Tuesday, November 15, 2016

Europe Stocks To Open Higher As Trump Policy Pushes US Dollar, Bond Yields Higher

By Arjun Kharpal
November 15, 2016

European stocks are expected to open higher on Tuesday as the U.S. dollar stood near a thirteen and a half year high and treasury yields continued to rise as traders anticipate President-elect Donald Trump's policies will stoke inflation.

London's FTSE 100 is seen up 26 points at 6,780, the French CAC is called 25 points higher at 4,538, while the German DAX is expected to open 40 points stronger at 10,745.

The dollar index – which measures the greenback against a basket of currencies – was around $99.879 in Asia trade. It had risen to 100.22 earlier. If it manages to break the 100.51 mark that it reached in December 2015, this would mark the highest level since 2003, according to Reuters.

U.S. 10-year Treasury yields also continued to tick up.

Traders will be watching Trump's economic policies closely because of the effect it could have on monetary policy. The Republican has said that he plans to spend on infrastructure and cut taxes to stimulate the economy. Increased fiscal stimulus could have an impact on the Federal Reserve's interest rate hiking path.

A number of Fed officials spoke on Monday about Trump's policies. Richmond Fed President Jeffrey Lacker said that a "more stimulative fiscal stance" would "bolster the case for raising rates".

Article Link To CNBC:

Facebook's WhatsApp Adds Secure Video Calling Amid Privacy Concerns

By Joseph Menn
November 15, 2016

One of the world’s most popular means of communication, Facebook's (FB.O) WhatsApp, is adding fully encrypted video calling to its messaging app on Monday, a move that comes as privacy advocates worry about the potential for stepped-up government surveillance under a Trump administration.

WhatsApp, which boasts more than a billion users worldwide, adopted end-to-end encryption early this year, making it technically impossible for the company or government authorities to read messages or listen to calls.

The new video calling service will thus provide another means for people to communicate without fear of eavesdropping though WhatsApp does retain other data such as an individual's list of contacts.

WhatsApp co-founder Jan Koum said in an interview that video calls will be rolled out to 180 countries within hours after the feature is introduced at an event in India.

“We obviously try to be in tune with what our users want,” Koum said at the company’s unmarked Mountain View, California headquarters building. “We’re obsessed with making sure that voice and video work well even on low-end phones.”

Koum told Reuters that improvements in phone cameras, battery life and bandwidth had made the service viable for a significant proportion of WhatsApp users, even those using inexpensive smartphones.

Apple Inc (AAPL.O) offers its FaceTime video calls to iPhone users, and Microsoft Corp's (MSFT.O) Skype offers video calls on multiple platforms. But WhatsApp has built a massive installed base of mobile customers and has been steadily adding more features to what began as a simple chat applications.

Price Of Allegiance 

WhatsApp has operated with some autonomy since Facebook bought it in 2014. Koum and co-founder Brian Acton, longtime Yahoo (YHOO.O) engineers who started the company in 2009, now have 200 staff, mostly engineers and customer support, up from 50 when Facebook bought it.

Koum said Facebook has allowed WhatsApp to use its servers and bandwidth around the world for voice and now video. That support will help spread the souped-up WhatsApp much farther and faster, he said.

But the corporate allegiance also has a price. After years of pledging that it would not share information about users with Facebook, which already has digital dossiers on its own 1.7 billion users, WhatsApp revised its privacy statement in August to say it would do exactly that. That means Facebook knows whom WhatsApp users contact and their phone numbers.

Some users complained, but Koum said that he had not seen a shift in behavior.

“In terms of security and privacy, what people care about the most is the privacy of their messages,” he said.

The video service is well integrated and adds a few twists. Users can move around the thumbnail video showing what their correspondent sees and flick a video call in progress to the side to minimize it while checking texts or email.

Koum said WhatsApp remained committed to security after the U.S. election of Donald Trump as president last week heightened fears of increased surveillance.

Trump, along with some leading congressional Republicans and FBI Director James Comey, has advocated requiring tech companies to turn over customer information in many circumstances, a position which, if put into law, could require companies including WhatsApp to completely redesign their services.

Other countries including China and the United Kingdom also take a dim view of encryption.

But Koum said he not see a major threat to his service, noting that diplomats and officials use WhatsApp in many countries.

“It would be like them shooting themselves in the foot.”

Article Link To Reuters:

Asia Frets Over Trump, But There’s An Economic Upside

Trump has plenty of nerves to soothe before he gets the keys to the White House.

By Anthony Fensom
The National Interest
November 15, 2016

Donald Trump’s surprise election win sent shockwaves through Asian markets, while his apparent intent to cancel the Trans-Pacific Partnership (TPP) has not helped sentiment either. But providing he avoids provoking a trade war with China, a Trump administration could actually be beneficial to Asia’s economy.

Here is a quick look at the positives and negatives for the world’s most dynamic economic region.

Positives: U.S. Economic Growth

A stronger U.S. economy would not only benefit Americans. Providing Trump does not follow through on threats to slap tariffs of up to 45 percent on Chinese imports, Asia’s major exporters, including China, Japan and South Korea, would all benefit should America’s consumers increase spending, along with the promised boost to U.S. infrastructure.

Accounting for nearly a quarter of global gross domestic product, any pickup in the United States, the world’s largest economy, would help propel global GDP higher and lift millions more out of poverty in Asia.

The last two presidents to expand America’s role in the global economy were Clinton and Reagan, with U.S. GDP accounting for around 32 percent of the global economy when Clinton left office. (It was 34 percent under Reagan). Reversing that slide would help global trade start recovering and the world economy get back to at least trend growth, after two years of subpar performance.

Stronger Dollar

A stronger dollar will make Asian imports cheaper, benefiting a number of major Asian exporters to the United States including China (20 percent of total U.S. imports), Japan (6 percent), South Korea (3 percent), India (2 percent), and Vietnam, Taiwan and Malaysia (all below 2 percent).

The expected weakening of Asian currencies should be of particular benefit to Japan, the world’s third-largest economy, given the link between a lower yen and higher company profits and Japanese stocks.

“Approximately 14 percent of the profits that Japan Inc. makes comes from North America-based production, so Trump’s promise of a sizable cut in corporate taxes could well add at least a couple of percentage points to Japanese earnings next year,” according to Jesper Koll, CEO of WisdomTree Japan.

Negatives: Trade Shocks

Trump’s decision not to ratify the TPP has effectively killed the twelve-nation trade deal, which was seen as the centerpiece of the U.S. “pivot” to Asia and would have been the biggest free-trade pact in history. Accounting for 40 percent of global GDP, the trade pact encompassed Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.

Asia’s biggest winners from the TPP included Japanese automakers, Australian and New Zealand farmers, and Malaysian palm oil producers, but Vietnam was also expected to be a major beneficiary, with an expected 11 percent GDP boost by 2025.

Conversely, the TPP’s failure is a win for protectionists, including Japan’s sheltered farmers, damaging potential U.S. exports to Asia. Geopolitically, China now has a clear pathway toward pushing its own regional trade pact, the Regional Comprehensive Economic Partnership, which would link ASEAN’s ten member nations with Australia, China, India, Japan, New Zealand and South Korea, accounting for one-third of global GDP, and strengthen Chinese economic leadership.

Worse than the TPP’s failure, though, is the risk of a U.S.-China trade war, should Trump follow through on threats to declare China a currency manipulator and impose damaging tariffs on Chinese imports. This could provoke countermeasures from the nation’s top trading partner that could ultimately harm both economies.

Declaring Beijing a currency manipulator could trigger further trade restrictions, potentially spurring China to weaken the yuan, according to Japanese brokerage Nomura.

India, Asia’s fastest growing major economy, faces the risk of curbs on immigration and on Indian workers’ remittances from the United States. Tighter immigration restrictions would be damaging for the Philippines too, given that America hosts 35 percent of all Filipinos working abroad and accounts for 31 percent of total worker remittances, a key source of foreign earnings.

Other Asian nations at risk include South Korea, with Trump having criticized the 2012 free-trade deal with the U.S. ally as costing “almost 100,000 American jobs.” The trade pact has helped boost South Korea’s U.S. exports to 5 percent of its GDP, including automobiles and electronics.

Overall, ANZ Research sees the highest risk for Asia’s trade-dependent economies, comprising Singapore, Malaysia, Thailand, Taiwan and South Korea, while the more domestically driven nations such as India, Indonesia and even China would be less affected.

“If the US imposes tariffs on China’s exports and its trade surplus declines by, say, 25 percent, it would shave only 0.6 percentage points off China’s GDP growth,” the Australian bank suggests.

