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

Saturday, May 7, 2016

week ending May 7

Fed Tightening: More Reasons to Go Slow - The 2016Q1 advance release, discussed at length by Jim, provides additional evidence in favor extreme caution in tightening monetary policy — maybe even a reconsideration of the June rate hike that seems, according to conventional wisdom, a done deal. First, the output gap increased slightly in 2016Q1. Even taking into account the uncertainty surrounding this sure-to-be revised estimate of first quarter growth, it doesn’t appear like the output gap (as implied by CBO’s estimate of potential) is still shrinking. Second, the interest sensitive components of aggregate demand — nonresidential investment and net exports — are exerting drag on growth, in accounting terms. While one might argue that investment is down because of the collapse in investment associated with the energy sector noted by Jim, what’s true is nonresidential investment excluding mining and well drilling is also down.  Third, net exports are likely to continue to stagnate, given the appreciation of the dollar that has already occurred. Note that while US exports could decline because of either the surging dollar or the slowing world economy, the decline in US imports is striking. A stronger dollar (driven by interest differentials) implies a higher level of imports, so the decrease in imports is suggestive of a slowing US economy. Of course, there are only two months of trade data incorporated into the advance release, so it may be the March data (coming later this week) will erase this decline in imports. My estimates using an error correction model involving exports, world GDP, and the real dollar and two lags of first differences over the 1973Q1-2016Q1 indicate a short run price elasticity of about 0.10, and a long run of 1.3. (See this post for a description of the methodology.) The half life of a deviation from long run (statistical) equilibrium in the export relation was about 2 years. That means that we have yet to see all of the depressing effects of the dollar appreciation that starts in 2014Q4. A Fed tightening in June will likely further appreciate the dollar, thereby exacerbating the external drag on the US economy.

Citi Asks: "Are Investors Beginning To Price In QE4?" -- While many investors and analysts are asking when the Federal Reserve will decide to hike rates again, Citi's Global Head of FX Strategy Steven Englander asks a rather different question:Are investors beginning to price in QE4? He points out that economic data in the U.S. hasn't been very good (sans unemployment headline data), and that for every one positive data release, a series of disappointments follow. He points to the fact that Citi's economic surprise indicator has been dropping since mid-April as reflecting that reality. US economic data have been soggy, other than labor market data, which means that we get one positive data release a month followed by a series of disappointments. This is reflected in the Citi economic surprise index(Figure 1), which has been dropping since mid?April and where a 0 level would be considered strong outperformance.

ANALYSIS-Job market slowdown, rising wages may fit Fed's playbook: (Reuters) - A slowdown in U.S. hiring coupled with a jump in wages last month dovetails with what the Federal Reserve expected as the economy approaches full employment and is not likely to alter its interest rate hike trajectory. The Labor Department reported on Friday that 160,000 jobs were added in April, short of the 215,000 expected by economists and below the recent monthly average of 200,000, tempering hopes of a strong economic rebound in the second quarter. Although not a few investors viewed the report as a red flag for the Fed, some analysts said the data, especially if the rise in wages triggered higher inflation, could push the U.S. central bank closer to hiking rates, perhaps as soon as June. "Employment was never going to continue rising at more than 200,000 a month indefinitely. Those monthly gains are simply unsustainable," said Paul Ashworth, chief U.S. economist for consulting firm Capital Economics. Indeed, Fed officials had since late last year warned of a slowdown in hiring, noting that monthly gains of 100,000 jobs would be adequate to keep the pace of economic growth aligned with population growth. Fed Chair Janet Yellen made that point in December. Anything over that level would mean that labor market "slack" is still being absorbed. April's employment report, however, indicates remaining slack may be running out.

Lower Oil Prices and U.S. Economic Activity - NY Fed - After a period of stability, oil prices started to decline in mid-2015, and this downward trend continued into early 2016. As we noted in an earlier post, it is important to assess whether these price declines reflect demand shocks or supply shocks, since the two types of shocks have different implications for the U.S. economic outlook. In this post, we again use correlations of weekly oil price changes with a broad array of financial variables to quantify the drivers of oil price movements, finding that the decline since mid-2015 is due to a mix of weaker demand and increased supply. Given strong interest in the drivers of oil prices, the oil price decomposition is information we will be sharing in a new Oil Price Dynamics Report on our public website each Monday starting today. We conclude this post using another model that finds that the higher oil supply boosted U.S. economic activity in 2015, though this impact is expected to wear off in 2016.  As described in our post last year, we use a model to distinguish demand and supply shocks on oil prices based on correlations of oil price changes with a large number of financial variables. We updated the model here using data through late April 2016. The chart below shows oil price changes along with the model-implied supply and demand drivers of prices cumulated from early June 2015 (when the last post was published) to late April 2016. The initial fall in oil prices between early June and early August was due mainly to supply factors, while the subsequent drop-off into September was demand-driven (due largely to China-related global financial market turmoil in August). Demand was again a large contributor to the drop in oil prices at the end of last year.

Ben Bernanke and Democratic Helicopter Money: “The fact that no responsible government would ever literally drop money from the sky should not prevent us from exploring the logic of Friedman’s thought experiment, which was designed to show—in admittedly extreme terms—why governments should never have to give in to deflation.” The quote above is from a post by Ben Bernanke... I put it up front because it expresses a macroeconomic truth that no one should ever forget: persistent recessions and deflation are never inevitable, and always represent the failure of policy makers to do the right thing. There are many useful points in his post, but I just want to talk about one: Bernanke is in fact not talking about helicopter money in its traditional sense, but what I have called elsewhere ‘democratic helicopter money’. When most people talk about HM, they imagine some scheme whereby the central bank sends ‘everyone’ a cheque in the post, or transmits some money to each individual some other way. It is what economists would call a reverse lump sum tax, or reverse poll tax: the amount you get is independent of your income. That makes it different from a normal tax cut. Bernanke suggests an alternative. The central bank sets aside a sum of newly created money, and the fiscal authorities then spend it as they wish. They could decide to use all the money to build bridges or schools rather than give it to individuals. There might be two reasons for doing HM this way. First, for some reason the fiscal authorities are reluctant to spend if they have to fund it by creating more debt, so it may allow them to get around this (normally self-imposed) ‘constraint’. Second, a money financed fiscal expansion could be more expansionary than a bond financed fiscal expansion. Lets leave the second advantage to one side, as the first is sufficient in a world obsessed by government debt.

Janus's Bill Gross: 'Helicopter money' is coming in a year or so -  (Reuters) - The next big monetary and fiscal policy move should include an airdrop of "money from helicopters" to stimulate the U.S. economy and avoid an extended recession, says Bill Gross, a portfolio manager at Janus Capital Group Inc . Gross may not be entirely serious about "helicopter money," but in his latest Investment Outlook note published Wednesday, he said the Federal Reserve and U.S. Treasury should engage in another round of quantitative easing (QE), printing trillions of dollars to buy government bonds and thereby boost the economy. "Drop the money from helicopters," wrote Gross, manager of the $1.3 billion Janus Global Unconstrained Bond fund. "There is a rude end to flying helicopters, but the alternative is an immediate visit to austerity rehab and an extended recession. I suspect politicians and central bankers will choose to fly, instead of die." "Helicopter money" is an idea made popular by the American economist Milton Friedman in 1969, when he suggested that dropping money out of helicopters for citizens to pick up was a sure way to restart the economy and effectively fight deflation. Gross noted that the Federal Reserve, the European Central Bank, Bank of Japan, and the Bank of England have effectively bought bonds from their governments for six years and allowed them to spend money to support their sagging economies. "They buy the bonds by printing money or figuratively dropping it from helicopters, expanding their balance sheets in the process," said Gross. "They then remit any net interest from their trillions of dollars or yen bond purchases right back to their Treasuries. The money in essence is free of expense and free of repayment as long as the process continues uninterrupted."

"Bankers Will Choose To Fly Instead Of Die" - Why Bill Gross Thinks Helicopter Money Is Imminent –- What should the policy response be? Retraining and education sound practical and are at the head of every politician’s promised ticket for the yellow brick road, but to be honest folks, I doubt that much of it will be worth the expense. Four years of college for everyone might better prepare them to be a contestant on Jeopardy, but I doubt it’ll create more growth; for the Universities perhaps, but not many good jobs for the students. Instead we should spend money where it’s needed most – our collapsing infrastructure for instance, health care for an aging generation and perhaps on a revolutionary new idea called UBI – Universal Basic Income. If more and more workers are going to be displaced by robots, then they will need money to live on, will they not? And if that strikes you as a form of socialism, I would suggest we get used to it. Higher taxes are one way to pay for it, but let me suggest another – something that a Rand Paul or father Ron would have been good at. Drop the money from helicopters. Now, even though this idea sounds more fictional than Trump’s 15 foot wall, it really isn’t. Milton Friedman, then Ben Bernanke and now a host of respected economists including the conservative Economist magazine itself are introducing the idea. These advocates do not really intend to throw money out of choppers. In broader terms, they are advocating fiscal stimulus but stimulus that isn’t paid for with private borrowing or taxes. That last sentence is critical – “not with private borrowing or taxes”. Democrats and Republicans alike can endorse that. Instead, the money can be printed by central banks as it has been recently. It’s a hard concept to understand and that’s why politicians never discuss it – nor do most central bankers, who want to preserve the sanctity of their “balance sheets” and independence of their institutions.But the independence between central banks and government is rapidly eroding – a new culture is forming if only by necessity. Printing money via QE is in effect a comingling of monetary and fiscal policy, of central bank and treasury. The Fed, the ECB, BOJ and BOE have in effect bought bonds from their treasuries for 6 years now in order to allow them to spend money in support of their sagging economies. They buy the bonds by printing money or figuratively dropping it from helicopters – expanding their balance sheets in the process. They then remit any net interest from their trillions of dollars or Yen bond purchases right back to their treasuries. The money in essence is free of expense and free of repayment as long as the process continues uninterrupted. Technically, the central bank will argue, they have not allowed their treasuries to finance for free because they will sell the bonds back to the free market one day. Not a chance. The only way out for Japan for instance with 350% of debt to GDP and much of it owned by the BOJ is to extend and extend maturities at 0% interest until private markets catch on. Which frankly is what they want. Global markets wising up to the scheme will precipitate the sale of the remaining JGB’s, weaken the Yen and create their magical 2% inflation!

Donald Trump's Idea to Cut National Debt: Get Creditors to Accept Less -- After assuring Americans he is not running for president “to make things unstable for the country,” the presumptive Republican nominee, Donald J. Trump, suggested that he might reduce the national debt by persuading creditors to accept something less than full payment. Asked on Thursday whether the United States needed to pay its debts in full, or whether he could negotiate a partial repayment, Mr. Trump told the cable network CNBC, “I would borrow, knowing that if the economy crashed, you could make a deal.” He added, “And if the economy was good, it was good. So, therefore, you can’t lose.” Such remarks by a major presidential candidate have no modern precedent. The United States government is able to borrow money at very low interest rates because Treasury securities are regarded as a safe investment, and any cracks in investor confidence have a long history of costing American taxpayers a lot of money. Mr. Trump told CNBC that he was concerned about the impact of higher interest rates on the cost of servicing the federal debt. “We’re paying a very low interest rate,” he said. “What happens if that interest rate goes two, three, four points up? We don’t have a country. I mean, if you look at the numbers, they’re staggering.” The Congressional Budget Office projects that interest payments on the federal debt will climb to $500 billion in 2020 from roughly $250 billion this year. That is based on a projection that rates on the benchmark 10-year Treasury will reach 4.1 percent in late 2019, still a low level by historical standards. If rates were to climb more quickly, or reach higher levels, debt payments would be higher.

Trump as "New News" and his Impact on the Supply of Global "Safe Assets" - President Don Trump will provide some interesting variation in key economic variables.  This will allow macro economists in the year 2040 to make some research progress.  Many macro economists have written that the world lacks "safe assets".  Here is a piece of IMF research and here is a piece by Gourinchas and Jeanne  that provides a nice summary of this literature.  Dr. Trump has hinted that he will consider defaulting on U.S debt or at least using this threat to negotiate a "haircut" for our creditors.   Forward looking lenders (i.e China) might demand a default premium (i.e a higher interest rate) in the future for buying our bonds.   A Trump Presidency will help game theorists, who study the causes and consequences of reputation, to test their model's predictions.  Bernie Sanders' policies will help us to study labor markets (by raising the minimum wage and making college free).  Donald Trump's policies will provide lots of interesting variation for macro economists.  Out of self interest, economists have plenty of good choices here in this upcoming election.

Trump the Debt -- Needless to say, Donald Trump has expressed some odd ideas on the US national debt. He has argued that we can’t afford this or that because we are 19 trillion in debt, promised to pay back the debt in 8 years, & asserted that the debt is no big problem (one out of three right is not bad for Trump). But now he’s gone and done it — twice. Many people are focusing on Trump’s interview with CNBC including “I would borrow, knowing that if the economy crashed, you could make a deal.” This statement is a major threat to the world economy. It is also forbidden by the US Constitution Amendment 14 Clause 4 “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. … ” This partially repealed the 1st Amendment protections of freedom of speech and the press. Trump violated the constitution. Josh Marshall (once a history graduate student) noted this. It’s also absurd. The US Federal Government doesn’t have to renegotiate or repudiate dollar denominated debt, since it can make as many dollars as it pleases (the Fed is independent exactly as long as it pleases Congress that the Fed be independent).

New U.S. Currency Oversight May Still Leave Manipulators At Large - The U.S. Department’s latest currency report is supposed to ratchet up pressure on trade partners whose exchange-rate policies are giving exporters a leg up on American firms. But the administration’s new metrics for calling out currency offenders still leave countries enough latitude to avoid triggering censure by Washington.Under the Treasury’s new guidelines, a country has to meet three criteria to start an official sanctions process. Its trade surplus with the U.S. has to be larger than $20 billion. The economy’s surplus of international trade, services and  investment—or “current account”—must be larger than 3% of that country’s gross domestic product. And the country has to have been intervening in the foreign-exchange market to the tune of 2% of GDP over a year. Fred Bergsten, a senior fellow at the Peterson Institute for International Economics and longtime advocate for stronger action by the U.S., applauded Treasury for tightening its currency policy oversight. But he and others said tougher guidelines are still needed. Otherwise, currency manipulators could avoid getting caught. Treasury officials cite a major appreciation of the Chinese yuan over the last decade and recent international currency agreements as evidence their diplomatic strategy has proven effective.

Only One of Six Air Force F-35s Could Take Off During Testing - Five of six Air Force F-35 fighter jets were unable to take off during a recent exercise due to software bugs that continue to hamstring the world’s most sophisticated—and most expensive—warplane. During a mock deployment at Mountain Home Air Force Base in Idaho, just one of the $100 million Lockheed Martin LMT 0.30% F-35s was able to boot its software successfully and get itself airborne during an exercise designed to test the readiness of the F-35, FlightGlobal reports. Nonetheless, the Air Force plans to declare its F-35s combat-ready later this year. Details surrounding the failed exercise were disclosed earlier this week in written testimony presented to Congress by J. Michael Gilmore, the Pentagon’s chief weapons tester. . “The Air Force attempted two alert launch procedures during the Mountain Home deployment, where multiple F-35A aircraft were preflighted and prepared for a rapid launch, but only one of the six aircraft was able to complete the alert launch sequence and successfully takeoff,” Gilmore wrote. “Problems during startup that required system or aircraft shutdowns and restarts – a symptom of immature systems and software–prevented the other alert launches from being completed.” It’s not the only recent example of “immature systems and software” stalling progress on the $400 billion F-35 program. Aside from reports of glitches affecting both the onboard and ground-based software that drive the F-35—including bugs in the F-35’s radar software that requires periodic in-air radar reboots and maintenance software problems that could potentially ground the entire fleet—Gilmore detailed another recent example in which F-35s had to abort their test mission due to software stability issues.

The U.S. Navy now has an unmanned drone warship. Could it be hacked at sea? -- The U.S. Navy and the Defense Advanced Research Projects Agency(DARPA) are now testing a new unmanned drone warship. The first Navy drone ship is a 132-foot ACTUV (Antisubmarine warfare Continuous Trail Unmanned Vessel) known as Sea Hunter, which cost around $120 million to build. The military says more can now be produced for $20 million or so each. But some are concerned that with no humans at the controls, these “robot ships” could be hacked, pwned remotely, and used by America's enemies to attack the United States. Sea Hunter will be tasked with patrolling the oceans worldwide to detect and track enemy submarines. Sea Hunter does this without even one human on board, and can track an enemy sub for thousands of miles, months at a time out at sea. “[The Sea Hunter] as the unique capability to go out, to see other vessels operating potentially in our own waters,” DARPA's Jared Adams told reporters who met with military officials in San Diego to view the vessel on Monday. Sea Hunter will be the focus of joint DARPA/Navy test operations over the next two years off the California coast.

“Free Trade” in Trouble in the United States - “Free trade” seems to be in deep trouble in the United States, with serious implications for the rest of the world.Opposition to free trade or trade agreements emerged as a big theme among the leading American presidential candidates.Donald Trump attacked cheap imports especially from China and threatened to raise tariffs. Hillary Clinton criticised the Trans-Pacific Partnership Agreement (TPPA) which she once championed, and Bernie Sanders’ opposition to free trade agreements (FTAs) helped him win in many states before the New York primary.That trade became such a hot topic in the campaigns reflects a strong anti-free trade sentiment on the ground.Almost six million jobs were lost in the US manufacturing sector from 1999 to 2011.Wages have remained stagnant while the incomes of the top one per cent of Americans have shot up.Rightly or wrongly, many Americans blame these problems on US trade policy and FTAs.The downside of trade agreements have been highlighted by economists like Joseph Stiglitz and by unions and NGOs. But the benefits of “free trade” have been touted by almost all mainstream economists and journalists.Recently, however, the establishment media have published many articles on the collapse of popular support for free trade in the US:

"Rich" Americans Confidence Crashes Most Since 2013 -- Despite equity prices soaring to within inches of all-time record highs, it appears 'rich' Americans are no longer impressed by The Fed's handiwork. As Bloomberg's Consumer Comfort index slumps to its weakest since Dec 2015, high-income (over $75k) Americans suffered their biggest plunge in confidence since October 2013 seemingly unable to revive their animal spirits as much as CFOs and their buybacks. High income Americans confidence typically lags stock market performance by about 4 weeks but has broken this time...

Nomi Prins: Gimme Shelter (From the Tax Man), Disappearing Money and Opportunistic Candidates - There’s a pile of money hiding offshore...the stunning amount of money that continues to flow across American borders (and those of other countries), and eventually disappears into the pockets of the corporate and political elite, ultimately causes even more damage to our finances and our lives. Donald Trump and Hillary Clinton have themselves taken advantage of numerous tax “efficiency” strategies that make money evaporate. Of course, you shouldn’t doubt for a second that they’ll change their ways once in the Oval Office. According to an April 2016 Oxfam report, the top 50 U.S. companies are hoarding more than $1.4 trillion in cash offshore. What’s more, for every dollar that these firms spent lobbying Congress for “favorable” tax treatment (a collective total of $2.6 billion between 2008 and 2014), they received $130 dollars in tax breaks and $4,000 in subsidies from the U.S. government. These companies, including Pfizer, Goldman Sachs, Dow Chemical, Chevron, Walmart, IBM, and Procter & Gamble, created “an opaque and secretive network” of more than 1,600 company subsidiaries located in tax havens that they decided to disclose. (Because of the weak reporting requirements of the Securities and Exchange Commission, there could be thousands more.) According to a March 3rd report from the Citizens for Tax Justice, the Fortune 500 companies are now saving $695 billion in federal income taxes on a total of $2.4 trillion in offshore holdings. Americans can’t afford to ignore such tax games, since we’re the ones who, in effect, wind up paying the taxes these firms don’t. For government policymakers, such tax evasion is a grim matter of attrition, since the U.S. (and other countries) plunge ever deeper into debt thanks to such antics and then find themselves cutting services or raising taxes on us to cover the gap between the money they’re losing and the taxes they’re collecting.

“John Doe’s Manifesto”: Panama Papers Source Blasts Lack of Media Interest, Calls for Prosecutions, Whistleblower Protection  Yves Smith - Martha r flagged a new story at Suddeusche Zeitung from “John Doe,” the source for the Mossack Fonseca revelations, on what he intended to accomplish and what he feels needs to be done. I’m posting on his manifesto to encourage you to read it in full and circulate it.  The whistleblower, John Doe, states his underlying objective was to tackle “massive, pervasive corruption” that promotes and perpetuates income inequality. He is encouraged by the debate so far but stresses that the underlying behavior was criminal and needs to be treated as such: Shell companies are often associated with the crime of tax evasion, but the Panama Papers show beyond a shadow of a doubt that although shell companies are not illegal by definition, they are used to carry out a wide array of serious crimes that go beyond evading taxes. I decided to expose Mossack Fonseca because I thought its founders, employees and clients should have to answer for their roles in these crimes, only some of which have come to light thus far. It will take years, possibly decades, for the full extent of the firm’s sordid acts to become known.  And he throws down the gauntlet: "we must not lose sight of another important fact: the law firm, its founders, and employees actually did knowingly violate myriad laws worldwide, repeatedly. Publicly they plead ignorance, but the documents show detailed knowledge and deliberate wrongdoing. At the very least we already know that Mossack personally perjured himself before a federal court in Nevada, and we also know that his information technology staff attempted to cover up the underlying lies. They should all be prosecuted accordingly with no special treatment.

Companies may have booked more profits in Bermuda than China, UN report shows - So much money is flowing into tax shelters that companies may have booked more profits in Bermuda than in China, the second-largest economy in the world. The United Nations found that multinational firms from a sample of 26 developed economies reported more profit from holding companies in the tiny island of Bermuda ($43.7 billion) than in China ($36.4 billion). There’s also been a greater move toward the use of foreign holding companies. “The proportion of investment income booked in low tax, often offshore, jurisdictions is high — and possibly growing,”  the report said. Companies around the world poured $221 billion into tax havens in 2015, with a greater portion of the money coming from China, Russia and Brazil, according to the report. Luxembourg, the Netherlands, the Cayman Islands and the British Virgin Islands were among the biggest destinations for companies seeking tax shelters.  The U.N. has been calling for more cooperation among countries on tax laws as a way to combat the use of tax havens. The euro zone recently tightened laws among member countries, and it may have caused multinational companies to pull money out of Luxembourg and Netherlands in the final three months of 2015. “The persistence of financial flows routed through offshore financial mechanisms highlights the pressing need to create greater coherence among tax and investment policies at the global level,” the U.N. report said.

White House Pushes for New Anti-Laundering Authority | American Banker: The Obama administration announced several major initiatives aimed at countering money laundering on U.S. soil, just days before the names of thousands of companies implicated in the Panama Papers investigation are expected to be made public. Along with the publication of a long-awaited beneficial ownership rule, the Treasury Department and the Justice Department said that they would urge Congress to pass several bills designed to improve transparency and put the U.S. on par with foreign partners in the fight to curb the flow of illicit funds. "Illicit financial activity is a critical concern for the United States and our partners around the world, and the Administration is committed to taking all available steps on this important issue," said Treasury Secretary Jacob Lew in a letter urging Congressional leaders to adopt new and pending legislation. The beneficial ownership rule will expand customer due diligence requirements for U.S. banks by forcing them to obtain the names of any individual who owns more than 25% of a company or controls it, as soon as an account is opened. Treasury will also send a bill to Congress that would require a new company to disclose the name of its owners when it is formed.

Obama’s Great Lie: What’s Good for Wall Street Felons is Good for America--  William K. Black -- To no one’s surprise, President Obama lobs periodic attacks on Bernie Sanders’ plans to restore the rule of law to Wall Street elites.  Obama launched his latest attack, fittingly, through Wall Street’s sycophant-in-chief, Andrew Ross Sorkin.  Sorkin’s column expresses his shock at how Obama repeatedly extended their interview for hours beyond its scheduled length.  No one else is shocked that Obama, trying to make the case that bailing out the Wall Street felons was an act of supreme genius, would find Sorkin’s relentless sycophancy towards those felons and their political cronies so endearing.  This is the first segment of my response.  It focuses on the Obama administration’s great lie – the only policy “tools that work” in response to a financial crisis are getting “in bed with the banks” and making even wealthier through federal bailouts the bankers who grew wealthy by leading the fraud epidemics that caused the crisis. The context of Sorkin’s column was Obama making the pitch for his “economic legacy.”  Obama is distressed that we do not understand how great he was because he was too busy saving us to have the time to “explain” to us how great he was. “We were moving so fast early on that we couldn’t take victory laps. We couldn’t explain everything we were doing. I mean, one day we’re saving the banks; the next day we’re saving the auto industry; the next day we’re trying to see whether we can have some impact on the housing market.” Actually, one can explain everything one is doing in this sphere.  There are no reasons to keep secrets on economic and financial strategy.  A president who has a good case to make on the merits of his economic policies can make that case to the public with all the advantages of his office.   A president who allows elite CEOs to grow wealthy through fraud and even wealthier through a public bailout will – and should – squander his political capital. Obama admitted to Sorkin, that he chose the strategy of allying himself with Wall Street and disparaging its critics.

Why Real Reform Is Now Impossible -- Charles Hugh Smith: The endless bleating of well-paid pundits in the corporate media about "reform" is just more circus.  As I explain in my new book  Why Our Status Quo Failed and Is Beyond Reform, real structural reform would trigger the collapse of the status quo. (As a reminder, the status quo benefits the few at the expense of the many.) But there's another dynamic that makes reform impossible. I've prepared a chart to explain this dynamic:  Central banks have transformed the market--in stocks, bonds, commodities and risk--into the signaling mechanism that tells us all is well. Even though the real-world finances of the bottom 95% continue deteriorating, a rising stock market and suppressed measures of risk signal that the economy is doing well.  Elevating the market into the oracle of economic health creates a systemic risk:  If the market tanks, the status quo is called into question. People start asking, is it truly a wonderful arrangement that benefits us all, or is it really just a skimming machine that funnels money and wealth from the many into the voracious maws of the few? Central banks thwart this existential danger to the status quo by rescuing the market every time it approaches the market clearing event level. (see chart) In a market clearing event, risky loans and bets are liquidated, credit dries up, risk soars and the price of assets falls to levels that once again make fundamental sense.Market clearing events are a necessary part of a healthy credit and asset-allocation system. If the market is never allowed to clear away the dead wood of mal-investments, high leverage, nose-bleed valuations, bad bets and risky loans that should never have been issued, all this dead wood eventually chokes off healthy expansion.

Here’s Why We Can’t Rely on Shareholders to Fix CEO Pay -- Wall Street’s top money manager, Larry Fink, enjoys sharing his economic wisdom with the Washington policy world. The BlackRock CEO reportedly has his eye on the Treasury secretary seat in a Hillary Clinton administration. He’s also been a passionate deficit hawk, with a particular zeal for raising the Social Security retirement age to 70. After all, he once said, most of us have jobs nowadays where we just “sit around.”  Fink may have been trying to prove this last point in 2015 by personally demonstrating how you can get a decent paycheck without doing much more than sit around. A really decent paycheck. Despite a 5 percent drop in BlackRock’s share price, Fink collected an 8 percent raise—to $26 million.  Fink’s pay for nonperformance makes BlackRock a ripe target for shareholder scrutiny. But the firm’s role in our country’s executive pay problem goes far beyond its own CEO’s paycheck.  As the top money manager in the world, with an astonishing $4.6 trillion in assets, BlackRock holds shares in thousands of US corporations. What does BlackRock do with all this clout? In shareholder votes on CEO pay, the firm almost always supports whatever corporate boards propose—despite a purported commitment to linking compensation to rigorous long-term performance standards. Between July 1, 2014, and June 30, 2015, it approved compensation plans over 96 percent of the time.  Investor Stephen Silberstein is working to end this rubber-stamp voting. BlackRock may not be the only mutual fund that turns a blind eye to executive excess. But its enormous size makes BlackRock and its CEO Larry Fink “the single outfit and person in the country most responsible for outrageous CEO pay packages,” Silberstein says.

Seven big banks settle U.S. rate-rigging lawsuit for $324 million | Reuters: Seven of the world's biggest banks have agreed to pay $324 million to settle a private U.S. lawsuit accusing them of rigging an interest rate benchmark used in the $553 trillion derivatives market. The settlement made public on Tuesday, which requires court approval, resolves antitrust claims against Bank of America Corp (BAC.N), Barclays Plc (BARC.L), Citigroup Inc (C.N), Credit Suisse Group AG (CSGN.S), Deutsche Bank AG (DBKGn.DE), JPMorgan Chase & Co (JPM.N) and Royal Bank of Scotland Group Plc (RBS.L). Several pension funds and municipalities accused 14 banks, including those that settled, of conspiring to rig the "ISDAfix" benchmark for their own gain from at least 2009 to 2012. Companies and investors use ISDAfix to price swaps transactions, commercial real estate mortgages and structured debt securities. The alleged illegal activity included the execution of rapid trades just before the rate was set each day, called "banging the close," causing the British brokerage ICAP Plc (IAP.L) to delay trades until they moved ISDAfix where they wanted, and posting rates that did not reflect market activity. Under the settlement, payments would include $52 million from JPMorgan; $50 million each from Bank of America, Credit Suisse, Deutsche Bank and RBS; $42 million from Citigroup and $30 million from Barclays. The remaining defendants are BNP Paribas SA (BNPP.PA), Goldman Sachs Group Inc (GS.N), HSBC Holdings Plc (HSBA.L), Morgan Stanley (MS.N), Nomura Holdings Inc (8604.T), UBS AG (UBSG.S), Wells Fargo & Co (WFC.N) and ICAP, lawyers for the plaintiffs said.

Fizzled Goldman Sachs Cases Put S.E.C. in Harsh Light - The Securities and Exchange Commission is supposed to be Wall Street’s top cop, charged with protecting investors while it ensures that brokers and bankers adhere to the rules.Recent articles in The New Yorker and Fortune, however, raise questions about whether the agency was willing to take on tough cases against one Wall Street firm, Goldman Sachs, and its executives. They feed into a broader concern about whether the agency can adequately police the markets by taking on the biggest players.  Jesse Eisinger of ProPublica, who has contributed to DealBook and has delved deeply into the financial crisis, wrote the article in The New Yorker about the S.E.C.’s decision not to pursue charges against any senior executives at Goldman related to a synthetic collateralized debt obligation put together by the firm. Fabrice Tourre, a midlevel trader who helped structure the transaction, was the only individual accused of wrongdoing.A lawyer at the S.E.C. assigned to the case provided materials showing that the agency seemed to avoid pursuing more senior executives for their role in the deal, at least not until the last moment. A supervisor at the agency stated in an email that many involved in the transaction were “good people who had done one bad thing,” and later wrote about the financial crisis “that the vast majority of the losses suffered had nothing to do with fraud and the like and are more fairly attributable to lesser human failings of greed, arrogance and stupidity of which we are all guilty from time to time.”When the time came to finally decide who to sue, those involved in the investigation were split about suing anyone at Goldman above Mr. Tourre. In the end, Robert S. Khuzami, the enforcement director at the time, said that “the lack of consensus among our group is itself, for me, confirmation” that others should not be named.

OTC derivatives statistics at end-December 2015 - Bank of International Settlements - The Bank for International Settlements (BIS) today released OTC derivatives statistics at end-December 2015.

  • Global OTC derivatives markets saw a broad-based decline in activity in the second half of 2015. The notional amount of outstanding contracts fell by 11% between end-June 2015 and end-December 2015, from $552 trillion to $493 trillion (view data). Trade compression to eliminate redundant contracts was a key driver.
  • The fall in notional amounts was accompanied by a sharp drop in the gross market value of outstanding derivatives contracts, which provides a more meaningful measure of amounts at risk. Gross market values decreased by 6% between end-June 2015 and end-December 2015, from $15.5 trillion to $14.5 trillion, their lowest level since 2007 (view data). The decline was concentrated in interest rate swaps.
  • Central clearing, which is a key element in global regulators' agenda for reforming OTC derivatives markets to reduce systemic risks, continued to make inroads. The share of credit default swaps booked with central counterparties rose to 34% at end-December 2015, up from 31% at mid-2015 and less than 10% at mid-2010 (view data).

Developments in the latest OTC derivatives statistics are summarised in the Statistical release, together with charts showing historical data. Additional data are available on the BIS website, where they can be viewed as tables in PDF or browsed in the BIS Statistics Explorer. The OTC derivatives statistics at end-June 2016 will be released no later than 15 November 2016.

Buffett Says Derivatives ‘Time Bomb’ May Elude Auditors’ Reviews - Warren Buffett said banks’ holdings of derivatives make it unattractive to invest in most large financial firms and that the contracts still contain hidden risks. “Some of these things get so complicated that they’re very hard to evaluate,” Buffett said. “They can be extraordinarily hard to mark,” he said. “The auditors, I don’t think, are necessarily capable of holding that behavior in check.” The remarks build on the billionaire’s critique of derivatives, even after Berkshire entered such contracts to speculate on stock movements or borrowers’ creditworthiness. Buffett said Saturday he shuns deals that could require Berkshire to post collateral, and that the larger risk is that a disruption to markets -- potentially from a cyber or nuclear attack -- could make it hard for the largest lenders to value their holdings. “It’s still a potential time bomb in the system,” Buffett said. “Anything where discontinuities can exist can be real poison in markets.” During the 2008 financial crisis, American International Group Inc. wasn’t able to meet obligations to banks after mortgage-related securities plunged in value, forcing the government to step in with a bailout. While regulators have worked to the limit risk that a single company’s blunders could infect the larger financial system, Buffett said there is still reason to be concerned about individual companies. “If you take the 50 largest banks in the world, we wouldn’t even think about probably 45 of them,” Buffett said. “There can be enormous gaps in things that you thought were fully protected by collateral, or netting arrangements and that sort of thing. So I regard very large derivative positions as dangerous.”

Stan Druckenmiller: The Fed has no end game, and 'the chickens are now coming home to roost' -  Legendary hedge fund manager Stanley Druckenmiller, who runs Duquesne Capital, says that “the bull market has exhausted itself” after eight years of a “radical monetary experiment.”Speaking to a room of nearly 3,000 investors at the 21st annual Sohn Investment Conference, Druckenmiller said that policymakers have no “end game” for ending years of ultra easy monetary policy, which central bankers unleashed during the financial crisis. “I have argued that the myopic policymakers have no end game,” Druckenmiller said. "They stumble from one short-term fiscal or monetary stimulus to the next despite overwhelming evidence that they only produce a sugar high and grow unproductive debt that impedes long-term growth. Moreover, the continued decline of global growth despite unprecedented stimulus the past decade suggest we have borrowed so much from our future and for so long that the chickens are now coming home to roost." Markets do have an end game though. While Druckenmiller didn’t explicitly give an investment recommendation, he did strongly hint at buying gold. .“Let me throw this one at you," he said. "My hint is what is the one asset you did not want to own when I started Duquesne in 1981? It’s traded for 5,000 years and for the first time has a positive carry in many parts of the globe as bankers are now experimenting with the absurd notion of negative interest rates. Some regard it was a metal. We regard it was a currency, and it remains our largest currency allocation.”

U.S. oil industry bankruptcy wave nears size of telecom bust | Reuters: The rout in crude prices is snowballing into one of the biggest avalanches in the history of corporate America, with 59 oil and gas companies now bankrupt after this week's filings for creditor protection by Midstates Petroleum and Ultra Petroleum. The number of U.S. energy bankruptcies is closing in on the staggering 68 filings seen during the depths of the telecom bust of 2002 and 2003, according to Reuters data, the law firm Haynes & Boone and Charles Gibbs, a restructuring partner at Akin Gump in Texas, said the U.S. oil industry is not even halfway through its wave of bankruptcies. "I think we'll see more filings in the second quarter than in the first quarter," he said. Fifteen oil and gas companies filed for bankruptcy in the first quarter. Some oil producers appear to be holding on, hoping the price of crude stabilizes at a higher level. In February, oil slumped as low as $27 a barrel from peaks above $100 a barrel nearly two years ago. U.S. crude has recovered somewhat, and on Tuesday was trading a little below $44 a barrel. Until recently, banks had been willing to offer leeway to borrowers in the shale sector, but lately some lenders have tightened their purse strings. A widely predicted wave of mergers in the shale space has yet to materialize as oil price volatility makes valuations difficult, and buyers balk at taking on debt loads until target companies exit bankruptcy.

Fed may need more powers to support securities firms during crises: Dudley -- The U.S. Federal Reserve may need more powers to provide emergency funding to securities firms in times of extreme stress in order to deal with a liquidity crunch, New York Federal Reserve President William Dudley said on Sunday. "Providing these firms with access to the discount window might be worth exploring," Dudley said in prepared remarks at a financial markets conference in Amelia Island, Florida organized by the Atlanta Fed. The discount window is a credit facility through which banks borrow directly from the U.S. central bank in order to cope with liquidity shortages. The Fed currently has limited ability to provide funding to securities firms in such situations, with the discount window only available to depository institutions. But the transformation of securities firms since the financial crisis, Dudley said, with the major ones now part of bank holding companies and subject to capital and liquidity stress tests, meant the environment has now changed. "To me, this is a more reasonable proposition now than it was prior to the crisis when the major dealers weren't subject to those safeguards," he said.

U.S. data is being leaked, ECB study suggests - - Key U.S. economic information may have been leaked ahead of its release, judging from the price moves in key equity and bond futures contracts, according to a study released Monday. The European Central Bank published a working paper — which means it hasn’t been peer reviewed as yet — arguing that seven out of 21 market-moving announcements show evidence of “substantial informed trading” before the official release time. The paper identified seven indicators that they said showed “strong” evidence of pre-announcement drift: The Conference Board’s consumer confidence index; the National Association of Realtors’ existing-home sales report and pending-home sales report; the Commerce Department’s preliminary GDP report; the Federal Reserve’s industrial production report; and the Institute for Supply Management’s manufacturing and nonmanufacturing index. The authors looked at price movements 30 minutes before that data’s release and studied the movements in futures on the S&P 500 index and 10-year Treasury note. They did this on 21 indicators from January 2008 to March 2014. The authors estimate that the profits associated with these trades -- in just the S&P 500 futures -- may have amounted to $20 million a year. The release of key economic information has been under scrutiny before. Just last week, the Federal Reserve’s own watchdog criticized the central bank over its handling of sensitive economic information. The New York attorney general pressured the University of Michigan into stopping its practice of charging investors a fee for an advance copy of the consumer-sentiment survey.

What’s Up with GCF Repo®? -- NY Fed - In a recent Important Notice, the Fixed Income Clearing Corporation (FICC) announced that it would no longer support interbank trading for its General Collateral Finance Repo Service. (GCF Repo®, hereafter GCF Repo, is a registered service mark of FICC.) But what exactly is the GCF Repo market? And what is interbank GCF Repo specifically? In a series of four posts we take a close look at the GCF Repo market and how it has evolved recently. This first post provides an overview of the GCF Repo market and evaluates its size relative to that of the tri-party repo market as a whole. We also explain what interbank GCF Repo is and show what share of the market it represents.

Understanding the Interbank GCF Repo® Market -- In this post, we provide a different perspective on the General Collateral Finance (GCF) Repo® market. Instead of looking at the market as a whole, as we did in our previous post , or breaking it down by type of dealer, as we did in this primer, we disaggregate interbank activity by clearing bank and by collateral class. This perspective highlights the most traded collateral and the extent to which dealers at a clearing bank are net borrowers or net lenders. This view of the market is informative given the proposed changes announced recently by the Fixed Income Clearing Corporation.

Why Dealers Trade in GCF Repo® -- NY Fed -- In this post, the third in a series on GCF Repo®, we describe dealers’ trading strategies. We show that most dealers exhibit highly regular strategies, using the GCF Repo service either to borrow or to lend, on net, on almost all the days in which they are active. Moreover, dealers’ strategies are highly persistent over time: Dealers that use GCF Repo to borrow (or to lend) in a given quarter are highly likely to continue to do so in the following quarter. Understanding how dealers trade in the GCF Repo market may provide insight about the role of the repo market more generally and about how recent regulations and market reforms can affect dealers’ trading strategies.

Borrowing, Lending, and Swapping Collateral in GCF Repo® » In the third post in this series, we examined GCF Repo® traders’ end-of-day strategies. In this final post, we further our understanding of dealers’ behavior by looking at their trading pattern within the day.  Using confidential GCF Repo data from the first half of 2015, we study to what extent, within a day, dealers enter into GCF Repo contracts with the main purpose of either borrowing cash or lending cash. We label dealers as “pure borrowers” if at least 90 percent of their GCF Repo activity consists of borrowing (repos). Similarly, we label dealers as “pure lenders” if at least 90 percent of their activity in the GCF platform consists of lending (reverse repos). Dealers that do not fit in either category are labeled “mixed.”  As the table below shows, among the fifty-seven dealers active in GCF Repo over our sample period, twelve can be classified as pure borrowers and six as pure lenders, comprising 7 percent and 14 percent of total daily activity, respectively. Moreover, between 2012 and 2015, dealers’ behavior has been highly persistent: the probability that a dealer classified as a pure borrower in a given half-year would remain so in the following one was 86 percent; the corresponding probability for a dealer classified as a pure lender was 71 percent. This result recalls our finding in the preceding post that dealers tend to persist in their borrowing and lending behavior.

Buffett Says Hedge Funds Get ‘Unbelievable’ Fees for Bad Results -- Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said large investors should be frustrated with fees they’re paying hedge fund managers who fail to match the returns of index funds. “There’s been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities,” Buffett said Saturday during Berkshire’s annual meeting in Omaha, Nebraska. Hedge funds traditionally charge a management fee that’s 2 percent of assets, plus 20 percent on any profits. That’s “a compensation scheme that is unbelievable to me,” Buffett said. He added that some pension funds have disregarded his advice, and gone ahead and hired consultants. The billionaire made a bet in 2008 against Protege Partners that its strategy that invests in hedge funds couldn’t beat a Vanguard mutual fund that tracks the S&P 500 Index. The winner’s charity of choice gets $1 million when the wager ends at the end of next year. The bundle of hedge funds in Protege’s bet returned 21.9 percent for the eight years through 2015, according to a Berkshire presentation Saturday. That compares with the 65.7 percent climb in the S&P Index fund. ‘A Huge Minus’ “I hope you realize that for the population as a whole, American business has done wonderfully, and the net result of hiring professional management is a huge minus,” Buffett said.

In Latest Blow To Hedge Funds, Largest US Life Insurer Is Redeeming Most Of Its Investments -- It has been a terrible year for hedge funds, not only in terms of performance but more importantly when it comes to keeping LPs and investors happy and invested, and it is only getting worse. Recall that in recent weeks some very prominent alternative money managers have been slammed with major substantial requests such as Brevan Howard which was served with an cash call for $1.4 billion, and Tudor which has seen $1 billion in redemptions, while New York City’s pension for civil employees voted this month to pull $1.5 billion from hedge funds. Then, just three days ago, AIG joined the anti-hedge fund fray when it announced it would redeem $4 billion from its hedge fund investments, while Chris Ailman, who runs investments at the $187 billion California State Teachers’ Retirement System, or CALSTRS, said that the hedge fund industry’s two-and-twenty fee model is “broken” and “off the table” for large institutional investors. Moments ago we the latest confirmation that the hedge fund business model is indeed suffering through an existential battle when MetLife Inc., the largest U.S. life insurer, said was seeking to exit most of its hedge-fund portfolio after a slump in the investments. According to Bloomberg, the insurer is seeking to redeem $1.2 billion of the $1.8 billion in holdings, a process that may take a couple of years to complete, Chief Investment OfficerSteven Goulart said Thursday in a conference call discussing first-quarter results at the New York-based company. The portfolio, which posted negative returns in the quarter, was cut by about $600 million in 2015, he said.

A losing bet | The Economist -- HEDGE funds employ the cleverest people in the world to exploit the opportunities that other managers miss. That is why they deserve their high fees—or so the story goes. That story is getting harder and harder to believe. In the first quarter of the year the average fund lost 0.8% after fees, according to Hedge Fund Research, an index provider. That follows a loss of 1.1% for the average fund in 2015, and a gain of just 3% in 2014. In other words, the average investor has earned a cumulative 1% since the start of 2014.While clients have made do with the crumbs, the managers are still dining well. They get annual management fees of 2% or so, however the funds perform. Those that have done well have earned performance fees on top. All told, managers will have earned a lot more than their clients over the past couple of years. Market conditions have been difficult for the hedge-fund titans. Sudden shifts between “risk-off” and “risk-on” markets, such as the market turnaround in February, are very hard to time. Dan Loeb, who runs the Third Point hedge fund, told clients in a letter in late April that recent months have seen “one of the most catastrophic periods of hedge-fund performance that we can remember”. .  So what about the longer run? In 2007 Warren Buffett, the investment guru who heads Berkshire Hathaway, a conglomerate, struck a $1m bet with Protégé Partners, a fund of hedge funds, over whether a hedge-fund portfolio would beat the S&P 500, after fees, over the subsequent ten years. As the chart shows, with around 19 months to go, Mr Buffett seems almost certain to collect. He drummed the point home at Berkshire’s recent annual meeting, saying, “There’s been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities.”

What Good Are Hedge Funds? -- Dave Dayen - HEDGE FUNDS ACTUALLY SPRANG from the widening of a small loophole in New Deal reforms meant to stop companies that trade on behalf of investors from ripping off their clients and threatening economic stability. The Investment Company and Investment Advisers Acts of 1940 prohibited firms operating with pools of investor money from engaging in risky practices like short sales (bets that a stock will go down instead of up), leverage (investing with borrowed funds to amplify returns and heighten risk), and corporate takeovers. Meanwhile, investment companies had to register with the Securities and Exchange Commission (SEC), disclosing their portfolios and their corporate structures. The 1940 laws also restricted certain types of fund manager compensation. The purpose was to eliminate the kind of speculative risks with pools of capital that generated the Great Depression. AP Photo/Mary Altaffer The plot of Billions closely resembles the investigation of SAC Capital's Steve Cohen for illegal trading activity. Here, U.S. Attorney for the Southern District of New York Preet Bharara speaks on the case during a news conference, Thursday, July 25, 2013 in New York. These rules remain in place for the $30 trillion mutual-fund industry, which also invests large pools of client funds. But wealthy families secured a loophole in the 1940 Acts for their own private investment managers. The law exempted advisors with fewer than 100 clients who didn’t offer services to the general public from complying with the regulations. Policymakers justified this by reckoning that “sophisticated investors” can handle the risks, while retail investors—“widows and orphans”—needed to be protected more stringently.

Mania in Private Equity as Investors Throw Money at Funds --Yves Smith -- Anyone who has been around finance a while recognizes the blowout phase. Investors are desperate to put their money to work even when prices are look precarious. Deals go from being negotiated to being sell-side dictation. Rationalizations abound. Remember the line from Chuck Prince, then CEO of Citigroup from July 2007: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” Mind you, he was so bold to make that remark right as the Bear Stearns subprime hedge funds were imploding, which kicked off the first acute phase of the credit crisis.  But what most people don’t remember about that Prince quote was that it wasn’t about mortgages. It was about lending to private equity which had also gone into a moonshot in 2006 and early 2007. And as we’ll discuss in more detail soon, private equity again has the classic signs of being in another “devil take the hindmost” phase of frenzied capital commitments.  Last year, average prices paid, measured in EBITDA multiples, were at record highs, exceeding the 2007 peak. Yet while past bubbles show that crazy prices can always get crazier, there are warning signs that a peak is probably coming sooner rather than later. The Fed is clearly eager to raise rates as soon as it has any thin justification to do so. A rising rate environment will hit long-dated and higher risk assets the hardest. That means private equity is doubly exposed.

Tough Private Equity Transparency Bill in Illinois Focuses on Indefensible Contract Terms, Beats California Bill on Fee Disclosure Requirements -- Yves Smith - Even though California was first to have a state official propose path-breaking private equity transparency legislation, as we’ve written, that effort was already falling short of its promise due to the lack of definition of key terms in the bill. That lapse allows crafty private equity general partners and their captured investors wriggle room to circumvent a key aim of the bill: to report fees and expenses paid by the portfolio companies to the general partner and any related parties, since those monies do not flow through the limited partnership and are thus not subject to disclosure and oversight.The California initiative, led by California Treasurer John Chiang, who also sits on the boards of CalPERS and CalSTRS, has been seriously outclassed by a bill that was introduced via amendment yesterday in the Illinois Senate. Sponsor Daniel Biss, a mathematics professor turned legislator, has proven to be an extremely quick study of the private equity industry. We’ve embedded the text of HB6292 at the end of the post. You can also read it here. It is a vastly more ambitious and painstakingly drafted bill than its California counterpart, AB 2833. A key difference is that Biss’ bill opens new terrain by requiring disclosure of some of the most troubling terms of private equity limited partnership agreements, specifically, the indemnification provisions, the clawback language and management fee waivers.

CCRI Daycare Center Being Moved Out for Goldman Sachs -- Governor Gina Raimondo's Administration, who announced in March that Goldman Sachs was coming to Rhode Island to assist small businesses, is slated to be plugging Goldman Sachs staff into the longstanding space that has been home to the daycare center run out of the Knight Campus building at CCRI in Warwick.  “We are thrilled Goldman Sachs is bringing this program to Rhode Island, providing a unique opportunity to help us move our state forward by strengthening our local businesses – the backbone of our economy. 10,000 Small Businesses will build on the comprehensive package of tools we have launched to support entrepreneurs, create jobs, and ensure everyone can make it in Rhode Island,” said Raimondo in a Goldman Sachs press release.  According to the Providence Center, the CCRI Daycare Center, which currently serves thirty-six children, is being forced to move. "We were notified in March that CCRI had other plans for the space," said Owen Heleen with the Providence Center, who runs the Imagine daycare center at CCRI. "It will be closing in June.  We were there seven years, I believe.  That was the only space they had available [at CCRI's Knight Campus] and we're working hard to develop a new spot." According to faculty at CCRI, the daycare is being move for administrative office to house Goldman Sachs personnel.  "I understand the [day care] staff must be out in June and renovations will begin to accommodate a new counseling center which could include the new Goldman Sachs' business initiative."

Goldman targets 'mass affluent' borrowers with unusual lending plan | Reuters: Goldman Sachs Group Inc (GS.N), the banking gold standard for the world's elite, sees a future in less prosperous investors. A creative strategy taking shape inside the bank calls for it to partner with small brokerages and wealth management firms to lend money to their clients, many of whom have far less wealth than what's in the typical Goldman private bank account. The idea is for Goldman to reach a big set of borrowers, in the U.S. and possibly abroad, without having to acquire them through a merger or build relationships one by one, people familiar with the initiative said. The plan is still in very early stages and may not be active until next year, the people added. The strategy is unusual not just for Goldman, but across Wall Street, since most banks simply lend to their own customers. It also carries more risk because it may be harder to vet borrowers or the assets they post as collateral. The bank is looking to earn money from a broader borrower base as profits from traditional businesses like bond trading have slowed down. In April, Goldman completed a deal to buy $17 billion worth of online deposits from GE Capital Bank to expand its reach on Main Street.

Why Institutional Investors Are Shunning Online Lenders | American Banker -- OnDeck Capital's disappointing first-quarter results have provided the clearest evidence yet of just how quickly institutional investors have soured on marketplace lending. While industry watchers have been warning for months that lenders were struggling to find buyers for their loans — or at least buyers' willing to pay attractive prices — OnDeck's weak earnings report late Monday illustrated the speed and extent of investors' retreat. OnDeck executives said on a conference call Monday that the volume of loans sold to investors plunged to 26% in first quarter, down from 40% just three months earlier. They warned that volume is expected to decline even further this quarter, to around 15%. The abrupt pullback took a huge bite of OnDeck's first-quarter earnings, as the company was forced to hold more loans on its balance sheet, depriving it of gains on loan sales and compelling it to set aside more cash for anticipated losses. The firm reported a $12.6 million quarterly loss and signaled that it does not expect much improvement before next year.

Buffett: I'd consider taking money out of banks if they charge for deposits - With persistently low interest rates around the globe, billionaire investor Warren Buffett told CNBC on Monday he'd consider taking money out of banks, especially if negative interest rates result in customers being charged to park their money in accounts.  "There could be a point where you'd really want to start withdrawing currency," Buffett said in a wide-ranging "Squawk Box" interview from Omaha, Nebraska, after he hosted the annual meeting of Berkshire Hathaway shareholders on Saturday. "If currency in a bank is worth less than currency in your hands ... that could produce something in the way of behavior," he said. "It's a different world. If you have a lot of money in euros, as we do ... you're better off putting it under your mattress than in a bank." He acknowledged, however, that the resulting low yield environment is a drag on Berkshire's earning power. "We have close to $60 billion that's out invested at about a quarter of percent or less," the Berkshire chairman and CEO said. "One point on $60 billion is $600 million a year. If we were getting 3 or 4 percent on that money, that's a couple billion to us. You notice it."

So Sue Them: What We’ve Learned About the Debt Collection Lawsuit Machine - ProPublica - Millions of Americans live with the possibility that, at any moment, their wages or the cash in their bank accounts could be seized over an old debt. It’s an easily ignored part of America’s financial system, in part due to a common attitude that people who don’t pay their debts deserve what’s coming to them. A couple of years ago, we set out to find out more about the growing use of the courts to collect consumer debts. How many lawsuits are filed? Who is filing them? Who is getting sued? The suits are filed in state and local courts, and many states rely on antiquated systems or only keep data at the county level. We ultimately collected what details we could from a variety of states and large, urban counties. Then, we wrote a series of stories sharing what we found:

But there’s a lot more to understand about the rise of this legal tactic — one that continues to alarm judges who see it firsthand.

Regulators Eye Changes to Consumer Compliance Ratings | American Banker: – Financial regulators are proposing changes to their standards for evaluating institutions' compliance with consumer protection rules to account for the evolution in supervisory approaches since the standards were adopted in 1980. The Federal Financial Institutions Examination Council on Friday proposed modifications to its Uniform Interagency Consumer Compliance Rating System (known as the CC Rating System) to reflect broad changes to supervision that have taken place since the system was adopted more than 35 years ago. "When the current CC Rating System was adopted in 1980, examinations focused more on transaction testing for regulatory compliance rather than evaluating the sufficiency of an institution's [compliance management system] to ensure compliance with regulatory requirements and to prevent consumer harm," the notice said. "In the intervening years, each of the FFIEC agencies has adopted a risk-based consumer compliance examination approach to promote strong compliance risk management practices and consumer protection within supervised financial institutions." The comment period for the proposed changes will be open for 60 days.

Deferred-Interest Promotions Are Back Under Scrutiny - Nearly seven years after a landmark overhaul of the credit card industry, regulators are renewing their scrutiny of a popular type of loan that can pack a big punch for consumers who don’t use it as intended.  Deferred-interest promotions, commonly offered on store-brand credit cards, give consumers a chance to buy big-ticket items like appliances, furniture or even medical procedures and put off paying any interest charges often for the first six to 12 months. Critics warn that the deals can be misleading and costly, because shoppers do not always realize they will be hit with interest charges for the entire period if they fail to pay off their balances by the end of the promotion.  In March, Richard Cordray, the head of the Consumer Financial Protection Bureau, told Congress that regulators had “significant concerns” about deferred-interest promotions, repeating a warning he has made for several months. In December, the agency issued a report that said the number of purchases using deferred-payment promotions had increased 21 percent between 2010 and 2013.The report singled out such promotions as “the most glaring exception” to the trend toward “upfront” pricing after the passage of the 2009 Credit Card Accountability Responsibility and Disclosure Act. That act was a sweeping reform of card industry practices that aimed to eliminate hidden fees and curb abusive policies, particularly those affecting borrowers with poor credit.Consumer advocates say stamping out potentially deceptive behavior is a constant challenge. As certain avenues for profit are cut off, the credit card industry moves to other permitted products.

Consumer Financial Protection Bureau to Put End to Mandatory Arbitration for Retail Financial Products - Yves Smith - It looks like a pervasive abuse is about to bite the dust. A major way that financial firms have tipped the playing field even further in their direction is the inclusion of mandatory arbitration clauses in their contracts. The argument has been that this feature is beneficial to consumers, since arbitration is cheaper that litigation in the event of a dispute. But studies have repeatedly found that to be bollocks. The arbitrators that are chosen to serve are not only screened to be big institution friendly; arbitrators that wind up ruling in favor of customers have this funny way of being moved to the bottom of the selection list, while hanging arbitrators get regular assignments. For instance, from a 2009 report by the Center for Responsible Lending: Arbitration cases can be unfair not only because consumers have no choice in the matter, but also because prior results from Public Citizen research suggests that consumers may win only 4% of the time. The relationship as currently structured gives arbitration forums and arbitrators a strong incentive to side with “repeat players” that control the flow of ongoing business, rather than a consumer seen only once. In the credit card context as well as many other consumer transactions, it is very difficult to find a product without a forced arbitration agreement hidden somewhere in the fine print. And a New York Times investigation found that individuals almost never avail themselves of arbitration for amounts under $2500; they found only 505 examples from 2010 to 2014. Similarly, the forced arbitration clause means class action attorneys cannot take up these cases. Despite the regular demonization of their efforts, banks find it profitable to engage in penny-ante grifting which is just not worth it for a customer to pursue, like charging undisclosed fees, or timing and ordering deposits and check clearing during the day so as to maximize the amount of consumer fees. While consumers don’t net much from these lawsuits, the bigger point is to stop this behavior going forward and to put financial firms on notice that if they engage in small scale ripoffs across large numbers of customers, they face good odds of being caught out and having to pay back a lot of their ill-gotten gains.

Rule on Arbitration Would Restore Right to Sue Banks - The nation’s consumer watchdog is unveiling a proposed rule on Thursday that would restore customers’ rights to bring class-action lawsuits against financial firms, giving Americans major new protections and delivering a serious blow to Wall Street that could cost the industry billions of dollars. The proposed rule, which would apply to bank accounts, credit cards and other types of consumer loans, seems almost certain to take effect, since it does not require congressional approval.In effect, the move by the Consumer Financial Protection Bureau — the biggest that the agency has made since its inception in 2010 — will unravel a set of audacious legal maneuvers by corporate America that has prevented customers from using the court system to challenge potentially deceitful banking practices.Honing their plan over decades, credit card companies, banks and other lenders devised a way to use the fine print of their contracts to push consumers out of court and into arbitration, where borrowers must battle powerful companies on their own. Without the ability to pool resources, most people abandon their claims and never make it to arbitration. The new rules would mean that lenders could not force people to agree to mandatory arbitration clauses that bar class actions when those customers sign up for financial products. The changes would not apply to existing accounts, though consumers would be free to pay off their old loans and open new accounts that are covered. And while those rules are not final yet — there will be a 90-day public comment period — financial industry lawyers say they are tough to derail.

CFPB's Arbitration Plan Delivers Sharp Blow to Financial Industry | American Banker: In a major setback for banks, credit unions, credit card companies and many other financial firms, the Consumer Financial Protection Bureau on Thursday issued a proposal that would ban the use of arbitration clauses that prevent consumers from bringing class-action lawsuits. The 377-page proposal, released to the media a day early, would still allow companies to offer arbitration as a way to resolve disputes, but it could no longer make it mandatory. Clauses would have to explicitly state that consumers cannot be stopped from taking part in a class-action lawsuit. As part of its proposal, the bureau would provide specific language that companies must use in communications with consumers. "Many banks and financial companies avoid accountability by putting arbitration clauses in their contracts that block groups of their customers from suing them," Richard Cordray, the director of the CFPB, said in a press release. "Signing up for a credit card or opening a bank account can often mean signing away your right to take the company to court if things go wrong." For several decades, financial firms have used arbitration agreements to prevent consumers from banding together to sue for wrongdoing, the CFPB said. Consumers with disputes over small-dollar amounts, such as finance charges or overdraft fees, have had no remedy to seek redress, in violation of consumer protection laws, the CFPB said. The proposal is extremely broad, covering most every type of firm in the industry, including banks, credit unions, credit card issuers, certain auto lenders, auto title lenders, payday lenders, private student lenders, loan servicers, debt settlement firms, foreclosure rescue firms, prepaid card issuers, installment lenders, virtual currency firms, money transfer services and certain payment processors. The proposal alone would cover roughly 50,000 firms.

Banks Skewer Proposal Limiting Arbitration - WSJ: —Consumers are set to gain new powers to sue banks under a proposal unveiled by regulators, a move that lenders warned would hurt rather than help most borrowers. The plan, which would allow class-action lawsuits, sets up the latest clash between the banking industry and the Consumer Financial Protection Bureau over whether the agency is coming down too hard on lenders and overly restricting their operations. Lauded by consumer advocates, the proposed rule would restrict the use of arbitration clauses in many financial contracts. It would give consumers more latitude to challenge, for example, what they deem as hidden fees and excessive charges on products ranging from credit cards to private student loans.The CFPB aims to prohibit financial companies from using mandatory-arbitration clauses as a way to block class-action lawsuits, in which a large number of plaintiffs with similar complaints band together. Companies still would be able to require consumers to enter arbitration to resolve individual disputes. The new rule is expected to take effect next year after a 90-day public comment period and drafting of the final rule. The industry reaction was swift, with Wall Street and its advocates warning of unintended consequences of the rule within hours of the CFPB proposing it on Thursday. The change likely will result in higher litigation costs for banks, which they will offset either by raising the costs of consumer-loan products or reducing services, said Nessa Feddis, senior vice president for consumer protection and payments at the American Bankers Association, an industry group. House Financial Services Committee Chairman Jeb Hensarling (R., Texas) called the proposed rule “a big, wet kiss to trial attorneys.”

CFPB Arbitration Rule Vulnerable to Legal Challenge, Industry Lawyers Say -- Financial services lawyers are predicting that efforts by the Consumer Financial Protection Bureau to prevent companies from keeping consumer complaints out of a courtroom will wind up being challenged in court. As The Wall Street Journal reports, a rule proposed by the agency Thursday would prohibit financial companies from using mandatory-arbitration clauses as a way to block class-action lawsuits. While companies would still be able to require consumers to enter arbitration to resolve individual disputes, the elimination of the no-class arbitration provisions would strip away incentives for companies to include arbitration clauses in their contracts. And many are predicting that as a result, companies would discontinue using them. The CFPB argues that class actions are a “more effective means for consumers to challenge problematic practices by…companies” than arbitration, which it says gives financial service providers an unfair advantage over customers. Those concerns are shared by the plaintiffs’ bar, which applauded the agency’s move. So far opponents of the rule, including the American Bankers Association, are trying to get the agency to change course, warning that allowing its proposal to take effect would unleash a “flood of attorney-driven class action suits.” But lawyers who represent companies say a legal showdown may be unavoidable, whether it’s waged by a trade association or a company exposed to a class-action complaint as a result of the new rule.

How the Industry May Challenge CFPB's Arbitration Plan | American Banker: The finance industry pushed back against a proposal by the Consumer Financial Protection Bureau Thursday that would ban arbitration clauses in consumer contracts, saying it will pave the way for a flurry of class action lawsuits and result in higher prices for products and services. The proposal drew criticisms across the various affected industries, including most types of consumer lending with the exception of mortgages. Industry lawyers made it clear at a field hearing in Albuquerque, N.M. that they are expecting a fight. "Ultimately, there's a high likelihood that the rule will be challenged," said Quyen Truong,a partner at Stroock & Stroock & Lavan LLP, and a former assistant director and deputy general counsel at the CFPB. "I think the impact will be tremendous and the CFPB recognizes that internally because it will increase class actions, which is a big cost in terms of litigating." The proposal would still allow companies to offer arbitration as a way to resolve disputes. But industry lawyers said by allowing consumers to bring class actions, particularly over small-dollar amounts, the CFPB had opened the flood gates to class action lawsuits. Companies cannot afford to set aside reserves for class action litigation and operate an arbitration process.

Constitutional Challenge Could Be 'Very Messy' for the CFPB | American Banker: A federal appeals court case challenging the constitutionality of the Consumer Financial Protection Bureau is raising concerns that if the agency loses, it could open the floodgates for a flurry of other lawsuits against the CFPB. A three-judge panel is due to decide soon whether a provision of the Dodd-Frank Act specifying that a director of the CFPB could be removed only "for cause" is constitutional — and what remedies should be put in place if it isn't. "If the court said Director [Richard] Cordray was not constitutionally appointed, it could provide grounds for people to challenge various enforcement actions and rulemakings," said Andy Arculin, of counsel at the law firm Venable and a former senior counsel in the CFPB's Office of Regulations. "Potentially it could be very messy for the CFPB." The CFPB got pummeled in oral arguments on April 12, when judges focused on constitutional issues raised by the nonbank mortgage lender PHH Corp., which sued the CFPB last year after Cordray ordered a $109 million disgorgement for an alleged kickback scheme. Hostile questioning by two D.C. Circuit judges has led many lawyers to believe that the panel might lean toward a ruling against the bureau's constitutionality.  Any ruling that invalidates the agency likely would result in further attempts by Congress to reform the CFPB with a commission structure or by subjecting it to appropriations.

Breaking up big banks won't stop another financial crisis - Brookings Institution -- In debating whether or not to break up the big banks, there is a key misconception that has to be put to rest by both sides: another financial crisis will occur, regardless. Financial crises are part of the economic framework of capitalism, whether they are based on Dutch tulip mania in the 1600s, the Panic of 1907 with runs on banks and trusts, the savings and loan debacle of the 1980s, or the subprime mortgage meltdown of the last decade. History is clear, there is no magic solution to end financial crises based on the size or number of banks in a country.  What you can do is guard against financial crises, reducing their likelihood and mitigating their severity when they do occur. That is precisely what the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) tries to accomplish. Dodd-Frank enhanced bank regulators’ authority and responsibility to better regulate financial institutions, with extra emphasis on the largest, most risky and most complex banks. It created new authority to regulate large non-bank financial institutions whose failure could threaten the nation’s financial stability (such as AIG during the last crisis). Importantly, Dodd-Frank created a new Consumer Financial Protection Bureau (CFPB) to regulate the practices of the Big Banks, and set and enforce consumer protections for many financial services products -- regardless of whether they be offered by a bank or another lender. Remember: much of the subprime mortgage machine that caused the financial crisis occurred outside of the commercial banking system

Four Months into 2016 and Only Two Bank Failures | American Banker: Not that long ago you could count on two banks failing each week. Maybe more. But times have changed. When state and federal regulators closed Trust Company Bank in Memphis, Tenn., on Friday, it was only the second U.S. bank failure this year. The Bank of Fayette County in Piperton, Tenn., agreed to assume Trust Company's four branches, all of its $20.3 million in deposits as well as approximately $3.9 million of the failed bank's $20.7 million of assets. The Bank of Fayette County is a division of the $373.9 million-asset Moscow Bancshares. The resolution is expected to cost the Deposit Insurance Fund $7.2 million, according to a press release by the Federal Deposit Insurance Corp. North Milwaukee State Bank was the first failure of 2016; the $67.1 million-asset bank was shut down March 11. The last bank to fail in Tennessee was Community South Bank in Parsons in August 2013.

