Authored by Peter Cleppe, originally posted at Euro Insight,

If Brexit marks the beginning of the end for the European project, Brussels will take its share of the blame

If Britain leaves the EU and if the reaction to Brexit causes years of uncertainty, the EU will reap what it has sowed. British discontent is only a precursor to unrest on the Continent, where populists from across the political spectrum feel they have lost control over their fate, and are gaining popularity.

We’ve seen the transfers of power to the European level after ignoring the referendums on the European Constitution in France and the Netherlands in 2004. We’ve witnessed the refusal to allow Grexit, which could have been an alternative for continued fiscal transfers and interventions into national budgetary decisions. Both have created a lot of discontent and anti-EU sentiment since 2010.

Last year, there was the decision to outvote Central and Eastern Europe on the sensitive issue of forcing countries to accept refugees, which isn’t even possible in a passport-free zone, as people can travel freely, but which was decided to divert attention from criticism on Angela Merkel’s controversial refugee policy and to organize yet another transfer of power to the EU level.

Finally, we could see how Prime Minister David Cameron’s proposals to bridge the gap between the EU and citizens were met with a lukewarm reaction. His proposal, for example, to allow national parliaments to block EU proposals was watered down to make it harder to implement.

If the British vote to ‘Remain’, they most likely won’t do so with a majority of more than 60%. That however is the threshold needed, according to pollster Comres, to really settle the debate for the next few years.

With a narrow victory for the ‘Remain’ camp, it is therefore more than likely that the debate would just start over the next day, very much like the Scottish demand for independence which has remained a prominent feature in UK politics after 44.7% of Scots voted to secede from the UK in a referendum in 2014.

If people vote to ‘Leave’ the EU, the government is likely to activate article 50 of the EU Treaty, which foresees that the status quo is maintained for two years and that both parties are given the chance to renegotiate their relationship.

Many think that two years will be much too short for this. The British government thinks that there could perhaps be 10 years of uncertainty, while EU Council President Tusk has mentioned seven years. Some in the ‘Leave’ camp have claimed that there may even be a second referendum after a Brexit vote, whereby Britain would get the chance to remain in the EU after all, but under better conditions than those negotiated by Cameron in February this year.

It’s unlikely that the UK would want a relationship similar to that between Norway and the EU. Norway may have complete access to the European single market because of its membership of the European Economic Area but in exchange it needs to comply with over a set of EU rules without having any influence over them within the EU institutions. That surely won’t be an option for a country which just would have left the EU because of a desire to have more sovereignty.

Also, to have the EU-Canada trade deal (CETA) as a model, as advocated by the ‘Leave’ campaign’s Boris Johnson, may not be appealing, given the lack of access the financial services industry would enjoy to the EU market.

The British may prefer something like the Swiss model instead, which means that the UK and the EU would negotiate which markets they would open to each other and which rules they would harmonise or mutually recognize. At the moment, a Swiss firm like Credit Suisse is based in London in order to be able to access the EU’s single market, so some extra hurdles may emerge.

Whatever trade relationships are pursued by a post-Brexit Britain, it’s very possible that a Brexit vote would unleash protectionist sentiment on the Continent and that the EU would want to punish the “naughty pupil” by means of limiting market access for British financial firms. Diplomats have already made clear that both France and the EU Commission are keen to “punish” the UK if it would vote to leave, while Germany, which exports a lot to Britain, is planning to be more conciliatory in the event of a vote for Brexit.

This protectionism would both hurt Britain and the Continent, given that the City of London can be seen as its financial lifeline. It would in any case be similar to the EU’s reaction to Switzerland, after the Swiss expressed in a referendum the desire to restrict free movement for EU citizens and the EU Commission essentially refused to negotiate.

British proponents of EU membership have made the case that Cameron’s deal guarantees that the “high-watermark” of EU intervention in British policy has been reached.

But EU opponents have questioned how legally binding the deal is, leading to obscure debates on the relationship between international and EU law. They have claimed that even after threatening the nuclear option – a referendum on Brexit – Cameron didn’t manage to obtain more than what they consider to be peanuts.

One thing is certain: if Brexit marks the beginning of the end of the EU project, many of those responsible are to be found in Brussels.