Asian bonds are also at risk should U.S. interest rates move higher, while the potential flow of funds from emerging markets back to the United States would further weaken Asian currencies and increase borrowing costs for companies with U.S. dollar borrowings.

Security Costs

More worryingly, particularly for Seoul and Tokyo, is Trump’s call for U.S. security allies to shoulder more of the fiscal burden for U.S. military protection, including even acquiring nuclear weapons to counter the threat from communist North Korea.

“They have to pay . . . because this isn’t 40 years ago. It’s got to be a two-way street,” Trump said. “It could be that Japan will have to defend itself against North Korea.”

While Japan currently pays around 75 percent of the cost of hosting U.S. military bases, South Korea pays only 40 percent and would have to increase its defense budget substantially.

For Asian economies though, the hope is that Trump will be more of a “pragmatist and deal maker” than seen during the bitter election campaign.

“No matter the outcome of US elections, globally there appears to be a trend toward more protectionism, a growing distrust in political and economic systems and a continued strong ascent of China’s economic and political powers,” Fidelity International’s Gillian Kwek said.

Making America great again could benefit Asia too, but Trump has plenty of nerves to soothe before he gets the keys to the White House.

Article Link To The National Interest:

A Clinton-Free Democratic Party

With the era of the Clintons now over, Democrats should feel liberated.

By William McGurn
The Wall Street Journal
November 15, 2016

Blame Monica Lewinsky.

More precisely, for Democrats wondering how their party ended up in the ditch, Bill Clinton’s sexual dalliance with a then-22-year-old intern is an excellent place to start. Because it’s clear in retrospect that the most significant aftermath of l’affaire Lewinsky was not the subsequent impeachment of President Clinton but the death of the New Democrat movement that was until then driving his administration.

Now, there’s always been more than a little mythmaking about Mr. Clinton’s political moderation. Notwithstanding some campaign rhetoric and a stint as chairman of the Democratic Leadership Council when he was governor, there wasn’t much sign of the New Democrat in President Clinton until Newt Gingrich and his fellow Republicans gave him a drubbing in 1994. Before Republicans took the House and reset the national agenda with their “Contract with America,” the “moderate” President Clinton had reneged on his promise of a middle-class tax cut and tried to push through the unpopular HillaryCare bill.

But give the Big Dawg his due. When the Republicans took Congress, he had the wit to recognize he’d been too far in front of the American people. So instead of fighting the GOP agenda he tried to co-opt it, especially on the economy.

The result? With the exception of the North American Free Trade Agreement signed in 1993, the achievements of the Bill Clinton presidency date mostly from after the Republican revolution and include welfare reform and repeal of the Glass-Steagall restrictions separating commercial from investment banking. As Mr. Clinton himself put it in the 1996 State of the Union, “the era of big government is over.”

So what happened? In a word, Monica.

When the Lewinsky scandal broke, it was the New Democrats such as Connecticut Sen. Joe Lieberman who were Mr. Clinton’s chief critics within the party. By contrast, the Democrats who came to Mr. Clinton’s rescue were liberal stalwarts such as Reps. Barney Frank and John Conyers.

Democrats have been tacking left ever since. Yes, Barack Obama in 2008 campaigned as a moderate, but he never governed that way. What marks this year’s Democratic primary was how antediluvian it all was: a battle between Mrs. Clinton and an aging socialist, each trying to outdo the other in how much he/she would tax, spend and redistribute.

Now Mrs. Clinton has lost to an outsider many on both sides confidently declared could never be elected—and the recriminations are starting. This is standard fare for a party after an unsuccessful presidential campaign, and the GOP would be doing the same had Mr. Trump lost.

But a full accounting of the Democratic Party’s failed bid for the White House must also reckon with the party’s even more profound collapse at the state level. Notwithstanding the idea that the Obama coalition represents America’s future, the political reality is that over the Obama years Republicans more than doubled the number of state legislatures they control and now boast more governors than they’ve had in almost a century.

With Elizabeth Warren and Bernie Sanders holding the heart of the party, the room for the type of New Democrat rethink of the early 1990s seems small. Still, for Democrats the defeat of the Clintons should be liberating. Ever since the Monica scandals, Democrats have found themselves excusing the inexcusable on everything from sex in the Oval Office (his) to private email servers in the Chappaqua basement (hers).

When Mr. Clinton won the presidency in 1992, it helped that he was a governor from Arkansas and not a Washington fixture. Since then, however, the party has become much more Beltway oriented. At a time when the top two concerns of the American people are keeping us safe from attack and fixing a sluggish economy that has left record numbers of Americans out of work, the Democratic Party is preoccupied with overturning the Citizens United Supreme Court decision and upholding the Planned Parenthood view of abortion right up to the minute of birth. Outside a New York or D.C. newsroom, it turns out that these aren’t nearly as popular as Democrats and their allies in the newsrooms think.

The good news for Democrats is that the Clinton hold is now broken. For the next year or two, this will mean a spell in the wilderness where everyone points fingers. Even so, one day there will be a new campaign. And the departure of the Clintons opens the door for other Democrats, including Democratic governors not yet in office, who would never have had a prayer so long as Bill and Hillary dominated the show.

The challenge for the Democratic Party is this: Mrs. Clinton lost an election in good part because she repudiated the compromises with Republicans that accounted for her husband’s greatest achievements as president—but she never would have been nominated if she hadn’t.

Article Link To The Wall Street Journal:

How To Keep Steve Bannon Out Of The White House

By Jonathan Bernstein
The Bloomberg View
November 15, 2016

As Donald Trump builds his administration, it's important to distinguish between his legitimate decisions on personnel and policy -- even those that differ substantially from mainstream ones -- and the scarier actions that need to be resisted by everyone committed to democracy.

Take the first big announcements on filling jobs at the White House. As the new chief of staff, Reince Priebus, the Republican National Committee chairman, is not the worst possible choice.

But the president-elect also has chosen Steve Bannon as chief strategist and senior counselor. By announcing the two appointments together, Trump is suggesting the two may have comparable clout. Thus, Bannon is about to become one of the most influential people in the country.

Bannon is a longtime professional bigot, as documented by the Southern Poverty Law Center among others. When both the Anti-Defamation League and the Council on American-Islamic Relations -- two groups that have clashed with each other -- immediately condemn the same thing, then you know something is not normal. And, in this case, it is also not acceptable.

Bigotry isn't just immoral. It puts democracy at risk by threatening the equal citizenship of those who are targeted. Trump’s threats against the media and against his political opponents, by undermining legitimate opposition, are in the same category.

Win or lose, this is a battle worth fighting. But how?

White House staff positions, unlike cabinet and other executive-branch appointments, are not subject to the advice and consent of the Senate. That’s how it should be: These crucial positions are responsible only to the president, whereas the top officials in executive-branch departments and agencies have to answer to Congress as well as the president.

But outside opposition can raise the cost, perhaps even higher than Trump is willing to pay. Organized groups and individual constituents can demand that every member of Congress, in both parties and both chambers, go on record as supporting or opposing the selection of Bannon. It's true that presidents are entitled to the staff they want, but members of Congress routinely offer their opinions on such selections -- and so those opposed should push hard to get a response.

If Bannon is to be defeated, the Republican senators who opposed Trump in the election might be the key.

Though the Senate can't directly block Bannon, individual senators can place a "hold" on one or more Cabinet or executive-branch nominees and refuse to budge unless he is removed from consideration. Honoring these holds is at the discretion of the majority leader. If Senate Majority Leader Mitch McConnell tries to move ahead despite the objections, then Democrats and some Republicans could vote down Cabinet picks until Trump relents.

Even if Republican senators like Ben Sasse and Jeff Flake, who would not support Trump in the campaign, won't fight, it's still possible that opposition from organized groups could be enough to defeat this selection. Trump might be initially emboldened by this dissent, but then could grow impatient.

Even if unsuccessful, this is a fight worth having. It can put Trump on notice immediately that the political system will push back if he follows through on subverting democratic norms.

And, yes, this is one time when it would useful to clarify where everyone stands. A lot of Republicans resisted Trump's nomination, and a fair number were willing to stand against him even in the general election. Many of them will, naturally, support a lot of the policies he signs into law. Forcing a fight on Bannon will give them an early opportunity to demonstrate that they still oppose the anti-democratic excesses -- and keep anti-Trump liberals and conservatives on the same side of a fight, even as they part ways over (say) Obamacare and taxes.

Yes, the battle to keep this man from having a formal role in government is a long shot. But it's worth fighting.

