calls out the names of victims of police or vigilante murder in remembrance, and was rolled out with a series of protests around the country led by the crew. They were alternately lauded and mocked; some internet commenters, myself included, called bullshit on the move. Not because it was difficult to believe their concern about racial justice in America, but because it read like a marketing meeting-hatched rollout wherein they wore social justice like a costume.

Pew Report: 40 Percent of U.S. Millennials Favor Limits on Speech Offensive to Minorities: More than any other generation, Millennials are militant about the use of offensive language towards minorities, and are rejecting the idea of a blanket right to “free speech.” A Pew report published on Friday revealed that 40 percent of Millennials in America (aged 18 to 34) were in favor of the government limiting hateful speech offensive to minorities. The Millennial jump is significant from the percentage of Gen Xers who had the same opinion (27 percent) and an even smaller proportion of Boomers (24 percent) who believed that the government should have the ability to limit offensive speech. Only 12 percent of the so-called Silent generation—Americans aged 70 or older—were likely to support the idea. The study found that race, sex and political leaning influenced decision-making. Specifically, non-whites were more likely to be in favor of government limits on speech (38 percent), as opposed to non-Hispanic white Americans (23 percent). A mere 18 percent of Republicans thought that the government should exercise prevention against hateful speech against minorities, while nearly double the number of Democrats—35 percent—would be in favor of it. One third of women surveyed were supportive of the government limits, and only 23 percent of men thought the same. Americans are far less likely to welcome government intervention on offensive speech than Europeans. Of six EU nations surveyed, a median 49 percent said they would be in favor of government curbing speech deemed offensive to minorities. Meanwhile, 67 percent of Americans said that people should exercise their right to freely say things in public, even if they are offensive, compared to a median 46 percent of people in European countries who believe the same.

The Looming Land Of The Not-So-Free: 40% Of Millennials Would Censor Offensive Speech - America: Land of the free and future home of censorship? A new study by Pew Research shows that American Millennials are far more likely to support the government banning offensive speech about minority groups than other generations. Of those aged 18-34, 40 percent support censoring offensive speech. "We asked whether people believe that citizens should be able to make public statements that are offensive to minority groups, or whether the government should be able to prevent people from saying these things. Four-in-ten Millennials say the government should be able to prevent people publicly making statements that are offensive to minority groups." There's also a difference in education levels and support for limiting speech.Those with a high school degree or less are 9-percentage-points more likely to support censorship.

More Young Adults Live With Their Parents Now Than During the Recession - Family togetherness isn’t just for Thanksgiving dinner. More young adults are now living with their parents than during the recession, according to U.S. Census data. The share of 18-to-34-year-olds living with their parents was 31.5% as of March 2015, up from 31.4% last year, according to a report from the Commerce Department on Monday. In 2005, just 27% of young adults lived with their parents, a number that has climbed pretty steadily since then. That the percentage at home has barely moved from last year is particularly notable because many economists expected young people to start moving out as the economy has improved and unemployment among young people has dropped significantly. The housing market is relying on those new households to drive future demand. But the trend of young people continuing to live at home is unlikely to significantly reverse course any time soon, even as the economy improves, says Jed Kolko.Instead, Mr. Kolko says that the rise in children living with their parents is largely related to the fact that people are marrying and having children later, not to the weak economy and housing market. Single people without children are more likely to continue living at home much later.Earlier this month, the Pew Research Center showed that more young women were living with their parents in 2014 than any time since the 1940s. Researchers noted that young women traditionally left home to get married, which they are now doing later and later. Because young people aren’t likely to leave home in large numbers as their job prospects improve, the surge of pent-up housing demand they were expected to create will be more like a slow, steady trickle, Mr. Kolko said.

Detroit Public Schools Bankruptcy Could Cost the State $3.4 Billion [Michigan Capitol Confidential]: The Detroit Public Schools' $1.3 billion in pension obligations is the major roadblock to the school district filing for bankruptcy, according to a recent state of Michigan analysis. That $1.3 billion is how much the district must pay into the pension system from 2016 to 2031, according to Kurt Weiss, spokesman for the state Treasury department. “Our estimates are actually quite conservative,” Weiss said in an email. Pension legacy costs for public school employees have skyrocketed statewide, not just in Detroit. Required employer contributions to the statewide school pension system have increased by 92 percent from 2007 to 2014, increasing from $835 million to $1.6 billion. Overall, the state projects that if Detroit Public Schools filed for bankruptcy today it would enter the process with $3.4 billion in outstanding liabilities, most of which are owed to the state.

A Smaller Share of High-School Grads Are Heading to College—Especially Poorer Ones - A new analysis of Census Bureau data suggests that a national push to get more people into college isn’t getting a passing grade, especially when it comes to enrolling newly minted high-school graduates. Just under 66% of recent high-school grads were enrolled in two- or four-year college programs in 2013, down from 68.6% in 2008, according to research by the American Council on Education, a higher-education industry group. Most troubling is the sharp downward trend line for poor students: 45.5% of low-income, recent high-school graduates were enrolled in college in 2013, compared with 55.9% in 2008. That drop comes despite expanded grants and other financial aid offerings earmarked for those exact students, a relatively modest gain in net tuition, fees, room and board costs at four-year colleges and outright decline in such prices at two-year schools. “The finding was not expected,” said Christopher Nellum, senior policy research analyst at ACE and a co-author of the article, which will appear in the winter edition of ACE’s The Presidency magazine. He says low-income grads may be spooked by stories about overwhelming student-loan debt burdens and not think college is “within reach.” (Nellum says the declines could have been even worse without aggressive efforts to boost enrollments.) With more employers requiring college degrees for even the most entry-level positions, declining enrollment trends could spell long-term trouble for the subset of the population that can least afford prolonged unemployment. These findings also put yet another major dent in President Barack Obama’s plan for the U.S. to retake the top spot in global college attainment rates.

For thin-skinned students, we have nobody to blame but ourselves - It would be easy to call protesting college students crybabies and brats for pitching hissy fits over hurt feelings, but this likely would lead to such torrents of tearful tribulation that the nation’s university system would have to shut down for a prolonged period of grief counseling. Besides, it would be insensitive. Instead, let me be the first to say: it’s not the students’ fault. These serial tantrums are direct results of our Everybody Gets a Trophy culture and an educational system that, for the most part, no longer teaches a core curriculum, including history, government and the Bill of Rights. The students simply don’t know any better. This isn’t necessarily to excuse them. Everyone has a choice whether to ignore a perceived slight — or to form a posse. But as with any problem, it helps to understand its source. The disease, I fear, was auto-induced with the zealous pampering of the American child that began a few decades ago. The first sign of the epidemic of sensitivity we’re witnessing was when parents and teachers were instructed never to tell Johnny that he’s a “bad boy,” but that he’s “acting” like a bad boy. Next, Johnny was handed a blue ribbon along with everyone else on the team even though he didn’t deserve one. . Rather than protecting Johnny’s fragile self-esteem, the prize undermined Johnny’s faith in his own perceptions and judgment. Today’s campuses are overrun with little Johnnys, their female counterparts and their adult enablers. How will we ever find enough fainting couches?

How anxiety scrambles your brain and makes it hard to learn - A study of UK undergraduates has found that even among students symptom-free before starting university, some 20% are troubled by a clinically significant level of anxiety by the middle of second year. What does anxiety do to students? It causes the body to prepare itself for fight or flight. “If you are in a situation of imminent actual threat, then the increased alertness and body response can be lifesaving,” explains Chris Williams, professor of psychosocial psychiatry at the University of Glasgow, and medical advisor to Anxiety UK. “But if it occurs when trying to revise, or present a talk, or at such a high level that it paralyses or causes errors, it can interfere with what we want to do.” What happens in the brain of someone experiencing excessive anxiety is not fully understood. One line of research, says consultant psychiatrist Rajeev Krishnadas, is that it involves the prefrontal cortex and the amygdala – a key region of the brain involved in learning and memory, as well as in the physiological and behavioural responses to fear. “An external stimulus – sight, hearing, touch, smell and taste – activates a number of regions of the brain, crucially including the amygdala,” says Krishnadas. Under normal circumstances, he says “the amygdala is under tight control from the prefrontal cortex, which evaluates the threat associated with the stimulus. If the stimulus is non-threatening, the activity within the amygdala is suppressed. If it is threatening, the amygdala fear response is maintained.”

Student Debt in America: Lend With a Smile, Collect With a Fist -- Borrowing is risky, financial decisions are not always rational, and people often do a poor job of properly weighing the interests of their present and future selves. The private enterprise system is built to limit overborrowing by sharing risk between lenders and borrowers. ... They charge more interest when they take on more risk. Because most loans can be discharged in bankruptcy, lenders share the cost of default.   But the federal student loan program doesn’t work that way. Those ads that run on bus stop signs and on late-night television — “No Cash? No Credit? No Problem!” — are essentially the Department of Education’s official policy on student loans. On the front end, the department is the world’s nicest, most accommodating lender. Interest rates ... are lower than banks charge... Borrowing for college is essentially an entitlement.  When the loan bill finally comes due, the federal government transforms into a heartless loan collector. You don’t need burly men with brass knuckles to enforce debts when you have the Internal Revenue Service..., which can and will follow you as long as you live. The government acts this way because the federal student loan program has been removed from the norms and values of prudent lending. Because the Department of Education doesn’t consider risk, it takes no responsibility. If life, luck and bad choices leave you in the hole, it’s all on you. 

What Would Effective Counseling for At Risk Student Loan Borrowers Look Like? - During the first stage of this program, CEFC worked with the National Consumer Law Center to train nearly 400 counselors how to diagnose and implement solutions for consumers with defaulted student loans. Once it became clear that this effort required more follow-up oversight and quality control with the trainees and their employers, CEFC implemented the second stage of the program to combine the training with program reporting and quality control. When it became further apparent that an even more comprehensive approach would lead to better results, CEFC implemented a third stage, which provided intensive training in both the technical aspects of distressed student loans and behavior-change counseling techniques. This included an intensive program of post-counseling borrower follow-up, monitoring implementation of program protocol, and third-party evaluation. Program training and counseling materials were developed and provided under contract by the National Consumer Law Center and the Counseling and Family Therapy Department at the University of Missouri-St. Louis. In addition, each financial counseling provider was paired with a legal services provider so that the borrowers who needed legal help could be referred to a lawyer with student loan knowledge, expertise and a commitment to help.  In the third stage of the program, CEFC contracted with three first-rate providers of general financial and credit counseling and education services. Each of these providers contracted with a legal services partner to fully implement the program. A total of 626 student loan borrowers were helped.

Student Loan and Mortgage Debt and the Racial Wealth Gap -- Forgiving student loan debt for low-income Americans could reduce the racial wealth gap among those households by as much as 50%, according to a new report from Demos and the Institute on Assets and Social Policy. Abbye Jo Atkinson has just posted an interesting paper arguing that mortgage debt reduction could likewise significantly reduce the racial wealth gap. Even reducing interest rates on distressed mortgages systematically (rather than randomly under HAMP and similar programs) would disproportionately aid minority borrowers, who disproportionately were assigned to the subprime market. The 2008 foreclosure crisis devastated household wealth for black and hispanic families in the U.S. While the median net worth for white families declined from $193,000 to $142,000 between the 2007 and 2013 Survey of Consumer Finances, the median net worth for black families eroded from $19,2000 to $11,000.  The Demos/IACL report notes that while young black adults are significantly less likely to attend college and to have a college degree, and have lower incomes than their white counterparts, they are nevertheless more likely to have significant student loan debt. The racial wealth gap is fundamental to racial inequality in our nation. It means that the starting line for each generation is unequal. The initial distribution, of housing, education, and capital for each new generation is grossly skewed. The federal government owns most of the nation's student loan debt and mortgage debt (via the effectively nationalized and nominally independent GSEs), and could therefore legislate a variety of tailored debt reduction programs, that might begin to repay the nation's huge debt to the descendants of its former slaves.

Board Member Reveals That CalPERS Engages in Systematic Violation of California Open Meeting Statutes -- Yves Smith - Heretofore, we’ve focused on only one of CalPERS’ monthly board committee meetings, that of its Investment Committee, because that is the CalPERS forum that intersects most directly with our efforts to expose private equity misconduct and how limited partners like CalPERS justify and even enable it.

That focus has uncovered signs of serious shortcomings in CalPERS’ governance, such as the refusal of staff in open board sessions to answer questions posed to them by board members, as well as the fact that CalPERS for years awarded its CEO’s bonus and pay increases in secret, or what is called “closed session,” in violation of California’s Bagley-Keene Open Meeting Act. (Credit where credit is due: CalPERS did correct its compensation award process after we called the board’s attention to it.) However, as we will discuss later in our new series on a recent CalPERS private equity workshop, the giant pension fund engaged in a fresh set of transgressions in how it handled efforts of members of the public to provide input on the workshop. Bear in mind that Bagley-Keene articulates and implements the broad language of the California state constitution regarding transparency in government.

CalPERS Hired a Fiduciary Counsel Accused of Serious Misconduct Over More Than a Decade, Including Kickbacks, Failure to Disclose Conflicts of Interest --  Yves Smith - As hedge fund manager David Einhorn says of companies he shorts, “No matter how bad you think it is, it’s worse.”  The latest example of that syndrome at the giant California public pension fund CalPERS that it recently selected a fiduciary counsel, Robert Klausner of Klausner Kaufman Jensen & Levinson, who has previously served the seedier, less capable end of the public pension fund universe. Starting in 2004, the press, including in the New York Times and Forbes, has described him as involved in serious improprieties, including regularly getting kickbacks from class action law firms and using his law practice as the foundation for running a much larger and more lucrative pay-to-play operation.  CalPERS’ due diligence was so deficient that it apparently missed damning information that was in the public domain, failed to run basic conflict of interest checks, and ignored basic considerations regarding suitability of experience (his most eminent client appears to be the Louisiana State Employees Retirement System, which to put it politely, is far from a model of good governance).

CalPERS Debunks Private Equity: Executive Summary -- Yves Smith - Announcing a series that shows how CalPERS' efforts to defend its private equity program through a workshop for its board backfired. CalPERS’ last board meeting included a private equity workshop that featured a series of panels, led almost entirely by outside experts, the most notable of whom was Harvard Business School professor Josh Lerner. This workshop revealed:

    • ¶ The fact that CalPERS was unable to make an intellectually honest defense of private equity, despite a considerable expenditure of time and involvement of industry experts, suggests that no intellectually honest defense exists.
    • ¶ Rather than having this workshop serve as a first step in a process of examining the real issues inherent in private equity investing and the options CalPERS has to address them, it was clearly meant to justify the status quo investment strategy, and suggested that the best CalPERS could hope for was slow, incremental change. In fact, as we will discuss, CalPERS has considerable leverage, but is unwilling to consider using it due to the depth of its intellectual capture and poor incentives at the staff level.
    • ¶ CalPERS is running on brand fumes, at least as far as private equity is concerned. Its reputation for greater acumen is demonstrably false, despite the fact that it is much more heavily staffed than the overwhelming majority of private equity investors. The frequency and severity of errors in the presentations call into question the honesty and competence of CalPERS’ advisors, and in turn, CalPERS itself, since the staff chose them, worked with them to develop the presentations, and is ultimately responsible for their accuracy and completeness. It also raises Diogenes-like questions as to whether any honest advisors can be found in private equity.
    • ¶ The diminution of CalPERS as an institution is the direct result of CEO Ann Stausboll’s strategy of aggrandizing her power by persuading the board to cede authority to her. The board asked remarkably few questions, despite the considerable amount of unfavorable information presented. By contrast, during the in the public comments section, an MBA student asked more incisive questions than the board did.

The Bigger Significance of CalPERS’ Private Equity Carry Fee Release: Another Nail in the Carried Interest Tax Loophole Coffin -- Yves Smith -- Experts on the tax beat have recently been saying, as incredible as it may seem, that the days of the billionaire-creating carried interest loophole are numbered. The release by CalPERS of carry fee information across its portfolio yesterday may well move its sell-by date forward.  First, as we’ve discussed, whenever CalPERS has taken a step forward on transparency in private equity, the rest of the industry has eventually followed. For instance, CalSTRS’ foot-dragging on gathering and disclosing carry fee information will become increasingly untenable.  Second, CalPERS’ disclosure provides a basis for making a back-of-the envelope estimate of how much general partner income gets this preferential tax treatment. CalPERS is roughly 1% of the limited partner universe in private equity, It is so large that experts have argued that it can be regarded as an index fund (indeed, it has been used as an industry proxy in a 2013 paper by professor Tim Jenkinson and other Oxford academics). It reported $700 billion in carry fee payments for its 2014-2015 fiscal year. Even though CaLPERS invests in private equity funds that target foreign market, the overwhelming majority are run by US managers like KKR and Carlyle. So it’s not unreasonable to simply gross up the $700 million to $70 billion in overall private equity carry fees. Assume that the hedge fund industry is of roughly the same size, but gets somewhat less in carry due to the fact that its high water mark system is less favorable to the investment manager then the private equity hurdle rates (see our companion post today for a further discussion). So assume that the carry fees on hedge funds are a bit lower, say $60 billion. But there are other funds that also have managers receiving carry fees, like infrastructure funds. So a rough estimate for total carry fees per annum is on the order of $125 to $150 billion.

CalPERS Pokes Its Board in the Eye by Releasing Private Equity Carry Fee Info After, Rather Than During, Board Meeting - Yves Smith - CalPERS is so confident of its control over its board that it has no compunction about broadcasting how little respect it has for them. But as we will show, the board is culpable by being a willing party to this abuse. The latest example came yesterday, when CalPERS released information about the so-called carry fees it has paid to private equity managers. Remember that this development came about because we publicized the fact that Chief Operating Investment Office Wylie Tollette admitted that the pension fund had no idea what it was paying in carry fees. A media firestorm ensued and CalPERS relented, demanding that all of its general partners provide carry fee data over the history of all of their funds.  Dan Primack of Fortune reported that CalPERS had set a due date of July 13; the Financial Times reported on July 12 that CalPERS had received the information from all but six funds. We submitted a Public Records Act request to find out who the refusniks were. In the end, only three funds had failed to provide the information. Two said CalPERS had the information already; one was a fund in which CalPERS had sold its interest and they basically told CalPERS to bugger off.

CalSTRS, CalPERS okay risk reduction Capitol -- CalPERS and CalSTRS both adopted plans this month to reduce the risk of major pension investment losses, a small step back for pension systems once required to keep all of their money in stable and predictable bonds. A voter-approved measure in 1966 allowed public pension funds to invest up to 25 percent of their assets in blue-chip stocks. In 1984 voters approved another measure allowing all of the pension funds to be invested in anything deemed prudent. Over a phase-in period the average CalPERS increase will be roughly 50 percent. The CalSTRS increase for school districts will be well over 100 percent by the end of the decade.With diversified portfolios mainly in stocks and other higher-yielding investments, the two big pension funds had little loss protection during the recent deep recession and stock market crash. The California Public Employees Retirement System lost $100 billion, a plunge from $260 billion in fall 2007 to $160 billion in March 2009. The California State Teachers Retirement System lost $68 billion, a drop from $180 billion to $112 billion. Despite a major bull market, the pension funds have not recovered. The CalPERS fund, valued at $295 billion, has about 74 percent of the projected assets needed to pay future pensions. CalSTRS, with $188 billion, is about 69 percent funded.

Pensions’ Private-Equity Mystery: The Full Cost - WSJ: Public pensions are owning up to a painful truth about their private-equity bets: They never totaled the bill. For years, officials who oversee retirements for teachers, firefighters and other government workers said they failed to either ask or disclose how much private-equity firms kept in performance fees, the biggest source of profits for outside money managers. Now, pension funds from New York to California are doing those calculations and revealing much bigger sums than they had ever made public. The size of the expenses could mean tougher scrutiny of private-equity investments and more pressure to cut back those holdings or negotiate lower fees. The California Public Employees’ Retirement System is expected to announce this week that it paid private-equity firms billions of dollars more over the past 17 years than it had previously disclosed, according to people familiar with the situation. Similar assessments made public recently by retirement systems in New Mexico, South Carolina, Kentucky and New Jersey showed total costs were as much as 100% higher than originally disclosed.

TVA racks up $6 billion shortfall in its employee pension fund - The Tennessee Valley Authority lost $762 million in its pension fund investments in fiscal 2015, leaving the federal agency with a record high $6 billion shortfall in its employee retirement system. TVA's pension plan, which provides benefits to 23,700 retirees and also includes nearly 10,000 active TVA employees, reported assets of $6.8 billion as of Sept. 30, or only 53 percent of the $12.8 billion that actuaries estimate the plan needs to provide all of the future benefits promised to TVA workers and retirees. "Employees and retirees at TVA are worried at the end of the day if they are going to get their promised benefits," said Leonard Muzyn Jr., an energy market analyst for TVA in Chattanooga who has served on the Tennessee Valley Authority Retirement System board for the past 12 years. "We only have slightly more than half the money we need to pay for the program, and TVA has deferred $5.4 billion to future customers to pay for these benefits. What if the competitive landscape for utilities worsens and TVA can't collect that money? It's a big concern for a lot of people." Muzyn said TVA's pension fund has been "at risk" from a lack of adequate funding for the past eight years.

Intel Lawsuit Questions Place of Hedge Funds in Retirement Plans - “We push the boundaries.”That’s how Intel Corporation, the respected Silicon Valley computing giant, describes its role as an innovator and creator of value for shareholders, customers and society.But pushing boundaries in another area — oversight of its $14.6 billion employee retirement plans — is bringing Intel unwanted scrutiny. Big bets on hedge funds and private equity in those plans drew a lawsuit late last month from a former employee, Christopher M. Sulyma. He contends that these investments have increased risks and costs in the retirement portfolios, hurting plan participants.The lawsuit against Intel and members of its board who oversee the plan’s operation and investments is the latest in an increasingly successful line of actions brought against companies offering 401(k) plans to their workers. These cases have argued that the retirement plans were being run in a manner inconsistent with fiduciary requirements.While each lawsuit against a 401(k) plan sponsor varies, most involve high and often hidden fees levied on participants.The case against Intel has a different twist. At its heart is this question: Should hedge funds, private equity portfolios and commodities be anywhere near a 401(k) plan?

Florida employers face higher health insurance costs in 2016 - A study from Mercer Health & Benefits LLC shows that Florida employers are expecting to pay more for health care coverage in 2016.  Specifically, 99 large and small companies in Florida responded to a Mercer survey, saying a 4.7 percent increase in cost per individual is expected in 2016, after adjustments are made to their health coverage plans. This is slightly lower than the increase Florida companies saw at the beginning of 2015, which was 5.7 percent, said Matthew Snook, a partner at Mercer.   Nationally, employers are expecting an average cost increase per individual health coverage plan of 4.3 percent, according to the survey findings. "Florida is very typical of the country, on average," Snook said. Findings from the survey also show 36 percent of companies in Florida are on track to be hit with the excise tax in 2018. The excise tax, also know as the "Cadillac tax," is a 40 percent tax beginning in 2018 on health care plans that exceed $10,200 worth of benefits for an individual, or $27,500 for families. This is most likely to impact large employers, a recent Kaiser Family Foundation survey found, because they often offer flexible spending accounts (FSAs) as an employee benefit. FSAs are accounts that employees can put pre-tax dollars into to pay for out-of-pocket health care costs.. Nationally, Mercer found that 23 percent of large employers are expected to be hit by the excise tax in 2018, meaning the percentage of Florida companies is 13 percent higher than the national average.

Survey: More patients avoiding healthcare due to rising prices - - Many people with health problems are avoiding the doctor because of high healthcare costs. more than one-third of low-wealth Americans report they didn’t seek care or get a prescription filled because of steep co-payments. That’s according to a recent survey by the commonwealth fund. Four out of five of those individuals were required to pay a deductible, which has steadily risen over the last five years. In 2009, people on average paid $900 a year in deductibles alone, while the average for 2015 is $1,300. “I guess it’s just the fear of how much it’s going to cost you, and not being able to pay your other bills.” explained Marble Hill resident Mark Welker on Sunday, “Something’s going to have to give, and usually it seems to be your health first, just to make ends meet for everything else.” “I think it’s something that we’re facing more of.” Explained Southeast Health Chief Medical Officer Matt Shoemaker, “The patients are facing pressure from the insurance industry, and to be able to afford the premiums, they’re having to go with higher deductible plans.” Shoemaker also says the “healthcare industry as a whole has not done a very good job of keeping costs down in recent years.” A separate analysis Conducted in September by the Kaiser Foundation appears to back that claim; it revealed the average price of a healthcare deductible rose more than 6-times faster than a typical worker’s earnings since 2010.

UnitedHealth suggests Obamacare is being gamed - In a profit warning that sent its stock down as much as 7% Thursday, UnitedHealth Group Inc. said that not enough people are signing up under the exchanges set up by Obamacare and that it was considering withdrawing from them. But there was another factor behind the lowered outlook from the nation’s biggest health insurer: people signing up after the open-enrollment period that have higher claims. Or, less charitably—people are gaming Obamacare. In UnitedHealth’s  words: “We have identified higher levels of individuals coming in and out of the exchange system to use medical services.” This isn’t supposed to happen. There are so-called special enrollment periods, meant to be 60 days following certain life events—marriage, birth of a child, or a loss of health coverage.  Other special periods include moving, gaining citizenship, gaining or losing a dependent, having a change in income or household status that impacts eligibility for tax credits or cost-sharing reductions, and leaving jail. A spokesman for UnitedHealth acknowledged the issue but didn’t provide more details on how this was occurring or what medical services these out-of-enrollment users sought.

Is the ACA in trouble?: United Health Care’s surprise announcement that it is considering whether to stop selling health insurance through the Affordable Care Act’s health exchanges in 2017 and is also pulling marketing and broker commissions in 2016 has health policy analysts scratching their heads. ...  Is United’s announcement seriously bad news for Obamacare, as many commentators have asserted? Is United seeking concessions in another area and using this announcement as a bargaining chip? Or, is something else going on? The answer, I believe, is that the announcement, while a bit of all of these things, is less significant than many suppose. ...  What seems to have happened—one can’t be sure...—is that the company, which mostly delayed its participation in the individual exchanges until 2015, incurred substantial start-up costs, enrolled few customers who turned out to be sicker than anticipated, and experienced more-than-anticipated attrition. Other insurers, including Blue-Cross/Blue-Shield plans nation-wide which hold a dominant position in individual markets in many states, did well... But minor players in the individual market, such as United, may have concluded that the costs of developing that market are too high for the expected pay-off. ... What this means is that United’s announcement is regrettable news for those states from which they may decide to withdraw, as its departure would reduce competition. United might also use the threat of departure to negotiate favorable terms with states and the Administration. ... But it would be a mistake to treat United’s announcement, presumably made for good and sufficient business reasons, as a portentous omen of an ACA crisis.

Why The Obamacare Exchanges Are Failing -- I reported earlier this week that the Obamacare Marketplace is slowly failing. Three days later the largest health insurer in America, UnitedHealth Group, announced it expects to lose $500 million on exchange plans next year and may exit the market in 2017. The issue for many insurers is they were encouraged to participate in the exchange in return for a temporary risk sharing program called Risk Corridors. Under this program, all insurers paid into a pot of money and the firms suffering excessive losses were to share the funds based on a formula. However, a budget deal passed late in 2014, the ‘Cromnibus’ Spending Bill, required the program to be budget neutral. The losses far exceeded the pot of money collected by the program. Insurers have only received about $0.13 cents on the dollar of what they would have gotten under an opened-ended program. The Centers for Medicare and Medicaid Services (CMS) has affirmed insurers will get their money. But the question is: where it is going to come from? CMS has $363 million to divvy up while insurers have requested $2.87 billion. Why are insurers losing so much money? In my original article, I stated the exchange plans are suffering adverse selection due to the perverse regulations which drive up costs – making health coverage a bad deal for all but the sickest enrollees. The only people enrolling are those who are eligible for the most generous subsidies. Consider what Larry Levitt, a health insurance analyst with the Kaiser Family Foundation, told Bloomberg. “The ACA marketplaces are not yet profitable for most insurers,” “It’s going to take enrollment growth, especially among healthy people, to make it an attractive market for insurers. If enrollment stagnates, we could very well see insurers thinking twice about their participation.”

Quarter of adults struggling to cover healthcare costs, high deductibles, Commonwealth Fund says -- A new report by The Commonwealth Fund has found that a quarter of working-age adults struggle to pay for their healthcare in 2015 in the wake of rising deductibles and out-of-pocket costs.  The Health Care Affordability Index report also found that among adults with low incomes, 53 percent simply can't afford healthcare.  The results were in line with Commonwealth's 2014 findings, suggesting the problem isn't getting any better.   Accounting for all private, individual or marketplace insurance, the Affordability Index found that only 13 percent of adults felt their premiums were too pricey, and 10 percent said they had unaffordable deductibles. However, 43 percent said their deductibles were placing them under undue financial burden. Half of low- to moderate-income individuals reported the same, while a significant number of adults with higher incomes -- 32 percent -- said it was difficult to afford their deductibles.  When it came to visiting a doctor or filling prescriptions, fewer people had difficulty affording copayments and coinsurance. But the lowest-income respondents, those with incomes under 20 percent of poverty line, said it was difficult or impossible for them to afford their payments. Roughly one-third of low-income adults also said that this was the case.  This is problematic for employers and insurers who want to discourage people from overusing healthcare services, or utilize services that, from a medical standpoint, may be unnecessary. The survey finds that cost-sharing also creates disincentives for people to obtain necessary care, such a prescription drugs or doctor visits prompted by illness.

How the TPP may put your health care data at risk --- The Trans Pacific Partnership (TPP), a massive trade agreement that covers nearly 40 per cent of world GDP, wrapped up years of negotiation earlier this month. The TPP immediately emerged as an election issue, with the Conservatives trumpeting the deal as a source of future economic growth, the Liberals adopting a wait-and-see approach (the specific details of the agreement are still not public) and the NDP voicing strong opposition. The focal point of most TPP discussion in Canada has centered on two sectors: the dairy industry, which would experience a modest increase in competition and receive a staggering multibillion-dollar compensation package, and the automotive parts sector, which would face Asian-based competition as a result of new, lower local content requirements (the industry is also pressing for a compensation package). Lost in the discussion over imported butter and Japanese-made auto parts are the broader implications of the TPP. New rules on corporate lawsuits could result in more claims by foreign corporations against the Canadian government over national policies or court decisions (pharmaceutical giant Eli Lilly is already suing the government for $500 million over Canadian patent rulings) and an extension in the term of copyright beyond the international standard would lock down the public domain for decades and potentially cost Canadians hundreds of millions of dollars per year.

How the TPP Will Create a Medical Privacy Hellscape -- Matthew Cunningham-Cook - On October 6, the European Court of Justice issued a sweeping ruling invalidating the existing cross-Atlantic data transfer agreement, putting the entire business model of companies like Facebook and Google at risk. Lo and behold, just a month later comes a trade agreement that will make sure that Facebook and Google’s little legal problems in Europe won’t happen in. say, Australia, Japan, New Zealand or Canada.To wit, from the TPP’s electronic commerce chapter: Each Party shall allow the cross-border transfer of information by electronic means, including personal information, when this activity is for the conduct of the business of a covered person.  It’s unfortunately widely accepted–even in the EU–that companies like Facebook and Google consider consumer data a commodity to be bought and sold. There is little variance across the world as to this fact. But medical data is a whole other area entirely, with a range of laws protecting medical privacy across the TPP zone. But what happens when medical data is transferred to another country? The EU’s  Directive on Data Protection explicitly prohibits the offshoring of EU citizen data to countries with lower security standards. But HIPAA has none of the same protections–an overhaul of HIPAA to make its protections stronger could be prevented by TPP rules. The Inspector General of the Department of Health and Human Services already found data protections sorely lacking in 2014, when it wrote: “For example, Medicaid agencies or domestic contractors who send [personal health information] offshore may have limited means of enforcing provisions of BAAs [business associate agreements] that are intended to safeguard PHI. Although some countries may have privacy protections greater than those in the United States, other countries may have limited or no privacy protections to support HIPAA compliance.” So the short of it is this: medical data protection in the US is already poor compared to the EU, and TPP could preempt any effort to strengthen protections–sending any changes directly to an investor-state tribunal, where it is more likely than not to be overturned.

Big Pharma has become addicted to an illusion - Pharmaceuticals companies used to be research enterprises that discovered and developed drugs. Then they became marketing giants, skilled at selling as many blockbuster pills as possible. Lately, they have turned into mergers and acquisitions machines, buying and selling medicines invented by others. It is hard to view their evolution as progress. Pfizer’s $160bn planned acquisition of Dublin-based Allergan, the maker of Botox, has attracted loud criticism because it will allow the US group to reduce its taxes through an “inversion” into Irish domicile. It is equally a symptom of the M&A frenzy that has gripped the industry in the past couple of years, with companies lining up to bid in auctions for valuable patents. “I cannot comprehend why [the deal] is not being applauded by the political class,” Ian Read, Pfizer chief executive, complained this week. Presumably, Mr Read was being deliberately dense because it is obvious. Pfizer will not achieve its aim of “earning greater respect from society” by combining asset trading with tax arbitrage. Instead of taking their chances by investing in drug discovery themselves, some wait until a smaller biopharmaceutical enterprise has done so and then try to buy the rights. It is less risky and uncertain for investors but it also tends to be extremely expensive. AbbVie, for example, paid $21bn for Pharmacyclics this year, largely to acquire a single blood cancer treatment. Their shareholders have become addicted to mergers. The Pfizer-Allergan deal provoked their dismay not because Pfizer is paying a huge price for Botox and tax relief but because the next one was postponed. Instead of following the megamerger instantly with a demerger, it will wait at least two years before splitting its patent drugs and generics divisions. How boring!

Surprise! “Pharma-bro” Martin Shkreli reneges on promise to return jacked-up $750 per pill price on Daraprim to original $13.50 level - Promises made in the age of social media need not be kept, many think, as attention spans tighten while the world awaits its next objet d’indignation — which is another way of saying that no matter how horrible you’ve behaved, it’s not necessarily unreasonable to believe that in two months the world’s forgotten about you and your promise, so there’s no pressing need to keep it.  That’s generally true, so long as your horribleness doesn’t reach the majestic heights of Turing Pharmaceutical CEO Martin Shkreli, who increased the price of an anti-parasitic drug by 5,455 percent and claimed it was “still under-priced” before saying that his “altruistic” motive behind founding Turing was “to create a big drug company.” That bypasses the Internet’s short-term outrage circuit and gets filed away next to “2 Girls 1 Cup,” “Goatse,” and other unforgivable acts against humanity.  So when Shkreli’s company announced on Tuesday that he had decided against rolling the price of Daraprim — a drug used primarily to treat parasitic infections in pregnant women and HIV patients — back from $750 to $13.50 per pill, it wasn’t going to go unnoticed.  “We pledge that no patient needing Daraprim will ever be denied access,” said Nancy Retzlaff, a representative of a company whose track-record with pledges she was sullying with every word she spoke. She noted that “drug pricing is one of the most complex parts of the healthcare industry” and that “a drug’s list price is not the primary factor in determining patient affordability and access,” words which are meant to assuage fears that in the future, the company will continue to behave as it has in the past and does in the present.