It's the Liquidity, Stupid: Regulators to Big Banks | American Banker: Regulators cited a slew of technical concerns in their response to megabanks' living wills, but the technological, logistical and legal flaws they found appeared to center on a single issue: liquidity. The Federal Reserve Board and Federal Deposit Insurance Corp. were clearly concerned whether global banks can stock up on enough cash and highly liquid assets to subsist during bankruptcy, experts said. "Liquidity as a whole is a critical piece of the puzzle," said John Simonson, a principal at PwC. "The regulators want to make sure that the plans are very detailed, in order to make sure that there in fact is the right amount of liquidity in the right legal entities at the right time." The FDIC and Fed expressed their concerns about liquidity both directly and indirectly. They asked, for instance, if the firms' mechanisms for failure — who pulls which levers and when — were thorough enough. In the next round, the megabanks will be expected to explain why they would agree to undergo bankruptcy while still holding a substantial amount of cash reserves."Will the board actually pull the pin?" asked Joseph Fellerman, a former top adviser at the FDIC's Office of Complex Financial Institutions. The repercussions of such a decision would be immense both to the organization and individuals making the final call. "Effectively they're talking about putting themselves out of a job, and then subjecting themselves to litigations post-failure," Fellerman said. The agencies also highlighted flaws in the information technology systems of banks, raising concerns about whether they could be relied on to track collateral and other essential funding data in a timely manner.

Fed's Dudley Acknowledges Link Between Regulations and Liquidity Problems | American Banker: — New York Federal Reserve Bank President William Dudley became one of the first regulators to explicitly acknowledge the possible link between new regulations and liquidity problems in the market. Speaking before a financial markets conference sponsored by the Atlanta Fed in Fernandina Beach, Fla., Sunday evening, Dudley said that traditional metrics of liquidity may not suggest problems, but those metrics also do not tell the entire story of what is happening in those markets. Broader trends — such as the reduced profitability and inventories of securities dealers — have likely weighed down liquidity in Treasuries markets and corporate bond markets because of various post-crisis regulations. That stagnation may suggest that the risk has shifted from dealers to asset managers, Dudley said, and regulators may not have fully accounted for that effect. "Capital and liquidity requirements for the largest securities dealers—which have been raised significantly since the financial crisis—might have adversely impacted market liquidity," Dudley said. "These regulatory changes likely have affected the profitability of dealer intermediation activities and consequently the provision of market liquidity." Dudley said that the supplemental leverage ratio — which requires the largest banks to hold additional capital to offset the leverage shown on their balance sheets — treats all assets the same, regardless of risk profile, which reduces the profitability and prevalence of Treasury repurchase agreements. As a result, it reduces liquidity in that market. Restrictions on proprietary trading of corporate bonds, meanwhile, have reduced the depth of those markets as well.

Big Banks Just Claimed A Constitutional Right To A Taxpayer Subsidy: -- Big banks get a lot of free money from the federal government. And their lobbyists think they have a constitutional right to it. Each year, the government pays billions of dollars to banks to thank them for being part of the Federal Reserve system. These payments aren't structured to influence or encourage any particular business activity -- banks just get straight cash, no matter what they do. The subsidy is economically useless. It doesn't push interest rates lower or boost pay for bank tellers or help more farmers qualify for loans. The money just goes straight to the bottom line, boosting bank profits. Late last year, Congress passed a law limiting these payouts, using the savings to help pay for a highway bill. While lawmakers originally proposed trimming the subsidy by $17 billion over five years, the legislation ultimately only cost banks $2.7 billion, thanks to a late compromise that allowed smaller banks to keep receiving full payment. Since the subsidies are scaled to the size of each bank, the lion's share of the $2.7 billion will come from a small number of big firms. The top lobbyist for the American Bankers Association wrote a letter to the Fed last week calling the subsidy cuts "an unconstitutional taking of member banks’ property without compensation." "The government’s actions ... amount to a regulatory taking of member banks’ property," ABA President and CEO Rob Nichols wrote.  You read that correctly. A bank lobbyist argued that banks have a constitutional right to money from the government.

New Federal Reserve push to limit fallout from bank failures – FT - The Federal Reserve is proposing new measures to prevent a chaotic bank collapse by asking institutions that trade with a failing lender to pause before demanding their money back. In an effort to prevent a re-run of Lehman Brothers’ collapse in 2008, the Fed unveiled a proposal for lenders to stop counterparties from immediately exercising certain contractual rights when a bank goes into bankruptcy. The move on Tuesday marks the US’s latest effort to end “too big to fail” lenders by finding ways to handle a bank collapse without jeopardising financial stability or requiring a taxpayer-funded bailout. The proposal would require the rewriting of contracts so that counterparties such as fund managers waive their right to terminate contracts, and thus claim payments, for a period of up to 48 hours when a bank enters bankruptcy. Janet Yellen, the Fed chair, said it would help manage the risks around a big bank’s collapse by allowing time to transfer certain contracts — notably derivatives, repo and securities lending transactions — from a failed institution to a solvent one. “When these contracts … unravel all at once at a failed, large banking organisation; an orderly resolution of the bank may become far more difficult, sparking asset fire sales that may consume many firms,” she said at a Fed public meeting to discuss the rule on Tuesday. The move would have implications for asset managers, hedge funds and insurance companies that do business regularly with banks through contracts known as qualified financial contracts, or QFCs.

Fed Proposes Curbs to Early Termination Rights for Banks | American Banker: — The Federal Reserve on Tuesday published a proposal to limit early termination clauses in certain derivatives and repurchase contracts in order to keep banks solvent in the immediate aftermath of failure at the largest bank holding companies. The proposal would bar global systemically important banks from entering into certain qualified financial contracts that include early termination provisions earlier than 48 hours from notice of bankruptcy. The plan would effectively place a stay on counterparties' ability to call certain derivatives, repurchase agreements, reverse repurchase agreements and certain securities transactions in order to give regulators time to stabilize the failed bank without liquidity draining from the institution. In prepared remarks before the Fed Board on May 3, Fed Gov. Daniel Tarullo said the proposal goes a long way to ensure that Dodd-Frank's bankruptcy and orderly liquidation provisions can be effectively executed. While the proposal would only apply to the G-SIB holding companies, it would affect a wide swath of contracts with all manner of nonbank entities. "In approving this proposal for comment and, eventually, adopting a final regulation, we have the opportunity to consolidate the substantial progress made in containing the risks to financial stability that can arise from QFCs," Tarullo said. "Nonetheless, if Congress at some point addresses bankruptcy provisions applicable to financial firms, it could be useful to reconsider the breadth of collateral types that currently are eligible for QFC treatment."

New Fed Bailout-Prevention Rule to Reach Beyond Banks - WSJ: Asset managers such as Pacific Investment Management Co. look set to lose hard-fought protections against the cost of a bank failure, as the Federal Reserve on Tuesday proposed another rule aimed at preventing taxpayer bailouts for financial firms. The proposal would force changes to derivatives and other esoteric financial contracts of the type that destabilized broader financial markets after the 2008 collapse of Lehman Brothers Holdings. The proposal would see investment firms lose certain contractual rights to terminate financial deals with big banks—rights that essentially have allowed them to claim payments in the event of a bankruptcy filing without having to stand in line with other creditors. Big banks already agreed to waive such rights in 2014, but asset managers and hedge funds have resisted the change because it threatened to put them in a weaker contractual position. While the broad outlines have been under discussion for years, key details were announced for the first time Tuesday. One potentially controversial provision could make the rules retroactive by requiring changes to existing contracts as soon as a bank and its counterparties enter into any new contracts. Fed officials said the cost of the rule would be relatively small and would be significantly outweighed by the benefits to financial stability.

Federal Reserve Tries Wizardry to Cure Derivatives Problem - Pam Martens - Yesterday, the Federal Reserve held a public board meeting to propose two new Byzantine rules to prevent another 2008-style financial contagion on Wall Street and potential crash of the U.S. economy. Unfortunately, the details brought images of the curtain scene from the Wizard of Oz. If you looked beyond the copious verbiage, there didn’t seem to be much there, there. Both plans appeared to target concerns over derivatives. Coincidentally, Freddie Mac, already a ward of the government as a result of the 2008 crash and a derivatives counterparty to some of Wall Street’s largest banks, reported yesterday that it had lost $4.56 billion in its derivatives portfolio in just the first three months of this year. Derivative losses were an early precursor to the 2008 crash. The first proposal mapped out by the Fed is called the Net Stable Funding Ratio and would require the largest banking organizations “to maintain a stable funding structure in relation to the composition of their assets, derivative exposures, and commitments.” The Fed doesn’t want a bank run or a demand for derivatives collateral to drain the bank of its liquidity. (Read the details of the proposed rule here.) The second plan would establish restrictions within derivative and repo contracts of U.S. Global Systemically Important Banks (GSIBs) and the U.S. operations of foreign GSIBs. The idea is to prevent derivative or repo counterparties from cancelling the contracts if the GSIB failed and was put into resolution under the terms of the Dodd-Frank legislation. That could trigger a disorderly resolution and contagion at other banks (otherwise known as a repeat of 2008). The details of that rule proposal are here.

Dodd-Frank Failures Bolster Case for Revamp | Bank Think: In the span of the past several weeks, we have seen regulators created by the Dodd-Frank Act lose two important court decisions over their processes while a third looming ruling could take another swipe at the Consumer Financial Protection Bureau's authority. Meanwhile, several big banks failed yet again to meet a Dodd-Frank standard meant to eliminate "too big to fail." Nearly six years after Dodd-Frank's passage, can anyone honestly say that this law is working? The setbacks in the post-crisis legislative reforms include questions over regulators' adherence to administrative law, as well as the statutory bounds of the CFPB's authority. The legal tangling underlines this point: With many of the law's requirements simply too complicated to implement, evidence is mounting that those practical difficulties have led agencies to disregard legal norms as they try to fulfill their missions. First, a federal judge threw out the determination by the Financial Stability Oversight Council — created by Dodd-Frank — that MetLife was a "systemically important financial institution," or SIFI. Judge Rosemary Collyer chided the FSOC for "fundamental violations of established administrative law" and ruled that the final determination of SIFI status for MetLife was "arbitrary and capricious" without even considering the substantive arguments.Next we have the failure of a number of large banks to gain regulatory approval for the "living wills" that are mandated by Dodd-Frank. A living will is essentially a roadmap for winding down a large bank in the event of a bankruptcy. This is now the second time many of the banks received poor grades. Under the law, the Federal Deposit Insurance Corp. and Federal Reserve Board can ultimately force banks with subpar plans to increase capital or divest assets to become easier to unwind. But the banks' progress so far — as well as the regulators' delay in providing feedback and vague guidance on what makes a good plan — does not inspire confidence.

Fed Survey: Banks ease Standards on Residential Real Estate, Credit Quality in Oil Regions "deteriorated somewhat" - From the Federal Reserve: The April 2016 Senior Loan Officer Opinion Survey on Bank Lending Practices Regarding loans to businesses, the April survey results indicated that, on balance, banks tightened their standards on commercial and industrial (C&I) and commercial real estate (CRE) loans over the first quarter of 2016.3 The survey results indicated that demand for C&I loans had weakened and that demand for CRE loans had strengthened during the first quarter on net. The first of two sets of special questions asked banks about lending to firms in the oil and natural gas drilling or extraction sector. The majority of domestic banks reported that loans to firms in this sector account for less than 5 percent of their outstanding C&I loans. In contrast, the majority of foreign banks reported that loans to firms in this sector account for more than 5 percent of their outstanding C&I loans. On balance, both domestic and foreign banks expect delinquency and charge-off rates on such loans to deteriorate over 2016 and noted that they were undertaking several actions to mitigate the risk of loan losses. In addition, on balance, banks indicated that the credit quality of loans made to businesses and households located in regions of the United States that are dependent on the energy sector had deteriorated somewhat.  Regarding loans to households, banks reported having eased lending standards on most types of residential real estate (RRE) mortgage loans, while demand for these loans strengthened over the first quarter. Modest net fractions of banks reported easing lending standards on credit cards and other consumer loans, whereas lending standards for auto loans remained basically unchanged. Over the first quarter, banks reported stronger demand across all consumer loan categories.

Every Time This Has Happened, A Recession Followed -- Three months ago the Fed released its Fourth Quarter "Senior Loan Officer Opinion Survey on Bank Lending Practices", which revealed something ominous. It showed that in Q4, lending standards tightened for the second consecutive quarter. This was a problem because as Deutsche Bank pointed out at the time two consecutive quarters of tightening Commercial & Industrial loan standards "has never happened before without it signalling an eventual move into recession and a notable default cycle. Once we have 2 such quarters lending standards don't net loosen again until the start of the next cycle." As of today, we now have three consecutive quarters of tightening lending standards. In fact,based on the latest survey, net lending standards tightened even more than during Q4 as shown in the chart below, and are now the tightest on net since the financial crisis. Needless to say, if a recession and a default cycle has always followed two quarters of tighter lending conditions, three quarters does not make it better.

US banks sound caution on commercial property loans - Top US bankers have sounded caution over commercial real estate lending as concerns rise that bubbles are forming in parts of the country’s property market. Lenders have helped fund a boom in recent years in cities such as New York and Miami, where luxury high rises have sprung up across the skyline. But executives at several banks signalled during results season that they were tightening up standards for CRE lending, which includes mortgages secured against big apartment and office developments. “We want to be careful on CRE,” said Brian Moynihan, chief executive of Bank of America, which has a $58bn commercial real estate portfolio. Richard Davis, chief executive of US Bancorp, told investors that the country’s fifth-largest lender by assets was being “very watchful”. “We’re protecting what we have, and probably being more careful,” he added. “A lot of the banks are growing that [CRE] a lot. It’s been flat for us.” Richard Fairbank, founder of Capital One, the eighth-biggest US lender, said last week that “competition is pressuring loan terms and pricing” in CRE. Still, he said that also applied to loans for commercial and industrial businesses, and added there were “good growth opportunities” in some areas. Rising rental incomes have made CRE look attractive at a time when rock bottom interest rates have reduced returns on offer from other assets.

Oil trouble spilling over into auto, credit card loans - May. 3, 2016: For the first time since oil prices began crashing in mid-2014, banks polled by the Federal Reserve are warning of a "spillover" effect onto loans made to businesses and households in energy-dependent regions of the country.   Senior loan officers of nearly 100 banks acknowledged that credit quality has "deteriorated" on everything from auto loans and credit cards to commercial real estate mortgages. Translation: More people aren't paying and delinquencies are rising.  It's a sign of how the deep spending cuts, mass layoffs and even bankruptcy filings in the oil patch are inflicting real pain in certain energy-focused states like Texas and North Dakota. Some large U.S. banks have individually warned of early signs of so-called contagion. For instance, last month Wells Fargo said office vacancies in the Houston area have risen and multifamily housing activity is looking "a little bit weaker." That makes sense given the rise in bankruptcies and the mass layoffs announced by Houston-based energy companies like Halliburton, Baker Hughes and ConocoPhillips. "Those are things that those regions are going to have to grapple with," John Shrewsberry, Wells Fargo's chief financial officer, said during a conference call with analysts.

Derivatives Losses Are Mushrooming at Freddie Mac; Now It’s the Taxpayers’ Problem -  Pam Martens - On April 21, Wall Street On Parade reported that the U.S. government (also known as the U.S. taxpayer) was on the hook for potentially tens of billions of dollars in derivative losses at Freddie Mac and Fannie Mae – the two companies the government put under conservatorship during the Wall Street financial collapse of 2008. (See related article below.) This morning, Freddie Mac is adding further angst to this potential derivatives blowup scenario by reporting that it lost $4.56 billion in its derivatives portfolio in just the first three months of this year – a stunning 90 percent increase over what it lost in derivatives in the first quarter of 2015. That brings its derivative losses for all of 2014, 2015 and the first quarter of 2016 to $15.54 billion. (See chart below.) This is certain to bring gasps from some members of Congress. While positive net income has offset the derivative losses in recent years, making Freddie Mac profitable overall, the company said in its press release this morning that it had an overall $354 million net loss for the first quarter of this year, meaning the derivative losses fully wiped out the earnings it makes from its portfolio of mortgages and other sources of positive income such as the fees it collects for guaranteeing mortgages.  Despite acknowledging that its net worth is a mere $1 billion, Freddie Mac said in its press release that it would not be drawing further from the U.S. Treasury at this time. Under the conservatorship arrangement, the U.S. Treasury has already infused over $187.5 billion into Freddie Mac and Fannie Mae. But according to a government audit released by the Government Accountability Office (GAO) on February 25 of this year, the U.S. Treasury has committed taxpayers to an additional $258.1 billion that Freddie Mac and Fannie Mae can draw down.

Freddie Mac may need another taxpayer bailout next week -- Freddie Mac is expected to report a loss when it announces first-quarter earnings before the bell on Tuesday. That’s bad news for any public company, but especially critical for the mortgage provider because of its tangled history with the federal government.  Freddie and its counterpart, Fannie Mae, were put into conservatorship in 2008 as the mortgage meltdown ensnared the financial system. They have lingered as wards of the state ever since. The Treasury Department modified the deal in 2012, requiring Fannie and Freddie to send all quarterly profits to the government — and shrink their reserves to zero by 2018.  As Mel Watt, the chairman of Fannie and Freddie’s regulator, put it in a speech in February, Fannie and Freddie are quickly approaching the point where they won’t be able to weather quarterly losses without going back to the Treasury for taxpayer dollars.  There are many reasons Freddie and Fannie could lose money in any given quarter, Watt noted, including the fact that the enterprises now stand to make less income on the portfolios they’re required to shrink. What many analysts are watching for this time, though, is the use of interest-rate derivatives.  Freddie has used such instruments to hedge against big swings in interest rates and their value can fluctuate unpredictably. (Fannie relies more on the issuance of longer-term debt to guard against short-term interest-rate swings.) Derivatives have gone bad for Freddie before. In the third quarter of last year, it reported a $475 million loss, the first negative quarter in four years, when rates plunged. Freddie did not need to tap Treasury for more funds, but neither did it remit money to the government.

Fannie and Freddie: REO inventory declined in Q1, Down 34% Year-over-year -- Fannie and Freddie reported results this week. Here is some information on Real Estate Owned (REOs). From Fannie Mae: Fannie Mae Reports Net Income of $1.1 Billion and Comprehensive Income of $936 Million for First Quarter 2016 Fannie Mae reported net income of $1.1 billion and comprehensive income of $936 million for the first quarter of 2016. The company reported a positive net worth of $2.1 billion as of March 31, 2016, which the company expects will result in its paying Treasury a $919 million dividend in June 2016. Fannie Mae reported the number of REO declined to 52,289 at the end of Q1 2016 compared to 79,319 at the end of Q1 2015. Freddie Mac reported the number of REO (Real Estate Owned) declined to 15,409 at the end of Q1 2106 compared to 22,738 at the end of Q1 2015.Here is a graph of Fannie and Freddie Real Estate Owned (REO).   REO inventory decreased in Q1 for both Fannie and Freddie, and combined inventory is down 34% year-over-year.   For Freddie, this is the lowest level of REO since Q4 2007.  For Fannie, this is the lowest level since Q1 2008. Delinquencies are falling, but there are still a large number of properties in the foreclosure process with long time lines in judicial foreclosure states.

Freddie Mac: Mortgage Serious Delinquency rate decreased in March, Lowest since Aug 2008 - Freddie Mac reported that the Single-Family serious delinquency rate decreased in March to 1.20% from 1.26% in February. Freddie's rate is down from 1.73% in March 2015. This is the lowest rate since August 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.  These are mortgage loans that are "three monthly payments or more past due or in foreclosure".  Although the rate is generally declining, the "normal" serious delinquency rate is under 1%.    The serious delinquency rate has fallen 0.53 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until the second half of this year.   I expect an above normal level of Fannie and Freddie distressed sales through 2016 (mostly in judicial foreclosure states).

Black Knight March Mortgage Monitor -- Black Knight Financial Services (BKFS) released their Mortgage Monitor report for March today. According to BKFS, 4.08% of mortgages were delinquent in March, down from 4.66% in March 2015, and the lowest since March 2007. BKFS also reported that 1.25% of mortgages were in the foreclosure process, down from 1.68% a year ago. This gives a total of 5.33% delinquent or in foreclosure. Press Release: Black Knight's Mortgage Monitor: Home Price Increases Muting Affordability Gains from Low Interest Rates; Refinanceable Population Grows to 7.5 Million Today, the Data & Analytics division of Black Knight Financial Services, Inc. released its latest Mortgage Monitor Report, based on data as of the end of March 2016. This month, in light of mortgage interest rates falling by approximately 35 basis points (BPS) since the start of 2016, Black Knight examined how these lower rates have impacted home affordability. Calculating principal and interest payments based on a fixed-rate mortgage with a 30-year term and 80 percent loan-to-value (LTV) ratio, Black Knight examined how much per month it would cost a borrower to purchase the median-priced home at the national and state levels. All else being equal, interest rate declines would save borrowers significant money on such a purchase, but as Black Knight Data & Analytics Senior Vice President Ben Graboske explained, rising home prices are muting – and in some areas, completely cancelling out – the positive impact declining rates would have on home affordability.  "Excluding home price movement, the interest rate decline since the start of the year would save borrowers approximately $44 a month when purchasing the median-priced home nationally," said Graboske. "However, when you factor in estimated home price appreciation (HPA) – the most recent Black Knight Home Price Index Report for February showed annual HPA at 5.3 percent – those monthly savings fall to just $18. ”

The Racist Roots of a Way to Sell Homes - Contracts for deed are making a comeback. They are increasingly being used by investment firms that have bought thousands of foreclosed homes and want to sell them to lower-income buyers “as is,” according to a recent report in The Times by Alexandra Stevenson and Matthew Goldstein. Many of the homes are in Alabama, Georgia, Michigan, Missouri and Ohio. In one example in the article, investors who bought foreclosed homes at an average price of $8,000 issued a contract on one in Ohio in 2011 for $36,300 at 10 percent interest.Contracts for deed make gouging possible, because unlike traditional mortgages, there is no appraisal or inspection to ensure that the loan amount is reasonable. They also let an investor swiftly evict buyers for missed payments, rather than giving them time to catch up, as required under a mortgage. And they usually require the buyer to pay hefty upfront fees. Unlike a rental security deposit, however, the fee is almost never refundable.Contracts for deed are similar in some ways to the subprime lending that contributed to the housing bust in this century. Investors in the contracts include some of the Wall Street players who inflated the mortgage bubble, including Daniel Sparks, the former Goldman Sachs executive, whose department was betting on a crash in 2007 even as the bank was selling toxic mortgage securities. The stated rationale for contracts for deed is that low-income buyers cannot qualify for mortgages — the same line that was used to justify subprime lending.

MBA: Mortgage "Refis Down, Purchases Flat in Latest MBA Weekly Survey" -- From the MBA: Refis Down, Purchases Flat in Latest MBA Weekly Survey  Mortgage applications decreased 3.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 29, 2016. ...The Refinance Index decreased 6 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.1 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 13 percent higher than the same week one year ago. ... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.85 percent from 3.83 percent, with points increasing to 0.35 from 0.32 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990. Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000. Refinance activity increased a little earlier this year when rates declined. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 13% higher than a year ago.

Mortgage Rates Back Near 2016 Lows - Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates falling following the Fed's decision to stand pat last week, and other negative economic data. Mortgage rates are now hovering just above their low point for the year. 30-year fixed-rate mortgage (FRM) averaged 3.61 percent with an average 0.6 point for the week ending May 5, 2016, down from last week when it averaged 3.66 percent. A year ago at this time, the 30-year FRM averaged 3.80 percent. 15-year FRM this week averaged 2.86 percent with an average 0.5 point, down from last week when it averaged 2.89 percent. A year ago at this time, the 15-year FRM averaged 3.02 percent. 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.80 percent this week with an average 0.5 point, down from last week when it averaged 2.86 percent. A year ago, the 5-year ARM averaged 2.90 percent. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Borrowers may still pay closing costs which are not included in the survey.

CoreLogic: House Prices up 6.7% Year-over-year in March -- The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).  From CoreLogic: CoreLogic US Home Price Report Shows Home Prices Up 6.7 Percent Year Over Year in March 2016. Home prices nationwide, including distressed sales, increased year over year by 6.7 percent in March 2016 compared with March 2015 and increased month over month by 2.1 percent in March 2016 compared with February 2016, according to the CoreLogic HPI....“Home prices reached the bottom five years ago, and since then have appreciated almost 40 percent,” said Anand Nallathambi, president and CEO of CoreLogic. “The highest appreciation was in the West, where prices continue to increase at double-digit rates.”  This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100. The index was up 2.1% in March (NSA), and is up 6.7% over the last year. This index is not seasonally adjusted, and this was a solid month-to-month increase. The index is still 5.3% below the bubble peak in nominal terms (not inflation adjusted). The second graph shows the YoY change in nominal terms (not adjusted for inflation). The YoY increase had been moving sideways over the last year, but has picked up a little recently. The year-over-year comparison has been positive for forty nine consecutive months.

Lawler: Q1 Home Builder Results --From housing economist Tom Lawler: Below is a table showing some selected operating statistics from large, publicly-traded home builders for the quarter ending March 31, 2016. Here a few (of what could be many) points.
1. In terms of units, 27% of D.R. Horton’s net orders last quarter were from its “entry level” Express brand, up from 18% in the first quarter of last year. Express comprised 23% of Horton’s deliveries last quarter, up from 8% a year earlier.
2. Both Meritage Homes and MDC Holdings said that they either had or were to planning to increase production of lower priced homes (“entry-level-plus” in Mertigage’s case, and their “new, more affordable product line” in MDC’s case.
3. Meritage Homes said that its margins were in “a handful” of communities in Southern California and Arizona that it acquired in 2013 were adversely impacted by the reduction in FHA loan limits in those markets effective at the beginning of 2014. Specifically, the company said that “(w)hen those loan limits were reduced, we weren’t able to get the prices we were expecting ...”

Construction Spending May 2, 2016: Home sales may be puttering along but construction spending nevertheless remains one of the strongest reports on the calendar. Construction spending did inch 0.3 percent higher in March, which is lower than expected, but February is now revised sharply higher, from a 0.5 percent decline to a 1.0 percent gain. Gains for March and February are positives for near-term momentum though they are offset by a sharp downward revision in January to minus 0.3 percent from plus 2.1 percent. Back to March, residential spending rose 1.6 percent driven by gains for multi-family homes with single-family homes flat. The latter is a disappointment but does follow a trend of steady strength in prior reports. Non-residential spending rose 0.7 percent in March led by transportation and including a respectable gain for manufacturing, one that may hint at better results for capital spending. Public spending on educational building and on highways is also up though Federal spending remains weak and state & local spending, which has been strong, fell in the month. Year-on-year, total construction spending is up 8.0 percent, which includes a 7.8 percent gain on the residential side and a 9.3 percent gain on the non-residential side. These are down from 10 percent rates in prior reports but are still very hard to match anywhere else in the economy.

Construction Spending increased 0.3% in March - Earlier today, the Census Bureau reported that overall construction spending increased 0.3% in March compared to February: The U.S. Census Bureau of the Department of Commerce announced today that construction spending during March 2016 was estimated at a seasonally adjusted annual rate of $1,137.5 billion, 0.3 percent above the revised February estimate of $1,133.6 billion. The March figure is 8.0 percent above the March 2015 estimate of $1,052.9 billion. Private spending increased and public spending decreased in March: Spending on private construction was at a seasonally adjusted annual rate of $842.3 billion, 1.1 percent above the revised February estimate of $832.8 billion. ... In March, the estimated seasonally adjusted annual rate of public construction spending was $295.2 billion, 1.9 percent below the revised February estimate of $300.8 billion. This graph shows private residential and nonresidential construction spending, and public spending, since 1993.  Private residential spending has been increasing, but is 36% below the bubble peak. Non-residential spending is only 2% below the peak in January 2008 (nominal dollars).  Public construction spending is now 9% below the peak in March 2009.  The second graph shows the year-over-year change in construction spending. On a year-over-year basis, private residential construction spending is up 8%. Non-residential spending is up 9% year-over-year. Public spending is up 7% year-over-year. Looking forward, all categories of construction spending should increase in 2016. Residential spending is still very low, non-residential is increasing (except oil and gas), and public spending is also increasing after several years of austerity. This was below the consensus forecast of a 0.5% increase for March, and construction spending for February and January were revised down.

Construction Spending Up 0.3%, Led by Home Building - — U.S. construction spending advanced in March to its highest level in more than eight years. Gains in home building and nonresidential construction offset a drop in government projects.Construction spending rose 0.3 percent in March after a 1 percent gain in February, the Commerce Department said Monday. The back-to-back increases raised total spending to a seasonally adjusted annual rate of $1.14 trillion, the highest level since October 2007.The February increase represented an upward revision by the government from its initial estimate that spending had fallen 0.5 percent that month. But the estimate for January was revised down by the government to show a drop of 0.3 percent, from a previously reported increase of 2.1 percent.The report showed that "the housing market remained robust" through the first quarter of the year, said Jesse Hurwitz, an economist at Barclays Research.Last year, home construction was a bright spot for the U.S. economy, and that support is expected to continue through 2016.Residential construction grew at a 14.8 percent annual pace in the first three months of the year. It was one of the few sources of strength in a quarter in which the economy grew at an annual rate of just 0.5 percent — the slowest pace in two years. Hurwitz said Barclays thinks the government will revise up its estimate of the economy's growth last quarter to a 0.7 percent annual rate, from its initial 0.5 percent estimate, based on economic data released in recent days. The government will issue its revised estimate on May 27. Advertisement Continue reading the main story In March, home construction increased at a 1.6 percent annual rate, while nonresidential construction increased 0.7 percent. Spending on government projects dropped 1.9 percent, with both state and local and federal spending falling.

U.S. construction spending rises to 8-1/2-year high | Reuters: U.S. construction spending rose to an 8-1/2-year high in March and the prior month's outlays were revised higher, pointing to sustained strength in the sector despite a sharp downturn in spending by energy firms. Construction spending increased 0.3 percent to the highest level since October 2007, following an upwardly revised 1.0 percent jump in February, the Commerce Department said on Monday. Economists polled by Reuters had forecast construction spending rising 0.5 percent in March after a previously reported 0.5 percent decline in February. Construction outlays were up 8.0 percent from a year ago. Though February's outlays were revised higher, construction spending for January was revised down to show a 0.3 percent drop instead of the previously reported 2.1 percent increase. A drop in nonresidential construction investment helped to hold down economic growth to a meager 0.5 percent annualized rate in the first quarter. Much of the weakness in spending on nonresidential structures reflected relentless aggressive spending cuts in the energy sector, which is reeling from last year's plunge in oil prices. In March, construction spending was supported by a 1.1 percent surge in private construction, which hit its highest level since October 2007. Outlays on private residential construction increased 1.6 percent. Spending on private nonresidential structures, which also includes factories and offices, advanced 0.7 percent to the highest level since October 2008. Public construction outlays fell 1.9 percent in March as outlays on state and local government construction projects, the largest portion of the public sector segment, declined 1.4 percent. Federal government construction spending tumbled 7.4 percent in March.

March 2016 Construction Spending Growth Rate Improved?: The headlines say construction spending improved - but slightly below expectations. The backward revisions make this series wacky - but the rolling averages declined. Econintersect analysis:

  • Growth decelertion 2.0 % month-over-month and Up 8.6 % year-over-year.
  • Inflation adjusted construction spending up 7.5 % year-over-year.
  • 3 month rolling average is 9.2 % above the rolling average one year ago, and down 0.2 % month-over-month. As the data is noisy (and has so much backward revision) - the moving averages likely are the best way to view construction spending.

US Census Analysis:

  • Up 0.3 % month-over-month and Up 8.0 % year-over-year (versus the reported 10.3 % year-over-year growth last month).
  • Market expected 0.2 % to 1.0 % month-over-month (consensus +0.5) versus the +0.3 % reported

Construction Spending Update -- Looking at the latest construction spending report can be an informative exercise, despite the fact that the data lag other releases, because it bundles together various measures of construction activity for one comprehensive look. The latest report, released on May 2, revealed continued growth in construction spending. Private construction spending increased 8.5 percent on a year-over-year basis. The breakdown of growth by segment shown in chart 1 reveals that private residential (the sum of new single-family, multifamily, and residential improvements) and private nonresidential spending contributed almost equally to this increase (4.0 and 4.5 percent respectively).i  Growth in private residential and nonresidential spending from the year-earlier level has persisted since July 2011, but how does the level of spending compare to the previous cycle? The seasonally adjusted annual rate of private nonresidential spending has rebounded to a level just 1.8 percent below its previous peak. Private residential construction spending, on the other hand, remains 35.8 percent below its previous peak. With that said, after zooming out to look at spending over the entire horizon of the series and adjusting for inflation (see chart 2), it doesn't seem particularly wise to judge the health of construction spending relative to the past peak. In hindsight, the last peak was clearly an aberration, especially for residential spending.  Using this longer-running and inflation-adjusted time series to help put current spending in context, it's hard not to notice that the level of private nonresidential spending has surpassed the level seen in earlier peaks (the most recent peak excluded) while private residential spending now looks to be about on par with levels seen in earlier peaks. This surface-level comparison is a bit short-sighted, as this is not a mean-reverting time series. An upward trend in aggregate real construction spending seems perfectly reasonable as the population and economy grow over time. Shifting focus to the dashed trend lines in chart 2, we see that spending on residential construction has yet to catch up with trend but is much closer than when compared with the previous peak, while spending on nonresidential construction is at a level that exceeds its trend.

The U.S. Homeownership Rate Falls Again, Nearing a 48-Year Low - The homeownership rate fell slightly in the first quarter of 2016, dashing hopes that it had finally hit a bottom. In the first three months of this year, the rate was at 63.5%, not seasonally adjusted. That is down from 63.8% in the fourth quarter of 2015, according to estimates published on Thursday by the Commerce Department. That puts it back near its 48-year low of 63.4% in the second quarter of 2015. At the end of last year, economists had said the homeownership rate appeared to have stabilized and might begin to tick upward after falling for years following the housing crisis. When adjusting for seasonality, the homeownership rate in the first quarter also fell slightly to 63.6% from 63.7% in the fourth quarter of last year. Some economists caution against reading too much into such a statistically small change in quarterly estimates. The fact that the homeownership rate is essentially flat is still good news, they said. “We’re not seeing significant decreases like we were two, three, five years ago,” said Ralph McLaughlin, chief economist at real-estate information company Trulia. The continued declines in the homeownership rate in part reflect a growing number of renter households. Some 363,000 new renter households were formed in the first quarter compared with the same time last year, about twice as many as the 177,000 new owner households.

U.S. Consumer Credit Jumps Much More Than Expected In March - - Partly reflecting a notable increase in non-revolving credit, the Federal Reserve released a report on Friday showing a sharp jump in U.S. consumer credit in the month of March. The Fed said consumer credit surged up by $29.7 billion in March after climbing by a revised $14.1 billion in February. Economists had expected credit to rise by about $15.8 billion compared to the $17.2 billion increase originally reported for the previous month. The Fed said revolving credit, which largely reflects credit card debt, also increased by $11.1 billion in March after edging up by $2.9 billion in the previous month. The report also said consumer credit soared by an annual rate of 10.0 percent in March, as revolving credit spiked by 14.2 percent and non-revolving credit jumped by 8.5 percent.

U.S. Consumer Credit Ballooned in March at Fastest Pace Since 2001 - WSJ: —Borrowing by U.S. consumers ballooned in March at the fastest pace in more than a decade, as credit-card debt expanded particularly quickly.   Outstanding consumer credit, a measure of non-real estate debt, rose by a seasonally adjusted $29.67 billion in March from the prior month, the Federal Reserve said Friday. The 10.0% seasonally adjusted annual growth rate was the fastest growth pace since November 2001.  The print smashed economists’ expectations. Economists surveyed by The Wall Street Journal had forecast a $16.5 billion increase in March.  The data can be volatile from month to month and are subject to later revisions. J.P. Morgan Chase economist Daniel Silver noted the surge came “after a run of three soft increases” in consumer credit growth in prior months, as well as a weakening in consumer spending in recent months.  Consumer credit increased at a seasonally adjusted annual rate of 6.4% in the first quarter, compared with a rate of 6.1% in the first quarter of 2015. It rose at a 4.78% pace in February, reduced from an earlier estimate. Revolving credit outstanding, mostly credit cards, increased at a 14.16% annual pace in March, the fastest pace since July 2000. Revolving credit rose at a revised rate of 3.72% in February.

Energy expenditures as a percentage of PCE hit another All Time Low in March  - Note: Last month I noted that energy expenditures as a percentage of PCE had hit an all time low. Here is an update through the March 2016 PCE report. Below is a graph of expenditures on energy goods and services as a percent of total personal consumption expenditures through March 2016. This is one of the measures that Professor Hamilton at Econbrowser looks at to evaluate any drag on GDP from energy prices. Data source: BEA Table 2.3.5U. The huge spikes in energy prices during the oil crisis of 1973 and 1979 are obvious. As is the increase in energy prices during the 2001 through 2008 period.  In March 2016, energy expenditures as a percentage of PCE declined to another all time low of just under 3.7%. However, WTI oil prices increased from $30.32 per barrel in February to $37.55 in March - so energy as a percentage of PCE will probably increase a little over the next few months.

Joe Smuck Is Spending The Money Saved From Lower Energy Prices - Looking back, the Federal Reserve believed the decline in oil prices was good for the economy - and would provide a stimulus as consumers could spend the money saved on lower oil prices on other items. A quick look shows the rate of consumption growth has declined from its peak in January 2015. Lower oil prices did not seem to lift consumption. And the personal savings rate, peaked at the end of 2012 - has been in a very tight range since January 2013. Any savings from lower fuel costs did not migrate into savings (money banked or debt reduced). Energy prices at times positively correlates to expenditures, at times negatively correlates - but most of the time it does its own thing. What I found interesting is that consumers are currently spending more on energy related items than they did before the recent decline in energy prices. Increased consumer spending since the beginning of 2015 came from durable goods - and to a large extent from the auto sector. The consumer seems have invested the fuel savings on gas guzzling beasts. [graphic below from University of Michigan] And consumers started driving more. The graph below is population adjusted miles driven. Still over time - the real correlation for expenditures is to income. People eventually spend all they make. If you measure an economy by how much it spends (GDP) - why would anyone believe lower prices for anything could provide an economic boost.

The American Consumer is Doing Less to Support GDP Growth -  In their first "preliminary" estimate of the US GDP for the first quarter of 2016, the Bureau of Economic Analysis (BEA) reported that the economy was growing at a +0.54% annualized rate, down -0.84% (well more than half) from the +1.38% rate recorded for the fourth quarter of 2015. Follow up: The reasons for the -0.84% decline in the headline number were numerous, with much lower contributions from both consumer expenditures for goods (-0.33%) and commercial fixed investment (-0.33%) having the greatest impact. Imports (-0.13%), inventories (-0.11%), consumer services (-0.06%), and exports (-0.06%) continued the quarter-over-quarter declines in growth rates. Only governmental spending showed an improved contribution to the headline number improved relative to 4Q-2015 (+0.20%). 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. The BEA's "bottom line" (their "Real Final Sales of Domestic Product") was essentially cut in half relative to the prior quarter, dropping from +1.60% to +0.87%. Annualized household disposable income improved in this report. Real annualized per capita disposable income was reported to be $38,511 per annum, up $208 per year from the prior quarter. The household savings rate also increased to 5.2%. For this revision the BEA assumed an effective annualized deflator of 0.70%. During the same quarter (January 2016 through March 2016) the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was mildly dis-inflationary at -0.20%. Slightly over estimating inflation results in slightly pessimistic growth rates, and if the BEA's "nominal" data was deflated using CPI-U inflation information the headline growth number would be a significantly better +1.45%.

U.S. Consumer Spending Increases in April, to $95-- Americans' daily self-reports of spending averaged $95 for the month of April, up from $89 in March. The latest spending figure represents the highest average for the month of April in Gallup's nine-year trend, exceeding the $91 average from April 2015. The $6 increase in daily spending in April is on the high side for changes in April over March. Since the recession, April spending has increased by nearly this much -- $5 -- only once, in 2015, whereas in all other years since 2010, April spending was roughly the same as in March. The April 2016 average is based on interviews with more than 15,000 U.S. adults. Each day, Gallup asks Americans how much they spent "yesterday" in restaurants, gas stations, stores or online -- not counting home, vehicle or other major purchases, or normal monthly bills -- to provide an indication of Americans' discretionary spending. More broadly, spending averages have increased quite a bit since the recession and immediate post-recession years of 2009 to 2011, when monthly figures dipped as low as $58. They began to climb over the course of 2012 and 2013, and have since held at those higher levels. In most years since tracking began in 2008, spending has increased at least slightly in May. But sometimes it has increased significantly, such as in 2014 when it increased by $10 and in 2008 when it increased by $28. Not all years have yielded such change, however. In 2012 and 2015, there was no difference between April and May spending.

Gallup US ECI May 3, 2016: Americans' confidence in the economy retreated in April, with Gallup's Economic Confidence Index averaging minus 14 for the month, down from minus 10 in March. The April average ties with September 2015 as numerically the worst since confidence started climbing toward positive territory in late 2014 and early 2015 after gas prices began to decline. The high point in confidence occurred in January 2015 when the monthly index averaged plus 3, while the low point was minus 60 in October 2008. Since March 2015, Americans have been more upbeat about the current state of the economy than about the direction in which it is headed. In late 2014 and early 2015, as gas prices dropped, the two ratings were generally similar. In April, 24 percent of Americans rated current economic conditions as "excellent" or "good," while 30 percent said they were "poor," resulting in a current conditions score of minus 6. At the same time, 37 percent said the economy was "getting better" and 58 percent said it was "getting worse," for an economic outlook score of minus 21. The gap between the two ratings ties as the largest in the past year.

United States Redbook Index -- : Redbook Index in the United States increased by 0.60 percent in the week ending April 30 of 2016 over the same week in the previous year. Redbook Index in the United States averaged 2.35 percent from 2005 until 2016, reaching an all time high of 7.60 percent in March of 2005 and a record low of -5.80 percent in July of 2009. Redbook Index in the United States is reported by the Redbook Research Inc.. The Johnson Redbook Index measures the growth in the U.S. retail sales. The index is based on the sales data of around 9,000 large general merchandise retailers representing over 80 percent of the equivalent 'official' retail sales series collected and published by the US Department of Commerce. This page provides the latest reported value for - United States Redbook Index - plus previous releases, historical high and low, short-term forecast and long-term prediction, economic calendar, survey consensus and news. United States Redbook Index - actual data, historical chart and calendar of releases - was last updated on May of 2016.

America now has nearly 5 PR people for every reporter, double the rate from a decade ago - Muck Rack: When you search job sites for “journalism,” “reporter” or other similar keywords, what you’ll find is a whole bunch of roles that have nothing to do directly with producing the news. For every one job result for a reporter, photojournalist or TV producer, you’ll get 10 results for jobs available to people with journalism backgrounds or degrees to switch careers toward marketing, advertising and - most of all - public relations. I decided to dig into the numbers and what I found was a media landscape that has seen a huge rise in pitchmen and a big drop in news reporters, at a rate that surprised even a jaded newspaper reporter such as myself. According to the U.S. Bureau of Labor Statistics, here is how the total American job numbers looked 15 years ago, and today: 2000: 65,900 news reporters, and 128,600 public relations people 2015: 45,800 news reporters, and 218,000 public relations people So 15 years ago, there were two PR people for every reporter in the country. Now there are 4.8 PR people for every reporter. This is a huge change, as companies and organizations are seeking to bypass a shrinking media industry and tell their own stories. What this means is that people are getting less objective news and more biased content.

The Malthusian cultural world has arrived -- For music, at least: The simultaneous advent of streaming music and the vinyl renaissance has led to some very interesting recording industry statistics over the past few months. Last month, the RIAA reported that vinyl revenues outpaced sales from streaming services, despite actual streams vastly outnumbering physical vinyl sold. Now, Nielsen has released data revealing that, for the first time ever, old music (the “catalog,” defined as music more than 18 months old) outsold new releases in 2015. It’s important to note that Nielsen’s numbers here don’t include streaming numbers, but that in itself is telling of current trends: an easy-to-draw hypothesis from these stats is that new music exists primarily in the streaming realm, rather than in album downloads or physical copies. And as 2016 has progressed and seen such things as Kanye’s The Life of Pablo shenanigans, exclusive streaming rights, like Rihanna and Beyoncé with Tidal and Drake with Apple Music, and the fact that the Beatles dominated Spotify in their first 100 days on the service, streaming music’s hold on the future seems to be growing tighter.And note this:  Pink Floyd’s Dark Side of the Moon was the third-best-selling vinyl record of 2015.

The Lawmakers Who Control Your Digital Future Are Clueless About Technology: It is becoming increasingly clear that Senators Dianne Feinstein and Richard Burr, co-chairs of the Senate Intelligence Committee, don’t have the slightest clue about how encryption works. Good thing they’re currently pushing disastrous legislation that would force tech companies to decrypt things for law enforcement!Today Feinstein and Burr co-authored an op-ed in the Wall Street Journal entitled “Encryption Without Tears,” and wow, it is bad. They have yet again demonstrated a failure to grasp even the most basic principles of technology. Let’s walk through it: In response to these cases, we are circulating a proposal in the Senate to ensure that technology does not undermine the justice system.The draft proposal requires a person or a company—when served with a court order—to provide law enforcement with information (in readable form) or appropriate technical assistance that is responsive to the judicial request. This will enable law enforcement to conduct investigations using the communications involved in criminal and terrorist activities.Sounds simple enough, right? All these tech companies have to do is turn over encrypted data in readable form! This is foolishness. Companies simply don’t have access to the readable form of encrypted user data. That’s the whole point! They can’t help law enforcement even if they want to. What the senators are proposing would force companies to engineer backdoor access to their encryption algorithms, undermining the core principle of what allows encryption to protect you from hackers and criminals.

April Marks 12th Straight Month of Record Gun Sales - This April saw the most gun-related background checks of any April on record, making it the 12th month in a row to achieve a high water mark for gun sales.  The FBI ran 2,145,865 checks through the National Instant Background Check System last month, according to the agency’s records. That represents more than a 400,000 increase over the previous record set in April 2014. Though the numbers represent the best April on record, the month also saw the fewest checks of any month thus far in 2016. The trend of record-setting months began last May. In that period the background check system has seen records set for the most checks in a day, month, and year. Thus far 2016 is on pace to pass 2015 as the best year on record for gun-related background checks. The number of background checks is considered a reliable barometer for gun sales as nearly all sales made through licensed firearms dealers must by law include such a check. Some states also require a background check for gun sales between private citizens.

U.S. Gasoline Prices Hit 6 Month High, Keep Rising - The average price of gas is now hovering at a cost that is rather unattractive to drivers at $2.22 per gallon, according to AAA. The increase in gas prices is causing drivers—who have enjoyed, up until now a temporary reprieve at the pump—to think twice about traveling. The average price of gas in the United States is now at $2.22, up 8 cents over last week, hitting a 6-month high. This, in stark contrast to February’s ultra-low gas prices of $1.68 per gallon—a level that had not been since the end of 2008. Then, the price drop lasted only five months from December 2008 to May 2009 when it rose to $2.24 per gallon. This time around, prices dipped to $1.95 in December 2015, rising to $2.03 in April, then to today’s $2.22. The national average has remained above $2 per gallon for 40 consecutive days. Experts are predicting that our gas-price vacation is all but over, and that today’s higher prices—or even higher—will be our new norm once again. According to GasBuddy analyst Patrick DeHaan, “Gasoline prices may continue inching up until Memorial Day–a major test if refiners are well-prepared for the summer driving season.”

U.S. auto sales recover in April - U.S. auto sales recovered in April, suggesting the March downturn was the result of the early onset of Easter. U.S. light vehicle sales rose to a seasonally adjusted annual rate of 17.4 million, recovering from the March nosedive to 16.6 million, Autodata reported. That’s close to the 17.5 million seen in a MarketWatch-compiled economist poll. The recovery was particularly strong on the truck side, which enjoyed the strongest month since November. Sales of Fiat Chrysler’s Jeep improved by 17%, and Ford-brand sport utility vehicles had their best-ever April sales. Car sales, by contrast, were the second-lowest in over four years. Car and truck sales have eased off the breakneck pace seen at the end of 2015, when the sales rate was above 18 million for every month from September through November. Auto sales have been boosted by a number of factors: low gas prices, more jobs and loose lending standards, among them.

U.S. Light Vehicle Sales increase to 17.4 million annual rate in April -- Based on an estimate from AutoData, light vehicle sales were at a 17.42 million SAAR in April.  That is up about 4% from April 2015, and up about 6% from the 16.46 million annual sales rate last month.  This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for April (red, light vehicle sales of 17.42 million SAAR from AutoData). This was slightly above the consensus forecast of 17.3 million SAAR (seasonally adjusted annual rate). The second graph shows light vehicle sales since the BEA started keeping data in 1967. Note: dashed line is current estimated sales rate. Sales for 2016 - through the first four months - are up about 3% from the comparable period last year.

Decent news on houses and cars -- The two most leading parts of the consumer economy are houses and cars. Both were going strong last year before wobbling in the last few months. In the last week, however, we've received some positive news on both. First, the existing negative stats about housing: new home sales, which peaked over a year ago, and permits, which peaked last June: The good news we got last week was that real private residential investment rose as a share of GDP to a new post recession high (blue in the graph below). This typically peaks over a year before the next recession. Single family permits (red) also remain positive: Yesterday April motor vehicle sales returned to 17 million plus annualized (h/t Bill McBride): Car sales tend to plateau during expansions and decline at least 6 months before a recession. Had car sales had another month under 17 million, that would have been a bad sign. April returned us to the plateau range, so March might have been just a one-off exception. I don't want to oversell either of these data points. But they are positives that are consistent with the economy continuing to grow into next year.

Large Truck Orders Continue To Plunge, Down 39% In April -- Class 8, “heavy duty” truck orders are down 39% from a year ago. The Wall Street Journal reports Truck Orders Fall in April. Last month, trucking fleets ordered just 13,500 Class 8 trucks, the big rigs used on long-haul routes, down 16% from March and 39% from a year earlier. It was the fewest net orders in any April since 2009, FTR said. DAT Solutions, an Oregon-based transportation data firm, reported that loads available for dry vans, the most common type of tractor-trailers used for shipping consumer goods, fell 28% in April while capacity on the market was up 1.7% on a year-over-year basis.Eaton Corp. , the sales leader in heavy-duty truck transmissions, predicted that organic sales from its vehicles unit will fall 10%-12%, after earlier predicting that sales would drop 7% to 9%. The company lowered its outlook for the business after concluding there are at least 20,000 heavy-duty trucks built last year that are still sitting on dealer lots. Engine maker Cummins Inc. said on Tuesday it doesn’t expect any improvement in the truck market later in the year. It now expects heavy-duty truck production in North America to be at 210,000 vehicles this year, down 5% from its earlier view and down 28% from 2015’s actual volume. Cummins’ first-quarter sales of diesel engines to the heavy-duty truck market dropped 17% from a year earlier to $631 million.  CCJ reports Sagging truck orders ‘will probably get worse before it gets better’. Last month was the worst April for Class 8 truck orders since 2009 according to preliminary data released by FTR Wednesday. North American Class 8 truck net orders fell for the fourth consecutive month in April to 13,500 units, down 16 percent month-over-month and 39 percent year-over-year.

Air Freight Volumes Across Largest Global Market Tumble 15% In First Quarter -- For years, our biggest lament and recurring confirmation that unorthodox monetary policies are simply not working, has been tracking global trade - the lifeblood of any properly functioning global economy - which has not only failed to reach its pre-crisis growth rates, but especially over the past 2 years, has seen slowing dramatically. The latest evidence of this slowdown came earlier today when the International Air Transport Association (IATA) reported that demand for global air freight, measured in freight tonne kilometres, fell another 2% in March on subdued growth in world trade.Specifically, the IATA said that air freight volumes declined in annual terms for the second consecutive month in March 2016, and rounded out the weakest opening quarter of the year since 2012. While the IATA is somewhat hopeful that growth should pick up in the coming months as the US seaport disruption drops out of the annual comparison, it notes that the "broad signs of softness mean that 2016 is shaping up to be another weak year for air freight." Even muted optimism was hard to find in the statement of IATA Director General Tony Tyler who said that "expectations of purchasing managers gives little optimism for an early uptick. The combination of fierce competition, capacity increases and stagnant demand makes this a very difficult environment in which to generate profits." The reason for ongoing deterioration in trade - lack of demand: industry-wide capacity has continued to grow strongly as demand has fallen, keeping intense pressure on yields.

Rail Week Ending 30 April 2016: Rail Contracted 11.8 Percent From Same Month One Year Ago: Week 17 of 2016 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. All rolling averages moved deeper into contraction. The deceleration in the rail rolling averages began one year ago, and now rail movements are being compared against weaker 2015 data - and it continues to decline. There were port labor issues one year ago which affected intermodal movements - which skew the results both positively and negatively (this week again negatively as it is being compared to the shipping surge at the end of the strike). HOWEVER, one can ignore the strike which only affects intermodal - and concentrate on carloads - the data is very soft.  Carload traffic in April totaled 944,339 carloads, down 16.1 percent or 180,598 from April 2015. U.S. railroads also originated 1,028,460 containers and trailers in April 2016, down 7.5 percent or 83,729 units from the same month last year. For April 2016, combined U.S. carload and intermodal originations were 1,972,829, down 11.8 percent or 264,327 carloads and intermodal units from April 2015. In April 2016, five of the 20 carload commodity categories tracked by the AAR each month saw carload gains compared with April 2015. These included: miscellaneous carloads, up 25 percent or 4,743 carloads; coke, up 16.1 percent or 2.354 carloads; and chemicals, up 1.5 percent or 1,909 carloads. Commodities that saw declines in April 2016 from April 2015 included: coal, down 39.7 percent or 160,624 carloads; petroleum and petroleum products, down 25.1 percent or 15,122 carloads; and grain mill products, down 7.1 percent or 2,760 carloads. Excluding coal, carloads were down 2.8 percent or 19,974 carloads from April 2015. Total U.S. carload traffic for the first 17 weeks of 2016 was 4,087,620 carloads, down 14.3 percent or 83,729 carloads, while intermodal containers and trailers were 4,368,132 units, down 0.8 percent or 33,771 containers and trailers when compared to the same period in 2015. For the first four months of 2016, total rail traffic volume in the United States was 8,455,752 carloads and intermodal units, down 7.8 percent or 715,985 carloads and intermodal units from the same point last year.

Freight Rail Traffic Plunges: Haunting Pictures of Transportation Recession | Wolf Street: Total US rail traffic in April plunged 11.8% from a year ago, the Association of American Railroads reported today. Carloads of bulk commodities such as coal, oil, grains, and chemicals plummeted 16.1% to 944,339 units. The coal industry is in a horrible condition and cannot compete with US natural gas at current prices. Coal-fired power plants are being retired. Demand for steam coal is plunging. Major US coal miners – even the largest one – are now bankrupt. So in April, carloads of coal plummeted 40% from the already beaten-down levels a year ago. The AAR report: Rail coal traffic continues to suffer due to low natural gas prices and high coal stockpiles at power plants. Coal accounted for just 26% of non-intermodal rail traffic for US railroads in April 2016, down from 36% in April 2015 and 45% as recently as late 2011. Only five of the 20 commodity categories saw gains. Of the decliners, coal was the biggest. But petroleum products also plunged 25%, and grain mill products dropped 7%. Even without coal, carloads were down 3% year-over-year. But it’s not just coal. In April, loads of containers and trailers fell 7.5% year-over-year to 1,028,460 intermodal units. They transport goods for retailers and wholesalers. They haul parts, components, and assemblies for manufacturers. They haul imported goods from ports and borders to different destinations across the country, and they haul goods to be exported to the ports and borders. They’re a measure of the real economy. For the first 17 weeks of the year, total rail freight fell 7.8% from the same period a year ago, with carload traffic down 14.3% and intermodal down 0.8%.

International Trade May 4, 2016: The nation's trade gap narrowed in March but, unfortunately, is not a positive for the economic outlook. The gap came in at $40.4 billion in March vs a revised $47.0 billion in February and largely reflects a downgrade for imports which fell 3.6 percent in the month vs the prior month's 1.3 percent rise. Contraction in imports, though a positive for the gap, is however a negative indication for domestic demand, especially in this report as consumer goods show unusual weakness. And indications on foreign demand are also negative with exports, despite the positive effects of this year's depreciation in the dollar, slipping 0.9 percent vs February's 1.1 percent rise. Imports of consumer goods fell a very steep $5.1 billion in the month followed, in yet another major negative, by core capital goods which fell $1.6 billion. The former points to weak consumer demand and the latter points to weakness in business expectations. Oil was not a factor on the import side, averaging $27.68 per barrel vs February's $27.48 and making for a total petroleum deficit of $3.0 billion vs February's $3.5 billion deficit. Weakness on the export side is also concentrated in consumer goods, down $1.6 billion in the month, and includes a separate $0.7 billion decline for autos. Industrial supplies are also down. One positive is a $1.3 billion rise in core capital goods which, however, follows a long string of declines. A solid positive is a further gain for service exports, up 0.5 percent in the month and generally reflecting demand for the nation's technical and managerial expertise. The nation's gap with China, reflecting the decline in imported consumer goods, narrowed very sharply, to $20.9 billion in March from February's $28.1 billion. The narrowing with China offset widening gaps with the EU, at $13.1 billion, and with Mexico, at $5.4 billion, and also with Japan, at $6.7 billion.

Trade Deficit decreased in March to $40.4 Billion  - The Department of Commerce reported: The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $40.4 billion in March, down $6.5 billion from $47.0 billion in February, revised. March exports were $176.6 billion, $1.5 billion less than February exports. March imports were $217.1 billion, $8.1 billion less than February imports.  The trade deficit was smaller than the consensus forecast of $41.4 billion. The first graph shows the monthly U.S. exports and imports in dollars through March 2016.  Both imports and exports decreased in March. Exports are 6% above the pre-recession peak and down 5% compared to March 2015; imports are 6% below the pre-recession peak, and down 9% compared to March 2015. The second graph shows the U.S. trade deficit, with and without petroleum. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. Oil imports averaged $27.68 in March, up from $27.48 in February, and down from $46.47 in March 2015. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined a little since early 2012. The trade deficit with China decreased to $20.9 billion in March, from $31.2 billion in March 2015 (there was a surge in imports last year in March -as ships were unloaded - following the West Coast port slowdown). The deficit with China is a substantial portion of the overall deficit.

March 2016 Trade Data Looks Ugly: A quick recap to the trade data released today continues to paint a relatively dismal view of global trade. The unadjusted three month rolling average value of exports decelerated and imports accelerated (but all rolling averages are in contraction). Many care about the trade balance which improved because exports collapsed less than imports. <>

  • Import goods growth has positive implications historically to the economy - and the seasonally adjusted goods and services imports were reported down month-over-month. Econintersect analysis shows unadjusted goods (not including services) growth down 13.0 % month-over-month (unadjusted data) - down 9.3 % year-over-year (down 3.1 % year-over-year inflation adjusted). The rate of growth 3 month trend is decelerating and in contraction.
  • Exports of goods were reported down, and Econintersect analysis shows unadjusted goods exports growth deceleration of (not including services) 2.4 % month-over month - down 6.2% year-over-year (down 0.1% year-over-year inflation adjusted). The rate of growth 3 month trend is accelerating but in contraction.
  • The decline in seasonally adjusted (but not inflation adjusted) exports was consumer goods. Import decrease was due to consumer goods.
  • The market expected (from Bloomberg) a trade deficit of $-49.0 to -40.0 billion (consensus $-41.4 billion deficit) and the seasonally adjusted headline deficit from US Census came in at a deficit of $40.4 billion.
  • It should be noted that oil imports were up 27 million barrels from last month, and down 7 million barrels from one year ago.
  • The data in this series is noisy, and it is better to use the rolling averages to make sense of the data trends.

The headline data is seasonally but not inflation adjusted. Econintersect analysis is based on the unadjusted data, removes services (as little historical information exists to correlate the data to economic activity), and inflation adjusts. Further, there is some question whether this services portion of export/import data is valid in real time because of data gathering concerns. Backing out services from import and exports shows graphically as follows:

US Trade Deficit Tumbles As Overall Imports Plunge, Even As Oil Imports Continue To Rise -- In a surprising development, the U.S. monthly international trade deficit decreased substantially in March 2016 from $47.0 billion in February (revised) to $40.4 billion in March, below the $41.2 billion expected, as exports declined by a modest $1.5 billion, a 0.9% drop to $176.62BN from $178.16BN in Feb. At the same time imports outright plunged by $8.1 billion, down 3.6% in March to $217.06BN from $225.13BN in Feb. Curiously this happened just as Canada announced a trade deficit of C$3.4 billion, the widest on record. In March, the US trade deficit excluding petroleum was $37.48 billion. The previously published February US deficit was $47.1 billion. The goods deficit decreased $6.0 billion from February to $58.5 billion in March. The services surplus increased $0.5 billion from February to $18.1 billion in March.

  • Exports of goods and services decreased $1.5 billion, or 0.9 percent, in March to $176.6 billion. Exports of goods decreased $1.8 billion and exports of services increased $0.3 billion.
  • The decrease in exports of goods mainly reflected decreases in consumer goods ($1.6 billion) and in industrial supplies and materials ($0.8 billion). An increase in capital goods ($1.0 billion) was partly offsetting.
  • The increase in exports of services mainly reflected increases in travel (for all purposes including education) ($0.2 billion) and in transport ($0.1 billion), which includes freight and port services and passenger fares.
  • Imports of goods and services decreased $8.1 billion, or 3.6 percent, in March to $217.1 billion. Imports of goods decreased $7.9 billion and imports of services decreased $0.2 billion.
  • The decrease in imports of goods mainly reflected decreases in consumer goods ($5.1 billion) and in capital goods ($1.6 billion).
  • The decrease in imports of services was more than accounted for by a decrease in transport ($0.4 billion).

U.S.-Korea trade deal resulted in growing trade deficits and more than 95,000 lost U.S. jobs  When the U.S.-Korea Free Trade Agreement (KORUS) was passed just over four years ago, President Obama said that the agreement would support 70,000 U.S. jobs. This claim was supported by a White House fact sheet that claimed that the KORUS agreement would “increase exports of American goods by $10 to $11 billion…” and that they would “support 70,000 American jobs from increased goods exports alone.” Things are not turning out as predicted. Far from supporting jobs, growing goods trade deficits with Korea have eliminated more than 95,000 jobs between 2011 and 2015. Expanding exports alone is not enough to ensure that trade adds jobs to the economy. Increases in U.S. exports tend to create jobs in the United States, but increases in imports lead to job loss—by destroying existing jobs and preventing new job creation—as imports displace goods that otherwise would have been made in the United States by domestic workers. Thus, it is changes in trade balances—the net of exports and imports—that determine the number of jobs created or displaced by trade and investment deals like KORUS. In the first four years after KORUS took effect, there was absolutely no growth in total U.S. exports to Korea, as shown in the figure below. Imports from Korea increased $15.2 billion, an increase of 26.8 percent. As a result, the U.S. trade deficit with Korea increased $15.1 billion between 2011 and 2015, an increase of 114.6 percent, more than doubling in just four years.

Factory Orders May 4, 2016: Factory orders rose a solid 1.1 percent in March but follow a downward revised 1.9 percent decline in February. Durable goods orders are unrevised from last week's advance report at plus 0.8 percent while non-durable goods, the fresh data in today's report, rose 1.5 percent and reflect price increases for energy products. March's report got a major lift from a 49 percent jump in defense goods which, reflecting gains for defense aircraft, contributed to a 2.8 percent boost for transportation. But the gain for transportation masks a 0.9 percent decline for vehicle orders and a 5.7 percent decline for civilian aircraft. Excluding transportation, factory orders rose 0.8 percent vs a 0.9 percent decline in the prior month. This is the first gain for ex-transportation since October and the largest since June 2014. Softness in orders is centered in capital goods where the core reading inched only 0.1 percent vs February's 2.7 percent drop. Shipments of core capital goods, which are an input into GDP's business investment component, did rise 0.5 percent but follow declines of 1.8 and 1.4 percent in February and January. Total shipments rose 0.5 percent in March but again follow declines in the prior two months. Unfilled orders slipped 0.1 percent following a 0.4 percent decline in February in readings of special concern. Inventories, which are heavy given the overall softness, rose 0.2 percent but the build did not change the inventory-to-shipment ratio which held at 1.37. The factory sector has yet to get much lift from dollar depreciation and an expected gain for exports, though anecdotal indications on export orders did show isolated gains for April.

March 2016 Manufacturing New Orders Improved?: US Census says manufacturing new orders improved. Our analysis says sales declined. However, the rolling averages improved, but remain in contraction. Defense new orders were the major tailwind - and most of the data was mixed. US Census Headline:

  • The seasonally adjusted manufacturing new orders is up 1.1 % month-over-month, and down 2.0 % year-to-date (last month was down 1.7 % year-to-date)..
  • Market expected (from Bloomberg) month-over-month growth of 0.3 % to 1.6 % (consensus +0.6 %) versus the reported +1.1 %.
  • Manufacturing unfilled orders down 0.1 % month-over-month, and down 1.7 % year-over-year.

Econintersect Analysis:

  • Unadjusted manufacturing new orders growth decelerated 3.0 % month-over-month, and down 2.8 % year-over-year.
  • Unadjusted manufacturing new orders (but inflation adjusted) up 0.7 % year-over-year - there is deflation in this sector.
  • Three month rolling new order rolling averages accelerated 1.3 % month-over-month, but is down 2.0 % year-over-year.
  • Unadjusted manufacturing unfilled orders growth decelerated 0. % month-over-month, and down 1.7 % year-over-year
  • As a comparison to the inflation adjusted new orders data, the manufacturing subindex of the Federal Reserves Industrial Production growth decelerated 0.2 % month-over-month, and up 0.5 % year-over-year.

The Manufacturing Recession That Won't Go Away: Factory Orders Rebound From 5 Year Lows, Decline For 17 Months - In 60 years, the US economy has never suffered a 17-month continuous YoY drop in Factory orders without being in recession. Which begs the question: are we in one now. Moments ago the Department of Commerce confirmed that in March, US factory orders - despite rising 1.1% sequentially and above the 0.6% expected -  declined for 17th consecutive month on an annual basis, dropping 4.2% from a year ago. The silver lining: at $458 billion, the dollar amount was a modest rebound from February's downward revised $453 billion, which as we noted last month was the lowest print in the past 5 years.