Article Link To The Bloomberg View:

Sorry, Kids: America Isn’t A Safe Space

By Rich Lowry
The New York Post
November 15, 2016

Pity the anti-Trump protesters thronging the streets of American cities.

Apparently, no one ever told them that they live in a geographically, economically and ideologically varied nation and that about half of its inhabitants might support a Republican candidate for president. They mistook the country for the campus of Oberlin College.

The news that it actually isn’t arrived with the force of a thunderclap on election night. The shock of Donald Trump’s election has occasioned tears, rending of garments and days of protests showcasing the rank infantilism of the American Left.

Before Election Day, liberal commentators obsessed over Trump’s rumblings about not accepting the outcome and worried about his supporters lashing out. Trump shouldn’t have pre-emptively declared the election rigged, but the specter of Republican mayhem was always far-fetched.

When was the last time that GOP protesters ran out of control and burned down local business establishments? Tea Party rallies were famous for their orderliness — participants in a massive rally on the Mall in Washington, DC, even picked up their own trash.

It is left-wing protests that invariably devolve into law-breaking and so it was that the same kids who think Donald Trump is too divisive were soon smashing windows and throwing projectiles at police in behalf of their supposedly more open-minded vision of America. (The left’s street protesters act as if there is no social or political problem that can’t be addressed by hurling things at cops.)

The same media that would’ve denounced pro-Trump protests as a threat to democracy has treated the anti-Trump protests as a natural symptom of a divided country. Erupting in rage at the result of an election went from a grave offense against our system to the latest front in the battle for social justice right around the time that the Upper Midwest was called for Trump.

The level of self-awareness of the protesters isn’t high. Some hold signs reading, “This is what democracy looks like.” It is true that the right to peaceful assembly is a key aspect of any liberal democracy (even if some protesters need to work on the “peaceful” part), but as an illustrative exercise in democracy you can’t beat the national election last Tuesday that has so exercised anti-Trump protesters.

They have now adopted the slogan “not my president” — a phrase that the day before yesterday the Left considered a racist slur when hurled at President Obama.

The post-election mayhem could be written off as the work of an unruly fringe, if it weren’t that the Democratic Party is so beholden to the sensibilities of its cosseted youth, whom it mistakes for the shock troops of the future.

A party that considers it forbidden to say “all lives matter” because it will offend the enforcers of political correctness is a party that is going to have trouble appealing to Middle America.

One anti-Trump protester was seen the other day holding a sign reading, “Your vote was a hate crime.” It’s hard to imagine a better distillation of the coercive small-mindedness that prevails on college campuses. This attitude ensures a state of perpetual shock and outrage at the lived reality of a continental nation of more than 300 million free men and women.

The anti-Trump protests will in all likelihood continue. They aim to associate the president-elect with chaos and delegitimize him from the outset. But it is fully in Trump’s power, so long as he doesn’t show irritation or anger, to see that they backfire. One petulant tweet aside, he has struck a unifying tone, while it is his adversaries who are unhinged.

Trump’s critics are certain that he is the champion of a blinkered worldview. But the election and its aftermath show that it is the self-styled citizens of the world who need to get out more.

Article Link To The New York Post:

Europe’s Trump Panic

Maybe EU leaders should emulate his call for more defense spending.

By Review & Outlook
The Wall Street Journal
November 15, 2016

The European Union greeted Donald Trump’s election with gnashing of teeth and a typically chaotic “emergency summit” in Brussels over the weekend. Please, folks, get a grip.

This isn’t to say Europe doesn’t have cause for concern. The President-elect’s anti-trade convictions could be economically and politically damaging on both sides of the Atlantic. The Transatlantic Trade and Investment Partnership (TTIP) talks between the U.S. and EU may suffer the same fate as the Pacific trade talks did last week.

Mr. Trump’s soft spot for Vladimir Putin could exacerbate divisions between EU hawks and doves on the bloc’s response to Russian aggression in Ukraine. Mr. Trump also questioned America’s commitment to NATO, though he has since walked that back. One of his surrogates, Newt Gingrich, raised doubts about the U.S. commitment to smaller allies such as Estonia, which the former House Speaker described as a suburb of St. Petersburg.

But the EU bears some responsibility for alienating American voters who have trouble understanding the rationale for continued U.S. support for European security or free trade. One of Mr. Trump’s legitimate complaints about NATO is that only Estonia, Greece, Poland, the U.S. and U.K. meet the pact’s minimum requirement of spending 2% of GDP on defense.

In 2014 the newsweekly Der Spiegel noted that Germany, which spends about 1% of its gross domestic product on defense, would be able to deploy a grand total of 10 attack helicopters, 80 jet fighters and one submarine in a war. This in a country with a GDP of nearly $3.5 trillion. Meanwhile, Mr. Trump is the candidate who vowed to increase U.S. defense spending after years of declines under President Obama.

The EU also hasn’t covered itself in glory on trade. French and German politicians declared TTIP dead earlier this year even as the Obama Administration was trying to keep hopes for a deal alive. The EU did manage recently to conclude a free-trade deal with Canada, but only after barely overcoming a veto by Belgian dairy farmers. Decades of demagogy in Europe about the evils of all things American, from genetically modified foods to the “cowboy” instincts of U.S. foreign policy, haven’t exactly fostered a spirit of trans-Atlantic amity.

The truth is that many of Mr. Trump’s foreign-policy leanings remain a mystery, and Europe could help Atlanticists on both sides of the ocean by stepping up its defense commitments and reaffirming its ties to the U.S. rather than abandoning them.

A start would be to ditch the notion that a post-Trump NATO can be replaced with a new EU defense force, as EU foreign-policy chief Federica Mogherini and German Defense Minister Ursula von der Leyen proposed last week. The EU may one day scrape together a viable unified military force, but for now this scheme would replace an existing alliance with a fantasy. Previous efforts have failed, and there’s little reason to believe a new one would do more than give American isolationists another alibi to walk away from NATO.

Equally helpful would be a less vindictive EU approach to Britain’s exit from the Union. Many EU leaders seem eager to adopt antigrowth trade barriers as the cost of inflicting political punishment on British voters. That’s not a recipe for economic success at home or credibility with other partners.

Europeans like to lecture Americans about their political choices even as Americans always seem to be coming to Europe’s rescue. Before panicking about Mr. Trump, perhaps Europe’s leaders should meet him.

Article Link To The Wall Street Journal:

Asia Stocks Under Pressure As Dollar Stays Near 14-Year High

By Saikat Chatterjee 
November 15, 2016

The U.S. dollar held near a 14-year high on Tuesday and Treasury yields extended their rise as investors braced for stronger inflation in the United States amid expectations of expansionary fiscal polices under Donald Trump's presidency.

The combination of the two have derailed Asian currencies and equities, particularly in South Korea, Taiwan and Indonesia, which have seen big inflows this year, especially after the shock referendum vote by Britain to exit the European Union in June.

MSCI's broadest index of Asia-Pacific shares outside Japan was broadly flat after falling nearly 5 percent since Trump's shock victory at the U.S. presidential elections last week. European markets were expected to open steady.

Indian stocks and Australian shares led regional losers with declines of 1.4 and 0.4 percent respectively. Hong Kong stocks rose 0.5 percent, boosted by expectations of strong earnings from index heavyweight Tencent.

"People are already pricing in the Trump presidency and the repercussions on their own economies," said Joseph Roxas, an analyst at Manila-based Eagle Equities.

"The (regional) currencies are recovering, so the markets are recovering as well after quite a long down period. We should expect a little rally after such a big drop."

On a trade-weighted basis, the dollar index on Monday vaulted above its January peak to hit 100.22, its highest since early December 2015.

On Tuesday, it was steady at 99.922.

Dollar strength and rising U.S. yields have fueled capital outflows from emerging markets. Foreign investors pulled out 950 billion won ($812.52 million) from Korean stocks and pumped in 397.4 billion won ($339.89 million) into bonds between Nov. 9-14.

Analysts expect more gains for the greenback in the short term, resulting in further headwinds for Asia.

Though emerging market equities have staged a comeback in the third quarter, their performance has sharply diverged since last week, putting developed equities comfortably ahead.

"The immediate driving force is the anticipated policy mix in the U.S.," Brown Brothers Harriman analysts said in a note to clients.

They said most economists are "focusing on either the higher U.S. interest rates and a likelihood of a somewhat more aggressive Fed tightening cycle, or the possibility of a dramatically more stimulative fiscal stance. We see the combination (the policy mix) as an exceptionally potent force that will continue to propel the dollar higher."

Despite the general air of caution over Asian markets, investors are eyeing some opportunities such as banking stocks in Hong Kong which would benefit from any Trump-led deregulation in the financial sector.