Shkreli’s new target market: 1100 Americans-a-year --  The name should ring a bell — Martin Shkreli — that smirking chap at Turing Pharmaceuticals who jacked the price of anti-parasite drug Daraprim 50-fold, and in the process brought the widespread practice of pharma profit gouging into the public eye. Now he’s gone and done this: That’s KaloBios Pharmaceuticals, a seemingly bust US biotech that’s spent the past three years as a listed company failing to produce anything of use to society. Just last week the management threw in the towel; a de-listing from Nasdaq was set in train. Then Shkreli turned up with a promise of $3m of fresh cash and a new set of board members, taking 70 per cent of the equity. The share price set off for the moon, quite a few hapless shorts were smoked (short interest was at 8 per cent, according to Reuters) and everyone is now generally agog that a share price can rise almost 5000 per cent in the space of five days (before correcting 15 per cent on Tuesday). From less than a dollar on 18 November to a high of $45 on Monday, the stock was trading at $33 at pixel. What fun! Except has anyone actually looked at what Shkreli and his band of supporters are betting on here? KaloBios has a drug called lenzilumab. It recently failed basic Phase II trials as an asthma treatment. That was the previous management’s last hope.But the plan now is to try lenzilumab on a form of leukaemia, known as CMML. But it’s rare.Very rare. It affects four in every one million Americans each year, according to the American Cancer Society. That works out at approx. 1100 new potential patients annually if lenzilumab is proved to be effective. And where are we with that? Nowhere. Nevertheless, KaloBios is now valued at circa $150m.

Coca-Cola's Had a Secret Hand in Anti-Obesity Group: A nonprofit founded to combat obesity says the $1.5 million it received from Coke has no influence on its work.But emails obtained by The Associated Press show the world’s largest beverage maker was instrumental in shaping the Global Energy Balance Network, which is led by a professor at the University of Colorado School of Medicine. Coke helped pick the group’s leaders, edited its mission statement and suggested articles and videos for its website.In an email last November, the group’s president tells a top Coke executive: “I want to help your company avoid the image of being a problem in peoples’ lives and back to being a company that brings important and fun things to them.”Coke executives had similarly high hopes. A proposal circulated via email at the company laid out a vision for a group that would “quickly establish itself as the place the media goes to for comment on any obesity issue.” It said the group would use social media and run a political-style campaign to counter the “shrill rhetoric” of “public health extremists” who want to tax or limit foods they deem unhealthy.

American Hunger-Related Healthcare Costs Exceeded $160 Billion in 2014, According to New Study - While the official end of the Great Recession is a full five years behind us, there are now nearly 12 million more Americans who lack enough resources to access adequate food than there were in 2007, a number that has only improved slightly since United States food insecurity peaked at over 21 percent in 2009. These statistics alone are disturbing. But as detailed in a new study released today as part of Bread for the World Institute’s 2016 Hunger Report, absence of food security in the U.S. carries enormous healthcare costs, more than $160 billion in 2014. Using data from the U.S. Department of Agriculture (USDA), Census Bureau and research on food security published in peer-reviewed academic journals between 2005 and 2015, a team of researchers led by Boston University School of Medicine associate professor of pediatrics John Cook, estimated these health care costs by looking at the costs of treating diseases and health conditions associated with household food insecurity plus earnings lost when people took time off work because of these illnesses or to care for family members with illnesses related to food insecurity. Currently about 50 million Americans meet the USDA criteria for food insecurity. About 15 million of them are children. In 2014, 19.2 percent of U.S. households with children were food insecure–about a third higher than households without. The Boston University research team found if the costs of special education for children whose learning abilities are aversely affected by food insecurity are factored in along with related education impacts for high-schoolers, the $160 billion rose by an additional nearly $18 billion. This brings a total estimate of direct and indirect health care costs of U.S. food insecurity in 2014 to $178.93 billion.

Researchers find link between air pollution and heart disease - Researchers from the Johns Hopkins Bloomberg School of Public Health have found a link between higher levels of a specific kind of air pollution in major urban areas and an increase in cardiovascular-related hospitalizations such as for heart attacks in people 65 and older. The findings, published in the November issue of Environmental Health Perspectives, are the strongest evidence to date that coarse particulate matter - airborne pollutants that range in size from 2.5 to 10 microns in diameter and can be released into the air from farming, construction projects or even wind in the desert - impacts public health. It has long been understood that particles smaller in size, which typically come from automobile exhaust or power plants, can damage the lungs and even enter the bloodstream. This is believed to be the first study that clearly implicates larger particles, which are smaller in diameter than a human hair. "We suspected that there was an association between coarse particles and health outcomes, but we didn't have the research to back that up before," says study leader Roger D. Peng, PhD, an associate professor of biostatistics at the Bloomberg School. "This work provides the evidence, at least for cardiovascular disease outcomes. I don't feel like we need another study to convince us. Now it's time for action."

Unicef: Aids tops list of teen death causes in Africa - The Nation: Aids is the number one cause of death among teenagers in Africa, the United Nations Children's Fund (Unicef) said on Friday. Among HIV-affected populations, adolescents are the only group for which the mortality figures are not decreasing, the organisation said in a statement about its report titled "Statistical Update on Children, Adolescents and Aids". "It is critical that young people who are HIV-positive have access to treatment, care and support," Craig McClure, the head of Unicef’s global HIV/Aids programmes, said in the statement. "At the same time, those who are HIV-negative must have access to the knowledge and means to help them to stay that way." According to the UN agency, about half of those living with HIV are in six countries - South Africa, Nigeria, Kenya, India, Mozambique and Tanzania.Aids is the second leading cause of death among adolescents globally. Most adolescents who die of Aids-related illnesses acquired HIV when they were infants, 10 to 15 years ago, and then survived into their teenage years, sometimes without knowing their HIV status, Unicef said. In sub-Saharan Africa, the region with the highest prevalence of the virus, girls are "vastly more affected", accounting for 7 in 10 new infections among 15-19 year olds, the agency said.

Bad times for good bacteria: how modern life has damaged our internal ecosystems -- Human actions damage ecosystems on a global scale. Our influence is so great we’ve triggered a new geological epoch, called the Anthropocene, simply because of the changes we’ve brought about. But it’s not just the outside environment we’ve changed, we’ve also damaged the ecosystems inside us.  Our activities alter natural processes, such as weather patterns, and the way nutrients, such as nitrogen and phosphorus, move within ecosystems. We cause declines in species diversity, trigger extinctions and introduce weeds and pests. All this comes with costs, caused by the increasing unpredictability of both physical and biological systems. Our infrastructure and agriculture rely on a consistent climate, but that’s now becoming increasingly unreliable. And it’s not just the outside world that’s unpredictable; it may come as a surprise to some that we have internal ecosystems, and that these have also been damaged.  Every adult is made up of 100 million, million human cells (that’s a one followed by 14 zeroes). But the human body is also home to ten times this number of bacterial cells, which, collectively, are called the microbiota. Biologists have only been exploring this internal ecosystem for a decade or so, but surprising and important results are already emerging.  Possibly the most direct and personal effects are on our own microbiota. And these changes come with consequences for health and well-being. Exactly the same processes we see in external ecosystems – loss of diversity, extinction, and introduction of invasive species – are happening to our own microbiota. And damaged ecosystems don’t function as well as they should.

U.S. taxpayers set to shell out for growing peanut pile - (Reuters) - A mountain of peanuts is piling up in the U.S. south, threatening to hand American taxpayers a near $2-billion bailout bill over the next three years, and leaving the government with a big chunk of the crop on its books. Peanut growers in states including Georgia and Alabama boosted sowing acreage by a fifth this spring and now are wrapping up harvesting their 3.1-million-ton crop, the second-largest ever, even as prices plumb seven-year lows. There is a debate over why it is happening and how long the supplies and costs will build. Farmers and peanut groups blame the glut on poorer market conditions for alternative crops, such as cotton and corn, and improving yields as a result of crop rotation and new varieties. Some experts say it is the unintended consequence of recent changes in farm policies that create incentives for farmers to keep adding to excess supply. One way or another, U.S. farmers look set to keep producing more peanuts than Americans can consume, leaving taxpayers on the hook. First, the U.S. Department of Agriculture (USDA) is paying farmers most of the difference between the "reference price" of $535 per ton (26.75 cents per lb) and market prices, now below $400 per ton. A Nov. 18 report to Congress estimates such payments this year for peanuts exceed those for corn and soybeans by more than $100 per acre. (Graphic:  Secondly, government loan guarantees mean once prices fall below levels used to value their crops as collateral, farmers have an incentive to default on the loans and hand over the peanuts to the USDA rather than sell them to make the payments.

Hedge funds near-eliminate their net long in ags: Hedge funds all but wiped out their net long position in derivatives in the main agricultural commodities, led by selldowns in coffee, and in wheat, in which unexpectedly bearish positioning could set the scene for a price bounce. Managed money, a proxy for speculators, cut its net long position in futures and options in the top 13 US-traded agricultural commodities, from corn to cotton, by a little over 59,000 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows. The decline took the net long - the extent to which long bets, which profit when values rise, exceed short holdings, which benefit when prices fall – to 8,242 contracts, the smallest in five months, and well down on the net long of nearly 350,000 lots held a month ago. And it reflected in the main a selldown in the major grains, in which ideas of ample world supply and strong competition for orders - in particular since an upgrade two weeks ago to official estimates for US inventories - have undermined sentiment. 'Could cause a reaction' Indeed, the sales were so large that they raised some ideas that hedge funds might be reluctant to add to their short positions for now, for fears of overegging bearish bets.

Palm Oil Facing `Powerful Cocktail’ of El Nino, Fuel Demand --  Palm oil will extend its rally next year as the worst El Nino in almost two decades curbs output in the world’s biggest producers and Indonesia uses more for fuel, according to delegates at a conference in Bali.  The most consumed cooking oil found in everything from candy to instant noodles has jumped 26 percent from a six-year low in August after drought and smog hurt plantations in Southeast Asia. At the same time Indonesia is raising the amount of palm blended with diesel to 20 percent from 15 percent.  “El Nino and the Indonesian biodiesel mandate are a powerful cocktail that has the potential to drive prices in 2016,”  This El Nino will probably rank among the three strongest since 1950, the World Meteorological Organization says. It’s comparable to record events in 1997-98 and 1982-83, according to the Australian government. Output fell 5.5 percent in Malaysia and 7.2 percent in Indonesia in 1998, U.S. Department of Agriculture data show. Production slid 5.1 percent in Malaysia in 1983. The two countries supply about 86 percent of the world’s palm oil. Palm oil output in Indonesia and Malaysia will stagnate or decline next year, conference speakers said. James Fry, chairman of LMC International Ltd., predicted a 9 percent drop in Indonesian production and 4.5 percent slide in Malaysian output on a full-blown El Nino, while Fadhil Hasan, executive director of the Indonesian Palm Oil Association, expected a decline of 3 percent to 5 percent. While estimates varied on how much palm would be used as biodiesel in 2016, most delegates predicted an increase.

Ultimate Weapon in Existential Struggle: Using the TPP for Hostile Takeover of Mexican Agriculture -- Don Quijones - Resisting Monsanto, the world’s largest, most influential GMO giant, is an almost impossible task.  Few countries are more aware of this fact than Mexico, where a small collective of activist groups, scientists, artists and gourmet chefs have been engaged in a titanic legal struggle with Monsanto. Although they keep winning crucial battles, the war is still likely to be won by Monsanto, thanks to one key weapon in its arsenal: the Trans-Pacific Partnership. For Mexican smallholders and consumers, the struggle with Monsanto & Friends is an existential one. In a 2013 ruling banning the cultivation of GMOs in Mexico, Judge Manuel Zaleta cited the potential risks to the environment posed by GMO corn. If the biotech industry got its way, he argued, more than 7000 years of indigenous maize cultivation in Mexico would be endangered, with the country’s 60 varieties of corn directly threatened by cross-pollination from transgenic strands. Not only that: on Wednesday, in a separate lawsuit brought by Mayan beekeepers, Mexico’s Supreme Court ruled to block a move to allow the planting of genetically modified soy seeds in the southern Mexican states of Campeche and Yucatan, arguing that indigenous communities that had fought the move should be consulted before it was approved.  For a company that is long accustomed to getting its way in just about every jurisdiction on planet Earth, the constant obstructionism of the Mexican justice system is beginning to wear thin for Monsanto. But the company and its rivals still have one ace up their sleeves, a weapon that has the potential to obliterate Mexico’s judicial resistance in one fell swoop: the Trans-Pacific Partnership, the world’s biggest trade agreement that was recently signed by the governments of 12 Pacific-rim nations, including Mexico. Buried deep within the 5,000-plus page deal is the Intellectual Property Rights charter which, among many other sinister things, requires all 12 TPP countries to join a number of global intellectual property treaties, an agreement that elevates the rights of seed companies over farmers’ rights.

EPA Asks Court to Revoke Agency’s Approval of New Weed Killer for Genetically Engineered Crops - In a stunning reversal, the U.S. Environmental Protection Agency (EPA) has retreated from its earlier decision to let Dow AgroSciences market a new weed killer, branded Enlist Duo, which the company designed to kill hardy weeds on fields of genetically engineered (GMO) corn and soybeans.The agency said the product could pose potentially significant environmental risks, according to court documents filed Tuesday. “This sudden reversal shows that the EPA’s review and assessment of the Dow AgroSciences product was deeply flawed and incomplete,” said Mary Ellen Kustin, senior policy analyst for Environmental Working Group. “The EPA now has a second chance to step back and rethink the consequences of allowing Enlist Duo on the market. In our view, this chemical ‘solution’ would only keep farmers tethered to a chemical treadmill.”  In October 2014, EPA approved Dow AgroSciences’ request to market Enlist Duo, a mix of the herbicides glyphosate and 2, 4-D, in six states. In March 2015, EPA lengthened the list to 15 states. The company developed this new combination to fight so-called “superweeds” that have evolved to survive blasts of glyphosate, marketed as Monsanto’s Roundup, widely used on GMO corn and soybeans. But Tuesday, responding to a lawsuit filed by a coalition of environmental groups, including Environmental Working Group, the EPA lawyers told the U.S. Court of Appeals for the 9th Circuit that Dow AgroSciences had withheld data showing that the chemical mix has “synergistic effects,” meaning that the combination of pesticides intensifies the toxicity of the product to plants and possibly other living things.

Farmers worry new bill will allow GMO contamination - ACTIVIST AGRICULTURAL groups and organic farmers have expressed concern over a proposed Biological Safety Bill they say will lead to contamination of their crops by genetically modified organisms (GMO). Biothai Foundation director Witoon Lianchamroon warned against the Biological Safety Bill yesterday. He said if this bill passes Parliament and becomes effective, it will open the way for giant transnational biotechnology conglomerates to shirk their responsibility for the damage GMO contamination can cause to the environment. The Bill was approved by the Cabinet yesterday despite widespread protests over GMO liberalisation in Thailand by NGOs and organic farmers. The draft, presented by the Natural Resources and Environment Ministry, was accepted by the Cabinet. The bill will now proceed for its final consideration by the National Legislative Assembly. "The GMO liberalisation will definitely cast a huge negative impact on the agriculture, economy and healthcare of our nation. If the giant conglomerates are allowed to freely introduce GMO crops to our country, contamination of these genetically modified species to the environment is inevitable," Witoon said."And the bill did not mention anything about responsibility for the GMO contamination, which could cost more than Bt10 billion."  Witoon explained that GMO contamination would severely affect the country's agricultural sector, as the crop of other farmers would mix with the GMO gene. This would make it impossible to sell the crop to GMO-free markets like Japan and Europe. He further pointed out that the contamination would also reduce the biodiversity of the crop, alter the ecosystem, and consumption of the GMO product might cause health problems for consumers.

Genetically engineered salmon: What could possibly go wrong?  --As U.S. regulators cleared genetically engineered salmon for sale in the United States last week, they opened the door to what many scientists already feel is inevitable: The escape and reproduction of GE salmon in the wild and the possible destruction of competing wild species. Under the U.S. Food and Drug Administration-approved application, the company behind the so-called AquAdvantage Salmon, Aqua Bounty, can only raise such salmon in land-based tanks with "multiple and redundant levels of physical barriers to prevent eggs and fish from escaping." These barriers are described in detail and suggest that it will be very difficult for any eggs or fish to escape into waterways.  The FDA should be asking if there is ANY LIKELIHOOD WHATSOEVER that the salmon will escape, survive, disperse, reproduce and establish populations in the wild. Because although the salmon are sterilized, the "sterilization technique is not foolproof," according to The New York Times.  Any invention with a nonzero risk of systemic ruin and which is produced and deployed long enough will with almost 100 percent certainty create that ruin. Put more informally, if you keep repeating something that each time you repeat it has a small chance of creating catastrophe, eventually you will produce catastrophic conditions, that is, systemic ruin. Systemic ruin in this case would be the ruination of the wild salmon fisheries overrun by the GE type.  And, the damage might include other harmful effects to waterways and their associated wildlife that we cannot now anticipate. Remember, this is a fish that we've never seen operate in any existing ecosystem. We have no empirical data about its possible effects; and, releasing such fish into the wild to obtain that data risks the very ruin we wish to avoid.

Saudi Arabia Is Running Dry : For decades, Saudi Arabia seemed to regard its most precious resource as limitless. The Saudis built huge installations in the desert, and pumped out vast quantities of the stuff.  From the late 1970s onward, Saudi Arabian businessmen spent an estimated $85 billion developing wheat crops and production of other kinds of grains in the country’s northern desert. Underlying it all was the existence of a Lake Erie-sized aquifer of “fossil” water, so named because of its origins in the last Ice Age. On satellite photos, the fields look like giant green circles, as much as a mile in diameter — a function of the center-pivot sprinkler systems used to irrigate the wheat. For the last 30 years or so, Saudi Arabia’s experiment seemed successful. The production of wheat, barley and alfalfa soared from 201,000 hectares in 1973 to more than 1.1 million hectares in 1992. By the 1990s, the country turned itself from an importer of food into a net exporter, with much of its excess crop sold to neighboring countries. Experts warned over the years that the Saudis’ endeavor couldn’t last. In a famous 2004 report called “Camels Don’t Fly, Deserts Don’t Bloom,” Saudi analyst and banker Elie Elhadj said it was doubtful his country could sustain its domestic farm production. It drained too much water. Looks like he was right.  The last harvest of Saudi-grown wheat was in May, according to a recent Bloomberg report. Starting next year, the country will need to import 100% of that crop.It doesn’t end there. The Saudis also need to import alfalfa, too. Some of the largest dairy farms in the world are located, paradoxically, in Saudi Arabia. Those dairy cows need alfalfa to eat and produce milk.

In California, Stingy Water Users Are Fined in Drought, While the Rich Soak - Outside her two-story tract home in this working-class town, Debbie Alberts, a part-time food service worker, has torn out most of the lawn. She has given up daily showers and cut her family’s water use nearly in half, to just 178 gallons per person each day. A little more than 100 miles west, a resident of the fashionable Los Angeles hills has been labeled “the Wet Prince of Bel Air” after drinking up more than 30,000 gallons of water each day — the equivalent of 400 toilet flushes each hour with two showers running constantly, with enough water left over to keep the lawn perfectly green.Only one of them has been fined for excessive water use: Ms. Alberts.Four years into the worst drought in California’s recorded history, the contrast between the strict enforcement on Californians struggling to conserve and the unchecked profligacy in places like Bel Air has unleashed anger and indignation — among both the recipients of the fines, who feel helpless to avoid them, and other Californians who see the biggest water hogs getting off scot-free.

Let It Snow - California Drought Recovery Remains "Extremely Unlikely" -- While so much hope is pinned on El Nino relieving California's drought in early 2016, climatologists suggest tempering that optimism a little as what is really needed is snow. "Since it has been dry for so long, people get excited,” says one hydrologist, but, as Bloomberg reports, without snow "the notion of fully recovering from the drought is extremely unlikely,” as if the storms come in as rain, or the mountain snow can’t pile up high enough, a lot of water will be lost.  As Bloomberg reports, The drought relief for California widely expected from El Nino in early 2016 will be far more effective if a chill descends soon -- ideally with a bit of snow. “If we can get some snow on the ground and some cold nights, it will set up the snowpack and get cool air pooling,” Cool air, especially at high altitudes, will help ensure snow falls and stays on the ground in the mountains through the winter, as needed to supply the state’s reservoirs. During the winter of 2014-15, the three-month average temperature in the Sierra region topped the freezing mark of 32 degrees Fahrenheit (zero Celsius) for the first time in records dating to 1950, data compiled by Anderson show.  California as a whole posted its warmest February on record and both December and January came in among the top 10, according to the National Centers for Environmental Information in Asheville, North Carolina. Here is why all of this is important: If El Nino delivers the promised increase in big, wet storms off the Pacific from January to March, California needs a lot of what falls from those systems to be snow. If the storms come in as rain, or the mountain snow can’t pile up high enough, a lot of water will be lost.

California must capture water, not waste it - Peter Gleick - For the last century, California has had two key strategies for dealing with its winter wet season: Build big reservoirs on the rivers draining the Sierra Nevada to capture and store seasonal runoff and floodwater, and rely on mountain snowpack to build up in the winter and melt slowly over the spring and early summer. That approach brought great benefits to us and helped tame California's naturally variable weather.  But the era of big dams is over. We've built on all the decent dam sites (and some not-so-decent ones), federal money for Western water projects has dried up and the environmental damage caused by dams is now better known. As a result, it is unlikely that more than one or two new big dams will be built in California, and they would do little to expand the amount of water we can actually use.As for the snowpack, despite El Niño's potential to drop a lot of snow in the Sierra, as the climate warms, future snowpack will be smaller and it will melt faster, putting more strain on our water supply.California's water problems require a multitude of responses. We must reduce inefficiency and waste, and we must find new sources of water. One important approach is to improve our ability to capture, treat and use urban storm water, especially in the Los Angeles and San Francisco Bay areas.As we have paved our cities, covering the land with impervious concrete and asphalt, less and less rain is recharging urban groundwater; it's running off all those hard surfaces into storm sewers and out to the ocean.

2015 Hottest Year Ever Recorded … Until 2016, UN Weather Agency Reports - The World Meteorological Organization (WMO) announced today that 2015 is likely to top the charts as the hottest year in modern observations, with 2011-15 the hottest five-year period on record. With two full months still to add in, the global average surface temperature for January to October in 2015 was 0.73C above the 1961-1990 average. This already puts it a long way above 2014, in which average global temperature reached 0.57C above the 1961-1990 average. This year’s record is down to a combination of rising greenhouse gases and a boost from the strong El Niño underway in the Pacific, says the WMO. Today’s announcement is timed to coincide with the gathering of world leaders on Monday to begin talks in Paris aimed at striking a deal to reduce global emissions.  To put today’s news another way, global temperature in 2015 is likely to pass the “symbolic and significant” threshold of 1C above preindustrial levels, says the WMO.

An Unprecedented Thanksgiving Visitor: a Category 4 Hurricane by Jeff Masters and Bob Henson --Remarkable Hurricane Sandra exploded into a Category 4 storm with 145-mph winds overnight, making it the latest major hurricane ever observed in the Western Hemisphere (November 26). The previous record was held by an unnamed Atlantic hurricane in 1934 that held on to Category 3 status until 00 UTC November 24. Sandra is also now the latest Category 4 storm ever observed in either the Eastern Pacific (previous record: Hurricane Kenneth on November 22, 2011) or the Atlantic (previous record: "Wrong Way" Lenny on November 18, 1999). Prior to Sandra, the strongest East Pacific hurricane so late in the year was 1983’s Winnie, which topped out on December 6 at 90-mph winds. Sandra is the first major hurricane in the Western Hemisphere that has ever been observed on Thanksgiving Day. According to WU contributor Phil Klotzbach (Colorado State University), Sandra is on track to become the latest landfalling tropical cyclone on record for Mexico, beating out Tara (November 12, 1961). An Air Force Hurricane Hunter mission is scheduled for Sandra on Friday afternoon.

Weather disasters occur almost daily, becoming more frequent: U.N. - Weather-related disasters such as floods and heatwaves have occurred almost daily in the past decade, almost twice as often as two decades ago, with Asia being the hardest hit region, a U.N. report said on Monday. While the report authors could not pin the increase wholly on climate change, they did say that the upward trend was likely to continue as extreme weather events increased. Since 1995, weather disasters have killed 606,000 people, left 4.1 billion injured, homeless or in need of aid, and accounted for 90 percent of all disasters, it said. A recent peak year was 2002, when drought in India hit 200 million and a sandstorm in China affected 100 million. But the standout mega-disaster was Cyclone Nargis, which killed 138,000 in Myanmar in 2008. While geophysical causes such as earthquakes, volcanoes and tsunamis often grab the headlines, they only make up one in 10 of the disasters trawled from a database defined by the impact. The report, called "The Human Cost of Weather Related Disasters", found there were an average of 335 weather-related disasters annually between 2005 and August this year, up 14 percent from 1995-2004 and almost twice as many as in the years from 1985 to 1994.

Anger rises as Brazilian mine disaster threatens river and sea with toxic mud  - This weekend, 16 days after the collapse of the Fundão dam supporting the reservoir of the Samarco mine, the waters in the delicate ecosystem of the Rio Doce estuary began to turn brown. A crowd gathered at the village’s wooden dock to watch. Behind a tape cordon, a group of technicians from Samarco, – a joint venture of the Brazilian mining company Vale and the Ango-Australian firm BHP Billiton – sat under a marquee staring at monitors. To a small village with fewer than 2,000 residents, dependent on fishing, tourism and marine conservation, the arrival of the contaminated mud represents an existential threat. “I have lived here all my life, and I never thought I would leave here,” said Bruna Cordeiro de Santos, a 29-year old teaching assistant. “Now I have started to think where are we going to go? What are we going to do?” Local fishermen, contracted by Samarco to install protective barriers along a five-mile stretch of the riverbanks, lounged at the back of the crowd in distinctive bright orange jumpsuits. Approached by the Guardian, they said they were not allowed to talk to the press. Luciano Cabral, a biologist working for the municipal environmental department, said it was too early to tell if the fine mesh barriers, anchored to the riverbed and suspended by buoys, would work. But he was cautiously optimistic that the estuary would not be as badly affected as other parts of the river. “We believe that the mud is being diluted as it travels, and that the saltwater here will help in its dispersal,” he said. On one of the sandbanks out to sea, three diggers were at work attempting to widen the mouth of the river. “The best thing that can happen now is for the mud to flow out to sea as quickly as possible,” said Antonio de Padua Almeida, a biologist and head of the local Comboios nature reserve. “The mud will have much greater impact on the river than on the sea.” According to the latest models used by the environmental agencies studying the flow, the mud plume is expected to disperse along the coast around six miles south of Regência, two miles north and 1.5 miles out to sea.

Brazil dam toxic mud reaches Atlantic via Rio Doce estuary -  A wave of toxic mud travelling down the Rio Doce river in Brazil from a collapsed dam has reached the Atlantic Ocean, amid concerns it will cause severe pollution. The waste has travelled more than 500km (310 miles) since the dam at an iron mine collapsed two weeks ago. Samarco, the mine owner, has tried to protect plants and animals by building barriers along the banks of the river. Workers have dredged the river mouth to help the mud flow out to sea fast. The contaminated mud, tested by the water management authorities, was found to contain toxic substances like mercury, arsenic, chromium and manganese at levels exceeding human consumption levels. Samarco has insisted the sludge is harmless.In an interview with the BBC, Andres Ruchi, director of the Marine Biology school in Santa Cruz in Espirito Santo state, said that mud could have a devastating impact on marine life when it reaches the sea. He said the area of sea near the mouth of the Rio Doce is a feeding ground and a breeding location for many species of marine life including the threatened leatherback turtle, dolphins and whales. "The flow of nutrients in the whole food chain in a third of the south-eastern region of Brazil and half of the Southern Atlantic will be compromised for a minimum of a 100 years," he said.

Pollution from Brazil dam burst enters the sea, killing marine life – video -- Mud and mining waste from the bursting of two mining dams in Brazil on 5 November reaches the coast on Monday, spreading out to sea. The brown plume has been working its way down the Rio Doce river since the accident, in which 12 people died with a further 11 still missing. The mining companies involved, BHP Billiton and Vale, have contracted local fishermen to collect and bury dead fish which have been washing up on the shoreline as a result of the pollution

Melting Antarctic ice sheets could add up to 30cm to sea levels by 2100 - When projecting how sea levels could rise over the coming centuries, one of the most difficult factors for scientists to gauge is how much of the Earth’s vast ice sheets will melt, and how quickly.  A new study combines the latest observations with an ice sheet model to estimate that melting ice on the Antarctic ice sheet is likely to add 10cm to global sea levels by 2100, but it could be as much as 30cm.  The regions of the Antarctic ice sheet scientists think are most vulnerable to melting are “marine-based” glaciers, which sit on land that’s below sea level. Where the face of a glacier meets the ocean, warm water can melt it from underneath, gradually forcing back the “grounding line” where the glacier sits on the land. Around 75% of the West Antarctic ice sheet, and 35% of the East Antarctic, is marine-based. Recent research suggests that the long-term collapse of several marine-based glaciers in the West Antarctic has already started.  Losing the whole West Antarctic ice sheet would eventually add three metres to global sea levels, but scientists aren’t yet sure how soon this could happen. In the new study, published today in Nature, researchers have come up with a new assessment based on the latest evidence.  The results suggest a most likely contribution from Antarctic glaciers to sea levels of 10cm by 2100, up to a maximum of 30cm. This is slightly higher than the IPCC’s estimate under the same emissions scenario of 7cm by 2100. The IPCC’s overall estimate of global sea level rise, which includes all the other factors that affect sea levels, such as melt from Greenland’s ice sheets and the oceans expanding as they warm, is 60cm by 2100 (with a likely range of 42 to 80cm). For the IPCC’s highest emissions scenario, the top end of the range goes up to 0.98m.

So what's really happening in Antarctica? -- There have been quite few big media stories related to Antarctica recently, including a paper on the irreversible collapse of the marine portion of the West Antarctic Ice Sheet and a NASA-funded study that finds, contrary to numerous previous results, that the Antarctic ice sheet as a whole has been gaining mass between 1992 and 2008. This most recent study received a lot of media attention because it runs counter to what was said in the last IPCC Report. Certain parts of the media hailed this as another sign that the impacts of climate change had somehow been exaggerated a risk that the lead author Jay Zwally was concerned about before the research was published.  So what did Zwally and his colleagues do, what did they find, and why does it contradict a plethora of previous studies that suggest Antarctica has been losing mass over the same time period?   Zwally and his team measured the changing height of the ice covering Antarctica using two types of instruments — a radar altimeter and a laser altimeter — on two different satellites. Using measurements of elevation change to estimate changes in mass requires knowing the density of the snow. This is the difficult part and one of the key reasons that Zwally’s numbers are so different from previous estimates. The density of snow at the surface of Antarctica is about 1/3 than that of solid ice.  Because the accumulation rates and temperature in East Antarctica are so low, the ice sheet has a response time to changes in climate of many millennia. So the ice sheet may still be growing even though there has been no increase in accumulation for more than 10 millennia. The difference here is crucial: if the increasing height of 1-3 cm a year is owing to recent increases in snowfall, then we should use the density of snow in the calculation. One cm of snow over the entire East Antarctic Ice Sheet (EAIS) would increase its mass by around 35 Gt (35 billion metric tons). But if the increase in height simply reflects continuing adjustment since the last glacial period, then — Zwally et al. argue — we should be using the density of ice. That would mean an 1 cm increase in height would reflect an increase in mass of ~92 Gt.

Siberia's thawing permafrost fuels climate change - Over the past year, a number of giant, mysterious holes have emerged in Siberia, some as deep as 200 metres.Scientists say the craters may be emerging because the frozen ground, or "permafrost," that covers much of Siberia has been thawing due to climate change, allowing methane gases trapped underground to build up and explode.Permafrost is ground that is permanently frozen, where the ground temperature has remained below 0 °C (32 °F) for at least two years. It covers about a quarter of the northern hemisphere's land surface.When permafrost thaws, microbes digest the plant and animal remains that were locked in the permafrost and release greenhouse gases, carbon dioxide and methane into the atmosphere.The phenomenon is a self-feeding cycle, explained Sarah Chadburn, from the University of Exeter."Permafrost soils contain vast amounts of carbon, nearly twice as much as is currently in the atmosphere. As the permafrost thaws in a warming climate, the soil decomposes and releases carbon to the atmosphere as carbon dioxide and methane. These are greenhouse gases, and they warm the Earth even more. This leads to more permafrost thawing, more carbon release, and so the cycle continues," Chadburn said.

Global warming will be faster than expected -- -   Global warming will progress faster than what was previously believed. The reason is that greenhouse gas emissions that arise naturally are also affected by increased temperatures. This has been confirmed in a new study from Linköping University that measures natural methane emissions. "Everything indicates that global warming caused by humans leads to increased natural greenhouse gas emissions. Our detailed measurements reveal a clear pattern of greater methane emissions from lakes at higher temperatures," says Sivakiruthika Natchimuthu, doctoral student at Tema Environmental Change, Linköping University, Sweden, and lead author of the latest publication on this topic from her group. Over the past two years the research team at Linköping University has contributed to numerous studies that all point in the same direction: natural greenhouse gas emissions will increase when the climate gets warmer. In the latest study the researchers examined the emissions of the greenhouse gas methane from three lakes. The effects were clear and the methane emissions increased exponentially with temperature. Their measurements show that a temperature increase from 15 to 20 degrees Celsius almost doubled the methane level. The findings was recently published in Limnology and Oceanography. While increased anthropogenic emissions of greenhouse gases are expected and included in climate predictions, the future development of the natural emissions has been less clear. Now knowledge of a vicious circle emerge: greenhouse gas emissions from the burning of fossil fuels lead to higher temperatures, which in turn lead to increased natural emissions and further warming. "We're not talking about hypotheses anymore. The evidence is growing and the results of the detailed studies are surprisingly clear. [DB1] The question is no longer if the natural emissions will increase but rather how much they will increase with warming,"

Unmitigated Climate Change to Shrink Global Economy - When the world heats up, economies around the globe will cool down. That's according to a new study which predicts that rising temperatures due to climate change will wreak havoc on economic output."Our best estimate is that the global economy as a whole will be 23 percent smaller in 2100 than if we would avoid climate change entirely," said co-author of the study Solomon Hsiang, an associate professor of public policy at the University of California Berkeley. The study looked at the relationship between temperature and economic activity in 166 countries over a 50 year period. The findings indicate climate change will widen global inequality, perhaps dramatically, because warming is good for cold countries, which tend to be richer, and more harmful for hot countries, which tend to be poorer. In the researchers' benchmark estimate, climate change will reduce average income in the poorest 40 percent of countries by 75 percent in 2100. "There is sort of an optimal temperature band where countries seem to do really well from an economic standpoint and on either side there are temperatures that are too cold and temperatures that are too hot," Hsiang said. The magic number is 13 degrees Celsius or 55 degrees Fahrenheit, which is roughly the average temperature of the largest economies right now. But in 100 hundred years, if climate change goes unchecked, that could change dramatically.