Core Durable Goods Orders Tumble For 14th Month To Lowest Since 2013 -- As the avalanche of data comes to an end for today, following factory orders, durable goods final data for March paints an ugly picture of the US manufacturing economy. Not only did Core Durable Goods Orders drop 1.4% YoY - the most since Dec 2015 - but the overall level fell to its lowest since Dec 2013. The 14th straight month of YoY declines has not occurred absent an overall US economic recession, and this is the first 27-month decline since Lehman...

Advanced Economies Must Still Make Things - IEEE Spectrum: Manufacturing has become both bigger and smaller. During the past 10 years the worldwide value of manufactured products has grown, in inflation-adjusted terms, by more than 60 percent, surpassing US $12 trillion in 2015. Meanwhile, the relative importance of manufacturing is dropping fast, retracing the earlier retreat of agriculture (now just 4 percent of the world’s economic product). Based on the United Nations’ uniform national statistics, the manufacturing sector’s contribution to global economic product declined from 25 percent in 1970 to about 15 percent by 2015. The decline has registered in the stock market, which values many service companies above the largest manufacturing firms. At the end of 2015, Facebook, that purveyor of updated selfies, had a market capitalization of nearly $300 billion, about 50 percent more than Toyota, the world’s premier maker of passenger cars. And SAP, Europe’s largest software provider, was worth about 75 percent more than Airbus, Europe’s largest maker of jetliners. And yet manufacturing is still important for the health of a country’s economy, because no other sector can generate nearly as many well-paying jobs. Take Facebook, which at the end of last year had 12,691 employees, versus the 344,109 that Toyota had at the end of its fiscal year, in March 2015. Making things still matters. The top four economies remain the top four manufacturing powers, accounting for about 55 percent of the world’s manufacturing output in 2015. China is at the top of the list, followed by the United States (whose gross national product is still nominally No. 1), Japan, and Germany. But these countries differ markedly in the relative importance of manufacturing to their economies. The sector contributed about 28 percent of China’s GDP in 2014, second only to South Korea, with 30 percent. In the same year, manufacturing’s share came to about 23 percent in Germany, 19 percent in Japan, and only 12 percent in the United States total.

ISM Manufacturing index decreased to 50.8 in April - The ISM manufacturing index indicated expansion for the second consecutive month in April, following five months of contraction. The PMI was at 50.8% in April, down from 51.8% in March. The employment index was at 49.2%, up from 48.1% in March, and the new orders index was at 55.8%, down from 58.3% in March. From the Institute for Supply Management: April 2016 Manufacturing ISM® Report On Business® . "The April PMI® registered 50.8 percent, a decrease of 1 percentage point from the March reading of 51.8 percent. The New Orders Index registered 55.8 percent, a decrease of 2.5 percentage points from the March reading of 58.3 percent. The Production Index registered 54.2 percent, 1.1 percentage points lower than the March reading of 55.3 percent. The Employment Index registered 49.2 percent, 1.1 percentage points above the March reading of 48.1 percent. Inventories of raw materials registered 45.5 percent, a decrease of 1.5 percentage points from the March reading of 47 percent. The Prices Index registered 59 percent, an increase of 7.5 percentage points from the March reading of 51.5 percent, indicating higher raw materials prices for the second consecutive month. Manufacturing registered growth in April for the second consecutive month, as 15 of our 18 industries reported an increase in new orders in April (up from 13 in March), and 15 of our 18 industries reported an increase in production in April (up from 12 in March)."

April 2016 ISM Manufacturing Survey Declined But Remained In Expansion.: The ISM Manufacturing survey is in expansion for the second month after 5 months in contraction - however it declined and is barely positive. The key internals likewise declined and remained positive. The PMI manufacturing Index, also released today, is exactly at the same level.. The ISM Manufacturing survey index (PMI) marginally declined from 51.8 to 50.8 (50 separates manufacturing contraction and expansion). This was at expectations which were 49.5 to 52.5 (consensus 51.5). Earlier today, the PMI Manufacturing Index was released - from Bloomberg: The regional Fed manufacturing surveys indicated some growth in March, and now the ISM indicates manufacturing shows expansion also. The manufacturing sector has started out the second quarter completely flat, based at least on the April PMI which fell 7 tenths to 50.8. New orders did rise modestly in the month but that's the only good news in the report. Export orders, contracting at the fastest pace in more than a year, are not showing any lift yet from the lower dollar. And higher oil prices are not helping capital spending in the energy sector which remains a major negative for the sample. Output is flat, backlog orders are in contraction for a third straight month, and employment has completely stalled. And manufacturers continue to work down inventories as much as possible. Prices for raw materials, reflecting higher costs for oil-related products, did rise but not selling prices which are decreasing further. This report isn't closely watched but the ISM manufacturing report is, and similar results for ISM, which will be posted at 10:00 a.m. ET, could shake the U.S. outlook and perhaps global markets with it. Relatively deep penetration of this index below 50 has normally resulted in a recession.

ISM Manufacturing Survey Reports a Ho-Hum PMI of 50.8% - Robert Oak - The April 2016 ISM Manufacturing Survey is a ho-hum month of manufacturing molasses.  While in growth, Manufacturing is barely so and inventories are in their 10th month of contraction.  PMI was 50.8%, -1.0 percentage point lower than March.  New orders dropped -2.5 percentage points but are still in growth.  Manufacturing Employment is still contracting and has been for five months.  Overall it looks like manufacturing is on the cusp with very lukewarm, treading water type of growth.  The ISM Manufacturing survey is a direct survey of manufacturers.  Generally speaking, indexes above 50% indicate growth and below indicate contraction.  Every month ISM publishes survey responders' comments, which are part of their survey.  This month the comments were amazingly upbeat considering the actual index.  Lackluster and sluggish were words used to describe business with some saying they see signs of future pick up activity.  New orders dropped -2.5 percentage points to 55.8% which is solid growth.  The Census reported March durable goods new orders increased 0.8%, where factory orders, or all of manufacturing data, will be out later this week.  Note the Census one month behind the ISM survey.  The ISM claims the Census and their survey are consistent with each other and they are right.  Below is a graph of manufacturing new orders percent change from one year ago (blue, scale on right), against ISM's manufacturing new orders index (maroon, scale on left) to the last release data available for the Census manufacturing statistics.  Here we do see a consistent pattern between the two and this is what the ISM says is the growth mark: A New Orders Index above 52.3 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders. Below is the ISM table data, reprinted, for a quick view.

"No End In Sight To Current Downturn" - US Manufacturing Plunges To Sept 2009 Lows - Following April's flash PMI print plunge to cycle lows - blamed on the presidential election uncertainty - Markit's Final Manufacturing PMI printed 50.8 (as expected) its lowest since September 2009. New orders weakened further as the rate of job creation tumbles to thre-year lows. ISM Manufacturing fell back from its oddly decoupled bounce to July 2015 highs to a coincidental 50.8 (missing expectations of 51.4). As Markit concludes, apparently peddling fiction, "the April PMI data suggest there’s no end in sight to the current downturn in manufacturing activity...raising question marks over whether GDP growth will improve on the near-stalling seen in the first three months of the year." Manufacturing PMI Headline output and employment data are ugly... Notably, despite the drop, all respondents 'cherry picked' by ISM were positive. However, commenting on the final PMI data, Chris Williamson, chief economist at Markit said:“The April PMI data suggest there’s no end in sight to the current downturn in manufacturing activity. The survey indicates that factory output is dropping at an annualized rate of approximately 3%, and factory headcounts are being culled at a rate of around 10,000 per month.“Destocking is also very much in evidence as companies often reported weaker than expected demand and exports are slumping at the fastest rate for one and a half years. “Rather than reviving after a disappointingly weak first quarter, the data flow therefore appears to be worsening in the second quarter, raising question marks over whether GDP growth will improve on the near-stalling seen in the first three months of the year.”

PMI Services Index May 4, 2016: Highlights The services PMI for April came in at a soft but still expansionary plus-50 reading of 52.8 in April, up from 52.1 in April's flash and 51.3 in March. April's final is the best reading since January and points to moderate growth for the bulk of the U.S. economy. New orders bounced up from a survey low in March while business activity also improved. Not improving, however, and echoing this morning's ADP report is employment which softened in the month for the weakest rate of growth so far this year. Weakness in employment reflects, to a significant degree, contraction in backlogs which are down for a 9th straight month. Input prices rose in the month, reflecting higher energy costs, but selling prices remained unchanged which points to further pressure on operating margins. Though better than March, the April report still reflects caution over the economic outlook.

April 2016 ISM Services Index Slightly Stronger: The ISM non-manufacturing (aka ISM Services) index continues its growth cycle, and improved insignificantly from 54.5 to 55.7 (above 50 signals expansion). Important internals were mixed but remain in expansion. Market PMI Services Index was released this morning, and also remains in expansion.. This was above expectations (from Bloomberg) of 53.5 to 55.5 (consensus 54.7). For comparison, the Market PMI Services Index was released this morning also - and it improved into expansion. Here is the analysis from Bloomberg:The services PMI for April came in at a soft but still expansionary plus-50 reading of 52.8 in April, up from 52.1 in April's flash and 51.3 in March. April's final is the best reading since January and points to moderate growth for the bulk of the U.S. economy. New orders bounced up from a survey low in March while business activity also improved. Not improving, however, and echoing this morning's ADP report is employment which softened in the month for the weakest rate of growth so far this year. Weakness in employment reflects, to a significant degree, contraction in backlogs which are down for a 9th straight month. Input prices rose in the month, reflecting higher energy costs, but selling prices remained unchanged which points to further pressure on operating margins. Though better than March, the April report still reflects caution over the economic outlook. There are two sub-indexes in the NMI which have good correlations to the economy - the Business Activity Index and the New Orders Index - both have good track records in spotting an incipient recession - both remaining in territories associated with expansion.

ISM Non-Manufacturing Index increased to 55.7% in April -- The April ISM Non-manufacturing index was at 55.7%, up from 54.5% in March. The employment index increased in April to 53.0%, up from 50.3% in March. Note: Above 50 indicates expansion, below 50 contraction.  From the Institute for Supply Management:April 2016 Non-Manufacturing ISM Report On Business®  "The NMI® registered 55.7 percent in April, 1.2 percentage points higher than the March reading of 54.5 percent. This represents continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index decreased to 58.8 percent, 1 percentage point lower than the March reading of 59.8 percent, reflecting growth for the 81st consecutive month, at a slower rate in April. The New Orders Index registered 59.9 percent, 3.2 percentage points higher than the reading of 56.7 percent in March. The Employment Index increased 2.7 percentage points to 53 percent from the March reading of 50.3 percent and indicates growth for the second consecutive month. The Prices Index increased 4.3 percentage points from the March reading of 49.1 percent to 53.4 percent, indicating prices increased in April for the first time in three months. According to the NMI®, 13 non-manufacturing industries reported growth in April. The majority of the respondents’ comments reflect optimism about the business climate and the direction of the economy." This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index. This was above the consensus forecast of 54.7, and suggests faster expansion in April than in March.

Weekly Initial Unemployment Claims increase to 274,000 -- The DOL reported: In the week ending April 30, the advance figure for seasonally adjusted initial claims was 274,000, an increase of 17,000 from the previous week's unrevised level of 257,000. The 4-week moving average was 258,000, an increase of 2,000 from the previous week's unrevised average of 256,000. There were no special factors impacting this week's initial claims. This marks 61 consecutive weeks of initial claims below 300,000, the longest streak since 1973. The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since 1971.

US Jobless Claims & Job Cuts Rise In April -- It’s not terrible, but today’s updates on layoffs for April imply that growth is fading for the US labor market. Deciding if the deceleration will roll on–or give way to firmer numbers–is unknown at this point. Until or if upcoming releases bring deeper clarity, for good or ill, it’s still reasonable to assume that modest growth is the path of least resistance. But this morning’s numbers follow yesterday’s surprisingly weak profile of US private-sector payrolls via ADP’s estimate. The negative news is partly offset by upbeat survey reports for the US services sector for April. Nonetheless, the employment data isn’t moving in the right direction at the moment. Will tomorrow’s official job report for April tell us otherwise? Yes, according to the consensus forecast via While we’re waiting for Friday’s news, let’s dig into the details on the latest figures for jobless claims and job cuts. New filings for unemployment benefits jumped 17,000 last week to a seasonally adjusted 274,000, the Labor Department reports. Although claims are still low by historical standards, last week’s increase is the biggest weekly advance since late-January, pushing filings to a five-week high. Meantime, so-called job cuts accelerated last month to just over 65,000, according to Challenger, Gray & Christmas (CGC), an outplacement firm. That’s the highest monthly total in three months, although the year-over-year trend eased to just under a 6% gain through April.

Challenger Job-Cut Report May 5, 2016: Highlights Large-scale cuts in the energy sector continue to swell Challenger's layoff count, at 65,141 in April vs 48,207 in March. Energy layoffs in April totaled a very large 19,759 which is still short of recent highs of 25,051 and 20,103 in February and January. Cuts in energy are tied, of course, to low energy prices while cuts in the computer sector, at an unusually large 17,015 in April and reflecting action at Intel, are the result of the shift in consumer demand toward mobile devices. April's heavy count of layoff announcements had no effect on jobless claims in the month which edged toward historic lows. And these results, though they do point to rising corporate cut-backs, are not likely to lower expectations for tomorrow's employment report where in-trend strength is expected.

April 2016 Job Cuts Job Cuts Jump to 65K: The pace of downsizing increased in April, as US-based employers announced workforce reductions totaling 65,141 during the month The April figure represents a 35 percent increase over March, when employers announced 48,207 planned layoffs. Last month's job cuts were 5.8 percent higher than the 61,582 recorded in April 2015. Employers have announced a total of 250,061 planned job cuts through the first four months of 2016. That is up 24 percent from the 201,796 job cuts tracked during the same period a year ago. It is the highest January-April total since 2009, when the opening four months of the year saw 695,100 job cuts. Said John A. Challenger, chief executive officer of Challenger, Gray & Christmas: We continue to see large scale layoffs in the energy sector, where low oil prices are driving down profits. However, we are also seeing heavy downsizing activity in other areas, such as computers and retail, where changing consumer trends are creating a lot of volatility. The energy sector announced another 19,759 job cuts in April, bringing the year-to-date total to 72,660. That is up 26 percent from the 57,556 energy-sector job cuts announced in the first four months of 2015. Computer firms announced 16,923 job cuts during the month; the highest total among all industries. That total includes 12,000 from chipmaker Intel, which is shifting away from the traditional desktop and laptop market and toward the mobile market. To date, computer firms have announced 33,925 job cuts, up 262 percent from a year ago, when job cuts in the sector totaled just 9,368 through the first four months of the year. Noted Challenger:

US job cuts rise to 65,141 in April; 2016 layoffs at 7-year high: Challenger: Layoffs by U.S.-based companies accelerated in April, sending year-to-date job cuts to the highest level since 2009, a private study reported Thursday. Domestic companies announced plans to let go 65,141 workers last month, a 35 percent increase from March, according to the report by outplacement firm Challenger, Gray & Christmas . In the first four months of the year, employers said they would hand out 250,061 pink slips. That is the highest total for the January-to-April period since 2009. "We continue to see large scale layoffs in the energy sector, where low oil prices are driving down profits. However, we are also seeing heavy downsizing activity in other areas, such as computers and retail, where changing consumer trends are creating a lot of volatility," Challenger CEO John A. Challenger said in a statement.The energy sector was once again the biggest driver of downsizing among U.S.-based companies. Employers in the sector said last month they would send 19,759 workers packing. They have laid off 72,660 employees this year — almost double the 2016 total of the next largest job-cutting sector, retail. In the computer industry, the 12,000 layoffs announced by Intel accounted for the lion's share of the sector's roughly 17,000 payroll reductions. Challenger cautioned that it is not unusual to see job cuts rise while the economy is improving. He noted layoffs were elevated near the height of the dotcom bubble in the late '90s.

Gallup U.S. Job Creation Index May 4, 2016: Employed Americans' reports of hiring activity where they work were essentially unchanged in April, keeping Gallup's Job Creation Index near its highest level ever recorded. The index averaged plus 30 in April, similar to the nine-year high of plus 32 reached in March, as well as on several other occasions over the past 11 months. Workers' perceptions of their employers' hiring have been relatively steady over the past couple of years, with index scores at or above plus 27 since May 2014. Upon reaching a new high of plus 32 in May 2015, the index held at this figure for six months straight. It has hovered around that level ever since, and matched the record high yet again in March. Reports of hiring in nongovernment workplaces ebbed a bit in April, dipping two points to plus 31 (based on 42 percent hiring and 11 percent letting go). The net hiring score among government workers was also down slightly, at plus 24 (based on 39 percent hiring and 15 percent letting go).

Gallup Good Jobs Rate May 5, 2016: April Gallup Good Jobs (GGJ) rate was 44.9 percent, up nominally from the March rate (44.4 percent) and, although lower than a number of months last summer and fall, it is higher than the rate in any April since Gallup began measuring it in 2010. The current rate is a full percentage point higher than in April 2015, suggesting an underlying increase in full-time work beyond seasonal changes in employment. The percentage of U.S. adults in April who participated in the workforce -- by working full time, part time or not working but actively seeking and being available for work -- was 67.3 percent. This is up slightly from the March rate (66.9 percent) and just above the 66.9 percent average workforce participation rate since July 2013. Current workforce participation is slightly lower than the period from March 2010 to June 2013, when it averaged 67.7 percent. The survey's unadjusted unemployment rate was 5.2 percent, down from March's 6.0 percent. April's unemployment estimate is the lowest for any month since Gallup began tracking the measure in 2010, and marks a general and continuing decline in unemployment over that period. Underemployment was 13.8 percent, also down slightly from March (14.4 percent) and tied with October 2015's measure for the lowest Gallup has recorded since 2010.

    ADP: Private Employment increased 156,000 in April  -- From ADP: Private sector employment increased by 156,000 jobs from March to April according to the April ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis...Goods-producing employment dropped by 11,000 jobs in April, down from a downwardly revised 5,000 in March. The construction industry added 14,000 jobs, which was down from March’s 18,000. Meanwhile, manufacturing lost 13,000 jobs after being revised down to -3,000 the previous month. Service-providing employment rose by 166,000 jobs in April, down from 189,000 in March. ... Mark Zandi, chief economist of Moody’s Analytics, said, “The job market appears to have stumbled in April. Job growth noticeably slowed, with some weakness across most sectors. One month does not make a trend, but this bears close watching as the financial market turmoil earlier in the year may have done some damage to business hiring.” This was below the consensus forecast for 193,000 private sector jobs added in the ADP report. 

    April 2016 ADP Job Growth Declines To 156,000 - Well Under Expectations: ADP reported non-farm private jobs growth at 156,000. The rolling averages of year-over-year jobs growth rate remains strong but the rate of growth continues in a downtrend (although unchanged this month). But there is no question that this was a weaker jobs report than expected.

    • The market expected 165,000 to 210,000 (consensus 193,000) versus the 156,000 reported. These numbers are all seasonally adjusted;
    • In Econintersect's April 2016 economic forecast released in late March, we estimated non-farm private payroll growth at 125,000 (based on economic potential) and 240,000 (fudged based on current overrun of economic potential);
    • This month, ADP's analysis is that small and medium sized business created 85 % of all jobs;
    • Manufacturing jobs declined 13,000.
    • All of the jobs growth came from the service sector as manufacturing contracted;
    • March report (last month), which reported job gains of 200,000 was revised down to 194,000;
    • The three month rolling average of year-over-year job growth rate has been slowing declining since February 2015 - it is now 2.04% (insignificantly changed from last month's 2.08%)

    ADP changed their methodology starting with their October 2012 report, and ADP's real time estimates are currently worse than the BLS. Per Mark Zandi, chief economist of Moody's Analytics: The job market appears to have stumbled in April. Job growth noticeably slowed, with some weakness across most sectors. One month does not make a trend, but this bears close watching as the financial market turmoil earlier in the year may have done some damage to business hiring.

    Zandi's "Job Creation Machine" Stalls As ADP Employment Growth Worst In 3 Years -- Against expectations of a 195k gain, ADP reported just 156k job growth in April with manufacturing losing jobs once again and services job growth clowing quickly to catch down to such negative indicators as ISM Services Employment. This is the worst headline print since April 2013. From last week's job-creation-machine firinmg on all cylinders, Mark Zandi is now more cautious - “The job market appears to have stumbled in April. Job growth noticeably slowed, with some weakness across most sectors. One month does not make a trend, but this bears close watching as the financial market turmoil earlier in the year may have done some damage to business hiring.” Overall this is the worst print since April 2013... Goods-producing employment dropped by 11,000 jobs in April, down from a downwardly revised 5,000 in March. The construction industry added 14,000 jobs, which was down from March’s 18,000. Meanwhile, manufacturing lost 13,000 jobs after being revised down to -3,000 the previous month. Service-providing employment rose by 166,000 jobs in April, down from 189,000 in March. The ADP National Employment Report indicates that professional/business services contributed 27,000 jobs, down a bit from March’s 31,000. Trade/transportation/utilities grew by 25,000, well down from the 42,000 jobs added the previous month. Financial activities added just 4,000. "Despite the softest overall monthly jobs added in three years, small businesses remained an engine for job growth in April,” said Ahu Yildirmaz, VP and head of the ADP Research Institute. “Smaller businesses are less susceptible to global conditions, such as low commodity prices and the strong dollar, that may have caused larger businesses to ease up on hiring.”

    April Employment Report: 160,000 Jobs, 5.0% Unemployment Rate -- From the BLSTotal nonfarm payroll employment increased by 160,000 in April, and the unemployment rate was unchanged at 5.0 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, and financial activities. Job losses continued in mining. ... The change in total nonfarm payroll employment for February was revised from +245,000 to +233,000, and the change for March was revised from +215,000 to +208,000. With these revisions, employment gains in February and March combined were 19,000 less than previously reported...In April, average hourly earnings for all employees on private nonfarm payrolls increased by 8 cents to $25.53, following an increase of 6 cents in March. Over the year, average hourly earnings have risen by 2.5 percent. The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes). Total payrolls increased by 160 thousand in April (private payrolls increased 171 thousand). Payrolls for February and March were revised down by a combined 19 thousand. This graph shows the year-over-year change in total non-farm employment since 1968. In April, the year-over-year change was 2.69 million jobs. A solid gain. The third graph shows the employment population ratio and the participation rate.The fourth graph shows the unemployment rate.  The unemployment rate was unchanged in April at 5.0%. This was below expectations of 200,000 jobs.

    Payrolls Miss Huge: April Jobs Rose Only 160K, Below 200K Expected; Unemployment Rate At 5% -- So much for the only indicator that confirmed a "strong recovery." In yet another Goldman jinx which just two days ago boosted its payrolls forecast from 225K to 240K, moments ago the BLS reported that ADP's ominous print was right when it said that April payrolls rose only 160K, far below the 200K expected, and higher than just 1 of 92 economist expectations. This was the lowest print since last September's 145K.  Private payrolls rose 171K on expectations of a 195K print, with last month's 230K revised steeply lower to 184K.The unemployment rate also missed expectations of a drop to 4.9% and stayed flat at 5.0%.The March 215K job growth was revised lower to 208K, while the February was also revised lower from 242K to 233K for a net -19K drop.* According to the BLS, total nonfarm payroll employment increased by 160,000 in April. Over the prior  12 months, employment growth had averaged 232,000 per month. In April, employment gains occurred in professional and business services, health care,  and financial activities, while mining continued to lose jobs. (See table B-1.)The breakdown:Professional and business services added 65,000 jobs in April. The industry added an average of 51,000 jobs per month over the prior 12 months. In April,  job gains occurred in management and technical consulting services (+21,000)  and in computer systems design and related services (+7,000). In April, health care employment rose by 44,000, with most of the increase  occurring in hospitals (+23,000) and ambulatory health care services (+19,000). Over the year, health care employment has increased by 502,000. Employment in financial activities rose by 20,000 in April, with credit intermediation and related activities (+8,000) contributing to the gain. Financial activities has added 160,000 jobs over the past 12 months.

    BLS Jobs Growth Rate Declined In April 2016.: The BLS job situation headlines were relatively softer. Jobs growth decelerated this month - and the previous month's data was downwardly revised. Economic intuitive sectors remained positive. The rate of growth for employment decelerated this month (red line on graph below).

    • The unadjusted jobs increase month-over-month was average for times of economic expansion.
    • Economic intuitive sectors of employment were positive.
    • This month's report internals (comparing household to establishment data sets) was significantly inconsistent with the household survey showing seasonally adjusted employment declining 316,000 vs the headline establishment number of growing 160,000. The point here is that part of the headlines are from the household survey (such as the unemployment rate) and part is from the establishment survey (job growth). From a survey control point of view - the common element is jobs growth - and if they do not match, your confidence in either survey is diminished. [note that the household survey includes ALL jobs growth, not just non-farm).
    • The household survey removed 362,000 people to the workforce.
    • BLS reported: 160K (non-farm) and 171K (non-farm private). Unemployment rate unchanged at 5.0%.
    • ADP reported: 156 K (non-farm private)
    • In Econintersect's April 2016 economic forecast released in late March, we estimated non-farm private payroll growth at 125,000 (based on economic potential) and 240,000 (fudged based on current overrun of economic potential);
    • NFIB comments on this Jobs Report is towards the end of this post.

    The April Jobs Report – The Numbers - WSJ - The Labor Department said hiring continued at a subdued pace in April. Here are highlights from Friday’s report.  U.S. employers added a seasonally adjusted 160,000 jobs in April, falling well short of the 205,000 forecast by economists. Monthly employment growth has averaged 192,000 in the first four months of the year, a slowdown from the 229,000 average in 2015.  The unemployment rate stayed at 5% in April, meaning that nearly 8 million Americans who were looking for work couldn’t find a job last month. That’s half of its 2009 peak of 10%. In March, Federal Reserve officials projected the unemployment rate would fall to 4.7% by the end of this year, and drop to 4.6% in 2017.   Another gauge of slack in the labor market is the broader measure of unemployment that includes workers stuck in part-time jobs or too discouraged to search for work. It stood at 9.7% last month, matching February’s rate, which was the lowest since 2008.   The share of Americans participating in the work force stood at 62.8% in April, down from 63% in March but up 0.4 percentage points from a multi-decade low of 62.4% in September. Continuing improvement in the job market should draw more workers off the sidelines, but the aging U.S. population means many older workers may be gone from the labor market for good.  Average hourly earnings for private-sector workers last month rose 0.3%, or 8 cents, following a 6-cent increase in March. That brings April’s average hourly earnings up 2.5% from April 2015. The average workweek rose 0.1 hours to 34.5 hours last month. Some economists are concerned that as wages rise, falling corporate profits will make it harder for firms to keep adding workers.  Both March and February’s job gains were revised downward, resulting in 19,000 fewer jobs added than had been previously reported.

    US Employment Growth Continued To Slow In April -- Company payrolls increased by a lower-than-expected 171,000 last month, the US Labor Department reports–the weakest gain in three months. The crowd had been looking for stronger results near +200,000. Instead, this morning’s update falls in line with ADP’s April profile of weaker growth. The news provides more evidence that the US macro trend is off to a sluggish start in the second quarter, but it’s premature to assume the worst via today’s data. The labor market’s expansion has been decelerating this year, but for the moment the downshift doesn’t exceed the low points of the last several years. In short, we’ve been here before and without sinking into a new recession. Will it be different this time? No one knows, but the worst you can say at the moment is that we’re knee-deep in another soft patch that may or may not lead to a new downturn.  On the plus side, private payrolls are still growing at a healthy annual rate, rising by nearly 2.2% in April vs. the year-earlier level. That’s a robust trend… if it holds. The problem is that the annual pace has been edging lower for much of the past year. But let’s recognize that the slowdown is unfolding in slow motion, which implies that a sharp slide is nowhere on the horizon. In other words, the bigger concern at the moment is less about the economy slipping into a new NBER-defined recession vs. weak growth that becomes even weaker over an extended period of time. That may turn out to be an irrelevant distinction, depending on your personal finances and career path. In any case, the game of looking for a clear and distinct start to a new recession may fade into the mists of a post-2008 realm of warm and fuzzy macro trends subsumed by slow growth and unsatisfying job opportunities.

    Jobs report: Payroll number lower than expected but trend holds at 200,000: Payrolls rose 160,000 last month, less than the 200,000 we’ve come to expect and the smallest monthly gain since last September. Revisions to the prior two months data shaved 19,000 off of their previously reported gains. However, though this slower pace could represent a downshift in the rate of job creation, it is far too soon to jump to that conclusion. These monthly numbers are jumpy and require averaging a few months’ gains to get at the underlying trend. In fact, the monthly trend over the past three months is precisely 200,000... So, even while one can point to other slowing indicators, especially the 0.5% GDP growth in the first quarter of the year, do not assume the job market is softening. The rest of the report provides indicators that bounce both ways. On the soft side, the slipping of the labor force participation rate was a real disappointment and a reversal of a recent upward trend in this closely watched metric of movements in and out of the labor force (see figure). After rising from a low of 62.4% last September to 63% in April, the LFPR ticked back down in May to 62.8%. That’s still significantly off its lows, and again, the monthly numbers are jumpy, but this was the number I liked least in today’s report, especially since the same 0.2 percentage point decline was seen among prime-age workers, meaning the drop can’t be pinned on aging retirees.On the other hand, both average hourly wages and weekly earnings continue to beat (very low) inflation (weekly hours ticked up slightly last month), with both earnings measures up 2.5% over the past year, while inflation’s running around 1%. ... Underemployment, which includes about six million part-time workers who’d rather work full-time (and are thus under-employed), ticked down slightly but remains elevated at 9.7%. I’ve argued that an underemployment rate about a percentage point lower than this is consistent with full-employment, meaning there’s still slack left to be squeezed out of the job market. ... As noted, GDP rose only 0.5% and productivity fell 1% in the first quarter of this year, obviously weak indicators. Now we can add a jobs report that’s off its recent pace. Is the U.S. economy, just about to hit year seven of an expansion that begin in mid-2009, heading toward recession?

    The April Jobs Report in 9 Charts - U.S. employers added 160,000 jobs in April, and the unemployment rate was unchanged at 5%. Here’s a look into what we can learn by diving into the details of the monthly employment report. Over the past year, the economy has added a total of 2.7 million jobs. This is a somewhat slower pace than was seen over the course of 2015 when the economy was adding about 3 million jobs a year. Job growth is far from even across different industries. The mining and manufacturing industries are losing jobs, and federal and state government have barely grown over the past years. Professional and business services, and health care services, however, have each added over half a million jobs in the past year. Many economists prefer to look at measures of employment that include discouraged workers who would like work but have given up searching, or even gauges that include part-time workers who would like full-time work. When all these people are taken into account, the broadest measure of underemployment stands at 9.7%. The pace of hourly and weekly wage growth increased slightly in April to an average of 2.5%. The median unemployed person has been without work for 11.4 weeks. Those spells of unemployment have declined since 2010, but risen slightly over the past year. The share of the population that is working or in the labor force—that is, those working or actively looking for work—declined slightly this month. While a strong economy has been pulling some people back into the jobs market, the aging of the baby boom generation means large numbers of people are retiring each month. Workers age 25-54—the years in which most Americans are neither in school nor retirement—have higher employment and labor-force participation rates. While those rates had been improving, they have yet to recover to their pre-recession levels and both rates declined slightly in this month’s report. Unemployment rates vary considerably for workers with different levels of education.  The unemployment rate for college graduates declined this month to 2.4%, the lowest since early 2008. Unemployment climbed this month for workers without a high school diploma. The unemployment rate of black men and Hispanic women jumped this month, while the rate declined for black women. Overall, unemployment rates have trended down for all race and gender groups but remain somewhat higher than pre-recession levels.

    A disappointing jobs report overall --This morning’s employment situation report from the Bureau of Labor Statistics showed that the economy added 160,000 jobs in April and the unemployment rate held steady at 5.0 percent, while the labor force participation rate (LFPR) and the employment-to-population ratio (EPOP) ticked down. Nominal hourly wage growth held its recent trend, coming in at 2.5 percent over the year. Payroll employment growth of 160,000 is notably slower than recent months. Even with the downward revisions to March, job growth looks slower than first quarter of this year (averaging 203,000) or last quarter of 2015 (averaging 282,000). While it is true that as the economy reaches full employment, job growth would be expected to slow, we are not nearly close enough to full employment to view this slow down as a positive move. Given that the first quarter GDP numbers came in so weak as well (0.5 percent annualized), it’s unlikely April’s low growth is a data blip that will be significantly revised upwards.The LFPR had been ticking up for several months but unfortunately it dipped down in April, from 63.0 percent to 62.8 percent. Zeroing in on prime-age workers (ages 25-54 years old), their LFPR also fell in April, from 81.4 percent to 81.2 percent. These trends are directly reflected in a pick-up in the number of missing workers, which increased to 2.5 million in April. If the unemployment rate included these workers, who would be employed or looking for work if the labor market were stronger, it would be 6.5 percent, as opposed to the official rate of 5.0 percent. In general, labor force participation has been on the rise (and the number of missing workers has been falling) so hopefully this is just a one-month blip in the data and next month we will continue will the more promising trends. The prime-age EPOP fell in April as well, from 78.0 percent to 77.7 percent. As with the LFPR, the overall trend has been promising and hopefully will continue in upcoming months. Historically, the prime-age EPOP is still quite low, below its 2007 peak of 80.3 percent, and substantially below its 2000 peak of 81.9 percent. An even more troubling benchmark for April’s 77.7 percent prime-age EPOP is that it remains below the worst of the last two business cycles (78.1 percent in 1993).

    Comments: A Decent Employment Report  - Although the headline number for job creation was below expectations, this was still a decent report. Some positives include more wage growth (see below), fewer part time workers for economic reasons, fewer long term unemployed, and a decline in U-6 (an alternative measure of underemployment).  Total employment is now 5.5 million above the pre-recession peak. Total employment is up 14.2 million from the employment recession low. Private payroll employment increased 171,000 in April, while government employment declined 11,000 in April, mostly at the Federal level. Private employment is now 5.8 million above the pre-recession peak. Private employment is up 14.6 million from the recession low. In April, the year-over-year change was 2.69 million jobs.  Since the overall participation rate has declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old. In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle. The 25 to 54 participation rate decreased in April to 81.2%, and the 25 to 54 employment population ratio decreased to 77.7%. The participation rate and employment population ratio for this group has increased sharply over the last several months. The participation rate for this group might increase a little more (or at least stabilize for a couple of years) - although the participation rate has been trending down for this group since the late '90s.On a monthly basis, wages increased at a 3.8% annual rate in April. The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.5% YoY in April.  This series is noisy, however overall wage growth is trending up.The number of persons working part time for economic reasons decreased in April. This level suggests slack still in the labor market. These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 9.7% in April.

    562,000 Workers Drop Out Of The Labor Force As Participation Rate Resumes Drop --  In addition to the poor headline Establishment survey print which rose only 160,000 in April, coupled with a deplorable Household survey employment number which plunged by 316,000 for the month and below levels seen in February, an even more concerning development was the resumption in the deteriorating trend in the US labor force participation rate, which in recent months had been on a steady increase as far fewer workers were dropping out of the workforce (contrary to convention wisdom, this was not driven by new entrants into the labor force). All that changed today, when the number of Americans not in the labor force soared by a whopping 562,000 in April, pushing the grand total of people not in the labor force back over 94 million and fast approaching the all time high of 94.6 million.As a result, the participation rate, which recently had climbed to 63% or the highest since early 2014, has once again resumed its downward slope with the April print down to just 62.8% as the poor labor and demographic conditions once again emerge as a key driver within the US workforce.

    Prime Aged Workers Tumble By 280K, Workers 55 And Over Surge To New All Time High -- In addition to the troubling trend revealed by the yet again declining labor participation rate as a result of hundreds of thousands of Americans dropping out of the labor force (and lack of entrants), one other recurring concern we have had with the jobs report is that new job growth has disproportionately gone to elderly workers, those 55 and over at the expense of young (16-24) and prime aged (25-54) workers. This trend reverted itself in April. As the chart below shows, in April the household survey showed that when broken down by age group, a grand total of 270K jobs were lost, but it was the composition that was the issue because once again it was the prime-aged workers that took the brunt of the job cuts, as a whopping 284K workers aged 25-54 lost their jobs in the past month.This means that while total workers aged between 16 and 54 are still some 3.5 million belowwhere they were in December of 2007, during the same period workers aged 55 and over have grown by a whopping 8.1 million to a new all time high of 34.4 million, and as of this moment the oldest worker group comprises a record 22.8% of the total number of workers (per the Establishment survey) of 151 million.

    Where The April Jobs Were -- We already know that the quantity of the April jobs was disappointing, but what about thequality? Well, on one hand the BLS reported that based on the Household Survey, in April 253K full time jobs were lost so there's that. But what did the Establishment Survey, which is the far more massaged one and thus the one that algos pay the most attention to, show? As the chart at the bottom reveals, following the March job gains which were driven by low paying education/health and retail trade as well as the better paying construction worker jobs, in April retail trade saw a big drop (as we predicted would happen last month), construction work likewise exhausted its growth, while the old standbys of Education and Health and Leisure and Hospitality continued to increase, rising by 54K and 22K respectively. The biggest job growth category, however, was Professional and Business services (which typically includes part-time jobs although we break it out), which saw a 56K increase in April, the biggest move higher for this job group in years. An interesting rebound was observed in manufacturing jobs, which after tumbling by almost 30K last month, saw a modest 4K increase in April. On the other end, a surprising drop was seen in government workers, which declined by 11K, while the 8K drop in minin and logging workers was very much as expected as the shale drama continues.

    New Data Show U.S. Trade Deficit Doubled, More Jobs Lost Under Obama Trade Deal That Was Template for the TPP - Lori Wallach - Today's alarming fourth-year trade data on President Obama's U.S.-Korea Free Trade Agreement (FTA) arrived just as the Obama administration has started its hard sell to pass the Trans-Pacific Partnership (TPP). And that is a real problem for the White House.The Korea deal served as the U.S. template for the TPP, with significant TPP text literally cut and pasted from the Korea agreement. And the Obama administration sold the Korea deal with the same "more exports, more jobs" promises now being employed to sell TPP. And since then, our trade deficit with Korea more than doubled as imports surged and exports declined. The increase in the U.S. trade deficit with Korea equates to the loss of more than 106,000 American jobs in the first four years of the Korea FTA, counting both exports and imports, according to the trade-jobs ratio that the Obama administration used to promise at least 70,000 job gains from the deal.Today's Census Bureau trade numbers provide the grim data fueling the nationwide bipartisan trade revolt now underway as public opposition to more-of-the-same trade policies surges and presidential and congressional candidates spotlight the problems with the TPP and the failure of U.S. trade policies.  And the Korea trade debacle shuts down Obama's oft-repeated mantra that TPP opponents are somehow stuck in a past fight over the North American Free Trade Agreement (NAFTA). Today's job-killing trade data are the result of a 2011 trade agreement pushed passionately by Obama himself, which he sold as "fixing" NAFTA.

    Trump's deportation plan could slice 2 percent off U.S. GDP: study | Reuters: Donald Trump's vow to round up and deport all of America's undocumented immigrants if he is elected president could shrink the economy by around 2 percent, according to a study to be released on Thursday by conservative think tank the American Action Forum. The research adds to concerns about the Republican presidential nominee's policy proposals, which range from tearing up international trade agreements to building a wall along the U.S. border with Mexico. About 6.8 million of the more than 11 million immigrants living in the United States illegally are employed, according to government statistics. Removing them would cause a slump of $381.5 billion to $623.2 billion in private sector output, the Washington-based non-profit said in its analysis. The study added that removing those workers could leave potentially millions of jobs unfilled due to a lack of legal workers willing to do them. Industries with the highest share of undocumented workers include farming, construction and hospitality, according to the research. "The things Donald Trump has said are utterly unworkable," said Douglas Holtz-Eakin, the forum's president, and the top economic adviser to Senator John McCain's 2008 presidential campaign. Asked about the study on Thursday, Trump said he thought the analysts misunderstood his immigration policy, adding he wanted people to come into the country if they came "through the system." "I saw that report and they don't even have it right," Trump said

    What's behind the Recent Uptick in Labor Force Participation? Atlanta Fed's macroblog - The labor force participation rate had been generally declining since around 2007. However, that trend has partially reversed in recent months. As noted in the minutes of the March meeting of the Federal Open Market Committee, this rise was interpreted as further strengthening of the labor market. But will the increase persist? As shown in a previous macroblog post, the dominant contributor to the decline in participation during the last several years has been the aging of the population. To see what's behind the increase in participation during the last few months, the following chart breaks the participation rate change between the first quarters of 2015 and 2016 into a part that is the result of shifts in the age distribution (holding behavior within age groups fixed), and the parts that are the result of changes in behavior (holding the age distribution fixed). (enlarge)  During the last year, the negative effect on participation attributable to an aging population (0.22 percentage points) has been offset by a 0.23 percentage point decline in the share of people who want a job but are not counted as unemployed (including people who are marginally attached). This decline is an encouraging sign, and consistent with a tightening labor market. How much more can the want-a-job category improve? We don't really know. But that category's share of the population is currently about 0.3 percentage points above the prerecession trough of 2.0 percent. So at the current pace we would be at prerecession levels in about a year.

    U.S. labor costs rise modestly in first quarter | Reuters: U.S. labor costs rose steadily in the first quarter as the firming jobs market struggled to generate strong wage growth, which could give the Federal Reserve more latitude to hold off on an interest rate hike until later this year. The Employment Cost Index, the broadest measure of labor costs, increased 0.6 percent after an unrevised 0.5 percent gain in the fourth quarter, the Labor Department said on Friday. The first-quarter increase in the ECI was in line with economists' expectations. In the 12 months through March, labor costs rose 1.9 percent, well below the 3 percent threshold that economists say is needed to bring inflation closer to the Fed's 2 percent inflation target. Labor costs increased 2.0 percent in the year to December. The Fed on Wednesday left its benchmark overnight interest rate unchanged and suggested it was in no hurry to tighten monetary policy further. It hiked rates in December for the first time in nearly a decade. The moderate labor cost reading came on the heels of a report on Thursday showing broad weakness in the economy in the first quarter. Wage growth has been frustratingly slow and could remain moderate as the fairly robust labor market attracts people who had given up the search for work. Though employment gains have been broad, they have tended to be concentrated in the services industries, especially restaurants and the retail sector, which typically pay less compared to the manufacturing and construction sectors.

    Productivity and Costs May 4, 2016: The nation's output is slowing despite an increase in hours worked in what is the latest signal of structural weakness for the economy. Productivity fell at an annualized 1.0 percent rate in the first quarter for the 4th decline of the last six quarters. Output inched only 0.4 percent higher in the quarter despite a 1.5 percent rise in hours worked. Weak output makes for unwanted increases in unit labor costs which jumped 4.1 percent in the quarter for the largest gain since fourth-quarter 2014. Trouble in output and productivity reflects what have been declines in spending on capital goods, evident in last week's first-quarter GDP report where the business investment component posted its second straight drop. Employment may be strong but the productive capacity of each additional worker is on the decline.

    1Q2016 (Preliminary): Headline Productivity Contracts, Labor Costs Up: A simple summary of the headlines for this release is that the growth of productivity contracted while the labor costs grew (headline quarter-over-quarter analysis). The year-over-year analysis also shows labor costs increasing much faster than productivity. I personally do not understand why anyone would look at the data in this series as the trends are changed from release to release - and significantly between the preliminary and final release..The headlines annualize quarterly results (Econintersect uses year-over-year change in our analysis). If data is analyzed in year-over-year fashion, non-farm business productivity was up 0.7 % year-over-year, and unit labor costs were up 2.2 % year-over-year. Bottom line: the year-over-year data is saying that costs are rising faster than productivity. Although one could argue that productivity improvement must be cost effective, it is not true that all cost improvement are productivity improvements. [read more on this statement] Further, the productivity being measured is "capital productivity" - not "labor productivity". [read more on this statement here] Even though a decrease in productivity to the BLS could be considered an increase in productivity to an industrial engineer, this methodology does track recessions. [The current levels are well above recession territory. Please note that the following graphs are for a sub-group of the report nonfarm > business.

    US Worker Productivity Slumps At Worst Rate In 23 Years -- Despite a very modest beat of expectations US worker productivity fell for the 2nd quarter in a row (down 1.0% vs 1.3% QoQ), the two-quarter-average output per hour is down 1.4% - the worst slump since 1993. Unit labor costs rose by a better than expected 4.1% (helped by a downwardly revised 2.7% rise in Q4), the highest since Q4 2014.  America’s productivity slump is the biggest in nearly a quarter century... As Bloomberg notes, the confluence of falling productivity, higher labor costs and an economic slowdown are putting a dent in companies’ bottom lines, with earnings among S&P 500 Index members projected to slip for the fourth straight quarter. As we detailed previously, there are numerous reasons for this plunge in worker-productivity, from perverted inventives not to work to unintended consequences of monetary policy enabling zombies, but perhaps the most critical driver is exposed in the following dismal chart... 51% of total time spent on the Internet is on mobile devices - in 2015, first time ever mobile is #1 - to make a total of 5.6 hours per day snapchatting, face-booking, and selfying...

    The productivity slump and what to do about it - Jared Bernstein - But today, I’d like to explore a different problem: the significant downshift in productivity growth. . I’m afraid the slowdown is real... I think there are 5 reasons: slower growth of capital per worker, slower TFP, capital misallocation, the absence of full employment, and dysfunctional government (labor quality has been pretty constant, so it isn’t much implicated in the slowdown). ...First, as I detail here, there’s The Big Short problem: we have been misallocating capital to non-productive finance. ... Second, we are failing to tap a full employment productivity multiplier (FEPM). Among the pantheon of wrong-headed economic theories is the one that says: firms failing to operate at the edge of their productivity potential will be competed out of business by more productive firms. Unfortunately, in slack labor and credit markets, inefficient firms can handily maintain profit margins by squeezing workers and rolling over cheap loans. At full employment, workers have more bargaining clout, labor costs go up, and inefficiencies become more costly (Josh Bivens agrees and offers some evidence.) Third, analysis by Barry Eichengreen et al suggests that dysfunctional government eventually grinds down productivity growth. This strikes me as intuitive: an $18 trillion economy requires a government that can efficiently diagnose problems and prescribe solutions in areas of climate, infrastructure, education, innovation, social insurance, poverty and more. Our government, on the other hand, tends to engage in aimless votes to defund Obamacare and shudder the EPA and IRS. So, how can we better allocate capital, move toward full employment and restore functional government? for these productivity enhancing investments with a small tax on financial transactions. That would both raise revenues needed for public investment and raise the cost of non-productive, “noise” trading.

    What’s the deal with U.S. wage growth? - The U.S. unemployment rate has been at or under 5 percent for more than six months. But even though that number is close to many estimates of the long-run unemployment rate, neither inflation nor wage growth has picked up considerably, despite expectations that they would. To paraphrase an influential figure of the last era of full employment, what’s the deal with that? Why hasn’t accelerating—never mind strong—wage growth appeared yet? There are a number of possibilities, each a likely contributor to the failure of wage growth to pick up. The challenge is figuring out which are the largest contributors. But first, a quick review of  the state of nominal wage growth. After a period of seemingly being locked in at 2 percent, nominal wage growth in the United States appeared to pick up in 2015 by a number of measures. But as reflected in Figure 1, it looks like nominal wage growth has since halted its advances. Consider the Employment Cost Index, which seemed to show the first signs of accelerating wage growth in early 2015. The latest data for the first quarter of 2016, released this past Friday, show an annual growth rate of only 2 percent for private-sector workers. Nominal wage growth seems slightly higher according to the Current Employment Statistics data released every month with the jobs report. But both measures only show annual growth of about 2.3 percent—a decline from prior months.

    The Supreme Court Just Refused to Shield Corporate America From a $15 Minimum Wage. What Happens Now? -  With the Supreme Court’s decision Monday not to hear the fast food industry’s lawsuit against Seattle, the nation’s first $15 minimum wage law is safe – and opponents of higher pay floors for U.S. workers are running low on options. The decision upholds two previous rulings that Seattle’s law does not discriminate against franchise firms like McDonald’s. The case was the most prominent legal challenge to a large minimum wage hike in recent years, and one of several to fail. But while the hugely profitable industries that oppose Fight for $15 workers and their allies aren’t making much progress on the legal front, they’re far from done fighting. The minimum wage battleground reaches far beyond the legal arguments that have failed in Seattle, New York, and Washington, D.C.  With defeat in court long expected, , have opponents have turned instead to a more devious strategy: Cutting off working people’s primary avenue to economic independence before they even get to walk down it. You might expect self-described free-market critics to be content to let cities and states flirt with wage hikes, knowing that if they go too far the market will correct. But instead, corporate interests and their conservative allies are setting out to deny local communities the chance to even experiment with higher pay floors. Lawmakers in dozens of states have sought to preempt local employment laws of all kinds, from minimum wages to paid sick leave laws to anti-discrimination protections in the workplace.

    Raising the D.C. minimum wage to $15 by 2020 would lift wages for 114,000 working people  - Introduction and key findings.  Over the last four decades, typical Americans’ pay has stagnated—even though American workers are more productive and the economy has expanded. While low- and middle-income Americans are treading water, an enormous and rising share of income growth goes to corporate profits and the top 1 percent. The reason America’s prosperity in recent decades hasn’t benefited the vast majority is because those with the most wealth and power have enacted policies that exacerbate inequality. We can counter these efforts with policies—such as raising the minimum wage—that help ensure America’s prosperity is broadly shared. Advocates are now advancing a ballot initiative, The District of Columbia Minimum Wage Amendment Act of 2016, that would raise the D.C. minimum wage to $15 by 2020, and gradually lift the subminimum wage paid to tipped workers (such as waiters and bartenders) over a 9-year period until it equals the regular minimum wage. This report analyzes the likely effects of such an increase—in terms of the workers who would be affected and the resulting change in their pay. It also discusses some of the implications of raising and ultimately eliminating the separate lower minimum wage for tipped workers. Key findings include:

    • Raising the D.C. minimum wage to $15 by July 2020 would directly or indirectly raise wages for 114,000 workers—about 14 percent of all who work in the District of Columbia, and more than a fifth of D.C.’s private-sector workers (including nonprofit workers).
    • As the minimum-wage increase is phased-in, affected workers would receive $329 million in additional wages. Once the minimum wage reaches $15, the average affected worker would earn roughly $2,900 more annually than she would under the District’s current minimum-wage law (assuming no change in work hours).
    • The workers who would benefit (either directly or indirectly) from the higher minimum wage are overwhelmingly adult workers, most of whom come from families of modest means, and many of whom are supporting families of their own.

    The movement to end mass incarceration is still too weak to win big -- Once upon a time (last year), there was purportedly growing bipartisan consensus in Congress that mass incarceration needed to end. The resulting criminal justice reform legislation, however, ran into big trouble thanks to opposition from unreconstructed anti-crime warriors in the mold of Senator Tom Cotton, who says things like “it’s the victims of crime who will bear the costs of this dangerous experiment in criminal leniency.” So in classic Congressional fashion the bill is being deformed to attract more support. The most recent iteration of the Senate legislation, unveiled last week, frees judges to deal more leniently with low-level offenders and decreases harsh federal mandatory minimum sentences for drug offenders. It would also bring retroactive relief to thousands imprisoned under the old and racially-disproportionate crack sentencing regime. But it creates new mandatory minimums as well, including in cases involving fentanyl, a dangerously powerful opioid that is increasingly mixed with or substituted for heroin. Measures to decrease certain harsh firearm penalties have been cut. And while mandatory minimum sentences for drug offenders will be lower, they are are still remarkably draconian. “When first-time, nonviolent drug addicts…still get 15-year mandatory minimum sentences, we have to question how much reform is really being achieved,” Families Against Mandatory Minimums (FAMM) President Julie Stewart said in a statement that stopped short of either condemning or endorsing the bill. “The bill also takes some steps backward. It would now require courts to impose extra prison time for crimes involving fentanyl.”“But long sentences have been a dismal failure at stopping drug crime and abuse,” Stewart continued. “Congress would do better to invest more money in treatment rather than spend it on locking people up longer for drug crimes.”

    Solitary confinement is 'no touch' torture, and it must be abolished | Chelsea E Manning - Shortly after arriving at a makeshift military jail, at Camp Arifjan, Kuwait, in May 2010, I was placed into the black hole of solitary confinement for the first time. Within two weeks, I was contemplating suicide. After a month on suicide watch, I was transferred back to US, to a tiny 6 x 8ft (roughly 2 x 2.5 meter) cell in a place that will haunt me for the rest of my life: the US Marine Corps Brig in Quantico, Virginia. I was held there for roughly nine months as a “prevention of injury” prisoner, a designation the Marine Corps and the Navy used to place me in highly restrictive solitary conditions without a psychiatrist’s approval. For 17 hours a day, I sat directly in front of at least two Marine Corps guards seated behind a one-way mirror. I was not allowed to lay down. I was not allowed to lean my back against the cell wall. I was not allowed to exercise. Sometimes, to keep from going crazy, I would stand up, walk around, or dance, as “dancing” was not considered exercise by the Marine Corps. To pass the time, I counted the hundreds of holes between the steel bars in a grid pattern at the front of my empty cell. My eyes traced the gaps between the bricks on the wall. I looked at the rough patterns and stains on the concrete floor – including one that looked like a caricature grey alien, with large black eyes and no mouth, that was popular in the 1990s. I could hear the “drip drop drip” of a leaky pipe somewhere down the hall. I listened to the faint buzz of the fluorescent lights. For brief periods, every other day or so, I was escorted by a team of at least three guards to an empty basketball court-sized area. There, I was shackled and walked around in circles or figure-eights for 20 minutes. I was not allowed to stand still, otherwise they would take me back to my cell.

    Colorado city to pay restitution to poor jailed in 'debtor prison' | Reuters: The city of Colorado Springs has agreed to provide restitution to dozens of poor people wrongfully jailed because they could not afford to pay fines they incurred for petty infractions such as loitering or panhandling, attorneys said on Thursday. The settlement calls for the city to pay each of some 60 named individuals $125 for every day they spent locked up under a since-repealed ordinance that allowed incarceration of offenders who failed to pay fines for otherwise non-jailable offenses. The deal, providing for an estimated total payout of about $100,000, was announced in separate statements by the American Civil Liberties Union (ACLU) and Colorado's second-largest city. The case grew out of an ACLU study last year finding that despite the outlawing of so-called debtor prisons, judges in the city of 440,000 routinely converted fines into jail sentences, said Mark Silverstein, legal director of the group's Colorado chapter. "We hope today's settlement sends a loud and clear message to municipal courts throughout the state to stop using jail or the threat of jail to collect debts from persons who are too poor to pay," Silverstein said in a statement.

    How Big Data Harms Poor Communities -- Big data can help solve problems that are too big for one person to wrap their head around. But when the data is about humans—especially those who lack a strong voice—those algorithms can become oppressive rather than liberating. For many poor people in the U.S., the data that’s gathered about them at every turn can obstruct attempts to escape poverty. Low-income communities are among the most surveilled communities in America. And it’s not just the police that are watching Public-benefits programs, child-welfare systems, and monitoring programs for domestic-abuse offenders all gather large amounts of data on their users, who are disproportionately poor. In certain places, in order to qualify for public benefits like food stamps, applicants have to undergo fingerprinting and drug testing. Once people start receiving the benefits, officials regularly monitor them to see how they spend the money, and sometimes check in on them in their homes. Data gathered from those sources can end up feeding back into police systems, leading to a cycle of surveillance. “It becomes part of these big-data information flows that most people aren’t aware they’re captured in, but that can have really concrete impacts on opportunities,” Gilman says. Once an arrest crops up on a person’s record, for example, it becomes much more difficult for that person to find a job, secure a loan, or rent a home. And that’s not necessarily because loan officers or hiring managers pass over applicants with arrest records—computer systems that whittle down tall stacks of resumes or loan applications will often weed some out based on run-ins with the police.

    U.S. border apprehensions of families and unaccompanied children jump dramatically | Pew Research Center: Apprehensions of children and their families at the U.S.-Mexico border since October 2015 have more than doubled from a year ago and now outnumber apprehensions of unaccompanied children, a figure that also increased this year, according to a Pew Research Center analysis of U.S. Customs and Border Protection data. There were 32,117 apprehensions of family members – defined as children traveling with at least one parent or guardian – during the first six months of fiscal 2016 (October 2015 to March 2016). By comparison, apprehensions of unaccompanied children totaled 27,754 over the same period. The number of family apprehensions is more than double that of the previous year. The number of apprehensions of unaccompanied children shot up by 78%. The apprehension of more families than unaccompanied children is a reversal from summer 2014, when thousands of children fled gang violence and poverty in Central America and migrated north to the U.S. without a parent or guardian. During the first six months of fiscal 2014, there were 19,830 apprehensions of children and their families, compared with 28,579 apprehensions of unaccompanied children. It remains to be seen whether apprehensions of unaccompanied children or families will surge this summer and surpass the full-year apprehension totals from two years ago. This fiscal year, family and unaccompanied children apprehensions spiked in December 2015, and in January 2016 the Department of Homeland Security launched immigration raids targeting families. Since then, monthly border apprehensions have dropped below 2014 levels.

    Puerto Rico declares moratorium on Government Development Bank's debt | Reuters: Puerto Rico's governor on Sunday declared a moratorium on a $422 million debt payment due Monday by the island's Government Development Bank, the most significant default yet for the U.S. territory facing a massive economic crisis. Governor Alejandro Garcia Padilla said in a televised speech that he signed the moratorium on Saturday in what he characterized as a "painful decision" based on inaction from the U.S. Congress, which continues to debate a legislative fix for Puerto Rico's $70 billion debt load. Garcia Padilla, addressing Puerto Rico's 3.5 million people in Spanish, said the island's American citizens had sacrificed much for the nation throughout history and asked Congress on many occasions for tools to restructure its financial liabilities. "We do not want a bailout. We haven’t asked for a bailout. We haven’t been offered a bailout," he said as the U.S. territory's economic crisis enters its most dire stretch yet. Puerto Rico, a tropical paradise in economic purgatory, faces a $70 billion debt bill it knows it cannot pay, a staggering 45 percent poverty rate and a shrinking population as citizens flee to the mainland. The legality of this move to invoke the moratorium, which effectively means defaulting on the debt, is almost certain to be challenged by the GDB's creditors, and could spawn costly lawsuits and perpetuate more economic uncertainty for the island.

    On Puerto Rico, Congress Once Again Fails to Do the Obvious - When Alejandro García Padilla, the governor of Puerto Rico, announced that the island’s Government Development Bank would not pay its creditors an installment that was due on Sunday, he effectively put the territory into partial default. But what he really did was to acknowledge a hard fact: Puerto Rico owes far more money than it can possibly repay, and no one’s interests—least of all its citizens’—are being served by pretending otherwise.  Puerto Rico and its various government entities (like the Development Bank) owe, collectively, debts totalling seventy-two billion dollars, a burden that has almost doubled since 2003. It also has forty-four billion dollars in unfunded pension obligations. The island’s economy has been in recession for almost a decade, its poverty rate is above forty per cent, and it has been steadily losing population to the mainland. What this means is that Puerto Rico can’t keep paying its debts while also delivering a necessary modicum of services to its people. There are really only two ways out. The first is for Congress to agree to pay off Puerto Rico’s debts—something that isn’t going to, and shouldn’t, happen. The second is for Puerto Rico to do what any business in its situation would do: declare bankruptcy, so that its debts can be restructured. The problem is that Puerto Rico can’t legally do this, because the U.S. has no mechanism for handling a default by a state or commonwealth. (Puerto Rican cities can’t declare bankruptcy, either.) The territory can still default—even though there’s no legal mechanism for handling defaults by national governments, they do it all the time. But doing so without a formal procedure in place makes the fallout from default messier and more protracted than it needs to be.

    As Puerto Rico Defaults, Eyes Turn to Washington - Puerto Rico’s default on most of a $422 million debt payment on Monday puts the spotlight back on Washington to enact a rescue package for the island, and congressional aides said a revised bill would be introduced next week.On Monday, Treasury Secretary Jacob J. Lew renewed his call on Congress to act swiftly, warning in a letter to House Speaker Paul Ryan that without a legal framework for a debt restructuring, Puerto Rico is in danger of getting caught in “a series of cascading defaults” that could lead to a taxpayer bailout.“This is not just a matter of financial liabilities and litigation,” Mr. Lew said in the letter, which was circulated to other lawmakers and released publicly. Late last year, Mr. Ryan instructed the relevant House committees to find a “reasonable solution” for Puerto Rico. “The human costs for the 3.5 million Americans in Puerto Rico are real. And they are escalating daily,” Mr. Lew wrote. On Sunday, Gov. Alejandro García Padilla gave a televised address in which he announced the payment default — the biggest to date in Puerto Rico’s worsening debt crisis — and said he had to order it because Washington had failed to help in time.“We have repeatedly traveled to Washington to convey the urgency of the situation,” the governor said. “So far, no action has been taken. The crisis escalates each passing day.”

    Puerto Rico warns of more defaults after missing May payment - Gov. Alejandro Garcia Padilla warned that Puerto Rico bond investors face a cascade of defaults starting in July unless Congress passes legislation that facilitates a restructuring of the commonwealth’s debt. The exhortation made Monday in San Juan came a day after Mr. Garcia Padilla announced a moratorium on the payment of $400 million in Government Development Bank debt that matured Sunday. The governor said he was choosing to focus on providing essential services as the commonwealth’s financial crisis worsens, rather then to pay creditors. The default is the biggest yet by the island. The missed payment opens the door to larger and more consequential defaults on general-obligation bonds, which are protected by the island’s constitution. Puerto Rico and its agencies owe $2 billion July 1, including $805 million in GOs. It also could affect slow-moving efforts by U.S. lawmakers to resolve the biggest crisis ever in the municipal bond market. “We don’t anticipate having the money,” Mr. Garcia Padilla told a news conference in San Juan. “The really bigger deadline is the one the market’s more worried about, the July 1 payment,” Peter Hayes, who oversees $110 billion of state and local debt as the head of BlackRock Inc.’s muni group, said during an interview on Bloomberg Television. The May 1 payment “has been widely expected, generally known.”

    With Clock Ticking, Atlantic City Avoids Default -- But How Much Time Did It Buy? - City officials say there’s enough cash to get through the month; Christie and Sweeney continue to press for complete takeover.  It went down to the wire, but Atlantic City made a scheduled debt payment on time yesterday, avoiding what would have been the state’s first municipal default in nearly 80 years. Still, the city government remains on borrowed time thanks to its severe financial problems, with only enough money on hand to get through the rest of this month. All eyes now turn to Trenton, where a much-anticipated vote on a measure that would help ease the city through its fiscal challenges is scheduled for Thursday in the Assembly. But the vote comes while there’s still no consensus among lawmakers and Gov. Chris Christie on the best way to intervene in Atlantic City. That’s opened the door to intense lobbying, with the collective-bargaining rights of public workers and the city’s right to self-determination still the key sticking points. But the more immediate problem for the Atlantic City government was figuring out how to make a $1.8 million debt payment by the end of the day yesterday. Local officials had made it through the month of April by only a narrow margin, and property owners in the seaside resort have until next week to make their quarterly property tax payments without penalty. Faced with that crunch, some in the city had called for the government to skip the payment, arguing Wall Street could absorb the hit more than the city could. But Atlantic City Mayor Don Guardian announced during a news conference in city hall yesterday that enough property tax revenue had come in to allow the city to make the full debt payment by 10 a.m.

    There’s No Such Thing as a Free Rolex -- Zephyr Teachout - THIS week, the Supreme Court heard McDonnell v. United States, the case of Bob McDonnell, the former governor of Virginia who is appealing his 2014 conviction for public corruption. Although the court’s ruling is not expected until June, in Wednesday’s hearing several justices seemed set on undermining a central, longstanding federal bribery principle: that officials should not accept cash or gifts in exchange for giving special treatment to a constituent. Justice Stephen G. Breyer dismissed the idea that, in the absence of a strong limiting principle, federal law could criminalize a governor who accepted a private constituent’s payment in exchange for intervening with a constituent problem. Justice Samuel A. Alito Jr. expressed disbelief that an official requesting agency action on behalf of a big donor would be a problem. A majority seemed ready to defend pay-to-play as a fundamental feature of our constitutional system of government. In September 2014, after a six-week trial, a federal jury convicted Mr. McDonnell and his wife, Maureen, on multiple counts of extortion under the Hobbs Act, a key statute against political corruption, and honest-services fraud. It was not a complicated case. Jonnie R. Williams Sr., the chief executive of a dietary supplement manufacturer, Star Scientific, had showered the governor and first lady with gifts in return for favors. The McDonnells took expensive vacations, a Rolex, a $20,000 shopping spree, $15,000 in catering expenses for a daughter’s wedding and tens of thousands of dollars in private loans. In exchange, the governor eagerly promoted Mr. Williams’s product, a supplement called Anatabloc: hosting an event at the governor’s mansion, passing out samples and encouraging universities to do research.In one instance, Mr. McDonnell emailed Mr. Williams asking about a $50,000 loan, and six minutes later sent another email to his staff, requesting an update on Anatabloc scientific research. For the jury, that was more than enough to find Mr. McDonnell guilty.

    35,000 Alabamians no longer eligible for SNAP benefits - Montgomery Alabama news.: (WSFA) - Thirty-five-thousand Alabamians are no longer eligible for food stamps under the Supplemental Nutrition Assistance Program. As of Jan. 1, able-bodied adults, between 18 and 49-years-old, had to document that they had worked at least 20 hours a week by the first of May, or had to prove that they had dependents. Close to 50,000 Alabamians were in that category. The work requirement for food stamps hasn't been enforced since 2009. Brandon Hardin, the director of the Food Assistance Division, said the waiver to the requirement was allowed to expire because of the economy’s recovery. ""We have lost approximately 35-thousand indivduals due to the ABOD time limit requirement. It's about 4 or 5% of our total caseload, the total number of ABODs that we're currently dealing with." Those who are physically or mentally disabled, pregnant, or residents of 13 counties are exempt because their unemployment rate on average was higher than 10 percent last year. Those include Lowndes, Dallas, Perry and Barbour counties. As of this week, because of the requirement, there are 35,000 fewer people getting food stamps in Alabama.

