Stratfor: Russia’s economy burns; they have no good options.

Summary: As Obama’s military requests vast new sums to defend against Russia, Stratfor examines Russia’s crashing economy — and its few options for recovery. Russia is largest casualty of the financial world war begun by the Saudi Princes (bet on them to win). While this great conflict burns the US military dances away to its own delusional but profitable tune.

Stratfor

Russia Has Few Options for Turning Its Economy Around

Stratfor, 5 February 2016

Forecast

  • The Central Bank of Russia will try to reduce high inflation and encourage growth to counter the economy’s rapid deterioration.
  • However, the bank probably will not be able to rely on its biggest tool — the interest rate — to do so, instead turning to less effective means that will have little impact on inflation.
  • While the central bank’s efforts to reform the banking sector will not yield many immediate gains, they could spur growth in the long run by encouraging investment in Russian businesses.
  • Meanwhile, the Kremlin will use its limited resources to prop up Russia’s most important sectors, including agriculture and the military.
  • Still, unrest will likely grow throughout the year as inflation continues to put pressure on the Russian people.

Analysis

Low oil prices have thrown a wrench in many of the world’s economies, but perhaps nowhere more so than Russia. Depressed energy prices have sent the value of the Russian ruble tumbling and inflation soaring, and much of the Russian population is struggling to make ends meet.

The Central Bank of Russia, under pressure to find a solution to the country’s deepening economic crisis, is exploring all of the monetary policy options at its disposal. But the bank will find that its primary tool for combating the inflation wreaking havoc on the Russian economy — adjusting the country’s key interest rate — may be difficult to actually use under the current circumstances. As a result, bank officials will likely be forced to turn to secondary, less effective measures to keep the Russian economy from sliding even further into disrepair.

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NOAA’s El Niño update (myth-busting the news headlines)

Summary: One of the mysteries of the public climate change debate (now encompassing extreme weather) is the reliance of journalists and interested people on fringe sources when NOAA and the other climate agencies produce clear and timely articles. Such as NOAA’s about this El Niño, including this new one that tells us about this important weather event — and debunks much of what you’ve been told.

El Nino Godzilla

NOAA’s February 2016 El Niño update (plus Q&A)

By Emily Becker, climate scientist at NOAA, 11 February 2016

Despite getting a little boost from some strong winds across the tropical Pacific Ocean in January, the warmer-than-average ocean temperatures that drive El Niño have likely peaked. Now that we’re looking out from the other side of the mountain, let’s answer some questions.

Is this the strongest El Niño on record?

This is definitely one of the strongest three going back to 1950.  It’s hard to say definitively what single El Niño is the strongest, because there are many different ways to measure strength.

The Oceanic Niño Index, the three-month-average sea surface temperature departure from the long-term normal in one region of the Pacific Ocean, is the primary number we use to measure the ocean part of El Niño, and that value for November – January is 2.3°C, tied with the same period in 1997-98. There are other areas of the ocean that we watch, though, including the eastern Pacific (warmer in 1997/98) and the western Pacific (warmer in 2015/16).

Also, don’t forget the “SO” part of the El Niño/Southern Oscillation (ENSO), which is the all-important atmospheric response. All that extra heat in the tropical Pacific Ocean warms up the atmosphere above it, leading to more rising air, which changes the circulation all around the globe. By one measure (the EQSOI), the El Niño-related changes in the atmospheric circulation in 1997/98 and 2015/16 are tied; by another (the SOI), 1997/98 was stronger.

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What’s Going On With The Economy: Making Sense Of The Clashing Numbers

Summary; Here is a look at today’s data, helping to spark a rally but in fact showing a slowing economy. Today’s numbers show the clashing signals typical of an economy nearing an inflection point — in this case, typical of an economy before a recession (or an economy pausing before surging).  {2nd of  2 posts today.}

Economy

Contents

  1. December’s business inventory to sales ratio: rising.
  2. January’s Retail sales: still slowing.
  3. Freight volume: reports of its death are premature.
  4. Conclusions.
  5. For More Information.

(1) December’s business inventory to sales ratio: rising.

This is at best a coincident indicator, showing a mismatch between orders and shipments. We do not know the cause. Ordering for an expected rise in sales that didn’t happen? Transportation bottlenecks? Unexpected slowing of sales?