Some investors were also considering the Indian rupee, which is relatively less exposed to any flare-up in global trade protectionism than others.

In currency markets, the dollar was trading at 107.88 yen after hitting its highest level in more than five months overnight. The less volatile Chinese yuan plunged to its lowest levels in nearly eight years to 6.8641 after a weak fixing.

The dollar has been on a tear since Trump's shock victory triggered a massive sell-off in Treasuries.

The large moves in markets has been stoked by expectation that Trump's promised infrastructure spending and tax cuts will spur higher U.S. growth, pushing up inflation as well as borrowing costs.

Yields on the U.S. 10-year Treasury notes climbed to their highest since January to 2.23 percent on Monday, while 30-year paper reached 3 percent.

Just two days of selling last week wiped out more than $1 trillion across global bond markets, the worst rout in nearly 1-1/2 years, according to Bank of America Merrill Lynch.

In the oil market, Brent crude rose 1.6 percent to $45.14 a barrel, while U.S. crude climbed 1.87 percent to $44.13 on expectations of falling shale output.

Article Link To Reuters:

Multinational Firms Dumping Venezuela Operations In Fire Sales

By Corina Pons and Eyanir Chinea 
November 15, 2016

Multinational companies are selling their Venezuelan operations at hefty discounts - or even giving them away - as they to seek to escape the OPEC nation's soaring inflation and chronic supply shortages.

Six firms, including General Mills and oil producer Harvest Natural Resources, have sold operations for as little as half their assessed value on the companies' books, according to securities filings and interviews with a dozen people knowledgeable about the deals.

One company, U.S. autoparts-maker Dana, last year sold its debt-laden Venezuela operations to a local buyer for no cash compensation. Two multinational corporations - Clorox and Kimberly-Clark - chose instead to abandon their operations here.

Sell-offs by foreign companies could further isolate Venezuela's economy, which is already reeling from low oil prices and an unraveling socialist system. The fire-sale trend will likely accelerate as the crisis continues to cripple the local operations of more multinational firms, according to two private-sector sources familiar with similar deals in the works.

Firms acquiring such distressed operations, however, could reap huge gains if the country's economy improves.

Corimon - a Caracas firm best known for production of paint - in May purchased the local operations of Bridgestone Corp, the world's largest tire-maker. Corimon will continue to produce tires under the Firestone brand.

Carlos Gill, president of Corimon's holding company, declined to disclose the sale terms but called the timing of the purchase "an opportune moment" for his company.

Bridgestone declined to comment.

The sold-off operations, in some cases, were all but defunct before the deals because of chronic shortages of raw materials ranging from sugar to steel bars, as well as triple-digit inflation and difficulty exchanging a crashing local currency for dollars.

"A company that isn't operating is a corpse, and the vultures start to circle it," said Juan Pablo Olalquiaga, president of Venezuelan industry association Conindustria.

Sold 'For No Consideration'

President Nicolas Maduro has blamed the country's woes on an "economic war" launched by U.S. business elites and encouraged by Washington politicians. Maduro has said companies are intentionally slowing production or hoarding goods to destabilize his government.

The Venezuelan government's Information Ministry did not respond to requests for comment.

For years, Venezuela operations generated major revenue for Fortune 500 companies because high oil prices allowed the government to sell subsidized dollars through its exchange control system, boosting companies' local buying power. But the 2014 oil price crash left Venezuela short of dollars because the country depends on oil for almost all its foreign exchange.

More companies are deciding the country's challenges now outweigh any benefits. General Mills - owner of locally popular Diablitos Underwood deviled ham - reported in a filing earlier this year that it had taken a $38 million pre-tax loss on the sale of its local unit to an undisclosed third party.

Negotiations dragged on for nine months as the economy tanked, forcing General Mills to steadily lower the price, according to two sources with direct knowledge of the talks. General Mills did not disclose the sale price and declined to comment to Reuters.

Insurer Liberty Mutual said in statement last year that it was selling its local affiliate, Seguros Caracas, to a local entrepreneur, Humberto Gil. One source familiar with the deal described the arrangement as a "gift."

Gil did not respond to requests for comment on the sale, which still needs approval from Venezuela's insurance regulator. Liberty Mutual did not respond to requests for comment.

In 2014, Danish conglomerate The East Asiatic Company (EAC) sold its Venezuelan food business, Plumrose, to Liechtenstein-based Valartis Opportunities Fund. Neither company responded to requests for comment.

U.S. auto parts firm Dana said in a 2015 filing that it had sold its local affiliate "for no consideration" to a Venezuelan firm called Manufacturing and Logistics Solutions.

While auto sales soared during the oil-boom era of late socialist leader Hugo Chavez, they dropped 80 percent in 2014 as Venezuela's economy ran into hard times.

Dana sold the company for no payment, though it did secure an agreement that Dana would continue to supply raw materials and that the buyer would assume debts.

"After 49 years here, Dana couldn't exactly walk away from the company," said Jose Hernandez, who was on the board of directors of Dana's local unit and stayed on after the sale.

Writing Off Venezuela

Some companies did decide to walk away, an unusual move.

Despite mounting losses, companies rarely shut down businesses in Venezuela because they can face government accusations of economic sabotage or have managers imprisoned.

But Cleaning supplies company Clorox and personal hygiene products manufacturer Kimberly-Clark shuttered their operations as their facilities nearly ground to a halt for lack of raw materials.

Clorox, which left in 2014, said in a statement at the time that its Venezuela business was "no longer viable." Kimberly-Clark suspended operations this year, citing inability to obtain raw materials or hard currency.

Both were taken over by the Venezuelan government and have resumed operations under state control. Jorge Arreaza, Vice President at the time, accused Clorox of setting an "evil example" by leaving. Labor Minister Oswaldo Vera said Kimberly Clark threw "thousands of workers onto the street."

Both companies declined further comment on their Venezuela exit.

Other companies are writing down the value of their Venezuela operations through an accounting mechanism known a deconsolidation, which could signal that more sell-offs are in the offing.

The maneuver, already used by more than a dozen multinationals, involves a one-time write-off of the entire value of a company's subsidiaries. It is meant to avoid a constant trickle of balance-sheet losses caused by repeatedly slashing the worth of assets that are valued in Venezuelan currency.

It also creates incentives for Venezuelan buyers to put in bids for local factories and other assets.

Bridgestone, before selling its Venezuela operations to Corimon in May, deconsolidated its Venezuela operations in 2015 and reported an associated loss of $350 million.

Ford Motor Co and Oreo-cookie manufacturer Mondelez International Inc are among those who have written off their assets because of severe operational difficulties.

Ford told Reuters it remains "hopeful that the government will resolve local issues, and we can then begin to support the Venezuelan people with additional production." Mondelez said it would continue to manufacture products "to the extent that we can locally fund operations and access necessary materials and labor."

Government Intervention 

Last month's sale of the Venezuela operations of Harvest Natural Resources offered a rare opportunity for local investors to gain a foothold in the Venezuela oil industry, which is dominated by state-run firm PDVSA and large foreign energy companies.

PDVSA has for years been delaying payment to business partners, including Houston-based Harvest. Struggling to make up those losses, Harvest in 2013 negotiated a $400 million asset sale with Petroandina Resources Corp, a unit of Argentina's Pluspetrol Resources Corp, according to a Harvest filing from March.

Harvest Natural Resources said in an August filing that Venezuelan government blocked the deal. Oil Minister Eulogio Del Pino told Reuters in 2015 the government rejected the sale because the buyers did not have sufficient financing capacity.

Harvest declined to comment, but the company said in its filing that the deal's failure made clear that the government would not approve acquisitions by buyers based outside Venezuela.

The company in October ended up successfully selling its operations to Delta Petroleum, which is owned by Venezuelan businessman Oswaldo Cisneros.

Cisneros did not respond to requests for comment.

Principally known as a telecom magnate, Cisneros is making his first forays in to the oil business this year - and got a considerably better deal that what Petroandina negotiated, according to Harvest filings. Cisneros acquired the assets for$143.2 million, including legal fees and settling of Harvest debts, or about a third of what Argentina's Pluspetrol had agreed to pay.

Article Link To Reuters:

Oil Prices Rise On Falling Shale Output, Renewed Hopes Of OPEC Cut

By Mark Tay 
November 15, 2016

Oil prices rose around 2 percent on Tuesday to move away from multi-month lows struck the day before, pushed higher by expectations of falling shale output and renewed optimism that OPEC will deliver on touted production cuts.