    America’s continuing bad mood could be resulting in fewer babies -- The Economist presents a mystery in the decline of global fertility rates (seen in the above chart) since the Great Recession and Global Financial Crisis: The crunch was unsurprising: anxiety about jobs and money puts people off children. But a rich-world baby bust that began predictably turned into a puzzle. Fertility rates have fallen in countries with woeful economies, such as Greece and Italy. But they have also fallen in countries that sailed through the financial crisis, such as Australia and Norway. Although the American baby bust was expected, the lack of recovery after seven years seems odd. “I was fairly confident that women were just delaying births, and that we would see a rebound,” says Mr Johnson. “I’m beginning to wonder now.” In Britain the drop came late: the fertility rate fell from 1.92 to 1.81 between 2012 and 2014. Then there is France, where couples looked at the economic slump and shrugged. The fertility rate there has barely moved.  So the decline is global, in both countries hard hit by the downturn and those less so. Also, the upturn is seven years old and yet no rebound. Apparently, it seems, cute pictures of Prince George are not enough of an offset. Some possible explanations:   You can have a baby in a rented flat, of course. But in a country like Britain, where earlier generations found it easy to buy homes, that seems to flout a psychological rule for some. In the 1960s Richard Easterlin, an American economist, suggested that people would avoid having children if they felt unable to bring them up in a style that at least matched the way they were raised. It might be time to dust off that idea.

    House Republican proposal would make it harder for poor schools to feed their students -- Schools are supposed to help kids build character, socialize, and learn critical thinking and academic content. But we also ask schools to do a lot more: to offer extracurricular activities, serve as community centers and feed our children. Particularly in low-income areas, where kids come to school with a variety of disadvantages, the successful completion of these varied tasks can require Herculean efforts.That’s why we should celebrate initiatives that ease the burden on low-income schools. The Community Eligibility Provision, enacted in 2010, does just that; the program simplifies the school meal process and helps ensure that kids have something to eat during the school day, all at very little cost.Some children in low-income households qualify automatically to receive free or reduced-price meals because of homelessness, participation in Head Start, or receipt of safety-net benefits such as the Supplemental Nutrition Assistance Program. But other children need to apply for this benefit, and, as you might imagine, some of the neediest students fall through the cracks. The application process creates large amounts of paperwork for school staff members, who must not only process school meal applications, but also, if they want their school to be reimbursed for meals, track who is in which eligibility category during lunchtime.Community eligibility solves this problem for high-poverty schools. Participating schools get reimbursed based on student needs; schools with higher ISPs receive higher reimbursements. Yet a new proposal by congressional conservatives would restrict community eligibility, substantially increasing administrative burdens in more than 7,000 schools and threatening 3.4 million students’ access to school meals. For no good reason that we can see, lawmakers from the Education and the Workforce Committee may vote soon to raise the ISP threshold from 40 percent to 60 percent. Because ISP numbers don’t capture low-income students who must typically apply for free or reduced-price meals, this threshold would render all but the highest-poverty schools ineligible for community eligibility.

    Big Brother Arrives In Public Schools - Biometric Scanners Track Students Every Move -- As we detailed previously, those coming of age today will face some of the greatest obstacles ever encountered by young people.   And perhaps most crucially, their privacy will be eviscerated by the surveillance state. It appears that day is drawing closer as's Joseph Jankowski details, all over the United States, school districts have been implementing biometric identification technology for the purpose of allowing students to purchase lunch with no cash or card, and to track them getting on and off the school bus.This technology has many worried that school districts are going to far with collecting personal information on students and are putting their privacy at risk.In Illinois, the Geneva Unit District 304 has recently installed a biometric scanner in their cafeterias that will take student’s thumbprints for lunch purchases.The biometric scanner, made by PushCoin Inc, will allow parents to closely monitor their children’s lunch accounts through email updates. Also, PushCoin’s CEO, Anna Lisznianski contends the scanners can help school officials use lunch time more efficiently, reports EAG news.  Officials in several area school districts have said they plan on implementing similar technology in the coming months and years.We’ll record their thumbprints, there will be thumbprint readers at all the cash registers, and they’ll simply come by and — bang — hit their thumbprint. It makes it faster and, also, there’s a lot less opportunity for any kind of misuse or fraud when they’re using biometrics.”

    Detroit in a downward spiral as budget dries up - CBS News: -- Detroit has been breaking down, bit by bit, before our eyes. On Monday, most of its students could not go to school and on Tuesday, the taps will go dry for thousands. As always, money is the issue. There's not nearly enough to go around. Thousands of Detroit teachers walked off their jobs Monday in a wage dispute, forcing 94 out of 97 city schools to close and leaving more than 47,000 students out of class. "We're being told our school system is basically broke," said Ivy Bailey, the interim teachers union president. The sick out was called because the city schools are expected to run out of cash July 1st. No money for the teachers, and no funding for summer school or special education programs. The sickout was supposed to be for one day, but on Monday night, the union called on its members to stay off the job Tuesday, as well. On Tuesday, the school system announced that 93 schools would be closed, reports CBS Detroit.  Detroit's school district, which has dilapidated buildings crawling with mold and infested with rodents, has been in debt for several years now. It has stayed afloat by asking for short-term loans from the state, which it now owes $3.5 billion.

    Detroit teachers expected back in class after pay assurances: union | Reuters: Detroit school teachers were expected to return to their classrooms on Wednesday following a two-day "sick-out" over paycheck concerns after receiving assurances from officials "they will be paid for their work," a union representative said. Hundreds of teachers in Michigan's largest public school system called in sick beginning on Monday after hearing news the cash-strapped school system would run out of money to pay employees at the end of June. The Detroit public school system, or DPS, with nearly 46,000 students, has been under state control since 2009 because of a financial emergency. It will run out of money to pay employees after the fiscal year ends on June 30, the school system's state-appointed transition manager, former federal bankruptcy Judge Steven Rhodes, has said. Detroit Federation of Teachers Interim President Ivy Bailey received a letter from Rhodes that "gave teachers and school employees the assurance they needed that they will be paid for their work," the union said in a statement. Rhodes' letter to DPS staff, a copy of which the union provided to Reuters, said the school district would honor its "contractual obligation to pay teachers what they have earned." At a membership meeting on Tuesday afternoon, union officials encouraged the school employees to return to classes on Wednesday.

    Michigan House passes $500M Detroit schools restructure plan - (AP) - The Michigan House approved a $500 million restructuring plan for Detroit Public Schools early Thursday, just days after disillusioned teachers staged a two-day sick-out because they feared the financially struggling district wouldn't be able to pay them all through the summer. .Lawmakers in the GOP-controlled chamber started session Wednesday, but didn't emerge with a plan until a series of private caucus meetings had ended some 15 hours later. They said the plan would ensure all teachers are paid and the district eliminates debt. The House measure did not include a plan to create a commission with the authority to approve which schools open and close in the city - a key part of an alternative plan already passed in the Senate and a major reason why Democratic lawmakers voted against the House package. Democrats argued that a commission would be vital to address root problems at the schools relating to state control over the district, a lack of money and the proliferation of area charter schools. The Senate plan would also provide more than $200 million in additional funding that Democrats said would be crucial for the schools' recovery. Rep. Fred Durhal III, a Detroit Democrat, called the House plan passed Thursday a "temporary fix" and suggested the GOP-controlled House was aiding the continuation of a "second class education" for Detroit students.  But Republicans bristled at Democrats' ire. "I have never had a more difficult time in providing half a billion dollars," Pscholka told fellow lawmakers.

    The Iremonger books are new kid lit classics about the evils of capitalism - Vox: Edward Carey's Iremonger trilogy, a middle-grade children’s series that reached its conclusion last fall, is a marvelously creepy, grimy set of books — Roald Dahl by way of Bleak House-era Charles Dickens. It’s also a trenchant critique of capitalism. It's not new, of course, for children's literature to contain a moral lesson or even to critique social mores. In general, children's literature tends to suggest that we should all love one another more than we do, and then the way that love expresses itself is inflected by the particular author's political and social views. So we have the Narnia books, in which love is sacrificial and Christ-like, as opposed to Edmund's greedy and egotistic longing for superficial rewards. We have the Little House on the Prairie books, in which love is best expressed as libertarianism-inflected survivalism. And now we have the Iremonger trilogy, where love means living in defiance of capitalism. The Iremonger books depict a world in which endless consumption has filled the world with trash, workers literally become their labor, and the rich work tirelessly to strip the poor of their humanity. It is, in other words, our own world — but the evils of capitalism have been literalized. It's a morality play for the post-recession era.

    Numeracy Improves Financial Outcomes and Can Be Taught -- Two papers suggest numeracy improves financial outcomes and can be taught.

    • Numeracy and Wealth: We examined the relationship between numeracy and wealth using a cross-sectional and a longitudinal study. For a sample of approximately 1000 Dutch adults, we found a statistically significant correlation between numeracy and wealth, even after controlling for differences in education, risk preferences, beliefs about future income, financial knowledge, need for cognition or seeking financial advice. Conditional on socio-demographic characteristics, our estimates suggest that on average a one-point increase in the numeracy score (11-point scale) of the respondent is associated with 5 percent more personal wealth.
    • High School Curriculum and Financial Outcomes: Financial literacy and cognitive capabilities are convincingly linked to the quality of financial decision-making. Yet, there is little evidence that education intended to improve financial decision-making is successful. Using plausibly exogenous variation in exposure to state-mandated personal finance and mathematics high school courses, affecting millions of students, this paper answers the question “Can high school graduation requirements impact financial outcomes?” The answer is yes, although not via traditional personal finance courses, which we find have no effect on financial outcomes. Instead, we find additional mathematics training leads to greater financial market participation, investment income, and better credit management, including fewer foreclosures.

    Economist Removed from Plane for Algebra -- Guido Menzio an economist at the University of Pennsylvania–author of Block Recursive Equilibria for Stochastic Models of Search on the Job among other papers–was pulled from a plane because…algebra is suspicious. From FB: Unbelievable… Flight from Philly to Syracuse goes out on the tarmac, ready to take off. The passenger sitting next to me calls the stewardess, passes her a note. The stewardess comes back asks her if she is comfortable taking off, or she is too sick. We wait more. We go back to the gate. The passenger exits. We wait more. The pilot comes to me and asks me out of the plane. There I am met by some FBI looking man-in-black. They ask me about my neighbor. I tell them I noticed nothing strange. They tell me she thought I was a terrorist because I was writing strange things on a pad of paper. I laugh. I bring them back to the plane. I showed them my math. It’s a bit funny. It’s a bit worrisome. The lady just looked at me, looked at my writing of mysterious formulae, and concluded I was up to no good. Because of that an entire flight was delayed by 1.5 hours. Trump’s America is already here. It’s not yet in power though. Personally, I will fight back. Algebra, of course, does have Arabic origins plus math is used to make bombs.

    Bloomberg Tells Michigan Grads They Must Defeat Bernie’s Plan to Jail Wall Street Felons - William K. Black - Michael Bloomberg has just published, in Bloomberg, what he describes as “an adaptation of an address to the University of Michigan’s class of 2016.”  Having graduated twice from Michigan, as did our eldest, I was intrigued.  Bloomberg’s title was “Here’s Your Degree.  Now Go Defeat Demagogues.”  What Bloomberg means is that he is frightened that so many young people supported the “Occupy Wall Street” movement and support Bernie Sanders.  I’ve written before about Bloomberg, a Wall Street billionaire, and the myths he tries to spread about Bernie.  Wall Street elites fear Bernie.  They know he won’t take their money, he will end the systemically dangerous banks, and he will imprison their leading felons.  Bloomberg’s hate for, and fear of, Bernie is perfectly rational.  Why he thinks that Michigan students will take his advice and learn to love Wall Street’s felons is a lot less clear. Bloomberg conflates Trump attacking Mexicans as rapists and Muslims as terrorists with Bernie promising to prosecute elite Wall Street felons for their crimes and have the wealthy pay taxes far lower than they paid under President Eisenhower. Our country is facing serious and difficult challenges. But rather than offering realistic solutions, candidates in both parties are blaming our problems on easy targets who breed resentment. For Republicans, it’s Mexicans here illegally and Muslims. And for Democrats, it’s the wealthy and Wall Street. The truth is: We cannot solve the problems we face by blaming anyone.  In context, Bloomberg’s advice to students to “defeat” any elected official who would hold Wall Street’s felons accountable for their crimes is even more incoherent than it appears on its face.  Indeed, I will show why this is so in three different contexts.

    Mike Bloomberg Booed After Lashing Out At College "Safe Spaces"-- Michael Bloomberg gave a not so popular commencement address at the University of Michigan over the weekend. The former champion of banning large sugary drinks was surprisingly critical of college "safe spaces", the new trend that's sweeping the nation. When the topic of critical lessons learned throughout college came up, the former mayor didn't hold back on his feelings about the subject. As he spoke, he was originally met with a mixed reaction from the students, with some clapping and some booing. "The most important knowledge that you will leave here today with, like the importance of team work, has nothing to do with your major. It is about how to study, how to cooperate, how to listen carefully, how to think critically, and how to resolve conflicts through reason. In other words, it is working with others. Those are the most important skills in the working world, and it's why colleges have always exposed students to challenging and uncomfortable ideas. The fact that some university boards and administrations now bow to pressure groups, and shield students from these ideas through safe spaces, code words, and trigger warnings, is in my view a terrible mistake." He didn't let up there, and as he went on the crowd grew seemingly more irritated with the lecture and the booing took over. "The whole purpose of college is to learn how to deal with difficult situations, not to run away from them. A micro aggression is exactly that, micro. But in a macro sense, one of the most dangerous places on a college campus is the so-called safe space because it creates a false impression that we can isolate ourselves from those who hold different views. We can't, and we shouldn't try. Not in politics, or in the workplace."

    Prediction: No commencement speaker will mention this – the huge ‘gender college degree gap’ favoring women -- Now that we’re at the beginning of college graduation season, I thought it would be a good time to show the updated chart above of the huge college degree gap by gender for the upcoming College Class of 2016 (data here). Based on Department of Education estimates, women will earn a disproportionate share of college degrees at every level of higher education in 2016 for the eleventh straight year. Overall, women in the Class of 2016 will earn 139 college degrees at all levels for every 100 men, and there will be a 610,000 college degree gap in favor of women for this year’s college graduates (2.195 million total degrees for women vs. 1.585 million total degrees for men). By level of degree, women will earn: a) 154 associate’s degrees for every 100 men (female majority in every year since 1978), b) 135 bachelor’s degrees for every 100 men (female majority since 1982), 139 master’s degrees for every 100 men (female majority since 1987) and 106 doctoral degrees for every 100 men (female majority since 2006). Over the next decade, the gender disparity for college degrees is expected to increase according to Department of Education forecasts, so that by 2025, women will earn 147 college degrees for every 100 degrees earned by men, with especially huge gender imbalances in favor of women for associate’s degrees (170 women for every 100 men) and master’s degrees (145 women for every 100 men). The huge gender inequity in higher education for the Class of 2016 is nothing new — women have earned a majority of US college degrees in every year since 1982 and since then have earned an increasingly larger share of college degrees compared to men in almost every year, so that men have now become the “second sex” in higher education.

    College degrees are not the solution to stagnating wages or inequality -- EPI - Our recent report on the class of 2016 showed that young high school and college graduates still face high levels of unemployment and stagnant wages, even though the labor market has improved since the Great Recession. Between these two groups, however, young high school graduates face a far less forgiving economic reality: the unemployment rate for young high school graduates is over three times higher than their college-educated peers (17.9 percent versus 5.6 percent), nearly one in seven is stuck in a part-time job when they really want full-time work, and the wages of entry-level jobs have barely budged since 2000. There are clear economic advantages for young people with a college degree relative to those who do not pursue and complete a college degree. This often leads pundits to suggest that more education is  a solution to the low wages and high unemployment facing non-college educated workers.  Yet, while this could be good advice at the individual level, encouraging more people to pursue higher education will do little to address the ongoing wage stagnation experienced by both high school and college graduates.

    Postdoctoral researchers are vastly underpaid. Restoring overtime rights will help fix this. -- Postdoctoral researchers (postdocs) are highly-educated researchers who have completed rigorous Ph.D. programs, but they are often paid low wages and work long hours. Some of these workers make an effective salary of less than $15 per hour despite 11 years or more of undergraduate and graduate education. The good news is that the Department of Labor’s restored overtime rule would guarantee anyone earning up to $50,000 the right to earn overtime pay—including postdocs, who will likely get a raise to put them above the new salary threshold or start receiving overtime pay.  Many colleges and universities, however, have complained that they cannot afford to pay their postdocs overtime pay or give them a raise above the $50,000 threshold. Instead, they want the new overtime salary threshold to be lowered to $40,000 a year or less. If ability to pay is a concern, they should perhaps look at the top of their organizations, and not try to prevent hardworking postdocs and social workers from getting a raise: The University of Michigan executive who testified against the overtime rule is paid well over $200,000 a year. The university executives making decisions about who deserves to be paid overtime need to rethink their priorities. To learn more about the upcoming change to the overtime law, visit our overtime issue page.

    Student Debt Is About to Set Another Record, But the Picture Isn’t All Bad - : This spring’s college seniors are about to set another record for student debt. But they’re also likely to find a job and make a decent starting salary. About seven in 10 seniors set to graduate this spring borrowed for their educations. Along with their diplomas, they’ll carry an average $37,172 of student debt as they enter the workforce, according to a new analysis by higher-education expert Mark Kantrowitz. That breaks the record set by the 2015 class, which owed just over $35,000, on average. The figures by Mr. Kantrowitz—publisher of Cappex, a website that connects students to colleges and scholarships—are projections based on federal student-loan data and factors such as tuition inflation. To be sure, other groups have produced different estimates: The latest figure by the nonprofit Institute for College Access & Success shows seniors leaving college with an average 28,950 in debt. Other research shows the other side of the ledger: Salaries are rising for new college graduates.   Americans who earned a bachelor’s degree last year landed a job with an average starting salary of $50,651, according to the National Association of Colleges and Employers. That was 5% above the average starting salary for 2014 grads.  The figures are based on student surveys conducted at 60 colleges.The New York Federal Reserve says the median salary for recent college graduates–the point at which half earn above and half earn below—stood at $43,000 in 2015, up from $39,992 the previous year, based on government data. The unemployment rate for recent college grads as of December was 4.6%. (The New York Fed defines “recent college graduate” as anyone between 22 and 27 years old who holds a bachelor’s.)

    Visa Unveils Plan To Burden Millennials With Billions In Debt - For anyone concerned that $800 billion in student loans over the last decade simply won't be enough debt burden for millennials to carry, worry no more, a solution has been found. $800 billion in new student loans in the past decade but aside from that "consumers are deleveraging" has come up with a plan to add infinitely more debt to millennials who are working diligently as bartenders and waiters: credit cards. Visa has even unveiled a detailed timeline by which they can accomplish the task. The thought process is as follows: First, Visa estimates that all of those minimum wage jobs will be adding up to $8.3 trillion in personal income for millennials by 2025. Next, Visa believes that millennials use cards for 57% of their spending, making them an attractive "target" for massive amounts of additional debt credit card marketing. And finally, as a percentage of total available users, millennials use revolving credit more than any other generation. How long will it take to market the idea, sell the credit, and wait for the debt to pile up? Why, not soon after college of course. Visa estimates that if done properly, banks and other credit card issuers can have millennials saddled with billions in new debt by the young age of 28. The company even puts together a nice infographic to add to their excitement.

    273,000 union workers and retirees brace for pension cuts - About 273,000 union workers and retirees are about to learn the fate of their pensions. The struggling Central States Pension Fund is in such bad shape that it's seeking government approval to cut benefits -- and the ruling is expected to come this week. It would be the first time the government green-lights pension cuts under a new law giving the Treasury Department authority to approve, or reject, cuts proposed by a multi-employer, private fund as a way to head off insolvency. Previously, failing pension funds could reduce future benefits for current workers, but they couldn't touch those already being paid to current retirees -- until now. The Central States Pension Fund covers workers and retirees from more than 1,500 companies across a range of industries, but most of its retirees were truck drivers. A lot of the fund's companies went bankrupt after the trucking industry was deregulated in the 1980s. That's part of the reason the fund is in trouble now. It's currently paying out $3 for every $1 it takes in, and is expected to run out of money in 10 years.  About 115,000 retirees face pension cuts under the proposed plan, many of which could be severe.  Bill Hendershot, 74, is bracing for a 60% cut to his $3,500 monthly pension check. Bill and his wife rely mostly on his pension and their Social Security checks. They stand to lose $2,104 a month, or about one-third of their income, if the plan is approved.

    Why UPS retirees are bracing for possible pension cuts - UPS earned more than $3 billion last year. But 8,737 of its former workers could see their pension checks cut next summer. The problem is that some UPS retirees receive their pensions from the cash-strapped Central States Pension Fund, which covers hundreds of thousands of workers from different companies. That fund says it needs to make cuts in order to keep from running out of money. Jim Dopp, 63, is one of the former UPS truck drivers. He retired in May of 2007 after more than 30 years on the job with a monthly pension check of $2,903. But last month, he received a letter saying his check could be slashed in half -- to $1,452 -- as soon as July, if the Treasury Department approves the plan. The real kicker is that UPS would've covered the cuts made to his pension if Dopp had retired just eight months later. The Central States Pension Fund used to administer pension benefits to a group of unionized UPS drivers, but the company left the fund in 2008 as a way to save money and provide retirees with better benefits. It set up its own pension fund, but only took current workers with it. Any UPS drivers who had already retired would still be covered solely by the Central States fund.

    What’s driving Illinois’ $111 billion pension crisis -- Since the Illinois Supreme Court ruled in its May 2015 decision on Senate Bill 1 that pensions for current government workers can’t be modified, debate over pension reform has faded from view. But ignoring the problem won’t make it go away. In 2015, Illinois’ state pension debt reached a record $111 billion. Government-worker pensions already consume one-fourth of the state’s budget. And every day Illinois goes without a solution to its pension crisis, the state’s pension debt grows by over $20 million. The state’s pension crisis threatens to burden taxpayers with massive, ever-escalating taxes to bail out a system that is simply not sustainable. And while politicians’ underfunding the pension systems has aggravated the crisis, that’s not the main driver. The bigger problem facing Illinois’ five state-run pension funds is the unaffordable pension benefits politicians have given away to government workers and government unions over the past several decades. The generous rules on retirement ages, cost-of-living adjustments, or COLAs, and employee contributions have caused pension benefits to grow by more than 900% since 1987. Some of the biggest drivers include the following facts:

    • 60 percent of state pensioners retired in their 50s, many with full pension benefits.
    • Over half of state pensioners will receive $1 million or more in pension benefits over the course of their retirements. Nearly 1 in 5 will receive over $2 million in benefits.
    • Almost 60 percent of all current state pensioners can expect to spend 25 or more years collecting benefits, based on approximate actuarial life expectancies. Due to automatic, 3 percent compounded COLA benefits, those pensioners can expect to see their annual pension benefits double in size.
    • The average career pensioner – retired after Jan. 1, 2013, with 30 years of service or more – receives $66,800 in annual pension benefits and will collect over $2 million in total benefits over the course of retirement.
    • The average career pensioner will get back his or her employee contributions after just two years in retirement. In all, pensioners’ direct employee contributions will only equal 6 percent of what they will receive in benefits over the course of their retirements.

    Pension official called out for side gigs on company boards -- North Carolina's state treasurer was appointed to two corporate boards while holding public office, a move that watchdogs said could be a "breathtaking" conflict of interest, the International Business Times reports.  Janet Cowell is the sole fiduciary of North Carolina's $90 billion pension investments and the chair of the state's banking regulation commission, a rare concentration of power, according to the International Business Times. Meanwhile, she'll be responsible for board seats on insurance conglomerate James River Group Holdings and retail technology firm ChannelAdvisor. Ethics experts and employee rights groups raised concerns that the combined pay from Cowell's board seats will be more than her full-time paycheck as treasurer, according to the IBT. On top of that, one of James River's largest shareholders has also managed North Carolina pension funds, and James River's CEO has ties to a North Carolina-based bank.  A spokesperson told the IBT that Treasury staff were not involved in the negotiation of either board appointment, and that Cowell would recuse herself from all decisions related to either company. Still, the International Business Times points to email exchanges between Cowell and James River's lawyers, where Cowell offers to have the state ethics commission draw up a statement that would meet the company's "needs and preferences."

    Lousy 401(k) plans may spark more lawsuits: If you've got a less-than-stellar 401(k) retirement savings plan — one with high fees and poor investment choices — financial advisors usually recommend a few workarounds. Focus on cheaper index funds, for example, or use target date funds that might be more diversified than the portfolio you cobble together yourself with the investment options you have. And if that doesn't work, you might suggest to management that they look into a new 401(k) provider who charges less and has a better menu of investments. But some employees go one step further — taking their employers to court. They allege that their retirement preparedness was compromised because of the company's poor management of their 401(k) plan. Emboldened by a Supreme Court win and a string of settlements, employees have filed several new class-action lawsuits against employers. The cases usually center around excessive fees, poor plan designs and alleged conflicts of interest. "The focus has always been on practices of some plan sponsors that harm workers and retirees and limit their ability to build meaningful retirement wealth," said attorney Jerome Schlichter, whose St. Louis-based law firm represents many plaintiffs in these suits. Schlichter's firm has been responsible for winning more than $300 million in settlements or awards since the first suit of this type was filed in 2006.

    South Dakota Wrongly Puts Thousands in Nursing Homes, Government Says - — When patients in South Dakota seek help for serious but manageable disabilities such as severe diabetes, blindness or mental illness, the answer is often the same: With few alternatives available, they end up in nursing homes or long-term care facilities, whether they need such care or not.In a scathing rebuke of the state’s health care system, the Justice Department said on Monday that thousands of patients were being held unnecessarily in sterile, highly restrictive group homes. That is discrimination, it said, making South Dakota the latest target of a federal effort to protect the civil rights of people with disabilities and mental illnesses, outlined in a Supreme Court decision 17 years ago.The Obama administration has opened more than 50 such investigations and reached settlements with eight states. One investigation, into Florida’s treatment of children with disabilities, ended in a lawsuit over policies that placed those children in nursing homes. With its report Monday, the Justice Department signaled that it might also sue South Dakota.While the administration has received widespread attention for investigating police abuses and supporting the rights of gay and transgender people, the Justice Department has also steadily made these cases part of its civil rights agenda. The government says that those efforts have allowed more than 53,000 Americans with disabilities to leave institutions or avoid them altogether. It is a small number compared with the 250,000 working-age people who are estimated to be needlessly living in nursing homes, but advocates say the federal campaign has had significant effects.“There has been as much of a revolution in enforcing disability rights since 2009 as there has been for any other group in the county,” said Talley Wells, a disability lawyer with the Atlanta Legal Aid Society.

    Abortion Clinics In Blue States Are Closing, Too -- As the Supreme Court debates a Texas law that has led to the closure of at least 20 clinics, providers and researchers are noticing a quieter trend: Abortion clinics are closing in blue states, too. Twelve clinics have closed in California since 2011, along with three in Washington and a number in New York, New Jersey and Connecticut, according to data compiled by Bloomberg — all states considered relatively favorable to abortion rights because of their legislative policies. According to Nikki Madsen, executive director of the Abortion Care Network, a national association for independent abortion care providers, for every three independent abortion clinics in her network that close in more conservative states, about two have closed in more liberal states over the past five years. She broadly defines these more liberal states as those that offer Medicaid funding for abortion, almost all of which voted for President Obama in the 2012 election. (A representative for Planned Parenthood, the national organization that provides reproductive health services, including abortions, said that it did not have data on hand for Planned Parenthood clinic closures by state.) Abortion providers in more liberal states may not have sustained the kind of legislative targeting being tracked in places such as Indiana or Arkansas. But the combination of the economic difficulties of operating a clinic, a generally hostile atmosphere and declining demand means that many clinics are shutting down.

    Partners HealthCare errors costs all Mass. hospitals - Simple math errors at a tiny Massachusetts hospital have created big problems for other hospitals in the state, contributing to a potential $160 million drop in federal Medicare payments over the next year. A loss that steep — 10 percent of Medicare funding for the hardest-hit hospitals — could force layoffs of 2,000 staff, with cuts concentrated outside Boston, according to estimates by the Massachusetts Council of Community Hospitals. Advertisement The quaint 19-bed Nantucket Cottage Hospital, owned by Partners HealthCare System and considered the state’s only rural hospital, has for years had an outsized impact on hospital finances statewide — but usually for the better. Under nearly impenetrable hospital payment rules, Medicare must reimburse a state’s urban hospitals for employee wages at least as much as it reimburses its rural hospitals. As a result, Nantucket sets the floor for wage reimbursements at hospitals across the state. And because Nantucket’s wages are high, due to its remote island location and steep cost of living, that has created bonuses for many other Massachusetts hospitals in recent years. Not this year. Consultants hired by Partners made several errors that led to lower wages being reported to Medicare for Nantucket Hospital. They overestimated hours, thereby reducing the hourly rate, and did not include enough higher-paid physician hours and overtime pay, according to an e-mail from the Massachusetts Hospital Association obtained by the Globe.

    Prominent Democratic Consultants Sign Up to Defeat Single Payer in Colorado  - INFLUENTIAL DEMOCRATIC CONSULTANTS, some of whom work for the Super PACs backing Hillary Clinton, have signed up to fight a bold initiative to create a state-based single-payer system in Colorado, according to a state filing posted Monday. Coloradans for Coloradans, an ad-hoc group opposing single payer in Colorado, revealed that it raised $1 million over the first five months of this year. The group was formed to defeat Amendment 69, the ballot measure before voters this year that would change the Colorado constitution and permit a system that would automatically cover every state resident’s health care. The anti-single-payer effort is funded almost entirely by health care industry interests, including $500,000 from Anthem Inc., the state’s largest health insurance provider; $40,000 from Cigna, another large health insurer that is current in talks to merge with Anthem; $75,000 from Davita, the dialysis company; $25,000 from Delta Dental, the largest dental insurer in the state; and $100,000 from SCL Health, the faith-based hospital chain. Under the new system, there would be no health insurance premiums or deductibles, and all health and dental care would be paid for by the state through a new system called ColoradoCare. The plan calls for raising $25 billion through a mix of payroll taxes, along with bringing down costs through negotiations with providers.

    Health Insurers Struggle to Offset New Costs - WSJ: Insurers have begun to propose big premium increases for coverage next year under the 2010 health law, as some struggle to make money in a market where their costs have soared. The companies also have detailed the challenges in their Affordable Care Act business in a round of earnings releases, the most recent of which came on Wednesday when Humana Inc. HUM -0.40 % said it made a slim profit on individual plans in the first quarter, not including some administrative costs, but still expects a loss for the full year. The Louisville, Ky.-based insurer created a special reserve fund at the end of last year to account for some expected losses on its individual plans in 2016. The rate picture will vary by state and by company, analysts said, and not all insurers will need large premium increases to bolster their financial performance. Indeed, some companies, including Medicaid-focused insurers such as Centene Corp. CNC -0.59 % , have already said plans sold through the health law’s exchanges are profitable. Still, the analysts said, a number of insurers are likely to seek significant hikes as they aim to cover costs that have continued to outstrip their estimates—in some cases coming after earlier premium increases.

    Hospital Profits and Quality May Fall, But Hospital Executives’ Compensation Keeps Rising --Despite recent attempts at health care reform, US health care dysfunction seems to proceed inexorably with ever rising costs, and continuing problems with access and quality.  A likely reason is that those who find the current system personally profitable are in a position to resist real reform.  The people who seem to gain the most from the status quo are top hired executives of big health care organizations.In particular, stories about huge pay for hospital and hospital system managers continuously appear in the media.  For example, starting in October, 2015, we saw the following headlines:
    – Pittsburgh, PA, October, 2015:“Former Highmark CEO Made Nearly $10 Million in 2014, Tax Records Show”
    – Regarding Rochester General and Unity health systems in Rochester, NY, November, 2015: “Here’s Why Execs Got Millions After Health Merger
    – Regarding the CEO of North Shore-LIJ Health System in NY, November, 2015: “This Guy Makes $10M a Year to Head a Nonprofit
    – In Idaho, February, 2016, “Pay for 9 Treasure Valley Nonprofit Hospital Employees Hits or Tops $1 Million
    Even more interesting are stories that show massive compensation of executives despite their hospitals’ apparent poor performance.  Since October, 2015, we also found the following (in chronological order) Let Go After “Uneven Financial Performance,” CEO of Kaleida Health Got $1.6 Million of Severance in One Year, with More to Come (more)

    Politics In Real Life: Rising Health Care Costs Weigh On Voters - When the health insurance premiums got to the point that they were higher than her mortgage, Renee Powell started to become cynical. "There was something in me that just kind of switched," said the mother of two from Bartlesville, Okla. "I was OK with paying $750, but when it became about $100 more than my housing costs, it upset me."  While the Affordable Care Act managed to bring basic health insurance to almost everyone in the country — about 90 percent of Americans are covered — for many people it's not enough.Rising deductibles and copayments can mean people don't get much benefit from paying monthly premiums. A recent study from the Kaiser Family Foundation shows deductibles rose about eight times faster than wages in the past 10 years.That's taking a toll on people like Powell, even though they have insurance."The nature of insurance has been changing over the last decade, to the point where people's out-of-pocket costs are becoming a real struggle," said Larry Levitt of the Kaiser Family Foundation. "More people are insured, but in many ways people are not insured enough."High-deductible plans like Powell's, he said, are now the norm

    Medical error now third-largest cause of death in US: researchers -- Medical error is the third largest cause of death in the United States, according to an analysis published Wednesday in the medical journal BMJ. In 2013, at least 250,000 people died not from the illnesses or injuries that prompted them to seek hospital care but from preventable mistakes, according to the study.That number exceeds deaths from strokes and Alzheimer’s combined, and is topped only by heart disease and cancer, which each claim about 600,000 lives per year. The death toll from medical mishaps would be even higher if nursing homes and out-patient care were included, the researchers found. “People don’t just die from bacteria and heart plaque, they die from communication breakdowns, fragmented healthcare, diagnostic mistakes, and over-dosing,” said Martin Makary, a professor at Johns Hopkins University School of Medicine in Baltimore and lead author of the study. “Collectively, these represent the third leading cause of death in the United States,” he told AFP, adding that it is one of the most underreported endemics in global health.A earlier study estimated the toll at between 250,000 and 440,000 per year. Experts do not know the exact number of people who die from botched surgeries, faulty prescriptions, or a computer glitch simply because no one is keeping count.

    Healthcare Triage News: Lots of People Are Still Uninsured - Dr Aaron Carroll - Although the ACA has significantly reduced the percent of Americans who are uninsured, we have not yet come close to universal coverage. This has become a topic of focused debate among Democratic primary candidates. Short of achieving full coverage by passing a single-payer plan (which seems very unlikely in the near future), further gains in insurance coverage will come through means available through the ACA. It’s worth revisiting, therefore, exactly who constitute the uninsured at this point. A better understanding could allow policymakers and advocates to focus their efforts on those populations. A recent report from the Robert Wood Johnson Foundation and The Urban Institute covered just that. So do we, in this episode of Healthcare Triage News. (video)

    Why We're So Unhealthy -- That America is in the throes of a systemic health crisis can no longer be denied.According to the U.S. Department of Health And Human Services, more than two-thirds (68.8 percent) of adults are overweight or obese.  (Overweight is typically defined as a body-mass index (BMI) of 25 or higher. A BMI of 24.9 is not exactly featherweight; I would have to add 30 pounds to reach a BMI of 24.9.)  The health risks of being overweight or obese include:

    • type 2 diabetes
    • heart disease
    • high blood pressure
    • nonalcoholic fatty liver disease (excess fat and inflammation in the liver of people who drink little or no alcohol)
    • osteoarthritis (a health problem causing pain, swelling, and stiffness in one or more joints)
    • some types of cancer: breast, colon, endometrial (related to the uterine lining), and kidney
    • stroke

    Since the early 1960s, the prevalence of obesity among adults more than doubled, increasing from 13.4 to 35.7 percent in U.S. adults age 20 and older. (Source) The Journal of the American Medical Association (JAMA) reported in 2015 that roughly half of all adult Americans are diabetic or prediabetic (also called metabolic syndrome). If we add up everyone in America who is either suffering from or at risk of lifestyle-related diseases such as heart disease, diabetes and lifestyle-related types of cancer, it’s clear this is an unprecedented national health crisis that has no easy or cheap medical fix. Why have we become so unhealthy? The answers come thick and fast: we are more sedentary as most work is now white-collar; the foods low-income people can afford are unhealthy; children now spend time playing digital games rather than playing outside; serving sizes of sodas and other high-calorie/low nutrition beverages have ballooned; people buy more convenience and fast foods and prepare fewer meals at home, and so on. Two things are clear: there is no one solution to the epidemic of lifestyle-related diseases. The second is expressed by the Chinese proverb: “Diseases enter through the mouth,” i.e. disease is a result of what we eat and drink. Since what we eat has an enormous impact on our health, if we want to tackle our health crisis in a manner that get results, we must start with what we eat and how our food is grown, processed and prepared. A second Chinese proverb explains why we must start with diet: “When you’re thirsty, it’s too late to dig a well.”  If we want to avoid lifestyle illnesses, we must start pursuing a new way of growing and preparing food now, not after we’re already ill.

    Inequality Kills: Top 1% Lives 15 Years Longer Than the Poorest -- naked capitalism -- Yves here. Notice how the article includes the “Oh those poor people make bad lifestyle choices,” as the reason for shorter lifespans among the poor. While it gives a contrasting set of arguments, it sanitizes them by putting them under the heading of “stress,” such as those that are directly related to economic desperation and despair (suicide and drug addiction), as well as those that are due to living in neighborhoods with environmental hazards or safety issues. I hope other researchers will isolate the impact of higher level of suicides and drug-related deaths among the poor on the averages. Then you have the next order issues of less access to medical care.   I suspect one reason that poor people live longer (relatively speaking) in NYC is not the lifestyle choices some experts harp on, but that people in NYC are more active by virtue of being required to walk a lot. Obesity levels are much lower than in the poor areas of the South and Middle West. Unless you live right on top of one of the major bridges or tunnels, everyone here has the same air quality, and NYC tap water is also famously high quality. I know poor people who are HIV positive and get free meds from clinics here. I doubt most places in the US provide that much support for HIV positive residents.   Subtly, one can argue that poor people here are less poor in lifestyle terms than elsewhere. NYC has excellent public transportation, which makes it somewhat less difficult to manage being poor. The city has good parks and free entertainment of various sorts. Mind you, we are still taking degrees of hardship, but less hardship may make a difference in terms of stress, which also affects health. By contrast, when I visit Birmingham, I see women of color in lily-white neighborhoods (always women who are likely maids given that they are waiting in neighborhoods with no business districts or strip malls in walking distance) waiting for the busses that hardly ever run and wonder how they can possibly manage. And they are unlikely to be the worst off.

    The rising longevity gap between rich and poor - Brookings Institution --The past few months have seen a flurry of reports on discouraging trends in life expectancy among some of the nation’s struggling populations. Different researchers have emphasized different groups and have tracked longevity trends over different time spans, but all have documented conspicuous differences between trends among more advantaged Americans compared with those in worse circumstances.   In a study published in April, Stanford economist Raj Chetty and his coauthors documented a striking rise in mortality rate differences between rich and poor. From 2001 to 2014, Americans who had incomes in the top 5 percent of the income distribution saw their life expectancy climb about 3 years. During the same 14-year span, people in the bottom 5 percent of the income distribution saw virtually no improvement at all.   Using different sources of information about family income and mortality, my colleagues and I found similar trends in mortality when Americans were ranked by their Social-Security-covered earnings in the middle of their careers. Over the three decades covered by our data, we found sizeable differences between the life expectancy gains enjoyed by high- and low-income Americans. For 50-year old women in the top one-tenth of the income distribution, we found that women born in 1940 could expect to live almost 6.5 years longer than women in the same position in the income distribution who were born in 1920. For 50-year old women in the bottom one-tenth of the income distribution, we found no improvement at all in life expectancy. Longevity trends among low-income men were more encouraging: Men at the bottom saw a small improvement in their life expectancy. Still, the life-expectancy gap between low-income and high-income men increased just as fast as it did between low- and high-income women.

    U.S. cracks down on e-cigarettes and cigars, bans sales to minors | Reuters: The U.S. government on Thursday took wide-ranging steps to crack down for the first time on e-cigarettes and cigars, growing in popularity among teens, and banned sales to anyone under age 18 in hopes of sparing a new generation from nicotine addiction. The Food and Drug Administration's action brought regulation of e-cigarettes, cigars, pipe tobacco and hookah tobacco in line with existing rules for cigarettes, smokeless tobacco and roll-your-own tobacco. The new rules take effect in 90 days. The rules promise to have a major impact on the $3.4 billion e-cigarette industry that has flourished in the absence of federal regulation, making the nicotine-delivery devices the most commonly used tobacco products for U.S. youngsters. The FDA said it will require companies to submit e-cigarettes and other newer tobacco products for government approval, provide it with a list of their ingredients and place health warnings on packages and in advertisements.

    New Jersey is facing a 'poisoning' scandal in its schools — and parents are saying it's a 'cover up' -- Parents of four Newark Public School students have filed a proposed class-action lawsuit claiming the district and other city and state officials "poisoned" thousand of students by deliberately exposing them to toxic levels of lead from March 2011 to the present, which caused gastrointestinal- and cognitive-health problems. The complaint, which names New Jersey Gov. Chris Christie and Superintendent of Newark Schools Chris Cerf among the defendants, also alleges the district made a conscious decision to conceal the elevated lead levels present in schools' water supplies from children, parents, and teachers, even after the information became public in March 2016 after testing from the Department of Environmental Protocols. "Since [then] the Defendants have done nothing but attempt to cover up their actions, mislead parents and teachers, and make it difficult for the parents to get their children tested for lead," the suit reads. The suit also claims that the defendants "haphazardly and secretively installed filters" into some water sources to combat the issue but that the district failed to provide adequate maintenance, which would take as little as five minutes, twice a year. "The Defendants intentionally failed to change the filters for years despite the requirement that these filters be changed every six months," the suit claims. The district left some filters unchanged for "more than five years after they expired," according to the complaint. Further, the suit claims the defendants drank bottled water, instead of the schools' water, while leaving students to consume lead-infused water on a daily basis.

    Obama Chugs A Glass Of Flint Water, Says It Is "Drinkable" -- Earlier today, Obama landed in Flint, Michigan, his first visit to the city since its contaminated drinking water crisis began two years ago. Air Force One landed at Bishop International Airport and Gov. Rick Snyder was among the officials waiting on the tarmac to greet the president. With him, Obama brought a message of hope to residents of Flint, Michigan: a promise for change after lead from old pipes tainted their drinking water. So what did Obama do? The same thing Japanese authorities did when they arrived in Fukushima to "prove" they are not lying about the latent radioactive threat: he drank the Flint water. President Barack Obama drinks a glass of filtered Flint water during trip to Flint:  There was just one problem: Obama drank the filtered water. The president drank filtered Flint water for the press after I asked him if it was local water:   Obama also said that some kids may not be affected by the drinking water.  Obama takes a sip, says filtered #Flint water is safe for residents 6+ yrs old. #FlintWaterCrisis  What happens next? Well, since we doubt that this demonstration that local "filtered" water is safe will do much to change the local population's opinion about the regular water, Obama's demonstration may have been for nothing. As for the comparison with comparable Japanese confirmations that all is well, we do recall that one of the officials did end up having cancer.

    Dole Knew About Listeria Problem at Salad Plant, F.D.A. Report Says - The New York Times: The Dole Food Company, one of the largest processors of fresh produce, knew it had a listeria problem in one of its salad plants more than a year before it closed in January, according to a Food and Drug Administration report. The report, obtained by Food Safety News and The Food Poisoning Bulletin through the Freedom of Information Act, shows that products in the plant tested positive for listeria nine times before F.D.A. inspectors showed up to do a test in January at a plant in Springfield, Ohio.Four people have died after becoming ill so far in the outbreak, and 33 more across the United States and Canada have become so sick they have spent time in a hospital. Dole said the Justice Department was investigating.“They’d been having positive tests for listeria for some time,” said Bill Marler, a prominent food safety lawyer who represents one of the victims in a lawsuit against Dole. “If the government inspectors hadn’t showed up, who knows when or if they were going to tell anyone.”William Goldfield, a spokesman for Dole, said in an email that the company had corrected the issues at the plant, which recently reopened.

    Should You Be Concerned About the Overuse of Antibiotics in Farm Animals? -- The demand for food products “raised without antibiotics” is growing fast. In 2012, sales of these products had increased by 25 percent over the previous three years (1).  The overuse of antibiotics in food-producing animals is being blamed for the increase in resistant bacteria, also known as “superbugs.” When these are passed to humans they can cause serious illness. However, other experts suggest that antibiotic use in food-producing animals poses very little risk to human health.  Antibiotics work by killing or stopping the growth of harmful bacteria. Since the 1940s, antibiotics have been given to farm animals like cows, pigs and poultry in order to treat infections or prevent an illness from spreading. Contrary to what you may think, the chances of you actually consuming antibiotics through animal foods is extremely low. Strict legislation is currently in place in the U.S. to ensure that no contaminated food products are able to enter the food supply. No evidence suggests antibiotics in food products are directly harming people. Antibiotics are generally fine when used properly for treating or preventing infections. However, excessive or inappropriate use is a problem. When antibiotics are overused, they end up becoming less effective for both humans and animals. This is because bacteria that are frequently exposed to antibiotics develop a resistance to them. Resistant bacteria can be passed from food-producing animals to humans in a number of ways. If an animal is carrying resistant bacteria, it can be passed on through meat that is not handled or cooked properly. You can also encounter these bacteria by consuming food crops that have been sprayed with fertilizers containing animal manure with resistant bacteria. Resistant bacteria in supermarket foods is a lot more common than you might think. Commonly reported harmful bacteria from foods include Salmonella, Campylobacterand E.coli.  It may actually be the human use of antibiotics that causes the majority of bacterial resistance (16). Interestingly, the spread of bacteria such as MRSA from infected pigs to farmers is common (17). However, transmission to the general public is rare. A study from Denmark reported that the likelihood of transmission for the population was only 0.003 percent (18).

    How Widespread Is the Use of Glyphosate in Our Food Supply? -- As the active ingredient in Monsanto’s branded Roundup weed killer, along with hundreds of other weed-killing products, the chemical called glyphosate spells billions of dollars in sales for Monsanto and other companies each year as farmers around the world use it in their fields and orchards. Ubiquitous in food production, glyphosate is used not just with row crops like corn, soybeans and wheat but also a range of fruits, nuts and veggies. Even spinach growers use glyphosate.  Glyphosate used on U.S. soybean fields, on an average annual basis, was pegged at 101.2 million pounds; with corn-related use at 63.5 million pounds. Both estimates are up from a prior analysis that ran through 2011, which pegged average annual soybean use at 86.4 million pounds and corn at 54.6 million pounds. Both those crops are genetically engineered so they can be sprayed directly with glyphosate as farmers treat fields for weeds. Use with sugar beets, also genetically engineered as glyphosate-tolerant, was estimated at 1.3 million pounds, compared to 1 million pounds. Notably, glyphosate use is also seen with a variety of crops not engineered to be sprayed directly. Looking at the period ending in 2013 compared to 2011, glyphosate use in wheat production was pegged at 8.6 million pounds, up from 8.1 million pounds; use in almonds was pegged at 2.1 million pounds, unchanged from the prior analysis; grape use was pegged at 1.5 million pounds, up from 1.4 million pounds; and rice use was estimated at 800,000 pounds, compared to 700,000 pounds in the prior analysis. You can check out your own favorite food here and compare it to the prior analysis here. Some on the list may surprise you, including cherries, avocados, apples, lemons, grapefruit, peanuts, pecans and walnuts.

    Long-time Iowa farm cartoonist fired after creating this cartoon | Local News - KCCI Home: — Rick Friday has been giving farmers a voice and a laugh every Friday for two decades through his cartoons in Farm News. Now the long-time Iowa farm cartoonist tells KCCI that he has been fired. Friday announced Sunday that his job was over after 21 years in a Facebook post that has since gone viral.  "Again, I fall hard in the best interest of large corporations. I am no longer the Editorial Cartoonist for Farm News due to the attached cartoon which was published yesterday. Apparently a large company affiliated with one of the corporations mentioned in the cartoon was insulted and cancelled their advertisement with the paper, thus, resulting in the reprimand of my editor and cancellation of its Friday cartoons after 21 years of service and over 1,090 published cartoons to over 24,000 households per week in 33 counties of Iowa.  "I did my research and only submitted the facts in my cartoon." The cartoon features two farmers talking about farming profits. (view cartoon) The first says, "I wish there was more profit in farming." The second farm answers, "There is. In year 2015 the CEOs of Monsanto, DuPont Pioneer and John Deere combined made more money than 2,129 Iowa farmers. Friday received an email from his editor at Farm New cutting off their relationship a day after the cartoon was published. Friday’s editor said a seed dealer pulled their advertisements with Farm News as a result of the cartoon, and others working at the paper disagreed with the jokes made about the agriculture corporations.

    Largest US food producers ask Congress to shield lobbying activities - Some of the largest food producers in the US have successfully petitioned Congress to propose a change to the Freedom of Information Act that would shield their communications with boards overseen by the US Department of Agriculture from the scrutiny of the public, the Guardian has learned. The move follows a series of stories that showed the government-backed egg promoter, the American Egg Board, had attempted to stifle competition from Silicon Valley food startup Hampton Creek, in direct conflict with its mandate.  Several agricultural lobbyists including United Egg Producers, the National Cattlemen’s Beef Association and the National Pork Producers Council have now sent a letter to the congressional subcommittee overseeing appropriationsfor the Department of Agriculture (USDA) asking to be exempted from Foia requests to their own respective promotional boards. The letter to the subcommittee reads, in part: We support inclusion of language in the Committee report urging the U.S. Department of Agriculture (USDA) to recognize that the research and promotion programs are funded solely with producer dollars, and therefore are not agencies of the Federal government or subject to the Freedom of Information Act (Foia). The language added to the bill reads thusly: The Committee notes that the commodity Research and Promotion boards that the agency oversees are not agencies of the federal government, nor are Research and Promotion programs funded with federal funds. The funding used to operate and carry out the activities of the various Research and Promotion programs is provided by producers and industry stakeholders, and employees of the boards are not federal employees. Therefore, the Committee urges USDA to recognize that such boards are not subject to the provisions of 5 U.S.C. Section 552.

    The US just had its first Zika death -- Ana Rius, Puerto Rico's health secretary, just announced the first Zika-related death on the island. According to a new report from the US Centers for Disease Control and Prevention, a 70-year-old man who had been infected with Zika died in February from a drop in blood platelets, the part of the blood that is responsible for forming clots. This condition is called thrombocytopenia. It's still unclear if or how the two issues converged to be fatal. While a low-platelet count can be deadly on its own if untreated, Zika is rarely fatal in healthy adults. According to the CDC report, the man died "of complications related to severe thrombocytopenia." Puerto Rico, a US territory, has seen more than 600 cases of Zika. Seventy-three of those cases have been in pregnant women, which is of particular concern to health officials since the virus can cause severe birth defects like microcephaly, a condition in which babies being born with abnormally small heads. So far, 14 of the infected women have given birth to healthy babies, according to AP. Another 16 Puerto Ricans are currently hospitalized with the virus. Health officials say that four may have developed Guillain-Barre syndrome, a temporary condition that can cause paralysis, as a result. Zika is a fairly new virus that's been spreading throughout South America and some US territories. While it's been documented among US travelers, local transmission has been reported only in US territories. So far, there's no rapid diagnostic test to detect Zika in a newly infected person. And it has no cure.

    New discovery means more U.S. states will face a risk from Zika - For the first time in the Western Hemisphere, researchers have detected the Zika virus inAedes albopictus, the mosquito species known as the “Asian tiger,” a finding that increases the number of U.S. states potentially at risk for transmission of the disease.During the summer months when U.S. mosquito populations are at their peak, albopictus are more ubiquitous than the Aedes aegypti that have been the primary vector of the spread of Zika elsewhere in the Americas. Unlike the aegypti mosquito, which is mostly present in southern United States and along the Gulf Coast, the albopictus has a range as far north as New England and the lower Great Lakes.The discovery was reported recently by the Pan American Health Organization after researchers in Mexico confirmed the presence of Zika in Asian tiger mosquitoes captured in the state of San Luis Potosi and sent them to government labs for testing. U.S. health officials say they had anticipated the finding and have already encouraged states within the range of the Asian tiger mosquitoes to prepare for Zika. Scientists had previously identified the Asian tiger as the primary vector for Zika during a 2007 outbreak in the West African country of Gabon. U.S. health officials say the latest discovery should serve as a wake-up call to state and local governments that have assumed their populations were too far north to be at risk. 

    El Nino dries up Asia as its stormy sister La Nina looms: Withering drought and sizzling temperatures from El Nino have caused food and water shortages and ravaged farming across Asia, and experts warn of a double-whammy of possible flooding from its sibling, La Nina.  The current El Nino which began last year has been one of the strongest ever, leaving the Mekong River at its lowest level in decades, causing food-related unrest in the Philippines, and smothering vast regions in a months-long heat wave often topping 40 degrees Celsius (104 Fahrenheit). Economic losses in Southeast Asia could top $10 billion, IHS Global Insight told AFP.The regional fever is expected to break by mid-year but fears are growing that an equally forceful La Nina will follow.That could bring heavy rain to an already flood-prone region, exacerbating agricultural damage and leaving crops vulnerable to disease and pests. "The situation could become even worse if a La Nina event—which often follows an El Nino—strikes towards the end of this year," Stephen O'Brien, UN under-secretary-general for humanitarian affairs and relief, said this week.He said El Nino has already left 60 million people worldwide requiring "urgent assistance," particularly in Africa. Wilhemina Pelegrina, a Greenpeace campaigner on agriculture, said La Nina could be "devastating" for Asia, bringing possible "flooding and landslides which can impact on food production."

    As Asia's rice crop shrivels, food security fears resurface: (Reuters) - Nearly a decade after a spike in global food prices sent shockwaves around the world, Asia's top rice producers are suffering from a blistering drought that threatens to cut output and boost prices of a staple for half the world's population. World rice production is expected to decline for the first time this year since 2010, as failing rains linked to an El Nino weather pattern cut crop yields in Asia's rice bowl. A heat wave is sweeping top rice exporter India, while the No.2 supplier Thailand is facing a second year of drought. Swathes of farmland in Vietnam, the third-biggest supplier, are also parched as irrigation fed by the Mekong river runs dry. The three account for more than 60 percent of the global rice trade of about 43 million tonnes. "As of now we haven't seen a large price reaction to hot and dry weather because we have had such significant surplus stocks in India and Thailand. But that can't last forever," said James Fell, an economist at the International Grains Council (IGC). Rice inventories in the three top exporters are set to fall by about a third at the end of 2016 to 19 million tonnes, the biggest year-on-year drop since 2003, according to Reuters calculations based on U.S. Department of Agriculture data. Any big supply disruption can be extremely sensitive. In 2008, lower Asian rice output due to an El Nino prompted India to ban exports, sending global prices sky-rocketing and causing food riots in Haiti and panic measures in big importers such as the Philippines.

    Record Heat Threatens India’s Poor and Elderly - One year after India experienced the fifth-deadliest heat wave ever recorded, temperatures are again soaring to deadly extremes. Local governments are scrambling to address rising death tolls and dwindling water supplies. The drought and blistering heat, some 20 to 30 degrees Fahrenheit above normal, has claimed 300 lives since early April. Towns on India’s eastern side have been hit with record-setting temperatures — 119.3 degrees in the town of Titlagarh, Orissa, which is the highest temperature ever recorded in that state during April.  Before monsoon rains provide relief in mid-June, India’s subsistence farmers will incredibly vulnerable to the heat. They’re faced with a dire choice: stay inside and let the crops go to waste or work the land and risk heat stroke. Abandoning the choice altogether, thousands of farmers have migrated to cities in search of jobs — “often leaving elderly and young relatives behind in parched villages,” Reuters reports. The suffering of these farmers has reinvigorated calls for the government to provide a social safety net. This week, more than 150 Indian leaders and activists signed an open letter to the prime minister expressing their “collective anxiety about the enormous suffering of the rural poor.” They called for the government to provide 100 days of paid work a year for the poor and unemployed. In the meantime, local governments are running ads on TV telling people to stay indoors, seek shade, and drink lots of water. But staying indoors offers little respite for the one-third of Indians who lack electricity. Even those with electricity face the possibility of power outages, as the Indian grid struggles to accommodate millions of air conditioners running on high. “Drink water” has been a similarly difficult recommendation to follow. Two hundred and fifty thousand villages are short of water, as reservoirs have dried to a fifth of their full capacity. Some towns have run so completely dry that the government has had to send tankers of water for emergency relief.

    Water trains bring scant relief to drought-ravaged Indian state: (Reuters) - Haribhau Kamble, an unemployed labourer in India's richest state of Maharashtra, is forced to queue for hours in scorching heat to fetch water even as the government puts on trains to ship water to the region parched by back-to-back drought years.Locals had been hoping a 50-wagon daily water train would ease shortages, but they were disappointed as the 2.5 million litres carried by the train and ferried by tankers to villages was not enough to meet the needs of Latur's half a million people and Marathwada's 19 million. Marathwada, home to many sugar mills in Maharashtra - the nation's top producer, is one of the several regions in India that received below-average June-September rains in 2015. New Delhi estimates that overall 330 million people - a quarter of the country's population - are currently affected by drought. Water is set to get scarcer over the next two months as temperatures soar above 40 degrees Celsius (104°F), drying up Marathwada reservoirs that are now just 3 percent full. "That Maharashtra would face a water crisis was clear when monsoons failed, yet the state took no action to curb supplies to water-guzzling industries like beer and sugar," said Parineeta Dandekar, associate coordinator at the South Asia Network on Dams, Rivers and People. "There are limits on how much water the government can supply by train. Had it reserved water sources for drinking last year, the situation would have been much better now."

    Trafficking risk rises as villagers flee India's worst drought in decades: - The worst drought in decades across several states in India is forcing tens of thousands of people to migrate from rural areas in search of water, food and jobs, increasing the risk that they may be trafficked or exploited, activists said. About 330 million people, almost a quarter of the country's population, are now affected by drought, the government estimates. Destitute women, children and older family members left behind in the villages are most at risk of exploitation. "People in the rural areas have always been vulnerable because they want better jobs, better lives," said Mangala Daithankar at non-profit Social Action for Association and Development in Pune, in western Maharashtra state. "The drought has aggravated the situation because they are so desperate now. They have absolutely nothing," said Daithankar, who has worked in the state's drought-hit Marathwada region for about two decades. Maharashtra is one of the worst affected states, with successive years of poor rainfall ravaging crops, killing livestock, drying up reservoirs and forcing farmers into indebtedness that has led to thousands of suicides. In the state's Jalna district, scores of villages house only destitute women and children left in the care of older relatives who keep an eye on their homes and parched fields. "There's no water, so there are no jobs to be had on the fields and no food to feed their families,"

    Animals die as Cambodia is gripped by worst drought in decades - Here in Kompong Thom province’s Kampong Svay district, about 200kms north of Phnom Penh, Phean and Khoert spin a familiar narrative being repeated and lamented the length and breadth of Cambodia, which is currently in the midst of its worst drought in decades. According to Keo Vy, spokesman for the National Committee for Disaster Management, the severity of this drought cannot be overestimated. “Previous droughts only affected parts of the country, but the current drought is affecting the whole,” he said on Tuesday. Nineteen provinces have been classified as in a serious condition requiring “immediate intervention” from the government, he said, and while the authorities have held off on making an appeal for international aid, “ministries, military units, NGOs, and everyone capable of helping” have been asked to step up. Vy also warned that people are now more exposed to illnesses such as cholera, but insisted that the government “will not allow any Cambodian people to die of thirst.” In Ratanakiri province in the northeast, Unicef has found that 136 out 203 primary schools are facing water shortages, with “high absenteeism” of both students and teachers being reported.Over the past few weeks, the toll on animal life has been significant. First, in Siem Reap province, came the death of a female elephant, which collapsed from heatstroke after years of carrying tourists around Angkor Wat. In Battambang province in the northwest – one of the hardest-hit regions in the country – Radio Free Asia reported that at least 30 monkeys died after the heat claimed the last tracts of water in their flooded forest habitat. RFA also said at least 200 water buffalo and cows have perished in the northern province of Stung Treng.

    Drought-hit Zimbabwe sells off wild animals | Reuters - Zimbabwe put its wild animals up for sale on Tuesday, saying it needed buyers to step in and save the beasts from a devastating drought. Members of the public "with the capacity to acquire and manage wildlife" - and enough land to hold the animals - should get in touch to register an interest, the state Parks and Wildlife Management Authority said. There were no details on the animals on offer or their cost, but the southern African country's 10 national parks are famed for their huge populations of elephants, lions, rhinos, leopards and buffalos. A drought across the region has left more than 4 million Zimbabweans needing aid and hit the crops they rely on for food and export earnings, from maize to tobacco. It has also exacerbated an economic crisis in the cash-strapped country that has largely been deserted by foreign donors since 1999. Selling the animals would give some of them a new home and ease financial pressure on the parks authority, which says it receives little government funding and struggles to get by on what it earns through hunting and tourism

    Hyenas attack hungry women as Somaliland's drought deepens - charity: - Somaliland risks descending into famine amid a severe drought that has killed thousands of livestock, an international aid agency warned on Friday, adding there were reports of some women being set upon by hyenas after collapsing from hunger. "Many people are saying it's the worst drought in memory," said Mary Griffin, spokeswoman for Islamic Relief, who visited the region this month. She said malnourished mothers were unable to breastfeed their babies, and herders were feeding cardboard boxes to their surviving animals because there was no grass left for grazing. Adan Shariff Gabow, Islamic Relief's manager for Puntland, neighbouring Somaliland, said there were cases in Somaliland of women attacked by starving hyenas. "They fell down, malnourished, and we understand they were then set on by the animals," he said. The United Nations says 1.7 million people - many of them nomadic - need aid in Somaliland and Puntland, Somalia's two semi-autonomous regions in the north. Griffin said there was a "terrible sense of deja vu" in the Horn of Africa where a 2011 drought in southern Somalia killed more than a quarter of a million people. Aid agencies were criticised then for responding too late to warning signs.

    Giant red zone: Fire danger extreme across Saskatchewan, Alberta - Saskatchewan - CBC News: As tens of thousands of residents flee from Fort McMurray, Alta., the threat of more fires continues to loom across Alberta and Saskatchewan.   On May 4, Natural Resources Canada indicated that the risk of fire is "extreme" in the two provinces. A map the federal department produced for Wednesday shows a huge red zone over most of the region.The Canadian Wildland Fire Information System is a computer-based system that monitors fire danger conditions across Canada. The system creates a fire danger map based on daily weather conditions such as temperature and humidity. It also takes into consideration factors like how easy it is to ignite vegetation, how difficult a fire may be to control, and how much damage a fire can do. Here's what the fire risk map for Western Canada looked like a week ago. Almost nowhere in Saskatchewan was the risk considered "extreme." (Natural Resources Canada)  Last week, fire danger was rated as "low" in places now consumed by fire, like Fort McMurray. In Saskatchewan, there was virtually nowhere in the "extreme" risk zone.

    South Florida’s Tourist Season From Hell - On February 26 Gov. Rick Scott declared a state of emergency in communities hit by the pollution on Florida’s east and west coasts, citing “extensive environmental harm” and “severe economic losses” from ongoing discharges of Lake Okeechobee water to the St. Lucie and Caloosahatchee rivers. But so far, businesses say they haven’t seen any help. Some Everglades advocates took out a full-page ad in The New York Times calling out U.S. Sugar Corp. and its owner, the Charles Stewart Mott Foundation, for the pollution that runs off of sugar fields into Lake Okeechobee. Additionally, an article in the Huffington Post compared Florida’s water pollution to the poisoned water in Flint, Michigan, where the Mott Foundation is headquartered. As of this writing, the floodgates from Lake Okeechobee are still discharging polluted water into both the Atlantic and Gulf coasts, as well as towards the Everglades. In its wake, people are reporting dead sea life, unfit water conditions for swimming and fishing, and a rank smell. “It's brown, it stinks, it's cold,” a tourist from New Mexico told a TV reporter in Fort Myers."It doesn't look very appealing to get into to go swimming in.” The scuzzy water that’s wrecking this year’s tourist season comes courtesy of Big Sugar and other agricultural operators around Lake Okeechobee, which sits in the state’s sparsely populated center roughly between Palm Beach on the east coast and Fort Myers on the west coast. It’s America’s second biggest freshwater lake in the lower 48, and thanks to ridiculously permissive policies, it’s become a private dumping ground for mega-agricultural operations. These corporations pump the public’s water from the lake to irrigate their fields, then send the water; polluted with fertilizer and other farm chemicals, back into Lake Okeechobee.

    This disease has killed a million trees in California, and scientists say it’s basically unstoppable -- In California’s coastal forests, health is anything but good. Since 1995, a pathogen that causes a phenomenon dubbed ‘sudden oak death’ (a far catchier name than that of the pathogen itself, Phytophthora ramorum) has taken out millions of oak and tanoak trees, particularly along the coast extending northward from Monterey County. That includes areas of Marin County, Sonoma County and Big Sur.  The pathogen is a water mold that affects different trees differently, and not all are susceptible. It will tear through a forest and kill some trees while leaving others standing.  But in some trees, the pathogen causes tree trunks to crack open a ‘canker’ and literally bleed out sap. The disease is actually related to the pathogen that caused the Irish potato famine in the 1800s.  “Millions of acres of land have been affected in coastal California,” says Richard Cobb, a postdoc at the University of California, Davis, who studies the disease. “It spreads via wind and rain, and it’s made some really big jumps to different parts of the state and into Oregon. It probably spread into California via the nursery trade. And it has been moved around the country a lot, also within the nursery trade.”  Unfortunately, new research on this invasive disease, published in the Proceedings of the National Academy of Sciences Monday by Cobb and a group of colleagues, finds that while there may once have been a chance to stop the spread of sudden oak death — around the year 2002 — that opportunity has since passed. Forces didn’t mobilize fast enough or spend enough money, and the disease model employed in the new research (a model not so dissimilar from those used to study how various diseases can spread among humans) suggests continual spread of the disease.