Naomi Klein: Climate change makes for a hotter and meaner world - Bulletin of the Atomic Scientists - In this interview, Klein tells the Bulletin’s Dan Drollette about her latest non-fiction book, This Changes Everything: Capitalism vs the Climate, published by Simon & Schuster in 2014. The book takes no prisoners, pointing at weak government efforts to address climate change; environmental groups that have compromised with industry on too many issues; what she considers to be pie-in-the-sky “techno-fixes” such as carbon sequestering; conservatives who consistently deny climate change is even happening; and corporations that Klein thinks are seeking to earn a profit by scuttling efforts to deal with the crisis.  Her solution is to rebuild society along more equitable and local lines: raising food locally; making big investments in renewable energy; and ending government subsidies for the fossil fuel industry. She offers the dramatic expansion of renewable energy use in Germany and the Scandinavian countries as examples of government and citizens coming together to forge change and calls for a broad-based citizen’s movement to do the same in North America—harkening back as far as the Abolitionist movement for an example of such change. She also talks about the recent upheaval in national politics in her native Canada and how it may affect the upcoming climate change talks in Paris.

These Children Are Suing The Federal Government Over Climate Change -- Xiuhtezcatl Tonatiuh Martinez is not your average 15 year old. Speaking from his cell phone as he waits to board a plane for Los Angeles, Martinez fields questions with the aplomb of a seasoned activist, remaining sharply on message even as the conversation snakes and pivots around the gnarly issue of climate action. “Nothing else compares to climate change in the sense to take urgency as a global community,” he said. “It’s a human rights issue that affects people all over the planet.”Despite his young age, Martinez speaks like a veteran activist because, in a sense, he is one. His interest in climate activism began before enrolled in elementary school; he had his first public speaking engagement at age six. At age 13, he gave a TedX speech on environmental activism, was awarded the 2013 United States Community Service Award, and served on President Obama’s 2013 Youth Council. At 15, he was featured in a profile in Rolling Stone and spoke about climate change in front of the U.N. General Assembly.The government should be responsible for protecting us against climate change because … we have a right to life, liberty, and the pursuit of happiness  And now, alongside 21 other youth activists, Martinez is suing the federal government in order to force action on climate change.“Our generation has the most to lose, therefore our generation has the greatest opportunity to change the world,” Martinez said. “Just because we can’t vote doesn’t mean that we can have an impact on the way that our world is going to be left for future generations.”

Congressman now threatens to subpoena commerce secretary over global warming report - House Science Committee Chairman Lamar Smith (R-Tex.) opened another front in his war with federal climate researchers on Wednesday, saying a groundbreaking global warming study was “rushed to publication” over the objections of numerous scientists at the National Oceanic and Atmospheric Administration.  In a second letter in less than a week to Commerce Secretary Penny Pritzker, Smith urged her to pressure NOAA to comply with his subpoena for internal communications. Smith says whistleblowers have come forward with new information on the climate study’s path to publication in June.The study refuted claims that global warming had “paused” or slowed over the past decade, undercutting a popular argument used by those who refute the scientific consensus that man-made pollution is behind global warming. The research, considered a bombshell in the climate change debate, set off alarms among skeptics. Smith, a prominent congressional skeptic, claimed that scientists manipulated data to advance President Obama’s agenda and timed the study’s release to coincide with the administration’s new limits on emissions from coal plants. He is seeking NOAA’s internal communications and e-mails among its researchers, and in October subpoenaed Administrator Kathryn Sullivan for the documents. But she has refused to turn them over, saying that deliberative communications between scientists should be protected.

Is Obama Walking Into COP21 With An Empty Hand? -- I’m way behind the curve on COP21 — the 2015 Paris Climate Conference — and I hope readers with real expertise on the conference will weigh in, in comments. In this video, The Real News Network’s Jessica Desvarieux interviews Christian Parenti, a professor at NYU’s Global Liberal Studies program. His most recent book is Tropic of Chaos: Climate Change and the New Geography of Violence. Parenti gives this useful review of the bidding.

States warn US climate plan is illegal -- State officials in West Virginia and Texas are sending a letter to the governments of China, India and other countries, arguing that US President Barack Obama’s plan to cut greenhouse gas emissions is unlawful and likely to be struck down in court. In an intervention aimed at the international climate talks that begin in Paris next Monday, the attorneys-general of the two states warn that there are “significant legal limits [on Mr Obama’s] ability either to carry out the promises he has made in advance of Paris 2015 or to enforce any agreement arising out of the summit.” The letter is addressed to John Kerry, the US secretary of state, but is also being circulated to ministers from large economies that will be key participants in the Paris talks. The attorneys-general argue that Mr Kerry has a duty to tell other countries that “the centrepiece of the president’s domestic [carbon dioxide emissions] reduction program is being challenged in court by a majority of states and will likely be struck down.” The letter highlights the difficulties the US administration will face in the Paris negotiations because of the general opposition to action on climate change among the Republican party, which controls Congress and over half the state governments. West Virginia and Texas are leading the legal action, now joined by 27 states, against the Obama administration’s Clean Power Plan, its most significant climate policy. The centrepiece of the president’s domestic [carbon dioxide emissions] reduction program is being challenged in court by a majority of states and will likely be struck down- Attorneys-general of West Virginia and TexasThe plan, intended to cut carbon dioxide emissions from electricity generation by 32 per cent from 2005 levels by 2030, sets targets that encourage greater investment in renewable power and energy efficiency. Texas is the largest oil-producing state in the US, while West Virginia is the second-largest coal producer, after Wyoming. The states argue that the plan, drawn up by the Environmental Protection Agency using the legal authority of the Clean Air Act, overreaches by seeking to control energy policy, not just environmental issues, and by trying to supersede the authority of the states.

Isolation of 1600 Pennsylvania Avenue: Part I - - Jim Hansen - Earlier this year I received a message from a long-time reader of my Communications [1], who was persuaded of the urgency of the climate problem. As a significant supporter of the Democratic Party, he had the opportunity to meet President Obama, and he was preparing a specific question: would the President be willing to "meet with Jim Hansen," who, the supporter asserted, understood the problem as well as anyone and has "some viable ways to fix the problem?" Obama's response: he had already read my stuff (presumably meaning my book [2]), but would be interested in talking if it were about policy (presumably meaning that he was already convinced about the reality of the science). My response to the supporter was that we should check whether the offer was real after my long-overdue "Ice Melt" paper was submitted for publication.  This summer, after submitting the paper, my supporter tried valiantly, but dolefully reported that he could not get through, the President was too well protected. Not so easily deterred, I reported the matter to Obama's Science Adviser, John Holdren, and sent him my Ice Melt paper. Holdren responded that it was a valuable paper, but he ignored my request to meet the President.   So who does the President listen to? It is worth revealing. But first let's note facts that must be included in honest capable advice. China now has the largest fossil fuel emissions (Fig. 1a). U.S. emissions are dwindling a bit, and they will continue to be a decreasing portion of ongoing global emissions. India, the #3 emitter behind the U.S., is moving up fast.

COP21: Too Little, Too Late? Temperature, CO2 Thresholds Breached as Climate Disruption Intensifies - During the first week of December, delegations from nearly 200 countries will convene in Paris for the 21st Conference of the Parties (COP21) climate conference. It has been billed, like the last several, as the most important climate meeting ever. The goal, like that of past COPs, is to have governments commit to taking steps to cut carbon dioxide emissions in order to limit planetary warming to within 2 degrees Celsius above the preindustrial temperature baseline. Yet this is a politically agreed-upon limit. It is not based on science. Renowned climate scientist James Hansen and multiple other scientists have already shown that a planetary temperature increase of 1 degree Celsius above preindustrial baseline temperatures is enough to cause runaway climate feedback loops, extreme weather events and a disastrous sea level rise. Furthermore, the UK meteorological office has shown that this year's global temperature average has already surpassed that 1 degree Celsius level. Well in advance of the Paris talks, the UN announced that the amount of carbon dioxide already in the atmosphere has locked in another 2.7 degrees Celsius warming at a minimum, even if countries move forward with the pledges they make to cut emissions. Hence, even the 2 degree Celsius goal is already unattainable. However, similar to the way in which national elections in the United States continue to maintain the illusion that this country is a democracy, and "We the People" truly have legitimate representation in Washington, DC, illusions must be maintained at the COP21. Thus, the faux goal of 2 degrees Celsius continues to be discussed. Meanwhile, the planet burns.

Alberta Takes Drastic Measures To Reduce Carbon Emissions -- The Alberta government has done what it promised to do during its election campaign earlier this year, imposing measures to combat climate change including a carbon tax aimed at individual Albertans, phasing out coal-powered power plants and placing a cap on emissions from the oil sands.  Details of the Climate Leadership Plan are laid out in a government press release. Under the plan:

• Alberta will phase out all pollution created by burning coal and transition to more renewable energy and natural gas generation by 2030.
• Three principles will shape the coal phase-out: maintaining reliability; providing reasonable stability in prices to consumers and business; and, ensuring that capital is not unnecessarily stranded.
• Two-thirds of coal-generated electricity will be replaced by renewables – primarily wind power – while natural gas generation will continue to provide firm base load reliability.
• Renewable energy sources will comprise up to 30 per cent of Alberta’s electricity production by 2030.
• A price on carbon provides an incentive for everyone to reduce greenhouse gas pollution that causes climate change.
• Alberta will phase in this pricing in two steps.
• $20/tonne economy-wide in January 2017
• $30/tonne economy-wide in January 2018
• An overall oil sands emission limit of 100 megatonnes will be set, with provisions for new upgrading and co-generation. (The oil sands currently emit 70 megatonnes per year)
• In collaboration with industry, environmental organizations, and affected First Nations, Alberta will implement a methane reduction strategy to reduce emissions by 45% from 2014 levels by 2025.

Road to COP21 and Beyond: The Missing Analysis of the Kyoto Protocol and its Failure - It’s strange yet on the eve of COP21 in Paris, starting on November 30th, where humanity will try to save itself, that reasoned, careful analysis of previous such attempts have been heedlessly left to one side. The natural scientific backdrop of a deteriorating climate system will, it seems, not be translated into effective social and technological instruments.  One would think that such instruments would most likely emerge from a systematic, transparent, public, reality-based effort to construct or locate best practices that actually reduce emissions, thereby making humanity’s best or a better effort to stabilize the climate and stave off potential human extinction. The first step in such a careful systematic effort would be, one might think, an inventory and analysis of what had already been tried by the same group that will meet in Paris, the UN Conference of the Parties, or by previous efforts to deal with energy and emissions in perhaps less climate-focused ways, as happened in the 1970’s in response to the oil and environmental crises of that era.  But it appears as though no such evaluation will take place for perhaps a variety of reasons some of which can only be the object of speculation and surmise.  The COP organizers have customarily provided themselves however with a neat way to evade the accusations of an intellectual monoculture by surrounding the event with “civil society” events and side-events that suggest a marketplace of ideas that will compete at the event.

‘Filthy’ Corporate Sponsors Bankrolling COP21 Exposed in New Report  With less than one week before the Paris climate talks (COP21), Corporate Accountability International (CAI) released a report exposing the “filthy” track record of some of the corporations sponsoring the talks. The report, Fueling the Fire: The corporate sponsors bankrolling COP21, uncovers “the green veil of four of the meeting’s dirtiest sponsors,” including fossil fuel conglomerates Engie (formerly GDF Suez), Suez Environment, BNP Paribas and French utility Électricité de France (EDF). The organization argues that there is an inherent conflict of interest between the stated aims of the UN climate process and many of COP21’s corporate sponsors given their roles as global carbon polluters. Together, these four corporate sponsors represent direct ownership of and/or investments in more than 46 coal-fired power plants, exploration of tar sands in Canada, fracking in the UK and India, over €30 billion invested in the French coal industry and more than 200 megatons of CO2-equivalent emissions. CAI argues that “by detailing the corporations’ abuses to the environment and aggressive lobbying to undermine environmental policy, the report lays bare the conflict of interest inherent in allowing such sponsorship to exist.” “Inviting some of the world’s biggest polluters to pay for the COP is akin to hiring a fox to guard a hen house. We must eliminate this conflict of interest before the COP become corporate trade shows for false market-based solutions,” CAI Executive Director Patti Lynn said. The report details how the four sponsors have long track records of “policy interference that contradict the green public relations” they advance. Whilst energy giant EDF claims to be “committed to a decarbonized world,” it is an active member—alongside ExxonMobil and Shell—of the European business lobby group, BusinessEurope.

Groups Demand French President Lift Ban on Climate Protests and Marches -- Ahead of international climate talks which are about to begin in Paris, an international coalition of NGOs, political figures and civil society groups on Thursday demanded French President François Hollande lift the ban on protests and marches despite recent violence. The groups say the French government cannot proclaim a “commitment to democracy and freedom” while simultaneously suspending “democracy and freedom.” In a letter addressed to Hollande, which has also taken the form of an online petition that anyone can sign, the climate justice leaders expressed understanding for how the recent violence in Paris—also mirrored in attacks in Beirut, Ankara, Bamako and over the skies of Egypt—has made the security situation tense, but indicated the effort to shut down large scale protests is both short-sighted and counter-productive. “People from all over the world are flocking to Paris to have their voices heard on one of the most urgent challenges of our lifetime—the threat of climate change,” said Nick Dearden, head of the UK-based Global Justice Now, which is spearheading the effort to lift the imposed ban. “It is essential that there is robust participation from civil society during the climate talks and that world leaders are held accountable for how they engage with the issue.”As the letter to Hollande states plainly: “We urge you to reconsider the decision to prohibit the demonstrations in Paris. We understand the need to keep citizens safe, including those mobilizing on climate change. It must be possible to find a way to do this short of banning our demonstrations. Many other mass events and gatherings continue to happen in Paris on a daily basis.”

Paris climate activists put under house arrest using emergency laws - At least 24 climate activists have been put under house arrest by French police, accused of flouting a ban on organising protests during next week’s Paris climate summit, the Guardian has learned. One legal adviser to the activists said many officers raided his Paris apartment and occupied three floors and a staircase in his block. French authorities did not respond to requests for comment but lawyers said that the warrants were issued under state of emergency laws, imposed after the terror attacks that killed 130 people earlier this month. The author and climate change campaigner, Naomi Klein, accused French authorities of “a gross abuse of power that risks turning the summit into a farce”. “Climate summits are not photo opportunities to boost the popularity of politicians,” she told the Guardian. “Given the stakes of the climate crisis, they are by their nature highly contested. That is democracy, messy as it may be. The French government, under cover of anti-terrorism laws, seems to be trying to avoid this, shamefully banning peaceful demonstrations and using emergency powers to pre-emptively detain key activists.” Since Thursday, three people have been placed under house arrest in Rens, two in Paris, two in Rouen and one in Lyons, according to campaigners. They may now only leave their houses to sign a post office register verifying their whereabouts, three times a day.

France bows to Obama and backs down on climate ‘treaty’ France has offered a key concession to the US on the eve of historic climate talks in Paris, saying a new global climate accord will not be called a “treaty” and might not contain legally binding emissions reduction targets. In a significant climbdown, Laurent Fabius, French foreign minister, said signatories to the planned deal would still be legally required to meet many of its terms but most likely not the carbon-cutting goals underpinning the agreement. “The accord needs to be legally binding. It’s not just literature,” Mr Fabius told the Financial Times. “But it will probably have a dual nature. Some of the clauses will be legally binding.”  Mr Fabius, who is to chair the UN climate conference, added: “Another question is whether the Paris accord as a whole will be called a treaty. If that’s the case, then it poses a big problem for President Barack Obama because a treaty has to pass through Congress.”The comments are among the first by a senior official to signal a willingness to accommodate the world’s second largest carbon emitter to achieve a successful deal. John Kerry, US secretary of state, warned in an FT interview this month that the Paris climate change summit could not deliver a treaty that legally requires countries to cut their emissions. Mr Kerry stressed that there were “not going to be legally binding reduction targets like Kyoto”, a reference to the 1997 Kyoto protocol, a UN climate treaty which had targets for cutting emissions that countries ratifying it were legally obliged to meet. The Kyoto protocol was not ratified by the US. At the time, François Hollande, ​the French president, reacted angrily to Mr Kerry’s comments, saying making the accord legally binding was the whole point.  If it were not binding “there won’t be an agreement because that would mean it would be impossible to verify or control the undertakings that are made”, he said.

British Police Apologize for Undercover Officers’ Intimate Tactics - — They lived together, traveled abroad on vacation and, for five years, behaved like any other couple. Then one day the man, who called himself Mark Cassidy, disappeared, leading his bewildered ex-partner to eventually discover that she had been living with a married police spy. The case is one of seven that prompted a formal apology from the British police on Friday for the behavior of undercover officers who used relationships — one nine years long — to gather intelligence and to infiltrate environmental, social justice or other advocacy groups. In doing so the men had engaged in “long-term, intimate, sexual relationships with women which were abusive, deceitful, manipulative and wrong,” Martin Hewitt, assistant commissioner of the Metropolitan Police, said in a statement. Offering an unreserved apology, Mr. Hewitt said that the women were “deceived, pure and simple,” adding that “these relationships were a violation of the women’s human rights, an abuse of police power and caused significant trauma.”

UK reversing and undoing climate change policies, say doctors and nurses -- The UK is reversing its policies on climate change “without offering credible alternatives”, according to an alliance of Britain’s doctors, nurses and other health professionals. Writing in the British Medical Journal (BMJ), they say that natural disasters, food and water insecurity, the spread of infectious diseases and forced migration “are already affecting human health and provide a glimpse of the near future”. But they say that while globally there is progress on tackling climate change – with countries committing to curbing their emissions, religious leaders, such as the Pope, urging action and organisations committing to divesting from fossil fuels – the UK is bucking the positive trend. Since being elected in May, the Conservative government has cut energy efficiency policies, closed or cut subsidy schemes for wind and solar power, and put a carbon tax on carbon-free renewable energy. The alliance behind the article – published less than a fortnight before international climate talks in Paris – represent the trade body for UK doctors and medical students, the British Medical Association, plus eight Royal Colleges, the BMJ itself and leading health journal The Lancet. They call for the UK government to end the use of unabated coal by 2023 to “improve air quality, protect the health of our population, and reclaim the UK’s leadership position in tackling climate change”.

'Renewable energy investments in Jordan worth over JD1 billion' - Investments in the country’s renewable energy sector exceed JD1 billion at present and are expected to increase significantly in the next few years as more projects are in the pipeline, according to investment and energy officials. Renewable energy is “one of the most attractive and rapidly growing sectors in terms of attracting investments”, Jordan Investment Commission (JIC) President Montaser Oklah told The Jordan Times on Tuesday. “This sector is witnessing great momentum, and investors’ appetite to channel money into solar and wind energy projects is growing,” Oklah said. The entire ecosystem for renewable energy projects in Jordan is promising and encouraging as studies by energy authorities indicate that the Kingdom has more than 300 sunny days a year, according to experts. In addition, wind speeds in the northern region reach as high as 7.5 metres per second and 11.5 metres per second in the eastern areas of the country. “Jordan is also planning to expand the grid’s capacity to absorb more renewable energy projects… We have seen many projects launched and there are more to come,”

U.S. energy-related CO2 emissions up 1% in 2014 as buildings, transport energy use rises - Today in Energy - U.S. Energy EIA -- U.S. energy-related carbon dioxide (CO2) emissions were 5,406 million metric tons (MMmt) in 2014, 1% (51 MMmt) above their 2013 level. Energy-related emissions also increased in 2013, but because of declines in earlier years, the 2014 emissions were still roughly 10% below their 2005 level. One approach to assessing emissions trends considers changes in demographic and economic drivers, together with changes in the relationship between economic activity and energy use and the carbon content of energy. Increases in economic activity, reflecting changes in population and per capita output, tend to increase emissions. Reductions in energy consumed per unit of economic activity or emissions generated per unit of energy tend to reduce emissions. In 2014, U.S. gross domestic product (GDP) grew 2.4%, while energy use per GDP and carbon per unit energy declined 1.2% and 0.3%, respectively. Changes in energy-related emissions can also be analyzed by consuming sector. Emissions attributed to energy use in the residential, commercial, industrial, and transportation sectors tracked in EIA's data are measured by each sector's consumption of various fuels. In this accounting, emissions associated with the generation of electricity are apportioned based on the electricity consumption in each sector. In 2014, energy-related CO2 emissions in the transportation sector were 24 MMmt higher than the 2013 level. Transportation fuel prices declined between 2013 and 2014. Lower prices, along with continued economic recovery, led to higher gasoline consumption, along with higher consumption of other fuels. The growth in energy consumption more than offset improvements in the fuel economy of the vehicle fleet.

Despite Low Oil Prices, Renewable Power Gaining Traction, Energy Agencies Report — But Not Yet Fast Enough for the Climate -- The shift away from coal and towards renewable sources of energy is slowly beginning to gain traction, two recently-released reports from American and global energy agencies show. “The biggest story is in the case of renewables,” International Energy Agency executive director, Fatih Birol, told the Guardian as this year’s World Energy Outlook was released. “It is no longer a niche. Renewable energy has become a mainstream fuel, as of now.” Almost half of the new power generation added in 2014 came from wind, solar, wave or tidal energy, the report found, and renewables now represent the world’s second largest source of electricity after coal. Coal, whose share of the world’s energy mix has been rising since 2000, has peaked, the agency indicated, predicting that within two decades, renewable energy sources will replace coal as the backbone of the world’s electricity source. Domestically, the growth of renewable energy has been especially pronounced in Texas and other states long famous for their drilling and mining histories, data released by the U.S.-based Energy Information Administration shows. Texas has become the largest wind-power supplier in the country, helping to slash as much carbon from the state’s emissions in 2013 as both Vermont and New Hampshire combined produced that year, if Texas had gotten that power through burning an equal mix of coal and natural gas instead of wind. Still, the transition away from fossil fuels is coming too slowly to prevent catastrophic climate change, the IEA warned.

U.S. Failing To Harness Hydro Power Potential -- One of the more interesting types of green energy is hydroelectric power. Among green energy sources, hydroelectric power is second only to nuclear power in terms of generation capacity. In many respects hydroelectric plants are something like a miniature version of nuclear power plants; they are costly to put up but once they are built, they last for decades providing power at close to zero marginal cost. Yet despite their effectiveness, hydroelectric power plants have not garnered the kind of focus that wind turbines and solar arrays do.  Hydroelectric plants represent an intriguing opportunity to generate more energy without increasing carbon output. In particular, there are a significant number of existing dams at rivers across the U.S. where hydroelectric power is not being used. The U.S. Department of Energy did a study suggesting that up to 12 gigawatts of additional power could be generated simply by taking advantage of these existing plants. Beyond that proverbial low hanging fruit, there is a significant amount of construction activity around building new dams and hydro plants; over 600 dams are currently under construction with several thousand more planned for the future. Most of these new hydro power plants are being built outside the U.S. though. Like nuclear power plants, hydroelectric plants have gone out of vogue in the U.S. it would seem. The U.S. has plenty of opportunities to add to hydroelectric capacity as the DoE study demonstrates, yet little is being done on this front. In theory hydroelectric power could be a threat to the explosive trend towards greater natural gas use (and the associated phase out of coal power). Yet there is no indication that utility companies are looking to switch away from gas or any other source and towards hydroelectric in large quantities.

America's inconvenient SUV boom - Rumours of the death of American car culture have been greatly exaggerated. The US is on course this year to post its largest vehicle sales since the start of the 21st century. The surge is being led by the return of the sport utility vehicle, which accounts for a higher market share than ever before.  More than one in three US vehicle sales is an SUV. Though discontinued by General Motors, demand for second-hand Hummers is at an 11-year high. With numbers like these, President Barack Obama will have a tough sell in Paris next week. More than all its non-binding pledges, the global warming summit is meant to begin an era of new habits. If Americans won’t change theirs, will others follow? With the recent terrorist carnage, global leaders will already be highly distracted. Yet the Paris agenda is pressing enough. The monthly level of carbon dioxide in the earth’s atmosphere exceeded 400 parts per million earlier this year — a threshold that should set off alarm bells. As much as a half of India lacks reliable access to electricity. If you look at a Google earth map of India at night, large tracts are in complete darkness. Under what circumstances could a semi candlelit democracy agree to a carbon haircut? The short answer is bribery. At the Copenhagen summit in 2009, western nations pledged to transfer $100bn a year from 2020 to subsidise cleaner fuels in poorer countries. But these numbers are aspirational. Nor would they be enough to make a big economic dent. India alone needs to invest more than double that each year just to keep up with demand. At the current rate, it will meet most of that with new coal-fired plants supplied from its domestic lignite — perhaps the dirtiest form of the dirtiest fuel. Even if China continues to build new coal plants at its current rate, the average American pumps out three times more carbon every year than the average Chinese and more than 10 times the average Indian. Both China and India have borrowed the American idiom to proclaim their own middle-class dreams. Yet if the US version cannot be reimagined, it will be hard to persuade others to change theirs.

Volkswagen Told to Prepare Recall Plan for 3-Liter Diesel Models -- Volkswagen AG was given 45 days to plan a recall of models with 3.0-liter diesel engines found to contain software that California regulators consider a possible “defeat device” that can distort emissions tests. The California Air Resources Board is demanding the fix for VW, Audi and Porsche models from the 2009 model year on, the agency said Wednesday in a statement. VW’s Audi brand already said earlier this week it would resubmit a revised version of the software, which it hadn’t originally disclosed for regulatory review. Audi told regulators the device played a role in changing how the vehicles operate during emissions testing, but stopped short of saying it cheated in the same way that Volkswagen has admitted to using software to rig tests for its smaller diesels. However, CARB is treating the 3.0-liter software device as if it cheated on the test, said Dave Clegern, an agency spokesman. The 3.0-liter diesel discussion is part of Volkswagen’s effort to address its emissions scandal on three fronts: cheating software installed in about 11 million vehicles worldwide with 1.2-, 1.5- and 2.0-liter engines; irregular carbon dioxide ratings on about 800,000 vehicles; and the questionable software in larger diesel engines in the U.S. The company said this week it’s nearing approval to repair most of the rigged engines in Europe, by far the biggest market in which Volkswagen’s dirty diesels were sold.

Japan's coal power plants face headwinds over CO2 — Power companies’ plans to construct coal power plants to secure low-cost electricity are facing headwinds in Japan, as the Environment Ministry has raised objections from the viewpoint of preventing global warming. On November 13, Environment Minister Tamayo Marukawa said the ministry cannot approve a coal-fired power plant that Kansai Electric Power Co. and Tonen General Sekiyu K.K. plan to construct in Ichihara, Chiba prefecture, and another coal-fired power plant that KEPCO and Marubeni Corp. plan to build in Akita. Since June, the ministry has raised objections to the construction of five coal-fired power plants, including these two. A coal-fired power plant emits nearly twice as much carbon dioxide as a natural gas-fired power plant per unit of electricity generated. The government has set a target of trimming greenhouse gas emissions by 26 per cent compared to fiscal 2013 by fiscal 2030. The ministry says too many coal-fired power plants will make it difficult to achieve this goal. “It’s already uncertain if the goal can be attained,” a senior ministry official said. “It is the Environment Ministry that takes responsibility in the end.” Coal-fired power plants, which emit a large amount of carbon dioxide, are coming under increasing criticism globally. Britain has announced that it will abolish them in principle by 2025 while the United States is shifting to natural gas-fired power plants. The power industry has been promoting coal-fired power plants because their power generation cost is cheaper than that of oil-fired and liquefied natural gas power plants. The cost of coal-fired power generation is one-third of that of oil-fired power generation and half of that of large-scale solar power generation. It is about 10 per cent lower than that of LNG power generation.

Cheap Coal Threatens LNG's Toehold in Fast Expanding Philippines - Rigzone: (Reuters) - The Philippines is set to import liquefied natural gas (LNG) for the first time next year as it bids to replace fast-fading local gas supplies, but cheap coal is blowing off course Manila's vow to lift the use of cleaner fuels. With 100 million people and one of the world's fastest growing economies, the country aims to double its power generation capacity by 2030, hoping to put an end to daily blackouts that crippled its economy in the 1990s. But despite government support for gas, a rash of approvals for coal-fired plants is already set to push coal's share of power generation up sharply to over 50 percent by that time, while gas' share may fade slightly to 15 percent. A Philippines lawmaker conceded it is too early to say when legislators will call time on new coal plants.This type of dilemma is echoed throughout Asia, where more than 500 coal-fired plants are on the drawing board, spurred by coal's low cost and availability, while LNG needs billions of dollars for infrastructure to receive and store imported gas. "Many countries in Asia will remain reliant on coal for power generation over the coming decade,"  The Philippines wants to roughly double the share of natural gas in its power generation mix to up to a third by 2030, evenly balanced with coal and renewables. Adding impetus to its plan is the expected depletion by 2024 of the Malampaya gas field, which accounts for all of the country's gas supplies. Despite efforts to find reserves elsewhere, buying LNG overseas is the immediate option.

China and India drive recent changes in world coal trade - Today in Energy - U.S. EIA -Global trade of coal grew dramatically from 2008 to 2013, but in 2014, it declined for the first time in 21 years. China and India accounted for 98% of the increase in world coal trade from 2008 to 2013, but declines in China's import demand have led to declines in total world coal trade in 2014 and, based on preliminary data, in 2015 as well. Nearly all of the 47% growth in total world coal trade between 2008 and 2013 was driven by rising coal import demands by countries in Asia, specifically China and India. Coal trade in the rest of the world declined over the same period. However, data for 2014 and 2015 indicate a reversal of this trend, with declines in China's coal imports currently on pace to more than offset slight increases in other countries in both years. China imported 341 million short tons of coal in 2013, up from 45 million short tons in 2008, while India imported 203 million short tons, up from 69 million short tons. About 75% of China's coal imports and 90% of India's coal imports were steam coal, used primarily for electricity generation. Coking coal, used in the manufacture of steel, made up the remaining volumes. While China's coal imports have been declining in 2014 and 2015, India's imports continued to rise in 2014 and through the first half of 2015 as coal demand increased at a faster pace than domestic supplies. In China, rising output from domestic mines, improvements in coal transportation infrastructure, and slower growth in domestic coal demand have resulted in lower domestic coal prices and reduced demand for coal imports.

KunstlerCast 272 — A Conversation with Chris Martenson and Adam Taggart -- Kunstler - Original audio source  Chatting with Chris Martenson and Adam Taggart, authors of Prosper!: How to Prepare for the Future and Create a World Worth Inheriting. Both Chris and Adam were corporate executives who dropped out to pursue more a resilient way of life in a rapidly and increasingly hazardous changing world. Chris Martenson began that phase of his career with the video and later book titled The Crash Course, which undertook to explain the dangers of contemporary banking, finance, and money-creation. Chris and Adam maintain the front and back ends of the website, which features weekly articles and two excellent podcasts on issues pertaining to what I have called The Long Emergency.

Nuclear Reactors Make ISIS an Apocalyptic Threat - As you read this, a terror attack has put atomic reactors in Ukraine at the brink of another Chernobyl-scale apocalypse.  Transmission lines have been blown up. Power to at least two major nuclear power stations has been “dangerously” cut. Without emergency backup, those nukes could lose coolant to their radioactive cores and spent fuel pools. They could then melt or explode, as at Fukushima. Yet amidst endless “all-fear-all-the-time” reporting on ISIS, the corporate media has remained shockingly silent on this potential catastrophe. The world’s 430-plus licensed commercial nuclear plants give terrorists like ISIS the power at any time to inflict a radioactive Apocalypse that could kill millions, destroy huge parts of the Earth and devastate the global economy. Fallout from Chernobyl’s 1986 disaster has killed more than a million people. Cancer rates among children and others near Fukushima are soaring.  Americans downwind from Three Mile Island died in droves. Major scientific studies in Germany and elsewhere link soaring cancer and other human death rates to nearby reactor emissions even without an accident.

Nexus Gas takes next step to proceed with pipeline across northern Ohio - The company behind the proposed Nexus Pipeline across northern Ohio has filed paperwork to begin the official federal review of the $2 billion project. Texas-based Nexus Gas Transmission LLC on Friday asked the Federal Energy Regulatory Commission (FERC) to begin an environmental review of the 255-mile natural gas pipeline. The company had earlier filed preliminary paperwork. The company is seeking what’s called a certificate of public convenience and necessity from the federal agency that oversees interstate pipelines. FERC must now evaluate all potential environmental impacts, as well as the company’s plans to address and minimize them. The federal agency is expected to issue its final ruling in late 2016. The company called the filing “a significant milestone” in its announcement late Friday.flic Its filing with the federal agency includes responses to comments filed by pipeline opponents as well as a full evaluation of alternative routes and potential impacts of the pipeline, which will be 36 inches in diameter. The pipeline would run through northern Stark, southern Summit, the northeast corner of Wayne and across Medina County. It would run from eastern Ohio to Defiance in northwest Ohio and into Michigan. Connections could then carry the natural gas into Ontario.

Frack Foes Fear Release of Radium in Wayne National Forest - - Opponents of natural gas fracking in the 241,000-acre Wayne National Forest believe the process will release radioactive radium and other hazardous materials, while those in favor said drillers need to operate in the woodland so mineral owners can realize their properties' profit potential.The forest covers much of Monroe County, home of two notable fracking-related accidents last year. Environmentalists fear the dangers of fracking, in addition to risks associated with the pipelines needed to transport the natural gas, oil and liquids derived from the wells. Now, the Columbus-based Buckeye Forest Council hopes to prevent the U.S. Bureau of Land Management from allowing fracking in the wildlife area. "It took 350 million years for radium and its daughter elements to become isolated from the surface of the earth so that our carbon-based life forms could even develop,"  Radium is one of the radioactive materials found naturally in the Marcellus and Utica shale that fracking can activate, along with uranium and plutonium. Although these elements are generally in very small quantities, they are often present in fracking waste such as drill cuttings and briny wastewater.

Citizens at Athens BLM/Wayne forest meeting frustrated by inability to present testimony --There was a lot of shouting at the fracking-related event at the Athens Community Center yesterday (Nov. 18). Citizens were expressing their opinions about a proposal by the federal government's Bureau of Land Management to lease about 31,000 acres of the Wayne National Forest for drilling by the oil and gas industry. The great majority of the people in the large room where the Forest Service held the event were shouting to express their opposition to the proposal. None of the shouting done by either side was directed against anyone personally. It was simply the kind of more-or-less orchestrated shouting done at peaceful demonstrations.  Therefore, I believe that the violent behavior of one Forest Service officer who stood near me was entirely unjustified and outrageous. I witnessed this man behaving aggressively, pushing people and wielding a stick. He looked ready to beat people severely. Other people had to hold him back. . I am discussing the same incident described in the letter by Carl Edward Smith III. After the Forest Service officials decided to close down their event, a number of people gathered in the hallways or in other rooms. I talked with some people about the incident involving the violent Forest Service officer, and I talked about the drilling proposal with others (both pro-fracking and anti-fracking). I also listened to several discussions between people on both sides of the issue. Despite their passionate feelings, everyone was self-controlled and civil. Some citizens who had taken part in the orchestrated shouting of "No!" to the fracking proposal told me that they and many others had already spent four years speaking quietly in meetings, writing letters and submitting petitions to officials of the Wayne National Forest, the Ohio Department of Natural Resources, etc. But the officials had simply refused to listen or respond.