U.S. crude futures for December delivery CLc1 had climbed 90 cents, or 2.1 percent, to $44.22 a barrel. They struck their lowest in nearly two months the session before.

January Brent futures LCOc1 were up 81 cents, or 1.9 percent, at $45.24 per barrel.

Prices were buoyed by expectations that U.S. shale oil production will in December fall to its lowest since April 2014 at 4.5 million barrels per day (bpd).

"Crude oil prices stabilized after several days of continued falls," Australian bank ANZ said in a note on Tuesday.

"Headlines around increasing OPEC production remained prevalent, although the focus switched to final diplomatic efforts from nations to agree to a production cut."

Saudi Arabia's energy minister said it was imperative for the Organization of the Petroleum Exporting Countries to reach a consensus on activating a deal made in September to curb production, according to Algeria's state news agency APS on Sunday. OPEC members are due to meet later this month.

Also supporting oil markets was news that Harold Hamm, chief executive at U.S. independent oil producer Continental Resources, could serve as energy secretary when Donald Trump becomes U.S. president.

Hamm, if nominated, would be the first U.S. energy secretary drawn directly from the industry, a move that would jolt environmental advocates but bolster Trump's pro-drilling energy platform.

U.S. crude prices are also likely to be supported by short-covering, said Philips Futures' investment analyst Jonathan Chan.

"The current active contract (for U.S. crude) is expiring. The last trading day is next Monday, so some oil traders are already starting to close out their positions to roll over," said Chan, based in Singapore.

Elsewhere, Iraq will cut exports of Basra crude from its southern ports to 3.16 million bpd in December, compared with 3.24 million bpd in November. The allocated December volume will be the lowest in four months.

Meanwhile, returning Libyan crude oil production could cap market gains.

A tanker carrying the first freshly produced cargo of Libyan crude to be exported since the Ras Lanuf terminal reopened in September left the port on Monday. The reopening of the eastern ports has helped Libya's national production double to around 600,000 bpd.

Article Link To Reuters:

Trump’s Tangled Web Of Family And Business Ties

By Timothy L. O'Brien
The Bloomberg View
November 15, 2016

On Friday, Donald Trump named his three eldest children -- Donald Jr., Ivanka and Eric -- along with his son-in-law, Jared Kushner, to his presidential transition team. That group will direct the appointment of about 4,000 new people to posts that the White House oversees within the federal government.

Those appointments are where the president-elect knits together people with his policies; people who get those jobs are by nature beholden to Trump’s transition team.

Membership on the transition team also gives the eldest Trump children skin in the policy game, despite months of assurances from their father and others that there would be a bright, impermeable line separating them -- and their financial stewardship of the Trump Organization -- from the inner workings of the White House.

Donald Trump himself already brings ample financial and business conflicts of interest to the White House, as I’ve noted before in columns in June and last Friday. And President Trump, like all presidents, will be free from the conflict-of-interest laws that proscribe the financial dealings of most other members of the executive branch.

That arrangement will give the future president the ability to continue engaging in the real estate and licensing deals on which he has built his fortune -- and allow him to keep his promise of forgoing the $400,000 salary that the White House’s chief executive earns annually.

Of course, if the value of your name, on which your company is built, soars as a result of being president, then giving up $400,000 isn’t quite the trade-off it appears to be. If you can craft public policies so they benefit your businesses and allow you to make even more money, well, then the trade-off evaporates further.

Instead of using laws to keep presidential greed and self-interest in check, the U.S. has relied on two voluntary traditions: disclosure (via the release of presidential tax returns) and distance (by placing presidential assets and enterprises in a blind trust).

Trump has already spent more than a year demonstrating that he has no interest in releasing his tax returns. Bringing his children onto his transition team is the first formal indication that distancing the Trump Organization from the Oval Office isn’t a high priority.

In a “60 Minutes” interview aired Sunday, Trump said he didn’t care if his controversial presidential bid damaged his business brand. “This is big-league stuff,” he said. “I don’t care about hotel occupancy. It’s peanuts compared to what we're doing.”

When Lesley Stahl of “60 Minutes” asked the eldest Trump children if they were going to stay in New York and run the family business, Donald Jr. and Eric quickly nodded “yes.” Ivanka was more equivocal, saying she would advocate for issues that animate her while keeping her Trump Organization job, but that she would not be part of the Trump administration. (She and her father have no choice anyway; an anti-nepotism law -- put in place after John F. Kennedy appointed his brother Robert as attorney general during his presidency -- prevents Trump from giving her any government job that the White House oversees.)

Trump’s three eldest children are all involved in managing properties globally for their father’s boutique operation. That portfolio largely consists of commercial and residential real estate, along with licensing and development deals related to golf courses and hotels. Eric has focused on running the golf courses and the family vineyard in Virginia; Ivanka has taken the lead on the family’s hotel operations and manages her own fashion business, while Donald Jr. oversees the family’s existing real estate holdings.

Trump surrogates insist that concerns about conflicts of interest are overblown. Rudolph Giuliani, a senior Trump adviser and prospective cabinet member, told CNN that Ivanka and her two eldest brothers won’t be offering policy advice to Trump come January, though he conspicuously avoided commenting on what might happen over the next two months.

“There will have to be a wall between them with regard to government matters,” Giuliani told CNN.

Well, not between all of them. Giuliani said that Trump’s son-in-law, Jared Kushner, has his own business interests apart from the Trump Organization, which puts him in a “different situation” regarding conflicts than Trump’s eldest three children.

Presumably, Giuliani means that Kushner won’t be conflicted because he’s only a member of the Trump clan by marriage. Or perhaps he means that Kushner isn’t conflicted because he'd only talk business with his wife, Ivanka, while talking policy with his father-in-law, President Trump. Or perhaps Giuliani means Ivanka wouldn’t have conflicts because she’d talk business with her husband and brothers, while only talking policy with her father.

That’s all very confusing. Perhaps intentionally so. Ever since the scandals of the Watergate era, presidents have been much more forthcoming about how they manage their finances. Before Trump gets to Inauguration Day, he would do well to spell out the rules he and his family plan to lead and live by.

Article Link To The Bloomberg View:

China's Rising Prices Are A Sign Of Trouble

By Christopher Balding
The Bloomberg View
November 15, 2016

By December 2015, China had endured four years of declining producer prices. Coal was down 38 percent on the year, and steel down 31 percent. That month, the Communist Party hit on a new plan for reversing this dynamic. They called it "supply-side reform," and it was widely perceived as an attempt to eliminate the surplus capacity at mines and mills that was depressing prices and making debt difficult to repay.

Almost immediately after these proposed reforms hit the press, prices started going up. From Dec. 15 through the end of October, coal prices surged 114 percent and steel rose by 47 percent, more than making up for the previous year's losses. The increase was so pronounced, in fact, that the country's top economic planner actually asked miners to cap prices next year.

The problem is that these price increases had almost nothing to do with the fundamentals of supply and demand. And the government's attempts to reassert control are likely to make things worse.

The price surge had a number of causes. First, Beijing turned on the credit spigots. Year-to-date total social financing is now up 13 percent, compared to 6.7 percent growth in gross domestic product. With a high percentage of new credit going to public-works projects and real estate, much of it passed through into primary commodities -- that is, coal and steel.

At the same time, the central government was pulling out the stops to cut operating capacity. It set bold reduction targets, created an asset-management firm to consolidate mining companies and restricted working days at coal mines. It even warned regional governments that they'd be "seriously punished" if they failed to follow through. There's plenty of debate about how much reduction has actually occurred. But it's clear that they've made some significant progress.

By turning on the credit taps while attempting to restrain supply, however, Beijing telegraphed its intent to the market, thereby creating arbitrage opportunities. Investors keen to profit from the expected surge in activity piled into wealth-management products targeting basic commodities. As a result, trading turnover has surged enormously relative to consumption: Trough-to-peak daily turnover grew by more than 8,900 percent in steel. With supply flat and demand falling, prices were still pushed higher by traders and wealth managers.

All this is good news for coal and steel firms, but bad news for everyone else. Consumers are suffering as electricity prices rise. Energy companies, heavily reliant on coal, are losing money and lobbying for a price cap and expanded output. Construction firms are dependent on cheap steel to make their projects profitable. As always, propping up one sector in the economy comes at the expense of others.

Capping prices isn't the answer. It creates the central planner's dilemma: how to dictate market moves without forcing the trade-offs that market discipline imposes? If the implied price is above the market-capped price, firms will find a way to hide payments to account for the discrepancy. Chinese companies routinely get around capital controls; it isn't hard to believe they'd do the same under price caps.