    INTERVIEW-Brazil losing forest the size of two football fields per minute: - Latin America's largest country is still losing tropical forests the size of two football fields every minute, despite attempts to tackle illegal logging and improve local land rights, a former head of Brazil's forestry service has said. Deforestation rates in Brazil, home to the world's biggest expanse of tropical forests, slowed significantly between 2004 and 2010, but have picked up again in recent years due to a lack of innovation and government planning, Tasso Azevedo told the Thomson Reuters Foundation. Preserving forests is a key way to reduce emissions of planet-warming gases and combat climate change, as trees suck carbon out of the atmosphere. Forests are also home to hundreds of thousands of people who depend on them for their livelihood. "In some cases, we are walking backwards," warned Azevedo, citing poor cooperation between competing government departments and civil society in Brazil. "This is not a problem with one ministry - it's a problem with how the government has been structured in the last couple of years," he said. Government bodies are less willing to accept help from civil society, he said, and within official environmental agencies there is reduced openness to new ideas and strategies. The rate of deforestation in the Brazilian Amazon dropped by nearly 80 percent between 2003 and 2013, according to a study published last year in the journal "Global Change Biology". But the deforestation rate has crept back up, jumping 16 percent in the year to July 2015. Today the country is losing about 5,000 square kilometres (1,930 square miles) of Amazon forest annually, one of the largest absolute declines of any country, Azevedo said.

    Brazil prosecutors file 30 billion pounds lawsuit against Vale, BHP for dam spill: (Reuters) – Federal prosecutors in Brazil filed a 155 billion-real (30 billion pounds) civil lawsuit on Tuesday against iron miner Samarco and its owners, Vale SA and BHP Billiton , for a collapsed tailings dam in November that killed 19 people and polluted a major river. The 359-page lawsuit, which is also against the two states affected by the spill and the federal government, is the result of a six-month investigation led by a task force set up after the disaster, prosecutors said in a statement. The total damages, prosecutors said, were calculated based on the cost of the Deepwater Horizon oil spill in the United States. BP’s total pre-tax charge for that spill, in 2010, reached $53.8 billion. Prosecutors demanded an initial payment of 7.7 billion reais. Vale and BHP both said they had not received formal notice of the claim. However, BHP said in a statement to the Australian Securities Exchange that it was “committed to helping Samarco to rebuild the community and restore the environment affected by the failure of the dam”. It said that a separate lawsuit that Samarco, Vale and BHP settled with Brazil’s government in March, in which the companies would pay an estimated 20 billion reais, was the best way to repair damage caused by the spill.

    This massive seagrass die-off is the latest sign we’re failing to protect the Everglades— The shallow coastal waters of Florida Bay are famed for their crystal clear views of thick green seagrass – part of the largest stretch of these grasses in the world.But since mid-2015, a massive 40,000-acre die off here has clouded waters and at times coated shores with floating dead grasses. The event, which has coincided with occasional fish kills, recalls a prior die-off from 1987 through the early 1990s, which spurred major momentum for the still incomplete task of Everglades restoration. Fourqurean and government Everglades experts fear they’re witnessing a serious environmental breakdown, one that gravely threatens one of North America’s most fragile and unusual wild places. When most people think of the Everglades, they envision swamps — but seagrass is just as important, if less romanticized.  Besides being the home to majestic sea turtles, dolphins, and manatees, Florida Bay also hosts pink shrimp, spiny lobsters, spotted seatrout, and much more.  And although there is at least some scientific dissent, Fourqurean and fellow scientists think they know the cause of the die-off. It’s just the latest manifestation, they say, of the core problem that has bedeviled this system for many decades: Construction of homes, roads, and cities has choked off the flow of fresh water. Without fast moves to make the park far more resilient to climate change and rising, salty seas, the problem will steadily worsen.The Everglades ecosystem “being out of balance at a time of climate change is really going to have a huge impact on South Florida, if we don’t do something about it,” said Interior Secretary Sally Jewell, who surveyed the seagrass die-off last week during an Everglades Trip.

    Dredging of Miami Port Badly Damaged Coral Reef, Study Finds - — The large-scale dredging of Miami’s port to accommodate the newest generation of freighters, an undertaking that prompted a long-running battle with environmentalists, caused widespread damage to a portion of the area’s fragile and already distressed coral reef, according to a new report by the National Oceanic and Atmospheric Administration.The report, based on a December survey undertaken by scientists for the agency’s National Marine Fisheries Service, found that as much as 81 percent of the reef near the dredging site was buried in sediment, and an Army Corps of Engineers contractor report from August shows up to 93 percent partial coral death because of sediment, despite a plan by the Corps to minimize the damage.The damage is particularly alarming because the world is rapidly losing its reefs, partly because of global warming, experts say.South Florida has the only coral reef in the continental United States and 80 to 90 percent of it has died or been badly harmed over the years, officials say. The causes include ocean temperatures that have dipped too low or risen too high, acidification, sewage and pollution. Several cycles of white plague disease, including one in 2014 that coincided with the dredge, have also badly hurt South Florida’s reef. White plague, a virus that bleaches and kills coral, has been destroying reefs around the world.“This Florida reef is as important to our country as the sequoias of California, and we are losing it faster than we can figure out why,”

    CO2 fertilization greening the Earth: An international team of 32 authors from 24 institutions in eight countries has just published a study titled "Greening of the Earth and its Drivers" in the journal Nature Climate Change showing significant greening of a quarter to one-half of the Earth's vegetated lands using data from the NASA-MODIS and NOAA-AVHRR satellite sensors of the past 33 years. The greening represents an increase in leaves on plants and trees. Green leaves produce sugars using energy in the sunlight to mix carbon dioxide (CO2) drawn in from the air with water and nutrients pumped in from the ground. These sugars are the source of food, fiber and fuel for life on Earth. More sugars are produced when there is more CO2 in the air, and this is called CO2 fertilization. "We were able to tie the greening largely to the fertilizing effect of rising atmospheric CO2 concentration by tasking several computer models to mimic plant growth observed in the satellite data," says co-author Prof. Ranga Myneni of the Department of Earth and Environment at Boston University, USA. Burning oil, gas, coal and wood for energy releases CO2 in to the air. The amount of CO2 in the air has been increasing since the industrial age and currently stands at a level not seen in at least half-a-million years. It is the chief culprit of climate change. About 85% of the Earth's ice-free lands is covered by vegetation. The area of all green leaves on Earth is equal to, on average, 32% of the Earth's total surface area - oceans, lands and permanent icesheets combined. "The greening over the past 33 years reported in this study is equivalent to adding a green continent about two-times the size of mainland USA (18 million km2), and has the ability to fundamentally change the cycling of water and carbon in the climate system,"

    The Unstoppable CO2-Induced Greening of the Earth Continues -- Among the many climate-alarmist fears of CO2-induced global warming is the concern that the productivity of the biosphere will decline if global temperatures rise to the extent predicted by computer models. Yet, for many alarmists, the future is the present. Since 1980, for example, the Earth has weathered three of the warmest decades in the instrumental temperature record, a handful of intense and persistent El Niño events, large-scale deforestation, "unprecedented" forest fires, and the eruption of several volcanoes. Concurrently, the air's CO2 content increased by 16%, while human population grew by 55%. So just how bad is the biosphere suffering in response to these much-feared events? Or, is it even suffering at all? A new paper by Zhu et al. (2016) provides valuable insight into this important topic. Noting that global environment change is rapidly altering the dynamics of terrestrial vegetation, Zhu et al. set about to discover just how significant this phenomenon is, as well as what has primarily been responsible for it. This they did using three long-term satellite-derived leaf area index (LAI) records, together with the output of ten global ecosystem models, which they employed to study four key drivers of LAI trends (atmospheric CO2 enrichment, nitrogen deposition, climate change and land cover change) over the period 1982-2009. And what did this effort reveal? The 32 researchers -- representing 9 different countries (Australia, China, France, Germany, Japan, Spain, Switzerland, the United States and the United Kingdom) -- report finding "a persistent and widespread increase of growing season integrated LAI (greening) over 25% to 50% of the global vegetated area, whereas less than 4% of the globe shows decreasing LAI (browning)." And equally importantly, they report that "factorial simulations with multiple global ecosystem models suggest that CO2 fertilization effects explain 70% of the observed greening trend, followed by nitrogen deposition (9%), climate change (8%) and land cover change (4%)."

    One of the World’s Most Endangered Turtles Nearly Extinct With Fewer Than 10 Left in the Wild  -- Cambodia’s Royal Turtle (Batagur affinis), also known as the Southern River Terrapin, is one of the world’s most endangered turtles and is now facing threats to its very survival due to habitat loss caused by increased sand dredging and illegal clearance of flooded forest. For several years the small remaining population of Royal Turtles—perhaps numbering fewer than 10—have been successfully protected from extinct by the Fisheries Administration (FiA) in partnership with Wildlife Conservation Society (WCS ) and local communities. A recent increase in disturbance along the Sre Ambel River System in Koh Kong Province, the only place the species is still found in Cambodia, is putting this species at great risk. Listed on the International Union for Conservation of Nature and Natural Resources (IUCN) Red List of Threatened Species as Critically Endangered—the highest threat level—the Royal Turtle is one of the world’s 25 most endangered tortoises and freshwater turtles. The Royal Turtle is so named because in historical times only the Royal Family could consume its eggs. Until now, the species has been designated as Cambodia’s National Reptile by Royal Decree issue on March 21, 2005.“This year our team has observed a decline in nesting of the Royal Turtle,” In Hul, FiA official and project coordinator, said. “We believe this is caused by increased sand dredging, wood transportation along the nesting habitat and illegal clearance of flooded forest disturbing the females during the breeding season.”“Only one nest has been located this year, compared to four nests last year. This is very worrying and if it continues it will be potentially putting the species at high risk of extinction,” Hul added.

    60% of Loggerhead Turtles Stranded on Beaches in South Africa Had Ingested Plastic -- We know that ocean plastic can have a devastating impact on aquatic life such as seabirds, fish and whales. Now, researchers have found that 60 percent of post-hatchling loggerhead turtles stranded on southern Cape beaches in South Africa have been impacted by growing quantities of human-caused debris such as plastic fragments, packaging and fibers. A new study published in Marine Pollution Bulletin last month reported that 24 out of 40 of loggerhead turtles died within two months of stranding in April 2015. Of the turtles that died, 16 had ingested plastic. Gruesomely, 11 of these turtles died because plastic was blocking their digestive tracts or bladders. Here are other key points from the study, as reported by South Africa’s Times Live:

    • Plastic comprised 99 percent of debris collected.
    • The majority—77 percent—were hard plastic fragments‚ 10 percent were from flexible packaging and 8 percent were fibers.
    • Industrial pellets comprised 3 percent, compared to around 70 percent in a previous study between 1968 and 1973.
    • In the earlier study‚ only 12 percent of stranded post-hatchlings contained plastics‚ compared to the 60 percent of the current study.

    Mourning Loomis Reef - the heart of the Great Barrier Reef's coral bleaching disaster - Stretching for half a kilometre or so, Loomis Reef is the place where the alarm bells started going off. Prof Justin Marshall has been diving this reef, about 270km north of Cairns, for 30 years. Right now he is, to say the least, angry. “My veil is down,” he says, no longer bothering with the kind of polite niceties common among academics. “I have cried. I have broken down in front of cameras. This is the most devastating, gut-wrenching fuck up,” says Marshall, of the University of Queensland. Back in November, researchers and staff on the Australian Museum’s Lizard Island Research Station started to see the early signs of coral bleaching – faded colours, odd fluorescent hues and chunks of white. The Great Barrier Reef, of which Loomis is just one of 3,000 reefs, is in the death throes of its worst ever coral bleaching event – part of the third global mass bleaching since 1998. Latest figures show that 93% of the reef has been impacted by bleaching. The worst affected areas are in the reef’s north. “Loomis Reef was an amazingly diverse, beautiful little reef about 500 metres long – covered in lots of different coral. Now it’s going to be a big ball of slime,” Marshall says. The past tense, it seems, is deliberate.

    Scientists say there’s basically no way the Great Barrier Reef was bleached naturally -- This year, we’ve seen alarming bleaching of the Great Barrier Reef, caused by warm sea temperatures. A recently completed aerial survey of the reef found that 93 percent of the smaller reefs that comprise it showed at least some bleaching, and in the northern sector of the reef, the large majority of reefs saw bleaching that was severe — meaning many of these corals could die.There was already considerable murmuring that this event, which damages a famous World Heritage site and could deal a blow to a highly valuable tourism industry, did not simply happen by chance. And now, a near real-time analysis by a group of Australian climate and coral reef researchers has affirmed that the extremely warm March sea temperatures in the Coral Sea, which are responsible for the event, were hardly “natural.”“Human caused climate change made the extreme ocean temperatures that led to the massive bleaching events along the Great Barrier Reef this year at least 175 times more likely,” finds the analysis, which was led by Andrew King, a researcher studying climate extremes at the University of Melbourne. King and his four colleagues freely confess that their analysis has not yet been peer-reviewed — science doesn’t move that fast — and admit to adopting the “unusual approach of releasing the results before publication.” But they defend the move in light of the situation.“Because we have confidence in the methods, the methods have been peer reviewed, and because the results are so strong, we decided we needed to release them almost immediately. It’s important for the public to know that climate change is making these bleaching events far more likely,” 

    Large Swaths Of The Pacific Ocean May Actually Suffocate In Just 15 Years: It should come as no surprise that human activity is causing the world's oceans to warm, rise and acidify. But an equally troubling impact of climate change is that it is beginning to rob the oceans of oxygen. While ocean deoxygenation is well established, a new study led by Matthew Long, an oceanographer at the National Center for Atmospheric Research, finds that climate change-driven oxygen loss is already detectable in certain swaths of ocean and will likely be "widespread" by 2030 or 2040. Ultimately, Long told The Huffington Post, oxygen-deprived oceans may have "significant impacts on marine ecosystems" and leave some areas of ocean all but uninhabitable for certain species. While some ocean critters, like dolphins and whales, get their oxygen by surfacing, many, including fish and crabs, rely on oxygen that either enters the water from the atmosphere or is released by phytoplankton via photosynthesis. But as the ocean surface warms, it absorbs less oxygen. And to make matters worse, oxygen in warmer water, which is less dense, has a tough time circulating to deeper waters. For their study, published in the journal Global Biogeochemical Cycles, Long and his team used simulations to predict ocean deoxygenation through 2100.

    It May Soon Be Too Late to Save the Seas - What happens if marine life in the oceans can't pull in enough oxygen from the oceans to live? We may be about to find out. A startling new study led by the National Center for Atmospheric Research (the federal research arm of the National Science Foundation) published Wednesday found a disturbing trend – a warming planet could overwhelm natural variability and start to significantly affect oxygen levels in the oceans in just 10-15 years. The study confirmed what scientists have long observed - that climate change is causing a drop in the amount of oxygen dissolved in oceans in some parts of the world. But the study's central conclusion is what is so alarming - the effects of this drop in the amount of oxygen all marine life require will start to become evident in just 15 years or so. At some point, the drop in the ocean's oxygen levels will leave marine life struggling to breathe. Climate scientists have predicted for some time that the planet's rapidly warming climate (2014 and 2015 were the hottest years in civilized history and 2016 may eclipse the record as well) would start to affect oxygen levels in the oceans. But what they haven't been able to show, until now, is just how noticeable the drop in oxygen levels actually was – and how to separate what was caused by natural variability (like the el Nino cycle) and what was caused by climate change. Now we know. "Loss of oxygen in the oceans is one of the serious side effects of a warming atmosphere, and a major threat to marine life," said Matthew Long, who is the lead author of the study. "Since oxygen concentrations in the ocean naturally vary depending on variations in winds and temperature at the surface, it's been challenging to attribute any de-oxygenation to climate change. This new study tells us when we can expect the effect from climate change to overwhelm the natural variability."

    Native American tribe to relocate from Louisiana coast as sea levels rise: A small Native American community in coastal Louisiana is to be resettled after losing nearly all its land partly due to rising seas, a first in the United States. The band of Biloxi-Chitimacha-Choctaw, a Native American tribe living in the Louisiana coastal wetlands, has lost some 98 percent of its land since the 1950s. This is the first time an entire community has had to be relocated due in part to rising sea levels, said Marion McFadden, a spokeswoman for the U.S. Department of Housing and Urban Development. The land loss is also due to factors such as erosion and sediment mismanagement, a Louisiana official said. The band of Biloxi-Chitimacha-Choctaw have lived and fished on the Isle de Jean Charles in Louisiana's coastal south since the 1800s, a tribe's spokesman said. But land loss has caused the island to shrink from some 15,000 acres to a strip of about a quarter-mile wide by a half-mile long, a study by Northern Arizona University shows. From a peak of some 400 inhabitants, only around 100 remain. The loss of land to the sea and houses to hurricanes have caused families to leave, said Boyo Billiot, the tribe's deputy chief said in a telephone briefing to reporters. "No one likes to leave an area where they have history, a lot of memories," said Billiot. "We are people of the bayou. Water has played a central role in who we are." Climate advocacy group Climate Nexus said the relocation of the tribe was creating new "refugees" of climate change.

    Resettling the First American ‘Climate Refugees’ -   In January, the Department of Housing and Urban Development announced grants totaling $1 billion in 13 states to help communities adapt to climate change, by building stronger levees, dams and drainage systems. One of those grants, $48 million for Isle de Jean Charles, is something new: the first allocation of federal tax dollars to move an entire community struggling with the impacts of climate change. The divisions the effort has exposed and the logistical and moral dilemmas it has presented point up in microcosm the massive problems the world could face in the coming decades as it confronts a new category of displaced people who have become known as climate refugees. ... Around the globe, governments are confronting the reality that as human-caused climate change warms the planet, rising sea levels, stronger storms, increased flooding, harsher droughts and dwindling freshwater supplies could drive the world’s most vulnerable people from their homes. Between 50 million and 200 million people — mainly subsistence farmers and fishermen — could be displaced by 2050 because of climate change, according to estimates by the United Nations Institute for Environment and Human Security and the International Organization for Migration. ... “This is not just a simple matter of writing a check and moving happily to a place where they are embraced by their new neighbors,” said Mark Davis, the director of the Tulane Institute on Water Resources Law and Policy.  “If you have a hard time moving dozens of people,” he continued, “it becomes impossible in any kind of organized or fair way to move thousands, or hundreds of thousands, or, if you look at the forecast for South Florida, maybe even millions.”

    Greenland ice sheet melting has started early: In a year of startling data pointing to a warming world, the thin blue line in the chart below of Greenland's ice melt was initially dismissed as just too outlandish to be accurate. Greenland is home to the world's second largest ice mass, containing enough water to lift average sea levels about seven metres if it all melted.So in early April, signs that the giant ice sheets were melting at least a month earlier than typical during the three decades-plus of reliable records stunned scientists at the Danish Meteorological Institute. Warm air sweeping in from the south-west of Greenland had prompted more than 12 per cent of the ice sheet to register melting. Weather stations 1840 metres above sea-level reported temperatures of above 3 degrees, conditions that would be considered a warm day in July, let alone April.  "Greenland is really the big show when it comes to ice melt," said Matt King, Professor of Polar Geodesy and an ARC Future Fellow at the University of Tasmania. "It's probably losing as much ice as all the small glaciers around the world combined, and probably more than Antarctica. "Greenland is being eaten away from away from above and from the edges." Arctic air temperatures have risen about two degrees since the 1960s. Ocean temperatures are also warming, thawing Greenland glaciers in contact with surrounding seas. Since satellite records date only from the 1970s, some natural fluctuations may be in play, he said. Still, Greenland's early April warmth was consistent with other signals of a warming planet.

    Dominoes fall: Vanishing Arctic ice shifts jet stream, which melts Greenland glaciers -- Investigating the factors affecting ice melt in Greenland — one of the most rapidly changing places on Earth — is a major priority for climate scientists. And new research is revealing that there are a more complex set of variables affecting the ice sheet than experts had imagined. A recent set of scientific papers have proposed a critical connection between sharp declines in Arctic sea ice and changes in the atmosphere, which they say are not only affecting ice melt in Greenland, but also weather patterns all over the North Atlantic.  The new studies center on an atmospheric phenomenon known as “blocking” — this is when high pressure systems remain stationary in one place for long periods of time (days or even weeks), causing weather conditions to stay relatively stable for as long as the block remains in place. They can occur when there’s a change or disturbance in the jet stream, causing the flow of air in the atmosphere to form a kind of eddy, said Jennifer Francis, a research professor and climate expert at Rutgers University.  Blocking events over Greenland are particularly interesting to climate scientists because of their potential to drive temperatures up and increase melting on the ice sheet.   “When they do happen, and they kind of set up in just the right spot, they bring a lot of warm, moist air from the North Atlantic up over Greenland, and that helps contribute to increased cloudiness and warming of the surface,” Francis said. “When that happens, especially in the summer, we tend to see these melt events occur.”   Now, two new studies have suggested that there’s been a recent increase in the frequency of melt-triggering blocking events over Greenland — and that it’s likely been fueled by climate change-driven losses of Arctic sea ice.  A paper set to be published Monday in the International Journal of Climatology reveals an uptick in the frequency of these blocking events over Greenland since the 1980s.

    Arctic Ice Melt Affects Weather Patterns All Over North Atlantic -- The sharp decline in Arctic sea ice is affecting not only glaciers in Greenland but also weather patterns all over the North Atlantic. A study last week shows that frequency of summer “blocking” events, capable of producing extreme and stagnant weather, has increased since the 1980s. This has resulted in more warm air over Greenland and the temperature difference between the Arctic and temperate Atlantic has driven events like 2012’s record wet summer in the UK. For a deeper dive: Washington Post, Guardian, Nature World News

    Arctic Death Spiral Update: What Happens In The Arctic Affects Weather Everywhere Else - This was the hottest four-month start (January to April) of any year on record, according to newly-released satellite data. The Arctic continues its multi-month trend of off-the-charts warmth. So it’s no surprise that Arctic sea ice continues to melt at a record pace. New research, however, finds that warming-driven Arctic sea ice loss causes high-pressure systems to get stuck in places like Greenland, leading to accelerated melt of the land-locked ice that drives sea level rise worldwide.    Let’s start with the University of Alabama at Huntsville (UAH) satellite data, which show that the lowest part of the atmosphere (the lower troposphere) was an impressive 1.3°F (0.71°C) above the historical (1981-2010) average — a baseline that is itself 0.8°F (0.45°C) hotter than pre-industrial levels. The lower tropospheric temperature (LT) anomaly, via UAH scientist Roy Spencer.April just about tied the record for hottest April in the satellite record (which was 0.73°C). It follows the hottest March, hottest February, and “warmest January in satellite record.” So it’s easily been the hottest start to any year in the satellite record. This year has also set records for loss of Arctic sea ice. Here is a chart of Arctic sea ice extent from the Danish Meteorological Institute (2016 is in black):

    New Maps Chart Greenland Glaciers' Melting Risk - Many large glaciers in Greenland are at greater risk of melting from below than previously thought, according to new maps of the seafloor around Greenland created by an international research team. Like other recent research findings, the maps highlight the critical importance of studying the seascape under Greenland's coastal waters to better understand and predict global sea level rise. Researchers from NASA's Jet Propulsion Laboratory and other research institutions combined all observations their various groups had made during shipboard surveys of the seafloors in the Uummannaq and Vaigat fjords in west Greenland between 2007 and 2014 with related data from NASA's Operation Icebridge and the NASA/U.S. Geological Survey Landsat satellites. They used the combined data to generate comprehensive maps of the ocean floor around 14 Greenland glaciers. Their findings show that previous estimates of ocean depth in this area were as much as several thousand feet too shallow. Why does this matter? Because glaciers that flow into the ocean melt not only from above, as they are warmed by sun and air, but from below, as they are warmed by water. In most of the world, a deeper seafloor would not make much difference in the rate of melting, because typically ocean water is warmer near the surface and colder below. But Greenland is exactly the opposite. Surface water down to a depth of almost a thousand feet (300 meters) comes mostly from Arctic river runoff. This thick layer of frigid, fresher water is only 33 to 34 degrees Fahrenheit (1 degree Celsius). Below it is a saltier layer of warmer ocean water. This layer is currently more than more than 5 degrees F (3 degrees C) warmer than the surface layer, and climate models predict its temperature could increase another 3.6 degrees F (2 degrees C) by the end of this century.

    Tracking the 2°C Limit - March 2016: The first three months of 2016 have now all been blow-out months, all rising above 1°C anomaly over the GISS mid-century baseline. This month came in at 1.28°C. In fact, all of the past 6 months have come in at an unprecedented >1°C over their baseline. In terms of our anomaly over our 1880-1909 preindustrial baseline, this clocks in at 1.528°C and we've now marked 13 months where the 12 month average has remained over 1°C. We first crossed that point in February of 2015. (Full size image.) Reliable sources are telling me April 2016 is coming in about the same, around 1.2°C in the GISS data. The 2015/16 super El Nino is continuing to wane but we probably have a few more months of these extreme global anomalies to come before the surface station data begins to fall back to the long term mean trend line. The Ocean Nino Index (ONI) data is still just off its peak of 2.3, coming in at 2.0 for JFM (Jan/Feb/Mar). The satellite temperature data tends to lag the ENSO by about 6 months, so we will probably see those data sets also remain near their peak for another 6 to 8 months. (Full size image.)  Much noise is being made about the expected la Nina that will follow this current El Nino. John Abraham has a good article in the Guardian explaining how the ENSO cycles operate much like a battery; gaining heat in the oceans and then releasing that heat to the atmosphere. Many contrarians seem to think the la Nina is going to somehow wipe out the El Nino, but that's far from the case. They are essentially grasping for straws. This super El Nino and the resulting surface and satellite temperature responses have been nothing short of spectacular, and very concerning.

    Greenpeace Publishes Leaked TTIP Documents Revealing ‘Grave’ Environmental, Public Health Concerns - Greenpeace on Monday released a raft of leaked documents detailing talks between the European Union and the United States regarding a far-reaching free-trade deal. In a statement, the environmental nonprofit said "grave concerns" over environment and public health in the EU were laid bare in the 248 pages of leaked Transatlantic Trade and Investment Partnership negotiating texts. "These documents make clear the scale and scope of the trade citizens of the United States and the European Union are being asked to make in pursuit of corporate profits. It is time for the negotiations to stop, and the debate to begin," Sylvia Borren, executive director of Greenpeace Netherlands, said in the statement. "We call on the negotiators to release the latest, complete text to facilitate that discussion, and we ask that the negotiations be stopped until these questions, and many more have been answered. Until we can fully engage in a debate about the standards we and our planet need and want."  Among other things, the leaked documents, which Greenpeace  says comprise about three-fourths of the existing "consolidated texts" — documents presenting the EU and U.S. positions on issues side by side — reveal that the U.S. is urging the E.U. negotiators to adopt more lax regulations insofar as product regulation in the 28-nation bloc is concerned. These provisions, if adopted, would replace the stringent "precautionary principles" currently used in the EU. "In the chapter on sanitary and phytosanitary protection measures, proposals by the US delegation refers to 'products of modern agricultural technology,' which clearly indicates their pressure to get rid of trade barriers for genetically-modified organisms (GMOs), as the proposal also refers to the Global Low Level Presence Initiative, which addresses contamination of agricultural products by GMOs," Greenpeace said in an analysis of the leaked documents.

    TTIP Leaked Documents Show Obama Demands Killing Paris Accord Against Climate Change -- "248 pages of leaked Transatlantic Trade and Investment Partnership (TTIP) negotiating texts” show that the American negotiating position, as Greenpeace put the matter, allows "No place for climate protection in TTIP,” and, though "We have known that the EU position was bad, now we see the US position is even worse.”   Jorgo Riss, Director of Greenpeace EU, said, "The effects of TTIP would be initially subtle but ultimately devastating. It would lead to European laws being judged … disregarding environmental protection and public health concerns.”  A 70-year-old EU rule, which allows nations to restrict trade in order “to protect human, animal and plant life or health," or for "the conservation of exhaustible natural resources,” would end, if U.S. President Barack Obama gets what he wants. Furthermore, the “Precautionary principle is forgotten”: it’s currently enshrined in the EU Treaty, but Obama wants it gone; it is stated in the EU Treaty as allowing "rapid response in the face of a possible danger to human, animal or plant health, or to protect the environment. In particular, where scientific data do not permit a complete evaluation of the risk, recourse to this principle may, for example, be used to stop distribution or order withdrawal from the market of products likely to be hazardous.” Obama wants there to be no ability for EU nations to withdraw from the market “products likely to be hazardous.” All products would be assumed safe, unless proven not to be.

    Abrupt Sea Level Rise Looms As Increasingly Realistic Threat -- Last month in Greenland, more than a tenth of the ice sheet’s surface was melting in the unseasonably warm spring sun, smashing 2010’s record for a thaw so early in the year. In the Antarctic, warm water licking at the base of the continent’s western ice sheet is, in effect, dissolving the cork that holds back the flow of glaciers into the sea; ice is now seeping like wine from a toppled bottle. The planet’s polar ice is melting fast, and recent satellite data, models, and fieldwork have left scientists sobered by the speed of the sea level rise we should expect over the coming decades. Although researchers have long projected that the planet’s biggest ice sheets and glaciers will wilt in the face of rising temperatures, estimates of the rate of that change keep going up. When the Intergovernmental Panel on Climate Change (IPCC) put out its last report in 2013, the consensus was for under a meter (3.3 feet) of sea level rise by 2100. In just the last few years, at least one modeling study suggests we might need to double that.  Eric Rignot at the University of California, Irvine says that study underscores the possible speed of ice sheet melt and collapse. “Once these processes start to kick in,” he says, “they’re very fast.”  The Earth has seen sudden climate change and rapid sea level rise before. At the end of the planet’s last glaciation, starting about 14,000 years ago, sea levels rose by more than 13 feet a century as the huge North American ice sheet melted. But researchers are hesitant about predicting similarly rapid climate shifts in our future given the huge stakes involved: The rapid collapse of today’s polar ice sheets would erase densely populated parts of our coastlines.

    The Latest: Berkshire investors reject climate change report - Berkshire Hathaway shareholders have overwhelmingly rejected a resolution calling for the company to write a report about the risks climate change creates for its insurance companies. CEO Warren Buffett says he agrees that dealing with climate change is important for society, but he doesn't think climate change creates serious risks for Berkshire's insurance businesses. Buffett says the fact that Berkshire generally writes insurance policies for one-year periods allows it to regularly re-evaluate risks, such as climate change. The activists who proposed the motion tried to urge Buffett to take a public stance in favor of measures to reduce consumption of fossil fuels, but he resisted.

    Half of leading investors ignoring climate change: study | Reuters: Almost half of the world's top 500 investors are doing nothing to address climate change through their investments, a study showed on Monday. A report by the Asset Owners Disclosure Project (AODP), a not-for-profit organization aimed at improving the management of climate change, found that just under a fifth of the top investors - or 97 managing a total of $9.4 trillion in assets - were taking tangible steps to mitigate global warming These include investing in low polluting assets or encouraging the companies they invest in to be greener. A further 157 investors managing a total of $14.2 trillion were taking "first steps" towards addressing climate change, while 246 managing $14 trillion were doing nothing at all, the report said. "Climate change risk is now a mainstream issue for institutional investors and last year has seen many significantly step up their action to manage this," AODP Chief Executive Julian Poulter said in a statement. "However ... it is shocking that nearly half the world's biggest investors are doing nothing at all to mitigate climate risk," he said, adding pensions funds and insurers that ignore climate change were "gambling with the savings and financial security of hundreds of millions of people".

    The San Andreas Fault Is ‘Locked and Loaded,’ a Leading Seismologist Warns -- A leading earthquake expert has warned that a section of the San Andreas Fault in Southern California may be “ready to go,” and that a major temblor that could shake the Los Angeles metropolitan area is long overdue.  The Los Angeles Times cites comments from Thomas Jordan, director of the Southern California Earthquake Center at the University of Southern California, who said the movement of the Pacific and North American tectonic plates should amount to a shift of about 16 ft. every 100 years. But the southern part of the fault has been quiet since a 7.9-magnitude quake hit in 1857 — too long.“The springs on the San Andreas system have been wound very, very tight. And the southern San Andreas Fault, in particular, looks like it’s locked, loaded and ready to go,” Jordan said in the keynote speech of an earthquake conference in Long Beach, Calif.Jordan praised efforts by officials in Los Angeles to prepare the city for the Big One by retrofitting buildings and bolstering water and telecommunications infrastructure, but the impact of a large quake could still be massive. The U.S. Geological Survey, in a “ShakeOut Scenario” published in 2008, predicted that a 7.8-magnitude quake on the southern San Andreas Fault would cause about 1,800 deaths and $213 billion worth of damage, taking into account some of the retrofitting.

    Abandon hype in climate models -- The scenarios modeled for the IPCC’s Fifth Assessment Report assume the large-scale deployment of technologies that achieve negative emissions that draw down carbon dioxide from the atmosphere and permanently store it. But whether such proposed methods could be deployed at a material scale is unproven. It would be more prudent to exclude these techniques from mitigation scenarios used by the IPCC, unless and until we have sufficient evidence of their availability and viability to support their inclusion. Most of the modelled emissions pathways limiting warming to 2 °C (and all the ones that restrict the rise to 1.5 °C) require massive deployment of Biomass Energy with Carbon Capture and Storage (BECCS). This involves growing biomass which is used to generate power and geologically sequestering the carbon dioxide produced. While the constituent steps of this process have been demonstrated, there are but a few, small, examples of the combined process. To rely on this technique to deliver us from climate change is to demonstrate a degree of faith that is out of keeping with scientific rigour. There is a distinct lack of evidence to determine whether BECCS is technically feasible, economically affordable, environmentally benign, socially acceptable and politically viable at a material scale. Technically, there are serious doubts about the ability to sequester the vast quantities of carbon dioxide that are implied in the models. Economically, without a substantial carbon price, the costs would be much higher than competing power-generation technologies. Environmentally, growing such volumes of biomass would have profound effects on biodiversity. Socially, the use of land for BECCS would restrict agriculture – contributing to substantial increases in food prices; while politically, the issue seems so toxic that the Paris Agreement carefully avoided mentioning negative emissions at all.

    Peabody coal's contrarian scientist witnesses -- In Minnesota, an administrative hearing resulted in a judicial recommendation that will have impacts across the country. It was a case argued mainly between environmental groups (such as Minnesota Center for Environmental Advocacy, and their clients Fresh Energy and the Sierra Club) and energy producers (such as the now-bankrupt coal company Peabody Energy) regarding what a reasonable social cost of carbon should be. I was called as an expert witness in the case along with respected climate scientist Dr. Andrew Dessler. We were opposed by the well-known contrarians Drs. Roy Spencer, Richard Lindzen, and William Happer (who has recently received attention related to his charged fees in the case). . I recently wrote about the testimony and provided links to the testimonies submitted for the case.  On April 15th, the Administrative Law Judge decided that the estimated cost of carbon pollution currently used in Minnesota is too low. New knowledge about how fast the climate is changing, how much it will change, and how it will affect societies and economies would be reflected in a larger carbon cost. This leads to a large increase in the estimated cost, from $0.44-4.53 per ton to $11-57 per ton. A summary of the ruling can be found here and the full report is available here. How was this case won? Well certainly it helps to have science on your side. Without that, even the most expensive expert witnesses struggle. But Peabody’s scientists made errors that were easy to identify and point out to the Judge. Furthermore, the Judge was smart, quickly able to see through nonsense non-science.

    The political hurdles facing a carbon tax — and how to overcome them - Dave Roberts - A consensus has formed among economists, climate wonks, and progressives that a carbon tax is the best way to address climate change. In some quarters, rhetorical support for a carbon tax is seen as a litmus test for whether policymakers are serious about climate change. In my last post, I questioned the premise that a carbon tax is always and everywhere the "first best" climate policy. In this post, I'm going to do something different: I'm going to accept the premise. Let's assume that a carbon tax, equal to the social cost of carbon, is the ideal climate policy — the most efficient and cost-effective way to reduce carbon emissions. Let's stipulate that it is our ultimate goal. Now, how do we get there? To answer that question, we have to go beyond economics to political economy: institutional structures, power, and influence. We have to grapple with the political constraints on carbon pricing and think about how they can be overcome. This is not a topic on which the more fervent carbon tax advocates have showered themselves with glory. Their schemes are comprehensive. Their dreams are deeply felt. But their engagement with politics ranges from naive to disdainful. It's time for a better, more grounded conversation about what's possible for carbon pricing.

    Carbon Politics - I’ve always appreciated David Roberts’ voice in debates about climate policy.  He reads widely, looks for the strong points of arguments he otherwise disagrees with, and is open to changing his mind.  Even now, when I think he’s been substantially captured by a particularly blinkered stream within the climate change policy world, he’s still worth looking at.  Alas, however, his drift toward the Breakthrough Institute view of things is nearly complete. It would take a book or more to explain why it won’t be possible to simply regulate, subsidize and innovate our way to climate stability.  (I’m writing it now in fact.)  Let’s skip over all that stuff for now.  Here I’d like to say a few words about the politics of climate policy. Begin with DR’s position in a nutshell: Climate policy is constrained by public acceptance as revealed by polling and other empirical indicators.  The public will not support a price on carbon sufficient to achieve meaningful emissions reductions, but it will accept regulations such as fuel economy mandates and shutting down coal plants that are equivalent in their effects to a much stiffer carbon price.  Public opinion is even more of a constraint given the expectation that the fossil fuel industry will strenuously oppose any serious policy initiative at all: you need a lot of political approval to counterbalance them.  To the extent there is a political upside to carbon pricing it comes from the additional revenues it generates, which can be earmarked for popular spending programs on energy R&D and infrastructure.  These have the potential to create their own constituency, which will provide a political base for further climate action in the long run.

    Why you can't argue with a "modern" --The modern world is filled with things many of us regard as antiquated and old-fashioned. Modern people often say that ancient rituals are mere superstition, that science tells us what is real and what is not, and that we are now free from ideas including untestable ideas from religion that have slowed continual improvement in the lot of average humans.That the modern outlook has all the hallmarks of a religion never occurs to a thoroughly modern person (whom I'll refer to merely as a "modern"). A modern believes that the modern outlook is above and outside all superstition and groundless belief. In effect, the modern outlook is a myth that does not believe it is a myth. In using the word "myth," I do not mean to label the modern outlook false. In this context myth is simply a narrative that outlines a worldview. It turns out that a myth of any vintage, ancient or modern, can be a powerful tool in motivating behavior, in explaining and manipulating the world, and in assigning meaning to human existence. And any myth of any vintage can turn out simply to be mistaken in some or all of its details. The modern myth has some unique characteristics that make it particularly powerful and particularly dangerous at the same time. The modern myth tells us the following about the world and our place in it:

    1. Humans are in one category and nature is in another.
    2. Scale doesn't matter.
    3. History can be safely ignored since modern society has seen through the delusions of the past.
    4. Science is a unified, coherent field that explains the rational principles by which we can manage the physical world.

    Let me take these claims one at a time.

    Human Extinction Isn’t That Unlikely -- Nuclear war. Climate change. Pandemics that kill tens of millions. These are the most viable threats to globally organized civilization. They’re the stuff of nightmares and blockbusters—but unlike sea monsters or zombie viruses, they’re real, part of the calculus that political leaders consider everyday. And according to a new report from the U.K.-based Global Challenges Foundation, they’re much more likely than we might think. In its annual report on “global catastrophic risk,” the nonprofit debuted a startling statistic: Across the span of their lives, the average American is more than five times likelier to die during a human-extinction event than in a car crash. Partly that’s because the average person will probably not die in an automobile accident. Every year, one in 9,395 people die in a crash; that translates to about a 0.01 percent chance per year. But that chance compounds over the course of a lifetime. At life-long scales, one in 120 Americans die in an accident. The risk of human extinction due to climate change—or an accidental nuclear war—is much higher than that. The Stern Review, the U.K. government’s premier report on the economics of climate change, estimated a 0.1 percent risk of human extinction every year. That may sound low, but it also adds up when extrapolated to century-scale. The Global Challenges Foundation estimates a 9.5 percent chance of human extinction within the next hundred years. And that number probably underestimates the risk of dying in any global cataclysm. The Stern Review, whose math suggests the 9.5-percent number, only calculated the danger of species-wide extinction. The Global Challenges Foundation’s report is concerned with all events that would wipe out more than 10 percent of Earth’s human population.

    Biofuel Breakthrough: Production Jumps 64% - This week I wrote an update on the progress toward cellulosic ethanol commercialization, and given my previous coverage on the topic (especially Why I Don’t Ride a Unicorn to Work) this seems like an appropriate subject to discuss here. Last week the U.S. Environmental Protection Agency (EPA) announced that during the first quarter of 2016, just over 1 million gallons of cellulosic ethanol were produced. In fact, production for the month of March jumped 64 percent from the previous month to 446,000 gallons produced, the highest levels of the modern era. Production this year is well ahead of the pace in 2015, when 2.2 million gallons of cellulosic ethanol were produced for the entire year.. For the purpose of this discussion a renewable fuel is one that is derived from recently living biomass (as opposed to fossil fuels, which are derived from “ancient” biomass). First generation renewable fuels (aka “biofuels”) are those made in large volume today, such as ethanol produced from corn and sugarcane, and biodiesel produced from vegetable oils. Of the 34 billion gallons of biofuel produced in 2014, 97 percent of the total was via first generation ethanol (74 percent) or biodiesel (23 percent) processes.  Second generation biofuels, also commonly known as “advanced biofuels”, generally fall into one of two categories. Hydrotreated vegetable oil (HVO), also known as “green diesel”, is produced from hydrotreating technology utilizing the same kinds of feedstocks that are used to make conventional biodiesel. Instead of reacting the feedstocks with methanol as in the conventional biodiesel process, they are reacted with hydrogen. The products of this reaction are diesel-length hydrocarbons — green diesel — and propane (as compared to glycerin as the biodiesel byproduct). About 3 percent of the world’s 2014 biofuel volume was produced via this method.

    European Union Scraps Biofuel Targets --The European Union has scrapped post 2020 biofuel targets, thanks to pressure from green groups concerned about environmental damage. Green transport target will be scrapped post-2020, EU confirms EU laws requiring member states to use “at least 10%” renewable energy in transport will be scrapped after 2020, the European Commission confirmed, hoping to set aside a protracted controversy surrounding the environmental damage caused by biofuels. The European Commission will table a revision of the Renewable Energy Directive at the end of 2016, aiming to further push renewable sources like wind and solar across the European Union. On transport, “we will look specifically at the challenges and opportunities of renewable fuels including biofuels”, said Marie C. Donnelly, Director for Renewables at the European Commission. The current directive, adopted in 2008, requires each EU member state to have “at least 10%” renewable energy used in transport by 2020 – including from biofuels and other sources like green electricity. This has drawn criticism in Britain, where reaching the 10% target will require doubling current biofuel supply, adding a further penny per litre on pump prices,  according to a leaked memo by the Department for Transport.. But the 10% target will be dropped in the new directive, Donnelly told a breakfast seminar organised at the European Parliament on Tuesday.

    GOP states benefiting from shift to wind and solar energy: If there’s a War on Coal, it’s increasingly clear which side is winning. Wind turbines and solar panels accounted for more than two-thirds of all new electric generation capacity added to the nation’s grid in 2015, according to a recent analysis by the U.S. Department of Energy. The remaining third was largely new power plants fueled by natural gas, which has become cheap and plentiful as a result of hydraulic fracturing. It was the second straight year U.S. investment in renewable energy projects has outpaced that of fossil fuels. Robust growth is once again predicted for this year. And while Republican lawmakers in Washington have fought to protect coal-fired power plants, opposing President Barack Obama’s efforts to curtail climate-warming carbon emissions, data show their home states are often the ones benefiting most from the nation’s accelerating shift to renewable energy. Leading the way in new wind projects are GOP strongholds Texas, Oklahoma and Kansas, home to some of the leading critics of climate science and renewable energy incentives in Congress. Republican-dominated North Carolina trails only California in new solar farms, thanks largely to pro-renewables polices enacted years ago under a Democratic legislature. The most dramatic change has been seen in the plummeting cost of emissions-free wind energy, which has declined by two-thirds in the last six years thanks to the availability of cheaper, more efficient turbines. An annual analysis by the Wall Street investment firm Lazard determined that wind energy is now the lowest-cost energy source, even before federal green-energy tax incentives are factored in.

    Phasing out coal, oil and gas extraction in US would drastically cut emissions -- Phasing out coal, oil and gas extraction on US federal land would cut greenhouse gas emissions by 100m tonnes a year by 2030 and even more after then, providing a useful brake to climate change, according to a new study. A quarter of all fossil fuel extraction in the US occurs on the 650m acres of land under federal management. The outer shelf of the US’s marine territory, used for oil and gas drilling, is also under federal control. A study by research organization Stockholm Environment Institute found that denying new mining leases and allowing existing leases to expire would lead to a sharp decrease in emissions from coal and oil extraction, offset slightly by an increase in gas emissions. Overall, carbon dioxide emissions would drop by 100m tonnes per year by 2030, with the reductions increasing after this point. The research states that this reduction compared well to other proposed measures, such as vehicle emission standards and methane restrictions from the oil and gas industry. Only the Obama administration’s clean power plan, forecast to cut carbon pollution by 32% by 2030 based on 2005 levels, would exceed the emissions savings. The plan is currently on hold, pending a supreme court challenge. “Federal leasing practices could play an important role in US efforts to achieve its climate protection goals,” the study states. “Our findings suggest that policymakers should give greater attention to measures that slow the expansion of fossil fuel supplies.”

    A Crusader in the Coal Mine, Taking On President Obama -  Mr. Murray is also the architect of the most serious challenge to the Obama administration’s environmental goals, particularly its policy on climate change. He has filed more than a half dozen lawsuits against the administration, including several challenging its landmark policy to curb greenhouse gas emissions from coal-fired power plants. In February, he scored a big victory when the Supreme Court temporarily blocked the administration’s plan until an appeals court can consider an expedited challenge this summer.The expansion of its mining business at a time of deep industry disillusionment, coupled with an activist agenda, has made Murray Energy one of the leading forces combating environmental regulations. And it has made Mr. Murray a galvanizing champion of a once dominant industry fallen on hard times. For him, any attempt to regulate pollution from power plants is a plot not only to destroy coal producers in the United States but also to take control of the nation’s electrical supply. He blames regulators in Washington intent on accumulating power and handpicking winners and losers. “What it is is a political power grab of America’s power grid to change our country in a diabolical, if not evil, way,” he says. “Thank you, Obama!” As the nation struggles to come to terms with greenhouse gas emissions, climate change and mining’s environmental toll, Mr. Murray stands at the center of the economic, social and political debate. His life goal is to see that coal production in America remains vibrant — even as his critics say he is waging a doomed, rear-guard battle against inevitability.

    Climate protesters invade UK's largest opencast coalmine - Hundreds of environmental activists have invaded the UK’s largest opencast coalmine and halted operations across the vast site. Dressed in red boiler suits, groups of protesters crossed barbed wire fences to gain access to Ffos-y-fran mine near Merthyr Tydfil in south Wales. Some chained themselves to machinery, others lay across access roads.  Dozens of protesters, joined by local people, also blockaded the entrance to the mine’s headquarters. The action in Wales marks the start of a global wave of direct action coordinated by the group Reclaim the Power supporting a transition away from fossil fuels in 13 countries including Germany, South Africa, Indonesia and North America over the next two weeks.  Following a weekend of planning, protesters entered the site shortly after dawn on Tuesday. They had widely publicised their action and there was a large police presence including thesouth Wales force’s mounted section but no attempt was made to stop the demonstrators. Within hours Reclaim the Power said it had brought operations at the mine to a standstill. Nine people, including an 80-year-old from Penarth and members of Christian Climate Action, were locked to each other, blocking road access to the mine.

    Never-completed TVA nuclear plant that cost $4B for sale: (AP) — The nation’s largest public utility is selling a never-completed nuclear plant that has cost more than $4 billion dollars over the past four decades. The Tennessee Valley Authority board voted Tuesday at a meeting in Buchanan to declare the Bellefonte nuclear plant near Hollywood, Alabama, surplus. The site includes two partially finished nuclear reactors, railroad spurs and a helicopter pad. TVA President and CEO Bill Johnson says the 1,600 acre site will be sold at auction to the highest bidder. It has been appraised at $36 million. The decision to sell is the latest blow to the nuclear power industry, which seemed poised for resurgence a decade ago but has been stymied by cheap natural gas, high construction costs and relatively flat demand for power.

    'Totally unrealistic': The international nuclear fusion reactor prototype project is a decade late and €4 billion over budget - — The international ITER project to build a prototype nuclear fusion reactor will be delayed by more than a decade and faces another 4 billion euros of cost overruns, its director told the French daily Les Echos. ITER chief Bernard Bigot said the experimental fusion reactor under construction in Cadarache, France, would not see the first test of its super-heated plasma before 2025 and its first full-power fusion not before 2035. "The previous planning, which foresaw first plasma by 2020 and full fusion by 2023, was totally unrealistic," said Bigot, who succeeded Japan's Osamu Motojima at the head of ITER early last year. Bigot, the former head of the French nuclear agency CEA, also said he expected the new delay to add 4 billion euros ($4.6 billion) of cost overruns to the 14 billion to 15 billion euros estimated so far. The International Thermonuclear Experimental Reactor project's seven partners — Europe, the US, China, India, Japan, Russia, and South Korea — launched it 10 years ago with a cost estimated at 5 billion euros. In June an ITER board meeting is set to review the new deadlines, which Bigot said were considered ambitious by independent experts. Unlike existing fission reactors, which produce energy by splitting atoms, ITER would generate power by combining atoms, but it remains unclear whether the technology will work and whether it will eventually be commercially viable.

    Let's Stop Pretending Nuclear Power Is Commercially Viable -- First its new president, Jean-Bernard Levy, said French state utility EDF would delay a decision on its joint French-Chinese nuclear project in the UK, Hinkley Point. That was over a year ago. Then the CFO of EDF, Thomas Piquemal, quit reportedly because he opposed the project on financial grounds. That was a short time ago. Then after a slew of leaked memos, the French government just announced that EDF would be raising more money and the Hinkley decision would now come in September. David Cameron’s government in the UK backs this exceedingly expensive project and the French government controls both EDF and Areva, the nuclear manufacturer that developed the nuclear system to be used at Hinkley Point. As part of a plan to rescue Areva (which has lost money in each of the past four years and has negative equity, meaning the share-holder investment has been wiped out), EDF agreed, earlier in the year to buy Areva’s nuclear engineering division. Clearly, France views its nuclear ambitions as a matter of national prestige and intends to support Hinkley Point. These British nuclear units will cost roughly £18 billion ($27 billion). EDF has already sold a 35 percent share to the Chinese state nuclear company. However EDF still has to find more outside investors and get its ownership of the plant below 50 percent or it will have to consolidate Hinkley Point on its books and show all of the project’s debt on its own balance sheet. At the end of 2015, long- and short-term debt made up 79 percent of EDF’s capital, an already high number, and two of the three major bond rating agencies have assigned EDF's debt a “negative outlook." EDF also needs more capital to take over Areva, finish the French nukes still under construction and refurbish its own domestic fleet of aging nuclear power stations. All this will take place during what amounts to a financial crisis within the European electricity markets. So the French government just announced a $4.5 billion capital raising for EDF (the government will buy the lion’s share of the newly issued stock). But from the look of the numbers that share offering constitutes a modest fraction of what is required by a firm that will have to compete more and more in a competitive electricity market.

    Feds seek public input on oil-and-gas leasing in Wayne National Forest (AP) — A federal agency is seeking public comments on a draft environmental assessment of proposed oil and gas leasing in Wayne National Forest in southeastern Ohio. The Bureau of Land Management opened a comment period this week. Documents will be available for review until May 29. The environmental report analyzes impacts on about 40,000 acres underlying the forest. The agency says it is assessing a broader area than would be opened to drilling to avoid having to do a separate report on each individual lease request. Oil and gas companies told the bureau that they wanted to drill beneath the forest in 2011. The proposal has seen heated debate that pits supporters of the economic potential of the wells against southeastern Ohio residents and groups concerned about environmental problems.

    BLM draft assessment: Leasing to drillers won’t hurt national forest - A federal agency has issued a preliminary “finding of no significant impact” related to a proposal to lease 18,000 acres in the Wayne National Forest’s Marietta Unit for oil and gas drilling. The finding does not become official until after a draft environmental assessment (EA) issued Thursday by the federal Bureau of Land Management becomes final. The public has 30 days (until May 29) to review and comment on the draft EA. Then pertinent federal officials will have to review that input before finalizing the EA and the related finding of no significant impact. Click here to link to the EA and other pertinent documents.Proposals to lease land in the Wayne National Forest for deep-shale oil and gas drilling (which involves “fracking”) have generated bitter opposition from citizens and environmental groups concerned about the adverse effects on water and other natural resources in the national forest. However, other citizens, including many landowners whose land borders the Marietta Unit of the Wayne forest, support leasing and drilling. They say it will allow them to lease their own private oil and gas rights. Public and private land is intermingled throughout the Wayne National Forest. The EA in question only involves designated acreage on the Wayne’s Marietta Unit for which more than 50 oil-and-gas industry “expressions of interest” have been submitted, but not the Athens or Ironton units of the national forest. In the yet-to-be-signed finding of no significant impact, BLM District Manager Dean Gettinger, states, “Based upon a review of the EA and supporting documents, I have determined that the proposed action (leasing of 18,494 acres in the Wayne’s Marietta Unit) is not a major federal action, and will not significantly affect the quality of the human environment, individually or cumulatively, with other actions in the general area.”

    BLM displays shortsighted attitude on forest - Marietta Times -- In response to the BLM's recent "Finding of no significant impact" related to the leasing of 18,494 acres in the Wayne National Forest's Marietta Unit for deep shale oil and gas drilling: there are many of us absolutely appalled at this short-sighted assessment. There are so many ominous - not to mention, scientifically proven - down sides to this. The first real issue is water, on both ends of this potential fracking disaster. First: it takes about 4,000,000 gallons of fresh water to frack just one well. Fact. I attended the BLM so-called presentation at Marietta College back in March. I asked every agent there, "So. My first question is, where is all the fresh water to frack going to come from?" Not one could answer my question. One man did say 'the water source was up to each individual driller." There are no guidelines on this issue.   According to Terry Smith of the Athens News, there have, so far, been 50 individual expressions of interest in the Marietta Unit. If each one of those drillers frack even one well each, that is - let me get my calculator - 200,000,000 gallons of fresh, potable water. Taken from where? Wherever the hell a driller wants to get it. You can bet they won't use a public utility spigot. Then on the back side, where is all that now-radioactive, toxic, contaminated waste water going to GO? It will be injected back into the earth, under great pressure in injection wells, where? We know. In Marietta's injection wells up in Harmar, in Devola, Veto, and Waterford, among others, and down in Torch and Coolville. 200,000,000 gallons. Read that again. When that water perks back up everywhere - and you may be assured that sooner or later, it will - does anyone really think the water departments can ever provide safe drinking water again? Not to mention all the private water wells in our area. One other note: SE Ohio has no geological surveys of our aquifers. None.

    Local anti-fracking movement continues to grow - The local people and groups who continue to oppose fracking and injection wells have had mixed success against powerful fossil-fuel interests, federal and state government that are gung-ho about the expansion of fracking wherever there is natural gas. There are also, of course, some Ohio and Athenian businesses and citizens who focus on the prospect of immediate, if not long-term, economic benefits from fracking and/or who are ideologically against additional and effective government regulation when it comes to natural gas and other fossil fuels. Nonetheless, opponents, such as Athens County Fracking Action Network, have done an exemplary job locally on educating the people in the area on the well-documented harms that result from fracking. The voters of Athens City have supported a ban on fracking in the city that remains so far uncontested in the courts. They have supported legal action against the Ohio Department of Natural Resources and other government regulatory agencies for allowing inadequate permitting processes. Most recently, but not for the first time, they have taken a stand against the federal government’s proposal to allow fracking in the Wayne National Forest. They have lobbied elected officials at the city, county and state levels. Organized rallies. Roused and engaged citizens in some of the townships, like Torch, and nearby counties where injection wells are proliferating. The Athens County Bill of Rights Committee is right now undertaking a petition drive to get a provision on the November ballot to ban fracking and injection wells in the entire county.

    Toxic brine from oil well spills in Morrow County - Columbus Dispatch  -- A truck carrying brine from an oil well was struck by a train in Morrow County on Friday, spilling 3,200 gallons of the toxic waste water. None of the liquid spilled into creeks or affected public water supplies, said John C. Harsch director of the Morrow County Office of Homeland Security and Emergency Management Agency. Still, "there’s liquid all over the place,” Harsch said. “It just splashed everywhere,” said Sgt. Dave Flanagan of the State Highway Patrol’s Mt. Gilead post. “Covered the train, covered everything.” The brine came from a conventional well in Morrow County, not a horizontally fractured “fracking” well, said Eric Heis, an Ohio Department of Natural Resources spokesman. . The waste liquid was headed for disposal in an injection well. The Ohio Environmental Protection Agency was working with a contractor to clean the spill. The brine flowed into a farm field and a ditch, Ohio EPA spokesman James Lee said. He said he didn't think well water was affected. The Fishburn Services truck was heading west on Township Road 75 northeast of Edison about 8 a.m. when it crossed the CSX tracks. A northbound train traveling at 59 mph struck the truck in the tank, Flanagan said. The site is about 50 miles north of Columbus. The driver, James Thompson, 58, of Marengo, was taken by a MedFlight helicopter to OhioHealth Grant Medical Center in Columbus. Flanagan said he didn’t believe the injuries were life-threatening.

    Ohio report looks at drilling potential of Devonian shales - From a Monday press release from the Ohio Department of Natural Resources: Posted on 5/2/2016 by Geological Survey in Devonian shale oil oil and gas. A new open-file report released by the ODNR Division of Geological Survey provides an analysis of source rock generative potential and thermal maturity of the Devonian shale interval in eastern Ohio. The interval for this study extends from the top of the Middle Devonian Onondaga Limestone to the base of the Upper Devonian Berea Sandstone. Maps created as part of the study include total ototal organic carbon (TOC), existing hydrocarbons (S1), hydrocarbons generated during pyrolysis (S2), vitrinite reflectance (%Ro), and conodont alteration index (CAI). Open-File Report 2016-3 is available for free download here as a PDF file [file size = 19 MB].

    When fracking makes climate sense - Beacon Journal Editorial - Bernie Sanders boasts that he is the one candidate prepared to address climate change in a substantial way. Sanders also supports a ban on hydraulic fracturing in mining for oil and gas. The concept is swell in the ideal. Unfortunately, the country isn’t in position to follow such a course in the short term, not when natural gas accounts for one-third of electricity generation. Add the senator’s opposition to nuclear power and coal, and he has pushed aside roughly 85 percent of the country’s energy sources. How would Sanders replace them? Wind, solar and other renewable energy sources hold much promise. So does energy efficiency. They are not prepared to make up the difference soon, or likely even by the 2030s. This is one of the concerns about the way Sanders discusses an issue that he rightly describes as defining for the next generation. He doesn’t talk squarely about the complications and practicalities at work. No question, hydraulic fracturing, or fracking, involves risks via air pollution, plus water and ground contamination. Especially troubling are leakage of methane (a most potent greenhouse gas) and the toxic liquid injected and flushed at the drilling site. This process must be tightly regulated and adequately taxed, something Ohio still has not accomplished. What Sanders and others let slide too easily is that fracking (done right) produces fuel that burns more cleanly than the coal alternative. Natural gas generates 50 percent to 60 percent less carbon dioxide (the leading greenhouse gas) when burned in new, more efficient power plants. It also produces less soot, mercury, sulfur dioxide and nitrogen oxide.The technology just isn’t there to make a clean break with fossil fuels. And the problem of climate change cannot wait. A transition is required, and the cleaner alternative is natural gas, as long as fracking is well regulated.

    Gulfport loses $242 million despite increased production - Gulfport Energy’s Utica Shale production was strong in the first quarter but the company lost $242.3 million. Gulfport has drilled 244 Utica wells in Ohio. It has the second most wells after Chesapeake Energy. The loss equaled $2.17 per share, the company said in a press release ahead of a Thursday conference call with investors. The Oklahoma City-based company had revenue of $157 million during the quarter, but losses dragged its balance sheet into the red. Gulfport’s largest loss, $219.0 million, was from a drop in the future value of production from its oil and natural gas properties. Gulfport’s first quarter production averaged 692.2 million cubic feet equivalent per day, 1 percent above the company’s highest estimate. However, oil and natural gas prices were about half what they were a year ago. The company spent $74.5 million drilling and fracking wells and another $19.7 million on leases. Most of Gulfport’s production was in the Utica, where the company drilled 10 wells and began production from 15 wells during the quarter. The company has three rigs in the Utica and plans to drill up to 24 Utica wells and begin production from as many as 39 wells this year.

    Is Shell Chemical finally ready to act on Ohio River cracker? - Shell Chemicals is taking steps that suggest it finally may be ready to pull the trigger on a long-debated petrochemical complex which would include an ethylene plant (steam cracker) and three polyethylene units in the heart of the “wet” Marcellus/Utica natural gas liquids production region. If the $3+ billion project advances to construction soon, it would significantly impact ethane market dynamics, not just in Ohio/Pennsylvania/West Virginia but along the Gulf Coast too. And if it turns out we’re in for extended stagnation in drilling and production, the Shell cracker also may undermine plans to build additional NGL pipeline capacity out of the Marcellus/Utica—or any other cracker there.  Today we discuss the likelihood of Shell proceeding with its Beaver County, PA cracker and the effects the project’s development might have.  The production of NGLs in the Utica/Marcellus really started taking off in 2011-12, when shale drillers, responding to declining prices for natural gas, began to focus on “wet” gas liquids plays to take advantage of higher prices – thus higher returns. That required the build-out of gas processing and fractionation capacity, which we documented initially in Whoville, the Big New NGL Hub in Marcellus/Utica, and more recently in our Join Together With Demand series and Drill Down Report. As we noted in that report, in 2009, there was only 600 MMcf/d of gas processing capacity in the entire Northeast region, most of it legacy infrastructure dating back decades, and now there is some 7,600 MMcf/d of gas processing capacity—more than 40 new plants built in the past six years, most of them built by MPLX (MarkWest) at eight major processing centers across the region.  There are still more gas processing plants on the drawing boards. Similarly, there’s now some 500 Mb/d of fractionation (C3+ or full range) and another 240 Mb/d of de-ethanization capacity. All that production—natural gas, mixed NGLs and “purity” products like ethane, propane, butanes and natural gasoline—has also resulted in the build-out of extensive take-away capacity (pipelines for gas, NGLs and purity products; rail- and barge-loading terminals for NGLs and purity products) as well as the development of local gas-fired power plants to consume Marcellus/Utica gas and—the subject of our blog today—proposals to construct in-region steam crackers to consume locally sourced ethane.

    Enbridge predicts $62M in fines, penalties tied to oil spill (AP) — A pipeline company says it expects $62 million in fines and penalties related to a 2010 Michigan oil spill. In a filing Monday with the Securities and Exchange Commission, Enbridge says $55 million represents penalties under federal water law. The Alberta-based company says no final fine or penalty has been ordered yet as negotiations continue with the U.S. government. Enbridge says about 20,000 barrels of oil spilled into the Kalamazoo River system, near Marshall, from a ruptured line in 2010. Enbridge says total costs from the disaster are pegged at $1.2 billion. The company says most of the costs are covered by insurance.

    Pennsylvania Town Opposes Fracking, Says Civil Disobedience a Human Right: A Pennsylvania town attempting to stop the use of fracking, a highly toxic and economically-questionable method of oil extraction, has ruled that direct action and civil disobedience is a protected civic duty. Grant Township, a hotbed of fracking prevention and protest, on Tuesday passed an ordinance proclaiming that the use of nonviolent resistance against fossil fuel companies is protected because it is a “sanctioned civil right.” The new ordinance stems from a November 2015 adoption of the country’s first-ever municipal charter, aimed directly at fighting Pennsylvania General Energy Company (PGE) and the Pennsylvania Independent Oil and Gas Association (PIOGA). The charter established a local set of protocols codifying environmental and democratic rights, Common Dreams reports. “If a court does not uphold the people’s right to stop corporate activities threatening the well-being of the community, the ordinance codifies that, ‘any natural person may then enforce the rights and prohibitions of the charter through direct action.’ Further, the ordinance states that any nonviolent direct action to enforce their Charter is protected, ‘prohibit[ing] any private or public actor from bringing criminal charges or filing any civil or other criminal action against those participating in nonviolent direct action,’” a press release from Community Environmental Legal Defense Fund (CELDF), who assisted with drafting the ordinance, said in a press release. The charter has been hailed as "one of the boldest moves to stop the natural gas industry's attacks on our communities, climate and democracy.” "We're tired of being told by corporations and our so-called environmental regulatory agencies that we can't stop this injection well," stated Grant Township Supervisor Stacy Long. "We're being threatened by a corporation with a history of permit violations, and that corporation wants to dump toxic frack wastewater into our Township." "I live here, and I was also elected to protect the health and safety of this Township. I will do whatever it takes to provide our residents with the tools and protections they need to nonviolently resist aggressions like those being proposed by PGE,”

    DEP investigates 5 quakes, 1 close to Lowellville - Youngstown Vindicator -- The Pennsylvania Department of Environmental Protection is investigating five micro earthquakes in Lawrence County that occurred last Monday. The quakes – all too small for people to feel – occurred not far from a well pad operated by Hilcorp Energy Co. Subsequently, Houston-based Hilcorp voluntarily halted its nearby fracking operation about noon Monday. The U.S. Geological Survey reports these earthquakes that day in Lawrence County:

    • 12:05 a.m.: magnitude 1.9; 1.9 miles northeast of Bessemer, Pa.
    • 4:16 a.m.: magnitude 1.7; 0.6 miles west of Oakland, Pa.
    • 5:03 a.m.: magnitude 1.8; 1.2 miles east-southeast from Lowellville.
    • 10:54 a.m.: magnitude 1.9; 2.5 miles northeast of Bessemer, Pa.
    • 10:10 p.m.: magnitude 1.8; 1.9 miles northeast of Bessemer, Pa.

    The DEP will meet with Hilcorp to discuss geologic data the company collected from the area during and before drilling. The Pennsylvania Department of Conservation and Natural Resources is investigating the quakes with the DEP. Hilcorp has not returned a request for comment. Hilcorp, doing business as North Beaver NC Development, has four wells on that well pad. The first two wells were fracked in a southeast direction and were completed, according to the department.The second two wells were going in a northwest direction, and fracking was ongoing but near completion.“That time and space correlation suggests that [the earthquakes and the fracking] are related,” said Michael Brudzinski, a professor of seismology in the Department of Geology and Environmental Earth Science at Miami University in Oxford, Ohio. “The operator was very proactive about it. They are cognizant that there’s something to be concerned about.”

    Hilcorp Energy responds responsibly to 5 quakes: The Greater Youngstown area certainly is no stranger to adversity tied to hydraulic fracturing for oil and natural gas. Who, after all, could ever forget the rocking New Year’s Eve in 2011 when Youngstown and its environs were jolted by the most powerful of a series of 12 earthquakes that the Ohio Department of Natural Resources later attributed to injection-well operations at D&L Energy?In those and other incidents, the Ohio Department of Natural Resources and other state and federal agencies took charge, ordering shutdowns and initiating full-scale investigations. But in an encouraging sign of growing corporate responsibility, a different response accompanied the immediate aftermath of a series of five earthquakes last week that some believe can be traced to fracking operations in Mahoning Township, Pa., near the Mahoning County line. This time, the company in charge needed no prodding, pushing or shoving from the long arm of the state or federal governments to do the right thing. Houston-based Hilcorp Energy Co., one of the largest privately held oil and natural-gas exploration and production companies in the United States, independently acted to halt all fracking operations just a mere hours after it learned of the quakes. There were five of them that day – all technically described as micro-quakes because of their extremely low magnitude. The company’s decision to act on its own to ensure that worker and public safety would not be compromised reflects its awareness of the amped-up public consciousnesss toward the potential hazards of fracking to the environment and community health. It also reflects the higher standards to which companies drilling for natural gas and oil are being held as state governments – including those in Pennsylvania and Ohio – have enacted increasingly taut regulations to monitor the industry and safeguard public health.

    Pipelines drained; feds investigating cause of explosion - Natural gas pipelines were being drained Saturday as authorities try to determine the cause of an explosion in western Pennsylvania that destroyed one home, damaged at least three others and burned a fleeing homeowner. Officials in Westmoreland County said the 30-inch Texas Eastern transmission line burst open around 8:15 a.m. Friday in Salem Township, shooting flames into the sky. Spectra Energy said in a statement Saturday that it is cooperating with an investigation by the federal Pipeline and Hazardous Materials Safety Administration and taking steps to reduce harmful effects on the environment. "We are deeply sorry for the effect this incident has had on the community, and we are committed to taking care of all of those involved," the company said. The injured man, whose home was about 500 yards from the explosion, was taken to the University of Pittsburgh Medical Center-Mercy. An update on his condition wasn't immediately available Saturday. Company spokesman Creighton Welch said the pipeline was one of four parallel lines running through the rural area. One of the other pipelines was out of service, and the remaining two were being drained of natural gas, a process that should be finished by the end of the day, Welch said. Bob Rosatti, chief of the Forbes Road Fire Department in Salem, told the Pittsburgh Post-Gazette that once that work has been done, officials can begin inspecting the pipe that exploded and the three others. Spectra Energy said that the section of pipe where the fire occurred was built in 1981 and that a 2012 inspection found "no areas requiring repair or remediation." Welch said regulations call for the pipelines to be inspected every seven years.

    Pennsylvania gas blast reverbs in Massachusetts | Boston Herald: A massive natural gas explosion that rocked western Pennsylvania and left one person badly burned is being pointed to by elected officials and local advocates as evidence of the potential danger of a planned pipeline by the same company in West Roxbury. “The risk here is obvious,” U.S. Rep. Stephen F. Lynch (D-South Boston) said. “I see disaster on the horizon.” The West Roxbury Lateral Pipeline is an offshoot of a larger project by Spectra Energy Corp., a Texas natural gas company, and will wind through Dedham, and West Roxbury, among other towns. An explosion and fire on Spectra’s Texas Eastern pipeline in Pennsylvania Friday disrupted service and left one person with severe burns. “It could happen to us, and the damage, destruction and loss of life could be even more here, because we’re more densely populated,” said Paul Horn, of the Committee to Stop the West Roxbury Pipeline. “We all need to be concerned about this. Lynch and critics of the pipeline have balked at a high-pressure natural gas pipeline running through the narrow residential streets in West Roxbury, as well as its proximity to an active quarry that routinely uses explosives. A metering station is planned across the street from the quarry, while a compression station similar to the one that blew in Pennsylvania is planned for Weymouth. “Common sense and an overriding sense of responsibility for the safety of the public would definitely require us to stop this pipeline,” Lynch said. “You would hope common sense would prevail, but I’m still waiting.”

    Corrosion found on Texas Eastern pipeline that exploded Friday: The Texas  Eastern pipeline explosion that injured one man, damaged several homes and disrupted natural gas flows to the northeast on Friday involved a pipeline that federal investigators said had corroded in at least two places. The U.S Department of Transportation’s Pipeline and Hazardous Materials Safety Administration cautioned that “the cause of failure is unknown at this time, and the investigation is ongoing,” in a document on Wednesday. A preliminary investigation, however, revealed corrosion along two welds. One was located right where the pipeline ruptured and another was in a section of the pipe excavated after the accident. “The pattern of corrosion indicates a possible flaw in the coating material applied to girth weld joints following construction welding procedures in the field at that time,” the agency wrote. Experts warn that a preliminary finding is often amended or reversed entirely during the cause of an investigation, which could span months or even years. Spectra Energy, which operates the 30-inch diameter pipeline that burst and three others alongside it as part of the Texas Eastern system that stretches some 9,000 miles from the Gulf Coast to New York, has not resumed service at its Delmont Compressor station yet. The compressor was processing some 1.3 billion cubic feet of gas a day before the accident, which is about 7 percent of all the gas produced in the Marcellus Shale daily.

    Possibly flawed welds cited in Pennsylvania pipeline blast -  Investigators say they’ve found evidence of corrosion on a natural gas pipeline that exploded in western Pennsylvania last week, damaging homes and burning a resident. The federal Pipeline and Hazardous Materials Safety Administration says the cause of the blast remains unknown, but the corrosion indicates a “possible flaw” in the coating material applied to welded joints. The federal agency said Wednesday it has ordered Houston-based Spectra Energy Corp. to take a series of corrective actions. The damaged pipeline and three nearby pipelines are out of service while the probe continues. Three homes were damaged and one was destroyed in the blast. The injured man suffered third-degree burns over 75 percent of his body.

    Feds approve plan to build gas pipeline for power plant (AP) — Federal officials have signed off on a plan to build a 34-mile pipeline through five central Pennsylvania counties that will carry natural gas to a power plant being built along the Susquehanna River. Federal energy regulators approved the Sunbury Pipeline Project on Friday. The pipeline would service the power plant being built in Shamokin Dam, about 40 miles north of Harrisburg, and will travel through Lycoming, Montour, Northumberland, Union and Snyder counties. UGI Energy Services Inc. spokesman Kenneth Robinson says they are pleased with the approval. Construction should begin after state environmental regulators issue the necessary permits. The utility says they plan to complete the pipeline in November and have gas available early next year. The more than 1,100-megawatt power plant is scheduled to be completed in early 2018.

    Is Fracking For Gas As Dirty As Coal? - Even though coal is much cleaner than ever before, State energy portfolios are eliminating coal, and increasing natural gas, as fast as possible. According to Stephen Moore at The Washington Times, U.S. coal plants have reduced their emissions significantly in the past several decades.” But the shift away from coal is accelerating because of regulations discouraging companies from building new coal-fired plants, and State energy portfolios that dictate an increasing amount of power coming from renewables. Besides China’s new decreasing hunger for coal, another problem with selling coal to China is that no one in America wants that coal going through their backyards, especially along the best routes in the Pacific Northwest. As an example, a proposed coal-export terminal along the Columbia River in southwest Washington State has had nothing but problems getting permitted. According to an environmental impact report released last week by Washington Department of Ecology and Cowlitz County (the host county), the proposed terminal could have “unavoidable, significant impacts on greenhouse gases emissions, vessel traffic and rail safety.” Other concerns include increased water traffic, as 840 ships a year would be added, and a potential for train accidents along rail routes in Cowlitz County and other parts of Washington from the dramatically increased rail traffic that would occur. Opposition also came from unexpected sectors. Steve Charter, a Montana rancher, stated that the Washington coal port is also bad news for his own state of Montana, saying that rail towns would have to deal with traffic delays, diesel exhaust and other consequences.

    Map: Here's Where America Gets Much Of Its Natural Gas - The Utica shale play, which spans 60,000 square miles across Ohio, West Virginia, Pennsylvania and New York, will provide America most of its new natural gas, according to a new map published Monday by the U.S. Energy Information Administration (EIA). Production of oil and natural gas from the Utica play has increased since 2011, and companies have drilled more than 1,700 wells as of January 2016, according to the EIA map. The Utica is the center of America’s natural gas boom enabled by hydraulic fracturing, or fracking. America produced 79 billion cubic feet of natural gas each day in 2015, breaking the previous record by 5 percent, according to an EIA report from earlier this month. Much of the natural gas boom has been concentrated around the Utica shale. Together, the states around the Utica accounted for 35 percent of total American natural gas production while the rest of the country saw a modest decline. Ohio alone saw its natural gas production grew 41 percent faster last year than it did in 2014. The development of the Utica shale for natural gas helped America surpass Russia early last year as as the world’s largest and fastest-growing producer natural gas. Today, America’s proven recoverable natural gas reserves are seven times larger than they were in 2014. Rising U.S. natural gas production has made gas the fuel of choice for America’s power plants, which were transitioning to natural gas before 2015. Natural gas provided more electricity than coal for every month between July and October of last year, according to data released in December by EIA.

    Natural gas net imports in 2015 at lowest level since 1986 - Today in Energy - U.S. EIA -- U.S natural gas net imports fell to 2.6 billion cubic feet per day (Bcf/d) in 2015, continuing a decline that began in 2007, when net imports of natural gas exceeded 10 Bcf/d. While both U.S. natural gas consumption and production have increased in recent years, natural gas production has grown slightly faster, resulting in a decline in net imports. Increasing domestic production of natural gas has reduced U.S. reliance on imported natural gas and kept U.S. natural gas prices relatively low. Most U.S. imports of natural gas come by pipeline from Canada. A small and declining amount of imported liquefied natural gas (LNG) comes mainly from Trinidad. Most U.S. exports of natural gas are sent by pipeline to Mexico and Canada. The United States also exported LNG and compressed natural gas to several countries, but these volumes were relatively minimal in 2015. EIA's Short-Term Energy Outlook expects that the United States will become a net exporter of natural gas by mid-2017. In recent years, increasing production from shale plays in the United States has resulted in an increase in U.S. natural gas exports. Since 2012, the natural gas pipeline industry has added 3.4 Bcf/d and 0.2 Bcf/d of export capacity to Mexico and Canada, respectively. As a result, U.S. natural gas exports to Mexico grew from 1.3 Bcf/d in 2011 to 2.9 Bcf/d in 2015. U.S. natural gas net imports from Canada have remained relatively stable since 2011.

    Analyzing US Natural Gas Consumption in 2016 - Market Realist: US natural gas consumption fell by 1.8% for the week ended April 27, 2016, compared with the previous week. In contrast, natural gas flows to the power plants increased by 0.9% for the same period. This is 5.3% higher than the same period in 2015. Natural gas deliveries to the industrial sector fell by 1.2% for the week ended April 27, 2016, compared with the previous week. Natural gas flows to residential and commercial segments also fell by 4.7% for the same period. Natural gas consumption dropped due to milder-than-normal weather.  The EIA (U.S. Energy Information Administration) forecasts that US natural gas consumption could average 76.2 Bcf (billion cubic feet) per day and 77.4 Bcf per day in 2016 and 2017. Natural gas consumption is estimated to rise by 3.9% in the electric power sector in 2016. Then, it could fall by 1.3% in 2017 due to the increase in natural gas prices. . Natural gas consumption would also be driven by the rise in demand from the industrial sector in 2017. New projects coming online in the fertilizer and chemical sectors could also drive the demand. The EIA (U.S. Energy Information Administration) estimates that the US natural gas supply could exceed demand by 3.4 Bcf (billion cubic feet) per day in 2016. Then, it could further increase to 3.73 Bcf per day in 2017. Total US natural gas inventories are 48% higher than their five-year average. The widening supply and demand gap and high inventory could limit the upside potential for natural gas prices. The EIA forecasts that US natural gas prices could average $2.25 per MMBtu (British thermal units in millions) in 2016. Then, it could further increase to $3.11 per MMBtu in 2017. Moody’s Investor Service forecasts that gas prices could average $2.25 per MMBtu and $2.50 per MMBtu in 2016 and 2017. Raymond James, a financial services firm, forecasts that US natural gas prices could average around $2 per MMBtu in 2016.

    Natural Gas Prices Rise - WSJ: Natural gas futures rose Tuesday as traders took profits after a sharp price slide Monday. Futures for June delivery settled up 4.4 cents, or 2.2%, to $2.086 a million British thermal units on the New York Mercantile Exchange. Prices dropped 6.2% Monday as weather forecasts indicated minimal need for gas-powered indoor heating in the next two weeks. The natural gas market is already oversupplied, with storage levels 48% above the five-year average for this time of year, due to robust production and sluggish heating demand. “Nat gas demand will be decreasing after Thursday to relatively light levels through next week,” said forecaster in a note Tuesday. Still, many traders and analysts expect natural-gas prices to rise in the coming months as production falls to lower spending on new drilling and demand increases. “Bulls can continue to cite some recent production slippage that is finally seeing translation from the plunge in the rig counts,” said energy-advisory firm Ritterbusch & Associates in a note. “On the other hand, bears can indicate a near record level of storage.” A pipeline explosion on Friday caused a temporary rise in prices, but natural-gas deliveries to power plants appear unaffected, said data provider Genscape Inc.

    Natural Gas is Sexy Once Again from a Macro Fundamentals Standpoint (Video) -- The mild winter has Nat Gas stocks at record levels, but the last time this many natural gas rigs went offline in 2012, prices rebounded to the $5 level nicely on a long trending trade. Traders and Investors are trying to anticipate and evaluate the likelihood of this move in Natural Gas happening again.

    If You Frack With My Horses, I Will Kill You -- It’s pretty much that simple. And any jury in Texas will acquit me on the grounds of justifiable homicide  In fact, I would probably be named Horseman of the Year by the American Quarter Horse Association I can’t think of any more diplomatic or tactful way to put it. The algorithm is quite elementary: You frack with my horses + I kill you = You die.   Doesn’t take Cornell grad to figure out. Even a Texas Aggie gets it, mathematically speaking.  A number of foals born on the Sayre, Pennsylvania standardbred farm operated by Meadowlands owner Jeff Gural over the last three years have developed an affliction known as dysphagia, which prevents them from swallowing properly. The story was first reported by the Ithaca Journal. Gural said the farm’s water supply is behind the problem and that the water has a high concentration of manganese which may be the result of nearby fracking operations. Over three years, 17 foals born at Gural’s farm have developed the problem and last year 11 of 12 had the issue. Gural estimated his farm has produced 30 foals over the three-year period in question. No mares came down with the disorder. Each affected foal was sent to the Cornell University Equine Hospital, where they were successfully treated. Gural sells most of the horses he breeds at yearling sales and said that each one was 100 percent healthy and over the problem by the time they entered the sales ring. “Everyone wants to know if fracking is a factor and Cornell is doing a study,” Gural said. “I assume that at some point we will get to the bottom of this.” A previous study done by Cornell concluded that “dozens of cases of illness, death and reproductive issues in cows, horses, goats, llamas, chickens, dogs, cats, fish and other wildlife, and humans” could be “the result of exposure to gas drilling operations.”

    The Shale Sector Just Got Two Critical Wins – In Two Different States | A lot of things are in flux right now for U.S. oil and gas producers, and that includes critical legal frameworks for unconventional development across the country. The regulatory landscape got notably better for E&Ps this past week, with not one but two critical decisions coming down in favour of producers, in two completely separate parts of America. Perhaps the biggest development came Tuesday in the state of Pennsylvania, where the state legislature moved to strike down a controversial set of new rules that would have made surface use for oil and gas drilling more difficult. A group of lawmakers forming Pennsylvania’s House Environmental Resources & Energy Committee voted 19 to 8 to strike down the tougher drilling laws — which had been introduced in April by the state’s Independent Regulatory Review Commission. The move was seen as a big positive for unconventional development in key plays like the Marcellus shale. With the proposed rules mandating more expensive storage solutions for drill fluids — and requiring E&Ps to assess potential impacts on a slate of “public resources” before drilling. And that wasn’t the only bright spot for drillers. With a key court decision Monday coming down in favour of E&Ps — all the way across the country in Colorado.  That came from the Colorado Supreme Court, which ruled that the fracking bans implemented by two Colorado cities are illegal because they conflict with state law. Judges in the high-profile case decided that state-level regulatory body Colorado Oil and Gas Conservation Commission has the mandate to promote “efficient and responsible development of oil and gas resources.” With the court saying that municipal bans impeded this function for state regulators.

    New England gas pipelines update -- More than 3,000 MW of new, natural gas-fired generating capacity is either under construction in New England or will be soon, but some of the gas pipeline projects that would ease long-standing constraints into and through the six-state region have hit rough patches. Kinder Morgan in mid-April suspended plans for its Northeast Energy Direct project, a “greenfield” pipeline across Massachusetts and southern New Hampshire, and a few days later the state of New York denied the co-developers of the already-delayed Constitution Pipeline—a key link between the Marcellus and New England--a needed water quality permit. The fates of some other major projects in the Northeast are uncertain too. Today, we provide an update on pipelines in the land of Yankees and Red Sox.   We’ve written often about gas pipeline constraints to and through New England, a region with less than one-third the area of Texas but nearly 15 million people, the vast majority of whom believe that Fenway Park is heaven on earth. As we said in our Drill Down reports on the subject (Please Come to Boston and 50 Ways to Leave the Marcellus), New England has been adding a lot of new gas-fired generating capacity, but only modest enhancements have been made to the gas pipeline network that serves the region. And, as we blogged about in Polar Vortex Workaround, in the unusually cold winter of 2013-14, the lack of sufficient pipeline capacity to meet demand during periods of very high demand sent natural gas prices soaring as local distribution companies (LDCs) with firm transportation contracts took most of the gas and owners of many gas-fired power plants either scrambled for deliverable, high-priced gas or switched to firing their units with fuel oil.

    Residents to weigh in on new Atlantic Coast Pipeline path (AP) — Residents in three western Virginia counties will have a chance to weigh in a proposed new path of the Atlantic Coast Pipeline. The Richmond Times-Dispatch reports that the Federal Energy Regulatory Commission said this week that it will collect comments from the public and agencies on changes to the $5 billion natural gas pipeline proposal. The companies behind the project revised the route in February to avoid sensitive animal habitat in national forests in Virginia and West Virginia. The new route would affect about 249 additional landowners in Highland, August and Bath counties and parts of West Virginia. Federal officials will take public comment on the proposal during hearings in Marlinton, West Virginia, on May 20 and Hot Springs, Virginia, on May 21.

    US shale firm's bankruptcy exit shows new chapter just as tough - Reuters - Magnum Hunter Resources Corp and its founder Gary Evans are emblematic for the U.S. shale revolution: it started small, borrowed heavily to snap up land and rivals and then crumbled under the weight of debt when prices crashed.  Now, the oil and gas company is among the first casualties of the energy slump to exit bankruptcy and Evans has a message for its peers: even once you are debt-free you cannot take survival for granted if energy prices do not recover soon. With little chance of seeing hundreds of millions of dollars in debt repaid, creditors agreed to convert all of it into shares in a revamped Magnum Hunter. Bankruptcy lawyers say that by eliminating its entire $1 billion debt load, cutting costs by renegotiating contracts with suppliers and moving quickly, Magnum Hunter has already provided a template for other cash-strapped drillers. Now Evans and the new board face a fateful decision. One option is to hunker down and minimize spending and borrowing while waiting for markets to eventually recover.  Another is to ramp up drilling to get the company growing again, widening losses until oil and gas prices rise. Evans told Reuters in an interview that even debt-free Magnum Hunter, primarily a gas producer, would need gas prices to rise to $2.50 - $3.00 per million cubic feet equivalent from about $2 now to get the 15 percent return on new wells it normally uses as a target when making spending decisions. Magnum’s new owners appear set to opt for the low-risk, low-cost scenario - the company has told the court it expects to keep posting net losses through 2018 and its oil and gas reserves to shrink about 11 percent over that period.

    Bank's Oil Exit Creates New Questions for Energy Lenders | American Banker: Green Bancorp's surprise exit from energy lending has left others in the industry scrambling to make sense of what it means for them. The Houston company said late Thursday that it will purge $277 million of energy loans and other classified assets by the end of this year. The recent downturn in oil — and a dismal outlook for its recovery — was a drag on performance and a distraction for management's dealings with investors. The move makes Green the first Gulf Coast lender to call it quits on the struggling energy sector. Bad loans have taken large bites out of several banks' profits as oil firms struggle to stay afloat. Green's exit creates more uncertainty at a time when most energy lenders have been reassuring investors that they have a handle on oil-related risks. "I think it is a little wait-and-see in terms of what it means for other banks," said Emlen Harmon, an analyst at Jefferies. For others, Green's situation is unique. In the lead-up to the announcement, the $3.7 billion-asset company's stock — for a host of reasons — had been trading at a significant discount to banks of similar size along the Gulf Coast. Exiting the oil business will help Green clean up its books — and potentially return to making acquisitions, some industry observers said. At the same time, Green would be a much easier bank to acquire if it went ahead and did the hard work of purging its balance sheet of questionable energy credits.

    Texas’s Toxic Rivers: Fracking Chemicals Seep Into Waterways After Floods -  - The floods Texas has experienced recently have inundated oil wells and fracking sites resulting in the flushing of oil and fracking chemicals into local rivers. Emergency management officials in Texas have mobilized the Civil Air Patrol to photograph possible oil spills and leaks around the flood regions where a catastrophe could be in the making. Many environmentalists and residents have expressed concern that recent floods have deluged fracking sites, spreading oil and the chemicals used to turn shale into oil and is now depositing them into waterways and even possibly drinking water. Texas is the home to America’s petroleum industry where companies engage in shale fracturing — more commonly referred to as “fracking” — seen by many ecologists as destructive to the environment, mostly for the industry’s use of harsh chemicals. Photos show oil-sheen as well as plumes flowing from tipped tanks and fracking sites that were inundated with rainwater during March’s flooding of the Sabine River. “That’s a potential disaster,” Dr. Walter Tsou, a former president of the American Public Health Association, told the El Paso Times. “Cattle that drank the fracking fluid actually died an hour after drinking it. There are potential carcinogens that can lead to leukemia, brain cancer and other endocrine disruptors that can affect premature births.” Critics are additionally concerned that the state’s commission will continue to fail to hold oil and gas companies responsible for such incidents given that commissioners receive more than half of their campaign contributions from that industry.

    Fracking & Flooding Don’t Mix in Texas — Scores of photographs taken by state emergency-management officials show that when floodwaters rise in Texas, they inundate oil wells and fracking sites, sweeping crude and noxious chemicals into rivers throughout the Lone Star State. Most recently, rainbow sheens and caramel plumes can be seen radiating from tipped tanks and flooded production pads during the March flood of the Sabine River, which forms much of the state’s boundary with Louisiana. Similar scenes are visible in photos from last year’s floods of the Trinity, Red, and Colorado rivers. But despite apparent evidence that spills have been routine in recent floods, Texas’ regulator, the Railroad Commission of Texas, contends that it has responded effectively. Scientists and environmental groups aren’t as confident. “In other areas, cattle that drank the fracking fluid actually died an hour after drinking it. There are potential carcinogens that can lead to leukemia, brain cancer and other endocrine disruptors that can affect premature births.” They worry that as floodwaters rage, harmful substances are swept downstream into the environment — and, possibly, drinking-water supplies — before Railroad Commission inspectors can reach the site of the spills. “They’re looking after the fact at what might have happened,” said Ken Kramer, water resources chairman of the Lone Star Chapter of the Sierra Club. “Because of that, it’s pretty hard to figure out exactly what happened.” It’s hard to draw definite conclusions simply by looking at photographs, but after reviewing a few, one expert said the spills could be deadly.

    Fracking foes won't let go in Denton - The moment of reckoning has come at different times for the people of Denton, Texas, as they wait in fear for the outcome of an election May 7. For the resident and outside zealots who saw their hopes of a ban on hydraulic fracturing smashed by the Texas Legislature, the reckoning came with a repeal by the City Council of its fracking ban ordinance a month later. For council member Kevin Roden it came with the furious reaction from those same zealots to the zealots to the Renewable Denton Plan, a plan that would have placed Denton in the forefront of American cities turning hard toward renewable energy. For Joey Hawkins, a popular council member who voted against the original fracking ban and for its repeal, it was his recall — driven by those same activists — that voters will decide on election day. And for Pete Kamp and the other community leaders who formed Citizens For Local Governance, the reckoning has come in the realization their effort to deal with what was once a local zoning matter has been hijacked by national and international groups whose underlying message is anarchy. Kamp, who opposes fracking, has nonetheless been working furiously to encourage voters to reject Hawkins’ recall and to vote for at-large incumbents Greg Johnson and Dalton Gregory, who are facing challengers spurred on by the activists.

    Fracking: environmental groups sue EPA in call for strict rules on waste -- Frack waste has triggered earthquakes from Ohio to Oklahoma, and fouled rivers in Pennsylvania to North Dakota – and now the Obama administration is being sued by environmental groups to crack down on the industry. A coalition of environmental groups sued the Environmental Protection Agency on Wednesday to demand a strong uniform standard for the transportation, storage and disposal of frack waste. Since 1998, when the modern era of fracking began in Texas, the industry has generated hundreds of billions of gallons of frack waste – packed with toxic chemicals such as benzene and naturally occurring substances underground such as radium and arsenic – and there are almost no rules governing the process, environmental groups said. “Updated rules for oil and gas wastes are almost 30 years overdue,” said Adam Kron, senior attorney at the Environmental Integrity Project.  With the lawsuit, environmental groups hope to push the EPA to adopt strict national standards for frack water storage and disposal – starting with firm limits on wastewater injection wells. US Geological Survey scientists and independent researchers have found a sharp rise in seismic activity in states such as Oklahoma, Kansas and Texas and connected those tremors to high volumes of frack waste in disposal wells. A single well near Youngstown, Ohio, was linked to 77 earthquakes. Arkansas, Colorado and New Mexico have also experienced a spike in earthquakes, because of high-volume wastewater injection wells. “If the injection of vast gallons of this waste is leading to increased danger of earthquakes, that is certainly reasonable for the EPA to step in and try and do something about it,” Kron said.

    EPA failing to regulate disposal of toxic gas and oil production waste, according to lawsuit -- Environmental groups are suing the EPA over what they say is a 28-year-old broken promise to craft new rules for managing oil and gas production waste. The lawsuit – filed Wednesday in federal court in Washington, D.C. – seeks to force the Environmental Protection Agency to update rules for disposal of waste generated by the oil and gas production industry. Plaintiffs said the current rules are minimal and inadequate, and regulation now is largely left up to the states. The EPA agreed in 1988 that the rules needed to be changed but no action has been taken since then, according to the plaintiffs. Adam Kron, senior attorney for the Environmental Integrity Project, said this has “real-world impacts” since the waste can harm people’s health, contaminate drinking water and cause earthquakes. The plaintiffs said the waste can contain radioactive material as well as benzene, mercury and other toxins. “The rules governing the disposal and handling of this waste are the same rules that apply to all nonhazardous waste, even household trash, despite that fact that oil and gas waste can be toxic and much more dangerous,” said Amy Mall, a senior policy analyst for the Natural Resources Defense Council. “It’s outrageous that current rules haven’t been updated since 1981, even though the industry and its waste have grown exponentially.” The lawsuit targets both waste water and solid waste created by gas and oil drilling and the fracking process. The wastewater injection wells have been blamed for the sudden appearance of earthquakes in this region and others.

    Lawsuit seeks stronger regulation by EPA on how drillers handle, dispose of fracking waste: Seven environmental and community organizations are suing the U.S. Environmental Protection Agency in federal court to compel the agency to tighten controls on the handling and disposal of oil and shale gas drilling and fracking waste. The lawsuit, filed Wednesday in U.S. District Court for the District of Columbia, asks the court to set strict deadlines for the EPA to adopt updated oil and gas waste disposal rules that it says are almost 30 years overdue. ”Each well now generates millions of gallons of wastewater and hundreds of tons of solid wastes, and yet EPA’s inaction has kept the most basic, inadequate rules in place,” said Adam Kron, senior attorney at the Environmental Integrity Project. “The public deserves better than this.” According to the lawsuit, the regulatory refreshening is required by the U.S. Resource Conservation and Recovery Act, the federal law that governs waste disposal. The law mandates that the EPA to review and revise the regulations every three years if it determines such actions are necessary. The groups note that the EPA in 1988 determined that such regulatory revisions were necessary to address specific shortcomings, but never followed through with the changes.. “The agency has had a continuing duty to make the revisions it determined were necessary but has done nothing,” Mr. Kron said. He said the EPA has not responded to the notice of intent to sue filed by the environmental groups in August 2015.

    Lawsuit: EPA needs new rules to address manmade earthquakes (AP) — A coalition of environmental groups is suing federal environmental regulators over their alleged failure to stop oil and gas companies from disposing of drilling waste in ways that can threaten drinking water supplies and trigger manmade earthquakes. The lawsuit filed Wednesday in Washington urges the Environmental Protection Agency to issue new rules covering the disposal of contaminated wastewater created by hydraulic fracturing operations and then pumped back underground. The lawsuit filed by the Environmental Integrity Project, the Natural Resources Defense Council and other groups cites the sharp increase of earthquakes in states where oil and gas drilling has boomed in recent years, including Oklahoma, Ohio and Texas. EPA spokeswoman Laura Allen declined to comment on the pending litigation. Individual states often take the lead in regulating oil and gas operations.

    Geophysicist: Humans cause quakes, but fracking not main culprit - Geophysicist Dr. Justin L. Rubinstein answered the big question about earthquakes in Kansas and Oklahoma right in the title of his free lecture Saturday at the Cosmosphere: “Yes. Humans Really Are Causing Earthquakes.” The subtitle complicated things, though: “But not in the way you think.” Rubinstein said human-induced earthquakes have been known for more than a century, dating back to 1894 in Johannesburg, South Africa, where gold mines caused earthquakes.. Oil and natural gas production has been documented to cause earthquakes in several ways, he said. The extraction of oil and gas can cause earthquakes directly, but that is a minor factor in causing earthquakes. Hydraulic fracturing, often called fracking, also can cause earthquakes, but is much less of a factor than wastewater injection wells, Rubinstein said. That is because fracking involves much smaller amounts of fluids and over brief periods of time compared to wastewater disposal.. Contrary to popular belief, most of what is injected in wastewater wells isn’t chemicals used in fracking. It is mostly saltwater that comes out of wells along with the desired oil and gas. The saltwater is the remnant of ancient oceans trapped below ground. In this area of the country, the product of an oil well might be 20 parts saltwater to one part oil.  Earthquakes seem most likely to occur when wastewater can find its way to a fault in the earth, where fluid pressure can reduce friction. “You could imagine it as more or less lubricating the fault,” he said.

    Colorado Court Strikes Down Local Bans on Fracking - Colorado’s Supreme Court on Monday struck down local government prohibitions on hydraulic fracturing, or fracking, handing oil and gas companies a victory in a lengthy battle over energy production in the environmentally conscious state.In separate rulings, the court said a moratorium in Fort Collins and a ban in Longmont were invalid because state law pre-empted them. A lower court had reached the same conclusion earlier.Two other cities and Boulder County have prohibitions on fracking that presumably are affected by the decisions. With oil and gas exploration in a slump nationwide, the short-term effect of the rulings in Colorado will be small, industry officials said.But when the slump ends, activity in urban areas across the Front Range — the eastern foothills of the Rocky Mountains and Colorado’s most populous region, where oil and gas production is concentrated — could be significant.The land opened to exploration by Monday’s rulings is comparatively small. More significant, said experts on both sides of the conflict, is that the rulings shut down future efforts to stop fracking in local jurisdictions.

    Colorado Supreme Court voids two city voter-approved fracking bans | Reuters: Colorado's Supreme Court on Monday struck down voter-approved bans on fracking and the storage of fracking waste within the cities of Fort Collins and Longmont, ruling they conflicted with state law. Voters in Longmont approved a ban in 2012, while voters about 30 miles north in Fort Collins approved a five-year moratorium in November 2013, drawing legal challenges from the Colorado Oil and Gas Association, an industry trade group. Lower courts subsequently sided with the association, invalidating the Fort Collins moratorium and the Longmont ban. The Colorado Supreme Court affirmed the rulings in separate decisions. Justice Richard Gabriel said the Longmont ban could result in uneven and potentially wasteful oil and gas production and affect the rights of the owners of those interests. The decisions in Colorado are the latest rulings on attempts to curb the hotly contested oil and gas extraction process known as fracking through popular votes. In Denton, Texas, for example, voters approved a hydraulic fracturing ban in 2014 that prompted lawsuits by a Texas industry trade group and bills in the Texas legislature that eventually led to a state law that prohibited cities from interfering. The Colorado Supreme Court found the Longmont ban and Fort Collins moratorium operationally conflict with the application of the state's Oil and Gas Conservation Act. If left in place, the Longmont ban "could ultimately lead to a patchwork of regulation that would inhibit the efficient development of oil and gas resources,"

    Longmont fracking ban struck down, what now? - Boulder Weekly: The further I delved into the Colorado Supreme Court’s decisions to overturn Longmont’s ban on fracking and Fort Collins’ five-year, voter-sanctioned moratorium on the same practice, the more disturbed I became. The decisions, which were predictably announced by recent Hickenlooper appointee to the Supreme Court Judge Richard Gabriel, didn’t just say that the ban and moratorium were in conflict with state law as has been widely reported in the media. Oh no, they went much further than that. Upon closer inspection, I found these rulings read more like a climate change-denier’s manifesto than the narrow opinion on preemption that they claim to be. According to the Court, it had to determine if oil and gas extraction was to be governed by state, local, or a mix of state and local regulations. In order to do this, the Court asked and then answered several questions beginning with, “Is there a need for statewide uniformity” when it comes to oil and gas extraction? The Court concluded that while “uniformity in itself is no virtue, it is necessary ‘when it achieves and maintains specific state goals.’”The Court determined that the “state’s goals,” based on existing law, include preventing anything, when it comes to drilling methods, spacing and well patterns, that could cause “less than optimal recovery and a corresponding waste of oil and gas.” The court then determined that Longmont’s “ban on drilling within the city limits could result in uneven and potentially wasteful production of oil and gas… ” I should point out that Longmont never actually banned drilling in its city limits, just fracking, but that’s just one of the giant details lost at times on a Supreme Court that appears to have been trained at the Hickenlooper School of Critical Thinking. So in the end, the Court determined that the “state’s goals” are to optimize oil and gas recovery and prevent waste, and that the Longmont ban fails to maximize recovery and causes waste so it is clearly in conflict with the state’s goals and state rules and regulations designed to support the state’s goals. Therefore, the ban is illegal and no longer in force and effect. Case closed.

    Colorado’s battle over regulating fracking shifts to ballot — Colorado’s battle over who should regulate fracking — and how much — now shifts to the November election after the state Supreme Court overturned attempts by local governments to impose their own rules. The court ruled Monday that a ban on fracking in Longmont and a five-year moratorium in Fort Collins are invalid because they conflict with state law. State officials and the industry argued the state has the primary authority to regulate energy, not local governments. It wasn’t the end of the debate, however. Coloradans face a loud and fierce campaign over fracking this fall if activists succeed in getting any constitutional amendments on the ballot to restrict oil and gas drilling or give local governments the authority to do so. “We’re taking them as a serious threat to responsible oil and gas development in the state of Colorado,” said Karen Crummy, a spokeswoman for an industry-backed group called Protecting Colorado’s Environment, Economy and Energy Independence. “We consider all of these measures to be a ban on fracking,” Crummy said. “We’re going to fight.” Backers of the proposed constitutional amendments also vow a fight, saying Monday’s ruling injects a sense of urgency into their cause. “It can only help us because it shows that communities don’t have many rights right now when industry wants to drill,”

    This year’s anti-fracking measures are more extreme than ever: Two years ago, the last time Colorado was threatened with anti-fracking measures on the statewide ballot, Gov. John Hickenlooper (D) called the initiatives “radical” and “extreme.” Today, you’d better grab a dictionary and thesaurus to find some new adjectives, because the measures headed for this November’s ballot are much, much worse.In early May, the spotlight was back on a new set of anti-fracking initiatives, after the Colorado Supreme Court reaffirmed that local oil and gas bans are illegal. Food & Water Watch – the national activist group that campaigned for those local banssaid the court decision shows “exactly why we need to pass … ballot measures this November.” So how do the new initiatives compare to the 2014 ballot measures, which Hickenlooper warned “would drive oil and gas out of Colorado” due to their severe impacts? On setbacks, the activists are now pushing to ban oil and gas development within 2,500 feet of any occupied building. For scale, imagine a circle with a radius of 2,500 feet. The area inside that circle is roughly 450 acres – five times the size of Mile High Stadium and its parking lot. That’s the size of the no-drilling zone that would be imposed around any occupied building, and it’s 56 percent larger than the 2014 measure called for.  But there’s another catch, and it’s a big one. According to the setback measure, the no-drilling zone of 450 acres would apply to other places besides buildings, including parks, streams, irrigation canals, sports fields and other areas of “special concern.” Soon enough, finding places to drill new wells would become practically impossible – which is the goal of “ban fracking” groups like Food & Water Watch, of course.

    Moratorium at gas-leak facility sent to California governor: (AP) — California lawmakers are sending Gov. Jerry Brown legislation to extend the closure of a gas storage facility after it spewed massive amounts of natural gas for nearly four months. The Senate approved the measure in a 36-0 vote on Monday. SB380 by Democratic Sen. Fran Pavley responds to the leak of climate-changing methane at the Aliso Canyon facility near Los Angeles. It extends Gov. Jerry Brown’s January moratorium on injecting natural gas into the Southern California Gas Co. underground site. It requires state regulators to complete a safety review and decide if one of the nation’s largest natural gas storage fields should be eliminated. Opponents fear that limiting the major natural gas supplier for Southern California could lead to power outages.

    Fracking in Bakken Oilfield Largely Responsible for Global Rise in Ethane --The Bakken shale oilfield is single-handedly responsible for most of a mysterious global rise in atmospheric ethane—a pollutant that can harm human health and heat the atmosphere further—peer-reviewed research published last week reveals. The Bakken, which stretches from North Dakota and Montana into Canada, has made headlines over the past decade for its sudden drilling boom (and an equally sudden job market bust as oil prices have plunged over the past year).  But while the drilling boom made North Dakota the nation’s second largest oil-producing state, the amount of hydrocarbons leaking and being deliberately vented from the oil field may have been enough to alter the composition of the Earth’s atmosphere slightly, reversing a long-running decline in ethane levels worldwide. The Bakken alone is responsible for roughly two percent of the ethane emitted into the atmosphere worldwide, the newly published paper concludes. Ethane is the second-most common hydrocarbon in the atmosphere and helps form ozone, a gas that at ground-level is usually called smog, the notorious haze that can cause people breathing problems and damage crops. Smog has long been associated with fracking due to emissions of other pollutants—volatile organic compounds or VOCs—part of the reason that remote areas of Utah have recently suffered from a suffocating blanket of smog at levels higher than those found on summer day in freeway-clogged Los Angeles. But the role of ethane in smog problems is far less widely discussed. Ethane also contributes to climate change in three ways: as a greenhouse gas itself (though it’s extremely short-lived in the atmosphere so these effects are relatively fleeting), by extending the lifespan of the powerful greenhouse gas methane (because it consumes compounds that help break methane down) and because it helps to form smog, which the researchers described as “the third-largest contributor to human-caused global warming after carbon dioxide and methane.”

    Statoil ASA : to Resume Bakken Fracking Amid 10% Production Drop - Senior executives at Norway's Statoil ASA, the fifth largest Bakken Shale producer, on Thursday said the company's production has dropped about 10% in North Dakota, but it plans to reactivate some hydraulic fracturing (fracking) crews there. The offshore-focused company reported 1Q2016 adjusted earnings of $857 million (22 cents/share), compared to a $3.3 billion loss for the same period in 2015, but it does not break out results for specific Bakken or other U.S. onshore operations (Eagle Ford and Marcellus). In response to analysts' questions, CFO Hans Jakob Hegge gave the broad results and plans for the company's 355,000 net acres in the Bakken play. U.S. oil production comprises less than a third of Statoil's total equity production of more than 550,000 b/d as of mid-2015. Hegge said Statoil was down to one rig and no well completions during 1Q2016 in the Bakken. "Having said that, we are bringing in our frack crew to the Bakken area, so we expect the team to do some completions going forward," he said. Hegge also told analysts that the quarter-over-quarter declines in production are "not representative" of what you can expect going forward. "Going forward with increasing prices, you should expect a higher activity level [from us], including in the Bakken."

    Whiting to restart wells at 90 days of $50/bl   — Top Bakken producer Whiting Petroleum will start bringing wells online once oil prices touch $50/bl and stay there for at least 90 days. Bringing down its inventory of drilled but uncompleted wells (DUC) "would be one of the first things we would do at higher prices," chief executive Jim Volcker said in an earnings call today. "$50/bl is the price where we would move forward on that." The independent yesterday raised its output guidance on the back of an agreement it signed with an undisclosed private party to share drilling and completion costs. Volcker said there are more opportunities to sign similar joint venture agreements across its other acreage but a call on how to develop those resources will depend on where oil prices are. "We will evaluate as oil prices rise whether we want to drill those or whether we want to JV them," he said. Under the agreement signed on 14 April, the party will pay 65pc of drilling and completion costs for a 50pc working interest in 44 gross Williston basin wells in North Dakota.

    Western North Dakota oil refinery hampered by oil slowdown (AP) — The owners of a new oil refinery in western North Dakota plan to operate it at only 75 percent capacity due to continued losses tied to the slumping oil industry. The Dakota Prairie Refinery at Dickinson lost $7.2 million in the first three months of the year, due in part to low demand for diesel fuel, according to North Dakota-based MDU Resources Group Inc. “We are disappointed with market conditions that continue to challenge our refinery investment,” MDU Resources President and CEO David Goodin said in the company’s first quarter earnings report. MDU Resources and Indianapolis-based Calumet Specialty Products Partners spent $430 million on the refinery. Construction began in March 2013, and the plant began selling fuel in May 2015. The refinery can process up to 20,000 barrels of western North Dakota oil each day into diesel fuel and other products. A barrel is 42 gallons. Officials had expected to run the plant at 90 percent capacity, or about 18,000 barrels per day, but it currently is processing only about 15,500 barrels per day, according to The Bismarck Tribune. MDU Resources said in its earnings report that the plant is “operating satisfactorily” but that officials are focusing “on operational improvements and cost-cutting measures” to improve profitability.

    MDU cites continued losses with their new refinery in southwest North Dakota - MDU Resources Group Inc., will only run its Dakota Prairie Refinery in Dickinson at 75 percent capacity following continued losses of $7.2 million in the first quarter.   MDU Resources CEO Dave Goodin said the company is assessing its options regarding its partial ownership in the refinery, which started operations a year ago. The company had expected run the plant at 90 percent capacity but with a low local demand for diesel and higher costs of production, the refinery is currently only processing 15,000 to 16,000 barrels of Bakken crude daily. The lowest the capacity can be sustainably reduced at the refinery is 14,000 to 15,000 barrels per day.  MDU’s partner in the refinery, Calumet Specialty Products Partners, LP, also said in its quarterly earnings report that it may divest of some of its assets including Dakota Prairie. Despite the continued struggle of the refinery, other MDU Resources business sectors experienced growth in the first quarter and company earnings are on the rise.“The other businesses for the most part doing very well; I think that’s why shares are at their highest since last summer,” said Edward Jones analyst Brian Youngberg.He said many investors likely assume MDU will try to exit the refining industry. “The trick may be finding a buyer … especially when their partner is struggling even more,”

    Significant contamination at 3,900 fracking spill sites in North Dakota alone -- There's no doubt that fracking has provided a boost to the North Dakota economy in recent years, but at what cost? New research from Duke University scientists has mapped 3,900 fracking spill sites in North Dakota, analyzing both water and soil around these locations and finding significant, persistent pollution levels that could have serious implications for human and environmental health alike. Researchers found high levels of ammonium, selenium, lead and other toxic contaminants as well as high salt levels and radium, a naturally occurring radioactive element. And the problem appears to be persistent—pollutant levels regularly exceeded federal safety limits for safe drinking water or aquatic health, and at one site at least, the researchers were still able to detect high levels of contaminants in spill water four years after the spill occurred. This problem is apparently exacerbated by the fact that, unlike oil, many of the inorganic chemicals found in the wastewater are resistant to biodegradation, creating a long-term legacy of contamination. Avner Vengosh, professor of geochemistry and water quality at Duke’s Nicholas School of the Environment, suggests these findings present a new picture of the potential downsides of fracking when wastewater is not safely managed: “Until now, research in many regions of the nation has shown that contamination from fracking has been fairly sporadic and inconsistent. In North Dakota, however, we find it is widespread and persistent, with clear evidence of direct water contamination from fracking. The magnitude of oil drilling in North Dakota is overwhelming. More than 9,700 wells have been drilled there in the past decade. This massive development has led to more than 3,900 brine spills, mostly coming from faulty pipes built to transport fracked wells’ flowback water from on-site holding containers to nearby injection wells where it will be disposed underground.”

    It's About To Get Crazy Again - North Dakota Official Exalts Oil Boom "Is Coming Back With A Rush" - Great News!! As reports, North Dakota's top oil regulator sent out a message the other day to the leaders of Williston: Get Ready. "This is going to come back pretty hard and pretty rapidly," Helms said told members of Williston’s Chamber of Commerce."And we'll be back running to stay ahead of it." You can smell the desperate hope in his rhetoric... It’s not a matter of if- it’s about to happen and there’s no stopping it. Oil prices are on the rebound finally. Oil reached its highest level it’s seen in the last 6 months just yesterday. It’s the light at the end of the tunnel we’ve all been waiting for. Get your resumes out, get your work gear out, things are about to get crazy again. With oil prices climbing higher and higher we are about to see the oil patch fire back up. Drilling crews are going to kick it into high gear. Many companies will be entering back into the Bakken looking to make up lost time. Thousands of workers will be needed in every part of the oilfield. notes that according to Helms he’s projecting Williston will support 40,000 permanent oil jobs. This will  put the towns population over 80,000. Right now estimates are Williston has about 30,000 residents. It’s time to make room for an in-flux of 50,000 workers. We are going to see Williston explode in population growth.

    Next round of ND oil production figures ‘going to be bad,’ Helms says – Early March oil production numbers show that North Dakota will likely drop below 1.1 million barrels per day for the first time since June 2014, the state’s top oil regulator said. An official update will be released next week, but Director of Mineral Resources Lynn Helms told an oil industry group in Williston he expects to see a “severe” production drop. "It's going to be bad,” Helms told the Williston Basin chapter of the American Petroleum Institute Tuesday night. North Dakota saw a smaller than expected drop in oil production in February as more companies put fracking crews to work to complete wells and maintain cash flow. The state produced an average of 1,118,333 barrels of oil per day in February, a 0.4 percent drop from January, according to preliminary figures released in April.  But March figures, scheduled to be released May 12, are reflecting the more significant production drop Helms had been anticipating.

    Despite Shale Glut, U.S. Imports More Foreign Oil - WSJ: The U.S. is importing more foreign crude than it has in years, becoming one of the last ports of call for many oil-producing nations despite a glut of crude from domestic companies. Oil imports this year have surged 20% to about eight million barrels a day since early May 2015, when they approached a 20-year low, according to federal data. Crude from the Republic of Congo, Russia and Brazil is arriving at U.S. ports, while Canada is sending a record amount of oil to the U.S., the data show. A series of market disruptions in recent months is one reason for the sharp rise in imports, even though U.S. production is close to a three-decade high at nearly nine million barrels a day. These changes include Iran’s return to exporting crude after sanctions were lifted in January, a move that indirectly led to more U.S. imports even though Iran itself can’t sell to the U.S. Another big driver: The rest of the world is running out of places to store oil. Facilities from Rotterdam to Cape Town already are near capacity, but the U.S. still has room to spare, said Brian Busch, director of oil markets for Genscape, a data firm that tracks energy shipments.  The U.S. has filled about two-thirds of its total storage capacity and has room for roughly 100 million barrels more, Mr. Busch said. By comparison, major storage hubs in China and South Africa appear full, and Europe’s main storage space centered in Rotterdam appears to be within 10% of its usable capacity, according to Mr. Busch.

    Recent U.S. imports of oil tend to be heavier than domestic production - (EIA) In 2015, more than 70% of the crude oil produced in the Lower 48 states was light oil with an API gravity above 35 degrees. At the same time, 90% of imported crude oil was heavier, with a gravity below 35 degrees API. To accommodate increasing U.S. production of light crude oil, refineries have adjusted their imports by reducing imports of light crudes. The differences between domestic production and imports in this key oil characteristic could bring changes to petroleum refinery operations in the United States, as discussed in the EIA report, Implications of Increasing Light Tight Oil Production for U.S. Refining.Domestic crude oil production has grown rapidly in recent years, primarily because of light crude oil produced from low permeability (tight) formations. EIA's report on crude oil production and crude oil quality estimates that about 90% of the nearly 3.0 million barrel per day (b/d) growth in production from 2011 to 2014 consisted of light crude oil, with an API gravity of 40 or above. At the same time, light crude oil imports fell from 1.7 million b/d in 2011 to 0.7 million b/d in 2014, and medium crude oil (27° ≤ API < 35°) imports decreased from 3.3 million b/d to 2.5 million b/d. Imports of heavy crude oil (<27° API) have remained near 4.0 million b/d since 2010.  U.S. refineries reflect a wide range of capacities, quality of crude oil inputs, utilization rates, and sources of crude oil supply. Most U.S. refineries are designed to run medium to heavy crude oil. However, technical options are available for shifts in input streams to process additional light crude oil.

    Oil Price Upheaval Finally Hits Refiners - WSJ: U.S. refiners, which posted robust profits the last 18 months even as other parts of the oil business were racked by low crude prices, finally saw their roll come to a halt in the first quarter. Many refining businesses reported earnings for the period that were down roughly by half from a year earlier. That decline helped sour results for oil giants such as Exxon Mobil Corp., which has counted on refining to offset profit declines in energy production, and for Valero Energy, the world’s largest stand-alone refiner by output, which on Tuesday reported its lowest first-quarter profit in four years. “The first quarter presented us with challenging markets, with gasoline and diesel margins under pressure,” said Valero Chief Executive Joe Gorder.  Two trends have helped upend the refining boom: U.S. crude is no longer trading at a steep discount compared with oil from other parts of the world. And American exports of gasoline and diesel are pushing into increasingly well-supplied foreign markets.  For years, U.S. refiners benefited because a bounty of oil unlocked by shale exploration was essentially landlocked in the country due to a ban on most crude exports, creating a glut that pushed down prices compared with barrels in Africa and the Middle East.  That allowed U.S. refiners to turn oil into gasoline, diesel and other products more cheaply than some competitors, and enhanced their ability to export the fuels to foreign markets.  Now that U.S. oil production is falling and the country allows crude exports, that advantage has significantly diminished. Once as high as $25 a barrel in 2011, the difference between U.S. and international crude benchmark prices now sits at a little over $1 a barrel today.

    Massive Fire Burns At Gateway Town To Alberta's Oilsands; 30,000 Evacuated -- Residents of neighborhoods in the Canadian boomtown of Fort McMurray - considered the gateway to Alberta's oil sands as the Athabasca oil sands are roughly centered around the town - are under mandatory evacuation as a massive wildfire has jumped across Highway 63 and entered the city limits.  Homes have begun to burn in Fort McMurray as residents flee for safety from a blaze that’s doubled in size within a day.  More than 30,000 people have now been ordered to evacuate Fort McMurray communities. The fire has already destroyed homes on the outskirts of the municipality. Bernie Schmitte, wildfire manager at Alberta Agriculture and Forestry said that the fire made a "major run" during the night and reached the Athabasca River. All Air Canada and WestJet flights to and from Fort McMurray have been cancelled “My whole life is burning away,” Jenn Tremblett, who has left for Edmonton, told Metronews. “My home is in Gregoire (Fort McMurray neighbourhood) so it may be gone soon. "My family is trying to get out of town.” Tremblett said the community of Beacon Hill is on fire, after a nearby Shell gas station blew up. Fire officials have extended the evacuation order to 10 communities in the city, including Beacon Hill, Abasand, Waterways, Draper, Saline Creek, Grayling Terrace, downtown, Thickwood, Wood Buffalo and Dickinsfield.

    ‘Apocalyptic’ Inferno Engulfs Canadian Tar Sands City  - A raging wildfire in a Canadian tar sands town has forced tens of thousands of evacuations and destroyed several residential neighborhoods, offering a bleak vision of a fiery future if the fossil fuel era is not brought to an end. The blaze in Fort McMurray, Alberta, started over the weekend, doubled in size on Monday, and grew into an inferno on Tuesday. It is expected to worsen on Wednesday as strong wind gusts and record high temperatures persist. “It’s apocalyptic,” John O’Connor, a family physician who has treated patients with health problems in the region related to tar sands pollution, told the National Observer.  “There was smoke everywhere and it was raining ash,” evacuee Shams Rehman said to the Globe and Mail after he and his family reached an evacuation center in the resort town of Lac La Biche, Alberta. “I’ve never seen anything like it.”  Brian Jean, the leader of Alberta’s opposition party and a resident of the city, said much of downtown Fort McMurray was going up in flames: “My home of the last 10 years and the home I had for 15 years before that are both destroyed.” According to the Edmonton Journal: Officials estimate 17,000 citizens fled north to industry sites. Another 35,000 headed south, including 18,000 people enroute to Edmonton.Traffic was bumper-to-bumper as people packed families and pets into cars, trucks and campers. Line-ups snaked around gas stations and late in the evening, RCMP were advising they would travel the highway with gas to assist stranded motorists. Wednesday morning, the Alberta government took to social media to say that it would be escorting a fuel tanker along Highway 63 to help people who were still waiting for gas.

    Wildfire Empties Fort McMurray in Alberta’s Oil Sands Region - NYTimes — The entire community of Fort McMurray, the heart of Alberta’s oil sands region, was ordered to evacuate on Tuesday night as a fast-spreading wildfire advanced on the city and cut off its only highway link to the south.  The fire destroyed a number of homes in one neighborhood and some trailers in a trailer park, said Robin Smith, a spokesman for the Regional Municipality of Wood Buffalo, which includes Fort McMurray. According to television news reports, commercial buildings downtown were also ablaze. There were no reports of injuries by early evening. A video showed flames and smoke rising hundreds of feet into the sky, prompting the largest fire evacuation in Alberta’s history, The Edmonton Journal reported. The fire was expected to get worse on Wednesday, when winds were forecast to switch direction and increase in speed. Mr. Smith said early Tuesday that Highway 63, which connects Fort McMurray to Edmonton, Alberta, to the south and the main oil sands production areas to the north, was heavily congested with cars fleeing the fire, which began over the weekend. Late in the afternoon, however, the fire jumped over the highway, making evacuation to the south impossible, Mr. Smith said. He added that there was no immediate danger in areas north of Fort McMurray. The highway was later reopened. As of early Tuesday evening, the city’s airport was open, but some airlines were canceling flights, said Jillian Philipp, an airport spokeswoman. After leaving the airport earlier in the day, Ms. Philipp said she was unable to return because of the fire. But employees still there told her that it did not appear to be in the immediate path of the flames. The provincial government had ordered residents out of six neighborhoods and a trailer park by late in the afternoon after declaring the fire “out of control.”

    Alberta wildfire: Emergency declared in Fort McMurray - BBC News: A state of emergency has been declared in the province of Alberta in Canada after a wildfire forced all 88,000 residents of Fort McMurray to flee. Officials say the fast-moving blaze could destroy much of the city. The fire, which broke out on Sunday in the heart on the country's oil sands region, has gutted 1,600 buildings, including a new school. The evacuation was the largest-ever in Alberta. Oil companies operating in the area have been forced to cut output. Several firms have shut down some pipelines. This was done to help evacuate non-essential personnel, reports say, but oil facilities are not in the current path of the fire. So far there have been no reports of deaths or injuries, but two women gave birth in one evacuation centre, Reuters news agency reported. What residents witnessed Resident Neil Scott told the BBC: "It was something you'd see in a movie probably. I was stuck between a concrete barrier and the fire and I thought 'You know what? I might not make it out'. "There's whole neighbourhoods that are gone. A hotel burned down, a gas station exploded. One lady that I met she actually was sheltered behind like an electrical box when it actually exploded and she felt a shockwave." "You could hear the pop, pop, pop because of the propane tanks," Doug Sulliman, a former professional ice hockey player, told Associated Press. "The fire was just consuming these houses. It just destroyed the whole community." The night sky above Fort McMurray is illuminated by a fierce orange glow as fires continue to burn to the north and to the south.

    Residents evacuated as fires threaten Canadian oil sands town (AP) — A raging wildfire emptied Canada’s main oil sands city, destroying entire neighborhoods of Fort McMurray, Alberta, where officials warned Wednesday that all efforts to suppress the fire have failed. About 88,000 residents successfully evacuated as flames moved into the city surrounded by wilderness in the heart of Canada’s oil sands. No injuries have been reported. Alberta Premier Rachel Notley said all 105 patients at the local hospital had been safely airlifted to other care centers. She said, so far, the fire had destroyed or damaged an estimated 1,600 structures. Unseasonably hot temperatures combined with dry conditions have transformed the boreal forest in much of Alberta into a tinder box. Danielle Larivee, Alberta’s Minister of Municipal Affairs, said the province has declared a state of emergency and said the fire is actively burning in residential areas. Over 200 firefighters are battling the blaze. Fatalities have been reported from a collision on a nearby highway but she was unaware if it was related to the evacuation. More than 80,000 residents were ordered to flee as flames moved into the city, destroying whole neighborhoods.“This is a nasty, dirty fire. There are certainly areas of the city that have not been burned, but this fire will look for them and it will find them and it will want to take them,” Fort McMurray Fire Chief Darby Allen.  Firefighters were working to protect critical infrastructure, including the only bridge across the Athabasca River and Highway 63, the only major route to the city in or out. All commercial flights in and out of Fort McMurray have been suspended.  “It’s a possibility that we may lose a large portion of the town,”

    Alberta wildfire evacuees moved a 2nd time as weather shifts: (AP) — A raging Alberta wildfire has moved south, forcing three more communities to evacuate and an emergency operations center to move again — taking it far from the devastated oil sands city of Fort McMurray. Officials with the Rural Municipality of Wood Buffalo had been notified of changing weather patterns and weren’t taking chances, ordering the evacuation of Anzac, Gregoire Lake Estates and Fort McMurray First Nation, an aboriginal reservation. The fire has already forced the evacuation of more than 80,000 people and torched 1,600 homes and other buildings in Fort McMurray. There was still no indication of injury or death from the fires. The province of Alberta declared a state of emergency. “Homes have been destroyed. Neighborhoods have gone up in flames. The footage we’ve seen of cars racing down highways while fire races on all sides is nothing short of terrifying,” Prime Minister Justin Trudeau said in Parliament on Thursday, calling it “the largest fire evacuation in Alberta’s history.” Trudeau called on all Canadians “to support our friends and neighbors at this difficult time,” saying the federal government will match individual charitable donations to the Red Cross.

    Fort McMurray Wildfire in Alberta Grows, Firefighters Hope for Rain - NBC News: Gusting winds and "tinder-dry" conditions were feeding the beast of a blaze in western Canada early Friday, as officials warned it could be days or weeks before evacuated locals can return home. The fires in the province of Alberta forced 88,000 people to flee and destroyed more than 1,600 structures. Officials were waiting to see if it would be safe to get another convoy of evacuees out on Friday, according to local media.Around 328 square miles have been scorched. Alberta Premier Rachel Notley praised the "herculean" firefighter response but warned late Thursday that the inferno could spread due to "tinder dry" conditions. "They are very early days," she told a press conference. "There is much more to do and more help will be needed." Notley acknowledged the frustrations of evacuated locals desperate for answers but urged patience. "The damage to the community of Fort McMurray is extensive and the city is not safe for residents," Notley said. "It is simply not possible, nor is it responsible to speculate on a time when citizens will be able to return. We do know that it will not be a matter of days," she said. More than 1,110 firefighters, 145 helicopters and 22 air tankers are fighting the fires.

    Canada wildfire: Blaze disrupts convoy near Fort McMurray - BBC News: The only land convoy evacuating people trapped by a wildfire in the Canadian province of Alberta has been suspended after 200ft (60m) flames flanked the road. The convoy was made up of hundreds of people who fled their homes in Fort McMurray for oil worker camps north of the city. The fire is expected to double in size in the coming 24 hours. The fire now covers an area larger than New York City, and more than 80,000 people have fled their homes. Tens of thousands of people have been evacuated by air with 300 flights to the provincial capital Edmonton since Tuesday, and another 4,000 are due to leave on Saturday. No deaths or injuries have been reported. The police-escorted road convoy of 1,500 vehicles was due to pass by the southern part of the city but was suspended on Friday afternoon until Saturday. Twenty minutes south of Fort McMurray, the road forks into two branches. By noon on Friday, both were ablaze on either side. We watched with the police as the skies filled with grey and black smoke and flames roared into the air, devouring even the tallest pine trees. The danger, said one officer, was "tentacles growing out of the fire", which could end up looping around and trapping people.

    Halliburton and Baker Hughes scrap $28 billion merger | Reuters --  Oilfield services provider Halliburton Co and smaller rival Baker Hughes Inc announced the termination of their $28 billion merger deal on Sunday after opposition from U.S. and European antitrust regulators. The tie-up would have brought together the world's No. 2 and No. 3 oil services companies, raising concerns it would result in higher prices in the sector. It is the latest example of a large merger deal failing to make it to the finish line because of antitrust hurdles. "Challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action," said Dave Lesar, chief executive of Halliburton. The contract governing Halliburton's cash-and-stock acquisition of Baker Hughes, which was valued at $34.6 billion when it was announced in November 2014, and is now worth about $28 billion, expired on Saturday without an agreement by the companies to extend it, Reuters reported earlier on Sunday, citing a person familiar with the matter. Halliburton will pay Baker Hughes a $3.5 billion breakup fee by Wednesday as a result of the deal falling apart. The U.S. Justice Department filed a lawsuit last month to stop the merger, arguing it would leave only two dominant suppliers in 20 business lines in the global well drilling and oil construction services industry, with Schlumberger being the other.

    Energy explorers Halliburton and Baker Hughes abandon merger (AP) — Two companies crucial to the business of U.S. energy exploration, Halliburton and Baker Hughes, have abandoned their planned merger in the face of opposition by regulators who said it would hurt competition. Prospects for the merger, which was valued at nearly $35 billion when it was announced in 2014, seemed especially bleak after the Justice Department sued to block the deal on April 6. The government claimed the merger would lead to higher prices by unlawfully eliminating significant competition in markets for almost two dozen services and products crucial to finding and producing oil and natural gas in the United States. “The companies’ decision to abandon this transaction — which would have left many oilfield service markets in the hands of a duopoly — is a victory for the U.S. economy and for all Americans,” Attorney General Loretta E. Lynch said in a statement on Sunday. The Justice Department said its opposition to the deal stemmed in part from fear among oil and gas companies that rely on Halliburton and Baker Hughes. “We heard extreme statements of concern from dozens of companies and over 100 individuals,” Mark Gelfand, deputy assistant attorney general in the Justice Department’s antitrust division, told reporters Monday. He declined to identify the companies and did not detail their concerns.

    Energy producers weather historic oil market collapse: The oil market collapse has put more pressure on energy producers than ever before, causing an unprecedented financial crisis, according to industry officials. On average, an oil company earns only $26 for each barrel of oil sold at current oil prices,  according to a report by the Houston Chronicle. In February, oil prices in the United States fell to a 13-year low of $26 per barrel. Drillers could not generate cash at those prices, but still had to pay off debts. Margins had never been slimmer, one industry specialist said Wednesday at the Offshore Technology Conference in Houston. “This is, in historical context, extraordinary,” a partner at Norway’s Rystad Energy, said. “When you compare this to history, it makes some of the setbacks that we’ve put behind us in 2009 and the early 2000s look like a walk in the park.” Businesses have cut more spending – hundreds of billions of dollars – than in any previous downturn. Oil field production around the world has declined 10-12 percent. Still, global oil production hasn’t fallen enough to alleviate the world’s oil glut. Although the industry has shelved or canceled oil projects worth billions of dollars, companies continue to pump oil from deepwater installations and other projects approved years earlier. For example, oil companies sanctioned projects with 18 billion barrels in reserves in 2013 alone. Those projects added 1.7 million barrels a day to the world’s oil production last year and will add another 1.7 million this year. From 2017 until 2020, the projects will add another 5.8 million.

    Anadarko Petroleum reports 1Q loss — Anadarko Petroleum Corp. (APC) on Monday reported a loss of $1.03 billion in its first quarter. The company, based in The Woodlands, Texas, said it had a loss of $2.03 per share. Losses, adjusted for non-recurring costs and restructuring costs, came to $1.12 per share. The results beat Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for a loss of $1.19 per share. The oil company posted revenue of $1.67 billion in the period, falling short of Street forecasts. Three analysts surveyed by Zacks expected $1.78 billion. A year earlier, the company posted a loss of $3.27 billion, or $6.45 per share, on revenue of $2.32 billion. The adjusted loss in the 2015 quarter was 72 cents per share.  In the final minutes of trading on Monday, shares hit $51.95, a drop of 45 percent in the last 12 months. In after-hours trading, the stock traded at $50.50, down 2.8 percent.

    Shell’s Profits Plunge 83% | More earnings reports are trickling in. Royal Dutch Shell is the last oil major to report first quarter earnings, and like its peers, the Anglo-Dutch company saw its profits tumble. Shell’s current cost of supplies, likened to net profits, crashed by 83 percent from a year earlier, falling from $4.8 billion to just $0.8 billion. The results were the first since the company completed the $54 billion purchase of BG Group, and the combined company “is off to a strong start,” Shell’s CEO Ben van Beurden said. The good news for Shell is that the merger is moving quickly and the company is not seeing its cost structure rise.  BG Group has also added quite a bit of production to the combined company’s output. Still, Shell is still spending too much money. Shareholders are pressing the company to reduce spending to $30 billion so as to ensure the longevity of the company’s dividend payout. Shell outlined $3 billion in spending cuts to bring 2016 spending down to $30 billion. "Can we go further? Yes, we can," Shell’s CFO Simon Henry, said to reporters following the release. Shell also wants to sell off $30 billion in assets by the end of 2018. But as The Wall Street Journal noted, Shell is still not covering its high levels of capex and its dividend with cash flows. In the first quarter, Shell generated $4.6 billion in cash flow, but spent $6.1 billion on capex. And that does not take into account money going out the door in the form of dividends. Excluding proceeds from asset disposals, Shell needs oil prices to trade somewhere around $70 per barrel in order to cover capex.

    Devon Energy Reports $3.1B Loss, Increases Production Guidance - Devon Energy posted a $3.1 billion loss in the first quarter of the year, down $6.44 per share, but less than the $3.6 billion, or $8.88 a share in the first quarter of 2015. In explaining the loss, the company argued low oil prices. More precisely, Devon said it was presently selling a barrel of oil around the $20 mark, while a year ago, it was selling for about $56. Natural gas is going for $1.66 for 1,000 cubic feet, compared to $2.96 from a year ago. The company’s revenues for the same period dropped to $2.1 billion, down from almost $3.3 billion in the last year’s quarter. Devon said it had a core earnings loss of $249 million, or 53 cents a share. Amid a decline in revenues, Devon resorted to cutting expenses. Compared to a year ago, general and administrative costs were down by 23 percent, namely $194 million, with year-round savings estimated to reach $500 million. At the same time, operating costs were cut by 20 per cent compared to last year. The company on Tuesday raised production guidance for the second quarter and the full year. For the second quarter the company now projects oil production of 616,000 to 653,000 barrels a day. For the full year the estimates have risen to 611,000 to 648,000 barrels of oil equivalent production. Crude oil makes up about 40 percent of projected production.

    Beleaguered Chesapeake to Sell Off More Assets to Reduce $9B Debt -- The second-largest producer of natural gas in the United States, Chesapeake Energy Corp., has announced plans to sell part of its Oklahoma shale acreage in order to prop up finances and reduce a massive debt load of around $9.4 billion. Chesapeake announced yesterday that it would sell around 42,000 acres in the Stack field in Oklahoma, which currently produces around 3,800 barrels of oil equivalent per day. The assets will go to Newfield Exploration Co. for an estimated price of $470 million.  Furthermore, due to low oil and gas prices, the company will seek to sell additional assets that will bring between $500 million and $1 billion in its coffers by the end of the year."We anticipate subsequent divestitures during the second and third quarters," Chief Executive Doug Lawler said in a statement.  Despite these difficulties, the company’s shares were up 12 percent at $6.31 in pre-market trading after the company reported a smaller quarterly loss and cut its production expense forecast for the year. They later traded at $5.97, up 5.7 percent. The loss narrowed to $964 million over the first three months of the year, down from $3.78 billion in the same period of last year. First quarter revenue also fell by 39 percent to $1.9 billion, whereas analysts’ expectations stood at $2.55 billion. Except for an $853 million impairment charge, the loss in the latest quarter was 10 cents per share, in line with analysts' average estimate.

    Apache's Surprise Savings Signal US Drillers Not Done With Cuts  (Reuters) - Apache Corp's cost savings in the first three months of 2016 exceeded its own expectations and are likely to continue even if oilfield services costs rise, executives of the Houston-based oil and gas producer said on Thursday. The cost cuts mean the company could achieve its goal of cash flow neutrality for 2016 with oil prices at $35 per barrel and natural gas prices at $2.35 per million British thermal units, Chief Executive John Christmann told investors on a conference call to discuss first quarter results. The surprise savings come despite concerns that U.S. shale companies might have hit a wall in cost or productivity improvements, and are the latest sign that cost reductions could allow U.S. shale producers to keep drilling and pumping even if prices fail to recover significantly from a nearly two-year rout. "Six quarters into the downturn, we are still achieving significant quarter on quarter cost improvements," Christmann said, noting that well cost reduction efforts "continued to exceed our expectations." He said these cost reductions "are more than belt-tightening efforts in response to the downturn."

    EOG can post 'strong returns' at $40 oil, CEO says | Reuters: EOG Resources Inc has the ability to post strong returns with oil prices around $40 a barrel, and would post triple-digit returns should prices spike to $60, Chairman and Chief Executive Bill Thomas told investors on Friday. Houston-based EOG, considered one of the most efficient U.S. drillers, has a $15-$20 per barrel cost advantage over the rest of the industry, which needs a "sustained $60-$65 oil price and 12 months of lead time" to deliver modest growth, Thomas said on a call to discuss first quarter results. Thomas said the company was focusing on "premium drilling," which he defined as wells that can generate a return of at least 30 percent after taxes at $40 oil. The company also said its efforts at "enhanced oil recovery," or getting more output from existing wells with relatively low investments, had been successful, particularly in the Eagle Ford shale play in South Texas. "It will get more efficient as we move forward, and lower-cost," Thomas said. After falling 70 percent between mid-2014 and early 2016 amid a global glut, U.S. oil prices have recovered to trade above $45 per barrel on Friday, as a huge wildfire in Canada prompted substantial production cuts.[O/R]

    Bankruptcies spread through oil patch, more than 175 companies are 'high risk' - The number of U.S. oil firms filing for bankruptcies is swiftly approaching levels last seen during the telecom bust. According to Reuters, 59 U.S. oil firms have filed for bankruptcy since prices began falling in 2014, just nine filings shy of the 68 bankruptcies filed during the telecom bust in 2002 and 2003. Oklahoma-based Midstates Petroleum and Houston-based Ultra Petroleum became the latest firms to file for bankruptcy protection earlier this week. A report published by Deloitte in February found that nearly 35 percent of pure-play E&Ps listed worldwide, or about 175 companies, are at a “high risk” for insolvency. Thirty-five U.S. E&P firms with a cumulative debt of under $18 billion filed for bankruptcy protection from July 2014 to December 2015, according to Deloitte. According to data collected by Dow Jones U.S. Oil and Gas Index and seen by Reuters, the valuation of U.S. energy companies has declined by as much as $1.02 trillion since oil prices began sliding in 2014. However, the wave of bankruptcies has not put a large dent in U.S. production as most companies continue to operate under Chapter 11 protection. Crude production dipped 3.4 percent year-over-year in April to 9.129 million barrels per day, according to the U.S. Energy Information Administration.

    The Unloved Business That's Saved Big Oil From Low Energy Prices - For years, the business of turning gas and crude into the chemicals used to make everything from plastic bags to paint has been a mostly unloved corner of the world’s largest oil companies. Now, it’s shining, cushioning companies from Exxon Mobil Corp. to Royal Dutch Shell Plc from the worst energy price slump in a decade. “Chemicals are coming back on to the radar screen,” Simon Henry, chief financial officer at Shell, Europe’s largest oil company, said on Wednesday. In good times, when high oil and gas prices deliver billions of dollars in profits, the chemical business is largely a footnote in the profit and loss account. Today, with most major oil companies losing money in their production and exploration units, petrochemicals have become one of the biggest -- if not the biggest -- sources of income. The petrochemical business is getting a lift from the very same factor weighing down the production and exploration units: low oil and gas prices. Effectively, cheap energy translates into cheap raw materials and higher margins. “Petrochemical has been doing very well, actually,” Total SA CFO Patrick de la Chevardiere said last week. Take Exxon Mobil. In the first quarter, the chemicals business accounted for almost 75 percent of the $1.8 billion the company reported in profit. From January to March, it made $1.36 billion producing chemicals such as ethylene and propylene. During the same period it lost $76 million pumping oil and gas. Two years ago, when crude traded above $100 a barrel during the first quarter of 2014, the chemicals business accounted for less than 13 percent of Exxon’s income as the oil and gas business delivered $7.8 billion in profits.

    The riskiest energy companies are defaulting at a record rate - Two companies have pushed the default rate on risky bonds in the energy sector to an all-time high.  On Friday and Saturday, Ultra Petroleum and Midstates Petroleum respectively filed for bankruptcy protection. And according to Fitch Ratings, they pushed the energy high-yield default rate to 13%, topping the previous record of 9.7% set in 1999. Their filings added $3.1 billion to the high-yield energy bond default volume, according to Fitch.  Defaults in the energy high-yield space have been triggered by the spectacular plunge in oil and gas prices that started in the middle of 2014. Although oil prices are rebounding, with oil up about 20% in April to be the best-performing asset, many companies are still cash-crunched.  This means there may be more defaults to come. Fitch projects that the rate at which energy companies miss payments to their creditors will balloon to 20% by the end of the year. And, consulting firm Deloitte thinks that up to one-third of all oil producers could end up filing for bankruptcy by the end of the year if commodity prices don't rebound.  Midstates Petroleum filed for bankruptcy after reaching an agreement with its lenders that involves converting a $2 billion conversion of debt to equity.  Ultra Petroleum's filing for Chapter 11 bankruptcy Friday showed it had $3.92 billion in debt. The company's quarterly report, released on the same day, warned investors that it did not have enough liquidity to pay its debt and would likely seek court protection.  Fitch noted that Ultra's $850 million 6.125% bonds due in 2024 are priced at just $0.15, showing "the market's expectation of below-average bond recoveries."

    Hang On in There, Baby—Financial Struggles, Chapter 11, Asset Sales, Asset Purchases - On Friday of last week, two more large E&Ps filed for Chapter 11 – Ultra petroleum with $3.8 billion in unsecured debt and Midstates Petroleum filing with a $2 billion debt-for-equity swap deal. Over the past 18 months there have been 65 E&P bankruptcies – mostly small companies, but nine companies make up 75% of the $28 billion in total debt exposure of all of these firms. This chaos in the oil, gas, and NGL markets is having all kinds of financial and strategic ramifications. One of the consequences of all of the turmoil could be a wave of asset sales, demands for contract restructuring, and more bankruptcy proceedings. But there can be some real opportunities in all this chaos if you know what to look for, understand where the needs and pitfalls can lie, and especially to recognize that “the sun’ll come up tomorrow.” It’s no secret that the entire U.S. oil and gas producing industry is under a lot of financial pressure over the last couple of years.  Many companies had negative cash flow and heavy leverage before prices for everything they produced crashed to historic lows.  The high leverage and negative cash flow was enabling companies to put all the cash they could into the development of new oil, gas, and NGL supply.  When you’re in that situation and you lose 60 percent or so of your revenue because of a price crash, that’s a pretty material event.  Cost cutting in response to the crash, price hedges that delayed the impact, and simply stopping pretty much all of their drilling have combined to hold things together for most producers and midstream companies.  Unfortunately, in some cases that has not been enough.  There has been and continues to be a wave of asset divestitures and bankruptcies across the industry.  As noted above, from January 2015 through today there have been 65 energy bankruptcies (mostly small producers), potentially defaulting on $28 billion in debt.  But not all have been small companies. The lion’s share of total debt exposure, about 75% - has come from the bankruptcies of nine companies: Samson, Sabine, Milagro, Quicksilver, Magnum Hunter, Venoco, Energy XXI, Ultra and Midstates.

    Debt: The Key Factor Connecting Energy and the Economy – Gail Tverberg - There are many who believe that the use of energy is critical to the growth of the economy. In fact, I am among these people. The thing that is not as apparent is that growth in energy consumption is dependent on the growth of debt. Both energy and debt have characteristics that are close to “magic” with respect to the growth of the economy. Economic growth can only take place when growing debt (or a very close substitute, such as company stock) is available to enable the use of energy products.  The reason why debt is important is because energy products enable the creation of many kinds of capital goods, and these goods are often bought with debt. Commercial examples would include metal tools, factories, refineries, pipelines, electricity generation plants, electricity transmission lines, schools, hospitals, roads, gold coins, and commercial vehicles. Consumers also benefit because energy products allow the production of houses and apartments, automobiles, busses, and passenger trains. In a sense, the creation of these capital goods is one form of “energy profit” that is obtained from the consumption of energy. The reason debt is needed is because while energy products can indeed produce a large “energy profit,” this energy profit is spread over many years in the future. In order to actually be able to obtain the benefit of this energy profit in a timeframe where the economy can use it, the financial system needs to bring forward some or all of the energy profit to an earlier timeframe. It is only when businesses can do this, that they have money to pay workers. This time shifting also allows businesses to earn a financial profit themselves. Governments indirectly benefit as well, because they can then tax the higher wages of workers and businesses, so that governmental services can be provided, including paved roads and good schools.

    Should India Go Ahead With Shale Gas Exploration, Or Will It Be Wasted Effort? – Shale is a fine grained sedimentary rock that can be a rich resource for petroleum and natural gas, and as such shale gas is the natural gas that is trapped within shale formations. The Government of India had announced policy guidelines on October 14, 2013, whereby national oil companies ONGC and OIL were to take up shale gas and oil exploration activities in their nominated blocks. While the ultimate success of shale gas exploration efforts in India remains to be seen from the point of view of technological and economic feasibility, the fact remains that very large quantity of water has to be injected for shale gas exploration. Such water will have to be pumped from running river or ground water sources. Depletion of ground water resources can be a scary situation. Given the fact that several parts of India are already suffering from severe water scarcity due to frequent drought like situation and “water war” between the states are becoming very frequent, the question is whether India should go ahead with shale gas exploration at all that would require huge quantity of fresh water and result in large quantity of used waste water that would be chemically contaminated. Should India spend energy, time, efforts and resources in what appears to be a negative project?  India and the USA signed memorandum of understanding for shale gas cooperation during the recent visit of President Barack Obama to India.

    Russian April Oil Output Flat -- Reuters/Rigzone is reporting: Russian oil production edged lower in April: to 10.86 million barrels per day (bpd) from a record 10.91 million in March.  The preliminary statistics show Russia is determined to keep oil output high after the world's leading crude producers failed to clinch a deal to freeze output to support weak crude prices.  The sources said seasonal maintenance at oilfields and refineries brought production down.  Production still running above the 2015 average of 10.73 million bpd, however, which was the highest yearly output for nearly three decades.  Russian oil output has repeatedly surprised on the upside over the past decade, rising from as low as 6 million bpd at the turn of the millennium. Oil experts have repeatedly predicted a decline but it has yet to happen. Most remarkable is the "exactness" of the figures. 10.91 million - 10.86 million = 50,000 bbls or 0.4% and "we" know it's due to "seasonal maintenance at oilfields and refineries. Call me cynical, but 0.4% is a rounding error. I wish I could account for my own monthly spending that closely.

    Declining Production Rates for many of the Top 30 Oil Producing Countries (Video) - People don`t realize the magnitude of all the Oil Producing Countries with declining Production Rates, and trending the wrong direction compared with the consistent and steady rise in Global Oil Demand Growth. The Oil Market is going to 'unbalance' in the opposite direction over the next 12 months, and start heading south fast over the next five years. The US probably needs to increase Oil Production to 12 Million Barrels per day in five years just to keep up with global oil demand, as the US is one of the few countries globally capable of increasing capacity given the resource requirements, political stability, and technological requirements necessary to invest in these capital intensive projects. But it is going to take a much higher price for a sustained duration to get the US all the way to 12 Million Barrels per day, as much of the low hanging fruit has already been taken out of the ground so to speak.

    Iraq says oil exports, revenues increase in April (AP) — Iraq says April crude oil exports have increased by 2.3 percent from the previous month, filling cash-strapped coffers amid an acute economic crisis. Oil Ministry spokesman Assem Jihad, said Sunday that daily oil exports averaged 3.364 million barrels last month, worth $3.343 billion. March exports stood at 3.286 million barrels per day, bringing that month’s revenues to $2.9 billion. Jihad added that last month’s average price was $33.257 per barrel. Iraq’s 2016 budget is based on an expected price of $45 per barrel. Iraq holds the world’s fourth largest oil reserves, and oil revenues make up nearly 95 percent of its budget. Its economy was badly hit by the plunge in oil prices at a time when Baghdad is struggling to combat the Islamic State group.

    Brexit: What could it mean for the North Sea's oil? — In less than two months UK citizens will make one of their biggest political decisions in more than 40 years: whether to remain or leave the EU trading bloc they have been part of since 1973. While an exit from the EU could mark a major milestone for the UK economy — the government fears GDP could suffer by over 6% after 15 years — a leave vote is seen having a limited impact on the UK upstream sector. For a start, North Sea oil has been regulated by London since before the UK joined the EU. Offshore safety laws were tweaked by Brussels in the wake of the 2010 US Gulf of Mexico spill, but their scope is limited. In the short term at least, it is seen as unlikely that there would be any back-peddling on EU legislation which has already been implemented into domestic law. Existing rules, whether originating in Brussels or not, would not fall away on Brexit (British exit from the EU) and it is unlikely that they would simply be repealed. Further down the road the UK would be free set its own offshore rules, which could diverge with EU legislation. In upstream oil and gas, Brexit would not change the key fiscal regime for the North Sea. London already has sovereignty over corporation tax, licensing and other regulations would not be affected in the short term. There is also little sense of urgency over an exit vote in the industry. Any changes to the operating environment would be years down the line..Most multi-national firms support the UK remaining in the EU and Big Oil is also in favor of the status quo. BP’s boss Bob Dudley has said Britain’s role would be “much diminished” if it exits while Shell’s CEO has signed a pro-EU letter saying leaving “would deter investment and threaten jobs.”

    Oil Bulls Bet the Waning U.S. Shale Boom Will Curb Global Glut -- Hedge funds are rooting for a quick collapse of the U.S. shale boom. Money managers turned the most bullish since May as West Texas Intermediate crude climbed to a five-month high on optimism that falling U.S. production and rising fuel demand will trim the global glut. Investors shrugged off an inventory gain that left supplies at the highest since 1929. “The market’s focused not on current oversupply but on predictions of a balance in the second half of the year,” said Mike Wittner, head of oil markets at Societe Generale SA in New York. “Managed money is just adding to the upward momentum.” Speculators’ net-long position in benchmark U.S. crude climbed to the highest since May 12 in the week ended April 26, according to data from the Commodity Futures Trading Commission. Short positions dropped to a 10-month low. WTI futures surged 7.2 percent on the New York Mercantile Exchange in the CFTC report week, and were at $45.19 a barrel as of 10:14 a.m. in New York on Monday. Energy companies responded to the lowest prices since 2003 earlier this year by cutting spending on exploration and developing new fields. The number of active oil rigs fell to 332 last week, the least since November 2009, according to Baker Hughes Inc. The total is down to less than one-fourth of the 2014 peak. U.S. crude production fell to 8.94 million barrels a day in the week ended April 22, the least since October 2014, Energy Information Administration data show. The agency on April 12 cut its average forecast for the whole year to 8.6 million barrels a day. Output from U.S. shale formations will drop in May to the lowest level in almost two years.

    The Age of Cheap Oil and Natural Gas Is Just Beginning - Scientific American --Oil price rises over the past 40 years have been truly spectacular. In constant money, the price of oil rose by almost 900% between 1970 and 2013. This can be compared with a 68% increase for a metals and minerals price index, comprising a commodity group that, like oil, is exhaustible. In our view, it is political rather than economic forces that have shaped the inadequate growth of upstream oil production capacity, the dominant factor behind the sustained upward price push. But we believe the period of excessively high oil prices has come to an end. The international spread of two revolutions will assure much ampler oil supplies, and will deliver prices far below the highs that reigned between the end of 2010 and mid-2014. Beginning less than a decade ago, the shale revolution – a result of technological breakthroughs in horizontal drilling and fracking – has turned the long run declining oil production trends in the US into rises of 88% from 2008 to 2015. Despite current low prices and the damage done to profits, an exceedingly high rate of productivity improvements in this relatively new industry promises to strengthen the competitiveness of shale output even further. A series of environmental problems related to shale exploitation have been identified, most of which are likely to be successfully handled as the infant, “wild west” industry matures and as environmental regulation is introduced and sharpened.Geologically, the US does not stand out in terms of shale resources. A very incomplete global mapping suggests a US shale oil share of no more than 17% of a huge geological wealth, widely geographically spread. Given the mainly non-proprietary shale technology and the many advantages accruing to the producing nations, it is inevitable that the revolution will spread beyond the US.

    Oil Prices Edge Lower As OPEC Nears Record Output -- Forty-two years to the day after the filming of “Jaws” began (in Martha’s Vineyard, Massachusetts), and the bears are smelling blood in the water for a pullback (perhaps driven by this news from OPEC?). With certain countries closed for a bank holiday today (May day! May day!), here are five things to consider in the oil market:

    • 1) With a new month on deck, we get a new onslaught of economic data, and specifically, global manufacturing data. China kicked things off over the weekend, with a below-consensus print on its official PMI manufacturing number, showing marginal expansion at 50.1 (down from 50.2 last month and below the expectation of 50.4).
    • 2) The latest CFTC data show net-longs held by speculators such as hedge funds have increased to their highest level in a year, as short positions have dropped to a 10-month low. Once again, this has been driven by a ‘less bearish’ stance, as opposed to ‘mo’ bullish’ one, with both long and short positions shrinking. Shorts shrank by 6.9 percent, while longs slipped 0.5 percent.
    • 3) We can see in our ClipperData that Argentina is seeing crude oil loadings ramping up, encouraged by a newly-announced government subsidy. As long as international oil prices remain below $47.50/bbl, the government is paying $7.50/bbl to oil exporters.
    • 4) Currency movements continue to push and prod crude prices around. While the euro rallies above 1.15 for the first time since last August, it is joined in strength by the yen. Hence, the U.S. dollar index is weakening again – not surprisingly to the lowest since last August. The weaker dollar continues to backstop crude prices from a more severe sell-off.
    • 5) Finally, Halliburton and Baker Hughes has announced that it is calling off its merger – which was valued at one point at ~$35 billion. Opposition from regulators has been to blame for the breakdown. Halliburton has said that it will pay a $3.5 billion breakup fee to Baker Hughes as part of the conditions of the merger agreement.

    Oil down 3 percent on OPEC output hike, speculative ramp in Brent -  (Reuters) - Oil prices fell about 3 percent on Monday as production from the Organization of the Petroleum Exporting Countries neared all-time peaks and record speculative buying in global benchmark Brent sparked profit-taking on last month's outsized rally. OPEC's crude production climbed in April to 32.64 million barrels per day, close to the highest in recent history, a Reuters survey showed. Iraq's April exports from southern fields increased, as did seaborne exports from Russia, the biggest exporter outside OPEC. Traders also cited market intelligence firm Genscape's report of a 821,969 barrel rise in stockpiles at the Cushing, Oklahoma delivery point for U.S. West Texas Intermediate (WTI) crude futures during the week to April 29. Brent's new front-month contract, July (LCOc1), settled down $1.54, or 3.3 percent, at $45.83 per barrel, hitting a session low at $45.72. WTI (CLc1) closed down $1.14 cents, or 2.5 percent, at $44.78 a barrel, after hitting an intraday low at $44.54. "Our high side parameters for both WTI and Brent have been achieved and we would strongly suggest against purchases anywhere across the energy spectrum, especially off the weekly EIA data,"

    Oil Prices Fall Back as Rally Hits a Ceiling - There are early signs that the three-month rally in oil prices, up from a low of $26 per barrel in February, might be reaching its limits for the time being. Oil prices retreated at the start of the week as OPEC reported higher production levels. Iraq saw oil exports rise slightly, and there are rumors that Saudi Arabia is ramping up production in the wake of the failed Doha agreement. "There are enough supply stories out there to slow or temper any gains," Energy Aspects analyst Richard Mallinson told Reuters. Also, from a technical trading standpoint, oil is facing fierce resistance at $48 to $50 per barrel. The sharp run up in prices is now staring down a “textbook retracement,” Todd Gordon of said on CNBC. Backing that up is the fact that hedge funds and other money managers have amassed a huge pile of net-long bets on crude prices. Whenever positions increase by such a large amount, the chances that the pendulum swings back in the other direction rises. In other words, because oil prices have rallied so quickly, there is a good chance that they will correct and fall back again. . E&P companies are also not sure that the oil price rally is here to stay. When oil prices rose to $45 per barrel, a “flurry of dealing kicked off” according to Reuters, as companies scrambled to lock in prices for the rest of this year and next.  For its part, the Paris-based International Energy Agency believes that the worst is over for oil prices. Provided that the global economy fares well, oil prices should continue their upward trajectory, although in fits and starts. "It may well be the case, but it will depend on how the global economy looks like. In a normal economic environment, we will see the price direction is rather upwards than downwards,” the IEA’s Executive Director Fatih Birol told reporters on the sidelines of the G7 energy ministers’ meeting. "We believe under normal conditions towards the end of this year, second half of this year but latest 2017, markets will rebalance." At the same time, the IEA has consistently warned that today’s cutbacks in investment could set the markets up for a shortage several years from now.

    WTI Crude Jumps Above $44 After Smaller Than Expected Cushing Build -- Notable weakness in oil prices amid growth/demand concerns today, following genscape's Cushing's big build report yesterday, and expectations for continued builds in overall crude and Cushing levels set up trades ahead of API's report with oil below $44 heading in. An overallcrude inventory rise of 1.3mm barrels (almost double the 750k expectation) was not enough to trump a smaller than expected Cushing build of just 382k barrels (1.3m exp) which seemed to please the machines which ripped WTI back above $44 instantly. API:

    • Crude +1.265m (+750k exp)
    • Cushing +382k (+1.3m exp)
    • Gasoline -1.17m
    • Distillates -2.6m

    Why This Year's Oil Rally Might Be for Real - At first blush, the rally in oil to start 2016 bears some resemblance to the rally at the start of last year, which ultimately ended in tears. This time, though, analysts at Citigroup Inc. led by Seth Kleinman say the rally has legs. "The extra year of low prices has finally derailed the supply resilience that defined markets last year," writes Kleinman. A big factor differentiating this year from last year is what the markets are expecting a few months from now. Kleinman and his team point out that 24-month West Texas Intermediate (WTI) futures are currently around $49 a barrel, versus the $65 a barrel seen in the second quarter of 2015. If the futures market doesn't expect the price to rise, producers can't lock in a profit like they might have at $65. If you can't lock in a profit, you can't produce as much and thus the supply should theoretically fall. This has led some analysts and economists to say the futures price is far more important than the current or spot price. "To keep all capital sidelined and curtail investment in shale until the market has rebalanced, we believe prices need to stay lower for longer," "As short cycle shale production is a 12-month investment proposition, producers typically hedge out 9 to 12 months...As a result, the market anchor is shifting to this ‘one-year-ahead’ swap which creates the level of investment to balance future physical markets. It is therefore this forward price that needs to remain below full-cycle costs to curtail investment, not the spot price."   While U.S. supply was a big driver last year, it's time to look at supply outside of America. The analysts note that U.S. production peaked last April, and supply outside the country is now significantly impacted by low prices. This is important because it's much harder for other countries to get drills back online than in the U.S. Due to the nature of shale, once oil prices start to rise, U.S. producers can quickly ramp up production while other countries can't.

    Why Oil Prices Will Likely Drop Below $40 Soon - The 70 percent rise in crude oil prices from the lows of $27.1 per barrel to a high of above $46/b in a matter of three months is being driven by speculative activity—make no mistake about it. The speculators have latched on to every bit of rumour and news to bid prices higher, and this has nothing to do with the real fundamentals. However, speculation can boost prices only to a certain extent in the short-term. After this, the fundamentals take over. The extent of speculation is enormous, though the daily production of oil in the U.S. is around 9 million b/d, the WTI crude oil contract trades more than 100 times the produced quantity, as highlighted in this January 2016 post.. The trading volume is generated by the algo traders, day traders, and scalpers who are in and out of their positions many times a day. Due to their enormous volume, they set the direction of prices in the short-term. However, these traders are neither involved in the production nor do they take physical delivery of oil; they are usually active only in the near-term contracts until expiry; after which the users of oil take deliveries. The oil producers have used the sharp rise to hedge part of their production for 2016 and 2017 as reported by The Wall Street Journal. (Click to enlarge) However, Citi Research points out that the oil producers have hedged only 36 percent of their estimated production for 2016, compared to 50 percent in the previous years. If prices creep up further, the producers will not only hedge more, they are likely to increase production to mend their balance sheet. Pioneer Natural Resources has hedged 50 percent of its expected 2017 output and has conveyed its intention to add five to ten horizontal drilling rigs if prices recover to $50/b, with a positive outlook for oil fundamentals. Earlier on, too many U.S. shale oil drillers had indicated that they will be back at around $50/b levels.

    Is Gasoline Demand the Biggest Red Herring In Oil Markets?  - Gasoline demand is a red herring.  Gasoline demand distracts from the more important subject that there is no fundamental reason for the current oil-price rally. U.S. Gasoline Consumption Has Fallen 2 Million Barrels Per Day Since 2005.  Those who believe that gasoline demand is the fire behind oil’s recent rally confuse production with consumption. They also don’t understand that Americans increased their driving when oil prices were $100 per barrel and continued to travel more miles throughout and despite oil-price highs and lows. A recent Bloomberg article stated, “American gasoline consumption rose to 9.25 million barrels a day in March, an all-time high for the month.”   9.25 million barrels per day is product supplied, the measure of how much gasoline is produced in U.S. refineries. Total wholesale and retail sales is the measure of U.S. consumption and that amount is only 7.76 million barrels per day.  Consumption of gasoline in the U.S. has increased 802 thousand barrels per day (kbpd) since January 2014 but is 1,973 kbpd less than peak consumption in June 2005.  U.S. production of gasoline is 908 kbpd more than the post-Financial Collapse low in January 2012 but is 542 kbpd less than the peak in July 2007 (Figure 1). Meanwhile, net gasoline exports are at record high levels. Exports have increased 1,443 kbpd since June 2005. So, consumption has increased but remains far below pre-2012 levels. Production is again approaching earlier peak levels but most of the increased volume is being exported. The belief that U.S. consumption is approaching record highs is simply not true.  Americans are driving more than ever before. Vehicle miles traveled (VMT) reached an all-time high of 3.15 trillion miles in February 2016 (Figure 2). VMT have increased 97 billion miles per month (3 percent) since the beginning of 2015 and gasoline sales have increased 187 kbpd (2 percent). The rates of increase are not proportional.

    Crude Slumps On Big Inventory Build Despite Biggest Production Plunge In 10 Months -- Overnight exuberance sparked by lower than expected Cushing build reported by API is fading on the heels of June OPEC headlines of no production limits (and rising Saudi production) heading into DOE inventory data. Crude inventories printed a significantly higher than expected 2.78mm build but Cushing saw a smaller than expected build of 243k. Gasoline surprised with a 536k build (API 1.17m draw) and Distillates saw a smaller than API build of 1.26m barrels. The biggest news was the biggest plunge in US production since July 2015, and yet inventories still rose suggesting that fundamentally this is and has been as much a demand story as one of supply (even as OPEC countries are happy to offset declining US output).  DOE:

    • Crude +2.78m (+750k exp)
    • Cushing +243k (+1.3m exp.. Genscape +821k)
    • Gasoline +536k
    • Distillates -1.26m

    Overall inventory levels continue to rise... Production plunged by the most sicne July 2015 (driven by a 16.2% collapse in Alaska production - Lower 48 fell 0.4% Wow) On the all important topic of gasoline, which has been a key bullish driver in recent months, gasoline stocks rose 0.5MM to 241.8MM... ... even as consumption is moving briskly higher, and is now above the 10 year maximum for this time of the year. However, whatever it is that the algos were looking at, the reaction in crude was quick: Crude prices are slipping (focused on the outsize inventory build) since the plunge in production is driven more by Alaska (down 16.2% Wow) as opposed to Lower 48 (down 0.4% WoW)...

    Oil turns lower after bigger-than-forecast U.S. crude build | Reuters: A bigger-than-expected build in U.S. crude inventories to fresh record highs pushed oil markets lower on Wednesday after an early rally over concerns about production cuts in Canada's oil sands region due to a wildfire. U.S. crude stocks, which have been setting record highs since January, grew 2.8 million barrels last week, government data showed, about a million barrels more than analysts' expectations. Gasoline stocks also posted a surprise increase. The data overshadowed concerns over evacuations in the Canadian province of Alberta, where a wildfire raged unchecked through the Canadian city of Fort McMurray in the heart of the country's oil sands region, prompting some companies, including Suncor Energy (SU.TO) and Royal Dutch Shell (RDSa.L), to cut back production. "It's hard to see how it (the wildfire) wouldn't have a broader impact temporarily on pipeline exports," said John Kilduff, a partner at Again Capital Management in New York. "I think it was a legitimate scare that will prove transitory." U.S. crude futures settled at $43.78 a barrel, up 13 cents or 0.30 percent, while Brent crude settled down 35 cents or 0.78 percent at $44.62 a barrel.  Gasoline futures fell 1.17 percent to $1.4925 a gallon, after the EIA data showed a surprise increase of the fuel in storage. The gasoline crack spread 1RBc1-CLc1, a key figure in determining refiner margins, fell by 7.5 percent to $18.28 a barrel in afternoon trading.

    Interview: US oil output could recover in 6-12 months at $60-$65/b, says Birol -  Platts - US oil production could recover if prices rose to $60-$65/b but the impact would not be immediate, International Energy Agency Executive Director Fatih Birol said May 1. In an interview with S&P Global Platts on the sidelines of the G7 Energy Ministerial meeting in Kitakyushu in southwest Japan, Birol said that even if oil prices climbed over $60/b, US crude production would take six to 12 months to rescind the current trend of falling output. "It will take a lot of time to bring the logistics, the rigs, the workers together so we think we may need six months to one year [for] US oil production to come back and see a reverse in the trend of a decline. It will not be from one day to another," he said.Analysts have said that some of the US shale oil production that has fallen in the past year could come back if prices rose sharply above $50/b. But some have remained wary about the resilience of shale oil, as US crude production has fallen steadily in the past year. In its April monthly report, the IEA said US tight oil production fell by as much as 450,000 b/d year on year in March as low oil prices took their toll and rig counts tumbled. In IEA's annual medium-term oil outlook report, published in February, it had forecast US light tight oil production to decline by nearly 600,000 b/d. However Birol said he expected US crude oil imports to increase further, especially with strong oil demand growth bolstered by robust US gasoline demand.

    Oil up as fire curbs Canada output; higher dollar, stockpiles cap gains | Reuters: Oil prices surged on Thursday after a raging wildfire near Canada's oil sands region curbed output that mainly flows to the United States, before settling off their highs as a rebounding dollar and a huge U.S. stockpile build cut into gains. While the oil sands facilities are mostly to the north of the wildfire in city of Fort McMurray in Alberta that is spreading south, as much as a third of Canada's daily crude capacity has been cut and some major pipelines closed after more evacuations were ordered. A stranded Glencore oil cargo in Libya, after a stand-off between eastern and western political factions, also fed the rally at first. Some traders said the market had overreacted to both events. "The Canadian blaze, horrific as it is, is far south of the real producing fields to cause real lasting damage to production there," said John Kilduff, partner at New York energy hedge fund Again Capital. "The Libyan barrels weren't really on the market anyway." Crude oil futures jumped 5 percent before paring gains. Their retreat came as the dollar rose 0.6 percent, its most in three weeks, making greenback-denominated oil costlier for holders of the euro and other currencies. Some traders also pinned oil's weakening to market intelligence firm Genscape's report of a 1.35 million-barrels stockpile build at the Cushing, Oklahoma delivery hub for U.S. crude futures during the week to May 3. The Genscape report came on the heels of U.S. government data showing total crude stockpiles at record highs above 543 million barrels last week.

    500,000 Barrels And $1 Billion In Losses: The True Cost Of Canada’s Wildfire - It took the market over a day to appreciate the fallout from the devastating Canadian wildfire which has led to a state of emergency in Alberta, the evacuation of over 80,000 people in the oil sands gateway city of Fort McMurray, and the destruction of over 1,600 structures. According to insurance industry reports, losses from the fire are approaching $1 billion, and will likely set records for the country. The average cost of a single-family home in the community was recently around CAD$627,000 ($487,000), Aon said, citing data from the local real estate industry, and cited by CNBC. That would suggest losses of CAD$1 billion ($779 million), with more to come as the fire continues to blaze out of control. Such damages would already make the fire the third-costliest insured loss event in Canadian history, the firm said. And now that Canada has had a chance to evaluate the damage from the historic fire, the question on everyone's lips is what will be the near-term impact on oil production as a result of the fire. While initially producers located in the area denied they would be forced to reduce production, this has changed over the past 24 hours. “As more information comes in, it appears that the impact on production of the wildfires in Alberta will be significant,” said analysts at JBC Energy in Austria. Analysts noted that Shell shut its Albian Sands mine and Suncor shut its base plant, while producers Syncrude Canada and Connacher Oil & also reduced output in the region. "Taken together this amounts to some 0.5 million b/d of capacity that is currently offline. Infrastructure is being affected too, with the 560,000 b/d Corridor pipeline shut down and movement along the 140,000 b/d Polaris pipeline significantly curtailed. On top of that, trains are not operating near Fort McMurray, according to the Canadian National Railway,” said the analysts.

    Nigerian Oil Output Plunges to 20-Year Low as Attacks Escalate  |  Rigzone- Nigeria is suffering a worsening bout of oil disruption that has pushed production to the lowest in 20 years, as attacks against facilities in the energy-rich but impoverished nation increase in number and audacity. Chevron Corp. said on Friday it had shut down about 90,000 barrels a day of output following an attack on an offshore platform that serves as a gathering point for production from several fields. Even before that strike on Wednesday night, Nigerian oil production had fallen below 1.7 million barrels a day for the first time since 1994, according to data compiled by Bloomberg. “This is some very, very sophisticated brazen attack,” . “It is a resurgence of militancy. These guys don’t seem to be after money. They just want to frustrate the government.” The fresh round of attacks come after President Muhammadu Buhari vowed to stamp out corruption and oil theft. They echo a campaign waged by the self-proclaimed Movement for the Emancipation of the Niger Delta between 2006 and 2009, which cost the Nigerian government billions of dollars of lost oil revenue. That violence abated after thousands of fighters accepted an amnesty from late-President Umaru Musa Yar’Adua and disarmed, in exchange for monthly payments from the government in some cases. Chevron said it shut down its Okan offshore facility after it was “breached by unknown persons” and had sent “resources to respond to a resulting spill.” The facility, which feeds crude and gas into Escravos, one of the country’s largest export facilities, is jointly owned by the U.S. company and state-owned Nigeria National Petroleum Corp. A group calling itself the Niger Delta Avengers said on its website that it was responsible for the attack. The authenticity of the claim could not be verified by Bloomberg News.

    Oil Prices Lifted By Global Supply Outages -  -- Hark, here are five things to consider on this sixth day of May.

    • 1) Data has been light elsewhere, leaving the spotlight to shine on today’s Nonfarm payrolls report. Job creation last month was considerably lower than expectations, coming in at 160,000 compared to the consensus of 202,000. The unemployment rate remained at 5 percent. Average hourly earnings rose 0.3 percent YoY (good), while the participation rate dropped to 62.8 percent (bad).
    • 2) The fire in Fort McMurray, Canada rages on. It is now estimated that up to 1 million barrels per day of Canadian production has been taken offline. To put the situation in context, Canada produces ~4 million bpd of crude oil, nigh on 80 percent of which is produced in Alberta. Canada is the largest supplier of crude oil to the U.S. sending approx.3million bpd – the vast majority of which moves by pipeline.
    • 3) This piece today highlights how the U.S. Gulf is congested due to rising crude imports; we were quoted in the Wall Street Journal on Wednesday highlighting how there are over 28 million barrels of crude waiting to be discharged due to strong arrivals and weather delays.While we’ve been highlighting of late how Saudi imports have climbed to their highest level in nearly a year, it would be remiss not to shine a light on Iraqi flows, which have reached their highest level since September 2014. Imports reached nearly 280,000 bpd in April, heading to various destinations on the East, West and Gulf Coasts:
    • 4) This chart below is from EIA’s ‘today in energy’, highlighting the breakdown of U.S. crude production and imports by API gravity for 2015. More than 70 percent of domestic production last year is of light crude – oil with an API gravity of over 35:
    • 5) Finally, there has been a militant attack on a Chevron platform off the coast of Nigeria, which has forced the closure of a Chevron oil facility. The militant group, the Niger Delta Avengers, have claimed responsibility for bombing Chevron’s Okan platform in what is being viewed as one of the most serious attacks since 2009.

    OilPrice Intelligence Report: Oil Prices Buoyed As Global Supply Outages Accumulate: This week the oil markets experienced something that used to be common but has become a rarity since the collapse of oil prices almost two years ago: major unexpected supply disruptions. It is not that there have been no disruptions since mid-2014, just that they have not mattered in a world awash in oil. But as the supply and demand curves continue to converge, geopolitical upheaval is moving the needle on oil prices again. The largest disruption, of course, came from Canada, where forest fires have torched large swathes of boreal forest near major oil sands operations (more on that below). Oil prices initially surged on the news in the middle of the week, but fell back following EIA numbers showing an uptick in storage levels. The markets also seemed to digest the fact that Canada’s outage will be temporary, and the world still has problems with oversupply.  Forest fires spread in Alberta, and apocalyptic images spread around the globe, showing blazing fires and black haze engulfing much of Fort McMurray and the surrounding area. An estimated 80,000 people were forcibly evacuated from the city. Several oil sands companies said that they had reduced or shut down oil production in the region. Morgan Stanley estimates that about 400,000 to 550,000 barrels of production has been temporarily affected. Reuters pegs the outage at 640,000 barrels per day, while another estimate says 1 mb/d has been disrupted. The outages probably will not last too long as they have more to do with evacuated personnel than they do with damage to facilities. Nevertheless, the disruptions helped to push up crude prices this week.   Nigerian militants attacked a platform operated by Chevron in the Niger Delta. "Its Okan offshore facility in the Western Niger Delta region was breached by unknown persons," said Chevron in the statement. "The facility is currently shut-in and we are assessing the situation, and have deployed resources to respond to a resulting spill."

    Fire threatens Alberta oil production, helps boost price  --The massive wildfire in the heart of Alberta oil country is helping send crude prices higher. Benchmark U.S. crude rose 34 cents to $44.66 a barrel Friday in New York after earlier dropping by nearly 2 percent. Oil prices often spike when there is concern that production could be curtailed. Canada is the leading exporter of crude oil and natural gas to the United States, according to figures from the Energy Information Administration. Canada sends about 100 million barrels of crude and 240 billion cubic feet of natural gas per month to the U.S. S&P Global Platts, which tracks the energy industry, estimated that up to 820,000 barrels a day of crude oil production were shut in by the fire, although the number could be lower if facilities were operating below peak capacity.“It definitely is helping to boost the prices, although (the increase) is not that high considering the amount of crude that is being threatened,” said Jeff Mower of Platts. He attributed the restrained market reaction to high inventories of crude in the U.S., especially in the Midwest, where much of the Canadian crude goes for refining. Some grades of Canadian crude normally trade at premiums to benchmark U.S. oil while others usually trade at a discount, but all were trading higher Thursday and Friday than earlier in the week, according to Platts. The fire is near the tar sands hub of Fort McMurray, Alberta. So far there are no reports of damage to production facilities. More than 80,000 people have left Fort McMurray, where the fire has torched 1,600 homes and other buildings. Key pipelines were closed Thursday, although a major one reopened Friday morning, according to analysts for Genscape, which monitors the pipelines.

    A 4.5-Million-Barrel Per Day Oil Shortage Looms: Wood Mackenzie -  A report by Wood Mackenzie has warned the world may face a daily oil shortage of 4.5 million barrels by 2035. The amount represents around half of the global consumption estimate of the International Energy Agency (IEA) for 2016. In other words, a true crisis is looming—and for the moment, there is no apparent way around it. The most obvious reason is that energy companies don’t want to spend money on exploration when prices are so disappointingly low. Many of them simply can’t afford to spend on exploration if they want to survive in today’s price environment. Ironically, their long-term survival can only be guaranteed by further exploration spending. A lot of costly projects have been shelved since the summer of 2014 when oil prices started falling, with the initial investments basically written off. Reviving these projects will cost more money. Where this money will come from is unclear—there is no certainty where oil prices are going in the near term, let alone any longer period, and the European Commission today forecasted $41/barrel oil for the rest of this year and just over $45 for 2017.   Layoffs in oil and oilfield services are piling up at speed, well into six-figure territory to date. Cost-cutting has become the daily mantra of oil companies, and it’s easy to see why. Oil dived more than 75 percent over a year and a half – that’s a hard blow to withstand. However, those laid off as part of the E&Ps’ coping mechanism will not sit around and wait to be rehired at the first opportunity. They will, and do, look for work elsewhere. So, the energy industry is facing another shortage that will help determine the ultimate one: a shortage of manpower. The third part of the problem is reserves replacement. New exploration is not just a form of art for art’s sake, or a means of expansion to boost bottom lines. It’s an essential part of the operations of an oil business. Oil is finite, and in order to stay profitable, an oil company needs to maintain a consistent rate of reserves replacement.

    US rig count drops 5 this week to 415, another all-time low --  The number of rigs exploring for oil and natural gas in the U.S. dropped by five this week to 415, another all-time low amid depressed energy prices. A year ago, 894 rigs were active. Houston oilfield services company Baker Hughes Inc. said Friday that 338 rigs sought oil and 86 explored for natural gas. One was listed as miscellaneous. Among major oil- and gas-producing states, Oklahoma declined by three rigs, Louisiana was down two and Alaska, Colorado, North Dakota and Ohio each fell by one.Texas gained three rigs and Utah one. Arkansas, California, Kansas, New Mexico, Pennsylvania, West Virginia and Wyoming were all unchanged. The U.S. rig count peaked at 4,530 in 1981. The previous low of 488 set in 1999 was eclipsed March 11, and has continued to slide.

    Oil drillers dig for the bottom for rig counts | Reuters:  For the past year and a half, a chart of the number of U.S. oil rigs in operation has resembled a death-defying ski slope - but soon it may be time to get back on the chair lift. The U.S. rig count may finally be bottoming out as U.S. oil companies look for oil prices to rally just a bit more, a signal that the time has come to deploy more capital and get production moving again, analysts say. The number of active oil rigs in the United States has fallen for seven consecutive weeks, as of data released Friday. Some believe the rig count will start to rise, as drillers plan to ramp up production if benchmark U.S. crude reaches the trigger level of $50 a barrel. U.S. crude prices hit a year-to-date high of $46.78 last week. In the past two weeks, oil producers including Anadarko Petroleum Corp and Pioneer Natural Resources have cited an improving outlook for oil prices, executives said on calls discussing earnings. Dave Lesar, chief executive of oilfield services provider Halliburton Co, said he believes the rig count has hit a bottom and likely will rise this year. The U.S. rig count generally reacts to prices with a three or four-month lag, so following the nadir for crude in February, it should bottom in the next month, Morgan Stanley's head of energy commodity research Adam Longson said in a report this week. "The same analysis also suggests a notable increase in rig activity may be ahead – potentially reversing much of the decline over the past several months," he wrote.

    Oil Shrugs As US Total Rig Count Continues Crash To Record Lows  -- WTI crude prices are unimpressed at the rig count data today (after spiking off the dismal jobs data). Total rig count fell 5 to 415 - a new record low while oil rigs fell 4 to 328, tracking lagged oil prices to their nadir.  19th weekly decline of the 20 weeks in 2016... will it change as laged oil prices pick up?   With the total count continuing to crash to new record lows...

    Gulf States Tap Bond Markets, $50 Oil a 'Trigger' - Qatar became the latest Gulf Cooperation Council country intending to tap international bond markets with a planned $5 billion bond. If it is launched, it will be the first bond from the country since 2011. With the drop in oil prices, countries across the region are turning to the debt markets. Bloomberg reports that Qatar will run a $13 billion budget deficit in 2016. Last week, Abu Dhabi raised $5 billion from its first bond sale since 2009. Reuters reports that Qatar has already borrowed $5.5 billion through a bank loan concluded in January 2016. Proceeds from this bond will likely be used to  repay this bridge financing. Qatar 10-year yields are currently around 2.45%, according to (For more see: How Petro Economies Are Coping with $40 Oil.)  Devon Energy (DVN) CEO Dave Hager said on its conference call with Wall Street analysts to discuss 1Q16 earnings results that the company could start adding incremental drilling activity if oil prices hit $50 a barrel and could double capital spending if they reach $60, according to Reuters. His comments fall in line with a series of other CEO’s who indicated recently that oil prices around $50 could trigger a renewal of US shale oil production. Investor’s Business Daily reports that Pioneer Resources (PXD) said last week it would add five to ten drilling rigs when oil hits $50 per barrel. This has also led to speculation that companies will attempt to lock in hedges at these higher prices, which will allow them to continue producing even if oil prices fall again. This could result in the oil price falling quite rapidly in H216 since supply would not be scaled back quickly.

    The Saudis Know Something About Oil That Most Of Us Don't -- Rick Newman -- Yahoo!Finance -- Nomination For Geico Rock Of The Year Award -- Another "fluff" article from Yahoo!Finance with an eye-catching headline: The Saudis may know something about oil the rest of us don’t. Considering they produce 10 million bopd and most of the rest of us don't, I would hope the "Saudis" know something about oil that the rest of us don't. What an incredibly lame headline / thesis.  The writer seems to be overly excited about the "Saudis" monetizing their assets. In fact, they will be monetizing less than 5% of the implied value of Saudi Aramco and they are pretty much monetizing downstream assets. This has nothing to do with selling their oil in the ground, except marginally --- and an incredibly tiny margin at that. Why they are doing it is anyone's guess. We've talked about this before. But just the fact that they are doing it speaks volumes. Regardless, Rick Newman, noting that the Saudis probably know something about oil that you and I do not know about has nominated himself for the 2016 Geico Rock of the Year Award. Congratulations.

    Oil's Latest Casualty: Saudi Binladin Group Fires 50,000 Workers, A Quarter Of Its Workforce -- In the latest clear sign that low oil prices are taking their indirect toll not only the US shale sector, leading to billions in capex cuts and hundreds of thousands of lost oil and gas jobs, on Friday Saudi newspaper al-Watan reported that the multinational construction conglomerate Saudi Binladin Gropu (which was founded in 1931 by Sheikh Mohammed bin Laden Sayyid, father of Osama bin Laden who was removed as a shareholder in the business in 1993 and disowned by the family) has laid off 50,000 staff as pressure on the industry rises amid government spending cuts to survive an era of cheap oil. This means that Binladin, one of Saudi Arabia's biggest firms and among the Middle East's largest builders, whose total workforce is around 200,000 just fired a quarter of its total staff.  Reuters adds, citing al-Watan's unnamed sources, that the group has terminated the contracts of 50,000 workers - apparently all foreigners - and given them permanent exit visa to leave the kingdom. However, the workers have refused to leave the country without getting paid as some had not received wages for more than four months. Furthermore, they were protesting in front of the Binladin's offices in the country almost daily, the paper added.  What is most disturbing is that one of the biggest companies in Saudi Arabia if the not the Middle East, has had a series of pay disputes with workers this year as it appears unable to fund payroll. In March, scores of workers gathered outside one of the company's office in Saudi Arabia to demand unpaid wages.

    Hot Air in the Saudi Desert: a Kingdom in Descent?: The Kingdom of Saudi Arabia (KSA) is in financial dire straits. Since the plunge in oil prices, the kingdom has been hemorrhaging money left, right and center. It has provided billions of dollars to shore up counter-revolutionary governments around the Middle East, especially Egypt, it is heavily involved in the Syrian conflict, and is burning through some $6 billion a month waging war on impoverished Yemen. The country needs oil to be $104.6 a barrel, according to the Institute of International Finance, for its budget to break-even; the current price is around $45. Finances have become so tight that from being the second largest importer of armaments worldwide in 2010–14, deputy Crown Prince Mohammed bin Salman(MbS) has said the kingdom aims at sourcing up to 50 percent of arms from local producers to help diversify the economy. It is as much of a pie-in-the-sky idea as turning KSA over the next several years into a knowledge-based economy.What is also indicative of the financial difficulties ahead is that commercial banks have tightened lending to anyone outside of the government, with the state the primary borrower, according to a senior financial officer in Riyadh. “There is a liquidity crunch at the banks, and it is the government that is borrowing, so companies are suffering,” he said.

    Why Saudi Arabia Is Suddenly in Serious Trouble --  What does a country do when it enters a period of crisis? It calls the consulting firm McKinsey. That is precisely what Saudi Arabia did. McKinsey sent its crack analysts to the Kingdom. They returned—in December 2015—with Saudi Arabia Without Oil: The Investment and Productivity Transformation. This report could have been written without a site visit. It carries all the clichés of neo-liberalism: transform the economy from a government-led to a market-led one, cut subsidies and transfer payments, and sell government assets to finance the transition. There is not one hint of the peculiar political economy and cultural context of Saudi Arabia. The report calls for a cut in Saudi Arabia’s public-sector employment and a cut in its three million low-wage foreign workers. But the entire political economy of Saudi Arabia and the culture of its Saudi subjects are reliant upon state employment for the subjects and low-wage subservience from the guest workers. To change these two pillars calls into question the survival of the monarchy. A Saudi Arabia without oil, McKinsey should have honestly said, is a Saudi Arabia without a monarchy. What would the McKinsey transformation produce? “A productivity-led transformation,” wrote the eager analysts, “could enable Saudi Arabia to again double its [Gross Domestic Product] and create as many as six million new Saudi jobs by 2030.” The King’s son, Mohammed Bin Salman (MbS), took McKinsey at its word. He then copied and pasted the report in his own Saudi Vision 2030. Little of Prince MbS’s statement differs from the McKinsey proposal. The eagerness of the Prince shows his lack of experience.

    US-Created System In Iraq Is Collapsing: Protesters Storm Parliament, State of Emergency Declared - Live Webcast -- Less than two years ago, the US set up another puppet government in the mid-east this time in the state of Iraq when following substantial US pressure, on August 14, 2014 then prime minister al-Maliki agreed to stepped down and be replaced with Haider al-Abadi. Today, the regime is in chaos and the system set up in Iraq by the US is collapsing when protesters loyal to popular Shiite cleric Muqtada al-Sadr breached the heavily fortified Green Zone, home to government buildings and foreign embassiesm and stormed the Iraqi parliament, forcing MPs to flee and resulting in a state of emergency being declared for all of Baghdad.  As can be seen in the photo (and live webcast below), hundreds of demonstrators occupied the country's parliament. Video from inside the building showed jubilant crowds waving Iraqi flags and shouting "peaceful, peaceful." Supporters of Sadr, whose fighters once controlled swaths of Baghdad and helped defend the capital from ISIS, have been demonstrating for weeks at the gates of the Green Zone, responding to their leader's call to pressure the government to reform. Cited by NBC, Brig. Gen. Saad Mann, a spokesman for the Iraqi military, said that Iraq security authorities have declared a state of emergency in Baghdad. "All gates that lead to Baghdad are closed. No one is allowed to enter into Baghdad, only those who want to leave Baghdad can do so." "There is no evacuation for the American staff inside the American embassy," he said. A U.S. official who spoke on condition of anonymity said the American Embassy in Baghdad was not being evacuated, contrary to local reports. We expect that should the pro-US government fall, this will promptly change.

    "The Situation In Iraq Has Become Very Dangerous"- Iraq PM Orders Arrests As Mass Protests Continue --Following yesterday's dramatic escalation in Iraq's suddenly very unstable political situation, when Beghdad was put under a state of emergency after supporters of popular Shiite cleric Muqtada al-Sadr breached the heavily fortified Green Zone and stormed both the parliament and government offices - an event which we dubbed the collapse of the US-created political system in Iraq - the situation has continued to deteriorate.  Protesters reached the cabinet headquarters inside the Green Zone, storming the general secretariat of the cabinet building, al-Sumaria reported, citing security officials. Security has been boosted around the central bank, the Interior Ministry said in an e-mailed statement. The United Nations Assistance Mission for Iraq said it’s “gravely concerned” by Saturday’s developments and urged political leaders to work together to restore security in the country. “The situation in Iraq has become very dangerous,” said Wathiq al-Hashimi, a Baghdad-based political analyst said cited by Bloomberg. “No one will be able to control thousands of angry protesters while the rest of residents in Baghdad are in panic and living in real fear.”  Iraq has been mired in a political crisis for months, hindering the government's ability to combat ISIS, which still controls much of the country's north and west, or address a financial crisis largely prompted by the plunge in global oil prices.  Sadr and his supporters want to reform the political system put in place following the U.S.-led invasion in 2003, in which entrenched political blocs representing the country's Shiites, Sunnis and Kurds rely on patronage, resulting in widespread corruption and poor public services. The major blocs have until now stymied the reform attempts of Prime Minister Haider al-Abadi.

    Iraq Cleric Moqtada al-Sadr’s Followers Trigger Political Crisis - WSJ: Followers of a firebrand Shiite cleric who has long tormented the U.S. have triggered a crisis that threatens Iraq’s political stability and hampers its efforts to fight Islamic State extremists. Protesters loyal to cleric Moqtada al-Sadr stormed Baghdad’s government seat, occupied the Iraqi parliament and even attacked a senior lawmaker. They withdrew Sunday, but a committee of Sadr supporters organizing the protests said demonstrators would return after an Islamic religious holiday which ends Tuesday, according to Iraqi state television. The turmoil thrust Iraq’s fragile government into one of the biggest political crises of its young democracy at an important moment for U.S. officials who see stability in Baghdad as essential to the fight against Islamic State. Vice President Joe Biden visited Iraq last week, the highest ranking U.S. official to do so since 2011.  Islamic State claimed responsibility for multiple suicide attacks in the Baghdad area over the weekend that left dozens of people dead. The latest attack came on Sunday in the city of Samawah, south of Baghdad, and killed at least 30 people.  The Iraqi military has recently gained some momentum in the fight against the extremists. But Iraqi officials were forced to call back troops from the front lines in Anbar Province in April to protect the capital amid protesters’ threats, as U.S.-backed Iraqi forces are preparing for a campaign to recapture Iraq’s second-largest city, Mosul.  Iran-backed militia groups aligned with Iraq’s government announced late Sunday night that they are deploying fighters in Baghdad to help secure the city.

    Spontaneous Protests in Baghdad Green Zone Show Cracks in the Security Apparatus  Yves here. Readers may recall that we flagged the incursion of protestors into Iraq’s Green Zone, where both the US Embassy and Iraq’s Parliament had safely sat, well protected from citizens. The initial reports were that the occupiers appear to have been let in and were peaceful (only one politician injured and some damage to furniture in the Parliament). Most important, they did not want to overthrow the government but wanted an end to corruption, seeing it as necessary to get improved delivery of services to the population.  Lambert highlighted the minimal mainstream media coverage of this development and the lack of crisp talking points from sources close to the Administration. And the story appears to have dropped from the news radar. This Real News Network segment gives the background on the protests. They’ve been underway for some time, are secular in nature, and to a significant degree, cross sectarian and ethnic lines.

    Iraq crisis could impact India as oil prices claw back over $40 - Times of India: (IANS) The latest political crisis in Iraq is fraught with implications for India, which imports over half its oil from the volatile Middle East region, even as data on Monday showed the price of the Indian basket of crude oils has risen to nearly $45 a barrel. A state of emergency was declared in Baghdad on Saturday after hundreds of supporters of Iraqi Shia cleric Moqtada al-Sadr stormed the Iraqi capital's Green Zone and entered the parliament building. Sadr has been demanding that parliament vote in a new technocratic council of ministers. Moreover, Islamic State claimed responsibility for multiple suicide attacks in the Baghdad area over the weekend that left dozens of people dead.Low oil prices have severely hit Iraq's economy and Islamic State controls about a quarter of its territory. India's oil imports from the volatile Middle East region rose to 59 percent in the first 11 months of the last fiscal, reversing a previous decline, parliament was told last week. The increase was mainly on account of the rise in imports from Iraq, which saw the biggest jump from around 24.5 MT in each of the past three years, to 32.97 MT during April-February 2015-16. Petroleum Minister Dharmendra Pradhan told the Lok Sabha in a written reply that India imported 109.09 million tonnes of crude from 10 countries in the Middle East between April 2015 and February 2016, which was 59.22 percent of the total oil imports during the period. The Indian basket, comprising 73 percent sour-grade Dubai and Oman crudes, and the balance in sweet-grade Brent, rose to $44.59 on Friday for a barrel of nearly 160 litres, as per data compiled by the state-run Petroleum Planning and Analysis Cell.

    Russian orchestra performs amid Syria's ruins as airstrike nearby kills 28 -- A renowned Russian conductor led a triumphant concert Thursday in the ruins of the ancient Syrian city of Palmyra, once terrorized by the Islamic State group, even as an airstrike on a refugee camp in the north left at least 28 people dead and dozens wounded, including many children. The performance in the same ancient amphitheater where militants from the Islamic State, also known as ISIS, ISIL, or Daesh, carried out widely publicized killings — and called "A Prayer for Palmyra" — was intended to send a message that Russia's presence in Syria would bring hope and stability. But even as strains of Bach and Sergei Prokofiev's First Symphony echoed through the Roman theater packed with an audience that included Russian servicemen, Syrian government ministers, and children in colorful native dress, the war raged elsewhere. Images posted on social media of the aftermath of the airstrike that tore through the Sarmada camp in rebel-held territory close to the border with Turkey showed tents burned to the ground, charred bodies, and bloodied women and children being loaded onto a pickup truck.

    Caught On Tape: Raw Footage Shows The Moment A Missile Hits Aleppo Hospital -- Sadly, a typical consequence of war is that innocent "collateral damage" lives are lost. The civil war in Syria is no different, as over the past week four medical facilities were hit with missiles from fighter jets taking out their targets from the skies, pushing the civilian death toll even higher. One of the targets that got hit last week (during a truce nonetheless) was a pediatric hospital in Aleppo that was supported by both Doctors Without Borders and the International Red Cross. Recovered cctv footage captures the moments before, during, and after the hospital took a direct hit. The video also shows what is said to the be the last pediatrician in the city walking the halls moments before the missile hit, killing him and an estimated 50 others. U.S. Secretary of State John Kerry condemned the attack, immediately blaming the Syrian government. Predictably everyone involved in the region has denied having anything to do with the strike. As a reminder, the U.S. isn't innocent of horrendous events such as this, as just last October the U.S. repeatedly bombed a compound run by the humanitarian organization Doctors Without Borders, killing at least 30 people. Here is the raw footage of the bombing last week via ABC news. In the final seconds of the video, a person emerges carrying what appears to be a baby, driving home the realities of what can happen when nations meddle in others affairs.

    The World's Largest Shipping Company Is Already Preparing For The Next Oil Crash -- It was almost a year ago, when having tumbled in early 2015, oil proceeded to rebound strongly into the summer, where it traded at about $60 for three months, before US production resumed resulting in the next big leg lower which culminated with this's February drop to 13 year lows. At that point a comparable rebound to last year materialized, and just like last year,  the pundits have emerged claiming that there will be no further downside. Incidentally, we covered this comparison previously in "For Oil 2016 Is Setting Up To Be A Rerun Of Last Year." However, unlike last year, not everyone is (wrongly) convinced that this time the rebound in oil will be sustainable. One very prominent company that is already preparing for the next oil crash is the world's largest shipping company, Danish conglomerate A.P. Moeller-Maersk A/S (also known as Maersk).   Maersk is perhaps best known for its pragmatic, even downright bearish outlook on the global economy. Recall that three months ago, the company admitted in its annual report that "demand for transportation of goods was significantly lower than expected, especially in the emerging markets as well as the Group’s key Europe trades, where the impact was further accelerated by de-stocking of the high inventory levels."  The company's CEO, Nils Andersen, told the FT in February that "it is worse than in 2008.The oil price is as low as its lowest point in 2008-09 and has stayed there for a long time and doesn’t look like going up soon. Freight rates are lower. The external conditions are much worse but we are better prepared." It is the risk that the current 60% rebound in oil prices from 2016 lows is just another temporary bounce, that has forced Maersk to start preparing for the next oil crash.The company's CEO is confident that since the world keeps producing more petroleum than it can consume, it is "adapting its cost base to prepare for the risk of lower crude prices"according to Bloomberg.

    Asian oil derivatives volumes on CME surge 19.2% on month in April - Oil | Platts News Article & Story: Asian oil derivative clearing and trading activity on the CME Group's platforms saw a 19.2% month on month rise to 34,647 transactions in April, according to data from the exchange Wednesday. The largest gains were in its Dubai crude derivative offerings, which tripled to 1,225 trades in April from 299 in March. This was followed by an 80.6% month on month rise in middle distillate trading and clearing activity to 15,647 contracts. The biggest gains within this part of the barrel were in gasoil derivatives, which more than doubled to 14,292 in April. Both jet (36.4% month on month fall to 550), and regrade (21.5% fall to just 805) hedging activity dropped sharply following the close of the North Asian winter heating demand season.  The largest month-on-month slide was in the residual fuels segment, which recorded a 22.2% fall over the course of April to 7,910 transactions. 380 CST high sulfur fuel oil swaps fell 23.2% month on month to 6,165 in April, while 180 CST HSFO instruments edged up 3.2% over the same period to 1,461.

    Why China Is Really Dictating the Oil Supply Glut | Ship tracking data from Bloomberg shows that 83 supertankers carrying around 166 million barrels of oil are headed to China, which has stockpiled an impressive 787,000 barrels a day in the first quarter of 2016—the highest stockpiling rate since 2014. While the world was speculating about oil prices plunging to $20 and $10 per barrel, China was busy stockpiling its reserves. The chart below shows an increase in imports as crude prices collapsed. Since the beginning of this year, China has imported a record quantity of oil. Back in January 2015, Reuters had reported that China planned to increase its strategic petroleum reserves (SPR) from 30 days to 90 days. In January 2016, it was revealed that China was building underground storage to complement its above-ground storage tanks. The Chinese urgency points to two things. China believes that crude oil prices will not remain at the current levels for long, and that a disruption is possible due to geopolitical reasons, which can propel oil prices higher. As a net importer of crude, it is protecting itself against a black swan event and using the current low prices to fill its tanks. The filled up tanks will ensure a steady supply of crude for at least three months in case of a disruption.  Does the record buying spree by the Chinese indicate a bottom in crude oil prices? That is difficult to conclude, but it does put a floor beneath the current lows, because in all likelihood, China will resume its record buying and top up its SPR if prices tank.

    China Looking To Secure Oil Supplies By Buying Stake In Rosneft - Russian Deputy Energy Minister Alexei Teksler said a couple of weeks ago that Chinese state giant CNPC is interested in participating in the partial privatization of Russia’s top oil company, Rosneft.  Rumors that companies from the Chinese energy sector will take part in the Kremlin’s privatization plan for 2016 first started emerging late last year when the plan was announced. Yet oil prices fell so low that there were doubts as to whether such a deal or deals are still viable. Prices are now recovering and some analysts believe that this is just the start of a longer, massive rally that will eventually see oil trade in three-digit territory again. The fundamental reason: less investment in new E&P projects will inevitably tighten supply and once it does, the energy sector won’t have the manpower and equipment to expand it. The Chinese, however, may be a step ahead of the rest of the world, if indeed CNPC takes part in Rosneft’s IPO, as it reportedly confirmed it would.China needs secure long-term oil supply. Forget about the much talked-about switch from an industry-based to a service-based economy. Service-based economies also need fuel (a lot of it) and even with a blooming solar power sector, China remains a huge oil consumer, which is unlikely to change anytime soon.

    China April official factory activity PMI expands, but at slower pace: Activity in China's manufacturing sector expanded for the second month in a row in April, but only marginally, an official survey showed on Sunday, raising doubts about the sustainability of a recent pick-up in the world's second-largest economy. The official Purchasing Managers' Index (PMI) rose to 50.1 in April, easing from March's 50.2 and barely above the 50-point mark that separates expansion in activity from contraction. Analysts polled by Reuters had predicted the reading would improve to 50.4, after upbeat March data fueled hopes that the country's prolonged economic slowdown was easing. The findings were "a little bit disappointing," Zhou Hao, senior emerging market economist at Commerzbank in Singapore, wrote in a note. "To some extent, this hints that recent China enthusiasm has been a bit overpriced and the data improvement in March is short-lived." While production expanded modestly (52.2) and at nearly the same pace as in March, growth in domestic and export orders faded slightly, though remaining in positive territory.

    China manufacturing PMI unexpectedly slips as stimulus fades - —An official gauge of factory activity in China edged down in April, signaling a modest weakening of momentum for the world’s second-largest economy despite easy-credit policies and a stronger real-estate market. China’s official manufacturing purchasing managers index, a key gauge of factory activity, fell to 50.1 in April from 50.2 in March, the National Bureau of Statistics said Sunday. This was below a median forecast of 50.4 by 12 economists polled by The Wall Street Journal. But the indicator remained above the 50 mark that signals expansion for the second straight month, after a stretch of seven months in contraction below that level. China’s official nonmanufacturing PMI, also released Sunday, fell to 53.5 from 53.8 in March. The unexpected, if modest, drop in activity suggested that government efforts to bolster growth by expanding credit are having a short-lived effect. “This really highlights the fact that the stimulus we saw in the first quarter has a limited time frame,” said IG Markets analyst Angus Nicholson. “The fact that the PMI is already weakening shows the easy-credit policies are having far less efficacy in driving growth.” Credit growth rose sharply in the first quarter and Beijing frontloaded 2016 infrastructure spending in a bid to bolster momentum. The economy grew 6.7% in the first quarter, its slowest pace since 2009. The central bank is unlikely to ease monetary policy in response to Sunday’s weaker data, economists said, given that factory output continues to expand while debt levels are still rising. Corporate debt, now an estimated 160% of gross domestic product, has grown rapidly over the past half-decade partly due to increased borrowing to ward off the financial crisis.

    China Caixin manufacturing PMI contracts in April: Activity in China's manufacturing sector unexpectedly declined further in April, a private survey showed Tuesday, reviving doubts over the health of the world's second-largest economy. The Caixin Manufacturing Purchasing Managers' Index (PMI) fell to 49.4 in April from 49.7 in March, according to Markit, which compiles the index. A reading above 50 indicates expansion; one below indicates contraction. Economists polled by Reuters had forecast a reading of 49.9. The Caixin PMI, which focuses on smaller and medium-sized enterprises, was last in expansionary territory in February 2015. The official PMI, which targets larger companies, printed at 50.2 in April, the second successive month of expansion, figures released over the weekend showed.The survey findings follow recent economic data that appeared to suggest that China's economy was slowly regaining its poise after a torrid 12 months. China's exports rose at their fastest clip in a year in March, while industrial profits also picked up in the first quarter. A flurry of rate cuts and easing of reserve requirement have helped bolster sentiment, while the capital outflows that had unnerved sentiment at the start of the year have slowed. The Caixin survey, however, cast a more somber picture. Respondents reported stagnant new orders, while new export work fell for a fifth month running. Companies shed staff as client demand was muted.

    China’s automation push undercuts US politician promises to ‘bring the jobs back’ with tougher trade deals -- The Financial Times is running a major package of stories this week on automation, from AI to robotics.  One I wanted to highlight is this: “China’s robot revolution.” Here’s a portion: Across the manufacturing belt that hugs China’s southern coastline, thousands of factories like Chen’s are turning to automation in a government-backed, robot-driven industrial revolution the likes of which the world has never seen. Since 2013, China has bought more industrial robots each year than any other country, including high-tech manufacturing giants such as Germany, Japan and South Korea. By the end of this year, China will overtake Japan to be the world’s biggest operator of industrial robots, according to the International Federation of Robotics (IFR), an industry lobby group. The pace of disruption in China is “unique in the history of robots,”  In recent years, China’s central planners have been promoting automation as a way to fill the labour gap. They have promised generous subsidies — to be doled out by local governments — to smooth the way for Chinese companies both to use and build robots. In 2014, President Xi Jinping called for a “robot revolution” that would transform first China, and then the world. “Our country will be the biggest market for robots,” he said in a speech to the Chinese Academy of Sciences, “but can our technology and manufacturing capacity cope with the competition? Not only do we need to upgrade our robots, we also need to capture markets in many places.”

    China Lending Inflates Real Estate, Stocks, Even Egg Futures - — China is pouring hundreds of billions of dollars into its economy in a new effort to support growth. Some of it is going into roads and bridges and other big projects that will keep the economy humming.And some of it is going into eggs.China’s latest lending deluge has sent money sloshing into unexpected parts of the economy. That includes a financial market in Dalian where investors can place bets on the future productivity of the country’s hens.Egg futures have surged by as much as one-third since March, the sort of move that would be justified if investors believed China’s chicken flocks were headed for an unfortunate fate.But the market’s usual participants say the flocks are fine. In fact, the actual price of eggs in the country’s markets has fallen from a year ago, according to government statistics.The reason for the unusual jump in egg futures, they say, is China’s tendency to experience investment bubbles when the government steps up spending and lending. China’s previous efforts to bolster growth unexpectedly sent money into real estate and the stock market — markets that had unexplained rises followed by striking drops.

    Myth of China As Exporter Turned Domestic Consumer - If a business could foresee that it would have a declining consumer base (declining number of total potential customers), that would likely be a pretty good reason for serious concern and significantly lower growth expectations.  However, when it comes to China, the shrinkage of it's under 65yr/old population and particularly the 20-59yr/old adult population declines is somehow coinciding with the story of China transitioning from an export to a domestic consumption based economy?!?  To wit, with a declining population of 0-64yr/olds and likewise 20-59yr/old adults, China will transition from exporter to consumer (while all those grown "one child" policy adults support their 65+yr/old parents) and still grow 6%-7% annually?  Inquiring minds wonder how it's possible a declining base of consumers would consume more???  And in a word...CREDIT!!!  And, the growth of credit in China has simply gone, to use the technical term, "apeshit" or parabolic or feel free to substitute any of the terms meant to indicate highly unsustainable and likely ruinous.  The Details: Each bar in the chart below represents annual growth or decline of the Chinese adult population and the blue line is a 4 period moving average of the population change.  From 1973 through 2008, an additional 12.5 million Chinese adults entered the Chinese economy every year.  That meant 12.5 million more consumers, home buyers, car buyers, potential job seekers, etc. etc.  But since 2008, annual population growth has decelerated by 95% and by 2017 or 2018 begins a long decline.  Every year from 2018, the adult 20-59yr/old population of China will decline by millions for at least 2 decades and likely far longer.  This is no forecast or "gloom n doom" fantasy, simply counting the # of people born and tracking them through the population (plus, China has net emigration).  All this means the charts below likely show a best case scenario although the population data could be lower if greater emigration occurs or a higher mortality rate ensues due to illness, environmental, or global disturbances (aka, war).

    Beijing taps emergency pork reserves The spot price for a kilo of pork in China has surpassed even a 2011 peak as a shortage of breeding sows and growing domestic consumption drive record imports of Chinese consumers’ favourite meat from foreign farms. Spot pork prices in China rose to Rmb20.9/kg on Tuesday, where they remained on Wednesday up 4.5 per cent from the previous week’s starting level of Rmb20 and up 24.4 per cent for the year to date, writes Hudson Lockett. But the pocketbooks of China’s pork-hungry populace are feeling even more strain. The average wholesale price for a kilo of pork in China rose to Rmb26.45 for the week ended Friday, up 0.8 per cent from a week prior, according to the Ministry of Agriculture. Even that was short of the average price for pork belly meat in 50 Chinese cities compiled by the National Bureau of Statistics, which had risen to a record Rmb32.12 as of the week of April 15. Little wonder then that the Beijing municipal government announced on Tuesday it would for the first time release 3.05m kilograms of frozen pork reserve into the capital’s market between Thursday and July 4 in an attempt to lower prices it said had risen 50.6 per cent month on month, according to state news agency Xinhua. The same dispatch stated Beijing would provide subsidies of up to Rmb9 per kilogram of pork sold to encourage vendors to lower prices. Subsidies will also be used to encourage 20 per cent more pigs to be slaughtered during the same period. Policymakers have good reason to want to keep pork prices under control: China produces and consumes more pork than any other country on Earth, and the meat factors heavily into the CPI basket used to calculate overall consumer inflation. In March the official consumer price index rose 2.3 per cent year on year, with a rise of 28.4 per cent by pork prices during the period contributing 0.64 percentage points.

    China’s spiraling pork prices and global markets | Reuters: The forces that prompted China to tap its strategic pork reserve may explain more than just the price of pig in Beijing. They might also, when it comes to it, help to explain much else that’s happened in financial markets in recent months, from a rebound in the price of oil to a recovery in riskier assets. The Beijing municipal government moved this week to begin what it said was an unprecedented 3-million-kilo (6.6-millio- pound) release of pork from frozen reserves, in an effort to ease record prices, up about 50 percent over a year. China keeps a reserve of frozen pork against just such events. While there are supply issues in China’s pork industry, a recent vertiginous rise in prices has coincided with a massive injection of credit into the economy by authorities. Pork has also risen alongside prices and trading in other more financialized commodities. The price of iron ore is up by more than 50 percent year-to-date. Zhengzhou’s cotton market traded enough bales in one day last month to make everyone on earth a new pair of blue jeans. This has all happened as China, fearful of a slowdown in its economy, engineered a huge increase in credit and lending. Total social financing, the broadest measure of credit in the economy, rose 37.4 percent in the first quarter from the same period a year earlier. Bank credit was up 25.4 percent year-on-year in March. It seems likely that some of this money is driving food and other commodity price rises. Egg futures on Dalien’s commodity market have spiked by as much as a third since November, a price rise not reflected in end-consumer prices, at least not yet. And there is evidence of both speculative froth in some property markets and of an increase in infrastructure investment, neither of which seems warranted by fundamental demand.

    HSBC research: China’s rapidly ageing population is an economic ticking timebomb -- China's population is the most "likely to get old long before it becomes rich" and the country's rapidly aging population could be hugely damaging to the country's economic growth, according to new research from HSBC. HSBC global economist James Pomeroy argues, in the latest in a series of reports on demographics in the world's emerging markets, that while there are several major emerging economies — including Russia and many Eastern European nations — that could face big problems thanks to an ageing population, China is the most likely to take a big hit. Here's Pomeroy: Ageing populations are likely to drag down potential growth and government finances may become more strained. Just when these countries need to spend more on reforms and infrastructure, funds may have to be diverted to provide pensions and healthcare. Pomeroy adds: China is the most obvious case of an emerging market with poor demographics, with the working-age population set to shrink from 2016 onwards. China's median age is expected to rise above 40 in 2024, but despite a fast pace of growth, the country may not become "rich" until around the mid-2030s. The same fate looks set to befall Russia and much of Eastern Europe. The problem for these countries is that the slowdown in fertility rates has happened long before GDP per capita has crossed into "wealthy" territory (chart 4), meaning that slow population growth has become engrained. Here's the chart:

    Chinese cities dive back into debt to fuel growth even as defaults rise - (Reuters) - With a nod from Beijing, China's local governments have embarked on a massive new round of off-balance sheet debt financing, underpinning a fragile pick up in the economy but raising red flags on financial stability. The increased borrowing for an economy already swimming in debt adds to concerns about growing bubbles in certain major asset classes, such as real estate and commodities, and a bond market seeing a rise in corporate defaults. Economists say increasing public sector investment - most of it financed locally with debt - is behind improvements in China's economy. First-quarter GDP rose at the weakest pace in seven years, but other data suggested growth was picking up in March. "With new infrastructure projects effectively all funded by debt and more consumer mortgages, the leverage problem and risks on the financial sector are rising," Credit Suisse analysts wrote in a research report. Local government financing vehicles (LGFVs), which Chinese cities use to circumvent official spending limits, raised at least 538 billion yuan ($83 billion) in bonds in the first quarter, up 178 percent from a year earlier and the highest quarterly issuance since June 2014, Everbright Securities said, quoting figures from privately held financial data provider WIND. Issuance in March alone was a monthly record of 287 billion yuan ($44.3 billion). China's planning agency, the National Development and Reform Commission, declined to comment on the sharp rise in LGFV issuance.

    Listed Chinese companies suffer first profit drop since 2008- Nikkei Asian Review: -- Publicly traded companies in China saw net profit dip in 2015 for the first time since the global financial crisis hit in 2008, as a wide range of businesses from resources to home appliances struggled amid the country's economic slowdown. The combined net profit for 2,862 listed companies fell 1.1% from 2014 to 2.47 trillion yuan ($382 billion), based on comparable data from financial information firm Shanghai DZH. Aggregate sales declined 2.1% to 29.47 trillion yuan. Publicly traded corporations in China are required to publish results within four months of their fiscal year-end in December. Excluding banks and brokerages, net profit dropped 15.7% to 922.2 billion yuan. These figures reflect factors such as retroactive changes made by companies on their earnings and do not match data compiled by government-affiliated publications in the past. Steel and other resource-related corporations continued to struggle in 2015, burdened by excess staff and output capacity. Steel titans such as Baoshan Iron & Steel all saw net losses or significant profit declines. Chongqing Iron & Steel ended up with a net loss of nearly 6 billion yuan. With the company's capital ratio fallen to just slightly over 10%, the Chongqing municipal government has been forced to consider rehabilitation measures. Many companies buoyed earnings by unloading assets. Aluminum Corp. of China turned a 16.2 billion yuan net loss in 2014 into a profit last year, largely thanks to selling a subsidiary and other assets for over 5 billion yuan. There has been a slew of obscure financial arrangements, mainly among state-run enterprises. China Petroleum & Chemical and PetroChina have received nearly 10 billion yuan combined in government assistance.

    Warnings mount on world’s corporate debt, China crisis - Corporate debt has reached extreme levels across much of the world and now far exceeds the pre-Lehman financial bubble by a host of measures, the global banking watchdog has warned in a deeply-disturbing report. “As the credit cycle ages, following years of record-setting bond issuance, there are growing concerns about signs of stress in corporate balance sheets,” said the Institute of International Finance in Washington. The body flagged a double threat: a five-fold rise in company debt to $25 trillion in emerging markets over the past decade; and record junk bond issuance in US and Europe, along with shockingly-irresponsible levels of US borrowing to buy back shares and pay dividends. The warning came as the Hong Kong Monetary Authority aired its own grim concerns that the global system is dangerously over-stretched after years of easy money, with Asia’s entire financial edifice potentially in danger. “We are far from out of the woods, given new risks and headwinds on multiple fronts,” said Howard Lee, the body’s executive director. "There is the threat of a disorderly pullback in capital out of the region." Credit: IIF Mr Lee said the exodus of capital at the beginning of the year – mostly driven by fears of a Chinese devaluation – may be a foretaste of what is to come. “The next episode may be even more damaging given the financial imbalances built up over the past few years,” he told a forum in Hong Kong. “While the region has become a key driver of growth globally, this has come at the price of a pretty dramatic rise in debt fueled by easy global liquidity," he said. "As we have witnessed in advanced economies, disorderly deleveraging may weigh heavily on the economy and may even risk the financial system." The IIF said the ratio of net debt to earnings (EBITDA) for US companies has doubled to 1.4 from 0.7 at the top of the subprime bubble in 2007.  Firms continued to borrow as if there were no tomorrow even after their profits began to crumble in 2014.

    China warns economic analysts to stop being so pessimistic - — Chinese authorities are training their sights on a new set of targets: economists, analysts and business reporters with gloomy views on the country’s economy. Securities regulators, media censors and other government officials have issued verbal warnings to commentators whose public remarks on the economy are out of step with the government’s upbeat statements, according to government officials and commentators with knowledge of the matter. The stepped-up censorship, many inside and outside the ruling Communist Party say, represents an effort by China’s leadership to quell growing concerns about the country’s economic prospects as it experiences a prolonged slowdown in growth. As more citizens try to take money out of the country, officials say, regulators and censors are trying to foster an environment of what party officials have dubbed “zhengnengliang,” or “positive energy.” In the past, Chinese authorities have targeted mainly political dissidents while commentary about the economy and reporting on business has been left relatively unfettered in China in a tacit acknowledgment that a freer flow of information serves economic vitality. But Beijing has moved to reassert control of the country’s economic story line after policy stumbles that contributed to selloffs in China’s stock markets and its currency last year fed doubts among investors about the government’s ability to navigate the slowdown.

    China cuts yuan fix in biggest move since devaluation - Channel NewsAsia: China's central bank on Wednesday (May 4) fixed the yuan currency nearly 0.60 percent weaker against the US dollar, according to the national foreign exchange market, the biggest downward move since devaluing the unit in August last year. The People's Bank of China set the value of the yuan - also known as the renminbi (RMB) - at 6.4943 to US$1.0, weakening 0.59 per cent from the fix of 6.4565 the previous day, according to data from the Foreign Exchange Trade System. China only allows the yuan to rise or fall two percent on either side of the daily fix, one of the ways it maintains control over the currency. Analysts said the weaker fix was in line with strength in the US dollar on Tuesday, as financial authorities seek to make trading more market oriented. The dollar rose against most of its peers Tuesday as global growth worries swept equity markets and pushed oil prices lower, boosting demand for the safe-haven US currency. "To maintain a stable currency market, the RMB weakened accordingly," Liu Xuezhi, an analyst at the Bank of Communications, told AFP. Wednesday's cut came after China on Friday raised the yuan-dollar exchange rate by 0.56 percent from the previous day, the biggest increase in almost 11 years.

    Worst.Month.Ever... Hong Kong Retail Sales Collapse In March -- A spending survey done by MasterCard shows that March retail sales in Hong Kong declined at the worst rate in the history of the survey. According to the latest MasterCard SpendingPulse Hong Kong Report, "Overall retail sales in Hong Kong contracted 18.5% year-on-year, reflecting the deepest decline since 2014." Only grocery outperformed overall retail sales in March, while clothing and jewellery sales dropped by more than total retail sales. After the dismal March, Q1 retail sales declined 11.7% when compared to the same period in 2015. "The early Easter holiday did nothing to stimulate spending as consumer confidence remains subdued." said Sarah Quinlan, Senior VP of market insights for MasterCard advisors. "Overall our outlook for Hong Kong retail sales remains weak as the slowdown in spending from Mainland China continues to negatively impact the Hong Kong retail economy." Quinlan added.

    Japan final April manufacturing PMI hits lowest since Jan 2013 after Kumamoto earthquake | Reuters: Japanese manufacturing activity contracted in April at the fastest pace in more than three years and output fell the most in two years, a final survey showed on Monday, after earthquakes halted production in the southern manufacturing hub of Kumamoto. The Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 48.2 in April, which was above the preliminary reading of 48.0 but still below a final 49.1 in March. The index remained below the 50 threshold that separates contraction from expansion for the second consecutive month and showed activity contracted the most since January 2013. The output component of the PMI index also fell to 47.8, versus a flash reading of 47.9 a final 49.8 in the previous month to show the fastest contraction since April 2014. On April 14, the first of several earthquakes struck Kumamoto, which damaged houses, caused landslides and halted production at electronics and car parts factories in the area. Many companies have resumed production in Kumamoto, and economists say if this trend continues then Japan should be able to quickly shake off the impact on factory output.

    Sluggish factory activity sets global tone for second quarter | Reuters: Asian factories barely grew in April and those in the euro zone did little better despite heavy discounting, setting a sluggish tone on Monday for the global economy in the second quarter. Japanese manufacturing activity shrank last month at the fastest pace in more than three years as major earthquakes disrupted production, while the former bright spot of India sank to a four-month trough and growth in China was all but flat. The euro zone reading edged up only marginally, painting a more subdued picture of an economy that grew an encouraging 0.6 percent between January and March. With manufacturing dogged by insufficient demand and excess supply, the regional readings are likely to reinforce the view that a recent pick-up in economic momentum will be difficult to sustain and further policy stimulus is needed. "The backdrop remains one of sub-trend growth, inflation that is below target, difficulty in increasing revenue as margins are sacrificed to win modest volume gains, slow wage growth cramping spending and central banks that have used up much of their policy ammunition," said Alan Oster, chief economist at National Australia Bank. That has been a factor in foot-dragging by the Federal Reserve over a follow-up to its December rate hike, leaving the markets in a sweat in case U.S. policymakers move in June.

    Japan Announces $7 Billion Plan to Develop Mekong Region — Japan’s foreign minister announced a $7 billion initiative Monday to promote development in Southeast Asia’s Mekong region, which encompasses parts of Vietnam, Laos and Thailand through which the river flows.In a speech at Chulalongkorn University in Bangkok, Fumio Kishida affirmed the importance of Southeast Asia’s economic prosperity to Japan. He pledged 750 billion yen ($7 billion) in funding over the next three years to support development and growth in the region.The initiative will help promote “connectivity” within Southeast Asian countries and Japan through funding in infrastructure and development of human resources. Thailand has become a key manufacturing and export hub for Japanese manufacturers such as Toyota and Honda. “Invigorating the flow of goods and people by connecting the region through roads, bridges and railways is indispensable for promoting economic development,” he said, adding that Japan’s cooperation will go beyond just building infrastructure.Over the next three years, “we will make use of funds amounting to 750 billion yen toward cooperation with the Mekong region,” Kishida said. Specific details have not been announced but he said Japan would like to work together with the Mekong countries to create a framework to support the various efforts, including regional issues and theme-oriented support, in a detailed manner.“I am expecting the day when, as a result of these efforts, I can depart from Bangkok eastward in the morning and arrive in Ho Chi Minh City at night and enjoy pho for dinner,” he said.  Kishida also renewed his call for the establishment of a code of conduct in the South China Sea, where China, Vietnam, the Philippines and others have competing territorial claims, and that prosperity can only achieved if there is peace and stability in the region.

    Negative yielding bonds total near $10 trln, Japan leads -Fitch - The sum of government bonds worldwide that carry negative yields was $9.9 trillion in late April, with Japan accounting for two-thirds of the total and the rest in Europe, Fitch Ratings said on Wednesday. Of that total on April 25, $6.8 trillion were in long-term bonds and $3.1 trillion short-dated maturities. Negative yielding government debt was almost non-existent before central banks adopted extraordinary policies such as massive bond purchases in the wake of the 2008-2009 global financial crisis. The hefty amount of negative-yielding sovereign bonds in late April, due to unconventional policies adopted by the Bank of Japan and the European Central Bank, has complicated the task of banks, insurance companies, money market mutual funds and other investors, the rating agency said in a report. Because this negative-yielding debt overseas offers no income, investors will look for assets with positive returns, Fitch said. The consequences of this search for yields from investors have been more risk-taking and rising demand for higher-yielding U.S. government bonds, according to Fitch. "The desire to generate better returns could lead banks, insurance companies, money funds and other investors to lengthen maturities or lower the average credit quality of their portfolios, contributing to higher risk in the global financial system," it said in a statement. The nearly $10 trillion in negative-yielding Japanese and European bonds were yielding negative 24 basis points or negative $24 billion annually. Using 2011 yield levels, this amount of debt would have yielded 1.23 percent or $122 billion. At 2006 yield levels, it would have yielded 1.83 percent or $180 billion, Fitch said.

    Fitch: Widening Pool of Negative-Yielding Debt Squeezing Sovereign Investors | Reuters: Growth in the amount of sovereign debt trading at negative yields is putting increasing pressure on investors that depend heavily on income from government securities, according to Fitch Ratings. The global supply of long- and short-term sovereign securities yielding less than zero now nears $10 trillion, constraining the ability of banks, insurers and other sovereign investors to generate fixed-income returns. "Unconventional monetary policies in Japan and Europe have pushed sovereign yields to new lows, limiting investors' ability to maintain profits through investment income," says Robert Grossman, Managing Director, Macro Credit Research. The total amount of negative yielding government debt stood at $9.9 trillion ($6.8 long-term and $3.1 short-term) globally as of April 25, 2016. This debt currently yields negative 24 basis points (negative $24 billion) annually. If historical rates were available today, the same securities would have yielded 1.23% ($122 billion) using 2011 yields, and 1.83% ($180 billion) using 2006 yields. The desire to generate better returns could lead banks, insurance companies, money funds and other investors to lengthen maturities or lower the average credit quality of their portfolios, contributing to higher risk in the global financial system. One possible implication of a growing stock of negative yielding debt is increased demand for higher-yielding government securities like U.S. Treasuries, which could keep long-term yields low, potentially complicating the Fed's efforts to raise short-term interest rates later this year. Japan accounts for 66% ($6.5 trillion) of the total outstanding negative yielding debt, bolstered by the BOJ's negative rate policy and increased purchases of Japanese government bonds. The remainder of negative interest rate debt resides in Europe.

    Negative bond yields cost investors $24bn annually Almost $10tn of negative yielding government bonds are costing investors about $24bn annually, according to calculations by Fitch, posing challenges to long-term investors that rely on sovereign debt as a bedrock of their portfolios. The rating agency warned that the previously unthinkable scenario of negative-yield bonds is having a “broad impact” on investors such as insurers, banks, pension funds and money market funds. Analysts say insurance companies and pension schemes in particular are struggling to get the returns they need to plug widening deficits. Citigroup this year estimated that UK and US companies have pension deficits of $520bn, and put the developed world’s public sector pension underfunding at $78tn. Those deficits have been aggravated by the drooping yields of bonds, the traditional mainstay of their investment holdings. “[Pension deficits are] a ticking time bomb,” said Charles Millard, one of the report’s authors and the former head of the US government’s pension protection agency. “Unfortunately it is one that will explode slowly so it never creates the feeling of a crisis. The good news is that there is time to make repairs. The bad news is that without a crisis we do not tend to make those repairs.” As a result of low and even negative yielding sovereign debt, many investors are forced to buy riskier bonds with lower ratings, or longer-dated bonds. But that is eroding the possible returns there too. The 30-year bond yields of Japan, the US, Germany and the UK have sagged to 0.26 per cent, 2.64 per cent, 0.91 per cent and 2.34 per cent respectively. “There is some evidence that such policies are pushing some investors into riskier assets, but it is too early to see whether this is a sustained effect,” Fitch said. “In any case, the risk of unintended consequences does appear to be rising as banks, consumers and businesses adapt to a more uncertain economic environment in which negative interest rates are increasingly common.”

    Banks' bad loans surge to 15-year high in 2015 - The amount of bad loans extended by local banks surged to a 15-year high last year, largely due to a rise in the amount and rate of soured corporate loans, industry data showed Monday. As of the end of 2015, the total amount of bad loans held by local banks came to 29.98 trillion won ($26.21 billion), up from 24.21 trillion won a year earlier, according to the data from the Financial Supervisory Service (FSS). The 2015 figure marks the highest level since 42.11 trillion won tallied in 2000, in the apparent aftermath of the 1997-1998 Asian financial crisis. The amount had dipped to as low as 7.7 trillion won in 2007, but again shot up to 15.96 trillion won in 2009 following the outbreak of the global financial crisis the year before. The increase in 2015 was mostly attributed to a large amount of corporate loans going sour, especially those extended to large companies. In 2015, the overall amount of bank loans extended to large firms here only gained 7.28 trillion won to 436.78 trillion won. However, the amount of non-performing loans extended to large companies increased by a greater margin of 7.33 trillion won to 17.69 trillion won, accounting for 4.05 percent of their total borrowing.

    Make in India: Which Exports Can Drive the Next Wave of Growth? – IMF blog - The expansion of India’s exports of services between 1990 and 2013 has been nothing short of spectacular, putting India on a par with the world’s high-income economies in terms of service-product sophistication and as a share of total exports. This has created unique opportunities for continued growth. By contrast, when it comes to exports of manufactured goods, India has lagged behind its emerging-markets peers, both in quality and as a percentage of the total export basket, leaving substantial room for improvement. While trade leads to structural transformation and diversification of economies, the types of goods and services traded—and trading partners—make all the difference. India should capitalize further on its comparative advantage in exports of high-value services. At the same time, it should also increase the quality, sophistication, and diversification of manufacturing. That way, India can expand its total exports, while improving the sophistication of goods and services, and diversifying into higher value-added activities that generate better jobs for Indians. A new groundbreaking  IMF working paper on the evolution and prospects of India’s exports documents and analyzes the technological content, quality, sophistication, and complexity of India’s export basket. It also discusses their implications for future export performance, structural transformation, and growth.

    Reserve Bank of Australia Cuts Benchmark Rate - WSJ: —Australia’s central bank cut interest rates for the first time in a year, pushed by record-low inflation and a strong local currency, in a decision that brings the bank into line with its global peers. The Reserve Bank of Australia on Tuesday lowered its cash-rate target by one quarter of a percentage point to a new low of 1.75%. Economists polled by The Wall Street Journal ahead of the decision were evenly split, five forecasting a cut and five expecting no change. Swap-market bets put the odds of a cut at more than 50%. The Australian dollar fell almost 2% to as low as US$0.7557 after the rate cut. The move follows the release of data last week showing that the economy experienced its first bout of deflation on a quarterly basis since the global financial crisis in the first three months of 2016. “The board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting,” Gov. Glenn Stevens said in a statement. Mr. Stevens said that in reaching its decision, the bank took note of recent housing-market developments, where tighter lending standards have damped frothy prices that policy makers had previously worried could derail a fragile economic recovery. “At present, the potential risks of lower interest rates in this area are less than they were a year ago,” Mr. Stevens said.

    Surprise! Baltic Dry Index Plunges Most Since November As Commodity Bubble Bursts -- Who could have seen this coming? Remember a week ago when TV entertainers crowed about the surge in The Baltic Dry Freight Index was a "clear signal" that 'China is back' baby and that escape velocity growth was just around the corner as global growth was destined to pick up... Well, just as we warned very explicitly, the ramp in the index merely reflected the frenzied speculation in industrial metals by the Chinese and as authorities have cracked down on that idiocy, so the Baltic Dry has plunged by the most since November... as real demand punches back.

    Kenya says its 600,000 refugees are no longer welcome - Kenya said it was no longer willing to host 600,000 refugees living in the country because of concerns over national security, threatening to trigger a new African migration crisis. The government gave no timeframe on Friday for the mass repatriation of refugees, the vast majority from Somalia, and admitted the unexpected move would have “adverse effects” on those living in refugee camps. Some in Kenya believe the camps are breeding grounds for terrorists. The interior ministry called on the international community to “collectively take responsibility [for the] humanitarian needs that will arise” and to “expedite” the closing of camps while “minimising pain and suffering of the refugees”. It also said it was closing its department for refugee affairs. Over the past few years, hundreds of thousands of people have fled myriad African countries, with many seeking to reach Europe eventually. The vast majority in Kenya are in two camps that have over more than two decades become de facto cities — Dadaab close to the Somali border and home to some 340,000 people, and Kakuma near South Sudan which houses about 210,000 people. The other 50,000 are scattered around the country. Kenya also has 48,000 asylum seekers, according to the UN refugee agency. While Kenya has threatened on several occasions to close the camps, diplomats said Friday’s announcement was more serious because of the closing of the refugee department.

    Fading risks of global recession -- Since mid-February, the financial markets have become much less concerned about a hard landing in global economic activity, or at least about a potential clash between slowing economic activity and inappropriately tight macroeconomic policy from China and the US Federal Reserve. Financial conditions indicators have eased in the big economies, and this has been accompanied by a partial recovery in business surveys in many parts of the world. In the last edition of our monthly report card on Fulcrum’s global nowcasts, we commented that economic activity had turned a corner in the US and China, but this was offset by continued weakness in several key economies, including Japan and the UK. A similar pattern is apparent in this month’s nowcasts. Global recession risks, which seemed elevated in January and February, have now receded, but the world economy is far from robust. We therefore leave the overall verdict unchanged from last month: global activity growth is somewhat better, especially in the emerging economies, but it is still a long way from being satisfactory. (Full details of the latest nowcasts are shownhere.) Global activity has been growing below its long-run trend rate (3.6 per cent) since the start of 2014. At times (eg in February 2015, August 2015 and February 2016) the growth rate has fallen well below 2.5 per cent, and there have been elevated fears that a global hard landing might occur. On each occasion, however, the outcome has confounded the pessimists, and recession risks have quickly faded. Policy changes by the Fed have eased monetary conditions at critical times and China has repeatedly eased fiscal policy to inject temporary boosts to the sagging economy. This is exactly what has happened during the latest slowdown in January/February 2016, and the global economy has once again stepped back from the brink of outright recession.

    The Next Global Boom – and Bust - Simon Johnson - The mood at the International Monetary Fund-World Bank spring meetings here earlier this month was grim. The latest IMF forecast for global growth has been revised downward yet again – suggesting the world will grow at an annual rate of just over 3% this year and again in 2017. If realized, this would be a dismal performance. Before 2007, global growth (using the IMF’s methodology) was in the 4.5-5% range, based on steady productivity improvements in industrial countries and rapidly rising living standards in large emerging markets such as China, Brazil, and Russia. Now the US faces the uncertainty of a presidential election, weaker parts of the eurozone continue to struggle, and Japan is teetering on the edge of outright economic contraction. Brazil is in the midst of a political crisis, China is dealing with the aftereffects of prolonged fiscal expansion and explosive growth in its shadow banking system, and lower commodity prices are undermining economic performance in many other emerging markets. On top of all this, the British may vote in June to leave the European Union. Economic activity is affected by confidence: Do consumers believe their incomes are likely to rise (or even prove secure), and do companies believe that future growth will be buoyant enough to warrant current investment? And today’s macro mood is shared pessimism. Yet the medium-term scenario is unlikely to be global stagnation. New technologies continue to be invented, and billions of people aspire to improve their standard of living through education and hard work. Leading industrial economies have demonstrated remarkable resilience in the face of large negative financial-sector shocks over the past decade – as has China.

    Listen Carefully for Hints of the Next Global Recession - Robert Shiller - Economists are good at measuring the past but inconsistent at forecasting future events, particularly recessions. That’s because recessions aren’t caused merely by concrete changes in the markets. Beliefs and stories passed on by thousands of individuals are important factors, maybe even the main ones, in determining big shifts in the economy.  That is likely to be the case again, whenever we next endure a global recession. Worries that a big downturn might be imminent seem to have abated, but they still abound. In April, for example, the International Monetary Fund reported in its World Economic Outlook that while very modest growth is likely this year, the world economy was in a “fragile conjuncture.” It is therefore worth asking what actually sets off a real global recession. Most discussions focus on leading indicators — statistics about economic variables that have preceded recessions. While these kinds of correlations can sometimes be useful in forecasting, they provide little understanding of why major changes are taking place. Leading indicators don’t usually address ultimate causes, nor do econometric models that try to predict events. In fact, it’s instructive to remember that global recessions have usually begun suddenly and been a real surprise to most people.  Basically, global recessions tend to begin when newly popular narratives reduce individuals’ motivation to spend money. Psychology matters a great deal. The biggest recession of all, the Great Depression, began suddenly with the stock market crash of October 1929, as Christina Romer pointed out in a famous paper. Even before 1929 was over, she found, department store sales and automobile registrations had declined, indicating that consumer spending had already dropped sharply. But why?

    Venezuela should be rich. Instead it’s becoming a failed state -  It's come to this: The country with the largest oil reserves in the world can't afford to brew its own beer, stay in its own time zone, or even have its own people show up to work more than two times a week.  Venezuela, in other words, is well past the point of worrying that its economy might collapse. It already has. That's the only way to describe an economy that the International Monetary Fund thinks is going to shrink 8 percent and have 720 percent inflation this year. And that's not even the worst of it. No, that's the fact that the state itself is near collapse. Venezuela already has the world's second-highest murder rate, and now the Chavista regime seems to be threatening violence of its own if the opposition succeeds in recalling President Nicolás Maduro. It's a grim race between anarchy and civil war. This is an entirely man-made catastrophe. Venezuela, by all rights, should be rich. As we just said, it has more oil than the United States or Saudi Arabia or anyone else for that matter. But despite that, economic mismanagement on a world-historical scale has barely left it with enough money to even, well, pay for printing money anymore. That's right: Venezuela is almost too poor to afford inflation. Which is just another way of saying that the government is all but bankrupt.   How did Venezuela get here? Well, by spending more than it had and not having as much as it should. . It really shouldn't have been hard for the government to use some of its petrodollars on the poor without destroying the economy. Every other oil-rich country, after all, has figured that out. But you can't redistribute oil profits if there aren't oil profits to redistribute, or at least not many of them.  Add it all up, and Venezuela's oil production actually fell by about 25 percent between 1999 and 2013.

    Canada March trade deficit widens to record as exports slump | Reuters: Canada's trade deficit in March widened to a record C$3.41 billion ($2.69 billion) as exports sank for a second month on weak demand from the crucial U.S. market, Statistics Canada said on Wednesday. The deficit, far greater than a C$1.40 billion shortfall forecast by analysts in a Reuters poll, came as Canada is already struggling to deal with the prolonged effects of an oil price slump. Exports to the United States, which accounted for 74.2 percent of Canada's global total in March, fell by 6.3 percent while imports dropped by 4.8 percent. As a result, Canada's trade surplus with the United States dropped to a 22-year low of C$1.53 billion, down from C$2.12 billion in February. Peter Hall, chief economist at Export Development Canada, described the drop in exports as a concern and linked it to a drawdown in U.S. inventories which he said had cut demand for Canadian goods. "I wouldn't say this is time to push the panic button but it's time to be alert. This is something that is coming to us squarely from the United States," he said in a phone interview. The Canadian dollar weakened to C$1.2821 to the U.S. dollar, or 78.00 U.S. cents, down from C$1.2748, or 78.44 U.S. cents, shortly before the release. The Bank of Canada said on April 20 it could take Canada more than three years to recover from the oil price shock. The central bank is relying on a transition to non-energy exports to help drive the economy. March exports fell by 4.8 percent to C$40.99 billion, the lowest in more than two years. Shipments declined in 10 of 11 sectors, led by motor vehicles and parts, consumer goods and metal and non-metallic products.

    Russian FinMin spends over $5 bln from Reserve Fund in April to cover deficit | Reuters: Russia's Finance Ministry resumed depletion of its Reserve Fund in April, spending over $5 billion to finance the budget deficit, the ministry said on Thursday. The ministry said the Reserve Fund stood at $44.96 billion on May 1 compared to $50.60 billion a month earlier. It said it spent $2.6 billion, 2.3 billion euros ($2.63 billion) and 0.4 billion pounds ($578.08 million) from the fund in April. In roubles the Reserve Fund was worth 2.892 trillion at the beginning of this month. The Finance Ministry had not depleted the Reserve Fund over January-March. Russia's government is hoping to keep the budget deficit within 3 percent of gross domestic product in 2016.

    Leaked TTIP Documents: Threats to Regulatory Protections -- Europe, beware. The leaked TTIP text confirms that the United States is trying to export its failed regulatory model. If the United States succeeds in its project, Big Business will gain enormous power to block, slow, undermine and repeal European regulations. The leaked text makes clear that there are serious issues requiring analysis in particular sectors, but also that the Regulatory Cooperation chapter poses a major threat to health, safety, environmental, labor, consumer, civil and political rights, and other regulatory protections. The U.S. proposals in the Regulatory Cooperation chapter seek to export many of the worst features of U.S. rulemaking. There is a lot to recommend about the U.S. regulatory process in theory, but in practice, the U.S. rulemaking process now evidences a massive tilt to favor the interests of regulated industries. It is far too slow; regulators are bogged down in seemingly endless analytic requirements that are themselves biased to favor the interests of regulated parties. Its veneration of “cost-benefit analysis” provides a pseudo-scientific cloak to industry’s apocalyptic claims about the costs of the next regulation and operates at loggerheads with application of the precautionary principle. In the days ahead, Public Citizen will issue a more detailed analysis of the draft Regulatory Cooperation chapter. These are among our top line concerns from the U.S. proposals in that chapter:

    Leaked TTIP documents cast doubt on EU-US trade deal - Talks for a free trade deal between Europe and the US face a serious impasse with “irreconcilable” differences in some areas, according to leaked negotiating texts. The two sides are also at odds over US demands that would require the EU to break promises it has made on environmental protection. President Obama said last week he was confident a deal could be reached. But the leaked negotiating drafts and internal positions, which were obtained by Greenpeace and seen by the Guardian, paint a very different picture.“Discussions on cosmetics remain very difficult and the scope of common objectives fairly limited,” says one internal note by EU trade negotiators. Because of a European ban on animal testing, “the EU and US approaches remain irreconcilable and EU market access problems will therefore remain,” the note says. Talks on engineering were also “characterised by continuous reluctance on the part of the US to engage in this sector,” the confidential briefing says. These problems are not mentioned in a separate report on the state of the talks, also leaked, which the European commission has prepared for scrutiny by the European parliament. These outline the positions exchanged between EU and US negotiators between the 12th and the 13th round of TTIP talks, which took place in New York last week. The public document offers a robust defence of the EU’s right to regulate and create a court-like system for disputes, unlike the internal note, which does not mention them.

    After the leaks showing what it stands for, this could be the end for TTIP -- The documents show that US corporations will be granted unprecedented powers over any new public health or safety regulations to be introduced in future. If any European government does dare to bring in laws to raise social or environmental standards, TTIP will grant US investors the right to sue for loss of profits.  Today’s shock leak of the text of the Transatlantic Trade and Investment Partnership (TTIP) marks the beginning of the end for the hated EU-US trade deal, and a key moment in the Brexit debate. The unelected negotiators have kept the talks going until now by means of a fanatical level of secrecy, with threats of criminal prosecution for anyone divulging the treaty’s contents. Now, for the first time, the people of Europe can see for themselves what the European Commission has been doing under cover of darkness - and it is not pretty.The leaked TTIP documents, published by Greenpeace this morning, run to 248 pages and cover 13 of the 17 chapters where the final agreement has begun to take shape. The texts include highly controversial subjects such as EU food safety standards, already known to be at risk from TTIP, as well as details of specific threats such as the US plan to end Europe’s ban on genetically modified foods.

    Greenpeace Leak Exposes Big EU-US Rifts, US Thuggishness, in TTIP “Trade” Negotiations -  Yves Smith - News stories in recent weeks have been depicting the toxic “trade” deal, the TransAtlantic Trade and Investment Partnership, as looking remote due to rising public opposition, particularly in Europe. A Greenpeace leak, to be made public in full Monday but previewed to the Guardian and Süddeutsche Zeitung, show that the rifts are much deeper than pitchmen on either side of the pond would have you believe. These leaks are particularly significant because they are fresh, meaning of current negotiating documents. This means that unlike the previous TTP leaks via Wikileaks, which were of selected chapters and then at least a negotiating round behind the state of play, means that someone with a seat at the table is not happy and intended to throw another spanner into the works. And while Americans may not pay much attention to these leaks, the evidence of US bullying, as well as threats to European consumer safety on multiple fronts, is almost certain to further inflame grass roots resistance to the pact.  The Greenpeace leak not only catches out the Administration as greatly overstating how likely a deal is to be reached this year (a trick we’ve called out repeatedly in the context of the TPP), but it also exposes the EU side as prepared to fib to the EU parliament (which makes me wonder if that was the trigger for the leak, that it was a dissenter upset about the planned misrepresentation). From the Guardian: Because of a European ban on animal testing, “the EU and US approaches remain irreconcilable and EU market access problems will therefore remain,” the note says. Talks on engineering were also “characterised by continuous reluctance on the part of the US to engage in this sector,” One of the most dangerous sets of proposed changes would be to stymie the ability of Europeans to issue new regulations. And get a load of this: Disputes over pesticides residues and food safety would be dealt with by the UN Food and Agriculture Organisation’s Codex Alimentarius system.Environmentalists say the body has loose rules on corporate influence, allowing employees of companies such as BASF, Nestle and Coca Cola to sit on – and sometimes lead – national delegations. Some 44% of its decisions on pesticides residues have been less stringent than EU ones, with 40% of rough equivalence and 16% being more demanding, according to Greenpeace.

    TTIP expected to fail after US demands revealed in unprecedented leak -- Bernd Lange, the chairman of the European Parliament's important trade committee, has indicated that he now expects the Transatlantic Trade and Investment Partnership (TTIP) negotiations will probably fail, following a major leak of confidential documents from the talks. Greenpeace Netherlands has released half of the entire TTIP draft text as of April 2016, prior to the start of the 13th round of TTIP negotiations between the EU and the US, which reveal US demands in detail for the first time. Although the EU has improved transparency recently, and routinely publishes its offers for each TTIP chapter, the US has consistently refused to do so. Even MEPs and MPs have faced extreme restrictions on what they are allowed to look at, copy, or even say when it comes to the US position. The new leak by an unknown whistleblower represents a major blow to US attempts to keep its negotiating demands confidential, and provides important information to the both the EU and US public for the first time.The new documents confirm some of the fears expressed by many organisations and commentators regarding two key areas discussed previously here on Ars: the Investment-State Dispute Settlement (ISDS) mechanism, and regulatory cooperation.   As Ars noted last September, in the face of massive public concerns about ISDS, the European Commission is proposing a modified approach, the Investment Court System (ICS), which it claims addresses the problems of ISDS. However, even though the ICS idea was formally presented to the US last year, one of the TTIP leaks shows that it was not even discussed during the 12th round, something that the European Commission's public report on the negotiations omitted to mention. This confirms earlier indications that the US is not interested in ICS, and will insist on including standard ISDS in TTIP, regardless of EU worries.

    TTIP leaks update: Greenpeace response to Commission statements -- – In response to the European Commission’s statements on the TTIP leaks and a blog post by EU trade commissioner Cecilia Malmström, Greenpeace EU director Jorgo Riss said:  Commissioner Malmström is being disingenuous. The leaked consolidated documents make no mention of the EU’s precautionary principle, which provides a higher level of environmental and consumer protection. The mention of the precautionary principle that Malmström refers to is contained in an EU position paper that is not part of the leaked consolidated chapters.” “The leaked documents also show the influence of industry lobbies on trade negotiators. The leak mentions several times that negotiators regularly consult with industry and are prepared to represent their positions.”“Malmström may well promise not to undermine environmental and consumer protection, but the evidence tells a different story. In several areas the US proposes to lower EU standards, but there are no EU proposals in the leaked consolidated documents to counter this.” “If Europeans are to believe Malmström’s promises, the best thing would be for the EU to publish the latest consolidated chapters with clear proof that the Commission is proposing higher environmental and consumer protection in TTIP.”

    TTIP: We Were Right All Along  - In recent years, however, the EU has negotiated numerous bilateral trade agreements. This has been topped by the announcement in early 2013 that the EU and the US had agreed to enter into negotiations on a bilateral trade agreement, the so-called Transatlantic Trade and Investment Partnership (TTIP). The European Commission has always argued that the agreement is aimed at ‘help[ing] people and businesses large and small, by opening up the US to EU firms; helping cut red tape that firms face when exporting; and setting new rules to make it easier and fairer to export, import and invest overseas’. Furthermore, it contends that the TTIP, will ‘kick-start’ the EU economy by ‘generating jobs and growth across the EU’ and ‘cutting prices when we shop and offering us more choice’. These assertions have been strongly challenged by European (and American) civil society organisations, which have maintained that the proposed agreement is not primarily intended to reduce the few remaining tariffs between the world economy’s two biggest trading blocs, but that ‘its central objective is to dismantle and/or harmonise regulations in areas such as agriculture, food safety, product and technical standards, financial services, the protection of intellectual property rights, and government procurement’. . This has allowed politicians in the EU and US – who have paradoxically stated that the purpose of keeping a tight lid on the negotiations is precisely to prevent vested interests to apply pressures – to accuse critics of the TTIP of fear-mongering. Until now, that is. On May 1, Greenpeace Netherlands released 243 pages of leaked secret TTIP negotiation texts, which offer an unprecedented glimpse into the far-reaching implications that the agreement would have for climate, environment and public health – and, crucially, prove that civil society organisations were right all along.

    International - Dairy Farmers At Center Of Standoff In EU-U.S. Trade Deal Negotiations - Many German dairy farmers are braced for the worst as a trade agreement between the United States and the European Union is being negotiated, fearing they would be destroyed by bigger U.S. producers in a free market. Previously confidential documents from the negotiation of the deal called the Transatlantic Trade and Investment Partnership, or TTIP, shows those fears to be justified. The U.S. is found to be unrelenting with regard to the discussion of agriculture, saying it is only willing to make concessions to the European car industries if Europeans agree to further open up their agricultural markets. Such a tradeoff would mean less protection for dairy farmers such as Hans Hainz. “I am not in favor of free trade agreements because I fear for our very strict production standards, among other things,” said Hainz, who owns a farm with 55 cows in the Upper Bavarian town of Hölching. Hainz said he worries that the price of milk, which has sunk to a record low within the EU, will continue to fall, raising the prospect of many small and medium-sized family-owned businesses closing. Already, many smaller family-run businesses are fighting for survival.“Lazy compromises or horse trading carried out on the backs of our farmers and consumers is not acceptable and cannot be allowed to come to pass,”

    Most of Greek bailout money went to banks: study  -- Only 5 percent of international bailout money for Greece was used to kickstart the country's languid economy, a new study has found. The rest was used to pay back private creditors, many of which were banks.Less than 10 billion euros ($11.5 billion) from Greece's first two international bailouts ended up in the hands of the Greek treasury, according to new study by the European School of Management and Technology (ESMT). Contrary to popular belief, the lion's share of the rescue money sent to Greece was used for debt repayments, interest payments, bank recapitalization and debt restructuring, ESMT President Jörg Rocholl told DW in an interview on Wednesday. "Most of the money was used to actually transfer risks from private creditors to public creditors," Rocholl said. "This means money was used to repay the private creditors by taking on more debts that were taken by private creditors." Rocholl argued that the study offered one of the clearest glimpses to date into where the Greek bailout money came from and how it was spent.

    On the Importance of Fiscal Policy - Last week’s data on EMU growth have triggered quite a bit of comments. I was intrigued by Paul Krugman‘s piece arguing (a) that in per capita terms the EMU performance is not as bad (he uses working age population, I used total population); and (b) that the path of the EMU was similar to that of the US in the first phase of the crisis; and (c) that divergence started only in 2011, due to differences in monetary policy (an impeccable disaster here, much more reactive in the US). Fiscal policy, Krugman argues, was equally contractionary across the ocean. I pretty much agree that the early policy response to the crisis was similar, and that divergence started only when the global crisis went European, after the Greek elections of October 2009. But I am puzzled (and it does not happen very often) by Krugman’s dismissal of austerity as a factor explaining different performances. True, at first sight, fiscal consolidation kicked in at the same moment in the US and in Europe. I computed the fiscal impulse, using changes in the cyclically adjusted primary deficit. In other words, by taking away the cyclical component, and interest payment, we can obtain the closest possible measure to the discretionary fiscal stance of a government. And here is what it gives:

    The Poisoned Chalice of Macroeconomic Policy - David Beckworth --The Eurozone experienced a second recession in 2011-2012, just a few years after the first one in 2008-2009. This second downturn was the fatal blow that turned Europe's Great Recession into an outright depression. The standard explanation for the emergence of this second recession is the sovereign debt crisis and the increased fiscal austerity in the Eurozone periphery that occurred during this time. Is this understanding correct? Paul Krugman says no in  a new post. He points, instead, to the ECB's raising of interest rates twice in 2011 as the cause of the second recession. I agree with Krugman. This explicit tightening of monetary policy in the Eurozone, when many of its countries had to yet to fully recover from the first recession, increased the debt burdens and gave austerity its teeth. These latter developments had an effect on the Eurozone economy, but that they were more a propagating mechanism than the initial shock. I have a new Mercatus paper coming out soon that provides extensive empirical support for this view. So I am glad to see Krugman restart the conversation on what went wrong in Europe. The Eurozone Crisis was the Lords of Finance all over again. One question that Krugman does not address in his post is why the ECB chose to raise interest rates at this time. This, in my view, is an important question because it speaks to one of the two big shortcomings of inflation targeting that has led me to conclude its time as a monetary regime has come and gone. Unless we wrestle with inflation targeting's shortcomings, I am fairly confident we are gong to see central banks continue to repeat the ECB's mistakes in the future. To that end, I want to briefly review these shortcomings below.

    Nearly 90,000 unaccompanied minors sought asylum in EU in 2015 | Reuters: Some 88,300 unaccompanied minors sought asylum in the European Union in 2015, 13 percent of them children younger than 14, crossing continents without their parents to seek a place of safety, EU data showed on Monday. More than a million people fleeing war and poverty in the Middle East and Africa reached Europe last year. While that was roughly double the 2014 figure, the number of unaccompanied minors quadrupled, statistics agency Eurostat said. Minors made up about a third of the 1.26 million first-time asylum applications filed in the EU last year. European Union states disagree on how to handle Europe's worst migration crisis since World War Two and anti-immigrant sentiment has grown, even in countries that traditionally have a generous approach to helping people seeking refuge. Four in 10 unaccompanied minors applied for asylum in Sweden, where some have called for greater checks, suspicious that adults are passing themselves off as children in order to secure protection they might otherwise be denied. Eurostat's figures refer specifically to asylum applicants "considered to be unaccompanied minors", meaning EU states accepted the youngsters' declared age or established it themselves through age assessment procedures.

    6 EU member countries ask Brussels for 2-year internal border control - report -- Six European countries reportedly want to maintain border control within the EU beyond the period the Schengen free travel agreement allows for. The measure was imposed in response to the influx of asylum seekers from the Middle East. Temporary border controls between members of the Schengen treaty can last no longer than for eight months. Sweden, which has to suspend the emergency measure in June, is advocating the extension of the grace period. Germany, Denmark, Austria, France and Belgium are reportedly also supporting such a move.  The six countries have written a letter to the European Commission requesting to add a six-month extension to measures currently in place, the Local reported. They also want these grace periods to last two years in the future rather than eight months. Germany’s deadline to abolish border controls comes in May. Sweden received the largest number of refugees per capita among EU members since they poured into Europe last year. Germany got the largest absolute number. On Monday, Denmark announced its border control measures would be extended until at least June 2.

    Germany's Third Largest Party Adopts Anti-Islam Manifesto: Says "Muslims Are Not Welcome In Germany" - One week after Austria was shocked by the news that its right-wing, anti-immigrant Freedom Party, had swept the competition, gathering over 35% of the vote and leaving the other five candidates far behind, Europe's anti-immigrant juggernaut just added to its momentum when neighboring Germany's populist AfD party adopted an anti-Islam policy on Sunday in a manifesto that also demands curbs to immigration according to AFP. The biggest surprise however, is that the three year-old party is now also Germany's third strongest party. Formed only three years ago on what was originally a eurosceptic platform, the Alternative for Germany (AfD) has gained strength as the loudest protest voice against Chancellor Angela Merkel's welcome to refugees that brought over one million asylum seekers last year. However, with the migrant influx sharply down in recent months, the AfD has shifted focus to the signature issue of the xenophobic Pegida street movement, whose full name is Patriotic Europeans Against the Islamisation of the Occident."Islam is not part of Germany" ran a headline in the AfD policy paper agreed in a vote by some 2,400 members at the party congress in the western city of Stuttgart. The paper demanded bans on minarets on mosques, the call to prayer, full-face veils for women and female headscarves in schools.

    The European Commission to “Hold Its Nose” and Approve the Abolition of Visas for Turkish Citizens -- The European Union’s Agreement with Turkey on the topic of migrants, leaves for Brussels, less ways to maneuver on the visa-free regime with Turkey. Turkey has not fulfilled a number of preconditions, such as freedom of speech, fair justice and others, but on Tuesday the latter had unilaterally announced the abolition of visas for citizens of EU member countries. EU leaders are under pressure from the public, which is tired of arriving migrants, and therefore forced to give Ankara the green light on its desired visa liberalization process. On May the 4th The Commission will approve the abolition of visas with Turkey, however, if such a decision is made, the EC will do it, “holding its breath and holding its nose,” a BBC source said. Recall, that on that day the EC will provide a third progress report on visa liberalization for Turkey. Earlier, in a statement, the agency noted that if “Turkey will take the necessary measures to comply with the remaining conditions, the report will be accompanied by a legislative proposal to move Turkey to a visa-free list ( of countries)”.   “It is difficult to understand how it is that currently Turkey can meet these conditions. The government in Ankara is increasingly cracking down on critics od the autocrat, in a non- democratic manner”.

    Proposed Irish government to prioritise spending over tax cuts - document (Reuters) - Ireland's proposed minority government will use at least twice as much available resources on spending increases over tax cuts, an agreement between the country's two main parties seen by Reuters showed on Tuesday. Acting Prime Minister Enda Kenny's Fine Gael party moved towards breaking a nine-week, post-election deadlock on Friday by securing the support of the country's second largest party, rival Fianna Fail, to facilitate a minority administration. The parties met separately on Tuesday to ratify the final text of the agreement, which sets out ground rules for an arrangement that is scheduled to run until the end of 2018 and entails Fianna Fail abstaining in key votes. The seven-page document includes a broad policy framework such as targeting income tax cuts on low and middle income earners, reviewing public sector pay levels and building up a contingency fund as a buffer against fiscal shocks. "To address unmet needs, (the government will) introduce budgets that will involve at least a 2:1 split between investment in public spending and tax reductions," the document states. Ireland, which began unwinding years of deep austerity cuts last year, is in a position to introduce further expansionary measures thanks to its fast-growing economy. It is expected to focus that room for manoeuvre on spending in areas such as health, housing and infrastructure.

    King Felipe of Spain Dissolves Parliament, Clearing Way for New Elections - King Felipe VI of Spain signed a decree on Tuesday to dissolve Parliament and hold a rerun of national elections for the first time since the country’s return to democracy in the late 1970s. The step followed months of political paralysis and discord over who should form a government after inconclusive elections in December. That election resulted in a fracturing of Spain’s political landscape with the emergence of insurgent parties that challenged the establishment, marking a sea change in the nation’s politics. The repeat election is now scheduled for June 26, but opinion polls suggest that the outcome of a new vote could look much like the first, which split ballots among four main parties, with no single one close to a majority.Turnout, however, could fall amid growing frustration about the intense but fruitless party squabbling.Whatever the outcome in late June, Patxi López, the Socialist president of the lower house of Parliament, called on Tuesday for an electoral overhaul to tighten future deadlines for forming a government and to ensure that Spain does not spend so much time again in political limbo. He also urged party leaders to draw lessons now from their failure to break the deadlock since December.

    EU forecasts France, Italy, Spain, to miss budget targets | Reuters: France, Italy and Spain are set to miss European Union budget targets this year and next without urgent government action, European Commission forecasts showed on Tuesday. Excessive debts and deficits in the three biggest economies of the euro zone's Mediterranean south, at a time when bloc leader Germany's forecasts show rude fiscal health, may fuel further debate on whether the EU executive should impose fines. Portugal will also likely be in breach of EU budget rules. Euro zone growth will be slower than expected, with gross domestic product expanding 1.6 percent this year and 1.8 percent next compared to 1.7 percent in 2015, the Commission said -- a limping performance at a time when the European Central Bank's money printing policies are under fire from Berlin. The 2016-2017 GDP forecasts were down 0.1 point from those in February. The Commission saw slower growth in China and other trade partners, increased global tension and volatile oil prices as well as the uncertainty over whether Britain, the EU's second economy, will vote to quit the bloc in a referendum next month. The Commission's forecasts, together with medium-term fiscal consolidation plans submitted by governments last month will be the basis for a Commission decision, in the second half of May, on whether to step up the disciplinary procedure against those states which are in breach of the rules.

    Eurozone PMI disappoints, but retail sales climb - The eurozone economy grew at a weaker pace in March than first indicated by a survey of purchasing managers, while retail sales climbed for the fourth straight month in February. When it was released last month, the preliminary estimate of a measure of activity in the manufacturing and services sectors pointed to a revival as the first quarter drew to a close. But the final composite purchasing managers index released Tuesday by data firm Markit told a less encouraging story, indicating that first-quarter activity increased at the slowest pace since the final three months of 2014. The survey of 5,000 companies around the eurozone also confirmed that the European Central Bank faces an uphill struggle to raise the annual rate of inflation to just under 2%, with consumer prices in March 0.1% lower than a year earlier. Businesses cut their prices for the sixth straight month, as the costs they faced fell for the third straight month. "Sluggish growth is the result of lacklustre demand, accompanied by falling prices as firms compete at the expense of profit margins," said Chris Williamson, Markit's chief economist. Italy experienced the sharpest slowdown in March, as its composite PMI fell to its lowest level in 12 months, a blow to hopes that the economy might finally be emerging from a long period of stagnation. But the measure for France was revised lower to indicate the eurozone's second-largest economy barely emerged from contraction. There are some signs of resilience in the eurozone economy. Figures released Tuesday by the European Union's statistics agency showed retail sales rose for the fourth straight month in February, surprising analysts, who had projected a slight decline. Boosted by lower oil prices and a slowly falling unemployment rate, consumer spending has been the main support to the eurozone's modest recovery ever since it began in mid 2013. But there are few signs that spending will accelerate markedly in coming months, while there are signs the recovery is being held back by weakening demand for the eurozone's exports from China and other large developing economies, including major oil producers.

    IMF tells euro zone finance ministers to start talks on Greek debt relief - FT | Reuters: The head of the International Monetary Fund urged euro zone finance ministers to start talks on Greece's debt relief together with discussions on Athens' reform programme, according to a letter published by the Financial Times on Friday. The finance ministers of the euro zone's 19 countries will gather on May 9 in Brussels for an extraordinary meeting on Greece. They are meant to discuss Greece's reform programme and a new set of contingency measures that Athens should adopt to ensure it will achieve agreed fiscal targets in 2018. Successful reforms implementation in Athens would unlock bailout funds under a financial programme agreed by Greece and euro zone countries in July and would pave the way for talks on Greece's debt relief. "We believe that specific measures, debt restructuring, and financing must now be discussed simultaneously," IMF's Christine Lagarde wrote to euro zone ministers ahead of their meeting next week. Lagarde insisted that the IMF considered the bailout programme's target of a Greek primary surplus of 3.5 percent of gross domestic product in 2018 as very difficult to reach and "possibly counterproductive".

    Spy planes catching property tax cheats in Spain with possible Brexit looming - The Spanish government is clamping down on tax evaders by using aerial photographs to spot “secret” building work that would increase property taxes, particularly for British owners if Brexit is approved. Using light aircraft to fly low over the Balearic Islands, which include tourist destinations like Ibiza and Mallorca, authorities have been able to pinpoint undeclared additions that have been made to people’s homes like swimming pools and extensions which would drive up the amount owners are due to pay. "Impuesto sobre Bienes Inmuebles" (IBI) tax revenue goes to local governments to maintain the area’s infrastructure and general upkeep. The aerial surveys of 28 municipalities across the Balearic Islands between 2013 and 2015 found a total of 21,652 properties which had been altered in some way, including 2,382 swimming pools built without being declared.

    Nearly 90,000 unaccompanied minors sought asylum in EU in 2015 - Some 88,300 unaccompanied minors sought asylum in the European Union in 2015, 13 percent of them children younger than 14, crossing continents without their parents to seek a place of safety, EU data showed on Monday. More than a million people fleeing war and poverty in the Middle East and Africa reached Europe last year. While that was roughly double the 2014 figure, the number of unaccompanied minors quadrupled, statistics agency Eurostat said. Minors made up about a third of the 1.26 million first-time asylum applications filed in the EU last year. European Union states disagree on how to handle Europe's worst migration crisis since World War Two and anti-immigrant sentiment has grown, even in countries that traditionally have a generous approach to helping people seeking refuge. Four in 10 unaccompanied minors applied for asylum in Sweden, where some have called for greater checks, suspicious that adults are passing themselves off as children in order to secure protection they might otherwise be denied. Eurostat's figures refer specifically to asylum applicants "considered to be unaccompanied minors", meaning EU states accepted the youngsters' declared age or established it themselves through age assessment procedures.

    David Cameron Says Britain Will Accept More Syrian Children as Refugees - — Prime Minister David Cameron gave in to pressure from the House of Lords on Wednesday and announced that Britain would accept more unaccompanied Syrian children as refugees. Mr. Cameron did not specify numbers, but acted after a campaign led by a Labour peer, Alf Dubs, who came to Britain from Czechoslovakia in 1939, at age 6, fleeing the Nazis in a program called the Kindertransport, in which hundreds of Jewish children were rescued.. “We’re going to go round the local authorities and see what more we can do,” Mr. Cameron told Parliament. But he did not want “to take steps that will encourage people to make this dangerous journey,” from Syria to Europe, he said. Britain has agreed to take 20,000 refugees over five years from those in camps outside Europe and is providing aid to those camps. But Mr. Cameron has refused to take part in a European Union plan to redistribute refugees already in Europe, arguing that it only encourages others to take to the sea. Mr. Dubs said later, “I trust the prime minister will be true to his word and move swiftly to ensure the Home Office works closely with local authorities to find foster families to give these young people a stable and secure home.”

    EU Referendum: Poll shows Britain split 50/50 - but higher turnout among older voters could tip country into Brexit -- The British public is split 50/50 on whether to leave the EU but a higher turnout among the Outers could tip the balance in favour of Brexit, according to an opinion poll for The Independent. Given a straight choice, 50 per cent of people said Britain should leave and 50 per cent that it should remain. But when the findings were weighted to take account of people’s likelihood to vote, the result changed to 51 per cent for Leave and 49 per cent for Remain. The online survey of 2,000 people by ORB, conducted between Wednesday and Friday (29), suggests that Barack Obama’s intervention in the debate has not been the game-changer the In camp was hoping for. Although 23 per cent said his support for the UK remaining in the EU had made it more likely they would vote to stay in, 66 per cent said it had not. And 45 per cent said they had felt more inclined to vote to leave in the past seven days, while 43 per cent were more inclined to support remaining.  Although Britain is split down the middle on the In/Out question, a majority of people (51 per cent) believe the country will vote to remain in the June referendum, while only 17 per cent think it will vote to quit the EU. One in three people (33 per cent) replied “don’t know” or said the result is too close to call. The belief that the referendum will produce an In vote may be a mixed blessing for the In campaign. It could breed complacency and lead to some “soft” supporters of EU membership not bothering to vote.

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