Central Banking 2014 Upgrades & Arab Uprising Part II

Good evening to all

The month of July has been rather amusing in market volatility and global economic indicators balancing out each other, mixed in with the typical political cocktail of civil unrest.

ECB and Bank of England Harmony

 With the markets losing some of the power and confidence in tactic decision making, today they looked to the words of Mark Carney (Bank of England) and Mario Draghi (ECB). The Outlook of both and interest rate decision remained unchanged, though new weapons such as market guidance are becoming more weighted on market volatility.

A Central bank’s words are one the most secretly kept letters before an announcement, as these words are the recurring power mover of any market. Previously a central bank would never try to give their opinion on forward assumptions of market growth, though the new Bank of England governor changed the norm.  So these words are now a typical aspect for market makers to expect in the medium term.

Liberalisation of the ECB was also in discussion; the idea of releasing the minutes of the ECB, could be seen as a more accurate way of the market valuing the future. Though in the Gothic economist’s opinion this will only produce more wild fire, and take less value of the central bank’s overall decision.

Vertigo Markets

So with the last month being pinned to fallout part 2, of the financial crisis shows that the wounds slowly are healing, for now... The patient is still in intensive care.

The redbull juice of quantitative easing, unfortunately could be working. Grumbles for the Gothic economist, as his positive monetarist views against Keynesian borrowing malarkey as being the devils work could succeed, as the S&P climbed today. However... These growth patterns with an over capitalised market, may bring future worries, to the mix.

Today the US market saw growth patterns that had not been seen since 2011, amongst these positive movements, there has also been frailness at the midpoint, due to fears of reduced growth within in china and liquidity worries for domestic and medium sized businesses.

The Brent crude benchmark has been on rapid brinks of decline and ascension. The Chinese downturn in GDP forecast, and the US growth results have been players on this. Since July continuing into August has seen many Middle Eastern civil problems affect oil output, and with US sanctions on cutting Iranian oil exports have been also implemented this week. Hence this fall going into the winter season for the northern hemisphere could see prices above $112 a barrel.

Positives that can be seen are controlled inflation position within Europe and US, also boosted exports in some of the sovereignly constrained Euro zone countries.

Burn Baby Burn

The Middle East and North African political process is still far from maturing in stability. With Nigerian tensions, the Egyptian political problem and summer maintenance schedules, the fall could haunt the price yet.

Libya has been flooded with protests and shut down of its ports, leaving the OPEC state with no oil and in some cased more than 50% fall in refining, giving August and September contracts a rise.

The markets could possibly become more active in their discontent with the Arab uprising, as foreign direct investment thoughts to Africa becomes less desirable.

The biggest problem is that due to these cuts in production, you cannot stop oil extraction straight away, so all you can do is flare. The burning of fuel in some parts of Africa have forecast to total over $100m a month, and with Flaring already being a major issue within Northern Canada, more investment and maintenance is demanded within the Oil & natural gas sector.

This week saw oil spills in Thailand, Nigeria and evidence of manufacturing faults with an Exxon pipeline in Canada. Enough said on future prices and environmental damage.

Closing Black Words

The energy sector will continue to climb, as middle east tensions are predicted to continue , if  US continues to give out low unemployment data and growth support. Though this highly unlikely, and in the fall, markets will become more volatile, as the deadline for the US borrowing limit comes closer.

Buy while you still can...

Bad US timing in Africa as Resource war is in full swing

As Obama makes his first real appearance in Africa, has he come far too late? As the president touched down in South Africa, he was greeted with more welcoming protests than the warmth he may have encountered on his trip to the G8 summit in Northern Ireland.

Africa itself is the new Jewel in the eye of slowing down major economies in the northern Hemisphere and where strategic economics may now work with African ways of life, which was unheard of back in the 80s-90s. Holding vast realms of natural resources and economies egger to grow, China has been making the most progress out of all nations, though has also been finding out, that Africa is not always easily bought and tapped.

Late jump from the gate

The Current Obama administration did not make an appearance in its last term, and through this the US has been living off the success of the Clinton administration’s duty free policy on African goods and the Bush administration’s poverty donations, though there is still nothing yet from Obama.