Commissioners to ask for public hearing on proposed injection well - The state will be asked by the Athens County Commissioners to hold a public hearing on a pending injection well application. D.T. Atha Inc. of Albany filed the application with the state this summer, but a recently published legal advertisement triggered the start of a 15-day period in which objections can be filed with the Ohio Division of Oil and Gas Resources Management (part of the Ohio Department of Natural Resources). The injection well would be located off Route 144 at the eastern end of Rome Twp. Injection wells are used to dispose of brine and other waste, including fracking waste, from oil and gas production wells. The request that the commissioners ask for a public hearing came from Heather Cantino, a member of the Athens County Fracking Action Network, although residents of Rome and Troy Twps. were there to lend support. The commissioners have requested public hearings on past injection well applications, but without success — something pointed out by Troy Twp. resident Felicia Mettler, who lives near a K&H Partners injection well. She asked if there is something more the commissioners can do to get a public hearing on the Atha well. Mettler talked about the past contamination of drinking water by the chemical C8 that came from a DuPont plant. “That was one chemical. How many chemicals are used that are being put down in the ground with these injections wells? We don’t know,” Mettler said.

Court appeal related to injection well will be filed - The Athens County Fracking Action Network filed notice Tuesday that it will be appealing to Franklin County Common Pleas Court a recent decision by the Ohio Oil & Gas Commission related to a Troy Twp. injection well. The Ohio Division of Oil & Gas Resources Management issued a permit on March 18 that allowed K&H Partners to proceed with drilling its third well in Troy Twp. ACFAN appealed that decision to the Oil & Gas Commission. Earlier this month, the commission dismissed the appeal, ruling that it lacked jurisdiction to hear the case. While ACFAN asserts that the permit issued by the state was an injection well permit, the state and K&H argued that it was a drilling permit that is not appealable to the commission and that separate permission would be needed for K&H to start injections (which has since been given). The commission agreed with the state and K&H and dismissed the appeal. ACFAN will ask Franklin County Common Pleas Court to overturn the commission’s decision and order the commission to hold a hearing on the permit appeal.

Eco-group working to make invisible air pollution from Ohio's Utica Shale visible to everyone — Peter Dronkers of Earthworks makes invisible air pollution from shale drilling visible to everyone. The viewfinder of Dronkers’ special infrared gas-recording camera shows billowing clouds or wispy leaks. What appears in the videos as wind-blown plumes of smoke are really pollutants that are invisible to the naked eye. Earthworks, a national environmental group based in Washington, D.C., quietly came into Ohio during the summer with its camera to determine if shale drilling, natural gas processing and transportation are fouling the air and sickening Ohio residents. The $100,000 optical gas imaging thermographer camera can detect up to 20 different gases that environmentalists say could pose a health threat to those living in Ohio’s Utica Shale, the region in eastern Ohio with natural gas and liquids. Earthworks initially posted eight Ohio videos to YouTube. It returned recently to film seven additional Ohio sites that will be posted soon. The group has been recording emissions from shale sites in Ohio and six other states. Such emissions increase the likelihood that air pollution problems will be found, said Nadia Steinzor of Earthworks’ Citizens Empowerment Project. Her group and the Ohio Environmental Council are pushing a new grass-roots effort to determine how big a threat shale drilling and related emissions are to neighbors in Ohio.

Sharp Production Increases in 2014 Boosted Value of Ohio Oil/Gas - The combined value of all Ohio oil and natural gas production in 2014 was more than $3.1 billion, up nearly 132% from the prior year, according to an annual mineral industries report released late Friday by the Ohio Department of Natural Resources' (ODNR) Division of Geological Survey. The report, which provides basic and economic information about the state's extraction industries, also offered an updated analysis of oil and gas production last year, reaffirming that Utica Shale development continues to drive significant increases (see Shale Daily, March 24). The geological survey said the dollar value of Ohio crude was about $1.2 billion in 2014, up 57% from the prior year. The average price for oil produced in the state last year was $79.92/bbl. The dollar value of Ohio natural gas was $1.9 billion, up 229% from 2013. The report said Ohio's average natural gas price last year was $3.78/Mcf. Based on estimates from ODNR's Division of Oil & Gas Resources Management, the report said 715 oil and gas wells were drilled in the state last year. Wells were drilled in 38 of Ohio's 88 counties, demonstrating that conventional producers remain active outside a 12-county region in Eastern Ohio where shale producers have been most active. Ohio's Utica-Point Pleasant interval was the most actively drilled in 2014, accounting for 73% of all wells drilled, followed by the Clinton Sandstone, a long-time vertical target that accounted for 13% of all wells drilled. A total of 605 productive development wells were recorded in the state during 2014, most of which were located in Harrison County, where shale drillers reported 121 productive wells. Carroll and Guernsey counties reported 93 and 59 producing development wells, respectively, in a hotbed for Utica drilling to round out the top three counties for producing wells.

Ohio's fracking boom hits speed bump - — When shale oil-and-gas investment hit eastern Ohio three years ago, the results could be measured in steaks and Shiner Bock beer.  At least that’s the way they saw it at the Forum restaurant, a hangout for out-of-town oil-and-gas workers just off I-70. In the evenings, the bar at the front of the house was filled with customers from Texas and Louisiana, and they tended to order from the pricier part of the menu.  The bottom fell out in the fall, when the Organization of Petroleum Exporting Countries, the world’s largest oil cartel, decided not to cut back on production, which pushed prices even lower. This was an attempt by Saudi Arabia and other OPEC members to put pressure on North American producers, said Juan Pablo Fuentes, an economist for Moody’s Analytics. “OPEC has been the producer that increases output when prices go up and decreases output when prices are low,” he said. “They decided this time around that they don’t want to continue losing market share.” It’s a move that has rocked markets around the world. In Ohio, officials issued two drilling permits in the Utica in 2010, and then saw the figures skyrocket, hitting a peak of 712 permits last year, according to the Ohio Department of Natural Resources. The activity clearly has taken a step back this year, with 441 permits issued as of last week. The decline is a result of a pullback by companies such as Chesapeake Energy, the largest producer operating in the state, which had 190 new drilling permits last year and only 98 so far this year. A reduction in permits is going hand in hand with a reduction in drilling. Energy companies had 19 rigs drilling new wells in the state last week, down from a recent peak of 47 in January, according to oilfield-services firm Baker Hughes. As rigs go idle, workers get laid off, including those who work for outside companies that serve the rigs.

Fairer oil and gas tax - Toledo Blade Editorial - A panel of state lawmakers recently compiled a lengthy report on what to do about Ohio’s ludicrously inadequate, antiquated severance tax on oil and natural gas production. The study’s proposals can be reduced to a single, predictable recommendation: Don’t do anything.  That’s hardly surprising; the Republican-controlled General Assembly’s slavish adherence to the dictates of Statehouse fossil-fuel lobbies, and its appreciation of their campaign contributions, are well established. But when GOP Gov. John Kasich — no one’s idea of a red-hot tax-and-spender — calls the legislature’s inaction on the severance tax “disappointing,” Ohioans may want to pay closer attention.  Ohio’s boom in hydraulic fracturing, or fracking, in recent years has greatly increased oil and gas exploration in eastern and southern parts of the state. But the severance tax and related fees that Ohio charges producers remain absurdly low relative to those imposed by other states: 20 cents per barrel of oil and 3 cents per 1,000 cubic feet of natural gas.  The legislative report acknowledges that “Ohio’s total tax burden on the oil and gas industry is lower than or as low as every other state with a severance tax.” But while it concedes the need to “update Ohio’s severance tax to make it comparative with other shale-play states across the nation,” it provides no timetable for doing so.  Ohio’s current severance tax does not generate enough revenue to support effective state regulation of the drilling industry, or to enable local communities to make the upgrades in essential services — roads, public safety, environmental protection — needed to cope with the effects of fracking. Nor does it provide taxpayers with a fair return from extraction of the state’s nonrenewable natural resources.

Can Northeast Become A Net Gas Supplier To The U.S. In 2015? -- A highly anticipated event in the U.S. natural gas market is when the Northeast region crosses the line from being a net gas taker from, to becoming a net gas supplier to, the rest of the country. Ever since the Marcellus and Utica shale began ramping up, Northeast production has been on a course to eclipse regional demand. RBN predicted 2015 would be the tipping point when the supply-demand balance would finally reverse on an annual average basis, marking a new phase for Northeast prices and for the U.S. gas market as a whole. We’ve seen that despite capitulating oil prices, capital budget cuts and lower rig counts, Northeast production has continued to reach new highs in 2015 – beating the record again this past Sunday (November 22,2015) at 20.3 Bcf/d according to Genscape. But regional demand also has been at record high levels. Today with less than two months left in the year, we determine whether the Northeast region will – or already has - crossed the threshold to net supplier in 2015.

Pennsylvania safety seminar puts focus on Bakken crude - Emergency responders from four counties gathered in Hempfield on Saturday to learn how to better respond to rail incidents, particularly those involving Bakken crude oil. The highly flammable crude is transported from the Bakken Formation, an area encompassing parts of Canada, Montana and North Dakota, to oil refineries, some of which are on the East Coast. There’s been an increase nationally in crude oil transport by train, said Bill Wright, an adjunct instructor with the Pennsylvania State Fire Academy, who conducted the free training. The 28 first responders at the Hempfield Emergency Response Center learned about Bakken crude’s properties, how it behaves and how to handle it, Wright said. Although the number of rail incidents involving crude in Pennsylvania has been low, there have been significant numbers in West Virginia and Canada, he said.

EPA Finding on Fracking's Water Pollution Disputed by Its Own Scientists -- An Environmental Protection Agency panel of independent scientific advisers has challenged core conclusions of a major study the agency issued in June that minimized the potential risks to drinking water from hydraulic fracturing. The panel, known as the Science Advisory Board (SAB), particularly criticized the EPA's central finding that fracking has not led to "to widespread, systemic impacts on drinking water resources in the United States." The oil and gas industry has seized on the conclusion to argue that broad concerns about fracking's impact on drinking water are overblown. The SAB's 30 members, from academia, industry and federal agencies, said this and other conclusions drawn in the executive summary were ambiguous or inconsistent "with the observations/data presented in the body of the report." "Of particular concern is the statement of no widespread, systemic impacts on drinking-water resources," the SAB wrote in a preliminary report. "Neither the system of interest nor the definitions of widespread, systemic or impact are clear and it is not clear how this statement reflects the uncertainties and data limitations described in the Report's chapters." The panel said that the EPA erred by not focusing more on the local consequences of hydraulic fracturing. "Potential impacts on drinking-water resources are site specific, and the importance of local impacts needs more emphasis in the Report. While national-level generalizations are desirable, these generalizations must be cautiously made...A conclusion made for one site may not apply to another site."

Fracking Companies Have Been Getting Worse About Disclosing The Chemicals They Use - Want to know what chemicals energy companies use in their hydraulic fracking operations? Turns out it’s getting harder and harder to answer that question. According to a new study published in the journal Energy Policy, fracking companies have become less forthcoming since 2013 about the chemicals used in their operations, citing “the use of proprietary compounds” as grounds for limiting their disclosure.  The study, written by Harvard University researchers Kate Konschnik and Archana Dayalas as a follow-up to a similar analysis conducted in 2013, looked at more than 96,000 disclosures made between March 2011 and April 2015 on FracFocus, a hydraulic fracturing chemical registry. According to Inside Climate News, FracFocus was launched in 2011 as a tool for collecting voluntary disclosures from oil and gas companies, and was later adopted by more than 20 states in order to fulfill their chemical disclosure regulations.  But FracFocus’ ability to act as a proxy for state’s chemical disclosure regulations has been under fire for years.That criticism set off a slew of improvements at FracFocus. In 2015, the site announced plans to improve its accuracy and access, pledging to reduce the amount of information withheld under the guise of “trade secrets.”  Konschnik told Inside Climate News that some of the improvements FracFocus has made — especially the ability to download data in bulk, which makes large-scale analysis of fracking wells easier — have been “huge.” But the new study still found a 16.5 percent withholding rate in forms filed between 2013 and April 2015, compared to 11 percent between 2011 and 2013.

Massachusetts residents dig in against pipeline — The anti-pipeline crowd at the Yachnin family’s home was warmed by more than the hardwood logs burning in the fireplace when David Yachnin announced the state Attorney General’s comments from earlier in the day. AG Maura Healey, citing an energy study her office commissioned last summer and released Wednesday said Massachusetts doesn’t need natural gas pipelines to meet electricity needs through 2030. “I can’t tell you how huge a win this is for us,” Yachnin told the 65 neighbors and fellow opponents of the Kinder Morgan natural gas pipeline. About 4.3 miles of the line’s 400-mile length, from fracking gas fields in Pennsylvania, and piped underground through New York, Massachusetts and into New Hampshire is proposed to run through Andover, much of it parallel to power lines. The report’s findings and Healey’s backing will have weight when and if the pipeline ends up challenged in court, especially with the federal regulatory agency that will decide the project’s fate. “The only thing the FERC listens to is the court, and this is our court,” Yachnin said of the AG’s office, which represents the public in utility cases. Federal Energy Regulatory Commission (FERC) is reviewing the Kinder Morgan pipeline and whose approval the Texas company needs for the pipeline to be built.

Offshore drilling on town agenda - The Town of Swansboro will be the next Eastern North Carolina community to consider taking a stand against drilling off of the state’s coast. A draft resolution of offshore drilling opposition is on the agenda of tonight’s regular meeting of the Board of Commissioners. The meeting begins at 6 p.m. in the community room at the Swansboro Town Hall. If approved, the Town of Swansboro would stand “opposed to offshore oil and gas development and drilling and related seismic blasting activities off of the North Carolina coast.”To date, a number of coastal communities in the area have joined other municipalities in the state in going on the record against offshore drilling and/or seismic testing activities. In Onslow County, the towns of Holly Ridge and Surf City have adopted resolutions. In Carteret County, Emerald Isle, Morehead City and Beaufort have adopted resolutions opposing offshore drilling; and Atlantic Beach councilmen agreed to a resolution to be formally adopted this month. The Carteret County Chamber of Commerce and Tourism Development Authority have also taken a stance against it. Last week, Carteret County commissioners took action counter to what other coastal communities have done and adopted a resolution supporting Gov. Pat McCrory and his leadership as chairman of the Outer Continental Shelf Governors Coalition.

Fracking politics at work — or not — in Tallahassee -- Fracking is in the news in Florida. This may seem odd, as Florida is not anywhere near being a large oil-producing state. Fracking is in the forefront in Florida because a growing number of its citizens are becoming informed of its threats and its dangers and they want to stop it before it is too late. Hydraulic fracturing and acid well stimulation are techniques for breaking up oil- and gas-laden shale and limestone deposits in dried up wells or potential new wells to stimulate fossil fuel production. The process is fraught with risk of methane leaks, water contamination, earthquakes and poison residues but is used to squeeze more oil out of wells. So where are the ban-fracking bills? They are there in Tallahassee, several senators and representatives have sponsored them, but they may never be voted on. The problem is that the Florida House Speaker Steve Crisafulli and Senate President Andy Gardiner or possibly Senate President-elect Joe Negron have not put them into committee. Until they do so, a huge percentage of the Florida population will not have a chance to have their wishes represented in Tallahassee. Sources close to the legislative workings have said that Gov. Rick Scott would veto any ban-fracking bill if it were to pass, but that should not stop the democratic process. Something is wrong with our system if two individuals have the power to arbitrarily prevent a bill supported by a large proportion of our voters from even being considered in our Legislature.

Hydraulic Fracturing Knocking On Illinois' Doorstep: Hydraulic fracturing and natural gas development, well under way in Ohio and Pennsylvania, may soon come to Illinois, the latest state to experience an energy rush. Brad Richards, vice president of the Illinois Oil and Gas Association, said southern Illinois is in the midst of an oil and natural gas lease boom. In places like Wayne, Hamilton and Saline counties, there have been tens of millions, perhaps even a hundred million or more spent to acquire these leases, Richards said in a report on WUIS Radio, an NPR affiliate in Springfield, Ill. The leases are being bought up in the hope that companies could soon start developing shale formations. The formations are part of a large basin that straddles the Illinois, Kentucky and Indiana borders, said to hold up to 87 trillion cubic feet of natural gas, according to the Gas Research Institute, which funded a 1994 assessment of the region with the Illinois Basin Consortium. The extension of fracking into yet another state comes at a time when the price of natural gas has been declining. Natural gas on the New York Mercantile Exchange fell four cents in Tuesday trading to $2.18 for every 1,000 cubic feet. The price is now at less than half its 52-week high of $5.13.

Early report says Texas oil, gas production up from last year -- Texas produced 72,849,838 barrels of crude oil and 620,188,919 Mcf (thousand cubic feet) of total gas in September, according to a preliminary report by the Railroad Commission of Texas. The Commission regulates the oil and gas industry in Texas. Preliminary figures are based on production volumes reported by operators and will be updated as final corrected reports are received. Preliminary production numbers are up from a year ago, when Texas reported 65,824,450 barrels of crude oil and 595,603,581 MCF of total gas production. Preliminary September 2015 crude oil production averaged 2,428,328 barrels daily, compared to the 2,194,148 barrels daily average from a year ago. Total gas production averaged 20,672,964 Mcf a day, up from the 19,853,453 Mcf daily average in September 2014. Texas production in September came from 181,179 oil wells and 95,834 gas wells.

Oil Jobs Lost: 250,000 And Counting, Texas Likely To See Massive Layoffs Soon --Crude oil just capped off a third straight week of declines, as WTI nears the $40 per barrel threshold. Goldman Sachs is once again raising the possibility of oil dipping into the $20s per barrel. That spells more pain for the energy sector. Many companies have already slashed spending and culled their payrolls, but the total number of job losses continues to climb. According to Graves & Co., an industry consultant, oil and gas companies have laid off more than 250,000 workers around the world, a tally that will rise if oil prices remain in the dumps.“I was surprised it’s gotten this far,” Graves & Co.’s John Graves told Bloomberg in an interview. In an eye-catching statistic that highlights who exactly is bearing the brunt of the downturn, Graves says that oilfield service companies account for 79 percent of the job losses.Still, upstream E&P companies are also being substantially squeezed by another plunge in oil prices. According to an analysis by the Texas Alliance of Energy Producers, a new round of layoffs could be underway in Texas, for example. The Texas Alliance predicted that the first drop in oil prices last year would lead to 40,000 to 50,000 layoffs in Texas. But the renewed drop since the end of the summer could force many more cuts. Right now, the group is putting a conservative estimate at 56,000 job cuts so far, but they say the real tally is probably higher.

Despite oil bust, Texas prepares more students for oil jobs — The oil industry is mired in its latest bust, with thousands of jobs evaporating like flares flaming out over natural gas wells. But in Texas, education officials are preparing more young people for the oil patch, showing the state’s unshakeable commitment to the energy sector despite the employment uncertainties. The Houston school district is planning to expand its Energy Institute High School to around 1,000 students by 2017 and inaugurate a new 110,000 square-foot, $37 million facility. The three-year-old institute is the nation’s only high school fully specializing in oil and energy careers. In the oil-rich Permian Basin, two Midland high schools have begun “petroleum academies.” And state officials have approved vocational classes in oil production, authorizing all schools districts across Texas to teach them. “We are in this downturn, but as a society we have a responsibility to not let that affect our workforce and to keep ahead of the game,” said Energy Institute principal Lori Lambropoulos. Other oil and gas states, including North Dakota, Louisiana and Wyoming, offer technical training for high school students interested in the oil industry, but Texas’ program is more extensive, despite questions about whether there will be jobs in the near future for its graduates.

FRACKING: An Exercise in Reality Denial & Myth Creation  — Top state oil and gas officials have said it repeatedly: There is no credible link between fracking and groundwater contamination.Yet a WFAA investigation reveals the state’s own records reflecting a significant concern about a water well explosion in Palo Pinto County last year.And now, a neighboring water well is so contaminated with fracking related chemicals that the state says it poses a potential explosive threat.But what is the state doing about it?    That’s what Richard and Stella Singleton would like to know. They have lived and raised a family on their Palo Pinto County ranch for 24 years. Like many rural Texans, they rely on water from their well for bathing, cooking, and for their animals to drink.But all of that changed, they say, after Fairway Resources fracked an oil and gas well just a few hundred yards from their house in the summer of 2013.By December of that year, the Singletons said their well water started to smell like rotten eggs. Fumes filled their home. Then their water began to burn their skin. State inspectors came out to run tests. WFAA obtained documents related to the investigation through the Texas Public Information Act. Not only did those tests find excessive levels of methane in their water, but also but chlorides and the cancer-causing chemical benzene.  Oil and gas regulators with the Texas Railroad Commission issued a report saying the Singletons’ well water contained chemicals that may pose “adverse health effects” and an “explosion hazard.” The state’s solution? “Vent your water well” and consider “installing a well water aeration system,” documents show.

Oklahoma Leads The World In Seismic Activity As 2015 Quake Count Tops 5,000 -- With geologists having confirmed the link between fracking and earthquakes in Oklahoma (and energy executives trying to get those geologists fired), the news this week that The Sooner State leads the world in seismic activity will likely see more uproar from residents.. and more lobbying dollars spent to 'calm' the politicians. As KFOR reports, this year, more than 5,000 earthquakes have been recorded and experts say earthquakes in Oklahoma will likely increase in magnitude over time warning that it's only a matter of time before the state gets a big one that will change life for those of living there. "It's unclear exactly how high we might go, and the predictions are upper 5-6 range for most things that I've seen," Todd Halihan, a researcher from OSU, told KFOR NewsChannel4,   "Underneath any of these urban areas, whether it's Stillwater, Cushing, Oklahoma City, Guthrie, these cities are not built to seismic standards. They're not in L.A." Halihan said. "We have a lot of buildings that were built with earthquakes not even on the radar screen, so we would expect probably a fair bit of damage,"

U.S. oil company shakes up quake plans after Oklahoma temblors -- Reuters: Phillips 66 has overhauled how it plans for earthquakes, a sign U.S. energy companies are starting to react to rising seismicity around the world's largest crude hub in Cushing, Oklahoma. The changes include new protocols for inspecting the health of crude tanks, potentially halting operations after temblors, and monitoring quake alerts. The revisions, fully implemented in 2015 and first detailed to Reuters this past week, appear to mark the most significant acknowledgement by a major energy company that its seismic procedures were recently updated. They also come as some researchers say tougher standards for energy infrastructure such as pipelines and tanks could be needed to handle an uptick in quakes since 2009 in Oklahoma. Scientists have tied a sharp increase in the intensity and frequency of quakes in Oklahoma to the disposal of saltwater, a normal byproduct of oil and gas extraction work, into deep wells. A 4.7 magnitude quake struck in Oklahoma on Thursday, the strongest temblor there since 2011. About a month earlier, a 4.5 magnitude quake hit near Cushing. Regulators responded by calling for nearby disposal wells to shut or curb intakes. Phillips, a refiner, has 167,000 barrels per day of pipeline capacity and 700,000 barrels of storage tanks at Cushing, home to about 57 million barrels of crude and a nexus for U.S. supply, according to a 2015 investor presentation.

Colorado oil and gas spill report for Nov. 23 -- The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks.

  • WHITING OIL & GAS CORP., reported Nov. 9 that a valve failed on a pipeline near New Raymer. Between one and five barrels spilled.
  • DCP MIDSTREAM LP, reported Nov. 9 that a landowner was contacted about a pipeline leak near Johnstown. An unknown amount of condensate spilled.
  • NOBLE ENERGY INC., reported Nov. 10 that an oil line developed a leak near LaSalle. Between one and five barrels of oil spilled.
  • EXTRACTION OIL & GAS LLC, reported Nov. 13 that a valve was left open and overflowing while draining water off of a tank near Fort Collins. Less than 100 barrels of oil and between five and 100 barrels of produced water were spilled.
  • PDC ENERGY INC., reported Nov. 13 that fluid was found discharging to the surface of a well near Gill. Between one and five barrels of oil and produced water spilled.
  • NOBLE ENERGY INC., reported Nov. 18 that a water vault was discovered to have a leak during plugging and abandonment near Kersey. And unknown amount of produced water spilled.

US to cancel lease on land sacred to Blackfoot Indian tribes — The Interior Department plans to cancel a long-suspended oil and gas drilling lease near Glacier National Park that’s on land considered sacred to the Blackfoot tribes of the U.S. and Canada, according to court documents filed Monday. Tribal leaders said such a move would make up for a wrong done to them in 1982, when the government issued the lease without consulting the tribes. But the legal maneuvering in the case might not be over: The law firm representing the lease owner, Solenex LLC of Baton Rouge, Louisiana, indicated it would challenge any attempt to cancel the lease. Government attorneys said the lease was improperly sold more than three decades ago, in part because an environmental study did not consider the impact of drilling on the tribes. The U.S. Forest Service and Bureau of Land Management “failed to fully consider the effects of oil and gas development on cultural resources, including religious values and activities,” the attorneys wrote. The 6,200-acre lease is in northwestern Montana’s Badger Two-Medicine area, which is the site of the creation story for the Blackfoot tribes of southern Canada and the Blackfeet Nation of Montana. It is just west of the Blackfeet Indian Reservation. The lease could be canceled as early as Dec. 11.

North Dakota eyes science for oilfield brine cleanup — A half-century after it held saltwater and other oil-drilling waste, an abandoned pit near the Little Missouri River in western North Dakota was dug out and filled with fresh soil this week with hopes that the site will someday be capable of producing vegetation again. The reclamation, which involved the removal of some 6,900 tons of salt-tainted soil, came in the eleventh hour, workers say, as one more bout with heavy spring rains could have caused river erosion to eat into the briny pit near Medora, potentially threatening water supplies for several communities downstream. The 5,000-square-foot pit is one of only six so-called legacy sites targeted under new state legislation that sets aside $1.5 million over the next two years to restore land impacted from oil booms past and where companies no longer are legally responsible. The work near Medora, which was ranked as a top priority by the state, will use at least a third of the appropriation, regulators say. “We have to find a way to do it better, faster and cheaper,” said Alison Ritter, a spokeswoman for the state Department of Mineral Resources, which regulates oil and gas development in the state. That’s where the state’s two biggest universities come in: Money from a portion of a tax on North Dakota oil production is funding competing research to develop a method of restoring such sites without the use of expensive mechanized excavation. The focus is on remediating land ruined by saltwater, a byproduct of oil production that can be many times saltier than seawater. When land is spoiled by briny drilling waste, the traditional fix is to dig up and haul away the tainted soil and re-cover the land with good dirt.

North Dakota 'man camps' battle pending ban in oil capital -– Providers of temporary housing for North Dakota’s oilfield workers are fighting a plan by the state’s energy capital to evict their “man camps,” fearing it could set an example for others and add to the sector’s woes caused by a global commodity slump. Earlier this month, the Williston City Commission voted 3-2 in favor of an ordinance that would deny “man camps” occupancy permit extensions beyond July 2016. Should the ordinance pass in a final vote on Nov. 24, which appears likely, it would mark the first time since the U.S. shale boom began in 2008 that a community has evicted a “man camp,” though other communities in Texas and North Dakota have blocked their arrival or expansion. Williston leaders say it is time for oilfield workers to plant permanent roots or use existing hotels for extended stays and point out to abundant new permanent housing in this city with an estimated population of about 31,000. “The man camp industry should understand we allowed them to come here on a temporary basis,”

October, 2015, Bakken Oil Production Remains Flat Month-Over-Month -- November 25, 2015 - The Director's Cut comes out about the middle of the month. When it comes out, the data is for the month prior to the previous month; in other words, the "November 15th" Director's Cut was for September data. So this caught me by surprise. Platts Bentek reported today that October production from both the Eagle Ford and the Bakken remained flat. October production. Oil production from key shale formations in North Dakota and Texas remained relatively flat in October versus September, according to Platts Bentek. Oil production from the Eagle Ford shale basin in Texas continued flat streak in October, increasing only 6000 barrels per day (b/d), or less than 1%, versus the previous month, the latest analysis showed.    The average oil production from the South Texas, Eagle Ford basin in October was 1.5 million barrels per day. On a year-over-year basis, that is up close to 65,000 incremental barrels per day, or about 5% higher than October 2014.  The average crude oil production from the North Dakota section of the Bakken in October was 1.2 million b/d, or about 13,000 b/d from year ago levels.  "Much like the Eagle Ford, producers in the Bakken shale are also consistently looking to reduce costs to hold production steady," said Yahya. "In September 2014, 77% of the total wells drilled in the basin were drilled in the core counties (McKenzie, Dunn, Williams and Mountrail) and that metric has since risen to 92% in October 2015.   The price of oil out of the Bakken formation at Williston, North Dakota, was up 11% between January and October, with an average price of $46.85/b for the first 10 months of 2015, according to the Platts Bakken assessment.  Platts Bakken, however, is down 40% when compared to last year's corresponding month. The wellhead assessment has ranged between $33.35/b and $59.32/b since the beginning of January.

US Oil From Fracking More Volatile, Widespread Than Previously Believed -  The millions of barrels of oil pumped from shale rock around the country, in Colorado, Texas and other states, not just North Dakota, are full of unpredictable and flammable gases that make the crude difficult to move and process into fuel.After a series of fiery train derailments in the past year, federal investigators in May identified the “ultralight” oil traveling by rail from North Dakota’s Bakken Shale as an “imminent hazard,” meaning it significantly inflicts risk of death and injury to people and the environment, because of what they called its unusually flammable nature. Now, energy experts say the high levels of gas in North Dakota’s Bakken crude are present also in oil pumped from many shale formations, including the Niobrara Shale in Colorado and the Eagle Ford Shale and Permian Basin in Texas, the Wall Street Journal reported. U.S. oil production has risen in the past few years at levels not seen since the 1970s, boosted by applying new drilling techniques like hydraulic fracturing to plentiful shale formations to extract so-called tight or light oil. The U.S. Energy Information Administration expects American oil production to rise by 48 percent from 2012 to 2020, with tight oil accounting for 81 percent of that increase.Until the recent boom, much of the oil U.S. refiners processed was dirty and heavy. Now, the crude can be so light and gassy that it froths over refinery units like champagne, and refiners must invest in new equipment to process more of the oil.  The increased supply has lowered the price of the new oil by $10 or more than the level of traditional crude, so energy companies are keen to ship their oil abroad, where buyers would be willing to pay more. Though there’s a decades-old ban on crude exports, federal officials recently gave two companies permission to export oil that’s been minimally processed.

Analysis forecasts derailment every other year if oil train terminal is built — A proposal to build the largest oil train terminal in the Pacific Northwest could result in a derailment every two years and an oil spill from a derailment once every 12, according to a draft analysis by a Washington state agency. The document, released Tuesday, indicates that most fire departments along the oil trains’ rail route are not prepared for a spill or fire that could accompany a derailment. Out of the 12 departments that responded to the survey request, only one indicated its firefighters are trained and equipped for such an incident. Further, only half the departments said they knew the locations of BNSF Railway’s specialized firefighting equipment closest to their jurisdiction. And while three-quarters of them reported having access to personal protective equipment, firefighting foam and foam applicators, only a quarter said they had access to oil spill containment booms. The draft environmental impact statement from the Energy Facility Site Evaluation Council said that BNSF would bring four oil trains a day to the Vancouver Energy facility at the Port of Vancouver, Wash., with the loaded trains mostly following the path of the Columbia River and the empty trains returning east via Tacoma, Auburn and Stampede Pass. With those four daily trains, carrying 100 or more cars each of either light crude from North Dakota or diluted heavy crude from western Canada, the agency forecast “a derailment incident might occur once every two years with a loaded train, and once every 20 months with an empty train.”

One Broken Pipe Is Leaking A Huge Amount Of Methane -- A gas storage site in Los Angeles has been leaking for more than a month, in what environmentalists say should be a “wake-up call” for regulators about the state’s aging gas infrastructure. The Aliso Canyon storage well, about 30 miles northwest of downtown, is releasing 50,000 kilograms of methane an hour, according to an estimate from the Environmental Defense Fund (EDF). The Southern California Gas Company discovered the leak on October 23 and has been unable to contain it.“This is sort of the worst case scenario,” EDF’s Tim O’Connor told ThinkProgress. His group estimates the storage well has lost about 2 percent of its gas.  Because natural gas is 80 percent methane, and methane is a potent greenhouse gas, the amount Aliso Canyon has leaked will have the impact of 2.6 to 2.9 million metric tons of carbon for the next 20 years. Put another way, every day the leak continues, it single-handedly accounts for 25 percent of California’s total methane emissions. A spokesperson for the company said it was impossible to determine how much gas had leaked at this time. “We are committed to — and we will — stop the flow of gas, and are working with some of the world’s best well management experts to seal the leak as quickly and as safely as possible,” Kristine Lloyd told ThinkProgress in an email. “We are unable to provide a specific timetable, but the relief well process could take several months. While the relief well is built, we will continue to try to stop the flow of gas by pumping fluids down the well.” “Longterm exposure of irritants in a very pungent form can have really deleterious effects,” O’Connor said. The storage well is also a former oil well, which means it could have benzene and other chemicals. The gas company has received hundreds of complaints, including nausea, dizziness, and nosebleeds from the smell.

LA County residents to speak on sick-making natural gas leak — Dozens of Los Angeles County residents who say an uncontrolled leak from a massive natural gas storage field is making them sick plan to speak at a county Board of Supervisors meeting Tuesday and demand a full investigation of the leak, its causes and possible solutions. The planned testimony comes as the leak near Porter Ranch has persisted for a month. Residents have complained of nausea, headaches and other maladies, but the company that operates the storage field — SoCalGas — has said it does not pose a serious health threat. The residents planning to testify Tuesday issued a statement saying the company has “misled the public about the health risks.” About 30 families in the area have been temporarily relocated because of the leak, officials said. Last week, California’s gas and oil regulator issued an emergency order requiring the company to provide a plan for stopping the flow. Representatives of the county’s fire, public health and planning departments are also expected to speak at the supervisors’ meeting.

Utility plans to mask awful odor from uncontrolled gas leak — A utility trying to stop a monthlong leak at a massive natural gas storage facility near a Los Angeles neighborhood said it planned to use a mist to mask the sickening stench as work continues — possibly for three more months — to plug the well. SoCalGas officials told county supervisors Tuesday that the substance is safe and would neutralize the rotten-egg smell that has led to more than 660 complaints by residents to the air board about nausea, headaches and dizziness. Porter Ranch residents attended the supervisors meeting to criticize the company’s delay in owning up to the leak that began Oct. 23 and said they are wary of claims the deodorizing mist is harmless and fear it could cause unknown chemical reactions. “We’re not your guinea pigs,” said Matt Pakucko, president of a group called Save Porter Ranch. So far, the leak has stumped the gas company, a division of Sempra Energy, which has tried unsuccessfully to pour liquid into a leaking well that goes a mile and a half underground. Plans were underway to drill a relief well that could take three more months to complete. The company has 115 wells at the site that pump natural gas into a vacant, underground oil field when demand is low and draw it out for use by customers and power plants when demand spikes. It is believed to be the largest natural gas storage facility in the West and is capable of supplying all of Southern California for more than a month.