A better strategy is to tighten money and credit. Until the government manages that, firms will continue making poor decisions, politics will determine lending and financial markets will be prone to bubbles. The government also needs to relax control over the economy more broadly. China has thousands of industries and a work force larger than most countries. Its markets can't be calibrated by technocrats forever.

Article Link To The Bloomberg View:

Electric Jaguar SUV Highlights Auto Industry's Cross Currents

By Alexandria Sage
November 15, 2016

A lot of strange things can be found in Los Angeles, but a battery-powered Jaguar sport utility vehicle is something new even for Southern California.

The all-electric Jaguar I-PACE concept SUV, a preview of a vehicle Jaguar intends to start selling within two years, highlights how technology, regulation, shifting consumer tastes and cheap gas are converging to force automakers out of their traditional lanes.

Show visitors this week will also see the largest-ever Mini car offered by Germany's BMW AG and a bevy of trucks and SUVs that Detroit automakers General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles NV will promote in luxury electric car maker Tesla Motors Inc's home state.

FCA's Italian Alfa Romeo brand will also feature a new SUV, as will Germany's Volkswagen AG (VOWG_p.DE), which is trying to rebuild its image in California after the scandal over its cheating on diesel emissions tests.

With a mandate that zero-emission vehicles make up 15 percent of automakers' California sales by 2025, the state is driving carmakers to roll out carbon-free vehicles in an environment of uncertain future demand. At the same time, cheap gasoline is propelling a shift among U.S. consumers toward larger vehicles, particularly SUVs.

The move by Jaguar is a response to those conflicting pressures, executives said.

Recent company research indicated one quarter of Jaguar drivers would consider a battery-powered vehicle.

"There's no doubt the market is shifting," said Joe Eberhardt, CEO of Jaguar Land Rover North America. "There are differing views of how rapidly that shift is happening and to what degree. We want to be prepared."

Twenty percent of Jaguar's North American sales come from California. The brand is owned by India's Tata Motors.

"It's a very fluid time in the industry and I don't think there is a right or wrong or specific answer to what the next 10 years will be," Eberhardt told Reuters. "Which means we have to be flexible enough...to see what direction the market will take."

Jaguar has enjoyed strong U.S. sales of its 2017 F-PACE SUV, helping drive a 93 percent rise in year-over-year U.S. Jaguar sales from January until October. Until the F-Pace debuted this year, Jaguar had sold only sedans and coupes, leaving the SUV business to Tata's Land Rover brand.

The electric platform of Jaguar's new SUV available in 2018, with its 90kWh lithium-ion battery pack and targeted range of 220 miles, had to be built from the ground up.

Co-development with Tata Motors, itself working on electric and hybrid vehicles, was not feasible given the differences between market segments and needs, Eberhardt said.

The I-PACE targets the same wealthy, environmentally aware consumers now driving Tesla's Model X SUV. But Eberhardt said Jaguar's vehicle will be "a much lower price point" than the most premium Model X offering, which fully loaded can cost about $130,000.

Other luxury carmakers from Audi to BMW and Mercedes-Benz have announced, but not yet launched all-electric SUVs, and Eberhardt said he believed Jaguar would beat them to market.

"Out of the established car makers, we really are the first. Which has advantages but on the other hand it's unchartered territory."

Article Link To Reuters:

The Trump ObamaCare Panic

The GOP shouldn’t blow itself up over the meaning of ‘repeal.’

By Review & Outlook
The Wall Street Journal
November 15, 2016

Democrats are already panicked that Donald Trump will repeal ObamaCare and throw millions of people off the subsidy rolls, while some conservatives seem panicked that the President-elect will renege on his campaign promises and millions of people won’t be thrown off the entitlement. Like most inflamed political questions after Mr. Trump’s victory, the health-care debate would benefit from some perspective.

“Either ObamaCare will be amended, or repealed and replaced,” Mr. Trump told the Journal last week, and on “60 Minutes” on Sunday he added that “we’re not going to have a two-year period where there’s nothing. It will be repealed and replaced.” Mr. Trump is being more subtle than his critics.

The most important point is that the businessman’s election has stopped the entitlement cold. Until Mr. Trump intruded, liberals believed that the Affordable Care Act was the end of history, or the beginning of the end, and it would be a steady march toward single payer and even more central planning, with them in command.

But now the public has seen the results of their commands—premiums are soaring by 25% on average next year nationally and far more in some states. The cascade of insurers quitting the unprofitable exchanges, lower-than-expected enrollment and narrowing provider networks are contributing to the law’s woes. Liberals have been wrong on all the major health-care questions. They said health costs would fall, people could keep plans and doctors they liked, and voters would learn to love ObamaCare.

Instead, ObamaCare’s manifest failures have primed voters for new reform alternatives, and almost any change in policy direction would improve on the status quo. Even some Democrats were privately discussing reopening the law under Hillary Clinton.

So far most of the debate has been focused on the insurance mandates to cover birth control, pre-existing conditions and allowing adult children to stay on their parents health plan until age 26, as if those were the entire bill. The first and third mandates increase costs at the margins but also happen to be popular. Our guess is that insurers would continue to offer them even if not required by law.

The notion that pre-existing conditions cannot be covered without a federal command is a liberal myth meant to frighten the most vulnerable, and cancer patients are not going to be turned away at hospital doors. But the ObamaCare mandate-subsidize-regulate program is not the only or best option to help the sick, as reality has exposed.

The details are technical and involve the design of health insurance contracts, but the main point is that there are reasonably healthy markets—like employer-sponsored plans, Medicare Advantage and the Medicare drug benefit—that do not exclude the sick. ObamaCare’s high and rising costs are due to its architecture and attempt at income redistribution, not to some economic inevitability.

As a candidate in 2008, then Senator Obama recognized that the fundamental problem with the insurance market is that it’s too expensive for many consumers. He said that you don’t solve homelessness by passing a law that requires people to buy houses. It’s a shame he abandoned that philosophy in the White House.

The reason so many people haven’t joined ObamaCare is that they’ve concluded that its health plans don’t offer value for the money, even if they qualify for subsidies. Deregulating and devolving power to states and consumers to innovate and experiment would allow insurance products and prices to reflect what consumers want. Unchaining health care from Washington would also increase competition and lure more insurers back into the individual market. We’d favor replacing ObamaCare’s complex subsidy structure with a refundable tax credit for people who lack job-based coverage.

One lesson of ObamaCare that Republicans should recognize as they debate a replacement is the need to minimize disruptions. Medicine is among the most personal and visceral of political topics, and voters tend to be sensitive to government-created turmoil in their own lives. Democrats learned this in their 2010 and 2014 midterm debacles, or at least they should have.

Another lesson is to approach the debate with humility and build a stable and durable political consensus. Democrats never even tried this in 2009 and 2010, and they imposed a single “comprehensive” solution on a large and diverse country of 320 million people. Other than ObamaCare, there’s no law that says Texas and California must have the same priorities.

House Republicans unified this year around a smart set of health-care reforms in their “Better Way” plan, and let’s hope they will avoid a friendly-fire massacre over the meaning of “repeal.” Even Senate Democrats may have an incentive to cooperate because so many of them are up for re-election in 2018 in states Mr. Trump won.

One virtue of his election is how it is already breaking up fossilized political certainties and thus expanding policy opportunities. The Affordable Care Act is vulnerable because it is failing, and the Republican goal should be to put patient-centered, higher quality and truly affordable coverage within closer reach for all.

Article Link To The Wall Street Journal:

Shale Firms See 'Light At The End Of The Tunnel'

By Ernest Scheyder
November 15, 2016

U.S. shale producers are redeploying cash, rigs and workers, cautiously confident the energy sector has turned a corner after Donald Trump's election victory and OPEC's recent signal that it plans to curb production.

The downturn produced a leaner, more efficient U.S. shale industry that was forced to develop and quickly adapt new technology to compete with conventional oil supplies during a two-year period of depressed prices.

"You're starting to see a little bit of light at the end of the tunnel," Ryan Lance, chief executive of ConocoPhillips, the largest independent U.S. oil producer, said in an interview last week. "We're beginning to put capital back to work, but we're being cautious."

Specifics of the deal by the Organization of the Petroleum Exporting Countries - especially what it means for each member - need to be finalized at a meeting later this month in Austria. But the tentative agreement indicated OPEC kingpin Saudi Arabia is keen to end a damaging two-year oil price war. That prodded U.S. producers to action. [nL8N1C42M9]

The U.S. oil drilling rig count has grown 6 percent since OPEC's September accord, according to oilfield analytics firm NavPort, with additions across the country's top shale fields including the Permian (7 percent) and the Bakken (17 percent).

