Diary of a Financier

Top Newsstuffs (October 22-28)

In Bookshelf on Sun 28 Oct 2012 at 06:45

The champagne of news…

The poor economics of Canadian oil sands | Mining.com
Canada’s oil sands producers are struggling with a lack of pricing power since 99% of exports land in the US, where benchmark WTI trades at >21% discount to global Brent Crude. (WTI was at a premium before Saudi Arabi changed its benchmark to Brent in 2009; oil sands still price off WTI at ~$48/bbl discount.)
One-fifth of oil sands producers use traditional mining techniques that need WTI @ $90-100 to break even vs. steam driven (SAGD) producers’ $65-70 costs. Current WTI ~$86 puts the former out of business.
Pipelines & exports to other international markets like Asia are stuck in regulatory morass.

Offshore Tax Havens Weigh Taxes as Caribbean’s Debt Rivals Greece | Bloomberg
The Bahamas, Cayman Islands and Antigua & Barbuda are considering instituting their first income & sales taxes, in addition to raising registration fees for offshore companies/hedge funds. The region’s slow growth, low savings & high external debt have prompted the proposal; Cayman’s budget deficit is $504M (double its forecast).

Presentation: The facts about taxation in America | The Motley Fool
Putting the debate into historical context, the current state of taxes is:
1. Historically low effective tax rates.
2. Income/payroll taxes own the largest share of federal revenue in the post-war era–to the benefit of corporations’ alltime low share.
3. US pays the 3rd lowest total taxes as a %GDP in all the developed world (OECD).
4. US corporate tax rate is the highest in OECD, but the corporate share continues to decline (due to loopholes).
5. Middle & upper classes bear an equal, minimal burden (%taxes v. %income) for the lower 60% of earners.

Rail Traffic Weekly: Growth steady, but more commodity groups turn negative | Association of American Railroads (AAR)
Carloads -2.8% and Intermodal +3.7 (cumulative ytd volume); -4.4 and +3.5 respectively (vs. this week last year).
7 of 20 carload groups posted gains: Farm products +87, petroleum products +60.5 & lumber +19.8; iron/steel scrap -25.5, coal -13.9 & waste -13.2.
[3 more commodity groups slip into the red, but the rally in both farm products ex grain  & petroleum products continues.]

Infographic: China’s amazing growth & the slowdown’s effect on the global economy | Financial Times
“China has emerged as a leading exporter, but its slowing growth is now affecting commodity prices… Meanwhile, growth of machinery imports is slowing, and even China’s strong growth in luxury goods sales is faltering.”

The Germans are coming for their gold | John Carney (CNBC)
Bundesbank has requested that the NY Fed audit German gold reserves to tally its holdings and ship 150 tons back to Germany for “thorough examination”–all of which has never happened before.
Says Mr. Carney, ‘it doesn’t matter whether or not the gold exists, as long as the Fed says it does.’
[Recall the US Treasury’s audit of the NY Fed’s gold reserves in July 2012.]

Ocean Power: The Ignored Alternative | OilPrice

Five Reasons Natural Gas Prices Have Stabilized | Credit Suisse
CS expects rangebound NG prices to become the new normal for forseeable future.

Charts: Modern American economic history | Matt Stoller (Roosevelt Institute)
Looks at American economic development in the post-war era, specifically tracking investment.  Most notably, both Bush & Obama fostered an “all of the above” energy policy, but Bush led an unfathomable spike in Real Estate investment.

Infographic: Obama v. Romney Economic Positions | LearnVest
Illustrates Presidential candidates’ political standing on major economic issues.

Emerging “Red Pill” economics: Can central banks just cancel sovereign debt? | Societe Generale
Discusses the burgeoning movement to consolidate the Fed & Treasury (public sector entities), which would cancel a large portion of government debt since the Fed owns 10% of outstanding T-bonds.
[My initial reaction is that there’d be a destabilizing effect that shakes the “faith” underpinning fiat.  They don’t have to cancel the CB held sovereign debt: for example, the Fed already distributes all of its profits–like T-bill interest– to the Treasury, which makes such T-bills something like currency, a zero-interest fiat liability.]

“The Chicago Plan Revisited”: IMF’s epic plan to conjure away debt and dethrone bankers | Ambrose Evans-Pritchard (The Telegraph)
Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666. Now, a new IMF study revives a scheme first conceived by Irving Fisher in 1936 as a prescription for the Great Depression by separating the monetary & credit functions of the banking system: transition the fiat system from privately-issued/debt-based to government-issued/debt-free; end fractional reserve banking by having banks reserve 100% against liabilities by borrowing from the US Treasury, thereby reducing private Debt/GDP from 200 to 100% & reasserting the Fed’s control over money creation.

Worst carry trades show central banks reach stimulus limits | Bloomberg
FX trading volumes are -39% y/y and G7 currencies’ volatility index is at a 5-year low, suggesting that traders playing the carry trade (borrow in cheap currencies to invest in higher yielding ones) don’t think funding yields can go much lower. Central Banks may be at the limit of their easing capabilities.


  1. […] tonnes), Frankfurt up 31-50%, London stay at 13% (unch) & Paris wiped out 11-0% (-374 tonnes). [Previously] #Trust […]


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