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Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/news/2016-06-22/british-discontent-about-eu-only-precursor-unrest-continent

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Investors are fleeing hedge funds and moving their money to a handful of private equity funds.

A quarter of limited partners, or institutional private equity investors, plan to reduce their exposure to hedge funds in the coming year, according to a survey by investment firm Coller Capital.

The firm polled more than 100 private equity investors and found that 36% of them are pouring into private equity, while infrastructure and real estate are also proving popular.  

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It’s worth noting here that Coller Capital is a private equity secondaries firm, providing liquidity in private equity markets. As such, one could expect them to take a brighter view of private equity investments and have a somewhat less favorable outlook on hedge funds.

Regardless, these results seem to be more evidence for investors’ lack of confidence in hedge funds, which have taken a beating amidst volatile commodity price and losses from big, concentrated bets.

Prominent funds like Bill Ackman’s Pershing Square Capital and David Einhorn’s Greenlight Capital tumbled about 20% last year. Third Point’s Dan Loeb described the first quarter of this year as “one of the most catastrophic periods for the industry” and warned of a “hedge fund killing field.” 

Billionaire Steve Schwarzman of the private equity giant Blackstone Group has said he has little sympathy for those struggling in the hedge fund world

Hedge fund investors — including pensions, endowments, sovereign wealth funds, and insurers — have seen a massive mismatch between their expected returns and actual returns from their portfolios. 

Many funds are lowering fees or offering other investor perks to compensate, but some investors are still fleeing.  

In contrast, 79% of investors in the survey said they will not change their commitment to private equity despite the recent market volatility. An appetite for private equity can be seen from the nearly $10 billion fund that Leonard Green & Partners raised, as well as Blackstone’s $18 billion global fund, and KKR’s $11 billion fund

That may be explained by the 11% or higher annual returns that a majority of investors have enjoyed since the inception of their private equity portfolios. One in five of the investors saw net returns of over 16%, according to the survey. 

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Private equity firms have enjoyed startling growth over the past few years compared to hedge funds and other asset managers. Even though there may be a ‘new normal’ of slower growth going forward for the $3.5 trillion private equity industry, it still presents an attractive option for investors. 

SEE ALSO: Investors are sending a strong signal that they’re tired of takeovers

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Original source at: Markets | http://feedproxy.google.com/~r/TheMoneyGame/~3/t994mo2S2PQ/coller-capital-private-equity-and-hedge-funds-survey-2016-6


In a word – “Yes”

 

Source: Google Trends

 

It appears the “herd” was right last time.

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Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/news/2016-01-30/bear-market-back-here-googles-answer


Everyone knows that the US, China, and the EU are some of the world’s biggest economies.

But sometimes it’s difficult to visualize how these economic powerhouses look relative to other major economies.

So to represent how much each big economy matters to global growth, Charles Schwab’s Jeffrey Kleintop put together a chart showing the major economies’ share of world GDP and their 2016 growth forecast by the IMF.

It’s notable that some of the fastest growing economies like India and Indonesia have less weight on the global economy, while the US economy is growing at a slower pace but has significantly more weight.

Another interesting comparison is China versus the EU. In terms of GDP, the EU is twice as big as China, but China’s (slowing) growth rate is still much greater than that of the EU.

And while both Russia and Brazil are looking at a grim year of growth, they are significantly smaller chunks of the global economy than many of the other countries on the chart.

Putting all of these growth forecasts together, Kleintop notes that, “the IMF expects faster global growth in 2016 than last year, tying the recent drop in the stock market to a growth scare rather than an oncoming global recession.”

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SEE ALSO: 14 incredible facts about Texas

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Original source at: Markets | http://feedproxy.google.com/~r/TheMoneyGame/~3/aLV08QZ9riw/how-much-big-economies-matter-to-global-growth-2016-1

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Submitted by Daniel Drew via Dark-Bid.com,

After the carnage of the 2008 crash, former Federal Reserve Chairman Paul Volcker proposed a rule that would prevent banks from making short-term proprietary trades with financial instruments. In other words, no gambling allowed. This rule would become known as The Volcker Rule, and it went into partial effect on April 1, 2014. Full compliance is required by July 21, 2015. Of course, the bank lobbyists were hard at work, and numerous exceptions and loopholes were created. The definition of "financial instruments" did not include currencies, despite the fact that currencies are the basis of the modern financial system and should be considered the ultimate financial instrument. Also, banks were allowed to "hedge" their risks. As JPMorgan demonstrated in 2012, apparently, it is possible to lose $6 billion while hedging risks with credit derivatives.