Alaska completes $65 million buyout of TransCanada in LNG project -- The state on Tuesday completed the buyout of TransCanada’s interest in the Alaska LNG project, a $65 million expense that gives Alaska the same stake in the $55 billion effort as ExxonMobil, BP and ConocoPhillips. Gov. Bill Walker hailed the move as “historic,” calling the gas line project the best “get-well card” for a state facing a $3.5 billion deficit. “By gaining an equal seat at the negotiating table, we are taking control of our destiny and making significant progress in our effort to deliver Alaska gas to the global market,” he said in a press statement. First production of the pipeline-liquefied natural gas project is not scheduled until 2025, assuming the companies, and the state, agree to spend the billions of dollars that must be advanced to move the project in the coming years. Under terms established in 2014 under former Gov. Sean Parnell, TransCanada made upfront investments and held the state’s 25 percent stake in the proposed 800-mile pipeline and a gas treatment plant on the North Slope. In the recent special session called by Walker, the administration argued a buyout would produce up to $400 million more a year in revenue for Alaska, and give the state more of a say across the entirety of the project. Called a “gigaproject” because of its size, the effort includes other major facilities in which TransCanada did not hold an interest, such as the proposed liquefaction plant in Nikiski.

Independents win big acreages in state North Slope lease sale -- Some people in industry still have a lot of faith in the North Slope, even with crude oil prices skidding. Independent companies bid aggressively for acreage Dec. 18 in the state’s North Slope “area-wide” sale, acquiring acreage at rock-bottom prices. The bulk of the offers were rock-bottom bids but with the exception of two high bids by Denver-based Armstrong Oil and Gas on tracts near a discovery Armstrong plans to develop with Repsol. Armstrong beat out competing bids by ConocoPhillips, in fact. The Alaska Department of Natural Resources auctioned off 131 tracts on 186,400 acres with high bids totaling $9.51 million. Armstrong was the highest bidder in the sale, offering $1.92 million on two tracts near the Colville River, the area of the Repsol/Armstrong discovery. ConocoPhillips offered the only competing bids in the sale of $160,000 for those two tracts. Two other parts of the North Slope were put up for bid, the “foothills” area of the southern Slope and state offshore acreage in the Beaufort Sea, but drew no bids. About 2.2 million acres of 5.1 million acres in the state’s central North Slope area were up for bid, not including the southern foothills and Beaufort Sea state acreage where there were no bids.

Low Crude Prices Catch Up With the U.S. Oil Patch -- U.S. companies have stunned global rivals by continuing to produce oil—particularly from shale deposits—ever more cheaply as American crude prices plunged from over $100 a barrel in 2014. But the recent drop toward $40 a barrel and below puts even the most efficient operators in a bind.  “Forty-dollar to fifty-dollar oil prices don’t work in this business,”  The worst-case scenario most major producers have discussed in the past six weeks with investors involved a price of $50 a barrel. That is beginning to look optimistic as Saudi Arabia continues to produce near-record volumes and major exporters such as Iraq have increased output. Many oil executives, including BP PLC CEO Bob Dudley, expect prices to be “lower for longer.” The U.S. Energy Department is forecasting the price of oil will average around $50 a barrel next year.  Many companies that were hoping to weather low energy prices without new rounds of layoffs and salary cuts may be forced to slash those costs yet again.  “We’re really reaching the limit of what people can do,” . “Right now, you are down to the best areas, the best rigs, the best people. Any cuts from now on are bone rather than fat.”  Earlier this month, EOG Resources Inc., a Houston-based shale driller, said some of its most prolific wells would yield a rate of return above 40%, even with U.S. oil prices at $50 a barrel.  But break-even prices can exclude land costs, which for some companies amount to billions of dollars, and they don’t include the cost of using pipelines to transport crude, according to company financial statements and analyst reports.  In nearly all of its investor presentations this year, EOG has said it can turn a profit at prices at or below the prevailing oil price at the time of the presentation. Yet more than $6 billion in capital spending this year has produced nearly $4 billion in net losses over the past year for the company, which is an industry bellwether.

Energy Downturn Spreads Beyond the Oil Patch - WSJ: The prolonged slump in crude prices is rippling beyond the oil industry into areas of the North American economy that, until recently, had managed to avoid the worst of the downturn. With the crude-market decline in its 17th month and nearly a year after OPEC dealt prices a sharp blow by refusing to rein in output, lower profits and mounting losses are crimping budgets, spurring multiple rounds of job cuts and driving some energy companies to seek bankruptcy protection. Signs of that distress are spreading throughout once-booming oil-producing regions across North America. Sales of single-family homes in Houston fell 10% on the year in October, the first double-digit decline this year, according to the local association of real-estate agents. Restaurants in Texas and the Southwest have experienced a drop in revenue and customer traffic, industry tracker Black Box Intelligence said in a recent report. Chili’s Grill & Bar operator Brinker International blamed low oil prices for weak results in some states that rely heavily on the energy industry. “While we have been seeing pockets of softness within those regions for a while, the top-line challenges expanded during the quarter across Texas, Oklahoma, Arkansas, Louisiana,” Chief Executive Wyman Roberts said on a conference call last month.

Oil Workers Brace For Fresh Layoffs, As Industry Wrestles With ‘Lower For Longer’ Crude Prices - : Texas rigs haven’t gone completely silent. Some companies can still make a profit pumping oil out of West Texas wells. But the state’s recent boom came from shale plays, like the Eagle Ford in the south of the state. With producers earning less than $40 a barrel for crude, there’s simply no way to earn back what it costs to frack and drill such wells. “We’re seeing declines in population across these towns in south Texas,” says Ed Hirs, an energy economist at the University of Houston. For nearly eight years, high-paying jobs grew at a blistering pace across the region, long one of the poorest in the state. Now companies are shutting down operations, and those jobs are vanishing. “And until the price returns to a level above $75, $85, $95 a barrel,” Hirs says, “we won’t see a complete reemployment of everybody who’s left.” So people are leaving — not just south Texas, but the industry — in search of work. Some will come back when the price of oil recovers. But this is an industry where roughly 70 percent of the workforce is over age 50. That’s the legacy of weak hiring during the oil bust of the 1980s and 1990s. “I think this is going to be an acute problem in a couple of years’ time. I think it’s going to come bite us extremely hard,”  “Many of the people we’re losing today through the industry and that have been let go are the highest skilled and the highest remunerated and just happen to be the older people in the industry who we’ve relied on.”

Oil companies brace for big wave of debt defaults - Low oil prices are leaving many oil and gas companies with difficult debt loads, causing them to default at an extraordinary rate. On top of that, rating firm Moody’s forecasts the default rate will increase. “The energy sector remains the most troubled, accounting for almost a quarter of the 79 defaults so far this year,” said Sharon Ou, Moody’s Credit Policy Research senior credit officer. The strain on the oil patch comes after years of borrowing heavily at the start of the domestic energy renaissance. At the time, oil was hovering around $100 a barrel. But now, with West Texas Intermediate crude oil slightly above $40 a barrel, these companies are seeing their revenue dry up — and remain saddled with debt. Marc Lasry, the chief executive of distressed investing specialist Avenue Capital Group, said these energy companies boosted their borrowings to between $250 billion and $300 billion, compared with the $100 billion at the start of this year. The energy boom of the past decade was fueled by a wave of credit from U.S. banks that now say they expect more delinquencies and charge-offs from energy companies this year. Federal Reserve officials earlier in November noted an increase in weakness among credits related to oil and gas exploration, production, and energy services following the decline in energy prices since mid-2014. Among the major banks raising red flags about the health of the loans are Wells Fargo, Bank of America and JPMorgan Chase.  Some banks are renegotiating their credit lines to gas and oil companies, while others are cutting credit lines to oil and gas firms and are requiring more collateral to protect against the surge of defaults.

U.S Drillers’ Operating Loses Could Surge In 2016 -- With oil prices having fallen by nearly half over the last sixteen months, it is little wonder that oil companies found their balance sheets under pressure. From Exxon to Continental all oil companies have faced problems in maintaining their capital spending and more importantly, their profitability. In light of that, it is little wonder that oil companies pulled every lever they could to survive.  First of all, companies have been relying on production growth. Shale producers especially have done all they can to keep production as high as possible. The idea has been to offset the falling price per barrel with more barrels of output. Some firms, like Devon Energy, have been exceptionally successful with this strategy. The problem is that production growth is not sustainable for shale firms in the absence of large amounts of capital spending, which these firms cannot sustain at this point. The declining production curves are simply too great for oil companies to keep the oil flowing without significant new investment. Thus investors should be prepared to see production fall in 2016.  Secondly, cost cuts are also playing a big role at oil companies in sustaining profits. Oil companies in general are “sharpening their pencils” on cost cuts according to analysts. The supply chain crimp on prices across the entire oil vertical has been severe. From Haliburton to Frank’s International, every oilfield supplier has felt the pinch. This has motivated the supply chain to be more efficient in providing services and has let oil companies wring additional savings out of their businesses’. These double-digit savings have helped oil companies considerably in maintaining the bottom line, but it is starting to look like that trend may be waning. From Baker Hughes to mom & pop operations, the supply chain simply cannot do much more to help producers. That bodes ill for 2016 profits at oil producers.

TTIP talks: EU alleged to have given ExxonMobil access to confidential strategies --  The EU appears to have given the US oil company ExxonMobil access to confidential negotiating strategies considered too sensitive to be released to the European public during its negotiations with the US on the trade agreement TTIP, documents reveal. Officials also asked one oil refinery association for “concrete input” on the text of an energy chapter for the negotiations, as part of the EU’s bid to write unfettered imports of US crude oil and gas into the trade deal. The employers’ confederation BusinessEurope was even offered “contact points” with US negotiators in the State Department and Department of Energy, according to the cache of material which was released under access to documents laws. The US has banned fossil fuel exports for 40 years but the policy was relaxed towards Mexico in August. Previous leaks of TTIP documents have revealed the EU is pressing for a guarantee in the trade deal that the US will allow free export of oil and gas to Europe, alarming environmentalists who fear imports would impact on the EU’s climate change plans. It would cost $100bn to build the infrastructure necessary to export the US fossil fuels, according to industry estimates, also released in the freedom of information trawl. Campaigners said the documents and emails obtained by the Guardian showed an extraordinary and shocking relationship between the EU and industry over the fossil fuel push. “This is an extraordinary glimpse into the full degree of collusion between the European commission and multinational corporations seeking to use TTIP to increase US exports of fossil fuels,” said John Hilary, the director of War on Want. “The commission is allowing the oil majors to write the proposed energy chapter of TTIP in their favour.”

Editorial: Lifting crude-oil export ban would help Big Oil, hurt the rest of us -- In 1975, after the country was shaken by the Arab oil embargo, Congress passed a ban on exporting crude oil from the United States. The motivation was to promote domestic fuel production and efficiency and to decrease U.S. dependence on foreign resources. Forty years later, we’re still working toward these goals. And we’re also trying to slash greenhouse-gas emissions, which are aggravated by fossil fuel consumption. So it’s unclear why a movement to lift the crude export ban has been gaining ground in Washington, where it enjoyed a victory last month in the House. Now that the proposal is headed to the Senate, we urge Maine’s Susan Collins and Angus King to come out against it — and stand up for the well-being of their constituents and the environment. Who would gain if the United States once again allowed crude oil exports? U.S. oil companies, which are seeking access to the world market in order to make up for the damage done to their bottom line by falling oil prices. Repealing the ban would be a huge gift to these firms. But there would be serious downsides for everyone outside the industry. Lifting the ban would likely spur more well drilling, enabling the production of up to 3.3 million more barrels of oil per day for the next 20 years, according to a study commissioned by the pro-repeal Brookings Institution. If just a fraction of this additional oil were burned, greenhouse-gas emissions could rise by up to 22 million metric tons annually — the same amount of pollution caused by five average-sized coal power plants. This would fuel the climate crisis blamed for this year’s flooding in the Southeast and drought in the Southwest. Maine would see more Lyme disease-causing ticks, as well as more record summer heat and poor air-quality days — no boon to the many residents with lung conditions.

Propane -- The Next Big Story -- November 27, 2015  From crisis to glut in less than a year.  Jack Kemp is reporting: Liquefied petroleum gases (LPG) are the fastest-growing category of hydrocarbon exports from the United States, with volumes up almost four-fold since 2012.  Some data points:

  • US propane exports, 2012: 200,000 bbls
  • US propane exports, 2015: nearing one million bopd 
  • composition: a range of light hydrocarbons to include ethane, butane, and propane, among others; 
  • purpose: petrochemical feedstock to residential heating and cooking
  • rules: unlike crude oil, LPG is treated as a refined product and can be exported with few restrictions, a position the U.S. Department of Commerce confirmed in 2014
  • traditionally, most LPG has been marketed in neighbouring countries, including Canada, Mexico, Central America and the Caribbean
  • in 2012, neighbouring countries accounted for 55 percent of all LPG exports, rising to almost 80 percent if South America is included.
  • by 2015, however, the total share of LPG exports to other countries in the western hemisphere had dropped to just 53 percent
  • exports to Europe, Africa and especially Asia have surged and now account for nearly half of all the LPG shipped abroad
  • China has overtaken Canada and Mexico as the most important export market for U.S. LPG, taking more than 24 million barrels, almost 100,000 bpd, in the first eight months of 2015

Another Historic Day in the Battle to Stop the Tar Sands -- After a string of pipeline victories and over a decade of campaigning on at least three different continents, the Alberta government has finally put a limit to the tar sands. Today they announced they will cap its expansion and limit the tar sands monster to 100 megatons a year (equivalent to what projects already operating and those currently under construction would produce).  As momentous an occasion as it is when an oil jurisdiction actually puts limits on growth, 100 million tons of carbon a year at a time when science is demanding bold reductions is still far too much. While historic, the government’s cap needs to be viewed as a ceiling rather then a floor and a ceiling that we will need to work like crazy to ratchet down until it meets the science. On the good side what the current cap does mean is that the two-to-five fold expansion the tar sands industry had planned will not happen. It means the 2,270,820 barrels a day already approved will stay in the ground, the 1,890,850 barrels a day in the application process will never see the light of day and the 1,923,00 barrels a day disclosed and announced will go no further then that. That’s 6,084,670 barrels a day that the government helped stop today and 154.07 million tons of carbon a year that we will be keeping from getting poured into the atmosphere.

Eni set to begin Arctic oil exploration, even as others give up - - Eni will soon will start production in a field in the Barents Sea almost 300 miles north of the Arctic Circle, the northernmost offshore oil platform in the world, where output should eventually reach 100K bbl/day, WSJ reports.The huge cost of pushing ahead with such projects, amid the sharp fall in crude oil prices over the past 12 months, has prompted companies to ditch Arctic drilling plans, but for Eni, the $6B Goliat project was too far advanced to be called off.  Eni CEO Claudio Descalzi says the Barents Sea is "a completely different kind of Arctic than northern Alaska” because the former is free of ice and is near a populated area where oil companies have been exploring for two decades.

Eni Should Take A Page From Royal Dutch Shell Book: No energy company was expected to drill in the region, after Royal Dutch Shell and Statoil moved away from the Arctic drilling plan. However, the Italy based Eni has stated that it will open crude oil taps in the Arctic Ocean soon. The company is optimistic about its exploration plan in the Goliat platform, as it believes that unlike the northern Alaska region, where Shell started its operations, Barents Sea will be favorable for crude oil production. Eni plans to start pumping crude oil from an oilfield in the Goliat platform before the end of 2015. The field is expected to pump around 100,000 barrels per day (bpd) and is around 300 miles away from the Arctic Circle. The field is located in the Barents Sea, which according to the company CEO, Claudio Descalzi is ice-free and has a comparatively moderate climate. Eni has made a risky move by venturing into the Arctic region, in the wake of the prolonged decline in crude oil prices that has forced oil and gas companies to postpone or cancel new energy projects in the Arctic region. The energy company remains optimistic despite recording a $1 billion loss in its third-quarter of fiscal year 2015 (3QFY15), as it continues with its $6 billion Goliat project. The company’s oil exploration success in Egypt and Libya, when its rivals failed, has strengthened its belief that the operations in the Barents Sea will be beneficial for the company’s financial position.

Mexico’s Pemex to refine record low level of crude oil in 2015 – Mexico’s state oil company Pemex will process the lowest amount of crude this year in at least a quarter century, internal refining plan documents seen by Reuters show, as plant outages and other inefficiencies continue to batter margins. The decline is a double blow, as it means the national oil giant will likely struggle to compete in the upcoming liberalization of Mexico’s retail oil sector and the country will probably have to buy more gasoline from U.S. refiners, unless it can significantly improve operations. As Pemex processes less oil, the utilization rate of its six domestic refineries – the volume of crude processed divided by refinery capacity – could sink to as low as 63 percent this year, badly lagging peers in the United States, Brazil and Venezuela and making it one of the most inefficient refiners in the world. U.S. refiners next door, meanwhile, have in recent years been running more crude than ever before, and in some cases at the highest efficiency levels on record. Pemex estimates it will process about 1.091 million barrels per day (bpd) by the end of this year, which would mark its lowest level since at least 1990. The company is producing less fuel even though domestic demand for gasoline has steadily risen by nearly 80 percent over the past 25 years. Refining less crude will push down Pemex’s utilization rate by about a fifth to 63 percent compared with about 77 percent five years ago, according to data from Houston-based energy consultancy Wood Mackenzie. Utilization rates at refineries in the United States average 89 percent while in Latin America, excluding Mexico, they average about 81 percent, Wood Mackenzie said.

Mining company behind red centre fracking plan claims project is safe - Fracking can be safely carried out near a renowned tourist drawcard in Australia's red centre and some Aboriginal people support the project for the royalties it will bring, according to a mining company chief behind the controversial bid.Traditional owners of the Watarrka National Park, which includes the Kings Canyon gorge, on Tuesday expected to seek a meeting with Environment Minister Greg Hunt in Canberra, urging him to act quickly to protect the land.Lawyers acting for the group intend to file an emergency application for heritage protection for Watarrka, under the National Heritage List and other laws.The Northern Territory government is assessing an application by Palatine Energy to explore for shale oil and gas across more than 1000 square kilometres of the national park. It would include the contentious fracking technique, which opponents say can threaten water supplies.Traditional owners have no legal right to veto the application, which Environmental Defenders Office Northern Territory principal lawyer David Morris said risks damaging areas of environmental and spiritual importance."[Traditional owners] say Watarrka is a place of incredible significance … there's a huge number of dreamings that go through that site, stories from the creation time, and many of those stories revolve around water," he said."Watarrka is one of the few places in that desert area where you would always find water.

Fracking debate: Kings Canyon traditional owners seek emergency heritage listing - Northern Territory traditional owners have met with Federal Environment Minister Greg Hunt to ask for an emergency heritage listing for Watarrka National Park, where a mining company wanted to explore for oil. However, the NT Government has said oil and gas exploration permit applications for Watarrka National Park and the Coomalie Council Region would not be granted. Mining company Palatine Energy said it was "profoundly disappointed" with the announcement. The park, about 300 kilometres south-west of Alice Springs, features the tourist spot Kings Canyon and is visited by hundreds of thousands of people every year.Three traditional owners, who jointly manage the park, said the NT Government had ignored their formal requests to protect the park from an exploration bid by company Palatine Energy. David Morris from the NT's Environmental Defenders Office, which has helped traditional owners lodge their application, said it had been a "good meeting" with the Mr Hunt. "We met for about half an hour and it was a good meeting. He listened to the traditional owners," Mr Morris said. Traditional owner Julie Clyne said she wanted Mr Hunt to impose the emergency listing. "I travel from Kings Canyon, Watarrka. I come here today with a message to say no to mining and to fracking," Ms Clyne said. In a statement, the Central Land Council's (CLC) David Ross said the senior traditional owners of Watarrka had made it "very clear for a long time" that they opposed any mining exploration in the park and accused NT Chief Minister Adam Giles of making "unsubstantiated claims of divisions" among the traditional owners. "Today's emergency application for federal heritage protection of the park shows that traditional owners don't trust the Giles Government," Mr Ross said.

Fracking at Kings Canyon shot down by Northern Territory government -- The Northern Territory government has denied a mining permit to a company seeking to frack the Watarrka national park, which encompasses Kings Canyon in central Australia. The decision on an application first lodged about four years ago was announced on the same day traditional owners petitioned the federal environment minister to step in and protect the land under commonwealth legislation. David Tollner, the minister for mines and energy, said oil and gas permit applications for both Watarrka and the Coomalie council region would not be granted under the oil and gas guidelines announced by the NT government last week. “Government recently implemented these new measures, on top of its already robust regulations, to ensure onshore oil and gas activities can proceed alongside other land usages in a safe and sustainable manner,” Tollner said. “Both applications were assessed as not satisfying all of the recently announced criteria.”   Palatine energy applied four years ago to explore resource extraction in the Watarrka national park, and had indicated it would use the hydraulic fracturing process. Watarrka’s 105,200 hectares of land is under the custodianship of the Martutjarra-Luritja people and contains three Aboriginal living areas: Lila, Wanmarra and Ulpanyali. The park contains more than 600 species of plants and numerous native animals. It is culturally significant to Aboriginal people and continues to be a place of traditional observance, customs and ceremony.

Trends in oil production - World field production of crude oil increased 2.9 million barrels a day in the 12 months ended last July. That compares with a 3.6 mb/d increase over the entire nine years from Jan 2005 to Dec 2013.The biggest single factor is Iraq, where production is up almost 1.1 mb/d over the last year. Although ISIS has managed to bring cruelty to much of the rest of the world, so far they have not disrupted Iraqi oil production. The second biggest factor in the 2.9 mb/d gain was the United States, where production increased 0.6 mb/d July 2014 to July 2015, thanks to the tremendous success of shale oil, or production based on horizontal fracturing of tight geologic formations. But that is going to change. The EIA Drilling Productivity Report tabulates detailed summaries of drilling and production in the main U.S. counties that have been responsible for the shale oil revolution. One of the interesting statistics is their calculation of the change in “legacy” production. To get this, the EIA tabulates production in these counties coming from wells that had been in operation for two months or more as of August, and then looks at how much was being produced by these same wells in September. This calculation comes out to be a drop in production of those legacy wells of some 330,000 barrels per day between August and September. The EIA series for the change in legacy production each month is plotted below. If we were relying only on historical wells without drilling new ones, U.S. shale production would fall about a million barrels/day every three months. Production has not fallen as dramatically as many of us has anticipated thanks to remarkable ongoing gains in productivity. Even so, the EIA estimates that U.S. shale oil production will be half a million barrels a day lower in December than it had been in June.  And it will fall further. The five biggest pure players among U.S. shale oil producers could be EOG, Pioneer, Devon, Whiting, and Continental Resources. Between them, these companies may account for about a fifth of total U.S. shale oil production, and between them they have lost $25 billion so far in the first three quarters of 2015.  Eventually this adjustment will bring crude oil inventories back to more normal historical levels. But we’re not there yet.

Why "Supply & Demand" Doesn't Work For Oil -- Gail Tverberg The traditional understanding of supply and demand works in some limited cases–will a manufacturer make red dresses or blue dresses? The manufacturer’s choice doesn’t make much difference to the economic system as a whole, except perhaps in the amount of red and blue dye sold, so it is easy to accommodate.  A gradual switch in consumer preferences from beef to chicken is also fairly easy to accommodate within the system, as more chicken producers are added and the number of beef producers is reduced. The transition is generally helped by the fact that it takes fewer resources to produce a pound of chicken meat than a pound of beef, so that the spendable income of consumers tends to go farther. A gradual switch to higher-cost energy products, in a sense, works in the opposite direction to a switch from beef to chicken. Instead of taking fewer resources, it takes more resources, because we extracted the cheapest-to-extract energy products first. It takes more and more humans working in these industries to produce a given number of barrels of oil equivalent, or Btus of energy. The workers are becoming less efficient, but not because of any fault of their own. It is really the processes that are being used that are becoming less efficient–deeper wells, locations in the Arctic and other inhospitable climates, use of new procedures like hydraulic fracturing, use of chemicals for extraction that wouldn’t have been used in the past. The return on any kind of investment (human labor, US dollars of investment, steel invested, energy invested) is falling.  For a time, these increasing inefficiencies can be hidden from the system, and the prices of commodities can rise. At some point, however, the price rise becomes too great, and the system can no longer accommodate it. This is the situation we have been running into, most severely since mid-2014 for oil, but also for other commodities, dating back to 2011.

Hedge funds turn very bearish on U.S. crude – Hedge funds and other money managers had amassed short positions in U.S. crude oil amounting to 154 million barrels by last Tuesday according to data from the U.S. Commodity Futures Trading Commission (CFTC). Short positions have increased more than 70 percent since the middle of October and stand at the highest level since August, the CFTC showed in its latest commitments of traders report published on Friday. The number of hedge funds with reported short positions of at least 350,000 barrels in the main WTI contract on the New York Mercantile Exchange hit 69 last week, the largest number since April. The average hedge fund short position has increased from 1.6 million barrels in mid-October to as much as 2.2 million barrels last week. Since the start of the year, movements in the price of WTI futures prices have been closely correlated with the accumulation and liquidation of hedge fund short positions.  Recent lows in WTI in March and August coincided with a large concentration of hedge fund short positions (178 million and 157-163 million barrels respectively) and a large number of reported short traders (78 and 65-66). The large increase in short positions over the last five weeks confirms how bearish many hedge fund managers have become about the outlook for U.S. crude as stockpiles continue to increase and U.S. weather remains mild.

Hedge fund short positions and oil prices in 2015 -– U.S. oil prices have cycled between $40 and $60 per barrel since the start of 2015 and the rise and fall has corresponded with the accumulation and liquidation of hedge fund short positions. There have been at least three cycles in WTI prices and hedge fund positions in the main NYMEX light sweet crude contract since the turn of the year. The first cycle began at the start of the year and was completed by mid-May. Money managers increased their short position from 74 million barrels at the start of January to a peak of 178 million barrels on March 17 before reducing it to 53 million by May 12. Front-month WTI prices fell from $48 to a low of $43 in the middle of March before rebounding to around $60 in mid-May. The second cycle began in mid-May and lasted until the middle of October. Hedge funds increased their short positions from 53 million to 163 million in mid-August before cutting it to 90 million by mid-Oct. WTI prices swooned from nearly $60 to a low of $39 in late August before recovering to almost $50 in early October. The third cycle began in late October and appears to be unfinished. Hedge funds boosted short positions from 90 million to 154 million on November 17. Prices dropped from $47 to around $40 though they have since recovered slightly. The attached charts show the correspondence between the accumulation and liquidation of hedge fund short positions, as reported by the U.S. Commodity Futures Trading Commission, and NYMEX WTI prices since the start of 2015.

Oil Prices Waver on Saudi Comments - WSJ: Oil prices wavered Monday as traders assessed the possibility that Saudi Arabia would cut oil production in an effort to boost prices. Robust output in the U.S., Saudi Arabia and elsewhere pushed the oil market into oversupply in mid-2014 and has kept prices near multiyear lows all year. Analysts say the global glut of crude will likely persist through at least the first half of 2016. Saudi Arabia’s official press agency Monday quoted the cabinet in a statement as saying it was ready to cooperate with countries within and outside the Organization of the Petroleum Exporting Countries to maintain the stability of the market. Some investors interpreted this as a sign that Saudi Arabia, the most influential member of OPEC, may push the oil cartel to curb its output and increase prices. OPEC has produced above its target of 30 million barrels a day for months. However, many analysts remain skeptical that OPEC will deviate from its strategy of keeping output high to defend its market share.

Oil rises on Middle East tensions, weaker U.S. dollar - Oil prices rose three percent on Tuesday as tensions in the Middle East escalated following the downing of a Russian fighter jet near the Syrian-Turkish border, and a weaker dollar provided an incentive for investors to buy more oil. Brent futures for January were trading at a near two-week high of $46.23 a barrel at 1420 GMT, a 3 percent or $1.40 gain on Monday’s close. West Texas Intermediate (WTI) crude was up 1.25 cents at $43 a barrel, also a near two-week high. “News of a military jet crashing in Syria is a reminder that there is still substantial risk in the Middle East,” said Bjarne Schieldrop, Olso-based chief commodities analyst at SEB. Turkey said it had downed a Russian fighter jet near the Syrian border, saying it had repeatedly violated its air space, one of the most serious publicly acknowledged clashes between a NATO member country and Russia for half a century. A weaker U.S. dollar, easing from an eight-month peak against a basket of currencies, also lent support, as some investors found it cheaper to buy the dollar-denominated commodity.

American Petroleum Institute (API) crude oil inventories rise 2.6 million bbls: American Petroleum Institute (API) crude oil inventory data result, for the week ended November 20 US crude stocks up 2.6 million barrels .... A larger than was expected build in oil stockpiles Stocks of crude at Cushing up 1.9 million barrels -  The API data is closely watched as a guide to the EIA data due Wednesday morning (US time). The consensus estimate for the EIA report is currently for a stock build of 1195K bbls

Crude Slides After API Reports Another Huge Inventory Build At Cushing - Following last week's modest inventory build, API reports another much larger-than-expected build in total crude inventories (+2.6mm barrels). This is the 9th weekly build in a row for total crude inventory but more worrisome is the 3rd weekly surge in Cushing inventories (+1.9mm build) as we warned previously, land storage fears are starting to rise.  Cushing and Total crude inventories surge...Charts: bloomberg

WTI Holds Losses After DOE Confirms Large Cushing Inventory Build Despite Crude Production Cut - Confirming API's data overnight, DOE reports a build in overall crude inventory (961k barrels - less than API) foro the 9th week in a row but more worryingly a significant build in Cushing inventories (+1.74mm barrels) for the 3rd week in a row. This 'bearish' shift is offset for now by the biggest drop in overall crude production in 7 weeks.Dramatically more than seasonally expected... And it's filling up...3mo highs As Crude production fell the most in 7 weeks... And the reaction is muted as WTi holds onto losses post-API... Charts: Bloomberg

Oil falls as spotlight returns to growing glut – Crude oil futures fell back towards $45 per barrel on Wednesday as the dollar gained and investor focus shifted back to a deep global supply glut. Brent was down 57 cents at $45.55 a barrel at 1554 GMT, having touched a low of $45.11. The benchmark hit its highest since Nov. 11 at $46.50 on Tuesday after Turkey shot down a Russian jet. It had risen for five consecutive days, its longest run of positive sessions since April. U.S. West Texas Intermediate (WTI) futures fell 37 cents to $42.50 a barrel, having gained $1.12 to $42.87 on Tuesday. Weekly data from the U.S. Department of Energy showed weekly crude oil stocks up 961,000 barrels versus a forecast rise of 1.2 million barrels, a slightly less bearish figure than expected. However gasoline stockpiles rose faster than expected and distillate inventories gained in the face of the forecast of a fall highlighting the scale of over-supply [EIA/S]. Despite the gains in recent sessions Brent is still down 8.2 percent this month and more than 20 percent this year, and analysts said there was unlikely to be any substantial recovery in the coming days.

U.S. oil drillers cut rigs for 12th week in last 13 - Baker Hughes -- U.S. energy firms cut oil rigs for a 12th week in the last 13, data for the holiday-shortened week showed on Wednesday, a sign drillers were still waiting for higher prices before returning to the well pad. Drillers removed nine oil rigs in the week ended Nov. 25, bringing the total rig count down to 555, the least since June 2010, oil services company Baker Hughes Inc said in its closely followed report. Baker Hughes issued the report two days earlier than usual due to the U.S. Thanksgiving Day holiday. That decrease brings the total rig count to about a third of the 1,572 oil rigs operating in same week a year ago. Since the end of the summer, drillers have cut 111 oil rigs. U.S. oil futures averaged $42 a barrel so far this week, up from $41 last week, but was down about 1 percent so far on Wednesday as the dollar gained and investors focused on a deep global supply glut. U.S. crude prices gained 20 cents after Baker Hughes issued the report, briefly pushing the front-month into positive territory, before quickly returning to near flat at $42.72 a barrel at 1:19 p.m. EST

Oil Prices Rise After Fall in Rig Count, Stockpile Data - WSJ: Oil prices rallied to small gains on Wednesday after data showing a decline in the number of working oil rigs and a stockpile addition smaller than expected. January crude closed up 17 cents, or 0.4%, higher to $43.04 a barrel on the New York Mercantile Exchange. Nymex oil had dipped as low as $41.72—losses of about 2%—in early trading. Brent, the global benchmark, rose 5 cents, or 0.1%, to $46.17 a barrel on ICE Futures Europe. Brent has now rallied for six-straight sessions, its longest winning streak since April and up 6% during that span. Oil prices rebounded into positive territory just after 1 p.m. when oil-service company Baker Hughes Inc. BHI -1.11 % reported the U.S. oil-rig count fell by nine in the most recent week, extending the drop reported a week earlier. The number of active U.S. oil-drilling rigs, viewed by some as a signal about trends in oil production, is down to 555, which is 54% lower than the peak in October 2014. It has fallen in 12 of the past 13 weeks.Prices had been on the rebound since the U.S. Energy Information Administration said crude-oil inventories rose by one million barrels last week. That was about in line with analysts’ expectations for a 1.1-million-barrel increase, but fell far short of the 2.6-million-barrel increase reported by industry group American Petroleum Institute. The API report had led to selling overnight and into the morning, brokers said.

Oil steadies on U.S. rig count drop, small crude build | Reuters: Crude futures erased early losses to settle steady on Wednesday after a smaller-than-expected supply build in the United States and drop in the number of U.S. rigs actively drilling for oil. Traders and investors also covered short positions before U.S. markets close for Thursday's Thanksgiving holiday, analysts said. "People did not want to be caught short ahead of the holiday with the global political tensions,"  "The combination of that and a drop in the rig count earlier helped push us higher.” On Tuesday, crude futures hit two-week highs after Turkey shot down a Russian warplane for alleged intrusion of its airspace, heightening political tensions in the Middle East. Benchmark Brent crude futures LCOc1 settled up 5 cents at $46.17 on Wednesday, after falling more than $1 to a session low of $45.03. U.S. crude's West Texas Intermediate (WTI) futures CLc1 finished the session 17 cents higher at 43.04 a barrel. WTI had also slipped more than $1 to an intraday low of $41.72. Trading volumes were light, typical of pre-holiday activity. Just over 360,000 lots of WTI futures were traded, versus Monday's volume above 500,000, Reuters data showed.

Oil prices fall more than 3% as dollar and oversupply continue to weigh - - Oil prices settled sharply lower Friday, pressured by a stronger dollar and the global oversupply of crude still clouding the outlook for the industry. Weak industrial data from China and a regulatory crackdown on Chinese stockbrokers also put pressure on the commodity, as fears about oil demand resurfaced. On the New York Mercantile Exchange, West Texas Intermediate futures CLF6, -2.95% fell $1.27, or 3.2% to $41.71 a barrel. Brent crude LCOF6, -1.30% the international oil benchmark, finished 1.6% lower at $45.46 a barrel on London’s ICE Futures Exchange. Trading volumes were thinner than usual as most financial markets were open for half a day. The dollar strengthened on Friday and pressured commodities such as oil, which are priced in the U.S. currency. The ICE Dollar Index DXY, +0.21% which tracks the dollar against a basket of rival currencies, rose 0.2% to above 100 by midday Friday. Geopolitical tensions after Turkey shot down a Russian jet along the Syrian border pushed prices up this week, but there is little indication so far the turmoil in the Middle East is affecting oil supply. Over the week, WTI futures were down 0.6%.