Whatever the cause, the usual response of businesses is to reduce orders. Even worse, getting caught with high inventories when a recession starts means that the drop in orders will be severe. December’s i/s ratio is the highest in 14 years (since Jan 2002).

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Max Weber explains Trump 2016: we want a charismatic leader to restore America

Summary: Past posts discussed the role of long-suppressed populism in the rise of Trump. But there are deeper forces at work, described a century ago by the philosopher Max Weber. Authority in America has passed from charismatic leaders to traditional leaders to bureaucrats (like Hillary and Jeb), as the Republic’s legitimacy drains away. Now comes the next cycle as a new generation of charismatic leaders arise. It offers both large risks and opportunities for America. Understanding is the first step to a better America. {1st of 2 posts today.}

Leadership

There has been endless guessing about the sources of Trump’s appeal, such as this by Glenn Thrush at Politico in November:

Trump may be the ultimate it’s-all-about-me candidate, but the piercing paradox of 2016 is that it actually isn’t about him — but about his ability to capture the mood of his voters, and that, more than anything, explains his pundit-defying durability.

While accurate, he sees the trees but not the forest. Whether Trump wins or loses, his success so far shows the rise of larger forces than those of politics-as-usual. From one perspective, this is the resurgence of American populism — for much the same reasons as its rise in the late 1800s: slowing growth, rising inequality, and high rates of immigration. Jonathan Chait reports that Trump has realized the appeal of populism and is adjusting his campaign to better tap it (Chait’s article is evidence that the commentariat has at last seen the rise of populism).

But there are deeper forces at work. Consider the planned 2016 contest for the Presidency, with the party leaders preparing Clinton vs. Bush. Two elderly boring mediocre candidates, both devoid of actual accomplishment, both running by right of succession in their respective political dynasties. In desperation Democratic Party loyalists turned to Sanders, another elderly politician advocating a grab-bag of nostrums almost as old as he is (for an analysis of the Democrat’s exhaustion see “Nothing Left” by Adolph Reed Jr. in Harper’s (“The long, slow surrender of American liberals”). On the Right, desperate loyalists turned to billionaires’ boy-toys — wind-up pols like the Rubio-bot.

This failure of the first- and second-tier candidates reveals that we have a tired system that has burned through its legitimacy. Polls confirm this, such as Gallup’s Confidence in Institutions survey that shows ugly low numbers for the Republic’s institutions (except the military, hardly a comforting signal). As Glenn Greenwald described the prospect of the 2016 before the insurgencies of Trump and Sanders…

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Banks Are The Key To This Stock Market Decline, & The Recession That Might Follow

Summary: After years of slow economic growth and rising asset prices in America, with investment gurus and economists predicting booms & crashes, events have again taken center stage. It’s time to again pay attention to the data.  {2nd of 2 posts today}

  • Risk markets are rolling over, high-grade bonds rise on a flight to safety.
  • Broad price movements like this are seldom false alarms; something is happening to fundamentals.
  • As usual during the early stages of a crash, we can only guess at the causes. Every crisis is unique. Do not assume this will follow the 2008 script.
  • Watch the banks! Banks lead us into financial crises; their stabilization leads us out.
  • Watch the data and take incremental steps to a more defensible portfolio stance. Avoid predictions!

 

Clear vision

This is another in a series of posts about the end to the expansion cycle which began in 2009 (links at the end). We can only speculate about the details and timing, but the broad outlines slowly become visible.

Look to the center of the decline in risk prices: banks. Their stocks are falling. Prices of their credit default swaps are rising. Concerns about their solvency have spouted suddenly, like daffodils after the first Spring shower. That’s how it should be. …

Read the rest at Seeking Alpha.

 

The new frontier: Even Developing Nations Do Cyber Spying

Summary: Revolutions in military technology allow rising powers to supersede the old ones, not just because the new tools provide asymmetric advantages, but because the military leaders of dominant love their obsolete big toys. As do military experts in general; compare the coverage of new carriers and aircraft vs. cybersecurity. Will this pattern play out in cyberspace? Emilio Lasiello explains how emerging nations aggressively exploit this new terrain of conflict. {1st of 2 posts today.}

Video Wall

A 21st century equivalent to the Battleship.

Even Developing Nations Want Cyber Spying Capabilities

By Emilio Iasiello from DarkMatters, 27 August 2015
Posted with his gracious permission.