JPMorgan is at it again – this time, with the Swiss franc. On January 15 of this year, the Swiss Central Bank sent shockwaves around the financial world when they abruptly abandoned the 1.20 EURCHF floor.

CHF/USD Futures

The Wall Street Journal reported that JPMorgan made up to $300 million in the ensuing trading chaos. With the FX market facing a severe shortage of liquidity, JPMorgan stepped in. However, as with any illiquid market, the dealers call the shots. Bid/ask spreads can explode, creating enormous transaction costs for anyone who has to trade. These parties included desperate retail FX brokers and small clients who were bankrupted by the Swiss central bankers. As the WSJ reported,

J.P. Morgan filled client orders at a certain rate, allowing them to quickly assess their position and continue trading when liquidity dried up in the market, this person said. The bank told clients it would fill orders at 1.02 francs per euro while the Swiss currency grew from 1.20 francs per euro to nearly .85 on Jan. 15, the person said. It is unclear how long the bank offered this rate to clients.

By setting the fill 15% away from the last price, JPMorgan was able to lock in any gains from a long franc position instantly. It also gave the firm's traders an anchor so they knew where they were at. What if the clients could get a more advantageous rate at another bank? It didn't matter. 1.02 was the price. If JPMorgan's traders saw a better rate elsewhere, they could trade with that third party and effectively arbitrage the market against their own clients. Of course, it was all transparent. You knew you were getting 1.02, but if your bankrupt broker is margin calling you at any price, there's not much you can do. It was JPMorgan's market.

The chaos of the Swiss bank bluff showed up in JPMorgan's first quarter report. In the trading section that reports the firm's value at risk, January 15 stands out like LeBron James in his 5th grade class picture.

JPMorgan VAR

With free reign to trade currencies and under the guise of "market making," JPMorgan raped the accounts of retail FX brokers and small clients who never could have imagined that the Swiss Central Bank would turn the stable franc into one of the most volatile currencies of the decade. It also appears that The Wall Street Journal overstated the $300 million headline number. According to JPMorgan, they made about $200 million that day.

The fact that JPMorgan still takes value at risk (VAR) seriously is another irony. Wall Street anti-hero Nassim Taleb has made multiple fortunes betting on improbable events via out-of-the-money put options, and he remains one of the most steadfast critics of VAR. Taleb has an arcane style of communication, but the summary of his criticism is that VAR is based on the normal distribution, which underestimates the effects of extreme price moves. Furthermore, the very idea that wild events can be predicted by any model is an arrogant assumption, according to Taleb. A white paper by the Chicago Board Options Exchange (CBOE) verifies Taleb's assertions.

S&P 500 Skew

The chart shows the type of statistical distribution that Taleb described as "Extremistan" in his popular book "The Black Swan." The frequency is heavy in the middle and higher than expected in the "tails," or the far extremes of the distribution. What this means is that wild events like the Swiss Central Bank bluffing the entire world happen more frequently than risk models suggest.

In their 10-Q filing, JPMorgan boasts that there were no VAR band breaks. Translation: They never had a 1-day loss that exceeded their estimates of about $50 million – although they did come uncomfortably close in March. Just like a typical swashbuckling bank that throws around billions of depositors' FDIC-insured money on convoluted derivative bets, JPMorgan is only concerned about downside volatility while ignoring upside volatility. Yes, they didn't have any downside VAR breaks, but anyone can look at the chart and see there were multiple instances where they made more than $50 million in a single day, with the Swiss bank debacle being the most notable one. Veteran traders know that this kind of wild upside can be just as great of a risk as unexpected downside. If you can make $200 million in a single day, you can also lose the same amount – especially when the P/L comes from linear non-derivative sources like the spot currency market. In this case, JPMorgan happened to be on the right side of the tidal wave. However, Citigroup, Deutsche Bank, and Barclays got caught in the crossfire, and they lost a combined $400 million on the franc. Just another day in casino capitalism.