How oil can get back to triple digits by 2017 -- After years of being too high, oil forecasts now appear too low. As supply rolls over we could see prices back at $100, with decade-high geopolitical risks shocking it higher.Spot, or immediate, prices are hard to model as demand is not linearly elastic, but dependent on hundreds of variables. Historical correlations also become irrelevant when sharp moves occur. Oil due for delivery in three to five years is easier to gauge. This should approximate the marginal cost of production for a given level of future global consumption. While spot prices are well off their lows, future oil is at levels last seen in the depths of the financial crisis when we were braced for a depression. The back end of the oil curve has effectively moved to partial-cycle costs, no longer incorporating full exploration costs. This mispricing has also dried up liquidity for future delivery, with major consumers unable to hedge at $60 even if they wanted to. Spare capacity is at multi-year lows but geopolitical risk is the highest it has been in a decade. Multiple Middle East and African nations are reconstituting their entire social order as the Arab Spring becomes an Arab Winter. Russia is becoming increasingly assertive and ideological extremism is spreading worldwide as economies stagnate. Daesh continues its rampage, declaring the Paris, Baghdad, Beirut and Sinai attacks as the first of a coming storm. Speculators, who remain negative, could easily be caught short by market or geopolitical surprises. For example, an OPEC cut at the start of December, despite being largely meaningless as Gulf production will subside seasonally, would cause a significant squeeze. We are at an intriguing time as oil has moved from overpricing to underpricing geopolitical and supply risk. The adjustment back is likely to be volatile and the chances of an upside shock to oil prices are growing.

Oil Deal of the Year: Mexico Set for $6B Hedging Windfall  |  Rigzone -- Mexico is set to get a record payout of at least $6 billion from its oil hedges this year, according to data compiled by Bloomberg. The Latin American country locks in oil sales as a shield against price declines through a series of financial deals with banks including Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc. For 2015, Mexico guaranteed sales at almost $30 a barrel higher than average prices over the past year. The 2015 payment, due next month, is set to surpass the record from 2009, when the Mexican government said it received $5.1 billion after prices plunged with the global financial crisis. The country’s crude has fallen by almost half over the hedging period so far this year. Crude sales historically cover about a third of the government budget. "The windfall is huge,"  "This gives Mexico breathing space." The hedge, which runs from Dec. 1 to Nov. 30, covered 228 million barrels at $76.40 each for the Mexican oil basket, according to government documents and statements. With less than two weeks to the end of the program, the basket has averaged $46.61 a barrel over the period. The difference would result in a payment of around $6.8 billion, not including fees. The final figure could vary from the Bloomberg estimate as some details of the hedge aren’t public and oil prices will change over the next two weeks. The Mexican oil basket fell on Nov. 18 to $33.28 a barrel -- its lowest since December 2008.

Petrobras Lost 2.29M Barrels of Oil to Strike  (Reuters) – Brazil's state-run oil company Petroleo Brasileiro SA said on Monday it had been unable to produce 2.29 million barrels of oil and 48.4 million cubic meters of natural gas during a strike that began on Nov. 1. Petrobras, as the firm is known, said the majority of unions representing oil workers had voted to end the strike, thought to be the most disruptive in 20 years. The largest union FUP proposed ending the strike on Nov. 14 though some hold-out unions continued.

Petrobras rules out raising fresh capital for now - source – Indebted state-run oil company Petroleo Brasileiro SA has ruled out bolstering its capital in the short term, a source with direct knowledge of the company’s decision said on Monday. In a statement released later on Monday, Petrobras, as the company is known, denied media reports of talks for the Treasury to transfer hybrid securities to the company, which would then book the securities as equity until it sold new stock. Instead of raising capital, Petrobras has opted to look at other alternatives to improve its finances, said the source, who asked not to be named because he is not allowed to speak publicly. Finance Minister Joaquim Levy said on Friday that he did not see an immediate need to inject fresh capital into Petrobras, saying it had adequate resources to sustain its operations. Sources at the finance and planning ministries have told Reuters that there has been no discussions about a possible recapitalization, but acknowledged that the financial situation of the company is a cause of concern. Petrobras is struggling with a deepening cash crunch caused by over-ambitious expansion spending and as a massive corruption scandal undermines its ability to refinance more than $130 billion of debt.

Venezuela Sees Crude in Mid-$20s If OPEC Doesn't Take Action  |  Rigzone -- Oil prices may drop to as low as the mid- $20s a barrel unless OPEC takes action to stabilize the market, Venezuelan Oil Minister Eulogio Del Pino said. Venezuela is urging the Organization of Petroleum Exporting Countries to adopt an “equilibrium price” that covers the cost of new investment in production capacity, Del Pino told reporters Sunday in Tehran. Saudi Arabia and Qatar are considering his country’s proposal for an equilibrium price at $88 a barrel, he said. OPEC ministers plan to meet on Dec. 4 to assess the producer group’s output policy amid a global supply glut that has pushed down crude prices by 45 percent in the last 12 months. OPEC supplies about 40 percent of the world’s production and has exceeded its official output ceiling of 30 million barrels a day for 17 months as it defends its share of the market. “We cannot allow that the market continue controlling the price,” Del Pino said. “The principles of OPEC were to act on the price of the crude oil, and we need to go back to the principles of OPEC.” Informal Meeting Oil slumped Monday amid a broader commodity rout as the dollar gained, making commodities priced in the greenback more expensive. Brent for January settlement fell as much as 62 cents, or 1.4 percent, to $44.04 a barrel on the London-based ICE Futures Europe exchange. The West Texas Intermediate contract for the same month, the U.S. marker grade, lost as much as 2.2 percent to $40.96 a barrel.

Venezuela Accuses US Of "Industrial Espionage" To "Sabotage" The Oil Industry - The government of Venezuelan President Nicolas Maduro is investigating a report that the U.S. government has been spying on executives of the state-owned Petroleos de Venezuela, or PDVSA, over the past decade. “The oil industry is the backbone of the Venezuelan economy,”Maduro said on state television. “The U.S. empire for a long time … has intended to sabotage [Venezuela’s] oil industry and defeat the [Caracas] government in order to steal the oil.” He spoke Wednesday shortly after the news website The Intercept said it had documents from Edward Snowden, the former contractor for the U.S. National Security Agency (NSA), saying the agency had been spying on PDVSA’s senior executives. Snowden, who faces espionage charges himself for releasing secret NSA files in 2013, is now living in self-imposed exile in Russia. Among the allegations by The Intercept was that the NSA intercepted the calls and emails of Rafael Ramirez, who served as PDVSA’s president from 2004 to 2014 and was the country’s energy minister from 2002 to 2014. The Intercept report was based on an article dated March 2011 in an internal NSA newsletter that it said was obtained by Snowden. The article in the newsletter, SIDToday, said, “[T]he NSA had obtained access to vast amounts of Petróleos de Venezuela’s internal communications.” The Intercept report added, “This produced few emails from PDVSA’s leaders, but the 10,000 employee contact profiles included those of PDVSA’s then-president, Rafael Dario Ramírez, and former company vice president Luis Felipe Vierma Pérez.”  The report came about three weeks after The Wall Street Journal published an article saying Washington had begun “a series of wide-ranging investigations into whether Venezuela’s leaders used PDVSA to loot billions of dollars from the country through kickbacks and other schemes.”

Global debt defaults near milestone: Global debt markets are on the cusp of an unwelcome development with the number of companies defaulting on their obligations set to reach the century mark, driven largely by struggling US shale gas providers. Currently, 99 global companies have defaulted since the year began, the second greatest tally in more than a decade and only exceeded by the financial crisis which saw 222 defaults in 2009, according to Standard & Poor’s. US companies account for 62 of this year’s defaults. Investors have become increasingly concerned about the state of the credit market, reflecting how companies have borrowed heavily against the backdrop of low interest rates during the era of easy money. Since 2007, the proportion of corporate bonds S&P has rated speculative-grade, or junk, has climbed to about 50 per cent from 40 per cent. Now, as markets anticipate the Federal Reserve will lift interest rates for the first time in almost a decade, the rise in defaults suggests a number of companies are being challenged by a sluggish operating environment, declining revenues and heavy debt loads. A slide in oil and commodity prices has weighed on smaller energy producers, primarily in the US, as big Opec producers continue pumping crude to maintain market share. In the US, about three-fifths of defaults in 2015 have been among energy and natural resources businesses, including Midstates Petroleum, SandRidge Energy and Patriot Coal.

Introducing the New OPEC Member That Likes Lower Oil Prices - After defending the interests of oil-exporting nations for five decades, OPEC has made a surprising choice with its newest member: a country that consumes about twice as much crude as it pumps. QUICKTAKE Oil Prices Indonesia will rejoin the Organization of Petroleum Exporting Countries as its 13th nation next month, almost seven years after suspending its membership. The country says that as OPEC’s only Asian constituent it will provide a vital link to the region where demand is growing fastest. Still, saddled with an oil-import bill of about $13 billion last year, Indonesia makes an unlikely addition to the exporters’ club. “If you’re accepting net-oil importers into the organization, it speaks volumes about the marginalization of OPEC,” said Seth Kleinman, head of energy strategy at Citigroup Inc. Indonesia is “never going to cut” supply, he said. Official explanations that paint Indonesia as a conduit between producers and consumers don’t fully illuminate a move that’s fundamentally at odds with OPEC’s mission: why allow a country that will benefit from lower prices into a group set up to underpin prices?

Second Largest Producer Of Oil In Asia Pacific Is A Net Importer Of Oil -- Bloomberg/Rigzone is reporting that Indonesia is a) now ready to re-join OPEC after voluntarily leaving the organization many years ago; and b) hopes the price of oil stays low. Say what? Indonesia hopes the price of oil stays low, and yet Indonesian oil production is second only to ChinaIt turns out that Indonesia consumes twice as much oil as it produces: Indonesia is projected to produce 850,000 barrels a day this year, according to a Nov. 13 report from the International Energy Agency. That’s about 789,000 less than it consumed last year. Only Libya, Ecuador and Qatar produce less among OPEC’s member states.  In October 2014, Indonesia gave up on a target of restoring output to 1 million barrels a day. Crude output has dropped more than 50 percent since the mid-1990s as shifting regulations and complicated permits deter investments in new fields.Despite all the verbiage, I was unable to follow the reasoning why Indonesia returned to OPEC. So, now let's take a more in-depth look at Indonesia's energy situation, going from a net exporter to a net importer in s a very short period of time. Some data points from the EIA: Population -- 4th most populous nation in the world.  Energy requirements -- struggles to attract sufficient investment to meet growing domestic energy consumption because of inadequate infrastructure; and  a complex regulatory environment  Unique challenges -- Indonesia encompasses more than 17,000 islands, presenting

  • geographical challenges in matching energy supply in the eastern provinces with demand centers in Java and Sumatra; 
  • urbanization and demand in other areas of the country are rising at a faster pace than energy infrastructure development

And now we get to the real reason Indonesia is re-joining OPEC -- it needs to rebuild those ties with "old" friends to ensure adequate crude oil imports: After suspending its OPEC membership seven years ago, Indonesia is scheduled to rejoin the cartel by 2016 as the country attempts to secure more crude oil supplies for its swiftly rising demand and greater investment from Middle Eastern members in its downstream infrastructure projects.

Saudi money supply, loan data show economy slowing | Reuters: Saudi Arabian money supply and bank lending figures show the economy of the world's biggest oil exporter has started to slow as low global energy prices force the government to clamp down on spending. M3 money supply grew just 3.9 percent from a year earlier in October, the slowest expansion since November 2010, when Saudi Arabia was emerging from the global financial crisis, according to central bank data released late on Thursday. Annual growth in September 2015 was 8.5 percent. Growth in narrower measures of money supply, M1 and M2, also slowed sharply to multi-year lows. Growth in bank lending to the private sector fell to 5.0 percent, again the lowest rate since November 2010, from 7.1 percent. The government has until recent weeks been able to keep the economy growing strongly by boosting Saudi oil output; the October data suggest this strategy may have reached its limits. Facing a budget deficit of over $100 billion this year, Saudi finance officials have said they are trimming spending in some areas to economise, and the cut-backs have started to crimp money supply. "There have been hints of the government introducing a fiscal squeeze, and the data point to the impact of this,"

Saudi Arabia says ready to work with others to stabilize oil market --  Saudi Arabia’s cabinet said on Monday it was ready to cooperate with OPEC and non-OPEC countries to achieve market stability, repeating what Oil Minister Ali Naimi said in a speech last week. “The council (of ministers) … stressed the kingdom’s role in (achieving) the stability of the oil market and its continuous readiness and efforts to cooperate with all OPEC and non-OPEC countries to maintain the stability of the market and prices,” the cabinet said. Markets closely watch any comment from Saudi Arabia’s political leadership for signs of any shift in its decision not to defend oil prices by cutting output, seeking instead to recover market share taken by higher-cost rival production. Some other members of the Organisation of the Petroleum Exporting Countries, which will meet on Dec. 4, have pushed Riyadh to abandon this policy and work to bolster prices. The weekly cabinet meeting statement typically mentions energy policy only in the context of a major speech by Naimi. Its statement on Monday paraphrased a speech Naimi gave in Bahrain on Thursday.

OPEC officials question upbeat outlook ahead of policy meeting - (Reuters) - OPEC officials questioned an upbeat forecast from the group's researchers in a meeting ahead of next week's gathering of oil ministers, with some sceptical there will be a quick easing of the supply glut in 2016. The comments point to a less jubilant mood in the Organization of the Petroleum Exporting Countries, whose oil ministers meet to set policy on Dec. 4, than during their last meeting in June. Oil has fallen to $45 a barrel on oversupply concerns compared to $65 last time. "Market data is showing loads of uncertainties," said one source. OPEC's national representatives - officials representing the 12 member-countries - plus officials from OPEC's Vienna secretariat - met to discuss the market. The two-day meeting, called the Economic Commission Board, finished on Friday. A year ago, OPEC made its historic decision to refuse to prop up prices by cutting supply and focus on defending market share. The shift was led by Saudi Arabia, supported by other Gulf OPEC members. Doubts about the policy among less wealthy members are growing. OPEC's research team expects higher demand for the group's oil in 2016 as supply from rival producers declines, reducing the global supply glut. World oil demand is expected to rise by 1.25 million barrels per day. [OPEC/M] One of the differences in views, an OPEC delegate said, was around whether OPEC's demand forecast is too optimistic, while another non-Gulf delegate was downbeat about the outlook.

OPEC to stay the course despite fears of $20 oil – OPEC is determined to keep pumping oil vigorously despite the resulting financial strain even on the policy’s chief architect, Saudi Arabia, alarming weaker members who fear prices may slump further towards $20. Any policy U-turn would be possible only if large producers outside the exporters’ group, notably Russia, were to join coordinated output cuts. While Moscow may consult OPEC oil ministers before their six-monthly meeting next week, the chances of it helping to halt the price slide remain slim. “Unless non-OPEC say they are willing to help, I think there will be no change,” said a delegate from a major OPEC producer. “OPEC will not cut alone.” When the exporters’ group last met in Vienna in June, Saudi oil minister Ali al-Naimi and those from other wealthy Gulf states could barely hide their jubilation. OPEC’s historic decision in November 2014 – to pump more oil and defend its market share against surging rival suppliers – was working, they proclaimed as crude traded near $65 per barrel. Six months later, it has hit $45, down from as much as $115 in the middle of last year. Now some member states are talking about a return to twenty-dollar-oil, last seen at the turn of the millennium. They point to Iranian confidence that international sanctions on its economy will be lifted by the end of the year. “Iran is announcing its production is going to increase as soon as they lift the sanctions and we need to do something. We (OPEC) cannot allow going into a war of prices. We need to stabilize the market,” Venezuelan oil minister Eulogio del Pino said on Sunday. Asked how low prices could go next year if OPEC failed to change course, he said: “Mid-20s.”

Don’t expect Saudi Arabia to back down when OPEC meets - Despite a nearly 30% fall in oil prices since a June meeting, don’t expect the Organization of the Petroleum Exporting Countries’ top exporter, Saudi Arabia, to back down from its strategy of fighting for market share. Instead, on Dec. 4 in Vienna, members of the oil-producing group are likely to spend their final meeting of 2015 much like they’ve spent the entire year so far: complaining about low prices but doing nothing about them. “Saudi Arabia will say no change,” Brian Youngberg, senior energy analyst at Edward Jones, told MarketWatch. Any meaningful OPEC production cut would have to be spearheaded by heavyweight Saudi Arabia. But the Saudis have made it very clear in the past year that they don’t want to lose ground in the oil market, especially as U.S. shale oil output remains strong. At a Thanksgiving time meeting a year ago, the group also left the production ceiling unchanged at 30 million barrels a day, where it’s stood since 2012. “Smaller countries that are struggling will continue to plea for a change, but they have no say,” Youngberg said. And “Iran will reiterate its plans to bring production up in 2016 regardless of what OPEC says to do.”All of that, longer term, “could cause OPEC to splinter as each country has different agendas and priorities,”

Biggest Oil Buyers Pick Themselves as Winners From OPEC Meeting  |  Rigzone: -- Oil buyers in Asia are sure of one thing as OPEC prepares to meet: They’ll emerge as winners from the group’s rift over production. Members of the Organization of Petroleum Exporting Countries will gather Dec. 4 in Vienna, where Iran has said it will announce plans to boost production by 500,000 barrels a day. That may further lift the 12-member group’s output, which has exceeded its target for 17 months. The increase in volumes would exacerbate a global glut and benefit the biggest oil- consuming region’s refiners, which are seeking cheaper sources of crude. OPEC is forecast to stick with its strategy of defending market share by maintaining output and driving down higher-cost production elsewhere, according to analysts and traders surveyed by Bloomberg . That’ll leave members including Saudi Arabia free to continue pumping even amid calls from Iran to make room for its extra supply after international sanctions over its nuclear program are lifted. “This is probably the best time we’ve ever had as a buyer,”  “We are enjoying an overflow of oil.” OPEC has exceeded its output target of 30 million barrels a day since June 2014 as it pumps near record amounts of crude, boosted by increases from its biggest members, Saudi Arabia and Iraq.   Profits from turning crude into naphtha, which is used to produce gasoline as well as petrochemicals, surged to $9.42 a barrel this month, the highest level since at least May, data compiled by Bloomberg show. Purchasing costs for refiners have slumped. Japan, Asia’s second-biggest oil consumer, spent an average of $51.22 a barrel in September for supplies, down from $113.47 in January 2014, according to data from the nation’s Ministry of Finance.

Ukraine stops buying Russian gas, closes airspace - Tensions between Russia and Ukraine escalated Wednesday as Ukraine decided to stop buying Russian natural gas — hoping to rely on supplies from other countries — and closed its airspace to its eastern neighbor. Russia’s annexation of Crimea from Ukraine in March 2014 and its support for separatist rebels in the east has brought relations between the two countries to a post-Soviet low. Ukraine has since been trying to cut its dependence on Russian gas. Russia’s state-controlled gas company, Gazprom, said Wednesday that it stopped sending gas to Ukraine on Wednesday morning and will supply no more because Ukraine has not paid in advance for more deliveries. Ukraine said it was its own decision to stop buying gas from Russia after it was offered better prices from other European countries. Those other countries import gas from Russia but can pipe it back to Ukraine. The stoppage comes less than two months after the two countries signed an EU-brokered deal ensuring supplies through March. Under the deal, Russia lowered the price it charged Ukraine to the same level granted to neighboring countries, from $251 per 1,000 cubic meters to about $230. Gazprom CEO Alexei Miller on Wednesday warned Ukraine and Europe of possible gas disruptions following the cut-off. Russia uses Ukraine’s pipelines to transport a part of its gas deliveries to other European countries. Ukraine’s “refusal to buy Russian gas threatens a safe gas transit to Europe through Ukraine and gas supplies to Ukraine consumers in the coming winter,” Miller said.

Lithuania leads way in reducing Russia's clout in energy | Since last year, a floating gas terminal called Independence has protected thousands of Lithuanians from the risk of sudden cutoffs in gas supplies from Russia, a regional heavyweight that has long used its near monopoly on energy in Eastern Europe as a political weapon. “This terminal has brought a strong sense of self-confidence,”  The terminal for liquefied natural gas, which is the size of an aircraft carrier, is docked off the this coastal city, some 300 kilometers (190 miles) west of the capital, Vilnius. Because the liquefied gas can be transported by ship, Lithuania can bring in gas from any number of countries around the world. “It’s like a symbol of our free will to make our own decisions. It adds to the feeling that our country is stronger and more self-reliant now,” said Petraitis. Lithuania’s experience is being echoed across Eastern Europe, where most countries have been actively trying to reduce their dependence on Russian gas. Ukraine on Wednesday said it had stopped buying Russian gas, claiming it could get enough from other European countries.

Israeli Prime Minister pushes for control of Golan after oil discovery - Israel invaded and occupied the Syrian territory known as the 'Golan Heights' in 1967, and has maintained a military and civilian presence there ever since. But the Israeli claim on the territory has never been recognized by the international community. Now, according to some analysts, the Israeli government has a new reason to secure their illegal annexation of the Syrian land: oil. Last month Afek, an Israeli subsidiary of the U-S-based Genie Energy, announced the discovery of huge reserves of oil in the region. The company’s chief geologist in Israel, Yuval Bartov, said the reserves could potentially hold billions of barrels of oil. Afek’s license to do exploratory drilling was renewed by the Israeli government for two years in October, shortly after the finding of the oil reserves. But the land on which the oil is located is actually Syrian territory. And despite the Israeli government claim to the oil, and the licensing of ten experimental wells, analysts say the discovery of oil in Golan may re-ignite the conflict between Israel and Syria over the control of the Golan Heights.

US accuses Syria of buying oil from Isis -- The US on Wednesday accused Syria of buying oil from the Islamist militants of Isis and imposed sanctions on a Syrian businessman it claimed is at the centre of the trade. The US Treasury department also announced sanctions on Cypriot and Russian businessmen who they allege have helped Syria evade international sanctions, including Kirsan Ilyumzhinov, the head of the world chess federation. US officials have often claimed that the Syrian government purchases oil from Isis — allegations that were substantiated in a Financial Times investigation. Still, Wednesday’s announcement represents the most direct accusation yet by the administration about the links between the Syrian regime and Isis. The four individuals and six entities listed by the Treasury will have any assets in the US frozen and will be barred from doing business with US companies or individuals. The administration has been criticised for doing too little to go after Isis’s oil infrastructure. However, the sanctions follow three weeks of stepped up air strikes against oilfields and trucks used by smugglers to transport the oil. They were also announced the day before a visit to Moscow by French President François Hollande when he is expected to discuss international co-operation in the campaign against Isis, including efforts to damage the group’s finances.

Chief Of Russian Air Force Accuses Turkey Of Coordinated Ambush On Downed Jet -- By now everyone is aware of the Turkish side of the story of how a Russian Su-24 was downed by a Turkish F-16 on Tuesday morning, when it allegedly crossed into Turkish airspace for a grand total of 17 seconds, with Turkey supposedly warning the Russian bomber which had been targeting alleged jihadists in the region no less than "ten times." Turkey even produced an alleged recording of said warning, which Russia implied was faked as the surviving pilot made it very clear no actual warning had been received by the Russian warplane. So now that Russia has had three days to go through the evidence and assemble the pieces of what it thinks happened, here is the summary as presented earlier today by the Commander in Chief of the Russian air force, Viktor Bondarev, which however presents a very gloomy picture with dire consequences for the peaceful geopolitics of the middle east.  In summary, what Col. Gen. Bondarev said is that Turkey actively sought to ambush and bring down the Russian jet starting long before the actual missile was fired, which can be confirmed by the flight patterns of Turkish warplanes which had taken off well in advance, otherwise they would not have had enough time to reach the battlezone.

Top U.S. Air Defense Commander: Turkey's Shootdown of Russian Jet "Had to Be PRE-PLANNED" -- (video) Lt. General Tom McInerney is an expert on handling threats from fighter jets. McInerney served as: Commander of the North American Aerospace Defense Command (Norad) – the military agency responsible for protecting the United States and Canada from foreign jet attacks – for the Alaska region, Commander of the Alaskan Air Command, Commander of 11th Air Force in Alaska. In his role as Norad commander for Alaska, McInerney dealt with more Russian fighter jet incursions (which he calls “bear penetrations”) than anyone else in the world. So McInerney knows how to tell innocent from hostile incursions by foreign fighter jets, standard rules of engagement of foreign fighter jets, how to read radar tracks, and the other things he would need to know to form an informed opinion about the shootdown of a foreign jet. Yesterday, McInerney told Fox News – much to the surprise of the reporter interviewing him – that assuming the Turkish version of the flight path of the Russian jet is accurate, Russia wasn’t threatening Turkey, and that Turkey’s shoot down of the Russian jet “had to be pre-planned”, as the jet wasn’t in Turkish air space long enough for anything other than a premeditated attack to have brought it down:  McInerney is right … especially given that a U.S. official told Reuters that the Russian jet was inside of Syria when it was shot down:  The United States believes that the Russian jet shot down by Turkey on Tuesday was hit inside Syrian airspace after a brief incursion into Turkish airspace, a U.S. official told Reuters, speaking on condition of anonymity.

Russian Pilots Executed While Parachuting: Turkish Media -- If Putin was angry when Turkey shot down a Russian plane, which may or may not have crossed Turkish territory - reports on both sides are conflicting - he will be absolutely livid to learn that, according to Turkey's Dogan News, the Russian pilots who had parachuted in an attempt to save their lives after the plane was shot down, had been executed while parachuting down by local rebels, which considering the video released earlier belonged to the Free Syrian Army, are same "rebels" who are funded directly by the CIA.  Both Russian pilots shot dead while parachuting down says Dogan News Agency citing Turkmen opposition commander

Syrian Gas Pipeline War Phase III – Russia Blocks Turkish Gas Pipeline -- With Russia allied with Syria in the Pipelinestan Gas Wars, the TurkStream gas pipeline – from Russia to Europe – the deal died when the Turks shot down a Russian bomber, to help their allies in Syria – ISIS. A number of major bilateral trade and infrastructure deals between Turkey and Russia that could be affected by the incident, including the proposed construction of a gas pipeline between the two countries, as well as the Akkuyu nuclear power plant.Russia’s economy minister singled out the TurkStream gas project on Thursday, as he discussed plans to halt preparations for a free trade zone with Turkey, Reuters reported.  As one of Russia’s largest customers when it comes to energy — Turkey imports 55 percent of its natural gas from Russia and 30 percent of its oil – any damage to these infrastructure deals could be significant, according to one Turkish academic.“Turkey has close strategic ties with Russia in terms of energy relationship with Russia, so it may be that the Turkish Stream project as well as the nuclear energy project – which is going to be constructed by the Russians — could be affected,” .“Now all these projects are uncertain because of this incident,” he added. Although Kumbaroglu did not believe gas supplies would be affected in the short-term, he feared for the longer-term projects: “In the longer term those strategic projects may be affected and these projects are actually to the benefit of both countries.”

Meet The Man Who Funds ISIS: Bilal Erdogan, The Son Of Turkey's President -  Russia's Sergey Lavrov is not one foreign minister known to mince his words. Just earlier today, 24 hours after a Russian plane was brought down by the country whose president three years ago said "a short-term border violation can never be a pretext for an attack", had this to say: "We have serious doubts this was an unintended incident and believe this is a planned provocation" by Turkey. As Sputnik transcribes, according to a press release from Russia’s Ministry of Foreign Affairs, Lavrov pointed out that, "by shooting down a Russian plane on a counter-terrorist mission of the Russian Aerospace Force in Syria, and one that did not violate Turkey’s airspace, the Turkish government has in effect sided with ISIS." Others reaffirmed Lavrov's stance, such as retired French General Dominique Trinquand, who said that "Turkey is either not fighting ISIL at all or very little, and does not interfere with different types of smuggling that takes place on its border, be it oil, phosphate, cotton or people," he said.   And while we patiently dig to find who the on and offshore "commodity trading" middleman are, who cart away ISIS oil to European and other international markets in exchange for hundreds of millions of dollars, one name keeps popping up as the primary culprit of regional demand for the Islamic State's "terrorist oil" - that of Turkish president Recep Erdogan's son: Bilal Erdogan. The prime source of money feeding ISIS these days is sale of Iraqi oil from the Mosul region oilfields where they maintain a stronghold. The son of Erdogan it seems is the man who makes the export sales of ISIS-controlled oil possible.

Putin and Hollande go after Erdogan’s racket - RT - Turkish President Recep Tayyip “no excuse” Erdogan thought NATO and Russia by this time would be at each other’s – Cold War 2.0 – nuclear throats, while Washington had brushed off Hollande’s idea with a cascade of platitudes and distortions. And in less than 17 seconds, Prime Minister Ahmet “I ordered it myself” Davutoglu had authorized Turkey to shoot down a Russian Su-24 - only a few hours before Hollande met with President Obama. So everything seemed to be falling into place. No chance of a new détente between the Atlanticist powers and NATO. On the contrary. Erdogan was sure he had sabotaged for good the Hollande-Putin face-to-face meeting in Moscow. Not so fast, Sultan. In Moscow, Hollande and Putin confirmed that France and Russia will not be torn apart. The French leader declared: "What we agreed, and this is important, is to strike only terrorists and Daesh and to not strike forces that are fighting terrorism. We will exchange information about whom to hit and whom not to hit." Now that unveils a thrilling horizon. In the “to hit” section we already find Daesh and Jabhat al-Nusra, a.k.a. al-Qaeda in Syria, which the Vienna negotiations have already branded as terrorists. And considering that al-Nusra has gobbled up, co-opted or instrumentalized an array of Salafi outfits, “moderate” or otherwise, it won’t be hard for the Russians to convince the French these are all legitimate targets.

Will Low Oil Prices Increase Internal Instability In Conflict Countries? -- With over 1.6 million internally displaced in South Sudan, and another 600,000 refugees in neighboring countries, are oil price declines exacerbating humanitarian crises in oil-producing African countries, and can we expect further deterioration as a result of the recent price depression.  This is a worthwhile issue to explore given South Sudan’s overwhelming reliance on oil revenues to fill government coffers; a similar situation that can be duplicated throughout Africa with not only oil, but other commodities exports as well. But, do price changes really exacerbate these conflicts? The answer is: it depends.  One should not discount the myriad grievances present amongst the varying ethnic groups in South Sudan, but this research seems to be quite relevant given its oil exports and that much of the fighting and resulting population displacement have been localized in South Sudan’s oil producing regions in Unity, Jonglei, and Upper Nile. The conflict has significantly disrupted operations centered in these oil producing regions imposing significant strain on government revenues through forgone income from Nilepet and increasing risk to other overseas players in the sector which is dominated by China (in particular CNPC and Sinopec, India’s ONGC and Malaysia (Petronas), with marginal activity by France’s Total, Kuwait’s Kufpec, and Kuwaiti-Egyptian Tri-Ocean Energy.

Standing idly by while the Middle East unravels is not an option  - As much as we hope that if we ignore what is happening in the Middle East it won’t affect us – it will. As recent events show, neither Islamic State nor refugees are being contained within the region. Isis is disappointed that refugees are not moving to the territory it controls. Refugees are voting with their feet, fleeing the barrel bombings of Bashar al-Assad’s murderous regime, and seeking refuge outside the country. They seek stability and a normal environment in which to live – a future of hope, not Isis’s apocalyptic future. The attacks in Paris were designed to provoke retaliation against European Muslims, and consequently more recruits for its “caliphate”. For Isis wants to add greater credence to its claim that the west is at war with Islam. The UK cannot let this narrative succeed. Isis will continue to try to launch attacks against the UK whether or not we are involved in the air campaigns in Iraq and Syria. Grievances against Britain go back a century, and do not simply stem from the UK’s ill-advised participation in the 2003 Iraq war. That conflict tipped the regional balance of power in Iran’s favour. It triggered a geopolitical struggle between Iran, on the one hand, and Saudi and the Gulf States and Turkey, on the other, which led to their supporting different extreme sectarian actors across the region, turning local grievances over poor governance into regional proxy wars. A quarter of a million Syrians have been killed and half the country displaced from their homes. This will have an impact on the security of the region - and the UK - for decades .

OilPrice Intelligence Report: Iran Sweetens The Deal For Foreign Oil Companies: Iran is hosting a two-day conference on November 26 to attract international investment for its oil and gas sector. At the conference, Iran will lay out 50 potential oil and gas projects to interested parties. Iran is looking to attract at least $100 billion in investment, capital that it says will help it achieve production gains of over 1 million barrels per day. The Iranian government is eagerly preparing for the removal of international sanctions, which is expected within a few months. Since reaching a historic agreement with the P5+1 nations in July, Iran has since overhauled its contract program with international oil companies, sweetening the deals in order to woo companies. Each individual project will have tailor-made contracts, rather than a standard contract for all projects. The details could indeed attract more investment than Iran has seen in the past. For example, companies will be allowed to sell production abroad. That will allow companies to earn more if they produce more, a situation that didn’t exist in the past under fixed-payment schemes. The contract terms could last as long as 20 years, whereas prior contracts only lasted 7 years. Foreign companies will still have to partner with a local Iranian entity. The bidding process could begin in March 2016 and the Iranian government has signaled its intent to sign contracts within two years.

India's Petronet Near To Winning Better Gas Terms From Qatar Sources  (Reuters) - India's biggest gas importer Petronet LNG is close to renegotiating a major deal with its Qatari supplier Rasgas, lowering the cost of gas shipments and avoiding a $1.5 billion penalty fee for lifting less gas than agreed, two sources said. The renegotiation is another sign of how falling oil prices and a global gas glut are bringing producing giants such as Qatar to the negotiating table. Petronet, which has a 25-year contract with Rasgas to annually buy 7.5 million tonnes of liquefied natural gas (LNG) has reduced purchases by about a third this year due to high prices -- even though it is only allowed to take 10 percent less, making it liable for a $1.5 billion penalty. Petronet and Rasgas opened renegotiation proceedings during Qatari Emir Sheikh Tamim bin Hamad Al-Thani's visit to New Delhi in March. If India manages to renegotiate a deal with Qatar it would be Prime Minister Narendra Modi's biggest diplomatic win in the energy sector since coming to power last year. Indian oil minister Dharmendra Pradhan reinforced the need to renegotiate prices and quantity under the long term deal with Qatar during his visit to Doha this month.

Singapore oil borrowers seeking more slack to avoid bond defaults - Borrowers in Singapore, so far spared from a wave of defaults in the oil services industry, are starting to ask creditors to cut them some slack. Three companies including Dyna-Mac Holdings Ltd, part owned by Keppel Corp, this month are asking bond holders to alter certain debt limits or profit targets as contract delays wreck firms' earnings. The issuers are among 28 oil services firms listed in Singapore with more than S$1.8 billion of notes maturing next year. "If the oil markets remain depressed beyond 2016, you're going to see some problems," . "Some of the oil and gas players will probably have to restructure their bonds." The borrowing that helped build Singapore's biggest export industry is looking overstretched after the price of Brent crude slumped near US$40 and the island's economy grew just 0.1 per cent in the third quarter. Delivery deferrals and provisioning by yards are causing "cash flow issues," Maybank Kim Eng Securities wrote in a Nov 20 report. Money is certainly tighter for the 28 listed oil services firms. The median ratio of their operational earnings to interest expense, a measure of a company's ability to pay its debts, was 5.4 times in their latest filings, a steep drop from 12.5 times at the end of fiscal 2014, according to data compiled by Bloomberg.