As he was escorted through Cape town in his usual armed battalion, including the support of the South African’s catalogue of Gorilla proof Jeeps, the president had come at a time of when millions of the continent’s inhabitants prepared for the mourning of Nelson Mandela, as well the general view of that Barak Obama “Another US President”. This comes from the Geo political position most south Africans see Mr Obama lying in. From the Libya Crisis and toppling of the Gaddafi regime last year, the involvement of more US drone aircraft in Africa and the current interactions and geopolitical moving in Syria.

Contractual ease by China

China has been conducting much more investment, as it saw the emptiness of foreign competition implementing strategy on the continent. China is finding it easy business doing deals in Africa, as a pragmatic position is taken for politics. There are no political improvements linked to any investment deal which may include a more stable government as some nations saw with previous western deals, giving much better political face to china.

Also with weak colonial might at the moment, no one is in the position to lecture China on its resource and foreign investment policies at this current time. Also with the increase of inflation in China, it is only be a matter of time until manufacturing is transferred overseas to Africa in order to reduce production costs.

Though making deals with Zimbabwe and Sudan hasn’t helped other sides of Chinese interests and shows more importance to business relationships than China’s social responsibility.

DIY Africa

The main issues with Africa are usually down to a few big factors where one or more is active:

• Political Corruption
• Civil Unrest
• Inadequate Infrastructure

The oil industry is probably the wisest of the high risks from African operations. Companies such as BP and Exxon Mobil have dealt with losing oil wells due to political tensions, such as in Somalia; workers being captured and ransomed off and the sabotage from local greed and jealousy, which is the most interesting one in my opinion.

In Nigeria a local communities jealousy over another that has a well contract from an oil firm, will usually result in pipes being cut, or well heads being set ablaze. The market for D grade black market oil is then created through tribal gangs stealing the unrefined liquid and in the meantime the environment being damaged. With Nigeria cultures you are taught not to share or help, so other communities do not work together. The only cooperative relationship that usually occurs is when cleaning companies pay gangs to destroy wells in order to get cleaning contracts.

Energy shortages are also a major issue. Known for its mass ownership of electric generators, Africa’s civil infrastructure is in desperate need of being created.

The Future

 

 

There are certain countries such as South Africa and Angola which provide a forward vision for the Continent, with maybe only one of the three issues being faced.

As the US ranks third as trading partner to the continent, it will be rather soon that more foreign direct investment moves swiftly in. This is also contributed to the the reduction in global market liquidity seen in the past weeks, on the basis of changing Central banking monetary policy (mostly from the US) and the predicted slowdown in emerging markets. Africa due to its minerals has not experienced a reduction in investment hunger so much and with still a very large gap in market capacity across the board of sectors from resource extraction to government development projects, whilst the northern boundary has the rope pulled tighter, the centre realms of the equator look promising, just how much for Africa and more so, how will the economic transition process effect Political engineering and efficiency? This issue brought up when Libya was still continuing in conflict.

 

Tata

G.E.

Wealth management stays strong, Shale keeps on fracking and France feels the heat...

Tax Privacy lies no more

The continuing transition of banking secrecy becoming more open, continued last week, as Luxembourg, the British territory of Bermuda and Chiefs of Uni Credit began a mixture of transitioning towards a mixture of openness towards taxation figures, and bank balances.

The Austrian chancellor though is going one step further. He has been given approval to negotiate with the US a tax centred upon foreign bank account holdings. More centered towards account holders in the US, it will most likely be a two part situation for EU member states also. Austria is also signing up with the US to a mutual administrative assistance in regards to tax matters.

The movement is a combination of pressures implemented from the EU and US. Allowing for tracking of financial intermediaries that can involved in a rouge transactions, to increasing the strain on beating tax avoidance. Obviously a growing concern for large investors, though that hasn't put them off too much...

Regardless of this big shake up, wealth management and private banking are still on the rise. The likes of Goldman Sachs and JP Morgan are preferring to have a stickier type of deposit holder, where reserves are less volatile than those entwined within their investment arms.

As all these changes for reform, glide out of the former Habsburg empire, from neighbouring italy Tax evasion scandels for Mr Belesconi as he loses his appeal for a zero four-year jail sentance, for his punishments for tax evasion. FT article

Black Clovers

Ireland has now been recognized for offshore exploits to a once ignored segment of the Eurasian plate. This will hopefully bring a few more receipts into the stagnant Irish economy, though still striving as the only euro-zone member, that is currently able to repay its debts to creditors and the ECB.

Whilst the ocean floor is being discovered off the west coast of Kerry, in the US, commercial competitive rates of liquefied natural gas have raised hopes for the department of Energy, as the mining of shale has unlocked vast amounts of the fuel source. So much that the US is on high prospects to be net exporter by 2020.

The new energy boom is acting as a boost to the US recovery, as will eventually be reflected within the future months whilst the Brent Crude price fluctuates  The oil price staying firm on still low growth forecasts, and possibly more so into the end of 2013, that the US's energy chat moves further away from coal and oil, in the hope to reduce CO2 emissions and increase its strategic dominance, by becoming less energy dependent.

French woes

Last Friday marked 25 years of the Franco-German relationship within the council of financial and economic affairs. Though a Francois Hollande has certainly realized he and his government may have really played with fire, in relation to their bullish comments amongst other EU nations over the previous weeks.

With taking advantage of trade woes with UK & China, and insulting government figures in Germany, it is only obvious for Mr Hollande to possibly expect a more uncooperative relationship, in regards to their views against the Germans and their strong Hayek position. As well he also needs to manage a healthy cabinet reshuffle.

Protectionism and National independence is becoming more an issue, and with the organisations, such as the WTO, being in a crisis, slowly taxes and tarrifs may comeback into being. Though it is more likely that free-trade-areas and economic zones will continue to exist, just with larger import/export costs.

The tale of two Islands in Asia

We are a week into the glimpse of China's new management board, upon the stage for China, seven suits encased with red ties stood before the world.

Mr Xi Jinping is now leader of an >80m Chinese communist party with his six new team members at the helm also, however attending the congressional announcement was former president Jiang Zemin. He was there for one reason only, to reassure the world, that as much pressure china's political system is under to become democratic, it will not cease. Mr Jiang actually got more attention due to this, compared with the new president at the congressional announcement, as Mr Xi is seen to be more open in a rational sense to changes within the political system.

This would be honey to the ears of Japan, as it announces it largest trade deficit with China, and this is not due to organic economic slowdown, it is down to a bunch of islands that Japan purchased. This has now led to negative growth in nearly two quarters, ergo Japan will be declaring a recession. Though even with a slightly easier going president, that's not to say members of the old school are not present in the other six.

Going to Behavioural and Strategic impact. The US has taken a very notoriously cunning step and in some ways it will overall benefit China. The US shifted the fire-power of 40,000 troops to conduct exercises   in the area, in a mutual indication to China, that it would standby Japan to defend it's territory, as Japan and the US have a treaty on defence of each other.
However at the same time, the US will now be overtaking Japan as largest export partner to China. So throwing a few 40,000 troops in an area to keep Japan happy for a while, whilst you take over their trading position is quite a good deal.
But it is just not the US that are conducting strategic positioning  China is producing bilateral trade agreements with South Korea, so to anyone's guess, economic pressure is fully being exerted onto the sword of the samurai. In return Japan is attempting trade agreements with the EU and Australia, regardless it will loose out.
Though it's not all sunshine and butterflies for the red flowers.
China's investor arms are going into the emerging markets, as western traders start getting bullish with their Chinese weighted portfolios. They seek non domestic protection, and as much as China racks on more tax incentives and lifts investment barriers, non of this is being seen to make a world of good; only behavioural investment sense of desperation, just making traders increase their bet values against China.

So China is plotting the downfall or economic suicide of Japan with its sustainable deficit of +200% of GDP.
Though it could be worse... You could be Greece, having to deal with your politicians not agreeing with the death dealers aka IMF and the EU, which just entered negative growth also. http://www.ft.com/intl/cms/s/2/0a35504a-0615-11e1-a079-00144feabdc0.html#axzz2CnY7xTPX

Whilst you then have to watch energy companies pay fines, of larger sums that what your country so desperately needs.
http://www.ft.com/intl/cms/s/0/555fa13c-2f46-11e2-8e4b-00144feabdc0.html#axzz2CnY7xTPX

Positive economics combined with the church of monetarism and Hayek. It lacks so much irrational emotion in these scaring areas, its hard to believe this is how economies work the best!!

Tata for now... GE