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Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/news/2015-06-15/what-volcker-rule-loophole-looks

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Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Wishing it was true doesn't make it true–it makes you a chump who fell for the con.

Once upon a time in America, no adult could survive without possessing a finely tuned BS detector. Herman Melville masterfully captured America's fascination with cons and con artists in his 1857 classic The Confidence-Man, which I discussed in The Con in Confidence (October 4, 2006).
 
An essential component of the American ethos is: don't be a chump. Don't fall for the con. And if you do, it's your own fault. The Wild West wasn't just thieves shooting people in the back (your classic "gunfight" in the real West)–it was a simmering stew of con artists, flim-flammers and grifters exploiting the naive, the trusting and the credulous.
 
We now inhabit a world where virtually everything is a con. That "organic" produce from some other country–did anyone test the soil the produce grew in? It could be loaded with heavy metals and be certified "organic" because no pesticides were used during production. But what about last year? And the year before? What's in the water used to irrigate the crops?
 
The employment/unemployment statistics are obviously BS. 93 million people aren't even counted any more–they're statistical zombies, no longer among the living workforce. If the unemployment rate were calculated on the number of full-time jobs and the true workforce (everyone ages 18 – 70 that isn't institutionalized or in prison), the unemployment rate would not be the absurdly delusional 5.6% claimed by the bureaucratic con artists.
 
The corrupts-everything-it-touches bribe vacuum known as Hillary Clinton is still disgracing the national stage, 24 years after she first displayed her con-artist colors. Hillary's most enduring accomplishment is the Clinton Foundation–a glorification of bribery, chicanery, flim-flam and cons so outrageously perfected that it serves up examples of every con known to humanity in one form or another.
 
And as she learned from hubby Bill–if the smarmy charm-con fails, quickly revert to veiled threats. "You'll never work in this town again!"
 
Hillary would fit right into Melville's river boat teeming with con-artists. The accent she uses on the marks–oops, I mean audience–changes as readily as the camouflage on a chameleon. Upper Midwest, Noo Yawk, Fake-Southern–what you hear depends on the credulity of her marks.
 
The entire American political system is a con, a sleazy mix of legalized bribes, auctioning off of favors, revolving doors between government agencies and the corporations they enrich and the blatant hypocrisy of snake-oil salespeople who know the marks (voters) face a false choice between two parties that are the same poison sold under different labels.
 
Which brings us to China, one of the greatest credit bubble and financial cons ever. Please examine this chart of the Shanghai Stock Exchange (SSEC). Clearly, there is no upper limit to the Chinese stock market: 5,000 today, 10,000 next week, 50,000 the following month and 100,000 shortly thereafter. The sky's the limit, Baby!
 
That China's credit machine is now dependent on a stock market bubble for its very survival speaks volumes about the true health of China's economy. This dependence was recently explained in Why China Is So Desperate To Blow The Most Epic Stock Bubble.
 
Everybody who thinks China's economy is healthy because its stock market is soaring has been suckered. Every good con-man/ con-woman knows that the con only works if the chump/mark wants to believe the impossible is true–that the snake-oil remedy will actually cure their ailments, that the "hope" candidate will actually change the corrupt system from the inside (ha-ha, they fell for it), and that China's economy is on its way to becoming the world leader in everything.
 
Many people want to believe this fantasy because it suits their agenda: For American pundits, China isn’t a country. It’s a fantasyland.
 
But wishing it was true doesn't make it true–it makes you a chump who fell for the con. We want to believe our political system isn't an unreformable cesspool, that our economy is a vibrant creator of new middle class jobs and that China will manage the greatest credit bubble in history without a hitch. But these are all cons put over to protect the wealth and power of those benefiting from the con.
 

If your BS detector isn't shrieking, it's broken. You've been conned. Wake up.

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Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/news/2015-06-09/if-your-bs-detector-not-screaming-its-broken


oil wells sunset ventura county california

Oil is hovering around $60 a barrel, a 40% decrease in price since the height of summer. This is widely thought to be a supply issue, with the US producing far more oil than it traditional has, and OPEC refusing to cut production to stabilize prices.

US Trust’s chief market strategist Joseph Quinlan sent out a note this week showing just how much US energy production has expanded in the last five years.

He writes:

The ingredients of the U.S. energy revolution were threefold: (1) Pro-market policies at the state and local levels, combined with (2) revolutionary technologies like horizontal drilling and hydraulic fracturing, and (3) good old American entrepreneurship and risk taking that upended the energy patch. By combining the three, the United States became the largest natural gas producer in 2013 and is on its way to becoming the world’s leading oil producer.

Here are six key charts showing how this is unfolding:

This is the four-week moving average of total US production (in thousands of barrels per day). Note the steep slope in the last two years.

Screen Shot 2014 12 11 at 9.27.32 AM

Here are America’s shale super fields since 2011. North Dakota’s Bakken and south Texas’ Eagle Ford are both now producing more than 1 million barrels a day, up from practically nothing just a few years ago.

Screen Shot 2014 12 11 at 9.27.25 AM

Natural gas production has increased along with oil. From US Trust: “According to the EIA, more than 50% of new wells in production in 2011 and 2012 produced both oil and natural gas. In 2012, of the number of wells drilled nationwide, 56% produced both oil and gas; the comparable figure in 2007 was 37%.”

Screen Shot 2014 12 11 at 9.28.17 AM

This new production has driven down the cost of energy in the US. Here’s how the cost of natural gas has changed since 2006 (it’s indexed such that 100 = January 2006) in the US, Germany, and Japan.

Screen Shot 2014 12 11 at 9.29.39 AM

 This is how much crude oil production changed between 2008 and 2013. The US is way out front, disrupting the global oil game.

Screen Shot 2014 12 11 at 9.27.45 AM

Finally, the US is moving closer to energy independence. This chart shows the net imports of crude and petroleum products as a percentage of consumption.

Screen Shot 2014 12 11 at 9.28.30 AM

SEE ALSO: An OPEC Minister Made A Surprising Statement About Who Controls Oil Prices

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Original source at: Finance | http://feedproxy.google.com/~r/TheMoneyGame/~3/f6u4ldX8l3Q/us-energy-production-boom-charts-2014-12


Excerpted from John Hussman’s Weekly Market Comment,

Is this time different? I’ve often characterized our approach to the financial markets as a value-conscious, historically-informed, evidence-driven discipline. In recent years, we’ve often been asked whether the world has changed in a way that makes historical evidence an inadequate guide to investing.

In some cases, those learnable regularities can be derived on the basis of clear theoretical relationships that describe how the world works with reasonable accuracy.

For example, every long-term security is fundamentally a claim on a very long-duration stream of cash flows that can be expected to be delivered into the hands of investors over time. For a given stream of expected cash flows and a given current price, we can quickly estimate the long-term rate of return that the security can be expected to achieve (assuming the cash flows are delivered as expected). Likewise, for a given stream of expected cash flows and a “required” long-term rate of return, we can calculate the current price that would be consistent with that long-term rate of return. The failure to understand the inverse relationship between current prices and future returns is why investors frequently argue that rich equity valuations are “justified” by low interest rates, without understanding that they are really saying that dismal future equity returns are perfectly acceptable.

We also observe the very regular tendency for profit margins to increase during economic expansions (presently corporate profits are close to 11% of GDP), and to contract during softer periods. Corporate profits as a share of GDP have always retreated to less than 5.5% in every economic cycle on record, even in recent decades. Since stocks are most reliably priced on the basis of long-term cash flows, and not simply Wall Street’s estimate of next year’s earnings, we find that valuation measures that are either relatively insensitive to profit margin swings, or that correct for their variation over the economic cycle, are much better correlated with actual subsequent market returns than measures such as price/forward operating earnings that don’t do so.

Our valuation concerns don’t rely on any requirement for earnings or profit margins to turn down in the near term. Valuations are a long-term proposition that link the price being paid today to a stream of cash flows that, for the S&P 500, have an effective duration of about 50 years. In evaluating whether “this time is different,” it should be understood that current valuations are “justified” only if 1) the wide historical cyclicality of profits over the economic cycle has been eliminated, 2) the average level of profit margins over the next five decades will be permanently elevated at nearly twice the historical norm, 3) the strong historical advantage of smoothed or margin-adjusted valuation measures over single-year price/earnings measures has vanished, and 4) zero interest rate policies will persist not just for 3 or 4 more years, but for decades while economic growth proceeds at historically normal rates nonetheless. Believe all of that if you wish. Without permanent changes in the way the world works, on valuation measures that are best correlated with actual subsequent market returns, stocks are wickedly overvalued here.

The chart below show several of the measures that have the strongest relationship (correlation near 90%) with actual subsequent 10-year S&P 500 total returns, reflecting data from the Federal Reserve, Standard & Poors, Robert Shiller, and valuation models that we have published over the years.

As of last week, based on a variety of methods, we estimate likely S&P 500 10-year nominal total returns averaging just 1.5% annually over the coming decade, with negative expected returns on every horizon shorter than about 8 years. The chart above shows the historical record of these estimates (in percent) versus actual subsequent 10-year S&P 500 total returns. What’s notable is not only the strong correlation between estimated returns and actual subsequent returns, but also that the errors are informative.

Given the full weight of the evidence, it should be clear that one can’t just say “well, look, the S&P 500 has done better than these models would have projected a decade ago,” and use that as a compelling argument that this time is different and historical regularities no longer hold. Quite the opposite – the overshoot in S&P 500 total returns since 2004 – relative to the prospective returns one would have estimated at the time – is highly informative that stocks are strenuously overvalued at present. That conclusion has strong statistical support. In fact, when we examine the historical evidence, we find that there’s a -68% correlation between the error in the projected return over the past decade and the actual subsequent total return of the S&P 500 in the following decade. That is, the more actual 10-year S&P 500 returns exceeded the return that was projected, the worse the S&P 500 generally did over the next 10 years. Notably, the “Fed Model” has a correlation of less than 48% with actual subsequent 10-year returns. It’s sad when a valuation measure that is so popular is outperformed even by the errors of better measures.

Last week, however, the market re-established conditions extreme enough to place the present instance among what I’ve often called the “who’s who of awful times to invest.” Importantly, and in contrast to a few similarly extreme conditions we’ve seen in recent years, we presently observe both widening credit spreads and – at least for now – deteriorating internals and unfavorable trend uniformity on our measures of market action.

In short, our views will shift as the evidence shifts, but here and now, the market has re-established overvalued, overbought, overbullish conditions that mirror some of the most precarious points in the historical record such as 1929, 1937, 1974, 1987, 2000 and 2007. That syndrome is now coupled with continued evidence of a subtle shift toward more risk-averse investor psychology, primarily reflected by internal dispersion and widening credit spreads. I’ve often emphasized that the worst market outcomes have historically been associated with compressed risk premiums coupled with a shift toward risk aversion among investors. In those environments, risk premiums typically don’t normalize gradually – they do so in abrupt spikes. We’ll continue to respond as the evidence changes, but under current conditions, we view the investment environment for stocks as being among a handful of the most hostile points in history.

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Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/news/2014-11-10/do-lessons-history-no-longer-apply


An Abandoned, Moss-Covered Shed Has Sold For $880,000 In London’s Bonkers Housing Market

chelsea

A disused, moss-covered shed in London has sold for £550,000 ($880,000) in a testament to the capital’s insane property market, The Telegraph notes.

House price growth in London is officially cooling according to new figures out today. But even as rate growth slows, record prices in the UK are still being set. 

British house prices rose 9% in October, down a bit from 9.4% in September, according to Nationwide Building Society’s monthly index. The Financial Times reported:

The average price of a house rose by 0.5 per cent month on month to £189,333, beating the previous high of £189,306 in August.

But  £190,000 — about $304,000 — won’t get you very far in London, where prices have spiraled upward in a way that most people regard as slightly crazy.

To be fair to the shed — a garage in Chelsea hemmed in by existing buildings — it’s in a great neighborhood and sits on approximately 0.005 hectares (0.013 acres) of land. 

This Google Earth map (below) shows you why it’s worth so much.

It’s on the fancy King’s Road, near to the Marco Pierre restaurant and Vivienne Westwood’s store. The trendiest neighborhood in London, in other words:

chelsea

And while the garage looks a bit gloomy now, look at these imaginary architect renderings of what it could look like after you’ve built a 1,000-square foot 2 bedroom house on the site:

chelsea

The plot already has planning permission, which is why the sale was so expensive:

chelsea

SEE ALSO: UK Property Prices Suffer ‘Largest Decrease Ever’ As London Real Estate Goes Into Full-Scale Collapse

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Saudi Arabia wants to use lower oil prices to pressure Russia to change its stance on Syria, to antagonize Iran, and to force US shale gas out of the market, Pepe Escobar explains the possible blowback

Via RT,

RT: Russia’s economy is surely being hit by the falling oil prices. But what about other oil producers like the OPEC states?

Pepe Escobar: A lot of people are being hurt. There are more or less 20 nations that need oil at least for 50 percent of their budget. Among these nations we’ll find especially a mix of African countries and Persian Gulf countries, that includes Saudi Arabia and Iraq as well, Venezuela and Ecuador. So it’s very complicated, it’s not only to hurt Russia…

RT: Saudi Arabia is one of the OPEC members and it is supposed to collaborate its oil price policy with other members. Why it is acting like this?

PE: OPEC is not a moralistic organization. There has been a lot of speculation about what Saudi Arabia has been doing. In fact, their strategy is still faulty – they want lower oil prices to pressure Russia vis-à-vis Syria, change their stance vis-à-vis Damascus and they want to more or less price shale gas from the US out of the market, and also pressure Iran vis-à-vis what’s going on in the Middle East, the famous Saudi-Iranian antagonism. This is not going to work in the long run because even Saudi Arabia will be in trouble if we have a barrel of oil like it was projected for the first quarter of 2015 between $70 and $80, now it’s a round $86-87. So they will be in trouble as well, their strategy in the long run is going to backfire.

RT: So, how long are these major oil exporting countries going to follow this strategy? When will they think of their own economic interests?

PE: When we look at the breakeven for most of these countries in terms of their state budget – how much they need a barrel of oil to cost if they can more or less even their expenses? When we look at the latest table – which is a composite of indexes from the Economist, Wall Street Journal, Bloomberg, Reuters – Venezuela and Ecuador need oil at $120 a barrel, they are going to be in a deep trouble. Iraq, for instance, needs around $106-116 – they are in trouble. The problem with Iran is that we don’t have very exact figures.

According to these indicators, Iran will need a barrel of oil between $130 and $140. That’s too much because oil is less than 20 percent of Iran’s revenues, so it’s not essential for them. Gas is much more important. In terms of Russia, we know how Russia may [be] hurt because for the State Budget of Russia for 2015 it’s around $100 a barrel. So if we have next year, according to the best projecting so far, between $70 and $80 and maybe even going down to $65-70 in the next few years, all of these countries are going to suffer. But the market is very volatile. In one year from now we could be talking about a completely different situation if we have more demands, especially from China, from the US, from Europe, supposing there is some sort of economic realignment in Europe. So this could change not just in a matter of not only days and weeks or years but very fast.

RT: Why aren’t the OPEC-states reducing the production volumes, like they normally do when prices drop?

PE: There are a lot of back-door consultations among OPEC members at the moment. Sooner or later we can expect less oil in the market, so the prices will go up. Especially, I would say from Venezuela, Ecuador… Iran – they need the revenue, so at the moment they are just starting the market flows. Obviously they have very good customers in Asia, even if they are buying less like China, they still buy Iranian oil. We have to see the US point of view, in fact, because the US doesn’t want very low oil prices to price their shale gas exploration out of the market. So there are going to be counter-moves by many OPEC and non-OPEC players as well.

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Original source at: zero hedge - on a long enough timeline, the survival rate for everyone drops to zero | http://www.zerohedge.com/news/2014-10-21/saudis-policy-downplaying-oil-prices-will-backfire-them

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