Although governments like China and the United States are seeking to establish norms of behavior for nation states in cyberspace, there is increasing literature indicating that there is mounting interest in acquiring cyber espionage capabilities, even among less technologically advanced countries. An October 2015 report by Citizen Lab, a Canadian-based organization, found 33 likely customers of FinFisher – malware able to read encrypted files, e-mails, and listen in to voice over Internet Protocol, and activate webcams. Client information was exposed in a data breach that targeted Gamma International Ltd, a Munich-based company that made FinFisher and sold it exclusively to governments and law enforcement organizations.

These developments come at a time when governments are seeking to curb the volume of hostile activity occurring in cyberspace. Revelations of suspected U.S. global surveillance and China’s rampant commercial cyber espionage have brought talk of creating a baseline for accepted actions for governments to take in cyber space. China and Russia, as well as the United Nations Governmental Group of Experts on Information Security have developed proposals addressing these very concerns.

Adding to this trend for nation state responsibility, in April 2015, the United States established “cyber sanctions” that granted authority to the Department of Treasury to sanction “individuals or entities” that pose a cyber threat to the “national security, foreign policy, or economic health or financial stability of the United States.” In a landmark agreement in November 2015, governments of the 20 leading global economies – including China – pledged not to engage in cyber-enabled commercial espionage for profit.

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Lessons from the hysteria about peak oil (2005-2013)

Summary: The peak oil hysteria provides rich lessons for us today about learning from activists and the value of listening to our major professional institutions. Easy cynicism led people to believe outlandish forecasts, wasting valuable time and resources. Worse, we have had many such barrages by doomsters — aided by their clickbait-seeking enablers in the media — which have us almost immune to warnings, no matter how well-founded. We can do better.

It's an Oil World

Where were you during the peak oil hysteria? It began in 2005 and died in 2013, marked by the opening and closing of The Oil Drum website. Despite their analysis and forecasts proving to be mostly wrong, most of their authors are still “experts” publishing elsewhere (see this bizarre example). That follows the pattern of modern American doomsters, as with those in the 1970s predicting global pollution and famine catastrophes and the military “experts” who cheered our disastrous occupations of Iraq and Afghanistan. Perhaps the activists predicting a climate catastrophe will add their names to this list in the next decade.

It’s not just historical trivia. We must learn from these bouts of irrationality if we have any hope of regaining the ability to govern ourselves.

Maximum World Oil Production Forecasts

Memories have faded, but a decade ago the predictions of end of oil were hot news. Comment threads overflowed with people terrified of the future. Conferences were held and books sold trumpeting certain disaster as the lifeblood of our industrial civilization dried up. Many of the following names were highlighted in journalists’ Rolodexes as the go-to people for hot quotes. Then as now, the names least often consulted proved to have the more accurate forecasts.

  • 2005 – Pickens, T. Boone (Oil & gas investor).
  • 2007 – Bakhitari, A.M.S. Oil Executive ((Iranian National Oil Co. planner).
  • 2007+ – Groppe, H. (Oil / gas expert & businessman).
  • 2007 – Herrera, R. (Retired BP geologist).
  • 2008+ – Westervelt, E.T. et al (US Army Corps of Engineers).
  • 2009 – Deffeyes, K. (retired Princeton professor & retired Shell geologist).
  • 2009 – Simmons, M.R. (Investment banker; see the posts about his work).
  • 2010 – Goodstein, D. (Vice Provost, Cal Tech).
  • 2010 – Wrobel, S. (Investment fund manager).
  • 2010 – Bentley, R. (University energy analyst).
  • 2010 – Campbell, C.  (Retired oil company geologist; see the posts about his work).
  • 2010 – Skrebowski, C. (Editor of Petroleum Review).
  • 2011 – Meling, L.M.  (Statoil oil company geologist).
  • 2012 – Koppelaar, R.H.E.M. (Dutch oil analyst).
  • 2012 – Pang Xiongqi (Petroleum Executive, China).
  • 2015 – Husseini, S. (retired Saudi Aramco).
  • 2020 – Laherrere, J. (Oil geologist , France).
  • 2020+ – CERA Energy (consultants).
  • 2020+ – Wood Mackenzie (consultants).
  • 2025+ – Shell.
  • 2030+ – EIA and IEA.
  • No visible peak – Lynch, M.C. (Energy economist).

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