Saudi Arabia Regains Lead In Oil Sold To China -- November 23, 2015 -- Some data points. It looks like China imports about 4 million bopd. It appears all of it comes from Russia and the Mideast. In October, shares of imports by county of crude oil into China (numbers round, conversion calculator here):

  • Saudia Arabia: 3.99 metric tons / month = 29 million bbls / month = 975,000 bopd
  • Angola: 3.62 million metric tons / month = 27 million bbls / month = 880,000 bopd
  • Russia: 3.41 million metric tons / month = 25 million bbls / month = 830,000 bopd
  • Oman: 2.84 million metric tons / month = 21 million bbls / month = 700,000 bopd
  • Iraq: 2.32 million metric tons / month = 17 million bbls / month = 570,000 bopd

In the linked article, Bloomberg says Saudi regained its lead over Russia in this metric (amount of crude oil sold to China); and that Angola, also, sold more oil to China than Russia in October, 2015. The most recent reporting period for US crude oil imports is still August, 2015 (a dynamic link), reported earlier.

Commodities Plunge To New 16 Year Low; Oil Slides On Venezuela Warning, Soaring Dollar -- As reported last night, ongoing concerns that China's economy is doing far worse than reported when the PBOC lowered its Yuan fixing below expected to the lowest level since August 31, pushed copper futures to a new low not seen since May 2009 while nickel dropped to the lowest level since 2003. A big catalyst for the ongoing collapse in the Bloomberg commodity index which just hit a fresh 16 year low, is the relentless surge in the dollar, with the DXY rising as high as 99.98 the highest since April, as a result of rising prospects for a December U.S. rake hike (odds are now at 70%, up from 36% a month ago) boosting currency differentials and flows into the USD, making commodities more expensive for buyers in other currencies. As Bloomberg also notes, a London Metal Exchange Index of six industrial metals has fallen for six weeks. Gold has dropped for five straight weeks, crude oil is on a three-week losing run. The Bloomberg Commodity Index is set for its worst year since the financial crisis, plunging 23 percent.

No End In Sight For Commodity Carnage As Chinese Fear Fed Hike Blowback -- Today's 1.75% rally in copper (ripping vertical at the US open) broke a record 14-day losing-streak after COMEX futures tested towards a '1' handle numerous times for the first time since March 2009 (when the S&P 500 traded around 800). The metals market appears to be increasingly pricing concurrent and/or future weakness in China’s old economy, according to Goldman, as China futures open interest surges, but discussions at the 2015 Shanghai CESCO conference last week exposed the extremely bearish views of Chinese market participants regarding Chinese metals demand in 2016 (notably sentiment was worse than that expressed by investors outside of China) specifically citing a Fed rate hike before year-end as a further bearish factor for metals.

Noah Smith on the Great Chinese Data Conspiracy -- Noah Smith weighs in on one of my favorite topics, China’s GDP:  It’s very hard to fake economic numbers in the same direction for a very long time — eventually, it becomes obvious to everyone that your economy is either much bigger or much smaller than the cumulative growth rates would have indicated. Something a bit like this happened to China back in 2007, when the Asian Development Bank reported that China’s gross domestic product was much smaller than believed. Chinese inflation had been understated, leading to real (inflation-adjusted) growth numbers that had been too high for too long. If you follow the link, you get this: In a little-noticed mid-summer announcement, the Asian Development Bank presented official survey results indicating China’s economy is smaller and poorer than established estimates say. The announcement cited the first authoritative measure of China’s size using purchasing power parity methods. The results tell us that when the World Bank announces its expected PPP data revisions later this year, China’s economy will turn out to be 40 per cent smaller than previously stated..  .  Well-informed analysts know that PPP calculations are a poor measure of a country’s potential military base, but with the corrected China PPP statistics, the whole question is moot. China is just not that big now and will not get that big any time soon.  I guess the “biggest economy in the world” is “not that big” and “2014” is not “anytime soon”.  Why Noah Smith would link to an outdated 2007 World Bank re-evaluation of China’s PPP GDP, when there is a more recent 2014 re-evaluation by the very same World Bank, that went in exactly the opposite direction—claiming China’s GDP was much larger than previously believed, and indeed is now the largest in the world.

Can China be like Chattanooga? Shifting from industry to services | Brookings Institution - Bernanke - Since the beginning of China’s growth miracle, a large part of the country’s development has been directed from the center. This “top-down” approach has focused on heavy industry, infrastructure (highways, bridges, airports), the movement of people from rural to urban areas, and the promotion of exports, particularly manufactures. The top-down model had its roots in Communist central planning, but in China it has been leavened with enough market liberalization and openness to international competition to foster significant gains in productivity and a rapid ascent up the technological ladder. To date, this strategy has been incredibly successful: In real terms, the Chinese economy is two-and-a-half times bigger today than a decade ago (IMF estimates, converted to constant dollars at PPP exchange rates). And, despite the recent slowdown, Chinese economic growth currently accounts for about a third of global economic growth, up from about a quarter ten years ago. However, the top-down approach is reaching its limits. The share of output devoted to heavy manufacturing, construction, and exports is too large to be sustained, the pace of urbanization is slackening, and the easier opportunities to improve technologically in manufacturing and related sectors have been exploited. Moreover, with its emphasis on capital investment and exports rather than on goods and services aimed at domestic consumers, the Chinese economy has not been serving its citizenry as well as it could. Recognizing these limits, China’s leadership is working to make the transition to a more organic, “bottom-up” growth model, focused on the development of services industries—retail trade, health, education, finance, transportation—delivered in many cases through markets and by smaller business units. (Services currently make up about half of the Chinese economy, compared to about four-fifths of the economy of the United States, according to the World Bank.) For various reasons, including the fact that productivity in services generally does not grow as quickly as in manufacturing, this transition will involve economic growth that is slower (though still rapid). And, because of the increasing reliance on market forces and smaller business units, Chinese growth in the future will be more erratic and harder to control from the center.

SUV sales boom in China auto market - An ongoing auto show in China's Guangdong province has seen a growing demand for sport-utility vehicles (SUV) from Chinese customers, a media report said on Sunday. Domestic and foreign players in the auto market are taking part in the Guanghzhou Auto Show, one of China's biggest auto shows, putting the spotlight on SUVs, the People's Daily reported. Yale Zhang, Automotive Foresight's Managing Director, said many auto brands, such as Ford's Everest and Great Wall Motor Co's Haval H7, have shifted their focus to larger SUVs, especially since China scrapped the one-child policy. "We clearly see a lot of families want to shift from sedans to SUVs because of their safety, comfort and also bigger room. Because now you will have a family, you have a child, you know SUV obviously is better. Even if you have two kids, SUV looks better than a sedan. So this is one of the reason why SUV in China is very popular and still growing." In the year through October, sales of SUVs surged 46 percent year-on-year in a broader market that grew 1.5 percent. According to Automotive Foresight, a market and industry research company, 32 new SUV models are expected to be released in China. Meanwhile, China's official data showed that car prices dropped 3.4 percent in the first nine months of this year, outnumbering the 1.2 percent decline for passenger vehicles overall.

The Rise and Fall of Shadow Banking in China - The conditions that gave rise to shadow banking in China before the bursting of the real estate bubble were unique; a finance-fueled stimulus package, coupled with moral hazard, under changing financial regulations, produced a shadow banking system that fomented institutional risk and threatened to bring about systemic risk. This was tightly managed by the Chinese government, which monitored developments, allowing some freedom while reining in the shadow banking sector when its costs outstripped its benefits. Shadow banking, which rose after the global crisis hit, appeared to be a matter of political expediency rather than careful planning, and its decline was absorbed into the greater concept of the “New Normal.” Shadow banking lost its luster and converted from a lending boom into a debt debacle that was absorbed under the umbrella of restructuring. As a brief summary, in China, shadow banking refers to non-bank financing, encompassing trust and wealth management products, entrusted loans, and bankers’ acceptance bills. Trust products were products that could include a trust loan, potentially bundled with securities, equity investments, and trust or entrusted loans. Entrusted loans were loans agreed upon between two companies, and were at first carried out between two related parties, such as between a parent and a subsidiary company, but during the shadow banking boom were increasingly carried out between non-related parties. Bundled assets sold to bank customers were called wealth management products. Bankers’ acceptance bills were normally used to finance trade and were traded on the interbank market, but during the shadow banking boom they were used in place of cash to pay bills by riskier borrowers. This occurred especially around mid-2013, as a liquidity crunch set in.

Chinese companies face a winter of discontent - Too much debt and too little growth may finally be catching up to China’s companies and banks. China has confounded analysts in recent years as debt has grown twice as fast as GDP, yet it has avoided the textbook consequences of a credit binge, such as surging loan defaults and bankruptcies. Bad debt levels among China’s large banks at sub 2% raise few alarms, while instead of worrying about defaults, Chinese companies have been raising funds in the domestic bond market at a record pace. With the country’s debt-to-GDP ratio now 250% by some estimates, analysts have long been vigilant for emerging signals of distress. Capital outflows have been a recurring concern, despite Beijing deploying a number of measures to stop money from bypassing capital controls. But now we have two more to consider: signs that Chinese banks are unable to lend, and fresh warnings from analysts that the country’s troubled heavy industrial sectors are on the verge of default. New lending by China’s banks collapsed last month. Total outstanding loans at the four largest state-owned lenders reached 35.7 trillion yuan at the end of October, down 65.6 billion from a month earlier, People’s Bank of China (PBOC) data showed. Such a decline has not been seen since during the global financial crisis in 2009.

Chinese Ghost Cities Coming to Life - What's on Weibo: Tens of millions of empty apartments in brand new cities all over China, deserted cinemas and quiet parks. It is an image that has captured the public imagination: ‘ghost cities’ have become a popular China topic in international media. American author Wade Shepard spent the past few years touring these new territories for his book Ghost Cities of China (2015). Earlier this year, he came to Beijing to speak about his project with New York Times reporter Dan Levin.  “The term ‘ghost cities’ is actually not appropriate,” Shepard tells Levin: “Ghost cities are places that once lived and then died. What I write about is new places that are underpopulated, and where houses are dark at night.” Shepard explains that most of China’s ‘ghost cities’ actually do have people living in them. The ones that don’t, are still under construction: “These new underpopulated cities are built by world luxury developers who are working on constructing new urban utopias all over China. The people living in these cities come from various places. Some are trendy people who are looking to live in a new city. Others have been relocated from their original villages. There are many from the countryside.” By 2020, China hopes to move 100 million people from the country’s farming regions into cities. China’s government-driven push for urbanization is part of changing the economy, going from export to domestic demand. New towns, with hospitals, roads and sport centers, are mushrooming all over China.

Caught On Tape: China Builds A Bridge In Just 43 Hours --When you have a billion people willing to work instead of expecting free "stuff", anything's possible... Earlier this year, a Chinese construction company had erected a 57-story skyscraper in just 19 days. This time the Chinese have built an overpass in mere 43 hours!   Workers took apart the old structure of Beijing's Sanyuan Bridge in a few hours. Then they brought an entire piece of concrete to bridge the gap and paved it over, reports To build the bridge, over 1300 tonnes of new surfacing material was used which save months of commotion and traffic woes. For the first time in Chinese workers tried out a new 'integrated replacement method.'

Beware of China’s Safety Record -- In the still of the night of Aug. 12 in Tianjin port, some 90 miles from Beijing, an explosion ripped through a warehouse housing volatile chemicals, killing more than 170 people. Hundreds more were injured. Chinese social media blazed with grief and indignation, but little surprise. “This will happen again, the only question is when and where,” a friend of mine said on the night of the disaster. Ten days later, on Aug. 22, an explosion rocked a chemical factory in Zibo in Shandong Province. On Aug. 31, another Shandong chemical factory blew up. And on Oct. 12, two months after the explosion at the docks, an inferno tore through a different Tianjin warehouse. Meanwhile, too many Chinese buildings prove to be less sturdy than a house of cards, collapsing to the ground, killing occupants. Among recent examples, a two-story building under renovation in Henan Province collapsed to dust on Oct. 30, taking with it 17 lives. Mega-engineering projects are not immune from low building standards. From 2007 to 2012, 37 bridges reportedly collapsed, with a toll of 182 deaths. These disasters are concealed by headlines touting China’s economic miracle. They are a result of the government’s love of mega-projects combined with rash planning, endemic corruption and careless construction, supervision and regulation. As Chinese capital flows abroad, dangerous practices are at risk of being exported. China’s experience at home should serve as a warning to other governments and companies. Chinese firms may offer the lowest bid on an infrastructure project, but Chinese construction brings tremendous risks.

Asia-Pacific leaders hope work on China-led free trade deal will 'intensify', with 2016 deadline discussed - Leaders from 16 Asia-Pacific countries agreed have agreed to push for the conclusion of a massive China-led regional free trade deal in 2016. The 10-member Association of Southeast Asian Nations (Asean) and China, Japan, South Korea, Australia, New Zealand and India have been negotiating for a trade pact known as the Regional Comprehensive Economic Partnership (RCEP) since May 2013. But after 10 rounds of official talks and four ministerial meetings, the grouping failed to wrap up by their earlier targeted deadline that is the end of this year. In his speech before the release of a joint statement yesterday, Malaysian Prime Minister Najib Razak said they have resolved issues on modalities for market access for trade, services and investment. "However, considering the challenges faced and the value of constructive engagements, more time is needed to conclude the negotiations," Najib told an audience that included leaders from RCEP countries there to attend the regional summit. "Hence, we the leaders of RCEP participating countries, agree to allow negotiations to continue and request our negotiators to intensify their efforts to con-clude and achieve a mutually beneficial and high-quality agreement in 2016." The statement said that, with half of the world's population and almost 30 per cent of the world's output and trade, the RCEP offers "immense potential to improve standard of living for billions of people." There is pressure to speed up the RCEP negotiating process after the 12-countries in the TPP finally reached a deal last month despite scepticism by many.

Trying not to choose: East Asia is the scene for an unprecedented experiment in international relations. Never before have so many countries been so intertwined economically with one big power (China) while looking to another (America) as the ultimate guarantor of their security. So far the experiment has seemed a stunning success. For 40 years, America has not just kept the peace; it has enabled a continental economic boom. And the biggest beneficiary of that has been China. Yet that order is now fraying, as China chafes under what it sees as an American-led world order that is impeding its rise and its natural regional predominance. In 2016 the tensions that this fraying produces may become acute, posing awkward questions for other countries in Asia. When Xi Jinping, China’s president, paid his first state visit to America in September 2015, the two countries were already at odds on a number of issues: the perennial bugbears such as China’s human-rights record and repression in Tibet and Xinjiang; and new concerns over cyber-security and the militarisation of space. The visit was marked, as always, by an effort to stress areas of co-operation, for example on climate change; but the two big powers are now rivals in a growing number of spheres. Asia is where the rivalry is most intense. It will become more so in 2016 for three main reasons. First, the two countries are doomed to worsening disagreement in the South China Sea.... Second, China will increase its activity in these wat­ers, perhaps with a more obviously military dimension, such as by building bases or by declaring an Air-Defence Identification Zone, as it did in 2013 in the East China Sea. ... A third reason is that China is ever more vocal in opposing America’s network of bilateral alliances that have been the basis of the region’s security architecture—with Australia, Japan, the Philippines, South Korea and Thailand. China decries these as cold-war relics, like American support for Taiwan, where an election in January may well add another cause of heightened strategic tension between the two big powers.

Taiwan falls into recession in 3rd quarter - Taiwan fell into recession in the third quarter, revised figures showed Friday, the latest indication that the slowdown in mainland China is hitting the island economy harder than originally thought. The second successive quarterly contraction from the previous three months may add to pressure on policy makers to take further steps to prop up the economy, with a central bank meeting on Dec. 17 looming large. The revised data prompted the government to lower once again its growth estimates for the current year and for 2016. Taipei already slashed in half its forecast for 2015 in August. The economy shrank 0.30% in the third quarter from the previous three months, following a 1.14% contraction in the second quarter, the revised figures showed, fulfilling a common definition of a recession among economists. On a year-over-year basis, GDP fell 0.63% in the July-September period, a slower pace of decline than an initial estimate of a 1.01% fall. The island's economy has been hit by China's deceleration, sluggish global demand for electronics and falling energy prices--factors that have pushed its exports down. A statement released by the Directorate-General of Budget Accounting and Statistics also blamed falling exports on "the crowding out effects from the expanded supply chain in mainland China." The weakness in the economy could prompt more central bank action following a rate cut in September that was Taiwan's first in more than six-and-a-half years.

Household debt rises at fastest rate on record -- Korea’s household debt and credit card spending not only reached a new high in the third quarter but also grew at the fastest pace since data has been compiled due to a percolating real estate market and the government’s encouragement of consumer spending to help the economy. But the risks of Korea’s mountain of household debt only grows as the U.S. central bank gets closer to finally raising interest rates, which it may start next month. According to the Bank of Korea on Tuesday, the outstanding debt and credit card spending during the July-September period amounted to 1,166 trillion won ($1.02 trillion), breaking the previous record of 1,131.5 trillion won set three months ago. In just three months, household debt and credit card spending grew 3 percent, or 34.5 trillion won, the biggest quarterly increase since data began being compiled in its current form in 2002. New quarterly debt and credit card spending broke the previous record set in the second quarter of this year, when 33.2 trillion won was added. When compared to a year ago, debt and credit card spending showed a sharper growth of 10.4 percent, or an additional 109.6 trillion won. Of the 1,166 trillion won total, debt borrowed from households accounted for the largest slice, at 1,102.6 trillion won, and an addition of 30.6 trillion won from the previous quarter, or 2.9 percent.

Japan government plans to raise minimum wage in stimulus package to revive economy | Reuters: Japan's government plans to raise the minimum wage and introduce other steps to revitalise the economy, but the draft of stimulus measures seen by Reuters on Monday appeared to break no new ground on reforms that analysts say are needed to end decades of stagnation. Prime Minister Shinzo Abe's government will also offer some financial support to people living off their pensions to bolster consumer spending, a copy of the draft obtained by Reuters showed. Citing unnamed sources, the Nikkei newspaper said on Monday that the government is planning to raise the minimum wage by 3 percent. But the draft didn't provide any specifics and analysts say the government will need to do more to foster durable growth. Raising wages is an urgent task for policymakers as Tokyo is keen to ramp up consumer spending, which is seen as crucial to boosting domestic demand and pulling the economy out of 15 years of deflation. However, some economists remained sceptical of the plans because they do not do enough to address Japan's rigid labour market and low worker productivity. "This sounds like short-term stimulus, but Japan needs structural reforms more than stimulus measures,"

Inflation Drumbeat - Noah Smith has an interesting Bloomberg View piece on Japanese inflation. Three crucial paragraph struck me:  Japanese unemployment is very low, and the economy is expanding at or above its long-term potential growth rate of around 0.5 percent to 1 percent. So according to mainstream theory, inflation would be an unnecessary and pointless negative for Japan’s economy. Why, then, are there always voices calling for Japan to raise its inflation rate? Actually, there are several reasons. The main one is that inflation reduces the burden of debt. Japan’s enormous government debt represents the government’s promise to transfer resources from young people (who work and pay taxes) to old people (who own government bonds). Since Japan is an aging society, there are more old people than young people. That makes the burden especially difficult to bear. Young people also tend to have mortgages, the repayment of which is another burden. Sustained higher inflation would represent a net transfer of resources from the old to the young. That would increase optimism, and hopefully raise the fertility rate, helping with demographic stabilization. It would also decrease the risk that the Japanese government will eventually have to take extreme measures to stabilize the debt. I like these paragraphs because they so neatly distill the language used by the standard policy establishment to advocate inflation. Noah clearly separates the usual "stimulus" arguments from the new "debt" argument, which helps greatly. Debt is a "burden." Sort of like snow on your roof, debt appears from the sky somehow and then represents a "burden" requiring "lifting," which would be beneficial to all. Debt "represents the government’s promise to transfer resources from young people ... to old people.." Apparently, the government woke up one morning, and said "we promise to grab about two and a half years worth of income from young people and give it to old people." Undoing such an ill-advised promise does indeed sound worthy.

Japan inflation below zero for 3rd straight month - --Prices fell slightly in Japan for the third month in a row in October, indicating that sustained inflation still remains elusive in the world's third-largest economy despite the central bank's efforts to spark price growth. The core consumer price index, which excludes fresh food, fell 0.1% from a year earlier, government data showed Friday, matching economists' forecasts. The last time prices fell three months in a row was in 2013, the same year the Bank of Japan set a 2% inflation target and announced its massive asset-purchase program aimed at ending more than a decade of on-and-off deflation. The figures show the BOJ is in the same boat as central banks in the U.S., Europe and Australia in facing persistently below-target inflation amid lower commodity and fuel prices. Some economists have forecast that flatlining inflation may force the bank and some of its peers to ease again. The BOJ has said lower imported energy prices mask an improving inflation picture. Excluding energy prices and food, prices actually rose 0.7% on year, though that was lower than the 0.9% rise in September.

Japan's government urged to cut doctor fees, drug costs - The Japan Times: A Finance Ministry panel on Tuesday urged the government to limit increases in social security expenses in fiscal 2016 as the state tries to rein in the costs of a graying society. “We’d like to call for limiting the increase for the ‘graying factor’ to a little less than ¥500 billion ($4.07 billion)” from the previous year, it said in a set of recommendations handed to Finance Minister Taro Aso. Social security-related expenses account for the largest slice of a budget request for the fiscal year starting April 1. The health ministry is asking for an increase of ¥670 billion in medical and other spending on top of an overall request of ¥30.67 trillion. To curb expenditure, the panel called for a review of medical service fees and pharmaceutical costs. The panel said fees for doctor services need to be lowered in addition to drug prices. A cut in the fees would be the first in 10 years. A 1 percent cut in the official medical service fees would push down the country’s annual medical costs by ¥430 billion.

Japan Proves that “Fix Trade” Sales Pitch for TPP, TTIP, and TISA is Wrong -- Not one, then, but three different treaties or agreements are now required to help trade. Or are they? For these various initiatives, the common thread running through them all is that, like Mommy’s Little Helpers, they’re there to offer assistance to, presumably, meet a need that exists and is not currently being met. So the evidence for erratic, static or even declining trade should be – as a minimum – clear and – preferably – significant. But it is not. Just the opposite in fact and for the U.S. imports keep on growing, exports keep on growing and the flows are huge. Maybe in amongst all that international trade there are casualties and the cause of those casualties are barriers to trade of some description. You don’t need to look too hard to find casualties when it comes to international trade. There’s plenty of examples to go round. Let’s take a look at some of these examples and find out what’s going wrong.   I’ll concentrate on Japan because for historic reasons Japan is traditionally viewed as a country which is hard for non-domestic companies to find success in because of ill-defined but oft cited “barriers” to trade. Dragging Japan into participation in the TPP was seen by the US Trade Representative as being crucial because, under lobbying from U.S. interests, it was deemed to be a huge market just waiting for exploitation by these same interests, but they were prevented from doing so because of Japan’s unfair restrictions on trade. While reading these tales of woe, keep in mind one thing that even the dumbest MBA flunker would be expected to know. Enterprises should only ever consider expending outside their home market into overseas territories if: 1) they have an unquestionable competitive advantage and 2) that competitive advantage can also be replicated in the overseas county.

Japan plans ¥3 trillion additional budget to prepare farmers for TPP, help struggling pensioners, families -  The government will compile a supplementary budget of just over ¥3 trillion for the rest of fiscal 2015, sources said Wednesday. The extra budget is intended to fund measures to help farmers cope with the Trans-Pacific Partnership free trade pact and to fund programs to create a society in which all citizens can play an active role, an initiative proposed by Prime Minister Shinzo Abe. Specifically, the budget will focus on measures to boost the earnings potential of livestock farmers and expand the exports of agricultural products, the sources said. The measures will be community-wide in reach. As for measures related to the dynamic society initiative, the government will provide benefits to low-income pensioners and beef up the existing program to assist rent payments by child-rearing families living near their parents, the sources said. In addition, budget allocations will be made for relief work and disaster prevention measures in areas struck by flooding in eastern Japan. The money will come from surplus state funds such as profit carried over from fiscal 2014 and excess tax revenues collected in fiscal 2015, the sources said.

Japan is using South China Sea tensions to peddle military hardware in Asia - Last year Japan lifted a decades-long ban on military exports, part of a loosening of restrictions on its military power that were put in place after its World War Two defeat. Now, as Japanese companies such as Mitsubishi, Kawasaki, and Hitachi market their military offerings, one area of geopolitical tension is serving as a particularly effective selling point: the South China Sea. This weekend Japan’s foreign and defense ministers reiterated concerns about China’s strengthening position in the South China Sea as they pressed the case, according to Bloomberg, for their Australian counterparts to buy a new generation of submarines made by Japanese defense contractors. Defense minister Gen Nakatani sought to cast the bid in the context of freedom of the seas. “Both of our nations are maritime nations and we have a key interest in freedom of navigation,” he said on Sunday (Nov. 22), according to Bloomberg. And last week Japan broadly agreed to transfer defense equipment and technology to the Philippines, which has been the most vocal opponent of Beijing’s territorial claims in the South China Sea, even taking up a case with an international tribunal in the Netherlands.  Beijing claims nearly all of the sea as its own territory, citing a “nine-dash line” that China drew up at the end of World War Two. That claim is considered outrageous by various Asian nations that have conflicting claims, and by the US, which has long viewed the sea—a vital trade route—as international waters.

Quietly, Guam is slated to become massive new U.S. military base - Thousands of Marines will land on this island sometime in the next few years, and their first steps will fall on a sturdy-as-granite pier in a sheltered Pacific harbor newly rebuilt to carry wave after wave of tank-driving troops.  This U.S. territory in the Western Pacific, long a way station for passing jets and submarines, is about to become a hub for a force of 4,800 Marines who’ll be charged with readying for war and disasters in East Asia. The trouble is the Pentagon has not yet persuaded two nearby islands to accept a proposal that would give the Marines a space to train during their Pacific patrols. And some are suggesting, subtly, that it may be difficult to station so many military service members on Guam if they cannot train nearby. On one island, Tinian, a Marine plan to practice ground maneuvers is setting off fears that the sounds of mortars and rocket blasts will quash a budding Chinese-backed tourism-casino industry. The companies behind the casinos have been hinting they’d pull out if the Marine proposal becomes a reality. On the other, Pagan, a proposal to make a massive international military training zone on an island known for its namesake volcano is hitting a nerve among people who dream of returning to it three decades after an eruption forced their evacuation.

Facebook Expands Free Internet in India -- Facebook CEO Mark Zuckerberg is on a quest to bring Internet access to everyone on the planet. “We just took another step towards connecting India,” Zuckerberg said in a post on his Facebook profile page on Monday. “As of today, everyone in India nationwide can access free internet services for health, education, jobs and communication through‘s Free Basics app on the Reliance network.” The expanded program means that anyone who is a customer of Reliance Communications—the telecommunications company with the fourth-most subscribers in India—is eligible to use Facebook’s “free basics” service, which includes access to popular websites such as news, weather, health, and local government information, sans charge. The app is part of the social network’s mission, which aims to spread Internet access to people in the developing world. The company rebranded the originally titled “” app to “Free Basics by Facebook” earlier this year after criticism that the initial name obscured Facebook’s involvement, and that it potentially conflicted with Net Neutrality rules.  India is Facebook’s second-largest market next to the U.S.

Will China Save Malaysia’s PM? - What price will Malaysia pay as the embattled 1Malaysia Development Bhd, the state-backed investment fund, sells power plants to China General Nuclear Power Corporation? Or, for that matter, China’s promise to buy lots of Malaysian government bonds to prop up the ringgit when its weakness has become a major political liability for Prime Minister Najib Razak? The currency has lost more than 20 percent of its value in the past year. 1MDB announced on Nov. 23 that it will sell its power assets to CGNPC for RM9.83 billion (US$2.3 billion at current exchange rates). CGNPC will assume all gross debt and cash of the 1MDB entity, Edra Global Energy Bhd. and its subsidiaries. The transaction is expected to be completed in February according to the statement. 1MDB has become a millstone around the prime minister’s neck, with at least four domestic investigations going as well as probes in the United States, Singapore, the UK and other countries, and with a semi-public dressing down by the President of the United States over the imprisonment of opposition leader Anwar Ibrahim. Najib serves as chief financial advisor to the fund. Najib knows he must bury the 1MDB scandal, in which an unknown amount of its US$11 billion in debt appears to be unfunded, as deeply as he can and then hope to call an election while the opposition is even more divided than the Barisan Nasional, the ruling national coalition led by the United Malays National Organization, the party he heads.

Deepening fall in Thai Oct industrial output adds to economic gloom - Thailand's industrial output fell more than expected in October and at the sharpest pace in nearly a year as the trade-dependent economy continues to struggle to grow in the face of weak demand at home and abroad. Southeast Asia's second-largest economy is still not firing on all cylinders more than a year after the military seized power in May 2014 to end months of political unrest. Export and domestic demand have remained sluggish and weaker commodity prices are weighing on the agriculture sector. While public spending and tourism are picking up, the government is still struggling to get construction started on some big infrastructure projects, clouding the outlook for a sustainable recovery. The Industry Ministry said on Friday its manufacturing production index (MPI) in October dropped 4.17 percent from a year earlier, after September's revised 0.38 percent dip, and compared with a 3.75 percent decline expected by economists in a Reuters poll. Bigger-than-expected export and import declines earlier this week had suggested output figures may surprise to the downside.

Global Trade Just Snapped: Container Freight Rates Plummet 70% In 3 Weeks"This market is looking like a disaster and the rates are a reflection of that," warns one of the world's largest shipbrokers, but while The Baltic Dry Freight Index gets all the headlines -having collapsed to all-time record lows this week - it is the specifics below that headline that are truly terrifying. At a time of typical seasonal strength for freight and thus global trade around the world, Reuters reports that spot rates for transporting containers from Asia to Northern Europe have crashed a stunning 70% in the last 3 weeks alone. This almost unprecedented divergence from seasonality has only occurred at this scale once before... 2008!  "It is looking scary for the market and it doesn’t look like there is going to be any life in the market in the near term." Baltic Dry at record lows... And Shanghai Containerized Freight collapsing... As Reuters reports, Shipping freight rates for transporting containers from ports in Asia to Northern Europe plunged by 27.9 percent to $295 per 20-foot container (TEU) in the week ending on Friday, one source with access to data from the Shanghai Containerized Freight Index told Reuters. The drop came after spot freight rates on the world’s busiest route dropped 39.3 percent last week, and the current rates are widely seen as loss-making levels for container shipping companies. The spot freight rates for transporting containers, carrying anything from flat-screen TVs to sportswear from Asia to Northern Europe, has fallen 70 percent in three weeks. In the week to Friday, container freight rates fell 22.5 percent from Asia to ports in the Mediterranean, dropped 8.6 percent to ports on the U.S. West Coast and were down 8.0 percent to ports on the U.S. East Coast. But even more concerning is this collapse is occurring just as the containerized freight industry enters its golden seasonal period...

Baltic Dry Index hits 30-year low - The Baltic Dry Index, a measure of shipping rates, fell to 498 points to touch a 30-year low on Friday, signalling that the recovery of the world economy is some distance away. The index, which measures costs of shipping commodities such as coal, iron ore, steel and grain, plunged 1.19% to 498 points on Friday, pushed down by waning demand in global trade. “It signals further trouble for the global economy,” said Atul J. Agarwal, managing director at shipping and oil exploring company Mercator Ltd, said. On 20 May 2008, BDI hit its all-time high of 11,793 points. Since then it has fallen 95.78%. The Baltic Dry Index is a composite of the Baltic Capesize, Panamax, Handysize and Supramax indices. It is the successor to the Baltic Freight Index and was first published on 4 January 1985 at a level of 1,000 points. “BDI is largely dominated by coal and steel. The demand for both are muted currently,” Agarwal said. Globally, steel faces an oversupply situation as the expected Chinese demand for its manufacturing activities has slowed down. In turn, China too has also been dumping some of its own steel production across the globe. Lower Chinese demand has also impacted global coal prices. Besides, India’s reducing dependence on imported coal for its energy requirements has also impacted global demand expectations for coal. Besides Mercator, domestic shipping companies such as Shipping Corp. of India Ltd, Great Eastern Shipping Co. Ltd and Chowgule Steamships Ltd undertake dry bulk cargo transportation. On 20 November, Bloomberg reported that the volume of goods imported into China has already fallen by around 4% in the first three quarters of the year, after rising an average 11% per year in 2004-14. That means China has cut around 0.4 percentage point from world goods trade growth in the nine months to the end of September, after having added an average 1 percentage point a year in the previous decade.

Leaky Ships: Ocean Carriers in the Age of Profitless Shipping -- Global shipping rates are astonishingly low right now; it’s possibly never been cheaper to ship goods around the world, ever. The China Containerized Freight Index collapsed to its single lowest point this week.  It costs $300 to move a 40-foot container from Rotterdam to Shanghai, which is barely enough to cover the cost of fuel, handling, and Suez Canal fees. Here’s some more context. Let’s say that you want to travel for a year; it’s cheaper to put your personal belongings in a shipping container as it sails around the world than to keep it at a local mini-storage facility. No ocean carrier can earn returns above its cost of capital at these price levels. A slowdown in demand has contributed to this price collapse, but it can’t entirely explain record low freight prices. In spite of a very real downturn in Chinese exports, trade volumes remain higher than just a few years ago, when container shipping prices were relatively high.Instead, the collapse in prices is mostly driven by overinvestment in shipping capacity by ocean carriers. The newest generations of container ships are larger and so much more efficient than previous ships. Lower costs matter in commodified industries like freight shipping, and it’s no surprise that global container lines have aggressively upgraded their fleets. It takes about three years to build and outfit a container megaship. And it was three years ago that the many carrier lines decided to invest in larger ships, when freight prices were near a historic high. At the time, carriers expected freight prices to be high and global trade to be growing quickly. That turned out not to be the case, and now there’s much greater supply.

Cry for Argentina? - Dean Baker - The election of the conservative candidate to the presidency in Argentina has been cause for celebration in mainstream Washington, as typified by this Washington Post editorial. I won't claim to know which candidate offered the better path for the country going forward, but we should not let the Washington Post types rewrite the past.  The governments led by the Kirchners have much to show for their twelve years in power. Nestor Kirchner took power in May of 2003, just as Argentina was beginning its recovery from its dramatic default and devaluation at the end of 2001. The I.M.F. was insisting that Argentina return to the austerity path that had led to a horrible recession in the years from 1998 to 2001. Its per capita income had already declined by more than 15 percent at the point of the default making the downturn more than four times as severe as the 2007-2009 recession in the United States. Kirchner said no deal. Instead he pursued policies to promote growth and employment, with an emphasis on helping those at the bottom end of the income distribution. To the great consternation of the folks at the I.M.F. (where Argentina became known as the "A-word"), his policies largely succeeded. While the I.M.F. kept predicting economic collapse, Argentina's economy grew rapidly. By the middle of 2003 it had already made up all the ground lost following the default and by the end of 2004 its per capita income was above the pre-recession level. And, it was much more evenly distributed.

Brazil central gov't posts record deficit for October | Reuters: Brazil's central government recorded its biggest primary budget deficit recorded for the month of October as a deepening recession drags down federal revenues, Treasury data showed on Thursday. The central government account, which covers federal ministries, the central bank and social security, had a deficit of 12.28 billion reais ($3.27 billion) in October, nearly double the 6.9 billion reais gap recorded in September. It is the sixth straight monthly primary gap for Brazil, which is expected to post a record consolidated deficit this year of 48.9 billion reais or the equivalent of 0.85 percent of gross domestic product. The consolidated balance includes results from states and municipalities and is scheduled to be released by the central bank on Monday. President Dilma Rousseff is struggling to shore up the government accounts as a rebellious Congress drags its feet to approve unpopular cost-cutting measures. The surprise arrest of the ruling coalition leader in the Senate, Delcidio do Amaral, on Tuesday will likely complicate Rousseff's austerity drive and could even revive calls for her impeachment. Treasury chief Marcelo Saintive told reporters the government could be forced to freeze more than 100 billion reais in expenditures if Congress fails to approve a bill to cut the primary target by Monday.

Ontario projects next year’s deficit will be $7.5 billion: — Ontario's Liberal government trumpeted a lower deficit projection Thursday as evidence it is reining in spending, but in reality much of the drop was due to a temporary accounting measure. The new 2015-16 deficit projection of $7.5 billion — $1 billion lower than was forecast in the spring budget — is mainly the result of the recent initial public offering of Hydro One, which increases revenue on the books by $1.1 billion, the government said in its fall economic update. The government is on track to eliminate the deficit by 2017-18, said Finance Minister Charles Sousa. "For the last six years running we've managed our program spending to offset softer revenues," he told the legislature. "We know with those challenges before us we need to address them and we are. We're overcoming those challenges by controlling our spending, going over our underground economy issues and going line by line to find the appropriate savings." The Liberal government has promised to dedicate the proceeds of asset sales, such as the Hydro One IPO, to the Trillium Trust infrastructure fund. It's a promise both opposition parties doubt, but Sousa said it's all going to infrastructure, which the Liberals have pledged to spend $134 billion on over 10 years.

Battered by increasingly aggressive NAFTA lawsuits, will Canada fare any better under TPP? -- Under NAFTA, Canada has been hit by 70 percent of all NAFTA investor lawsuits. NAFTA lawsuit losses have left critics “to wonder why their government continues to give private, for-profit arbitrators the power to interpret treaties, to decide over questions of public law and to impose fines paid from public funds.” If there’s any “good news” here, perhaps it’s that the lawsuit costs, “both financially and in public policy terms, are becoming clearer to more and more citizens. There is a powerful and growing global backlash against ISDS…. Canada should be seeking to disengage from this system,” says Sinclair. Breaking news of the latest outrageous NAFTA lawsuit — On October 22, 2015 the CBC reported that “An American-owned water export company has launched a massive lawsuit against Canada for preventing it from exporting fresh water from British Columbia. Sun Belt Water Inc. of California is suing Canada for $10.5 billion US. So far no valid claim has been filed, no NAFTA Chapter 11 arbitration has occurred, and there has been no financial settlement.

The Future of Money - CBS News: Tech giants like Google, Facebook, and PayPal are all steadily rolling out new-fangled services to turn our smartphones into digital wallets -- replacing cash and checks. And it's been reported that Apple is working on a new payment option to let iPhone users send money directly to one another -- as easily as a text message. If this all seems cutting edge, you may be surprised to learn there's one country that adopted mobile money years ago: Kenya. Here in the U.S., we can use smartphones to pay for things, but you typically need to be linked to a bank account or credit card. In Kenya, you don't need a bank account, you don't need a credit history, or very much money for that matter, making this country in East Africa a giant experimental laboratory defining the future of money. While a majority of Kenyans don't have a bank account, eight in 10 have access to a cell phone. So in 2007, Safaricom started offering a way to use that cell phone to send and receive cash. They call it M-PESA: m stands for "mobile;" "pesa" is money in Swahili.  It is often referred to as Kenya's alternative currency. But safer and more secure. You are effectively texting money.

Pope Francis, in Nairobi Slum, Denounces ‘New Forms of Colonialism’ - The pope got a taste of Kenyan slum life on Friday.He stepped out of his car on a muddy street and walked slowly past hundreds of poor children who live in shanties. He heard stories of gangs preying on women, of people dying from homemade alcohol and of sinister plots by businessmen to flood children out of their schools and steal land.When it came time to speak, Pope Francis delivered his sharpest remarks yet on his first trip to Africa.He lashed out against what he called “new forms of colonialism, which would make African countries parts of a machine, cogs on a gigantic wheel.”Francis said that “countries are frequently pressured to adopt policies typical of the culture of waste, like those aimed at lowering the birthrate.”He called the slums “wounds” inflicted by the elite. “How can I not denounce the injustices which you suffer?” he said.

The New ‘Extraordinary Threat’ to US National Security Is A Landlocked Country in Africa -- President Barack Obama has identified a new threat that he says "constitutes an unusual and extraordinary threat to the national security and foreign policy of the United States," but it isn't a new militant group in the Middle East or maneuvering by a rival superpower: It's the landlocked African nation of Burundi. On Monday, after months of political unrest and a violent weekend that saw five people killed and reports of mortar shelling in Burundi's capital Bujumbura, Obama signed an executive order that imposes sanctions on several top Burundian officials. Obama officially declared a national emergency in the US, saying Burundi's peace and security are threatened. The president specifically underscored the "killing of and violence against civilians, unrest, the incitement of imminent violence, and significant political repression," as cause for concern. The unrest in Burundi kicked off in April when President Pierre Nkurunziza announced plans to seek a controversial third term in office. At the time, critics argued that the 51-year-old leader was ineligible to extend his tenure in power due to the two-term limit outlined in the country's constitution, which was established in 2005 after more a decade-long civil war. The nation's high court ultimately cleared Nkruniziza to run, ruling that he had been appointed to his first term rather than democratically elected.

Russia adds yuan as currency reserve — The Central Bank of Russia has included the Chinese yuan in its reserve currency basket, TASS reports. The move is expected to boost the yuan’s presence in the Russian financial market. As of December 31, 2014, the latest data available, the US dollar was still dominating Russia’s forex basket at 44 percent. The second most-used foreign currency was the euro with 42 percent. The British pound made up 9.5 percent. According to Vesti.Finance, the Central Bank made the decision in November, but hasn’t bought the yuan yet. .  The Chinese currency started trading on the Moscow Exchange in 2010. Since then, the volume of trades has grown significantly. This August Russian traders bought a record 18 billion yuan (about $2.8 billion), which is four times more than in August 2014. Russian investors began looking east, after the US-led group of Western counties imposed sanctions against Russia over Ukraine. Sanctions have deprived Russia access to Western capital markets. In particular, they affected state-owned banks like Sberbank, VTB, Vnesheconombank, Gazprombank and Rosselkhozbank (Russian Agriculture Bank).The lenders were cut off from long-term (over 30 days) international financing.

One Big Influence on Interest Rates Is About to Reverse - Greg Ip - Low interest rates are usually attributed to low inflation, weak economic growth and supereasy monetary policy. But there’s another, deep-seated factor that doesn’t get much attention: demographics. The proportion of the developed world’s population in its highest-saving years—the decades just before retirement—has been rising in recent decades as populations have aged and fertility rates decline. That phenomenon is even more pronounced in China. This bulge in saving has helped push down interest rates around the world, according to Michael Gavin of Barclays. But, he warns, this about to change. When people retire, their income drops much more sharply than their consumption. As a result, they stop saving and start drawing down the assets they’ve acquired during their high-saving years. That could start to put upward pressure on interest rates and downward pressure on stock prices. Mr. Gavin gets a fix on this relationship by comparing the share of the population aged 40 to 65 to that aged 65 or over. The difference in shares, he finds, seems to be an important explanatory factor for real (inflation-adjusted) interest rates. The relationship between that difference in any single country and its interest rates is less powerful than the aggregate relationship. That makes sense: capital markets are global and thus an excess of saving in China will help depress interest rates in the U.S. (what Ben Bernanke called the “global saving glut”). Japan, for example, has seen its current account surplus shrivel as more of its population passed 65, so it is contributing far less to the global saving glut. But the impact has been masked by the still-large contribution of saving coming from China and other countries.

Rebooting the Eurozone: Step 1 – Agreeing a Crisis Narrative -- The Eurozone needs fixing, but it is impossible to agree upon the steps to be taken without agreement on what went wrong. This column introduces a new CEPR Policy Insight that presents a consensus-narrative of the causes of the EZ Crisis. It was authored by a dozen leading economists from across the spectrum. The consensus narrative is supported by a long and growing list of economists.

Europe recession 'could be permanent', think tank warns - The worst effects of the European recession risk becoming permanent in places, according to a left-leaning think tank. The IPPR's latest report pointed to the high level of unemployment and underemployment across Europe and said the chances of these becoming entrenched is "deeply alarming". It said there was 10% unemployment and a 5% underemployment rate in Europe. The UK's main problem was low productivity, the IPPR said. The official unemployment rate for the 28 countries in the EU was 9.3% in September, down from 9.4% the previous month. The rate in the 19 countries that use the euro stood at 10.8%, down from 10.9% in August. The IPPR said that unemployed workers risked being left behind as globalisation and technological progress lead to changes in the skills that employers require. German investment The report suggested that European countries look to Germany as a good example of maintaining workplace skills and high productivity rates. Germany - Europe's largest economy - invests 50% more on average than other countries in research and development. The report also found that the UK's in-work training had fallen by 4 percentage points since 2008 - the largest decline for any EU country.

Italy prepares to sell up to 40 per cent of state railways - The Italian government on Monday said it had started preparations to sell a minority stake of up to 40 per cent in the state railways, following the recent partial privatization of the postal services. Transport Minister Graziano Del Rio said a cabinet meeting had agreed to a set of directives for the sell off, namely that only train operating services should be partially privatized while railtracks should remain fully in public hands. "It is the beginning of a process" to be continued "in the coming weeks," Del Rio said, promising that the partial privatization will deliver "more efficiency" while respecting public service requirements. Ferrovie dello Stato Italiane is a public holding that currently includes Rete Ferroviaria Italiana (RFI), which manages railtracks, and Trenitalia, which runs trains. In the first half of the year it made 4.2 billion euros in revenues and just under 300 million euros in profits, and employed more than 69,300 people. Del Rio said the partial privatization plan - which the Economy Ministry previously said should be completed by June 2016 - should concern Trenitalia and possibly a part of RFI to be spun off from the parent company. Italy is under pressure to sell state assets to reduce public debt, which stands at around 2.2 trillion euros, although critics say proceeds from the process are unlikely to make much of a dent on total debt figures.

Italy Plans Bad Bank "Silver Bullet" Bailout -- Italy plans to launch a series of bad bank-style measures as early as the end of the year in an effort to cut its €330bn pile of non-performing loans as it seeks a “silver bullet” to boost its weak economic recovery, say senior officials. Such a move raises the prospect of a confrontation with the European Commission, which has so far rejected draft plans presented by the Italian Treasury, arguing that any government intervention would qualify as state aid, the officials say. According to several senior Italian officials, one plan under discussion involves placing the bulk of Italy’s NPLs into a privately held vehicle in which senior debt would be guaranteed by the state, probably through the state development agency Cassa Depositi e Prestiti. The aim would be to reduce the gap between the price banks are offering to sell the loans and the price private entities are willing to pay for them, which has remained stubbornly wide, amid private investors’ concerns about the ease of clawing back soured loans in Italy. One senior government official said a clean-up of NPLs would be the single most effective “silver bullet” for boosting Italian growth.

Swiss Banks ABS Hits Customers With Negative Interest Rates; Is Less Than Zero Crazy?  -- Alternative Bank Schweiz (ABS), a small bank in Switzerland broke the negative interest rate on deposits barrier. This is Money reports CHARGING customers to cake their money, (emphasis in caps theirs). The Alternative Bank Schweiz wrote to customers telling them they would face a -0.125 per cent rate on their money from 2016 – and a -0.75 per cent rate on deposits above 100,000 Swiss francs. The move echoes the Swiss central bank’s -0.75 per cent negative deposit rate imposed on financial institutions placing money with it. Sweden’s central bank also introduced negative rates, which currently stand at -0.35 per cent, while the European Central Bank introduced them in part with its -0.2 per cent overnight deposit rate. The Bank of England’s chief economist Andy Haldane delivered a speech in September discussing how Britain could have to consider negative interest rates as an extreme measure in a future crisis. The big Swiss banks passed on some of the pain from the Swiss central bank’s -0.75 per cent rate to their institutional clients, but Alternative Bank Schweiz is believed to be the first retail bank to hit savers with a charge. The bank describes itself as an ethical organisation focused on backing firms investing in social and environmental projects. With its balance sheet totalling nearly 1.6 billion Swiss francs last year, most of its activities are concentrated in cooperative housing projects, providing affordable housing and sustainable energy solutions, as well as organic farming.

Euro Area's Negative-Yielding Debt Tops $2 Trillion on Draghi -- Investor expectations that European Central Bank President Mario Draghi will expand monetary easing are pushing even more euro-area government-bond yields below zero. The total has risen to more than $2 trillion, or about one-third of the securities. Bonds across the region climbed last week when Draghi said the institution will do what’s necessary to rapidly accelerate inflation. The statement recalled the language of his 2012 pledge to do “whatever it takes” to preserve the euro and it solidified investor bets on further stimulus at the ECB’s Dec. 3 meeting. Two-year note yields of Germany, Austria and the Netherlands all dropped to records on Monday, while 10-year bond yields rose. “The ECB is doing little to counter this market speculation,” said Christoph Rieger, Commerzbank AG’s head of fixed-income strategy in Frankfurt. “Should they not deliver now it would clearly cause a huge backlash with regards to the euro and overall valuations.” The anticipation of greater easing has also undercut the euro. The single currency weakened to a seven-month low on Monday after futures traders added to bearish bets. A 10 basis-point cut in the ECB’s deposit rate is now fully priced in, according to futures data compiled by Bloomberg, while banks from Citigroup Inc. to Goldman Sachs Group Inc. are predicting an expansion or extension of the ECB’s 1.1 trillion-euro ($1.2 trillion) quantitative-easing plan. Negative-yielding securities now comprise a bigger slice of the $6.4 trillion Bloomberg Eurozone Sovereign Bond Index. The amount now compares with $1.38 trillion yielding below zero before Draghi’s Oct. 22 press conference, where he pledged to re-examine stimulus at the institution’s December meeting.

Europe's central banks in quandary as Fed tightening nears: (Reuters) - Europe's central banks are struggling with divergent quandaries over how to revive inflation and sustain economic growth as the U.S. Federal Reserve prepares to start raising interest rates for the first time since the collapse of Lehman Brothers. The world's major economies are recovering at very varying paces from seven years of economic and financial crisis, with Japan tipping back into recession and China trying to surmount a severe wobble this year. While the Fed is widely expected to pull the trigger on a slow but steady tightening from December in response to solid U.S. growth and employment figures, the European Central Bank is likely to ease monetary policy further on Dec. 3. "It (the ECB) cannot run the risk of disappointing markets, having raised expectations of action," said Ken Wattret at BNP Paribas in London, reflecting the view of a big majority of economists polled by Reuters. That is because headline inflation remains close to zero in the 19-nation euro area, and core inflation stripped of energy prices and seasonal factors is barely 1 percent, just half the ECB's target of close to but below 2 percent. Meanwhile, the Bank of England is still mulling when to make its first rate rise, and the Swiss and Swedish central banks are fretting over how to combat overvaluation of their currencies as the prospect of even lower ECB rates makes the euro cheap. Central banks in the euro area, Switzerland, Denmark and Sweden have already taken the rate they offer banks on deposits below zero, with the non-euro countries having to go deeper into negative territory to steady their exchange rates.

Exclusive: ECB discusses two-tiered bank charges, broader bond buys - officials -- Euro zone central bank officials are considering options such as whether to stagger charges on banks hoarding cash or to buy more debt ahead of the next European Central Bank meeting, according to officials. Little over a week before the meeting to set the ECB's policy course, numerous alternatives are open, from snapping up the bonds of towns and regions to introducing a two-tier penalty charge on banks that park money with the ECB. Officials, who spoke on condition of anonymity, said that even buying rebundled loans at risk of non-payment has been discussed in preparatory meetings, although such a radical step is highly unlikely for now. The ECB declined to comment. "They are still trying to figure out what will be in the package. A lot of people have different views," said one official with knowledge of talks that have put ECB President Mario Draghi at loggerheads with skeptical German policy-makers. "There are some who say you should surprise markets. But you cannot surprise indefinitely. Sooner or later, you are bound to disappoint." A virtually stagnant euro zone economy and a heightened sense of concern at the ECB sets the backdrop for a series of high-level meetings of central bank officials in Frankfurt that take place this week. "We have deflation, so you have to do something," said a second person. "How this all looks in a few years, nobody knows."

Europe’s Banks Are Still Drowning in Bad Loans -- The European Banking Authority EBA, which (we guess) is fighting for its survival after the ECB has become the sole supervisor of Europe’s “systemically relevant” banks, has recently issued a comprehensive report on the European banking system (this included the unintended revelation that its employees have yet to master the intricacies of Excel). As an aside, we have little doubt that this bureaucracy will survive. Has there ever been a case of an EU bureaucracy not surviving and thriving? We don’t recall one off the cuff, but perhaps we are mistaken. We’re sure some reason will be found to preserve this particular zombie sinecure as well.  Among the things the EBA’s report apprises us of, is that European banks continue to be submerged in bad loans, in spite of all the bailouts and extend & pretend schemes that have been implemented in recent years. As Reuters reportsThe scale of bad loans held by banks in the European Union is “a major concern” and more than double the level in the United States, despite an improvement in recent years, the EU’s banking regulator said on Tuesday. The total of Non-performing loans (NPL) across Europe is about 1 trillion euros ($1.1 trillion), equivalent to the size of Spain’s annual gross domestic product (GDP) and 7.3 percent of the EU’s GDP. Some 16.7 percent of loans at banks in Italy were designated as NPLs, equivalent to 17.1 percent of the country’s GDP. Spain’s banks had an average NPL ratio of 7.1 percent, or 15.8 percent of its GDP. Banks in Cyprus fared even worse, with half of their loans classified as bad, followed by Slovenia (28.4 percent), Ireland (21.5 percent) and Hungary (18.9 percent).

Eurozone Composite PMI Surges To 54 Month High Even As ECB Prepares To Launch More QE To "Boost Economy" -- With the ECB expected to announce a boost to QE and pushing rates even lower into record negative territory, perhaps Markit did not get the memo to double seasonally adjust the seasonally adjusted European manufacturing and services PMI survey data, when instead of providing cover for Draghi ("look, the economy is slowing down even more, surely you must unleash more printing") it reported that not only the Manufacturing PMI rose to 52.8 from 52.3, a 19 month high and above the highest estimate (range was 51.5 to 52.6), not only the Service PMI rose to 54.6 from 54.1, a 54 month high and also above the highest estimate (range of 53.5-54.4), but the Composite PMI soared to the highest level recorded since May 2011, rising from 53.9 to 54.4 (which was also above the highest estimate). From the reportEurozone businesses reported the fastest rates of growth in business activity and employment for four-and-a-half years in November. The Markit Eurozone PMI® rose from 53.9 in October to 54.4, according to the preliminary ‘flash’ reading, indicating the fastest rate of expansion of output since May 2011. Moreover, the survey’s employment, new orders and backlogs of work indicators all signalled the strongest monthly expansions in four-and-a-half years.

As If The French Did Not Have Enough Problems -- With bond yields hitting ever-increasingly negative levels and stock prices inexorably rising on a wave of real and promised liquidity from Draghi, one could be forgiven for believing the hype about Europe's recovery (had we not seen decades of failure for Japanese QE and 6 years for The Fed). So amid all this renewed hope, with its spiralling nationalism and warmongery -France just suffered the largest jump in joblessness in over 2 years to a new record high of 3.5898 million unemployed. chart: Bloomberg

French Unemployment Rises Most in Three Years to Record Level --The recovery in France appears to have stalled already, and this is from employment data before the terrorist attacks. Via translation from Les Echos ... The number of Class A unemployed rose by 42,000 last month. This is the largest increase in nearly three years. Overseas included, France now has 3,810,000 unemployed, a new record. The major disappointment is for the Government, which hoped that the sharp decline in September  finally marked the beginning of the reversal "credible" and "sustainable" in the curve of unemployment to which Hollande has conditioned his candidacy for re-election in 2017. "These figures are not satisfactory," euphemized Myriam El Khomri, the labor minister, while adding they "must still be interpreted with caution because the results of recent months experiencing strong variations." Economists point out that the attacks in Paris strengthen the uncertainties about the pace of recovery in France. They fear a decline in activity in tourism and catering that would inevitably damage employment.

Germany gives Greece names of 10,000 citizens suspected of dodging taxes -- Germany has handed Athens the names of more than 10,000 of its citizens suspected of dodging taxes with holdings in Swiss banks. The inventory, which details bank accounts worth €3.6bn – almost twice the last instalment of aid Athens secured from creditors earlier this week – was given to the Greek finance ministry in an effort to help the country raise tax revenues.  “This is an important step for the Greek government to create more honesty regarding tax in the country,” said Norbert Walter-Borjans, finance minister of the regional state of North Rhine-Westphalia. The state disclosed the data through Germany’s federal tax office. Greece’s leftist-led government vowed it would go after tax dodgers as one of the many policy commitments it signed up to when a €86bn bailout between Athens and its partners was agreed after months of wrangling in July. The financial lifeline was the third since Athens’ near economic meltdown following the first revelations of runaway deficits in May 2010. A total of 10,588 depositors were said to be on the list, including private individuals and companies. Sources said it resembled a “who’s who” of the well-heeled upper echelons of Greek society – able to spend Christmas in villas in Gstaad in Switzerland and summer at sea in luxury pleasure boats.

Greek private sector union calls Dec. 3 strike over pension reform | Reuters: Greece's biggest private sector union GSEE on Wednesday called a 24-hour general strike for Dec. 3, the second in under a month to protest against pension reforms demanded under the country's third international bailout. Prime Minister Alexis Tsipras' government has passed legislation raising the retirement age, increasing contributions for healthcare and scrapping most early retirement benefits. It also plans to merge a plethora of pension funds into one and cut back on supplementary pensions. GSEE and its public sector union ADEDY brought thousands of workers onto the streets on Nov. 12 to protest against austerity measures, setting Tsipras' government its biggest domestic challenge since he was re-elected in September.

Why Greeks are exhuming their parents - BBC News: Cemeteries in Greek cities are so overcrowded that bodies are often only kept in the ground for three years. Then families have to pay for exhumation - and for the bones to be kept in a building known as an ossuary. But many cannot afford to pay even for this limited degree of dignity in death. Katerina Kitsiou stands weeping by her father's grave in Thessaloniki's main cemetery. She has come to watch as her father Christodoulos is exhumed. He was buried seven years ago, but his children cannot pay for his grave any longer. "We paid for an extra four years to keep him there but we cannot afford it any more," says Katerina. It's clear that for her the occasion is deeply upsetting. "It's your beloved. You imagine him like a person and then you see only the bones. It's like a second funeral."   This is something most Greeks know they will have to face at some point in their lives - most feel obliged to attend the event out of respect to the dead.   Over the last 50 years, Greece's urban population has exploded.  Urban development has left cemeteries encircled, with no room to expand.  That's why graves are now usually rented on a three-year lease with an escalating price scale for any additional years. The prohibitive costs are meant to act as a deterrent so that the space can be reused.

The Great Greek Shipping Myth: The magnates who run one of the biggest merchant marine fleets in the world have long argued that if Greece tried to tax them, they would leave - and that their departure would devastate the economy. In recent years, as international institutions repeatedly bailed out Greece, the lenders have also pushed Athens to beef up its tax take. Shipowners have resisted any effort to ditch the tax breaks they enjoy, and no government has dared touch them. “Shipping is a pillar of the Greek economy,” says the Union of Greek Shipowners, the ocean-going industry’s main association. Greece’s statistics office says shipping contributes around $9 billion - or 4 percent - of the country’s Gross Domestic Product (GDP). When you include related business, the industry says, the figure jumps to 7.5 percent of GDP, or about $17 billion a year. Deep-sea shipping and related trades employ more than 192,000 people, it says. That’s 4 percent of all Greek workers. But a Reuters analysis of corporate filings and economic data suggests shipping’s heroic role in Greece’s economy is largely a myth. That’s because Greek shipowners include in their statistics billions of dollars which never actually enter the Greek economy. If Greece counted only payments to Greek companies and individuals – as other countries do – the deep-sea shipping industry’s contribution would be equivalent to around 1 percent of GDP.

Portugal becomes the second eurozone country this year to rebel against EU belt-tightening rules —Portugal’s president on Tuesday appointed anti-austerity Socialist leader António Costa as prime minister in a move that ends weeks of political turmoil but opens the door to a period of economic uncertainty. The ascent of 54-year-old Mr. Costa, the former mayor of Lisbon, makes Portugal the second eurozone country this year after Greece to rebel against a belt-tightening recipe imposed on troubled Southern European economies by the European Union’s executive arm. Greece’s rebellion, which started with the election of far-left Syriza party in January, has been short-lived, with the government now imposing austerity measures to meet the terms of its latest EU bailout. Mr. Costa, who has formed a parliamentary alliance with three euroskeptic far-left parties, will also face challenges making good on his pledges to increase public wages and unfreeze pensions. Such was the concern of the Portuguese political establishment over the proposals that President Aníbal Cavaco Silva on Monday insisted that Mr. Costa adhere to six conditions, including maintaining a tight budget and strong banking system, before he named him as prime minister.

End of EU Border-Free System Could See Euro Fail, Warns Juncker - WSJ: The head of the European Union’s executive Wednesday gave his sharpest warning yet about the possible effect of a collapse of Europe’s open-border policy and cautioned it could undo the bloc’s single currency project. The Schengen system, which allows for passport-free travel among 26 signatory countries in Europe, has come under severe pressure in recent months because of the influx of migrants into the region—the biggest migratory wave since the aftermath of World War II. The attacks in Paris, which made clear the ease with which some terrorists were able to travel to and across Europe undetected, have only compounded the crisis. France and Germany are among the countries that have ramped up border controls. EU governments also are looking at revamping the system’s rules to tighten the bloc’s external borders and ensure a fairer distribution of asylum seekers across the bloc. Speaking at the European Parliament in Strasbourg about the recent terror attacks in Paris, European Commission President Jean-Claude Juncker acknowledged that the “Schengen system is partly comatose.” “If the spirit of Schengen leaves us...we’ll lose more than the Schengen agreement. A single currency doesn’t make sense if Schengen fails,” he said. “You must know that Schengen is not a neutral concept. It’s not banal. It’s one of the main pillars of the construction of Europe.”

Dijssebloem threatens Greece & other countries with “Schengen expulsion” -- The head of the Eurogroup, Dutch Finance Minister Jeroen Dijsselbloem warned that countries which fail to adequately guard Europe’s borders and do not take in a fair share of refugees could find themselves outside the borders of a future “mini-Schengen” zone. Dijsselbloem’s threats have two different targets: Greece that has the honor to guard the EU’s and Schengen’s external border and countries like Hungary or Denmark or in general the poor Eastern European countries that refuse to take in refugees and refuse to comlpy with the EU plan on the Refugee Crisis. In an interview in Belgian business dailies De Tijd and L’Echo on Friday, Dijsselbloem, said the EU’s passport-free Schengen zone could not work if only a few countries gave shelter to refugees. “There are a few countries that are carrying the heaviest burden in the asylum crisis, taking in the most refugees,” he told the papers, naming Sweden, Germany, Austria, Belgium and the Netherlands. Dijsselbloem said his aim was to preserve the Schengen zone, but if countries did not shoulder their fair share, others would have to go it alone, since the migrant influx would otherwise endanger their generous welfare states.

Europe the Unready, by Paul Krugman - Consider the slow-motion disaster now overtaking the European project on multiple fronts, in each case Europe’s ability to protect itself turns out to have been undermined by its imperfect union.On the financial crisis: There’s widespread consensus among economists (though not, alas, among politicians) that Europe’s woes were mainly caused by mood swings among private investors, who recklessly poured money into southern Europe after the creation of the euro, then abruptly reversed course a decade later. Yet something similar happened in America, too, where money first poured into mortgage lending in the “sand states” — Florida, Arizona, Nevada, California — then took flight. In the U.S., however, the pain of that reversal was limited by federal institutions, ranging from Social Security to deposit insurance. In Europe, unfortunately, the cost of bank bailouts and much more fell on national governments, so that private-sector overreach soon spilled over into fiscal crisis.On refugees: the politics of immigration in general, and refugees in particular, are nasty everywhere... But Europe is also trying to maintain open internal borders while leaving the management of external borders to national governments like that of impoverished, austerity-ravaged Greece. No wonder, then, that border controls are making a comeback. And on terrorism: No free society can ever be perfectly secure from attack. But think about how much harder it gets when antiterrorism is pretty much left up to national governments, whose capacity for policing varies greatly. ... Ideally, Europe would respond to these setbacks by strengthening its union, creating more of the institutions it needs to manage interdependence. But the political will for that kind of move forward seems lacking, even for the most obvious steps. ...

What can we discover from average mortgage rate stats? | Bank Underground: Mortgage rates often hit the news with headline-grabbing low rates, or rate increases for certain mortgage products. An average mortgage rate strips away the extremes, and as I will outline can represent both what is available to the average borrower, and what is experienced. But first, why did the Bank start producing its own monthly mortgage rate statistics? Before the 1980s, the mortgage market was fairly straightforward, with each mortgage provider offering an SVR (or standard variable rate). But, during the 1980s and 1990s, the mortgage market became more competitive and dynamic, with the introduction of more complex products.  Fixed-rate mortgages were first introduced in 1989.  Flexible mortgages (such as those which allow borrowers to offset their loan with savings) became popular in the mid 90s, as did discounted variable rates offering a rate below the SVR for the first few years of the mortgage, and trackers which remain a certain number of basis points above Bank Rate. Also, when the Bank was granted independence by the government in 1997, mortgage rates statistics were needed to monitor the transmission of monetary policy. So, the Bank began to compile and publish average interest rate statistics: quoted interest rates data from 1995, and effective interest rates data from 1999.

Majority in UK Now Favor Brexit; Cameron's Quandary -- Attitudes towards the EU have hardened in the wake of the ISIS attack on Paris. A new poll reveals Majority of UK Public Now Wants 'Brexit'. More than half of the public now want to leave the European Union, according to an opinion poll for The Independent – the first time our monthly survey has shown a majority for “Brexit.” The survey of 2,000 people by ORB, conducted last Wednesday and Thursday in the wake of the Paris terrorist attacks, will be seen as a reflection of public anxiety about the EU’s migration crisis. Some 52 per cent of people say Britain should leave the EU, while 48 per cent want to remain.  When ORB asked the same question in June, July and September, a majority (55 per cent) wanted to stay and 45 per cent to quit on each occasion.  Last month, amid widespread media coverage of the refugee crisis, the margin narrowed slightly to 53 per cent in favour of staying in, with 47 per cent wanting out. Some 54 per cent of people who voted Conservative at the May election want to leave the EU, as do 93 per cent of Ukip voters. But a majority of Labour, Liberal Democrat, SNP and Green supporters want to remain. The overall findings will worry pro-EU campaigners, who admit privately that the refugee crisis is shifting opinion against membership. UK prime minister David Cameron really has his work cut out for him now. Just yesterday, German Chancellor Angela Merkel Reaffirmed Her Open-Door Refugee Policy.  She is out of her mind of course, and that's going to give all of Europe a major headache, while making matters especially difficult for Cameron who pledged to work out an agreement with Merkel and French President Francois Hollande that the British could accept.

The single European market is looking increasingly like a sham - One of the main arguments in favour of the UK’s continued membership of the European Union is that it will ensure British companies retain their access to the single market. The sector that is thought to most benefit from such access is finance. So, it may come as a bit of a shock to Britain’s Europhiles that leading senior executives of UK insurance companies are privately protesting that the single market in which they supposedly operate is a sham. The problem is, unsurprisingly enough, regulation. Solvency II is a new set of prudential rules for European Union’s insurers, designed to make them safer and level the playing field across the continent with new standards on accounting, capital, governance and the like. It may achieve the first aim; it appears to be falling some way short of the second.Solvency II has had a long gestation. UK insurers were initially relaxed about it, hoping the new rules would result in Europeans moving toward the British model. But since the 2008 financial crisis, regulators have become increasingly worried about longer-dated liabilities. These are the promises made by insurers – in the form, for example, of annuities – to make payments many years in the future. But different European regulators have allowed the insurers in their countries to calculate liabilities in different ways. The UK uses something called a “matching adjustment”, the French use a “volatility adjuster” and the Germans use “yield curve extrapolation” (which one cynic in the industry describes as “invent your own discount rate”). Working out the actual difference between these calculations would be the work of a long weekend in a darkened room with a wet tea towel wrapped around your head. But more important than the differences themselves is the fact that there are any differences at all. That is a weird state of affairs in a supposedly single market.

George Osborne's spending review cuts to hit social care and police -- George Osborne will announce big cuts in spending for the police, social care, local government, further education, renewable energy and welfare as he is forced to finally spell out how he plans to have reduced spending in key government departments cumulatively by nearly 50% since the Conservatives came to power in 2010. After weeks of media focus on protected Whitehall departments, the chancellor will detail how the cuts will fall across the rest of government departments. The shadow chancellor, John McDonnell, said Osborne had no more excuses left after five years. Stealing Osborne’s security theme, he added: “The cuts are putting people’s livelihoods at risk.” The Tory election manifesto commitments to protect the NHS, pensions, foreign aid, education and defence have put intense strain on the remaining unprotected budgets in Whitehall. Such is the reconfiguration of the state that nearly 43% of all public spending will be focused on health and pensioners by 2020, up from a third in 1997-98.

UK Q3 economic growth slowdown confirmed - RTÉ News: Britain's economy slowed in the three months to September, official data confirmed today, as trade posed the biggest drag on quarterly growth on record against the backdrop of a slowing global economy. The UK economy grew 0.5% in the third quarter, the Office for National Statistics said, confirming a preliminary reading. The growth rate slowed from 0.7% growth between April and June and was in line with a forecast in a Reuters poll. The UK growth figure was 2.3% higher than a year ago, down from 2.4% in the second quarter and showing the economy had slowed from last year's rapid 2.9% rate which outstripped those of other major advanced economies. Trade lopped 1.5 percentage points off growth in the third quarter, a sharp turnaround from a contribution of 1.4 percentage points in the second quarter, as imports saw their biggest growth in nearly 10 years. The slowdown in Britain's recovery reflects a global economic slowdown led by emerging markets such as China. British exporters have also struggled with a rise in sterling this year.

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