Also, Trump's victory is expected to bring to the White House an advocate for oil and gas drilling, who will slash regulations and encourage new energy industry development. [nL1N1DA35B]

Occidental Petroleum Corp, Chevron Corp, Pioneer Natural Resources Co and ConocoPhillips are among those adding rigs or preparing to do so.

Oasis Petroleum Inc, a major North Dakota producer, bought 55,000 acres last month from SM Energy Co for $785 million, a bullish bet on the future of oil prices. The company also plans to add rigs. [nFWN1D90K9] [nL4N1CO3K9]

"This all reflects more of a confidence around our business plan in a lower oil price environment," Oasis Chief Executive Tommy Nusz said in an interview last week.

"We feel like we can hold our own now in a $40 (per barrel oil) world and grow in a $45 to $50 world."

Citing its technology and other improvements, EOG Resources Inc raised its growth projections and now expects to boost output 15 to 25 percent each year through the end of the decade if oil prices stabilize near $50 per barrel.

"After two years of this down cycle, we are more than ready to resume higher-return oil growth," EOG CEO Bill Thomas told investors in early November.

All that activity will have an effect once things ramp up.

U.S. unconventional shale oil production is expected to dip 13 percent this year from 2015 levels and continue to slip into 2017 before rebounding 11 percent in 2018, according to data from the U.S. Energy Information Administration.

Investors Eye Potential 

Investors in the oil sector are also bullish, eager to see returns grow after lagging for several years.

"We fundamentally feel that where energy prices are at now are below where they are going to be at some point, and below their long-term equilibrium level," Tony James, president of private equity investor Blackstone Group LP, told reporters in late October.

James' outlook reflects a broader perception among shale oil producers and their financiers that the industry has turned a corner for the better, analysts said.

U.S. oil producers have launched initial public offerings, with Extraction Oil & Gas Inc and WildHorse Resource Development Corp filing this fall alone.[nL4N1CH4JV] [nL4N1DB6QR]

That is good news not only for the oil industry but also for its largest lenders, including Wells Fargo & Co and Bank of America Corp.

Oil "companies are now entrepreneurial and they've cut costs to become viable at these prices," a senior executive at one of the top private equity firms in New York said last month. The executive declined to be named as he is not authorized to speak to the media. "Those people are going to start producing again."

To be sure, a resurgence in the U.S. oil industry must still contend with market fundamentals, including a large oversupply and sluggish demand that neither Saudi Arabia nor President-elect Trump can fully control.

America's oil inventories rose by more than 14 million barrels in late October, the largest one-week increase on record and one linked to large production of shale oil and natural gas.[nL1N1D30QB]

If American oil companies continue to increase production, they run the risk of abrogating any OPEC output cuts later this month and pushing down prices on their own accord.

"Obviously if we pull back to $25 per barrel, that will have an impact upon our investing," said Al Walker, CEO of Anadarko Petroleum Corp.

Yet demand for the light, sweet oil produced across American shale fields continues to rise globally. U.S. crude oil exports hit an all-time high in September, according to U.S. Census data. [nL1N1D50O7]

And many companies have hedged for 2017 at least, taking advantage of the oil price rise this year. That emboldens executives to boost budgets.

Pioneer, considered by Wall Street analysts one of the best-run U.S. shale oil producers, has hedged 75 percent of its 2017 output at an average price around $50 per barrel.

"The industry is looking forward to a tepid recovery in early 2017," said John Chisholm, CEO of Flotek Industries Inc, which supplies chemicals used in fracking and other oilfield products.

Demand for Flotek's CnF, a nontoxic fracking fluid, during the first nine months of 2016 has already eclipsed 2015 sales volumes, with projections higher for 2017.

"These oil producers have reconstructed their business so they can make money at these low oil price levels. They're pressing forward."

Article Link To Reuters:

Mexico Says It Has The Tools To Fight Financial Volatility

By Dave Graham
November 15, 2016

Mexico has an array of tools to face down financial volatility in the wake of the U.S. presidential election, Finance Minister Jose Antonio Meade said on Monday, after Donald Trump's victory sent the peso currency MXN=D2 into a tailspin.

The government can use a windfall stemming from the Mexican central bank's foreign exchange gains on the peso, as well as some 110 billion pesos ($5.3 billion) in its oil stabilization fund, to ensure public finances are stable, Meade said.

"And we're facing this situation with well-capitalized banks," Meade said at an event in the central city of Puebla.

Trump's win sparked fears because of threats he made in the campaign to dump the 1994 North American Free Trade Agreement (NAFTA) if he could not recast it in the United States' favor, sending the peso to a record low of more than 21 per dollar.

NAFTA is a pact between the United States, Canada and Mexico, which sends 80 percent of its goods exports to the U.S. market.

Meade also noted the Mexican government had refinanced its 2017 debt maturities, meaning it can cover its financing requirements for next year in the domestic market.

"Mexico's public debt ... is something we are revising and discussing with the market," the minister said.

Speaking earlier at the same event, Mexico's Economy Minister Ildefonso Guajardo said he was sure Trump would not ditch NAFTA and noted that new chapters should be added to the trade deal to reflect economic changes over the past 20 years.

An updated NAFTA could cover e-commerce, protection of data and intellectual property in biotech medicine, promoting value chains at small- and medium-sized firms and taking a regional stand against unfair practices such as steel dumping, he added.

Mexico has in recent months slapped tariffs on Chinese steel imports, and one of Trump's top trade advisers, Dan DiMicco, former chief executive of U.S. steelmaker Nucor, has pointedly criticized China for dumping cheap steel on the world market.

If Mexico and the United States were to align policies on such issues it would chime with trade experts arguing for the NAFTA partners to pursue a more regional approach to safeguarding the competitiveness of North America.

Guajardo himself spoke of the need to defend the NAFTA region in an interview with Reuters last week.

Article Link To Reuters:

Snowden Warns Of Increase In U.S. Domestic Spying After Trump Victory

By Hugh Bronstein
November 15, 2016

Donald Trump's election as U.S. president raises concern that Washington may increase the intrusiveness of domestic intelligence gathering, former U.S. spy agency contractor Edward Snowden said on Monday, warning that democratic checks and balances were losing ground to authoritarianism.

Snowden lives in Moscow under an asylum deal after he leaked classified information in 2013 that triggered an international furor over the reach of U.S. spy operations. He spoke at a teleconference hosted by Buenos Aires University's law school.

"We are starting to substitute open government for sheer authoritarianism, a government based not upon the principle of informed consent granted by people who understand its activities but rather a trust in personalities, a trust in claims, a trust in the hope that they will do the right thing," Snowden said.

Washington pledged not to engage in indiscriminate espionage following Snowden's 2013 disclosures. But Snowden questioned if that policy could be modified by new officials "who have a very different set of values and can govern in the dark."

"If government does actually win our trust, because they go for some years and they do operate in a way that we should support, what happens when it changes?" he asked.

"This is kind of the challenge that we're facing today in the United States with the result of the last election."

Supporters see Snowden as a whistleblower who boldly exposed government excess. But the U.S. government has filed espionage charges against him for leaking intelligence information.

Trump, who scored an upset win over Democrat Hillary Clinton in last Tuesday's election, broke with many in his own Republican Party during the campaign and emphasized his success as a businessman and reality TV show star. He promised sweeping security measures to deal with the threat of attacks on the United States.

His election was greeted with concern from the American Civil Liberties Union over statements he made during the campaign supporting increased surveillance of U.S. Muslims, mass deportation of illegal immigrants, reauthorization of waterboarding and changing libel laws to increase press restrictions.

Snowden, asked if he thought the election of Trump, who has praised Russian President Vladimir Putin as a strong leader, might increase chances of him being pardoned by the U.S. government, responded: "Who knows?"

Article Link To Reuters:

'OPEC Cut Likely, $70 In Sight For 2017'

Supply glut that hammered prices is gone, trader says in note; ‘The noise surrounding negotiations is often misinterpreted’

By Alex Nussbaum and Simone Foxman
November 15, 2016

Hedge fund manager Pierre Andurand says OPEC is still likely to agree on an output freeze this month and prompt a sharp rally in oil prices, despite disputes among its members.

The years-long supply glut that hammered oil prices is gone with no sign that production will grow next year, Andurand said in a note to investors obtained by Bloomberg News. The founder Andurand Capital Management, which oversees $1.4 billion in its main strategy, put the chance of an agreement by the Organization of Petroleum Exporting Countries at 70 percent.

