Headlines today suggest the rest of this week will be exceptionally busy for the one-percent. The world is “trying to break” out from under them.
The headlines deal with two topics and one if an “oldie but goodie” that keeps everything in context. Perhaps, it is best to start there.
We go back to Matthew Simmons book from several years ago (2005 to be precise): Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. In it, he lays out the problem the Saudis are now beginning to face. As my friend Oilman2 is fond of saying “Depletion never sleeps.”
Consider now the tactical problems of the Saudis: They have a domestic extremism issue (the Wahhabi sect). They have water-cut. They have a national expectation of constantly rising incomes because of the ‘good times of oil.’
Yet, upon closer inspection, things are not going well. The price of oil has dropped dramatically (though not unexpectedly) as we cross the bottom of the economic long wave. When the economy – and inflation – was blowing things along, the Oil Cartel had the “luxury” of embargoes and gas lines.” Now? There’s a glut and North America has come into her own with a combination of new technologies. These cover both new well development as well as the rework side.
Toss in the future of Venezuela – which you’ll notice has slid to the “not worth mentioning” pile – and you’ll see that any major oil producer has their share of headaches.
This comes against a larger backdrop: We’ve been calling it the “Manufacturer’s Resource Wars” for years. It’s what happens when industrialized and “first nations” need the continued supply of raw materials at rock-bottom prices in order to maintain financial viability.
Even so, the stock market’s recent meteoric rise, which we judge will be over soon enough, has been driving more by accounting than sound operational accounting. Stock buy-backs, rosy promises of unlimited growth (and drone delivery) and the whole lot of it.
But, on closer inspection, there’s fraud in the book-keeping dept. What’s happened is that as bonds have come down in price (because rates may actually go up over time) there are investors with only two real choices, Take a flying on the digital tulips (Bitcoin is around $7,225 today) or buy up stocks that “talk a good story.”
At its core, the Saudi problems are global problems. And Venezuela, as the Financial Times noted this morning “Venezuela’s debt struggle poses more questions for investors.” Especially when other reports openly profile “The Drug Kingpin Running Venezuela’s Bond Negotiations.”
What could possibly go wrong?
Obviously, the Saudi’s need an out. And what is predictable when countries get into intractable situations? Why, they start wars, of course!
And that’s why it’s so interesting to follow the WW I rhyme with the pre-war Balkans prior to the Archduke Ferdinand killing that set WW I in place.
The Saudi’s are on the verge of ‘war’ with Hezbollah. Saudi Prince Salman’s Chess Game with Hezbollah in Lebanon.
Now, we need to look at a map because the Saudi’s already have what could be looked at as a hostage to use as a negotiating tool: Lebanon PM Under House Arrest in Saudi Arabia: Pro-Hezbollah Paper. So the map, please?
The circle upper left is the first Saudi problem if they want to beat the war drum: Jordan. With Israel on fairly good terms with them, Jordan has been a buffer zone between interests in the region. However, the future of Jordan is looking “iffy” why? Climate change: Jordan water crisis ‘to get worse’.
The right circle is where the oil is over toward Iran. Where Satellite imagery reveals decline in ISIS oil production.
The Saudi crown prince is bright enough to know that Hezbollah needs external aid to exist. And that’s why we read how the Saudi Crown Prince: Iran supply of rockets is military aggression .
To be sure, we don’t expect the outbreak of war this week. But in the longer-term, depletion never sleeps. So until we get to the “whip-saw spike” – expected when the results of reduced exploration and new production catches up – occurs, the pressures are on in Saudi Arabia and in Venezuela to meet social expectations on the one hand, while battling the demons of water-cut and depletion, on the other.
For now, the headline that matters is (as always) related to money: “Saudi Crackdown Widens as More Bank Accounts Said Frozen.”
This is not likely to have a direct or immediate impact on the U.S. markets, but as Saudi deals with other parts of the world stand to blow-up because of the internal house-cleaning now underway, if could drive future demands for liquidity and that’s where we look up the tracks a few miles to see that train a-comin’.
Where to Stack Cash?
While the uber-rich of the world can nod knowingly about the future of the Middle East – and place backing bets – they have a more immediate problem with a project by the International Consortium of Investigative Journalists.
They have just released their Paradise Papers and it outs all kinds of major corporations – like Apple.
- As governments shut down tax loopholes, Apple found new ways to keep tax rates ultra-low.
- Those rates allowed it to accumulate a $252 billion mountain of cash offshore.
- Ireland tied itself in knots hoping to retain Apple, its biggest source of corporate taxes.
The group’s revelations also focus on some of the Trump inner circle claiming, for example:
“One offshore web leads to Trump’s commerce secretary, private equity tycoon Wilbur Ross, who has a stake in a shipping company that has received more than $68 million in revenue since 2014 from a Russian energy company co-owned by the son-in-law of Russian President Vladimir Putin.
In all, the offshore ties of more than a dozen Trump advisers, Cabinet members and major donors appear in the leaked data.”
As time permits, you might want to click over to the ICIJ website and read what they’re doing. And maybe toss a couple of bucks in the Donate hopper. Because with corporate “media control” keeping the mainstream in lock-down mode, groups like this are up against some tall odds.
The main reason for mentioning this project is simple enough: Just like water-cut may (loosely) drive war in the Middle East, the leaking of names and parties in the tax-avoidance world may be compelling-enough to push some Big Money into new hidey-holes.
To accomplish that might mean raising some liquidity in coming weeks. And where will markets go when “liquidity is raised?”
Trump Calls for Talks
In Korea, Donald Trump is calling for talks with North Korea. But, as is predictable, the NorK’s, who may be watching a bit much media, have responded with a “nuclear sword of justice” rant.
So this doesn’t look to be going anywhere. They continue to be a, uh, marvel.
Meantime, the useless fallout from Trump’s Japan stop continues as The Network‘s minions at the State Department will surely remain worked-up that Trump didn’t bow in Japan.
And come on, is “Hope Hicks wears a tuxedo to Japan state dinner” really, oh, you know….news? Gotta say, she was looking “hotel-oscar-tango” to the fashion intelligencia.
That Gigantic News Hole
Ah, here we go: Remember how I was telling you that with Trump on a trip, the media would have trouble filling up all those useless news minutes?
So here comes Grabien with “Media Invent Two Fake Trump Scandals in First Day of Asia Trump.” NSS.
Let’s All Be “Experts”
Sometimes, we need a break from all the deep-thinking about here. So we toss the darts into the Nostracodeus runs and see “whatsup wid dat…”
Today, we look in on “experts.”
AI needs time to evolve … then we can regulate it, expert says. You mean like there wasn’t an FAA before Orville and Wilbur? Who knew?
UM linguistics expert to speak on the world’s disappearing languages. Question is, in what language will he speak? Here’s a new concept: Digital melting pot!
Can II be an expert now, too?
Another ugly “trute” for ya: CoreLogic US Home Price Report Reveals Nearly Half of the Nation’s Largest 50 Markets are Overvalued.
Market’s paying attention? Nope: Dow futures still up 12 ahead of the open.
Are we the only ones thinking “What do rats do?”
Or, are we just reading a bit too clearly between the lines?
More for Peoplenomics.com subscribers tomorrow. Cheap seats here in the bleachers open again Thursday so dew drop in, bubba….