Mish's Global Economic Trend Analysis

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Crude Plunges Following OPEC Decision to Not Cut Production Posted: 27 Nov 2014 07:09 PM PST For five consecutive months OPEC produced over its alleged quota. Nonetheless, and in spite of falling prices and pleas from Venezuela to restrict production, OPEC decided to take no action. In the wake of the news, West Texas Intermediate plunged nearly 7% and Brent fell over 8%. WTI Crude Futures Brent Crude Futures Please consider OPEC Fails to Take Action to Ease Glut as Crude Plunges. OPEC took no action to ease a global oil-supply glut, resisting calls from Venezuela that the group needs to stem the rout in prices. Futures slumped the most in more than three years. The group maintained its collective production ceiling of 30 million barrels a day, Ali Al-Naimi, Saudi Arabia's oil minister, said yesterday after the 12 nations met in Vienna. Brent crude dropped as much as 8.4 percent in London, extending this year's decline to 34 percent. Canada's producers big and small will have to tighten their belts to prepare for declining profits. "This is a pretty big shock," said Justin Bouchard, an analyst at Desjardins Securities Inc. in Calgary. "There's no question there's going to be a slowdown. Even the big guys will have to look at their capital spending plans." Western Canada Select, the Canadian benchmark, has lost more than a third of its value since June, in step with declines for West Texas Intermediate and the international gauge Brent. WCS traded yesterday at $55.94 a barrel, the lowest in the world. Venezuela Burns Through Currency Reserves Bloomberg reports Venezuela Burns Through Third of New Chinese Money in a Week Venezuela's international reserves declined $1.3 billion in the week after President Nicolas Maduro transfered $4 billion of Chinese loans to the central bank. The country's reserves dropped to $22.2 billion today, according to central bank data. A collapse in global oil prices pushed Venezuela's foreign currency holdings to an 11-year low earlier this month. Maduro on Nov. 18 ordered the Chinese loan proceeds to be moved from an off-budget fund, so that they would show up in reserves and help boost investor confidence in an economy beset by the world's highest inflation and widest budget deficit. The following day, Venezuelan bonds rose the most in six years in intraday trading. "If the plan was to calm the bondholders, then burning through a third of that money in five working days doesn't do it in any way," Henkel Garcia, director of Caracas-based consultancy Econometrica, said in a telephone interview. Hyperinflation in Venezuela Foreign reserves are the only reason why Venezuela's currency (the Bolívar) is not completely worthless. Nonetheless, inflation already exceeds 60% annually. In September, Venezuela's Bolívar Hit Record Low on Black Market. The plummeting Venezuelan currency breached a new, symbolic low of 100 bolívares per dollar on the black market Friday, according to market-tracking websites, in a sign of the worsening greenback shortage faced by President Nicolás Maduro's government. Economists say the bolívar is collapsing as Venezuelans clamor for dollars to protect themselves from an inflation rate topping 60%. But the government, which tightly restricts access to dollars, has cut the supply this year, prompting the value of the bolívar to plunge in unofficial street transactions. The lack of dollars—evidenced by mounting debts with private companies such as airlines and importers that service the country—has sparked fears of a potential default, since the country has more than $6 billion in bond payments due over the next three months. I suspect it will not be long before Venezuela is forced to halt bond payments. Should that happen, the Bolívar would likely collapse to zero in short order. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

"Neutrality" Gone Mad: Should GM Have to Promote Toyota? Posted: 27 Nov 2014 09:50 AM PST The EU's attempt to breakup Google gets more absurd by the day. I wrote about this just yesterday in Google vs. Sun vs. France: Too Big, Too Powerful, Too Free. I have a few more EU proposals regarding Google worth discussing, but first I have a few questions: In the name of neutrality... Should GM have to promote Toyota? Should Target have to promote WalMart? Should Pepsi have to promote Coke? The idea sounds blatantly absurd, because it is. Yet EU nannycrats Demand Neutrality From Google. Google was under fire on two fronts in Europe on Wednesday as privacy watchdogs told it to apply the "right to be forgotten" globally and German ministers pushed for laws to make its search engine a "neutral platform". The developments crown a difficult week for the US technology group, which has already seen Capitol Hill hit out at a European parliament resolution advocating Google's possible break-up. The non-binding motion is expected to be passed on Thursday The 11-page paper, whose lead signatory is the German economics minister Sigmar Gabriel, argues it may be necessary to introduce "platform neutrality" to tackle abuses of dominance, either through tough antitrust enforcement or new legislation. There is mounting unease in Washington that Google is being targeted for political reasons, in part to protect Germany's corporate champions in media and telecoms. A host of senior politicians – including the chairs of two House and one Senate committee – spoke out on Tuesday against the European parliament resolution and warned of negative consequences for trade and investment. The broad-ranging German position paper – dated November 13 and co-signed by interior minister Thomas de Maizière, justice minister Heiko Maas and the minister for digital infrastructure, Alexander Dobrindt – underlines the extent to which Germany is driving Europe's efforts to constrain Google's power. The German ministers urge Brussels to use the lure of Europe's domestic market and its political power to "stand up to global actors". The ministers write that a joint Franco-German working group has developed proposals aimed at regulating digital platforms that dominate the market. These measures include a requirement to display commercial offers from competitors without charge, and a guarantee of access to content without discrimination. Rotation Mechanism Also consider this nonsensical Google Breakup Proposal from Spanish and German MPs. German MEP Andreas Schwab and Spanish MEP Ramon Tremosa called for "a rotation mechanism, which displays Google's commercial services and their competitors in the same location and with the same prominence on the search results page. This move, its proponents say, would be close to the choice of browsers offered to consumers following the Microsoft investigation." This is the kind of nonsense we expect from France and Spain. But Germany? Why Stop There? Why stop with internet services? In the name of "neutrality", why shouldn't Mercedes be forced to offer free advertising to Fiat and GM. On a "rotation mechanism", why shouldn't Tiger Woods have to change his hat from Nike to Callaway? By the way, I have already been impacted by such nonsense. I wrote about it in 2012, in Country Specific Blog Censorship by Google; Twitter Employs Censorship as Well; Echo Comments Not Working on Redirects I do not have just one blog. I have many mirror copies. In the US my blog is globaleconomicanalysis.blogspot.com. In New Zealand it's http://globaleconomicanalysis.blogspot.co.nz. Occasionally I get asked why comments do not always display in other countries. It has to do with weird suffixes. Readers in other countries can try surfing my original blog URL by appending /ncr (No Country Redirect) as follows: http://globaleconomicanalysis.blogspot.com/ncr That Google has to do this is of course silly, but it has to do with country specific censorship. Hmm... are all my criticisms of France filtered out? Neutrality Solution The EU nannycrats have gone mad and I have just the solution. The EU is too big, too powerful, and too unwieldy. Instead of breaking up Google, let's unbundle the EU. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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