“History has demonstrated that OPEC typically never reaches an agreement before the headlines," wrote Andurand, who won big by predicting the oil market’s downturn in 2014. “Unfortunately, the noise surrounding negotiations is often misinterpreted by the media and most analysts who perceive bargaining techniques as a sign of a deal falling apart."

Oil retreated the past three weeks amid skepticism about OPEC’s ability to implement a freeze at its Nov. 30 meeting in Vienna. Prices closed at an eight-week low of $43.32 a barrel on Monday after Iran said it had increased production at three fields. Failure to reach a deal may drive down prices further amid “relentless global supply growth,” the International Energy Agency said Nov. 10.

Saudi Arabia, OPEC’s biggest producer, wants a deal to boost prices and head off a long-term shortage in supply, Andurand said. A freeze could bump up prices to $55 to $60 a barrel by year’s end, he said. Even without an agreement, prices will “slowly trend upward" towards $60 to $70 by the end of 2017.

The firm’s main fund lost 3 percent in October but is still up 7.8 percent for the year, according to the letter, with both numbers beating returns for the S&P GSCI crude-oil index.

Article Link To Bloomberg:

Apple Considers Wearables Expansion With Digital Glasses

Early product testing comes as company searches for next hit; Similar Google Glass project flopped as a consumer product.

By Mark Gurman, Alex Webb, and Ian King
November 15, 2016

Apple Inc. is weighing an expansion into digital glasses, a risky but potentially lucrative area of wearable computing, according to people familiar with the matter.

While still in an exploration phase, the device would connect wirelessly to iPhones, show images and other information in the wearer’s field of vision, and may use augmented reality, the people said. They asked not to be identified speaking about a secret project.

Apple has talked about its glasses project with potential suppliers, according to people familiar with those discussions. The company has ordered small quantities of near-eye displays from one supplier for testing, the people said. Apple hasn’t ordered enough components so far to indicate imminent mass-production, one of the people added.

Should Apple ultimately decide to proceed with the device, it would be introduced in 2018 at the earliest, another person said. The Cupertino, California-based company tests many different products and is known to pivot, pause, or cancel projects without disclosing them. Apple spokeswoman Trudy Muller declined to comment.

Chief Executive Officer Tim Cook is under pressure to deliver new products amid slowing sales of the iPhone, which accounts for two-thirds of Apple’s revenue. In July, he expressed enthusiasm for augmented reality after the rise of Pokemon Go, a location-based game that uses the technology. AR, as it’s known, adds images and other digital information to people’s view of the real world, while virtual reality completely surrounds them with a computer-generated environment.

The glasses may be Apple’s first hardware product targeted directly at AR, one of the people said. Cook has beefed up AR capabilities through acquisitions. In 2013, Apple bought PrimeSense, which developed motion-sensing technology in Microsoft Corp.’s Kinect gaming system. Purchases of software startups in the field, Metaio Inc. and Flyby Media Inc., followed in 2015 and 2016.

“AR can be really great, and we have been and continue to invest a lot in this,” Cook said in a July 26 conference call with analysts. “We are high on AR for the long run. We think there are great things for customers and a great commercial opportunity.”

Apple has AR patents for things like street view in mapping apps. It was also awarded patents for smart glasses that make use of full-fledged virtual reality. Apple is unlikely to leverage VR in a mass-consumer product, Cook suggested in October.

"I can’t imagine everyone in here getting in an enclosed VR experience while you’re sitting in here with me, but I could imagine everyone in here in an AR experience right now," he said during an onstage discussion in Utah.

Apple’s challenge is fitting all the technology needed into a useful pair of internet-connected glasses that are small and sleek enough for regular people to wear. Google’s attempt to develop internet-connected eye wear flopped in part because its tiny battery ran out quickly. Google Glass, as it was called, also suffered a privacy backlash and poor public perception of its external design.

After that disappointment, technology companies largely turned their immediate focus to VR and away from AR. Google recently introduced a VR headset alongside its Pixel smartphone, and Facebook Inc.’s Oculus VR unit has teamed up with Samsung Electronics Co. on a similar headset. Microsoft has the most public AR offering. Its HoloLens product shows holographic images in a user’s field of vision.

Apple’s effort may be more difficult because the chips, batteries and other components that will be available in a year or two may still not be small enough and powerful enough to build slim glasses capable of handling compelling AR experiences.

However, given time, technical challenges may play to Apple’s strengths. The company specializes in turning technology that others have struggled with into easy-to-use devices for the masses. For example, Apple simplified fingerprint technology into an unlocking mechanism for the iPhone and took touch screens mainstream with the original iPhone.

Augmented reality “is going to take a while, because there are some really hard technology challenges there, but it will happen in a big way, and we will wonder when it does, how we ever lived without it,” Cook said last month. “Like we wonder how we lived without our phone today."

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India, Not Trump, Is The Real Reason Behind The Crash In Gold Prices

Another politician, Indian Prime Minister Narendra Modi, is behind the moves.

By Nigam Arora
November 15, 2016

If you have been puzzled about the crash in gold prices after Donald Trump's election, you are in the company of almost every analyst and media outlet in the western world.

Gold and silver are a major part of the research at The Arora Report. A combination of our proven precious metal algorithms, extensive resources and knowledge of the emerging markets led us to alert subscribers to The Arora Report early that gold was about to crash and the reason behind it. Immediately after the election, the net position of The Arora Report in gold, silver and miners has been short as part of a sophisticated strategy.

The Chart

This annotated chart tells the story of the real reason behind the gold crash.

Since most investors do not use gold futures and silver futures, I normally use charts of a popular gold ETF GLD, -0.85% silver ETF SLV, -2.85% gold miner ETF GDX, +0.96% and junior gold miner ETF GDXJ, +2.10% I also often illustrate points using charts of very popular triple leveraged miner ETFs NUGT, +2.78% and DUST, -3.18% However, when election results started leaking out, ETFs were not trading; hence the chart of gold futures.

Gold jumped to $1,339 an ounce as speculation of a Trump win built. But then, as the chart shows, Trump buying was met by Modi selling. Modi selling finally overtook Trump buying. A subsequent budding rally attempt failed as interest rates rose and the dollar strengthened.

After reviewing the chart, you may justifiably ask: "Who is Modi and what makes him so powerful in gold?" Modi is Narendra Modi, the prime minister of India. The Arora Report maintains extensive resources in India as India is often the biggest source for demand of physical gold.

Let us understand the background and positioning of big players in gold before discussing how Modi killed the gold rally.

$1,850 Gold Price Call

In late July, a headline at MarketWatch said gold could push toward $1,850. Similar headlines were appearing all across major media. All of the media was relying on a call by Georgette Boele, an ABN Amro precious metals analyst.

The ABM Amro call was so popular that, subsequently, many media outlets republished the old news with slight refreshes.

As time went on leading to Election Day, it became a universal consensus that gold would jump dramatically if Trump were elected.

Going Solo

As my longtime readers know, over the years my investment calls have often gone against the prevailing wisdom, and typically the crowd catches up later.

When the media were screaming $1,850 gold in July 2016, algorithms at The Arora Report were showing that there was heavy pent-up selling pressure that would come into play if gold spiked over about $1,400.

Over the years I have learned not to ignore or easily dismiss the conclusions from the algorithms. After all, these are the same algorithms that gave a signal to back up the truck and buy silver at $17.73 before the big run to $50. The algorithms then gave a signal to sell all of the silver at $48.50. These algorithms also gave a backup-the-truck signal to buy gold in the $600 range with an average of $663 before a run to $1,904. Then they correctly gave a signal to sell half of the gold at the exact top at $1,904 and put a stop on the remaining at $1,750; subsequently, gold fell to the $1,000 range.

The proven track record of the algorithms gave me the backbone to write “Could gold fall to $850 an ounce if Trump made America great again?” As the election approached, I asked my staff to find other analysts who agreed with me. None were to be found.

Modi Action

India’s Modi has directed that 500 and 1000 rupee notes be banned. These notes represent 20% of the cash value in circulation and 80% of cash outstanding.

To understand heavy selling from India on Modi's move, one has to understand the underground economy in India that runs on black money. Estimates have been that the underground economy in India is about 20% to 25% of the total economy; the point is that it is very large.

The most common method to convert black money into white money over the past 50 years has been to slowly buy gold by paying cash using large bills. Converting black money into white money has been a major source of demand for physical gold. Now that large bills used to buy gold are worthless, demand for physical gold will decline.

What’s Next For Gold And Silver

There are serious implications for gold and silver, of not only what Modi has done but also of what Modi is about to do next. Please stay tuned for my next column on the subject.

Article Link To MarketWatch: